Policy

Quest10ns (And Answers) For 2007

12/29/2006 7:06 PM Eastern

Adelphia Communications is gone. CBS Corp. did better than Viacom after the split-up. Cable companies suddenly are in favor with Wall Street because they are the new phone companies. John Malone is almost back in the game, as a satellite competitor. The Yankees Entertainment & Sports Network may be worth more than baseball's New York Yankees. Two “kids” named Chad Hurley and Steve Chen will take home a big chunk of the $1.65 billion generated from the sale of their company to Google — and we're willing to bet you had never heard of YouTube at this time last year.

So what does 2007 hold in store? We don't know. But maybe you do.

Here are 10 questions that may be resolved in the coming year. Make your vote, then check your answers against the verdict of the 615 readers who responded to our online survey.


1 Will Cablevision Finally Go Private?


WHY?
Cablevision Systems' ruling Dolan family learned from their failed attempt to go private in 2005. In 2006, they simplified the deal and included Rainbow Media Holdings assets. The deal is also being reviewed by independent directors — the same ones who shot down the last deal.
WHY NOT?
The Dolans launched their $7.9 billion bid during a resurgence in cable stocks. The deal, valued at $27 per share, offered a 19% premium when tendered. But stock closed Dec. 15 at $28.18. The Dolans will have to raise their offer, but are restricted by Cablevision financial covenants on how much debt they can take on.
YES
NO

2 Will Cablevision Get Cleared to Launch Its In-Network DVR?


WHY?
Cablevision has developed technology that allows each subscriber to record and play shows from personal storage space on servers in its network. The economics favor this, since customers won't have to replace failing hard drives — or buy digital recorders in the first place. Cablevision argues that because the customer controls the recording, it falls under the 1984 Sony Betamax ruling, which allows consumers to record shows for their own use.
WHY NOT?
Almost every cable operator has said that if Cablevision wins, they will launch the same service — without paying programmers in the process. Programmers, for their part, believe this is a video-on-demand service and they should be paid for copies made by a cable company for its customers. “Fast-track” court proceedings to resolve the impasse are in progress.
YES
NO

3 Will a Democratic Congress Pass a Franchise Reform Bill?


WHY?
In 2006, franchise reform fizzled because at least 41 senators thought maintaining “network neutrality” for Google, Yahoo and other Internet services outweighed legislation to speed entry of phone companies into the cable business. This year, fears about network operators discriminating against what traffic gets carried the fastest will subside, liberating Congress to reorder cable franchising, this time.
WHY NOT?
Democrats will control Congress for the first time since 1994. Incoming Energy and Commerce Committee members Reps. John Dingell (D-Mich.) and Edward Markey (D-Mass.) plan to scope out a range of issues and vet the actions of the Federal Communications Commission, so serious effort to pass telecom legislation won't begin until 2008. Meanwhile, reform in individual states will let AT&T and Verizon blow off Congress.
YES
NO

4 Will Kevin Martin Put “a la Carte” Back on the Table?


WHY?
Convinced that tiers are a rip-off and some content poisons young minds, Federal Communications Commission chairman Kevin Martin will continue to hector cable to let consumers buy channels one at a time or get refunds for blocked channels. The issue resonates with the Christian right, whose support Martin needs if he runs for office.
WHY NOT?
When Comcast and Time Warner needed FCC approval to acquire Adelphia Communications, Martin had the industry by the throat. But, during a transaction that took the FCC more than 400 days to complete, Martin was silent on a la carte. Conclusion: Martin is more interested in scoring rhetorical points than affecting political change.
YES
NO

5 Will Congress Scuttle Retransmission Consent?


WHY?
When Congress allowed broadcasters to demand cash from cable operators for station carriage, lawmakers expected more investment in broadcast. Instead, ABC, CBS, NBC and Fox invested in cable, dominating expanded basic. Once Congress realizes programmers are forcing distributors to buy unwanted fare, it will instate universal must-carry.
WHY NOT?
Launching broadcast-affiliated cable networks in lieu of cash for station carriage was the brainchild of John Malone at Tele-Communications Inc. The National Cable & Telecommunications Association is paralyzed because operators and programmers are members. In 2005, the Federal Communications Commission concluded retrans works.
YES
NO

6 Will Charlie Ergen Sell EchoStar?


WHY?
John Malone's Liberty Media is about to take control of DirecTV. Merging the nation's No. 1 direct-broadcast satellite service with EchoStar Communications' Dish Network — the No. 2 DBS company — is a no-brainer. Ergen could pocket billions — and possibly get to run the resulting 28 million subscriber giant, with Malone's assent.
WHY NOT?
Ergen is a hands-on leader and keen competitor, who has built EchoStar from scratch. He's still relatively young and feisty, as any programmer will tell you. Thinking and acting independently are his calling cards. He's not about to relinquish control of EchoStar, to Malone, AT&T or any other buyer.
YES
NO

7 Will Theatricals Debut on VOD the Same Day Their DVDs Hit Retail?


WHY?
Video-on-demand revenue is projected to reach $1 billion in 2007, up from $730 million in 2006, according to Kagan Research. With VOD on the rise and DVD sales declining, studios may give cable the chance to offer Hollywood blockbusters on the same day and date as retailers. Comcast is already testing the approach in Denver and Pittsburgh.
WHY NOT?
Movies still generate most of their revenue from DVD sales. In fact, in the first half of 2006, DVDs garnered $6.5 billion for the studios. Yes, VOD is grabbing more eyes but not enough to convince studios to risk the golden egg. DVD sales will still come first.
YES
NO

8 Will Tom Freston Return to the Media Business Before Year's End?


WHY?
Freston enjoys the creative end of the media business, knows how to nurture talent and helped build one of the biggest brands, MTV, from scratch. Sitting it out is not his style. And Freston, who's already an investor with lifestyle network Plum TV, will get offers to try his hand at something new. Maybe Yahoo?
WHY NOT?
Sitting on an $82 million payout from Viacom, Freston has no burning financial incentive to get back into the day-to-day rat race. And he was never particularly enamored of corporate politics, or of courting Wall Street, which are part and parcel of being a top media executive. He has wide-ranging personal interests, particularly for humanitarian causes, that can give his life purpose.
YES
NO

9 Will NFL Network Get Basic Carriage by All Five Top Operators?


WHY?
Football is a ratings powerhouse. The NFL Network's first four Thursday-night telecasts each bettered a 5.0 household rating. The Dec. 16 Dallas Cowboys-Atlanta Falcons tilt drew a 7.5 rating. By comparison, ESPN's Monday Night Football games are cable's most-watched programs, averaging 12.4 million viewers per week, drawn from 92 million households.
WHY NOT?
While operators want to televise the games, they are not willing to force all subscribers to pay 70 cents just to get eight Thursday and Saturday night regular-season games. Comcast and Cox Communications are putting the games on a digital tier, so it's unlikely that Time Warner and Cablevision will make a deal that's more burdensome from a distribution perspective than their fellow operators.
YES
NO

10 Will a “Virtual World” Company Be the Next Internet Startup to Sell for $1 Billion?


WHY?
Gaming is hot, and Linden Lab's Second Life online multiplayer game has rocketed to the top of the buzz-heap with more than 2 million registered users as of mid-December. Key reasons: Participants design just about anything, from clothes to houses or even pets, and a market-based economy allows them to buy and sell those creations. Along the way, companies such as NBC Universal and Toyota promote real stuff.
WHY NOT?
While Second Life has Big Media's attention, the game's novelty may wear off. Linden Lab, which doesn't disclose finances, had just 42,000 paying subscribers as of November. Plus, potential buyers with deep pockets — such as Microsoft and Sony — have already invested in their own online multiplayer games. And who knows what else will get hot online this year?
YES
NO

June