Monday, April 06, 2009

Clash Of The Titans, Pt. 2

There were a few things I wanted to add to the original post I made last week.

One of the classic techniques that big media companies use when negotiating rights fees and related kinds of items is to "lift and separate," so to speak.

Yes, that phrase is from an old bra commercial. As a young boy, before the era of "your penis can still get hard" commercials, bra commercials were quite popular, and, of course, I found boobie exotica quite fascinating. I also find it fascinating that "lift and separate" is used when talking about about both boobies and facial hair. How is that possible?

And now, back to your regularly scheduled program.

When I say that they want payments from content providers, I believe it would be in the form of "preferred provider" agreements. Time Warner would announce an agreement with XYZ Media Company, and because of their preferred provider status, downloads of XYZ shows would not count against the download cap. The more content providers who signed up, the more pressure there would be on the holdouts.

Yeah, I know. As a consumer, that's a nightmare scenario, where different broadband providers all have download caps and all have preferred providers that don't count against those caps. It's just complete horseshit. That's where we're headed, though, and one of the reasons we're headed there is that in many cities, one cable or broadband provider is essentially granted a monopoly in exchange for a percentage of revenue or a set fee per subscriber.

Look at the situation Time Warner is in right now. Their cable television business is floundering because of competition from satellite. Plus (John Voncannon e-mailed me with this idea, so all credit goes to him), we're entering an era where people can drop their cable subscription and see most of what they want via over-air antenna and web streaming.

John's e-mail made me think about the future, and in the future, the idea of shows scheduled at certain times could be entirely obsolete. What could also be obsolete is delivery of content via the cable box. That's still a few years off, but it's certainly in the distance.

Well, that's the worst possible scenario for Time Warner. They lose television subscriptions, and the same companies that created a business model to exclude them are also increasing their bandwidth costs.

Plus, and I know this is also a ways off, but ten years from now, wireless networks may one day compete in terms of content delivery. Yes, they're all slow and hellishly expensive right now, but they're going to get faster and cheaper, and quickly, because they're all competing with each other.

So if you're Time Warner, and you can't stop the bleeding, what do you do? You leverage the monopoly you have inside franchise cities for broadband service. They could never roll out this kind of pricing plan, could never use it to pressure content providers, if there was any real competition. I think this is the line in the sand, though, and they're going to defend it as fiercely as they can.

They will, in the end, still fail. 250GB broadband caps (Comcast)? Possible, and even workable for 99% of users, probably. 40GB, or even 60GB? Laughable, given what's ahead for us in the future.

Time Warner lost 13.4 billion dollars last year on revenue of 46.98 billion. Do they seriously think that lowering the service level, not raising it, will actually help?

Does it ever?

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