Digital video recorders (DVRs) may turn out to be the “last gasp” of cable, satellite and other traditional multichannel subscription video providers. If users can get the same basic functionality (on demand viewing of the shows they want) over the Internet for free or paying for each show rather than a hefty monthly subscription, Who Needs a DVR?, as Nick Wingfield at the WSJ asks:
Among a more narrow band of viewers -– 18- to 34-year-olds -– SRG found that 70% have watched TV online in the past. In contrast, only 36% of that group had watched a show on a TiVo or some other DVR at any time in the past.
That last figure is a fairly remarkable statistic. Remember that DVRs have the advantage of playing video back on a device where the vast majority of television consumption has traditionally occurred –- that is, the TV set. Although it’s also possible to watch shows over the Internet on a TV set through a device like Apple TV and Microsoft’s Xbox 360, most people watch online TV shows through their computers — which have inherent disadvantages, like smaller screens and, in most cases, no remote controls.
Indeed, if users are going to buy a piece of hardware, why buy a DVR when they can buy a Roku box or a game console like the XBox 360 that will put Internet-delivered TV on their programming on their “television” (a term that increasingly simply means the biggest LCD in the house, or the one that faces a couch instead of an office chair)—
and save money?
This is precisely the point Adam Thierer and I have been hammering away at in this ongoing series. The availability of TV through the Internet and the ease with which consumers can display that content on a device, and at a time, of their choosing are quickly breaking down the old “gatekeeper” or “bottleneck” power of cable. Let’s see how long it takes Congress and the FCC to realize that the system of cable regulation created in the analog 1990s no longer makes sense in this truly digital age.
This ongoing series has explored the increasing ability of consumers to “cut the cord” to traditional video distributors (cable, satellite, etc.) and instead receive a mix of “television” programming and other forms of video programming over the Internet. As I’ve argued, this change not only means lower monthly bills for those “early adopter” consumers who actually do “cut the cord”, but, in the coming years, a total revolution in the traditional system of content creation and distribution on which the FCC’s existing media regulatory regime is premised.
This revolution has two key parts:
- Conduits: The growing inventory—and popularity—of sites such as Hulu, Amazon Unboxed and the XBox 360 Marketplace (or software such as Apple’s iTunes store), that allow users to view or download video content. Drawing an analogy to the FCC’s term “Multichannel Video Programming Distibutor” or MVPD (cable, direct broadcast satellite, telco fiber, etc.), I’ve dubbed these sites “Internet Video Programming Distributors” or IVPDs.
- Interface: The hardware and software that allows users to display that content easily on a device of their choice, especially their home televisions.
While much of the conversation about “interface” has focused on special hardware that brings IVPD content to televisions through set-top boxes such as the Roku box or game consoles like the XBox 360, at least one company is making waves with a software solution. From the NYT:
Boxee bills its software as a simple way to access multiple Internet video and music sites, and to bring them to a large monitor or television that one might be watching from a sofa across the room.
Some of Boxee’s fans also think it is much more: a way to euthanize that costly $100-a-month cable or satellite connection.
“Boxee has allowed me to replace cable with no remorse,” said Jef Holbrook, a 27-year-old actor in Columbus, Ga., who recently downloaded the Boxee software to the $600 Mac Mini he has connected to his television. “Most people my age would like to just pay for the channels they want, but cable refuses to give us that option. Services like Boxee, that allow users choice, are the future of television.” ….
Boxee gives users a single interface to access all the photos, video and music on their hard drives, along with a wide range of television shows, movies and songs from sites like Hulu,Netflix, YouTube, CNN.com and CBS.com.
Continue reading →
Continuing the “Cutting the (Video) Cord” series started by my PFF colleague Adam Thierer: The WSJ had two great pieces yesterday about the increasing competitive relevance of television distributed by Internet—a trend that was at the heart of an amicus
brief PFF recently filed in support of C omcast’s challenge of the FCC’s 30% cap on cable ownership. The first WSJ piece declares that:
After more than a decade of disappointment, the goal of marrying television and the Internet seems finally to be picking up steam. A key factor in the push are new TV sets that have networking connections built directly into them, requiring no additional set-top boxes for getting online. Meanwhile, many consumers are finding more attractive entertainment and information choices on the Internet — and have already set up data networks for their PCs and laptops that can also help move that content to their TV sets.
The easier it is for consumers to receive traditional television programming (in addition to other kinds of video content) distributed over the Internet on their television, the less “gatekeeper” or “bottleneck” power cable distributors have over programming. So the Netflix-capable
and Yahoo-widget-capable televisions described by the WSJ piece go a long way to increasing the substitutability of what we call Internet Video Programming Distributors (IVPDs) for Multichannel Video Programming Distributors (MVPDs), such as cable, satellite television and fiber services offered by telcos such as Verizon’s FiOS.
While such televisions are only expected to reach 14% of all TV sales by 2012, one must remember that a growing number of set-top boxes (
e.g., the Roku Digitial Video Player, game consoles like the Microsoft XBox 360 and Sony PlayStation 3, and TiVo DVRs) allow users to users to receive IVPD programming on their existing televisions.
As we argued in our amicus brief, the immense competitive importance of IVPDs lies not in the potential for some users to “cut the cord” to cable and other MVPDs (though that will surely happen), but in the immediate impact IVPDs have as an alternative distribution channel for programmers. In the pending D.C. Circuit case, we argue that both the FCC’s 30% cap, issued in December 2007, and the underlying portions of the 1992 Cable Act authorizing such a cap should be struck down as unconstitutional because the ready availability of IVPDs as an alternative distribution channel means that cable no longer has the “special characteristic” of gatekeeper/bottleneck power that would justify imposing such a unique burden on the audience size of cable operators. (Of course, Direct Broadcast Satellite and Telco Fiber are also eating away at cable’s share of the MVPD marketplace.)
The second WSJ piece, an op/ed, illustrates beautifully how cable operators are already losing “market power” (or at least negotiating leverage) in a very tangible way: they’re having to pay more for programming. Specifically, the Journal describes how Viacom plaid chicken with Time Warner—and won. Continue reading →
Ken Ferree and I just filed an amicus brief with the D.C. Circuit in what could be among the most important First Amendment cases involving economic regulation in years: Comcast’s challenge to the FCC’s cap on the maximum size of a cable operator’s nationwide subscriber-audience. While few may feel righteous indignation at limitations targeted at large corporations such as Comcast or Time Warner, the larger principle at stake here is deeply important: Will the First Amendment provide a meaningful check on what USC law professor Chris Yoo has called “architectural censorship” (i.e., so-called “structural” regulations that “have the unintended consequence of reducing the quantity, quality, and diversity of media content”).
In a nutshell, we argue that that:
- The provisions of the 1992 Cable Act authorizing the FCC to impose a “cable cap” are outdated in world of media abundance and vibrant platform competition.
- Because cable is no longer the unique “bottleneck” or “gatekeeper” that it was in 1992, these statutory provisions (not just the FCC’s 30% rule) must be subject to strict scrutiny under the First Amendment as a limitation on free speech.
- Because there are “less restrictive means” of ensuring cable operators do not impede the flow of video programming to consumers, the court should strike down these provisions.
- Even if the court upholds the statute, it should nonetheless strike down the cap issued by the FCC in December 2007 (30% of all Multichannel Video Programming (MVPD) subscribers as based on an outdated model of the video marketplace.
I encourage you to read our brief (below). I’ve provided a summary below, along with some additional commentary we just couldn’t cover under our 3500 word limit.
Strict Scrutiny. Yoo’s article Architectural Censorship and the FCC is essential reading for anyone who believes that government regulations on the size and shape of the “soapbox” can have huge effects on speech itself. Yoo argues that the First Amendment should check this kind of regulation–however “content-neutral” it might seem–under “strict scrutiny”, which requires that the government show that a regulation is the “least restrictive means” available for advancing a “compelling government interest.” But Yoo ultimately concludes (pp. 713-718, PDF pp. 45-50) that, under existing precedent, most “architectural censorship will be effectively insulated from meaningful judicial review.” Continue reading →
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