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AT&T Requests Transition from Analog to Broadband
AT&T is joining Verizon Wireless in an effort to even out the costs of wireless and landline services. AT&T has requested that the Federal Communications Commission approve replacing legacy circuit-switched or public-switched telephone networks (PSTN) with broadband and IP-based connections.
AT&T's request comes after the FCC issued a public notice on Dec. 1 asking for input on what it would take to move from the legacy system to Internet protocols.
"In identifying the appropriate areas of inquiry, we seek to understand which policies and regulatory structures may facilitate, and which may hinder, the efficient migration to an all-IP world," the FCC wrote. "In addition, we seek to identify and understand what aspects of traditional policy frameworks are important to consider, address and possibly modify in an effort to protect the public interest in an all-IP world."
At the core of AT&T's argument to replace the worldwide telephone network that carries analog data is that the company is losing landline subscribers each day as more people rely solely on wireless devices. Already 99 percent of Americans have wireless coverage, while 700,000 landline subscriptions are ending each month, according to AT&T.
Between 1999 and 2007 the number of broadband connections rose from less than three million to more than 121 million, according to a report by the FCC. Today, those services are available to nearly 90 percent of American households, and 66 percent of those households subscribe to broadband service.
While the majority of households are making the switch, others will not be prepared to make the change.
"More and more folks are relying on their cell phones or some kind of VoIP service at home, but it's going to be hard to convince an older generation to give up that familiar dial tone that often works even when nothing else does and the security of traditional 911 services," said Michael Gartenberg, a vice president at Interpret. "While we may see requests like this as some providers would like to put those businesses into more lucrative things, it's not likely to happen soon."
Latin American Mobile TV services to generate revenues of US$1.7bn in 2009-14
Accumulated revenues from mobile TV services in Latin America for 2009-14 will reach US$1.7bn, according to a recent study by telecoms consultancy Signals.
Revenues from mobile TV in the region are expected to grow at a CAGR of 62.4% during that period, Signals said.
The revenue forecast is based on estimated total consumption of 4.33bn hours over those six years.
Mexico and Brazil are the most mature markets today, while Argentina lags behind other markets in the region due to regulatory obstacles.
Signals said that operators will need to combine different services including mobile TV as well as fixed-mobile alternatives.
According to the consultancy, the deployment of 3G networks has enabled operators to offer quality unicast mobile TV services. By the end of the third quarter 2009, there were nine operators in Latin America offering the service.
"Brazil is by far the most competitive market, with four operators offering mobile TV services," Signals analyst Elías Vicente said. Brazilian operators offering this service are Claro, Vivo, Oi and TIM. "These operators as well as Mexican operators Iusacell and Telcel have interesting 3G packages including mobile TV services," Vicente told BNamericas.
"In Argentina, there are regulatory obstacles. However, the government has said that mobile TV services could be offered free of charge through terrestrial digital TV networks," he said.
The analyst added that Venezuela and Peru also have some deployments through 2.5G.
The increasing penetration of smartphones has contributed to the expansion of mobile TV services across the region.
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Broadcasters' Woes Could Spell Trouble For Free TV
A new Associated Press report states that for more than 60 years, TV stations have broadcast news, sports and entertainment for free and made their money by showing commercials. That might not work much longer.
The business model is unraveling at ABC, CBS, NBC and Fox and the local stations that carry the networks' programming. Cable TV and the Web have fractured the audience for free TV and siphoned its ad dollars. The recession has squeezed advertising further, forcing broadcasters to accelerate their push for new revenue to pay for programming.
That will play out in living rooms across the country. The changes could mean higher cable or satellite TV bills, as the networks and local stations squeeze more fees from pay-TV providers such as Comcast and DirecTV for the right to show broadcast TV channels in their lineups. The networks might even ditch free broadcast signals in the next few years. Instead, they could operate as cable channels — a move that could spell the end of free TV as Americans have known it since the 1940s.
"Good programing is expensive," Rupert Murdoch, whose News Corp. owns Fox, told a shareholder meeting this fall. "It can no longer be supported solely by advertising revenues."
Fox is pursuing its strategy in public, warning that its broadcasts — including college football bowl games — could go dark Friday for subscribers of Time Warner Cable, unless the pay-TV operator gives Fox higher fees. For its part, Time Warner Cable is asking customers whether it should "roll over" or "get tough" in negotiations.
The future of free TV also could be altered as the biggest pay-TV provider, Comcast Corp., prepares to take control of NBC. Comcast has not signaled plans to end NBC's free broadcasts. But Jeff Zucker, who runs NBC and its sister cable channels such as CNBC and Bravo, told investors this month that "the cable model is just superior to the broadcast model."
The traditional broadcast model works like this: CBS, NBC, ABC and Fox distribute shows through a network of local stations. The networks own a few stations in big markets, but most are "affiliates," owned by separate companies.
Traditionally the networks paid affiliates to broadcast their shows, though those fees have dwindled to near nothing as local stations have seen their audience shrink. What hasn't changed is where the money mainly comes from: advertising.
Cable channels make most of their money by charging pay-TV providers a monthly fee per subscriber for their programing. On average, the pay-TV providers pay about 26 cents for each channel they carry, according to research firm SNL Kagan. A channel as highly rated as ESPN can get close to $4, while some, such as MTV2, go for just a few pennies.
With both advertising and fees, ESPN has seen its revenue grow to $6.3 billion in 2009 from $1.8 billion a decade ago, according to SNL Kagan estimates. It has been able to bid for premium events that networks had traditionally aired, such as football games. Cable channels also have been able to fund high-quality shows, such as AMC's "Mad Men," rather than recycling movies and TV series.
That, plus a growing number of channels, has given cable a bigger share of the ad pie. In 1998, cable channels drew roughly $9.1 billion, or 24 percent of total TV ad spending, according to the Television Bureau of Advertising. By 2008, they were getting $21.6 billion, or 39 percent.
Having two revenue streams — advertising and fees from pay-TV providers — has insulated cable channels from the recession. By contrast, over-the-air stations have been forced to cut staff, and at least two broadcast groups sought bankruptcy protection in 2009.
Fox illustrates the trend: Its broadcast operations reported a 54 percent drop in operating income for the quarter that ended in September. Its cable channels, which include Fox News and FX, grew their operating income 41 percent.
Analyst Tom Love of ZenithOptimedia estimates that ad revenue at the big networks dropped 9 percent in 2009 and will be followed by an 8 percent drop in 2010 and zero growth in 2011.
A small chunk of the ad revenue is being recouped online, where the networks sell episodes for a few dollars each or run ads alongside shows on sites such as Hulu. Media economist Jack Myers projects online video advertising will grow into a $2 billion business by 2012, from just $350 million to $400 million in 2009.
But that is not significant enough to make up for the lost ad revenue on the airwaves. Advertisers spent $34 billion on broadcast commercials in 2008, down by $2.4 billion from two years earlier, according to the Television Bureau of Advertising.
So rather than wait for the Internet to become a bigger source of income, the networks and local stations are mimicking what cable channels do: They're charging pay-TV companies a monthly fee per subscriber to carry their programming.
Since 1994, the Federal Communications Commission has let networks and their affiliates seek payments for including their programming in the pay-TV lineup. Not everyone demanded payments at first. Instead they relied on the broader audience that cable and satellite gave them to increase what they could charge advertisers.
The big networks also were content to let their broadcast stations essentially be subsidized by higher fees for the cable channels that fell under the same corporate umbrella. A pay-TV company negotiating with the Walt Disney Co., which owns ABC, is likely paying more for the ABC Family channel than it otherwise would, with the extra assumed to help Disney cover its costs for the ABC network broadcasts.
But over time — such contracts generally run about three years — more networks began demanding payments for the stations they own. And affiliates already receiving the fees have bargained for more money.
Some talks have been tense. In 2007, Sinclair Broadcast Group, which operates 32 network-affiliated stations around the country, pulled its signals for nearly a month from Mediacom Communications Corp., which provides cable TV to about 1.3 million subscribers, mainly in small cities.
Mediacom may again lose signals from Sinclair's affiliates in markets as large as Des Moines and Cedar Rapids, Iowa, after last-ditch negotiations on fees Monday failed to produce a replacement for an agreement expiring Friday. Mediacom spokesman Tom Larsen said Sinclair wants a 50 percent hike in fees, though neither company would provide specific figures. Sinclair's general counsel, Barry Faber, said no new talks have been scheduled.
The American Cable Association says its members — mainly small cable TV providers — have seen their costs for carrying local TV stations more than triple over the past three years. The group's head, Matt Polka, says those fees have gone "straight to consumers' pocketbooks" through higher cable bills.
Gannett Co., for instance, which operates 23 stations, has taken in $56 million in fees from pay-TV operators in 2009 after negotiating a new batch of agreements, up from $18 million in 2008. Dave Lougee, president of Gannett's broadcast arm, defends the fees, saying "broadcasters were late to the game in really starting to go after the fair market value of their signals."
Analysts estimate CBS managed to get as much as 50 cents per subscriber in its most recent talks with pay-TV providers that carry CBS-owned stations. CBS Corp. chief Leslie Moonves said such fees should add "hundreds of millions of dollars to revenues annually."
That could be just the beginning. CBS and Fox are also asking for a portion of the fees that their affiliates get, arguing that the networks' shows are what give local stations the leverage to ask for fees.
Over time, the networks might be able to get even more money by abandoning the affiliate structure and undoing a key element of free TV.
Here's why: Pay-TV providers are paying the networks only for the stations the networks own. That amounts to a little less than a third of the TV audience, which means local affiliates recoup two-thirds of the fees. If a network operated purely as a cable channel and cut the affiliates out, the network could get the fees for the entire pay-TV audience.
If forced to go independent, affiliates would have to air their own programming, including local news and syndicated shows.
Fitch Ratings analyst Jamie Rizzo predicts that at least one of the four broadcast networks "could explore" becoming a cable channel as early as 2011.
Any shift would take years, as the networks untangle complicated affiliate contracts. At an analyst conference in 2008, CBS's Moonves called the idea an "a very interesting proposition." But he added that it "would really change the universe that we're in."
TV industry revenue drops 22.4 percent for 2009,
TV industry revenue dropped 22.4 percent to $15.6 billion last year compared to the industry’s tally for 2008, according to a year-end estimate from BIA/Kelsey. The 2009 revenue figure, part of the financial advisory company’s “Investing in Television Market Report,” marks the beginning of a leveling off in industry revenue to the mid-$10 billion level, which BIA/Kelsey expects to last through at least 2013.
The decline returns industry revenue to mid-1990 levels. For 2010, industry revenue is expected to grow a modest $500 million to $16.1 billion. An estimated $130 million of that growth will come from online advertising, according to BIA/Kelsey. In 2009, online revenue accounted for $518 million for the TV industry, up 12 percent from 2008.
By 2013, due to continuous double-digit revenue growth from online and mobile channels, the total should reach $1 billion. “While television’s numbers are tapering down due to audience erosion from other media delivery options, we continue to see that local TV remains a valuable way to reach relatively larger audiences, critical for mass communications in political campaigns,” said BIA Advisory Services VP Mark Fratrik.
According to the report, several markets will see revenue growth due to state and local elections, including Philadelphia, up 6.5 percent; Pittsburgh, up 5 percent; Las Vegas, up 5 percent; Chicago, up 4.5 percent; St. Louis, up 4.5 percent; and Hartford-New Haven, CT, up 4.5 percent.
Fox grants 'brief extension' in Time Warner cable dispute
Fox television's threatened blackout was avoided just before at New Years midnight deadline when the network struck a deal with Time Warner Cable to briefly extend their contract as negotiations between the two companies continued.
Time Warner Cable Inc. made the announcement as the clock rolled past midnight Thursday on the East Coast.
The extension for just a few hours made it appear likely that a deal on fees would be reached, allowing viewers access to Friday's Sugar Bowl between the Florida Gators and the Cincinnati Bearcats. The Cotton Bowl on Saturday, the NFL's final regular season contests on Sunday and "The Simpsons" and other Fox shows were also at risk.
Fox had threatened to pull the signal from 14 TV stations it owns, a move that would have affected more than 6 million customers of Time Warner Cable and Bright House Networks in New York, Los Angeles, Orlando, Fla., and other markets.
Six Fox cable channels, including FX, Speed and Fuel, were still being distributed as carriage arrangements on those channels didn't expire until midnight Pacific time.
The dispute focuses on how much Fox is paid by cable companies to retransmit stations' signals. Time Warner Cable and a smaller cable TV operator, Bright House Networks, have resisted paying a new $1 monthly fee per subscriber that News Corp. is demanding from both operators.
Time Warner Cable CEO Glenn Britt has called the fee demand excessive and said the cable operator has reached deals for "much lower" rates with Fox affiliates — stations that carry Fox programming but are owned by other companies.
Fox has said it needs subscription revenue to supplement the advertising revenues that have supported its broadcast network up until now.
Separately, Sinclair Broadcasting Group, which owns broadcast stations in markets as large as Des Moines and Cedar Rapids, Iowa, agreed to an eight-day extension for cable TV operator Mediacom Communications Corp. to carry Sinclair's Fox and CBS stations. Mediacom will pay Sinclair a higher rate than it was paying under a contract that also was expiring at midnight Thursday.
But in a sign of how talks can go awry, Cablevision Systems Corp. said early Friday that it had failed to reach a deal to continue carrying HGTV and Food Network for its 3.1 million subscribers in the New York, New Jersey and Connecticut, adding it had no expectation of carrying the signals again. The channels are owned by Cincinnati-based Scripps Networks Interactive Inc.
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Sony simplifies distribution system
Sony will unify international distribution for its vidgames and core electronics in 2010, according to the Nikkei newspaper.
This cost-cutting move means that subsid Sony Computer Entertainment will no longer ink separate overseas distribution deals for PlayStation 3 and other products, but will combine its distribution with those of the parent company.
Sony foresees a 50% increase in distribution costs in the coming fiscal year, making the search for savings and efficiencies ever more urgent. By consolidating its contract bidding operation, the company hopes to wring better deals.
Sony plans to make its game biz profitable by March 2011.
Irdeto acquires Philips White Box
Irdeto, the CA/DRM specialist, has acquired Philips Electronics' full suite of white-box cryptology patents, patent applications, software and knowledge, to significantly booster its existing IP portfolio for its Irdeto Cloakware solution.
Envivio Adds $1M for Video Encoding
Video encoding provider Envivio has raised $1 million worth of debt in a convertible note filed today with the SEC. The South San Francisco, Calif.-based company, which was one of the first allowed onto Apple’s new HTTP streaming platform, had last raised funding in 2008, when it took $25 million from a large group of investors including Harbourvest, Atlantic Bridge and Samsung Ventures. Envivio fits nicely in the middle of the industry shift towards adaptive bitrate streaming (sub. req.).
Equity firms eye Motorola's STB unit
Motorola's sell off its set top box unit has ignited serious interest from major private equity firms. Motorola is reported to be selling the unit that had $10.1 billion in sales in 2008.
Reuters reports that Bain Capital, TPG Capital, Blackstone Group and Silver Lake Partners have put in bids for the unit. There's also speculation that fellow cable vendor Arris Group could have put in a bid possible in partnership with an investment firm.
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Google to TV: Let YouTube handle your online video
Media companies should hand their online video activities to YouTube rather than pursuing home-grown efforts such as Hulu.com, TV Everywhere or SeeSaw, so says Nikesh Arora, Google’s president of global sales operations and business development.
“At some point in time it becomes an economic choice by the content owners. It’s a matter of core competences,” Arora told the FT. He said media industry efforts to replicate cable television’s business model online through TV Everywhere, were “clever”. However, Arora questioned traditional content owners’ ability to be successful content aggregators online. “They still have to figure out how to sell advertising,” he added, arguing that specialist online advertising networks such as Google AdSense could do a better job than broadcasters’ traditional sales teams. Google said it was talking to members of the cable industry about TV Everywhere and “we’d love to figure out a way of being part of it. I don’t think any door has been closed.”
Four elements were required to deliver online video advertising revenues – content creation, technology, advertising production and advertising, claims Arora and he said that after last year’s acquisition of DoubleClick, the online display advertising group, “we are playing in three of the four.”
84% of IPTV service providers will have VOD platform on COTS by 2012
A survey of IPTV service providers carried out by iLocus reveals that 54% of the service providers already use COTS hardware as the underlying platform for VOD solutions. The service providers seem aware of the benefits and the apparent trade off involved. To most of them, COTS hardware issue is a classic debate of modular/mass-production versus custom solution.
Among the remaining 46% that use proprietary hardware, a huge majority of 30% will shift over to COTS hardware in the near future. That represents a major trend. It seems that only a minority of service providers will be using proprietary hardware for VOD solutions a few years from now.
Traditionally VOD soluitons started with some basic ingest and streaming capability. Now the VOD solutions used by the service providers are taking all sorts of roles like nPVR type applications, and CDN etc. The proprietary hardware – for a majority it seems - therefore looks inappropriate in the network because service providers had not planned for all those functionalities.
SCRI RESEARCH NEWS
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