Thursday, December 22, 2005

Pre-XMAS Biz News

EDITOR'S NOTE: SORRY. SOMETIMES YOU HAVE TO TAKE CARE OF BUSINESS. READ THIS, AND WE'LL GET BACK TO THE FUN STUFF SHORTLY. (AND EAT YOUR VEGGIES!)

A LA CARTE CABLE NOT IN CONSUMERS’ BEST INTEREST
Kagan Report Finds Costs Would Rise
December 20, 2005

By Chuck Ross
LOS ANGELES (AdAge.com) -- As cable operators scramble to offer family-friendly tiers to ward off a government-mandated a-la-carte system of delivering channels to customers, it's become clear that consumers' best interests are not really what's being served.


That's the conclusion to be drawn from Kagan Research's latest look at the economics of the situation.

The problem is that the underlying conclusion that set off this latest round of discussions is based on a false premise, according to Kagan. That premise, as articulated by Federal Communications Commission Chairman Kevin Martin and based on a yet-to-be released FCC report, is that a la carte is in the best interests of the consumer.

"It's typically not understood that expenses for TV-channel platforms would rise with a la carte," Kagan said in a release last Friday. EDITOR'S NOTE: HARD TO TELL FROM ALL THE HAND-WRINGING AND WHINING COMING FROM THE CABLE OPERATORS. BUT ACTUALLY, I THINK IT'S COMMON KNOWLDEGE...TO EVERYONE BUT THE GOVERNMENT LOOKING FOR SOMETHING BENIGN TO MISDIRECT OUR ATTENTIONS ABOUT, AND TO THE FEW MISGUIDED LOBBYISTS....THAT ALACARTE IS A BAD IDEA.

On average, Kagan reports, cable subscribers pay about $1.49 per day for a bundled package of 64 channels, about seven cents a day more than they paid per day last year, when they received four fewer channels. On an average per-hour-watched basis, subscribers pay 15 cents to 20 cents. To beat the bundle price on an a-la-carte basis, subscribers would have to choose no more than nine channels, Kagan said.

This analysis assumes that most subscribers, in an a-la-carte pricing system, would tend to order channels such as Discovery and ESPN "that are also the most expensive," Kagan said.

"Those who want to rush to a-la-carte pricing are thinking too simplistic and are not thinking through the implications," Kagan Senior Analyst Derek Baine told TelevisionWeek. EDITOR'S NOTE: LIKE I SAID....OUR GOVERNMENT AT WORK. PROTECTING US FROM THINGS THAT AREN'T REALLY A PROBLEM, WHILE THE REAL PROBLEMS....WAY TO COMPLICATED TO MAKE FOR GROOVY SOUND-BITES....GO UN-TENDED TO.

The entire push for a la carte is based on flawed thinking at an even more basic level, Mr. Baine said. "Most ironically, what started all of this was the uproar about indecency that started with the Janet Jackson incident at the Super Bowl. You hear the argument that if there [were] a-la-carte choices or family tiers, many of us would not have seen that," he said, adding that the incident with Ms. Jackson happened during the Super Bowl over mainstream broadcast TV and would not have been blocked in any homes by family tiers or an a-la-carte system. EDITOR'S NOTE: DUH.

If only half a cable operator's subscribers migrate from a basic bundle to an a-la-carte model, "TV-channel operators would need to raise per-capita channel-carriage fees by a multiple of four," Kagan said in its release.

Currently, on average, basic-cable networks derive about half their revenue from fees they get from cable operators, about 44% of their revenue from ad sales and the rest from "miscellaneous activities," according to Kagan. EDITOR'S NOTE: MISC. ACTIVITIES? DRUG SALES? PANDERING? MONEY-LAUNDERING?

"If we went to a la carte, niche channels with small audiences would never get off the ground," Mr. Baine said. "Take the Food Network, for example. If the industry had been on an a-la-carte model when it wanted to launch, it would simply have never got off the ground. But because it was part of a basic bundle, it was able to find an audience and it prospers."

A la carte is, quite simply, "a bad consumer idea," said Brad Siegel, a cable-programming veteran who is vice chairman of the 14-month-old Gospel Music Channel. It "could cost the consumer so much more money to get so much less," he added. EDITOR'S NOTE: SOMETHING WE'RE ACCUSTOMED TO FROM OUR GOVT., OF COURSE. "Anyone who advocates [a la carte] doesn't understand what the impact would be for the consumers and the financial model of the business as a whole."

However, others argue that the fact cable operators are now saying they can come up with family tiers argues for going to an a-la-carte system. That Time Warner Cable, for example, has said it now has a plan for a family tier "demonstrates that the cable industry does have the ability to offer options, when they've been claiming for many months that they can't," said Lanier Swann, director-government relations for Concerned Women for America. EDITOR'S NOTE: JUST BECAUSE THEY CAN, DOESN'T MEAN THEY SHOULD, OR THAT IT'S A GOOD IDEA. (YOU SILLY DOOFUS)

Transition to Digital Gets Closer
By
STEPHEN LABATON
WASHINGTON, Dec. 19 - The House of Representatives moved early Monday to provide millions of households with coupons to buy equipment to keep their television sets working after broadcasters switch from analog to digital signals. But consumer groups warned that the new law would still impose significant costs on viewers. EDITOR'S NOTE: BUT THE PICHERS WILL BE SO PURTY!

The House measure, including a mandate to complete the transition to digital television by early 2009, was included in budget legislation approved shortly before sunrise by a vote of 212 to 206. The provisions, awaiting Senate approval, are of enormous importance to the television, cable and wireless telephone industries.

As part of the transition, the legislation would provide each household with up to two coupons worth $40 each for converter boxes to attach to analog television sets so they are not obsolete once broadcasters surrender their analog licenses on Feb. 17, 2009, as the new law would require. Not coincidentally, the date was selected to fall two weeks after the Super Bowl and a month before the widely watched National Collegiate Athletic Association basketball tournament.

Supporters of the legislation said it would allow enough time for a smooth transition and would raise billions of dollars for the Treasury from the sale of analog spectrum licenses that will have to be surrendered by the broadcasters and are being sought by wireless telephone and broadband providers. The legislation would also set up a $1 billion program for emergency workers to upgrade their communications systems.

"A great technical revolution that has been in the making for years will finally be complete," said Representative Joe L. Barton, Republican of Texas, who heads the Energy and Commerce Committee. "We will have three years to prepare for the transition. EDITOR'S NOTE: AT THE SPEED THAT TECHNOLOGY IS ADVANCING, BUT THE TIME THE LUDDITES IN WASHINGTON GET TO THIS 'MILESTONE', I'M WILLING TO BET THE TECH WILL HAVE MOVED ON TO SOMETHING ELSE. (VERY LIKELY EXPONENTIALLY).

"That is more than enough time for manufacturers and retailers to move low-cost digital televisions and converter boxes into the market, for the Federal Communications Commission to complete the channel allocation process, for broadcasters to finalize their digital facilities, and for government and industry to prepare consumers for the transition."

But consumer groups said the money allocated for the program, $990 million to $1.5 billion, would not be nearly enough for all of the analog television sets and that, in any event, many consumers would still need to pay $20 or more to upgrade each television set in their home that is not connected to a cable or satellite service. (The converter boxes are expected to cost about $60 apiece, and the coupons cannot be combined for a single purchase.)

"This is the government making your TV go black and then only paying part of the costs for some of the people to make it work again, and none of the costs for others," said Gene Kimmelman, public policy director at Consumers Union. EDITOR'S NOTE: MAYBE PEOPLE WILL LEARN TO READ AGAIN. OR TALK TO ONE ANOTHER. (HOW HORRIBLE)

An estimated 70 million to 80 million television sets now in use are analog and are not attached to cable or satellite services, though experts say that by the completion of the transition, consumers will be using many more digital sets and fewer analog ones.

The consumer groups and some Democrats had preferred a version of the measure adopted by the Senate Commerce Committee two months ago that would have provided $3 billion for converter boxes.

The conversion to digital signals will not affect consumers who own digital television sets or subscribe to satellite services or digital cable services. But analysts and cable company executives said additional legislation might be required to enable cable companies to alter their broadcasting feeds so that the more than 50 million customers who subscribe to analog cable services would be unaffected. EDITOR'S NOTE: THE CABLE COMPANIES ARE ALREADY FORCING US OFF OF THE ANALOG BOXES. I HAD ONE EACH OF THE ANALOG AND DIGITAL BOXES AND THE ANALOG SIGNAL WENT BLACK LAST YEAR.

The cable companies have sought legislation that would allow them to convert digital signals back into analog signals before transmitting them into homes, which would be far less expensive than replacing set-top boxes in each residence.

The House legislation will raise billions of dollars for the federal Treasury from auctions for spectrum licenses that must be surrendered by broadcasters. Those licenses are desirable because of their special characteristics - they cover large distances and the signals easily penetrate buildings.

As a result, wireless telephone companies and others have been urging the quick auction of those licenses to expand their broadband and other services. The government estimates that those auctions, which will begin in 2008, could raise at least $10 billion for the Treasury as it faces growing deficits from the war in Iraq, hurricane damage in the South and the new program to produce vaccines for the avian flu.

As a practical matter, the existing did not encourage a speedy transition to digital television because it required broadcasters to surrender their analog licenses at the later of two dates - Dec. 31, 2006, or when 85 percent of households receive digital signals.

Experts said the 85 percent requirement threatened to delay the transition for many years, although broadcasters have lobbied against setting a more immediate deadline.

CABLE WINNERS INCLUDE TNT, USA AND CARTOON NETWORK
Year-End Ratings Show Cable Nabbed 55% of TV Viewing
December 20, 2005
By
Abbey Klaassen
NEW YORK (AdAge.com) -- The good news for TV networks is that TV viewing is up about 10% from five years ago. Better news for cable networks is that they’ve reaped most of that increase in viewing.


According to Turner analysis of Nielsen Media Research, while 55% of TV viewing is to cable networks, the cable industry only nabbed 31% of total prime-time advertising dollars -- a sticking point for many in the cable industry. EDITOR'S NOTE: WHINE WHINE WHINE. (SOME OF THE AD PODS ON CABLE ARE SO FREQUENT AND SO LONG, I HAVE TIME TO GO TO THE BATHROOM, MAKE MYSELF A SNACK, ...........AND GET A MASTER'S DEGREE, BEFORE THE SHOW COMES BACK ON).

But among the cable landscape, there are also clear winners and losers.

This year was no different, as Turner’s TNT won the crown for viewers 18 to 49, averaging almost 1.2 million in prime time. The network was fueled by a pair of drama series that both ranked in the top three new original cable series for the year for viewers 18 to 49. “The Closer,” starring Kyra Sedgewick,” and “Wanted” with Gary Cole both averaged more than 1.5 million viewers in the demo.

In the past two months, however, NBC Universal’s USA network has given it a formidable challenge for the title, largely due to the return of Monday night WWE “Raw” telecasts, which regularly rank among the highest-rated and most-watched cable entertainment programs. TBS, ESPN and Lifetime ranked third through fifth in viewers 18 to 49.

"Adult Swim," the late-night programming block on Cartoon Network, had a banner year, although it wasn’t rated for the full year of 2004.

In a year-end ratings presentation two weeks ago, Turner Broadcasting research chief Jack Wakshlag had some fun illustrating its delivery of adults 18-to-34, as he compared "Adult Swim" and late-night hosts Jimmy Kimmel, David Letterman, Jay Leno and Jon Stewart. All, he noted, were out-delivered by "Adult Swim."

In the kids' category, Nickelodeon managed to increase its already-formidable lead position. It finished the year in first place for kids 2-11 with 1.2 million viewers, ahead of Cartoon Network’s 774,000 and Diseny’s 747,000. The network was encouraged by an 8% increase in tween viewing as well. It scored 523,000 tweens, ages 9 to 14, and its “Zoey 101” was the third-highest-ranked tween program after Fox’s “American Idol” and CBS’s “Survivor: Palau.”

A&E’s new programming look aged downEDITOR'S NOTE: 'AGED DOWN'? DONCHA LOVE THE WAY AD PEOPLE 'DUMB' DOWN THE LANGUAGE? the network dramatically. It was up 12% in 18-to-49s and 28% in 18-to-34s. Rainbow’s AMC, meanwhile, notched 16% and 17% gains in 18-to-49s and 18-to-34s, respectively.

Hallmark Channel grew 24% in 18-to-49s. FX was up 5% in the demo and Food Network up 12%. Among music networks, BET increased its 18-to-34 demo 15%, CMT increased 24% and VH1, despite its maturity, was up 15% in 18-to-49s and 18% in 18-to-34. Spike was up 23% in 18-to-49s, but could run into trouble in 2006 without the return of its top-rated program, WWE “Raw.”

Remaining within a few percentage points of their 2004 performances were Lifetime, Comedy Central, TBS, HGTV and History Channel.

Discovery fell 12% in 18-to-49s and, despite ESPN’s insistence that the absence of hockey didn’t hurt, it’s 2005 18-to49 ratings dropped 11%. TLC tried to shore up its losses and ended the year down about 25% in all demos.

Several smaller cablers ended the year with significant gains: MTV2 will be up 48% in 18-to-34 and National Geographic will be up about 60% in 18-to-49s and 25-to-54s. Comcast’s OLN was up about 26% and Discovery Health was up 30% in18-to-49s.

Among the news channels’ 25-to-54 sales demo, CNBC was down 7%, CNN and MSNBC both up 7% and Fox News down 12%. While CNN Headline News had the most growth at 52%, Fox News remained the leader for number of 25-to-54 viewers, by an almost 80% margin.
EDITOR'S NOTE: AND MY HEAVY VIEWING OF BBCAMERICA MUST SURELY HAVE TRIPLED THAT LITTLE CHANNEL'S RATINGS!

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