Fan Pass - I'll Pass On That

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#1795271 6-Jun-2017 12:27

shk292:

ockel:

There are plenty of brands I can get in Countdown but not PaknSave or New World. And vice versa. I think you need another example.

Every rule has exceptions. But it is rather facile to try to write off a whole argument based on an exception, especially when I already gave many other examples.

The fundamental distribution model for video is different to any other product. Why does this need to be the case?

There is plenty of non exclusive content in video. In fact Netflix dropped EPIX (and its vast library of movies) for the reason that it was non-exclusive content. Or is that just another exception to your rule to suit your argument?

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#1795312 6-Jun-2017 12:49

Jas777:

shk292:

ockel:

There are plenty of brands I can get in Countdown but not PaknSave or New World. And vice versa. I think you need another example.

Every rule has exceptions. But it is rather facile to try to write off a whole argument based on an exception, especially when I already gave many other examples.

The fundamental distribution model for video is different to any other product. Why does this need to be the case?

In the case of pre-recorded TV programmes and movies the difference isn't that much different but with 'live' sports there is a difference. 'Live sports would be more like concerts and you don't see multiple promoters of the same concerts.

Why not? They should be available for all video providers to buy and play at the same time, surely? No monopoly. Netflix's own content should be too? That's exclusive. It isn't theirs, they bought it

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#1795354 6-Jun-2017 13:35

ockel:

There is plenty of non exclusive content in video. In fact Netflix dropped EPIX (and its vast library of movies) for the reason that it was non-exclusive content. Or is that just another exception to your rule to suit your argument?

So you're arguing that video distribution works in fundamentally the same way as every other product? And all the problems with needing Sky to watch America's Cup, or Lightbox to watch Better Call Saul etc etc are just imagined? And the whole geo-blocking thing is a figment also? OK, very hard to argue with you in that case.

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#1795364 6-Jun-2017 13:48

shk292:

ockel:

There is plenty of non exclusive content in video. In fact Netflix dropped EPIX (and its vast library of movies) for the reason that it was non-exclusive content. Or is that just another exception to your rule to suit your argument?

So you're arguing that video distribution works in fundamentally the same way as every other product? And all the problems with needing Sky to watch America's Cup, or Lightbox to watch Better Call Saul etc etc are just imagined? And the whole geo-blocking thing is a figment also? OK, very hard to argue with you in that case.

Its not Sky. Its the content owners. Sky is just a conduit to watch the content as is everyone else who also has to buy content

ockel

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#1795369 6-Jun-2017 14:00

shk292:

ockel:

There is plenty of non exclusive content in video. In fact Netflix dropped EPIX (and its vast library of movies) for the reason that it was non-exclusive content. Or is that just another exception to your rule to suit your argument?

So you're arguing that video distribution works in fundamentally the same way as every other product? And all the problems with needing Sky to watch America's Cup, or Lightbox to watch Better Call Saul etc etc are just imagined? And the whole geo-blocking thing is a figment also? OK, very hard to argue with you in that case.

No. I'm refuting your claim that video is fundamentally different to every other product. Video has a mix of exclusive and non-exclusive content like other products. Where that product derives extra value by nature of its exclusivity (say a Netflix Original or a Ferrari from NZ's exclusive dealer or Tesla from, well, Tesla) then the wholesale supplier can maximise its profit by extracting a premium from the retailer for that exclusive agency. Similarly the content producers can decide to maximise profit by cutting up the world into regions that maximise the price they get by selling that content on a region by region basis. You might not like it but its their prerogative as the owner to decide that. What gives you the right to decide that they cant maximise their profits in the way they see fit? I loved Breaking Bad but I dont see the value in subscribing to Lightbox for 1 show ergo I wont get to see Better Call Saul. If I did see the value in subscribing for that content then I'd reach into my pocket. What I dont do is wail like a little baby and say that it should be available on a nonexclusive basis to all.

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#1795373 6-Jun-2017 14:16

In short, many products are consumables, it don't matter. The provider will sell to every retailer they can. Baked Beans etc. A 5yo doco becomes a consumable, and probably a 5yo top line movie as well.

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#1795378 6-Jun-2017 14:35

The problem is genuinely content generators opting to sell their wares by an exclusive distributorship model.

The only way I can see that changing is by local regulations requiring content to be available by more than one company, and I doubt that's big on anyones agenda.

It's the business model worldwide right now, with regards to how sports rights are sold.

Sky negotiated a price for these exclusive rights. If they didn't win these then someone else would have, but regardless of who wins, the prize is still a sole broadcast rights package.

That's the problem right there.

I can't opt to get my coverage from company B because I don't like the commentary of company A. There's only ever one company that has won the sole broadcast rights in my geographic area.

It really is a don't shoot the messenger/winner situation, and be happy someone in this region actually purchased the rights at all, although to be fair they are often free to all in countries that didn't successfully win a sole distributor contract.

The content owners need to wise up to this. I'd pay $20 a month for F1 coverage, if I could dial in and watch a live stream for example. Fanpass has shown that the infrastructure now exists for this to be viable. It's just priced beyond my reach now, but only because I have to pay Sky's overheads. If I could dial into the F1 show directly, then it wouldn't have to cost as much as what Sky's selling it for. Maybe this will change moving forward, but it's nothing to do with Sky really. As long as there are sole distributor rights on offer, their business model will be sustainable as there's simply no where else to go here.

ockel

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#1795380 6-Jun-2017 14:47

Jaxson:

The problem is genuinely content generators opting to sell their wares by an exclusive distributorship model.

The only way I can see that changing is by local regulations requiring content to be available by more than one company, and I doubt that's big on anyones agenda.

It's the business model worldwide right now, with regards to how sports rights are sold.

Sky negotiated a price for these exclusive rights. If they didn't win these then someone else would have, but regardless of who wins, the prize is still a sole broadcast rights package.

That's the problem right there.

I can't opt to get my coverage from company B because I don't like the commentary of company A. There's only ever one company that has won the sole broadcast rights in my geographic area.

It really is a don't shoot the messenger/winner situation, and be happy someone in this region actually purchased the rights at all, although to be fair they are often free to all in countries that didn't successfully win a sole distributor contract.

The content owners need to wise up to this. I'd pay $20 a month for F1 coverage, if I could dial in and watch a live stream for example. Fanpass has shown that the infrastructure now exists for this to be viable. It's just priced beyond my reach now, but only because I have to pay Sky's overheads. If I could dial into the F1 show directly, then it wouldn't have to cost as much as what Sky's selling it for. Maybe this will change moving forward, but it's nothing to do with Sky really. As long as there are sole distributor rights on offer, their business model will be sustainable as there's simply no where else to go here.

Yep. When the sum of the non exclusive rights sales exceeds that of the exclusive rights then it will be sold non exclusively.

And similarly when the expected (but unknown) profit from selling direct exceeds that from the known and certain profit from selling to a distributor then it would be sold direct. The former has risk in knowing quantity and price to maximise profit versus the transfer of risk to the distributor. So it becomes a risk adjusted expected return - probably with a high hurdle rate (IRR>20% for example). Its a classic build-a-business yourself or let someone else take the risk and build it.

Recall that PLP set its price for a season of the EPL and had expectations of uptake - but didnt achieve them. PGAGolf set its price for selling direct - and didnt achieve them. The former lost the rights to the new bidder - the latter decided to sell to the retailer.

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#1795381 6-Jun-2017 14:51

Jaxson:.... to be fair they are often free to all in countries that didn't successfully win a sole distributor contract.

The content owners need to wise up to this. I'd pay $20 a month for F1 coverage, if I could dial in and watch a live stream for example. Fanpass has shown that the infrastructure now exists for this to be viable. It's just priced beyond my reach now, but only because I have to pay Sky's overheads. If I could dial into the F1 show directly, then it wouldn't have to cost as much as what Sky's selling it for. Maybe this will change moving forward, but it's nothing to do with Sky really. As long as there are sole distributor rights on offer, their business model will be sustainable as there's simply no where else to go here.

That's a very good point. America's Cup live video is free in countries where the rights haven't been sold - so the value that Sky is delivering to the NZ viewer in this area is that instead of watching Team NZ for free on the free app, you're meant to pay Sky a silly amount to watch on their service. Fortunately, I have an Android device whose positioning system seems to be up the creek and it thinks it's in Canada. But, I'd be more than happy to pay a reasonable amount to the content creator to access this directly - eg through a paid-for app with reasonable global pricing.

It's easy to argue that the current model is the only one that would work, but to me the current model is more about the limitations of decade-old technology and attempts to preserve existing monopoly providers than it is about creators selling content efficiently to willing customers. Otherwise, nobody would need to use legal threats and technology blocks to prevent customer in place A buying the same product as in place B.

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#1795388 6-Jun-2017 15:04

ockel:

No. I'm refuting your claim that video is fundamentally different to every other product. Video has a mix of exclusive and non-exclusive content like other products. Where that product derives extra value by nature of its exclusivity (say a Netflix Original or a Ferrari from NZ's exclusive dealer or Tesla from, well, Tesla) then the wholesale supplier can maximise its profit by extracting a premium from the retailer for that exclusive agency. Similarly the content producers can decide to maximise profit by cutting up the world into regions that maximise the price they get by selling that content on a region by region basis. You might not like it but its their prerogative as the owner to decide that. What gives you the right to decide that they cant maximise their profits in the way they see fit? I loved Breaking Bad but I dont see the value in subscribing to Lightbox for 1 show ergo I wont get to see Better Call Saul. If I did see the value in subscribing for that content then I'd reach into my pocket. What I dont do is wail like a little baby and say that it should be available on a nonexclusive basis to all.

Bill Gates thought it was his prerogative as an owner to bundle IE with Windows. Why not? What gives anyone the right to decide he can't maximise his profits in the way he sees fit? But the USA and Europe didn't agree. There are, in fact, limits to property ownership.

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#1795392 6-Jun-2017 15:12

ockel:

Jaxson:

The problem is genuinely content generators opting to sell their wares by an exclusive distributorship model.

The only way I can see that changing is by local regulations requiring content to be available by more than one company, and I doubt that's big on anyones agenda.

It's the business model worldwide right now, with regards to how sports rights are sold.

Sky negotiated a price for these exclusive rights. If they didn't win these then someone else would have, but regardless of who wins, the prize is still a sole broadcast rights package.

That's the problem right there.

I can't opt to get my coverage from company B because I don't like the commentary of company A. There's only ever one company that has won the sole broadcast rights in my geographic area.

It really is a don't shoot the messenger/winner situation, and be happy someone in this region actually purchased the rights at all, although to be fair they are often free to all in countries that didn't successfully win a sole distributor contract.

The content owners need to wise up to this. I'd pay $20 a month for F1 coverage, if I could dial in and watch a live stream for example. Fanpass has shown that the infrastructure now exists for this to be viable. It's just priced beyond my reach now, but only because I have to pay Sky's overheads. If I could dial into the F1 show directly, then it wouldn't have to cost as much as what Sky's selling it for. Maybe this will change moving forward, but it's nothing to do with Sky really. As long as there are sole distributor rights on offer, their business model will be sustainable as there's simply no where else to go here.

Yep. When the sum of the non exclusive rights sales exceeds that of the exclusive rights then it will be sold non exclusively.

And similarly when the expected (but unknown) profit from selling direct exceeds that from the known and certain profit from selling to a distributor then it would be sold direct. The former has risk in knowing quantity and price to maximise profit versus the transfer of risk to the distributor. So it becomes a risk adjusted expected return - probably with a high hurdle rate (IRR>20% for example). Its a classic build-a-business yourself or let someone else take the risk and build it.

Recall that PLP set its price for a season of the EPL and had expectations of uptake - but didnt achieve them. PGAGolf set its price for selling direct - and didnt achieve them. The former lost the rights to the new bidder - the latter decided to sell to the retailer.

That is the problem you have in a market when you only have a small number of core fans/consumers. Sometimes you have to sell your product as part of a package with others to get sales. Is $1 per 1000 packages going to beat selling 100 $10 packages in the long run?

I guess in the future there will be a two tier model where you can get from source or from a 3rd party but of course the 3rd party will not pay the amounts they do now for the rights.

Who stumps up for the production costs will also change too I guess.

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#1795437 6-Jun-2017 15:38

Jas777:

ockel:

Jaxson:

The problem is genuinely content generators opting to sell their wares by an exclusive distributorship model.

The only way I can see that changing is by local regulations requiring content to be available by more than one company, and I doubt that's big on anyones agenda.

It's the business model worldwide right now, with regards to how sports rights are sold.

Sky negotiated a price for these exclusive rights. If they didn't win these then someone else would have, but regardless of who wins, the prize is still a sole broadcast rights package.

That's the problem right there.

I can't opt to get my coverage from company B because I don't like the commentary of company A. There's only ever one company that has won the sole broadcast rights in my geographic area.

It really is a don't shoot the messenger/winner situation, and be happy someone in this region actually purchased the rights at all, although to be fair they are often free to all in countries that didn't successfully win a sole distributor contract.

The content owners need to wise up to this. I'd pay $20 a month for F1 coverage, if I could dial in and watch a live stream for example. Fanpass has shown that the infrastructure now exists for this to be viable. It's just priced beyond my reach now, but only because I have to pay Sky's overheads. If I could dial into the F1 show directly, then it wouldn't have to cost as much as what Sky's selling it for. Maybe this will change moving forward, but it's nothing to do with Sky really. As long as there are sole distributor rights on offer, their business model will be sustainable as there's simply no where else to go here.

Yep. When the sum of the non exclusive rights sales exceeds that of the exclusive rights then it will be sold non exclusively.

And similarly when the expected (but unknown) profit from selling direct exceeds that from the known and certain profit from selling to a distributor then it would be sold direct. The former has risk in knowing quantity and price to maximise profit versus the transfer of risk to the distributor. So it becomes a risk adjusted expected return - probably with a high hurdle rate (IRR>20% for example). Its a classic build-a-business yourself or let someone else take the risk and build it.

Recall that PLP set its price for a season of the EPL and had expectations of uptake - but didnt achieve them. PGAGolf set its price for selling direct - and didnt achieve them. The former lost the rights to the new bidder - the latter decided to sell to the retailer.

That is the problem you have in a market when you only have a small number of core fans/consumers. Sometimes you have to sell your product as part of a package with others to get sales. Is $1 per 1000 packages going to beat selling 100 $10 packages in the long run?

I guess in the future there will be a two tier model where you can get from source or from a 3rd party but of course the 3rd party will not pay the amounts they do now for the rights.

Who stumps up for the production costs will also change too I guess.

Yep. The two tier model that developed in the past was the live and the delayed (or in the case of movies and general enterainment - cinema, PPV, first run broadcast etc).

There is a lot of speculation and desire for the NZRFU to go direct in the future. Especially for those that covet rugby but are unwilling to pay the current providers price. But put yourself in the NZRFU's shoes. Do you take say $50m pa for exclusive rights from party A or $35m pa for exclusive broadcast only rights and hope that you can either sell streaming rights for $15m to Party B or get enough subscribers to pay such that you can recoup your $15m lost by offering streaming direct?

Lets say that you choose the latter and that your EBITDA margin is 33% (highly arbitrary figure but consistent with Sky's EBITDA margin and Netflix's contribution margin) then you need to get $45m (15m of value foregone divided by .33) of subscriber fees for your streaming. Or some 150,000 subscribers at $300 for a season. Think the price is too high, then you need more subscribers to balance it 225,000 at $200/season. Thats a lot of people to attract and manage. And risky in comparison.

Streaming rights for the NRL were really interesting for the last contract in Australia. Telstra bought them from the NRL and then onsold them to Nine/Foxtel for a higher price because the latter wanted exclusivity across all media. NRL didnt go direct but did sell separately and the $$$ for exclusivity won out again.

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#1795453 6-Jun-2017 15:58

I think the fact that there is a viable alternative delivery model will start to impact on this situation.

With UFB coming into play, you're not limited to live broadcasts via UHF and satellite anymore.

Eventually the noise will be heard. It's almost the last arts medium to be affected? Music has fully flipped from ownership to streaming ability, movies are headed that way now, as is TV. Sports will eventually have to offer on demand streaming. Heck the full Indy 500 race is now available officially for free on YouTube:

ockel

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#1795454 6-Jun-2017 16:06

Jaxson:

I think the fact that there is a viable alternative delivery model will start to impact on this situation.

With UFB coming into play, you're not limited to live broadcasts via UHF and satellite anymore.

Eventually the noise will be heard. It's almost the last arts medium to be affected? Music has fully flipped from ownership to streaming ability, movies are headed that way now, as is TV. Sports will eventually have to offer on demand streaming. Heck the full Indy 500 race is now available on YouTube:

The Indy 500 replay (which has is that delayed tier of lower value rights) is available on Youtube. But the race itself was livestreamed on ESPN. Significantly greater value derived.

Amazon is playing in streaming sports rights. NFL, NBA, NHL, PSA (squash) have been doing it for years. Movies are still tiered on cinema release before anything else. The model to see a cinema release in-home and ondemand at $50/movie has been discussed but not really progressed - as the cinemas which pay c50% of gross box office to the distributor will want to see some price changes to allow them to lose their exclusive rights.

And streaming music? Show me a profitable model...... Such an outcome is unsustainable in the long run with participants having to exit, prices having to rise etc etc. Thats how a market works - sub economic returns result in firms exiting the industry.

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#1795516 6-Jun-2017 16:54

Jaxson:

. I'd pay $20 a month for F1 coverage, if I could dial in and watch a live stream for example. Fanpass has shown that the infrastructure now exists for this to be viable. It's just priced beyond my reach now, but only because I have to pay Sky's overheads. If I could dial into the F1 show directly, then it wouldn't have to cost as much as what Sky's selling it for. Maybe this will change moving forward, but it's nothing to do with Sky really. As long as there are sole distributor rights on offer, their business model will be sustainable as there's simply no where else to go here.

Good example. Im into F1 too. Sky will have paid good money for it, its a premium sport. But its also a niche sport. Say its $300 for a season. Two or three other sports are also $300 for a season or more. Pushing a grand. If they sold it as bits and pieces, there wont really be that many buying $300 subs, or a bit here and there on a per race basis. But if its bundled with many sports, its a more expensive option, but not bad value if you also like AC, Rugger, league, V8 Supercars etc. Or some.

Sky could opt out and buy a week old feed for much less, but its lost its value.

Someone said Americas Cup is free in many countries. many countries have no interest in it.

Its like a new hot movie, its all the rage on day one, then it fades, the owners ensure they get the rewards when they are highest as last years F1 race at Suzuka is valueless. On the night it was big value.

If the owners sold the content to everybody, not everybody will buy it, as it has low value.

I see it simply that its not about bad Sky monopoly, its about the owners and creators of the cool content, taking the good money before that content is stale. Yes, they could sell it everywhere fir the same overall value, but it wont have that value if ever other channel in NZ has it too

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