Brad Hubbard Innovation, Media

Diary of a Sports Cord Cutter: Zero Rating

By Brad Hubbard | @bradhubbard | 11.5.2016

A week or so ago Sling TV CEO Roger Lynch did his first ever Periscope live broadcast. While he couldn’t talk about specifics (partially because A) why would you and B) Dish was entering a quite period for it’s next earning release) he did point out that Sling TV sees new users every month but a major event like the Olympics triggers bigger pops in the user base.He also mentioned that he didn’t think that going to a ‘zero rating’ was a good idea.

With the recent announcement of AT&T purchasing Time Warner and another AT&T subsidiary DirecTV launching their OTT option this month with a ‘zero rating’ it makes you wonder which path we’ll go down.

‘Zero rating’ is when the backbone provider (AT&T, Century Link, Verizon, etc) allow certain types of content without having it content against you’re bandwidth limit. Now T-Mobile already does a version of this but in their case the content provider (Netflix, MLB, MLS, etc) have to except a lower quality stream in order to keep other content moving through the pipe. In AT&T’s case, according to a recent article in the Wall Street Journal, they say this will increase competition because anyone can pay DirecTV to have a ‘zero rating.’

So what does this mean to you and your ability to watch the Nebraska at Ohio State game on ESPN via an OTT application? Well it means that you have more options to watch the game depending on your device and application. It also means that there is a chance, however remote, that you could not have the ability to see the game.

Being a sports cord cutter for about a year now, I have come close but have not reached my data limit with my ISP. It would be nice if commercials didn’t count against the data cap but that is a technological innovation that isn’t very sexy to build. Not sure how many customers hit the 300GB limit most ISP’s are putting on their user but I would presume that it’s not a lot.

If AT&T wants to go down the road of having outfits like Netflix, MLB and others pay them so consumers won’t have their data caps maxed out then I think they are in for a rude awakening. There is nothing stopping AT&T or their subsidiary DirecTV from raising the price on the content provider and the customer in the name of meeting quarterly earnings. I would venture a guess that this is there plan.

Why is someone like Lynch against this, because it’s not a sustainable path. ‘Zero rating’ is essentially an end run around net neutrality. It would make, by default, the ISP’s the revenue winners in this future of video viewing. It puts the ball clearly in the backbone company’s court and invites a ‘pay to play’ model down the line.

Now back to that Nebraska at Ohio State game. If the backbone companies are able to initiate this ‘zero rating’ then if you are a Verizon customer, there is a chance that Disney (ESPN’s parent company) didn’t want to pay Verizon’s fee and therefore you cannot watch the game. I think that chance is slim but well within this model is a lower quality stream. In other words you are in the back of the bus viewing wise and there would not be much you could do about it.

‘Zero rating’ is not a really fair model for the user or the content providers or distributors. The backbone companies like AT&T are going to make their money because they are a necessity to modern living and they have the ability to put on caps which could also lead to revenue grow however inconsistent that may be. This is not the business model of the future. New models need to arise and they will as more consumers cut the cord, but the ‘Zero rating’ is not it.

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Brad Hubbard OLYMPICS

Empty Seats And Empty Pockets

By Brad Hubbard | @bradhubbard

It’s been pretty obvious if you have been paying attention, empty seats at the Olympics. The Wall Street Journal ran a piece on it and from most accounts, it’s pretty bad. While people can point to various reasons why, it seems pretty obvious, cost.

According to the Journal’s article, ticket prices range from $88 a piece for the taekwondo to $434 for the women’s basketball gold medal game. Apparently 70% of the tickets went to Brazil for the games. A country with an impeached president, an economy that contracted 3.8% last year and where the average monthly income is $678. When you look at it that way, of course there are empty seats.

TICKETS

This is no knock on Brazil. They are only guilty of buying into the International Olympic Committee (IOC) hype. ‘Bring the Olympics and look at all the money you’ll make!’ ‘Showcase your city to the world!’

Big lies.

If you haven’t read Andrew Zimbalist’s ‘Circus Maximus’ then go read it now. The Olympics folks is not about the athletes and it’s not even about the economic benefits to the city. It’s about a couple of people making money. The really sad part is that the residents of the city that’s hosts the games are the ones picking up the bill for the cost overruns.

ESPN’s FiveThirtyEight posted an article called ‘Hosting The Olympics Is A Terrible Investment.’ They point out that the Rio games are only 50% over budget. 50%! They say only 50% because that is on the low end. Brazil has been hit hard economically and there is no disposable income to spend on rhythmic gymnastics.

Just to pour a little more gasoline on the fire, today an IOC executive was taken to the hospital after police carried out a raid at his beachfront house as part of an investigation into, essentially, ticket scalping.

Ticket prices are high to see Usain Bolt or Katie Ledecky fade their competition because the IOC needs to make the money. If the average person can’t afford it than the IOC will shrug it’s shoulders and say ‘oh well’. It’s not fair to the athletes to compete in half empty venues and it’s not fair to some of the fans who want to go but can’t afford it. But in reality, what does the IOC care when they have executives accused of selling tickets above face value and collecting 70% of the revenue from TV deals anyway?

And people wonder why there are empty seats.

Brad Hubbard Baseball, Media, MLB

Limits To Rights

By Brad Hubbard | @bradhubbard

I’ve written a lot about cord-cutting and the sports fan on this site. I see it as an inevitability that at some point, probably during the re-upping of rights for the major sports leagues, that we will a significant change in how fans can access the games they want to see. The Wall Street Journal article on the YES Network’s negotiations with Comcast only magnify this point.

This past week Joe Flint and Matthew Futterman put together an outstanding article on the cost of sports rights with the regional sports networks. It’s a microcosm of the overall issue. What it really comes down to is different parts of major corporations trying to extract a whole bunch of money from one another.

Sports Rights RSNThis is a very high profile case because it involves the preeminent brand name in all of sports, the New York Yankees. Right now, if you live in the Yankees media footprint and have Comcast, you are not getting Yankees games next week.

Rut Roh.

The writers take it even further by point to this as a case of ‘how much further can this go?’ The consensus seems to be that people are not willing to pay anymore of their cable or satellite bundles even if it means missing the games they want to see. With costs rising and incomes staying flat, people have officially cut back.

This is a very interesting story with the public reaction right around the corner. Flint and Futterman did a great job and this is an article worth reading.

Cost Of Sports TV Raises Stakes in Yankees – Comcast Fight

Brad Hubbard Innovation, Media

Skipper In The Storm

By Brad Hubbard | @bradhubbard

The head of ESPN, John Skipper, did an interview with the Wall Street Journal where he talked about cord-cutting, Apple, and ESPN’s plans.

John SkipperSkipper says that Apple is close to being a bigger player in the TV service realm but are ‘frustrated by their ability to construct something which works for them with programmers.’ The Q & A goes on to touch on Sling TV and sports rights.

The major hurdle Skipper and ESPN have, along with other outlets, is the handoff from traditional distribution to digital combined with the rising cost of sports rights.

The fact is this, digital doesn’t pull in the dollars like traditional cable and satellite distribution does. Hence people are reluctant to do anything that could effect the cash cow because that cow is how ESPN affords the $1.9 billion a year for NFL rights.

Skipper has a tough job, ‘how do you make the handoff and maintain or increase revenue at the same time?’ Not sure there is an answer until but you are at some point going to be forced to make decision. That moment is coming closer with the evidence being the 7 millions subscribers ESPN has lost over the last two years.

I think Skipper very much understands the situation and see’s the gathering storm. Some sign makers on College GameDay differ and they could be right but Skipper doesn’t sound to me like someone who is panicking. The next questions becomes, will the Disney board panic if subscribers continue to decline?