NATPE 2008: Digital Revolution Devalues Content: Analysts
Added Distribution Points Jeopardize Financial Models
By Linda Haugsted -- Multichannel News, 1/30/2008 11:56:00 PM
LAS VEGAS--The strike by the Writers Guild of America may be the crisis of the moment, but financial analysts are as worried about other issues facing the entertainment industry such as retransmission consent, whether DVR usage is devaluing content, and the prospects of regulatory reform and recession.
On the latter issue, analysts on a Jan. 30 NATPE panel here said distribution companies, such as satellite and cable companies are “really durable.”
But content creators that might be part of those same conglomerates are vulnerable because of the digital revolution. To compete with a distributor takes hundreds of millions of dollars to replicate a system. To replicate and compete with content producers, though, all one needs is a cheap camcorder and a PC.
As companies grapple with competition with Internet-delivered content, and research how to get a piece of that viewership pie, analysts are looking at that issue from a different angle, trying to gauge how Internet-delivered content will impact negotiations on retransmission consent.
“It will be harder [for networks] to convince distributors to pay more for retransmission consent when their content is available for free on the Web,” said Craig Moffett, vice president, senior analyst, U.S. cable and broadcasting at Sanford C. Bernstein & Co. LLC. “I'm fascinated to see how the conversations will play out.”
Analysts are also worried about the long-term effect of digital video recorders on advertising and consumer perception of the value of content. Michael Nathanson, U.S media analyst for Bernstein, called DVRs a type of piracy. A consumer's ability to reprogram their own day is a service that benefits the distributor selling the technology, but not the content provider, he noted.
“We're teaching people to devalue content that's cost millions to produce,” he said, adding young computer users today will expect to pay nothing for content in the future.
Moffett lauded Time Warner Cable for “doing backflips” to protect content partners by disabling commercial skipping features on DVRs, while Dish Network and, most recently, DirecTV have “thumbed their noses” at advertisers by enabling and promoting the feature.
Another hot topic impacting the entertainment industry is the performance of the Federal Communications Commission under Chairman Kevin Martin.
This FCC has done something really remarkable, according to Moffett. “It actually pissed off Congress,” he said, noting investigations are underway into whether politics have entered its decisions.
The analyst said he has friends, “good, well-meaning workers in the bowels of the FCC,” who are disenchanted due to the politicization of the process.
“I'm rooting for them,” he said
Mediacom Asks FCC For Retrans Help
10/25/2009
