Independent TV providers were not the only group who took an interest in over-the-top video service, SlingTV, last week. On January 14, the FCC requested details from SlingTV’s parent company, Dish Network LLC (Nasdaq: DISH), relating to content negotiations for the new service. Interestingly, the request referred both to announced partners ABC Disney, Turner and Scripps but also to any material related to negotiations with A+E, CBS and Comcast, “regardless of whether the negotiations resulted in an agreement or informal arrangement”.
With the next generation of TV being built on broadband IP delivery and multiscreen access to content, the independent TV industry needs to ensure its voice is heard by the programmers and in Washington. The potential impact of Comcast Corp’s (Nasdaq: CMCSA, CMCSK) proposed takeover of Time Warner Cable Inc. (NYSE: TWC) and the mega-media entity that it creates will have a profound impact on the industry for decades.
Dish Network has been a visible and vocal opponent of the transaction, expressing many concerns, including the impact on access to programming rights. In their August 25th, 2014 submission to the FCC they disclosed that they are already experiencing challenges, stating: “In fact, DISH already has experienced difficulties in obtaining certain OTT rights from third-party programmers due to restrictive contractual limitations imposed by Comcast on such programmers.”
Is Dish testing the possibility of a large-scale migration to OTT delivery with SlingTV?
Publicly, Dish is saying that SlingTV is somewhat experimental and an attempt to provide an affordable video package for 18-35 year old millennials. Upon closer inspection, something larger and much more significant may be underway.
What was once a major advantage, national satellite coverage, is emerging as a road block for Dish. Satellites and transponder capacity are expensive, multi-decade investments. Satellites are ideal for one-way video delivery to fixed locations in a large geographic area. Their value in a mobile, interactive, broadband video world is substantially diminished. Dish is grappling with how to stay relevant.
Looking out 5-10 years, it seems likely that Dish may already be planning to migrate substantially all of its service off satellite to broadband delivery. With over 50 million subscribers, Netflix (Nasdaq: NFLX) has shown that it is possible to be an international video service without owning a delivery network. Why would Dish keep investing in expensive satellite delivery if it can avoid it? Strength and longevity come from owning a last mile broadband network. Independent operators continue to make incremental investments in their local loop networks and are extremely well positioned for the next decade of multiscreen IP video, voice and data services. Dish? Not so much.
While Dish struggles to figure out how it will deliver service over the next 5-10 years, for independent operators the path is clear. Now is the time to start trials of multiscreen and mobile technologies, so team members can get comfortable with the concepts and equipment, network performance can be assessed and strategies put in place to market and sell these services.
Vubiquity – From Satellite to IP, but are they still relevant?
Dish is not the only satellite video company moving to new IP delivery options, but making the transition can be dangerous. In the early days of IPTV delivery, it cost millions of dollars to build a video headend. Vubiquity (then Avail Media) saw an opportunity to build a single headend facility and deliver wholesale satellite video to independent operators for a monthly per subscriber fee. This worked well initially and made it possible for a lot of operators to enter the market and grow their video business.
Technology and markets evolved and soon after the private equity firm the Carlyle Group (Nasdaq: CG) invested $100M in Vubiquity in 2012, it was announced that the wholesale service would be transitioning to IP delivery. This aggressive phase out of satellite delivery sent shockwaves through the independent operator space. Not only did this shift the (substantial) delivery cost from the seller to the buyer, a number of operators who did not have affordable high-capacity backhaul to major cities were forced to scramble to find alternative options. For those who stayed with Vubiquity, video profit margins shrunk or were almost completely erased by the new monthly connectivity costs. This didn’t have to be the case.
A self-sufficient MPEG-4 linear video headend that cost $2.5M or more 7-8 years ago can be built for a fraction of that today. As a result, many operators have elected to bring their video processing in-house and eliminate the monthly delivery fee now required just to access Vubiquity services.
With the latest modular transcoding platforms like Inca’s 4430, supporting both linear and multiscreen transcoding in the same physical unit, operators can be well positioned to affordably launch their own multiscreen services and control their own destiny.
Vubiquity is working hard to stay relevant and offer new services to the space, but the reality is that the technology and knowledge required to launch multiscreen services are already well within the reach and ability of independent operators. There is no magic required, only good planning, hard work and a desire to win.
What does 2015 hold for the industry?
In order to maintain and grow strong businesses, operators need to continue investing in network capacity upgrades, staff training and development and new technologies.
There has never been a more dynamic or exciting time in our industry. Independent operators are in a unique and powerful position, owning their broadband local loop networks, living in the communities they serve and possessing the agility and vision to deliver the next generation of services.
At the same time, interconnect agreements, content rights, stimulus funding and regulatory engagement are taking on renewed importance. The next few years are going to be very busy, but I can’t think of any place I would rather be.
Author: Jeff Campbell, CEO, Inca Inetworks
Why Dish’s new SlingTV multiscreen service is good for Independent TV providers: http://www.incanetworks.com/dishs-new-slingtv-service-good-independent-tv-providers/
FCC Letter to Dish Networks for content negotiation details, January 13, 2014: http://transition.fcc.gov/Daily_Releases/Daily_Business/2015/db0114/DOC-331486A1.pdf
Dish Networks August 25, 2014 filing: http://apps.fcc.gov/ecfs/document/view?id=7521818574
Inca Powers Professional Football Video Processing for Multiscreen Service of Large Direct-to-Home Satellite Provider: http://www.incanetworks.com/inca-powers-professional-football-video-processing-for-multiscreen-service-of-large-direct-to-home-satellite-provider/
Inca High-Density Transcoder Powers 44 HD Channel Transition for Experienced MPEG-4 IPTV Provider, Carr Communications: http://www.incanetworks.com/inca-high-density-transcoder-powers-44-hd-channel-transition-for-experienced-mpeg-4-iptv-provider-carr-communications/
West Alabama TV Selects Inca Networks Modular MPEG-4 IPTV Transcoder for their State-of-the-Art IP/QAM Hybrid Network: http://www.incanetworks.com/news/west-alabama-tv-selects-inca-networks-modular-mpeg-4-iptv-transcoder-state-art-ipqam-hybrid-network/
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