Some more recommendations for the Pay TV world

In continuation of the last posting the following are some observations that will be useful for Pay TV operators (especially MSO's).

• Embrace IP and the vast potential it offers for revenue generation and better consumer targeting and control
• Have CableLabs come up with specifications that address (moving beyond packet switching and interoperability testing & verification) simpler non-capital intensive technology upgrading paths (viz. software driven interactivity, program/channel distribution/switching and monetization)
• Move to a "apps" driven  model for television (this will solve several problems/challenges - e.g. ability to move content to mobile platforms)
• Change the concept of TV Everywhere to make it more attractive (both in terms of content and cost) to the consumer to adopt 
• "Think beyond the box" for newer ideas for platforms of distribution of video content (including HD, 3D, etc.)
• Show FCC and the legislators that the industry is capable of bringing cheaper newer technologies to the Pay TV model and encourage a la carte

If even two of the above are taken up for implementation, you can be sure that Pay TV will have a better chance for long-term survival.

Some prescriptions for the Pay TV Market Operators especially the MSO's

I have been doing a lot of reading, discussing with industry peers and plain old thinking for the reasons why Pay TV operators are facing declining subscriptions and what needs to be done. I have come to the following conclusion.


* The Consumers are fed up with meaningless packages and tiers which only end up in costing the consumer more and hence their dropping tiered Pay TV. If a certain consumer wants just basic channels and local channels of acceptable quality, he/she should be able to get them at a reasonable cost.
* The consumer has always demanded a la carte - i.e. programs/channels that they want to subscribe to with their hard earned dollars, as opposed to the meaningless mind numbing drivel (according to them) that passes for Pay TV.
* The newer delivery methods such as the Internet and Mobile are giving the consumers a chance for retaliating against the entrenched industry practices (as reflected by consistently poor customer service).
* The huge lobbying and the specious arguments that these companies put up to the FCC and the Congress, followed by intensive lobbying for preserving the status quo at the expense of the consumer
* Availability of OTA and OTT has prompted a rethink in many a consumer's mind on the usefulness of paying for  Pay TV
* Neither the FCC or the legislators of all stripes tell the Broadcasters and Pay TV Operators to negotiate in good faith and come up with innovative consumer friendly television
* If the reason for the increase in Pay TV is because of increase in costs of channels being provided to them by the Broadcasters/Programmers, then the Pay TV Operators (in good faith) need to use their industry forum(s) and group(s) to negotiate pricing using the free market principles and not just pass on the costs to the consumer.
* The cost that could be saved by going "a la carte" is deliberately overlooked at the worst and grossly underestimated at the least by Pay TV Operators. The costs for both Pay TV Operators and Broadcasters who provide content should be directly proportional to the popularity of the content (that is why the ratings exist) and the eyeballs that they capture (to garner ad revenues).
* Move delivery of Pay TV content to alternative platforms (such as Internet - Netflix, etc..and Mobile as applications over smart phones (iPhone, iPad, BB, etc..) where consumers are willing to pay for the content and access them on an on-demand basis.
* Study after study shows that advertisement revenue rising on the alternative platforms and declining on the conventional delivery methods. The Pay TV Operators and the Broadcasters should take advantage of this and move their channels to the newer technology platforms
* Customer service is shoddy at best (especially in case of MSO's), and not that very good in case of Satellite operators with FTTH operators (e.g. FiOS, Uverse) being better than the others. This should open their eyes but it seems that as they grow larger, they continue to ignore this, if not deliberately then by default - which again leads to loss of consumers willing to pay for the service.

Pay television subcriptions drop for second straight quarter

SNL Kagan Reports -

The exodus from pay TV continues. SNL Kagan found that U.S. multichannel video subscriptions fell for the second quarter in a row. Cable, satellite and telcoTV providers collectively lost 119,000 customers during the third quarter. The decline compares to a gain of 346,000 customers a year ago, following the digital television transition.

Kagan said it estimated that cable operators lost 741,000 basic subscribers in the third quarter of 2010, “marking the single largest quarterly dip for cable since SNL Kagan began compiling data for the segment in 1980.” Cable’s share of multichannel subscribers slipped to 60.3 percent versus 62.9 percent a year ago.

TelcoTV actually added 476,000 customers in 3Q10, Kagan said. The sector still has but a small market share with 6.4 percent, though that’s up from 4.7 percent in 3Q09.
The direct-broadcast satellite industry, which added 145,000 subscribers in the third quarter, is expanding its market share slightly, up less than 1 percent over the past year to 33.2 percent.

Kagan said the pay TV market declined for the first time in history when it lost 216,000 customers in the second quarter of 2010. In the past two quarters combined, the segment has fallen 2.3 percent to just more than 100 million subscriptions, not eliminating overlap of duplicate subscriptions. 

“Operators are pointing to a continuation of the forces that pushed subscriber gains into negative territory in the second quarter, including the weak economy, high unemployment and elevated churn of former over-the-air households,” said Ian Olgeirson, senior analyst at SNL Kagan. “However, it is becoming increasingly difficult to dismiss the impact of over-the-top [Internet] substitution on video subscriber performance, particularly after seeing declines during the period of the year that tends to produce the largest subscriber gains due to seasonal shifts back to television viewing and subscription packages.”

OECD Forecasts gloomy for next two years for North America.

The OECD has forecast a gloomy forecast for the next two years for growth and employment in North America.

In the United States, the slowing recovery will mean gross domestic product growth sputters to 2.2 per cent in 2011 after a 2.7-per-cent expansion this year. U.S. economic growth will then pick up to a 3.1-per-cent pace in 2012, helping the jobless rate fall to 8.7 per cent that year from 9.7 per cent in 2010, according to the report.

Canada’s economy will grow 3 per cent this year, 2.3 per cent in 2011 and 3 per cent in 2012, the Paris-based OECD said Thursday in its latest outlook for member countries, and the unemployment rate will drop from 8.1 per cent this year to 7.4 per cent by 2012.

The real estate markets in both countries are key to the recovery, but currently are facing immense challenges of declining growth and falling values - more so in the United States.

Our good friend Gary Shilling of the "The Age of Deleveraging" fame has this to say about the prospects in the coming years.

He details nine reasons why real GDP will rise only about 2% annually in the years ahead— far below the 3.3% growth it takes just to keep the unemployment rate stable. Those nine reasons include:

1. U.S. consumers will shift from a 25year borrowing-and-spending binge to a saving spree. This will spread abroad as American consumers curtail the imports of the goods and services many foreign nations depend on for economic growth.

2. Financial deleveraging will reverse the trend that financed much global growth in recent years.

3. Increased government regulation and involvement in major economies will stifle innovation and reduce efficiency.

4. Low commodity prices will limit spending by commodity-producing lands (read Canada)

5. Developed countries are moving toward fiscal restraint.

6. Rising protectionism will slow, even eliminate global growth.

7. The housing market will be weak due to excess inventories and loss of investment appeal.

8. Deflation will curtail spending as buyers anticipate lower prices.

9. State and local governments will contract.

So long until my next.

Vikram R Chari's Blog

November 16, 2010.

This is my first blog that I have started today November 16, 2010. I have not yet started any topics as yet but will soon come up with material for my blogs. Having said that, I will mainly blog on the following topics –

• -          Current Economic situation
• -          The latest fad – gadgets/gizmos and services
• -          Sustainability
• -          Digital Television
• -          Other subjects that catch my interest

So, I close this posting today, and will start with one of the above topics during my next post. Stay tuned.