ESPN and Future Revenue Models

Very interesting and informative article on ESPN and how they operate. The purpose of the article is to show how ESPN is the current commanding factor in cable rights and cable sports and how that might change or stay the same is the shifting technological future. But as good as the article is - some important considerations slip through the cracks.

Early in the article they mention Aereo but only as an excuse to get in a few quotes from Barry Diller. Later in the article they mention that 898,000 consumers have fled the pay TV market but they don't explain that even with declining TV subscribers many of the big cable operators are still raking in cash because of the bonanza that is broadband. The article mentions ESPN3 but just as a throw away sentence in how "warehousing" is being handled.

What was not mentioned is how ESPN/Disney has already been way out front of competitors when it comes to broadband channels. Currently they have ABC News Broadband, Disney Connection, ESPN3, and SOAP Net. Those 4 channels can be purchased as a package for roughly $.50 per broadband subscriber but any broadband provider who wants to carry ESPN/Disney channels going forward MUST carry ESPN3 which at about $.20 per broadband subscriber is more than what ViaCom charges for Comedy Central as a standard cable channel. Think about that for a minute.

Many people look at the HBO Go product as a model going forward. HBO has insisted that HBO Go will only be available to subscribers from a traditional cable MSO or satellite provider. But what if that changes? Suddenly HBO has a product that is as attractive as Netflix or Amazon Prime or Hulu or the "cord-cutters". It could be a market that gets too rich for HBO to ignore under loyalty to the old model.

Same might be true for ESPN/Disney. Currently their broadband channels are only available through providers carrying their channel packages but what if once the dust settles with Aereo -  ESPN / Disney allows them to build ABC News Broadband, Disney Connection, ESPN3, and SOAP Net into their basic product offering for $.50 per subscriber? Small drop in the bucket when it comes to overall revenues but money is money. What if they enhanced that package by offering ESPN, ESPN2 and ESPNU for $10 per month? Suddenly we are talking different magnitudes of revenue.

The future will allow for many changes to today's TV model. The cable company may soon be just a "dumb pipe" provider and when that happens ESPN /Disney will be prepared.

They already are.

The State of Netflix

Interesting look at where Netflix is today and how it got there.

I don't think there is any way the stock ever gets back to the $300 neighborhood it was in 2011 but I am bullish on the stock. I think the company can either get acquired or it can become the on-line equivalent of HBO.

HBO has a big advantage in original programming because of its long history and the subscribers expectations of quality from the HBO brand but Netflix's on-demand library beats HBO's channels showing the same movies over and over.

The article is worth the read.

Time Warner Cable and Fox News TV Everywhere

Time Warner Cable now has TV Everywhere apps for Fox News and Fox Business News. This announcement got me wondering if we will see a new trend where TV Everywhere becomes the first line of defense for content producers against the oncoming tide of a la carte TV.

HBO Go is tremendous but the over the top service is only available to people who are already subscribing to HBO through their cable company. One hand washes the other in this arrangement. If you think about it - HBO is also a defacto package of channels. Nobody gets just one HBO channel. Other content providers who are not premium channels may see this and wonder if a similar arrangement like this can be used to their advantage.

I am not sure about the details of the Time Warner Cable arrangement with Fox News and Fox Business News regarding their apps but I have to wonder if the language of the agreement states that the apps are only available to people who subscribe to both channels? That may not be a big deal now when Time Warner and other cable companies package the channels together but it would be good protection and a very valid selling selling point if a la carte ever came to be. Sure with a la carte TV you would be free to pick either Fox News or Fox Business News or neither but what if you lost access to the apps for both channels if you didn't also get both linear channels?

Just something that occurred to me.

Google Fiber's Missing Channels

I've seen a number of articles about Google Fiber in Kansas City commenting on the channels their TV package seems to be missing. What I have not seen is a good explanation of why those specific channels seem to be excluded from the line-up.

I think I can explain. The noticeable missing content seems to be from ABC/Disney (including the ESPN channels), Turner (TBS, TNT, CNN, etc) and HBO. What these three companies have in common is they traditionally do not allow their content to be transported via fiber. If Google wanted to add the channels by pulling them down via satellite then those channels would probably already be secured. But the name of the company is Google Fiber not Google Satellite.

In my opinion this has little to do with the cost of the content - consider that HBO is premium content that only the subscribers who want it would be paying for it. This has to do with business models - both Google's and the content providers.  How subscribers access over the top portals like HBO Go or ESPN3 is probably one of the key sticking points. I'm also guessing that none of the three content providers are very excited about re-doing any existing most-favored agreements to satisfy Google.

It will be interesting to see how this is resolved.