In the television business, distribution is the key component in making content accessible and viewable by consumers on traditional and new platforms. Distribution is not only the way programming reaches audiences, but is a large component of programmers and distributors business models.
Traditionally TV distribution used to be much simpler; it was primarily through TV and consumed on the TV set. In this old media structure there were barriers to reaching consumers, (you would have to own a network or have a program carried by one). Today broadband allows for video content to be carried and viewed on the web. Countless individuals and companies can now reach viewers in new ways with all types of video content.
Television is still the primary way people consume video but new devices and new content are beginning to change consumers viewing behavior. Viewers can watch traditional TV or now have the option to aggregate their favorite videos through many new options like Netflix, Hulu, Amazon, or TV Everywhere and watch them on their TV, or a tablet, phone or computer. The rise of new platforms to distribute TV content through DVR and VOD plus online viewership has resulted in a number of exciting developments for programmers and distributors, as well as real threats and challenges.
Right now television content distribution can be broken down into three categories: traditional distributors, new challenging distributors, and programmers that try to take advantage of all avenues of distribution. Programmers now distribute through the traditional multi-channel operators (Time Warner), phone companies (Verizon & AT&T) and satellite distributors (like Dish and DirectTV) and new avenues like apps, TV Everywhere through a cable operator or digital offerings like Netflix.
Traditional Distributors in the TV Market
MSO’s, satellite, and phone companies are actively trying to delve into the growing market of cross platform viewing and video streaming. A recent development is TV Everywhere.
Comcast successfully released Xfinity on demand and struck deals with cable networks, broadcasters, and pay TV to stream their content online for Comcast subscribers. Applications like TV Everywhere are being released by a multitude of distributors, allowing consumers to stream their carried programming on any tablet, phone or computer. Time Warner now has TWC TV and Cablevision has TVtoGO. Phone companies also provide online streaming; Verizon streams FiOS TV and AT&T streams U-verse.
In February, DirectTV joined the online game and released DirectTV Everywhere. For traditional distributors, “TV Everywhere” has become an important part of their distribution model. But their applications have a lot of competition coming from Netflix, HuluPlus and Amazon which offer library’s of content and more recently original or exclusive programming.
Rising Challengers to Traditional Distributors
The development of broadband as a vehicle for video has spurred huge entrepreneurial investment in companies like Netflix, Apple, Amazon, Hulu, YouTube as well as user-generated content. Traditional distributors are being challenged by new online distribution channels like Netflix, Hulu, Amazon, Apple TV, and Google (YouTube). These distributors are offering very appealing services to consumers and at low costs (Netflix & HuluPlus: both $8 a month and Amazon Prime $79/ yearly), or in the case of the web, Google or YouTube for free (you only need to have broadband). In addition, there is easy access through many devices like the computer, Xbox, iPad, etc with a wide range of content. We know this is appealing to consumers since Netflix recently grew to almost 28 million subscribers.
For the past few years Netflix, Amazon and HuluPlus have provided old shows, almost like a library service. This year Netflix shook up its programming strategy when it released original content “House of Cards”. They did what no distributor or programmer has done before: presenting an entire television series “House of Cards” to subscribers upfront. The viewer can than choose to watch the show all at once or at their own pace instead of once a week. In some ways, this strategy makes Netflix a competitor to HBO and cable channels. It also has blurred the lines as to what kind of company Netflix is: a distributor or original programmer? Further following a similar lead, Amazon is now promoting that they have exclusive content that you can only find and watch on Amazon.
Apple’s release of the Apple TV has further blurred the lines of traditional distribution; offering the perks of online streaming and TV together. Further Hulu Plus and other services are offered on the Apple TV . These advancements have changed how the media works and how television content is distributed to consumers. Netflix offering original content, the Apple TV, Hulu Plus and Amazon’s exclusive content offerings shows how fast things are transforming in the distribution and video content business
TV Programming Distribution Strategies
Broadcast and cable networks, to stay competitive, have been dabbing into online streaming, tablet apps, and phone applications. Most cable networks do their best to offer applications that distribute some recent episodes, behind the scenes clips, best of clips, etc. However cable networks tend to limit the amount of long-form content because the distributors they partner with would not pay them as high of a sub fee for their programming. A critical part of the business model for cable programming services is maintaining a strong sub fee with distributors.
Cable channels like A&E, Discovery, History, Lifetime and many others have iPad applications. Disney offers “Watch” to stream ESPN and Disney Channel to computers and other devices . Recently on the broadcast side, broadcasters have been making more content available on their websites and through services like Hulu. Since broadcast don’t rely on sub fees they have been much more aggressive in moving their content to other platforms than cable. And just this month ABC and CBS both came out with tablet applications to stream their television series.
Distributors have been and must adapt to new technologies, platforms and consumer demands. Despite the buzz that cable and broadcast are “dying mediums,” the Neilson graph below shows that while online viewership is increasing, people are still consuming a large percent of content on the TV set.
The real measure of the success of TV distributors will be how well their offerings satisfy consumer interests in viewing content how and when they want too. If the traditional distributors don’t provide it, new companies like Netflix and Apple will meet that demand.
Distribution refers to the means by which television programming is delivered to consumers. It is done through traditional means like Broadcast, Cable or Satellite television, or through newer means like Video on Demand (VOD), Digital Video Recording (DVR), and online Subscription Video On Demand (SVOD) services like HULU Plus and Netflix.
When it comes to overseeing and regulating of these different means of mass television distribution, the Federal Communication Commission (FCC) is the principle government agency in charge. Its jurisdiction covers the means of mass emerging television technologies at the intersection of telephone, internet, computing, and digital signals. .
via the FCC website (http://www.fcc.gov/logos)
Several events have been ongoing during this semester related to the regulatory and legal aspects of distribution include a satellite provider, Dish’s disputes with both cable and broadcast networks, and the FCC’s ongoing plans for an incentive auction to reclaim spectrum space for wireless operators.
Dish Network vs. AMC Networks
The Networks’ dispute started years earlier with Cablevision’s lawsuit against Dish over their Voom HD channel which Dish stopped carrying in 2008. AMC was spun off from Cablevision in 2011. In April 2012, Dish notified AMC that it would drop their channels and by July, when their contract expired, Dish removed AMC Network channels AMC, WEtv, IFC, and Sundance from its lineup .
The companies indicated different reasons for the dispute. AMC stated that DISH dropped its programming because it wanted to gain leverage in an unrelated lawsuit involving Cablevision and their Voom HD channel . DISH, conversely stated that the dispute was over “bundling,” in which big networks like AMC try to sell several of their channels, both high- and low-rated, to providers in a bundle to get a better price .
Image via Deadline website (http://www.deadline.com/tag/dish-network/)
By September, Dish’s 14 million subscribers had been without any AMC channels for more than two months and feared not be able to view the season premiere of the AMC hit show, The Walking Dead, set to premiere October 14. Speaking on the dispute, Dish’s senior vice president of programming, Adam Shull stated that “The problem is they’re asking me to pay for four channels for really what is the price of three shows,” thus Dish wouldn’t be paying for any AMC shows .
On their part, AMC turned to social media in a quest to get their channels back on Dish, launching a YouTube video contest for angry Dish subscribers called “Hey DISH, Where’s my AMC?” .
The conflict would not be resolved until October 21 when Cablevision and AMC Networks settled their lawsuit with Dish Network for $700 million. The deal brought to end a dispute over whether Dish breached an affiliate agreement by terminating AMC’s Voom HD Network in 2008. At a trial that began in late September, AMC sought some $2.4 billion in damages from what it believed was Dish’s improper termination. Dish had defended itself by saying that it had the authority to cancel the Voom deal based on a contractual clause requiring Cablevision/AMC to invest $100 million per year on the channel. As part of the deal Dish also reached a new carriage agreement with AMC, bringing the network back to their lineup along with IFC, Sundance, and WEtv .
Dish Network’s AutoHop vs. Broadcasters
Image via Dish Network Website (http://godish.com/)
Another battle Dish Network has been involved in pertains to the AutoHop feature for its DVR systems, Hopper and Joey. Introduced in March, Autohop, an International Consumer Electronics Show (CES) Innovations 2013 Design and Engineering Award Honoree, allows users who are watching Primetime Anytime recordings to completely skip commercials. When the user starts watching a recording, they are allowed to choose whether or not to skip commercials. Users who choose to skip the commercials move from segment to segment of TV shows without having to watch the ads . This feature has undoubtedly caused uproar with broadcasters, who depend on ad sales for a majority of their revenue.
In May, three of the major broadcasters (CBS, NBC, and Fox) filed suit against Dish Network in Los Angles, contending that the technology violated copyright law. Dish simultaneously filed a suit against ABC, CBS, and NBC in New York seeking a declaratory judgment affirming the legality of their technology . In documents filed August 22, Fox’s lawyer argued that AutoHop was in “violation of the express terms and conditions of its contracts with Fox and federal copyright law. Both parties argued their respective points of view in front of U.S. District Court judge, Dolly Gee, on September 21 in Los Angeles. On November 6, Gee denied Fox’s request for a preliminary injunction that would shut AutoHop down. Gee, in denying Fox said, “Although Dish defines some of the parameters of copying for time-shifting purposes, it is ultimately the user who causes the copy to be made.” She also pointed out that Fox hadn’t proved there would be “irreparable damage” if no injunction was issued. Any harm to Fox, she said, could be relieved by monetary damages. The judge did agree with Fox though that Dish had likely committed copyright infringement and broken the contract between the two companies in making copies of Fox programming for alleged quality assurance .
On November 9, Fox filed an appeal against the denial of its request for an injunction, moving the matter from the U.S. District Court to the U.S. Court of Appeals for the Ninth District. More legal action from broadcasters followed on November 24 when ABC sought a preliminary injunction from U.S. District Judge Laura Taylor Swain in Manhattan federal court to also block AutoHop .
The broadcasters’ reason for going after AutoHop is that it “will ultimately destroy the advertiser-supported ecosystem” they depend on for revenue . The networks make more than $19 billion a year in advertising, money that pays for the high cost of programming. Without advertising, network executives say, media companies would have to charge distributors three times the current rate for their signals, added costs which would be passed on to consumers. Dish, on its part, said that it believes that the AutoHop feature does not violate the networks’ copyrights. Instead, the company said AutoHop is simply an enhancement of existing ad-zapping technologies, and ultimately a matter of consumer choice .
FCC Incentive Spectrum Auction
Image via Cio website (http://www.cio.com/article/717594/FCC_Approves_Wireless_Spectrum_Incentive_Auction_Plan)
The FCC is a quasi-autonomous commission that has elements of each of the legislative, judicial, and executive branches of government. It is part of the group of independent regulatory agencies (see also the FAA, FTC, and SEC) . In its control of television, the FCC performs several distinct functions such as rulemaking, licensing, registration, adjudication, enforcement, and informal influence .
Last February, President Obama signed a law empowering the FCC to buy spectrum from broadcasters wishing to give it up and then turn around and auction it to wireless broadband carriers. The FCC is working on the implementing rules for the incentive auction — so-called because broadcasters have a cash incentive to give up their spectrum . They have hopes that the auction could begin as early as 2014, but have until September 2022 to conduct the sale and license the airwaves to wireless companies .
For the most part, full-service broadcasters with major network affiliations and newsrooms have said they have no interest in the incentive auction, preferring to hang on to their entire spectrum so they can offer new services. However, other broadcasters that are struggling see the incentive auction as a way to recoup some or all of their investments. Speculators have also entered the market, buying up marginal stations with the intention of selling their spectrum at a profit in the FCC auction .
Fall FCC Spectrum Auction News
September 07, 2012: FCC Chairman Julius Genachowski set to release the FCC’s framework for the spectrum auction with target of having a report and order voted by mid-2013 and the auctions completed by the end of 2014 . Full article.
October 04, 2012: Chairman Genachowski said that the FCC will exceed its 300 MHz target for freeing up spectrum, a target the commission set in the National Broadban Plan . Full article.
November 13, 2012: An anonymous group of broadcasters interested in selling their TV spectrum in the incentive auction created the Expanding Opportunities for Broadcasters Coalition and tapped former Fox and Disney lobbyist Preston Padden to lead their efforts before the FCC as the commission writes rules for the auction . Full article.
December 03, 2012: FCC officials spelled out some financial options in a PricewaterhouseCoopers LLP webcast, urging listeners to file comments as the commission works to write rules for the auction. The deadline for comments on its Notice of Proposed Rulemaking was extended to Jan. 25, with reply comments due March 26 . Full article.
With the auction yet to occur, there is more news to come. To stay updated, check out the FCC’s official website.