Dear FCC -Be careful what you ask for.

You want ala carte, you got ala carte.

Its called the internet. Every single major cable and telephone company offers high speedaccess to the
internet and they allow you to pick andchoose the content you want to view.

The internetis the definition of ala carte program. Every type of programmingimaginable. All there for
you to find and choose what you want, when you want it. Some witha price tag. Most for free.

Openup your favoritesearch engineand put in the name of the program you want. Or put in the type
of programming you want. Its your Electronic Programming Guide. If its there and available you can find it.

Want to set up “channels” just so you can make it a little easier for you and the not so literate internet folks
to understand ? No problem. There have been standards to define programming channels on the net since IE 4.0.

Or you can just bookmark your favorite kids or family friendly websites and limit use to those sites.

Ala carte. Just the way you want it.

But its not on TV you say ? Well thats easy. Buy a

wireless RF transmitter for under 70
bucks. Plug it into the video out of your PC. Plug the reciever unit to the
video in of your TV. Start the video on the PC and boom, you are watching the video on your TV. Any TV. The old
black and white or the new plasma.

Its easy. I bet for another 50 bucks, you can get the cable company or any 17 year old to come set it all up for
you. There you have it. Unlimited choice. Complete ala carte.

The only thing missing is that traditional programmers havent flocked to create programming for this unlimited
choice universe.

its the beauty of capitalism. Where there is opportunity, you can find cash deployed to capitalize. But you
cant find it on the net. You can find inexpensive content. If its cheap and easy its created specifically as
programming for the net. But is there a single example of a million dollars spent on a show exclusively for the net
?

There should be. The potential customer base consists of 90mm broadband users in the USA. 100s of millions
across the world. Any programmerwith a high speed data line can reach any of them. Yet no one chooses to invest
an amount equalto even the least expensivebroadcast network show. Why ?

Because in an ala carte world, the cost of reaching an audience is outrageous. And consumers arent ready to
pay the freight to receive that programming.

As i have said before, the movie market is ala carte. Look at which content rises to the top in terms of
revenues from consumers and visibility. The content from the biggest companies who have spent the most money to
market .

Our movie from HDNet Films,
Enron- The Smartest Guys in the Room cost a relatively small $770k to
make, but we needed to spend millions to create visibility for the film. When we tried to get creative and
offer the film dayand date with its release on HDNet Films, the big theatrical chains got together and
decided they wouldnt carry it. Despite our unique offer to share in the revenues from the sale of the DVD. The
point being that if video distribution goes ala carte, the response from the powers that be wont be to embrace the
change. It will be to find ways to circumvent the change to their advantage.The movie industry is the perfect
example. Despite the fact that anyone with a videocamera and PC can produce a movie, the cost to get it to consumer
in an ala carte movie world, precludes all butthebiggest and/or very, very fortunate from reaching an
audience large enough to break even on a movie release..

Despite the fact that big movie studios could produce many, many movies for consumption, they produce a limited
number every year because they have pushed the cost to market a movieto such extremes. In their
alacarte movie market, they cant afford the risk. Is that where you want the TV business to go ? Do you want TV
production companies and networks to have to spend tens of millions ofdollars on each new show to make sure
that enough people watch and continue their ala carte selection of the network hosting the show ?

But wait, there is more to consider. There are technological considerations. Let me give you a phrase that you
will hear for the next 100 years when it comes to video distribution and I promise you , it will haunt you in an ala
carte world. That phrase is : “Bits are bits”

What that means is that digital bits dont care what type of data they carry. They are agnostic. Telephone
conversations. Ok. Video. Ok. Internet traffic. Ok. Video Conferencing. Ok. Medical Applications. Ok. Software
applications. OK.

Every video distributor is limited in the amount of bits they can carry to the bandwidth they have. The
valuation model of the cable industry is quickly turning into a revenue per bit maximization model. Which cable
MSO can sell the mix of digitalbits that maximizes the return on the number of bits available. Call it
Bit to Revenue Optimization.

If you muck up the video distribution side of the business so that video distributors, be they cable , satellite
or telco find that the return for bandwidth allocated to TV programming is less than bandwidth allocated to non video
applications, you got a huge problem.

You see, video bits require the most hand holding. They have to arrive with all the other bits that are part of
the TV show in a nice, neat continuous stream (net of some buffering of course). When those video bits are
part of medical or video conferencing applications, both the originators and the users expect to pay a little more.
When those bits are part of a TV show, they expect to pay a lot less.The model works today because the
aggregation of all those bits creates a price and experience that not only people are comfortable with, but that
consumers feel like they cant live without. Ask a politician whether his constituents will be happy if it turns out
that his/her push for ala carte results in less choice and higher prices ?

In an ala carte world, the ala carte applies not just to consumers choosing between TV networks, but distributors
choosing which applications to offer. Cable MSOs, Satcosand Telcos want their stock price to go up. They want
to make more money. There is the very real possibility, and I would say likelihood that as new software applications
come along, and they will, they could successfully compete for bits on distributors networks to the exclusion of TV
bits. Im not saying digital TV would go away, it wont. But could substantially less bandwidth be allocated to TV ? Of
course.

So, to all of you at the FCC, be careful what you ask for. That knock on your office door that today has people
saying they dont want to pay for channels they dont want, tomorrow could be people asking why you let them change
everything when it used to work so well.

And a word of advice to take or leave as you see fit. Its always a mistake to listen to your customers. The goal of
any organization should be to give their customers or constituents what they will want, not what they did want. Its
not the job of the customer to know their future consumption habits. Its your job.

32 thoughts on “Dear FCC -Be careful what you ask for.

  1. Pingback: The Publisher in the Value Chain 2009 Edition « Eoin Purcell’s Blog

  2. the trailer is supposed to be designed to get me to want to watch it.. so, with that said. I absolutely have no desire to go see another movie like “Madagascar” .. can’t they be original.. oh I forgot.. Disney is trying to give us movies they think we want to watch and I am guessing (Didn’t follow) that “Madagascar” did good…

    Comment by runescape money -

  3. Anyway… I think Theaters are missing the boat.. Why go… it stinks.. sticky floors and OVER PRICED FOOD!!! $3.00 for a tiny bottle of water.. JOKE. I think they are totally missing the boat. What about merchandising!!!! One of the reasons we like to go to Universal City Walk during an opening weekend of a cool movie is because we get to shop!!! “Star Wars Episode I” ..

    Comment by runescape money -

  4. If a movie opens on 30 screens, like Sideways or Million Dollar Baby, there is obviously no way it can achieve the results of a movie opening on 3,000 screens. And how do studios motivate millions of moviegoers—mainly under 25—to go to the 3,000 screens on an opening weekend to see a film no one else has yet seen or recommended? With a successful advertising campaign.

    Comment by wow powerleveling -

  5. This is worse than the old packaging. If I want this single channel, you have to buy the other crummy ones. At the same time the normal digital tier has shrunk by at least 6 channels thanks to this movie and the death of Trio & Tech TV.

    Comment by wow powerleveling -

  6. [Quote]
    Everything, essnetially, is going a la carte, no matter what the cable or any other industry wants. The American public will only grow accustomed to the myriad of choices.

    It doesn’t have to cost millions of dollars per se. It could be a matter of ushering in a lot more creativity in the marketing process.

    The real “problem” is that “media” is being redefined
    [/QuOTE]

    Thats what I always say! My optinion, too.

    Comment by Einkaufen -

  7. “Every type of programming imaginable. All there for you to find and choose what you want, when you want it.”

    Every type (speaking of broad genres), but not every show. Not even close. Where can I buy broadcast quality downloads of Veronica Mars, The O.C., or The Sopranos over the Internet? Preferably not from a middleman such as iTunes. Preferably including the entire back catalog of episodes.

    As far as I know, I can’t. So it would seem that we’re still very much in the beginning of an on-demand, a la carte world. The best stuff, the most desireable stuff, is still sitting in closed silos only accessible through various forms of hobbled (either due to quality or format) streaming.

    In ten years, maybe an entirely new array of programming will have developed in the online-only (or online-first) space. Stuff that people watch in quantity, stuff that can be paid for via either advertising or direct sale. But that still seems a distant goal, not a description of the way things are now.

    Comment by Electrical Oratory -

  8. Totally missed this entry. My two cents…

    Everything, essnetially, is going a la carte, no matter what the cable or any other industry wants. The American public will only grow accustomed to the myriad of choices.

    It doesn’t have to cost millions of dollars per se. It could be a matter of ushering in a lot more creativity in the marketing process.

    The real “problem” is that “media” is being redefined

    Comment by Charles -

  9. Mark is right. As I point out in my blog the movie industry is actually movie to more of a linear model with Netflix and other mass dvd rental companies.

    Comment by Article -

  10. I remember when me and my boy went to see Bob Guccione’s “Caligula” at some art house in Manhattan and the only ones in the theatre besides us was a family ranging in age from grandmother on down, and they were having a good ol’ time, and we left the theatre thinking that THIS was what America would eventually devolve into, but it seems the country has gone the other way!!!

    Shakespeare is replete with sexual innuendos and “crass” humour, and were HE around today I’m sure all the cash fundamentalists would be on his case too. I hate sounding like a PR man for Howard Stern, but the evangical persecutions of the FCC can all be traced back to his struggles with the FCC…and the broadcasting industry stood idly by.

    CBS should have sued the FCC RE: the wardrobe malfunction, because I had the game on tape and played it over and over but STILL could not see the nipple slip. It was only through the miracles of the internet that I got to see Ms Jackson’s not-THAT-impressive breast.

    Comment by EminemsRevenge -

  11. I need to make a wild weasel to get all of the red lights to switch to green for me.

    Comment by honda generators -

  12. More people win and few people lose! Maybe the guy who watches the golf channel religiously will be dissapointed, but the rest of us will be thankfull because we now have $40 a month more to spend on something else.

    Comment by Yjed -

  13. I think you need to rethink the way you are marketing to the consumers. How many people if they did not come to this website would have even heard of HDnet? I would know nothing about it if you hadn’t called Phil Jackson your “Bucketboy.”

    Comment by Jared Carter -

  14. I think you need to rethink the way you are marketing to the consumers. How many people if they did not come to this website would have even heard of HDnet? I would know nothing about it if you hadn’t called Phil Jackson your “Bucketboy.”

    Comment by Jared Carter -

  15. You ignore the political dimension to the story. The motive force behind this story is the cultural wars. Conservatives believe that cable TV has coarsened arts and entertainment and made it more difficult for parents to restrict access to programming they find objectionable. You can agree or disagree with their point of view, but the bottom line is that ala carte would be a negative impact to the revenue stream of producers who are already tied in to cable giants. Johnny may want his MTV, but Johnny’s mom may flush it if she is given the choice. You may well be right on the impact on costs, but that’s not the angle that most concerns cultural conservatives. It’s also possible there could be a democratization of cable through ala carte that wouldn’t reduce revenues just redistribute them. Not to worry. Money is power and this is a populist issue. In this country the populist always lose.

    Comment by Dudley Bokoski -

  16. I think, Mark, you’re still stuck in that old way of thinking as well.

    What if….the advertising model was switched from broadcast to pointcast, where advertisers agree to pay for a certain number of ad placements at a certain amount of dollars. The content creator ends up using advertising agents (in the same purpose that Google serves for current ads on the internet. After the pricy initial run of ads for a popular show are served, and the show becomes older, the ads get cheaper and cheaper and ultimately there become -more- sponsors for the shows than can possibly be fit into the current model.

    You’re thinking in the content+ads=one solid chunk of data view, and that’s just wrong. It’s been years since the technology became available to piece together disparate chunks of audio and video on the fly came available.

    Now, it just take somebody with knowledge and vision to jump on this and convince the current content creators to license their product for this. I’m assuming that won’t be you.

    Comment by Greg -

  17. Really interesting, I hadn’t thought about the fact that digital TV bandwidth could go to non-TV applications in an a la carte world. After a little thought, though, I think this is the way it should be, and my guess is you agree. Who decided that Comcast should be forced to use all of its bandwidth on a one-size-fits-all catalog of channels for its customers? I’d argue that if a non-TV application came out that was a more profitable use of bandwidth, Comcast SHOULD remove HBO7 or whatever from its menu in order to give that app some bandwidth.

    A wise media analyst I read says there are four types of businesses in the modern media landscape: input devices, output devices, distribution channels, and data. Making the distribution channels of the cable companies open to competition should ultimately provide more value for consumers (by letting them pay just for what they want), for cable companies (who will only eliminate channels if it means more revenue from distributing a different type of data), and for emerging businesses who find a way to utilize the freed up bandwidth in order to make a profit. If that means the long tail of TV goes away or gets pushed to the internet (do we really need several channels running Friends/Seinfeld/Simpsons reruns every night?) then so be it.

    Comment by Conor -

  18. Mark,
    You wrote an article about how people usually travel the same websites because it’s the easiest thing to do. But you haven’t mentioned that it’s the same in cable. I watch about 5-6 hours of tv a week. Two sitcoms and a sports program or two. I rarely deviate from my favortite channels and even the few times I do surf, I usually end up on one of my 8 most viewed channels anyways.
    The point is that I would gladly only pay for these channels because even if it cost me $10 a month for each channel(highly unlikely!) I would only be paying $80 which is just about what I’m paying now. But we all know that it wouldn’t cost $10 a month to get ESPN, FoxNews, and other channels that already have a great base. This is evident from the fact that you can USDTV for $20 month with those channels.

    What I’m saying is that al la carte tv is for the majority and not the minority! More people win and few people lose! Maybe the guy who watches the golf channel religiously will be dissapointed, but the rest of us will be thankfull because we now have $40 a month more to spend on something else.

    Comment by Stephen Stull -

  19. Mark is right. As I point out in my blog the movie industry is actually movie to more of a linear model with Netflix and other mass dvd rental companies.

    Comment by Matt -

  20. Mark is right. As I point out in my blog the movie industry is actually movie to more of a linear model with Netflix and other mass dvd rental companies.

    Comment by Matt -

  21. Well, OK, what if we could buy TV’s that are Internet enabled, and may be overtime TV and internet/PC will become one appliance? Why even have two different units? Why not marry the internet/PC with the TV? Just like TV and VCRs! Once all put into one, this separation of one form of content presented to consumer from another will slowly fade! This may also open up the door for introduction of new bits/bytes pipelines. There are talks about sending bits/bytes in multidimensional forms over ip/satellite. Once we consolidate our consumers viewing appliances into one, then we may be able to reduce expenses and go after better ways of providing them with content through programming and/or bits/bytes crunching! Is it not more expensive to have a consumer base that is divided between many different appliances? I can see Sony, Samsung, RCA, and many others working with Microsoft, IBM, Sun working on one appliance for all home/office viewing.

    Comment by Mitchell -

  22. Mark,
    I don’t know if Time-Warner cable is doing this in your neck of the woods, but a few weeks ago they decided to yank IFC and Game Show Network off the digital tier without a warning. And then they put them as part of special packages – They lumped GSN with a bunch of niche sports channels including Fox regionals and the Tennis channel. IFC got put in with Sundance and a couple movie channels. Each package is now $3 a month. So they are slowly working their way down to ala carte programming. And it stinks.

    Why did they have to force me to buy the Tennis channel when I just want to watch match game reruns? This is worse than the old packaging. If I want this single channel, you have to buy the other crummy ones. At the same time the normal digital tier has shrunk by at least 6 channels thanks to this movie and the death of Trio & Tech TV. But the price remains the same. Maybe they’ll be dumping more religious and shopping channels on me.

    In the end, the internet revolution won’t be about creativity when it comes to TV. It will be the birth of pirate channels. And nostalgia will be king of the format – people wanting to see stuff that they used to see on TV. And there’s lots of “unique internet programming” being created – but it’s of the adult nature.

    At a recent AV Geeks screening of films from the 60s to 80s dealing with computers, not one person in the film predicted adult entertainment applications. Yet that’s what truly pushes the technology. That’s what sold it to the masses (like the VCR). Isn’t that the only business that’s getting money on the internet from entertaining the masses?

    Comment by Joe Corey -

  23. Is this the same Mark Cuban that was arguing a few weeks ago that the Internet pipes are not big enough to hold all the traffic required to distribute bandwidth hogging Internet video looks like the Cable companies and Telco’s ahve nothing to worry about as long as they control the last mile .

    Comment by Matt -

  24. Because of the technology, aspiring program/movie creators can do so with relatively little money and still make quality films. What separates success is how these movies/programs are marketed – perhaps there should be guerilla marketing firms dedicated to helping quality low budget movies be marketed and get the viewership and exposure they need to be successful. Investors would need to be beaten off with a stick with the right business plan and people executing this type of niche company.

    http://www.blogforcapital.com

    Comment by Michel -

  25. Wild Flower, great post!!! I’ll throw my hat in the ring for the theaters selling merchandise. IF someone had tried to sell me a V for Vendetta tshirt before or after I saw the movie, I’d have bought it. I’d say the same sort of stuff would go for a lot of the movies that the theaters show.

    Comment by Mark Homewood -

  26. I love the conclusion:

    “And a word of advice to take or leave as you see fit. Its always a mistake to listen to your customers. The goal of any organization should be to give their customers or constituents what they will want, not what they did want. Its not the job of the customer to know their future consumption habits. Its your job.”

    Large organisations such as MS and Google, etc… lead the way in their technology. Small business needs to listen to the customers to survive. But at their level, it is their responsibility to drive innovation and/or culture forward into the future.

    Thanks Mark for another insiders look to the industry,

    Comment by Forex Trading -

  27. Interesting points on your site; but you’re really focused super-heavily on the ‘business’ side of this all. Which makes sense, but it overlooks examples where things become popular and whether these instances can be applied to this whole new market.

    For example, treading over what Wildflower discussed above, consider things that become popular with essentially zero marketing budget – movies which, due to their quality or uniqueness, generate relatively huge audiences. Such as the “Yellow Fever” movie. It’s on google video, and is getting much more play than most ‘indie’ movies, since it’s funny, original, and accessible.

    The production values aren’t huge, since it’s done on a student budget; some of the humour’s cheesy, but that’s part of the charm.

    The connection to all this talk of “widely distributed content”? Perhaps a totally new business model is the only effective way to use the internet.

    Good things rise to the top through word of mouth, fake-artificial things sink and die.

    Comment by Krupo -

  28. Not completely on the same subject, but I link this blog and “Disney almost got it” are kind of on the same subject. Why don’t you try a television series that you release on HDNet and on the net through redswoosh, and release it in Landmark Theaters at the same time, similar to what you do with your movies and releasing them on DVD.

    That way I can download it if I want to, or see it on HDNet in HD or pay to see it on the big screen. Just a thought.

    Comment by PaulD -

  29. Mark,

    Here is another way to watch your PC on your TV – services like movielink, vongo and cinemanow have made these pc to tv converters really popular:

    http://sewelldirect.com/pc-to-tv.asp

    Comment by Preston Wily -

  30. Cuban: “As i have said before, the movie market is ala carte. Look at which content rises to the top in terms of revenues from consumers and visibility. The content from the biggest companies who have spent the most money to market.”

    From http://www.slate.com/id/2118819 on the economic of opening weekend movie revenue: “[B]ox-office results reflect neither the appeal of the actual movies—nor their quality—but the number of screens on which they are playing and the efficacy of the marketing that drove an audience into the theaters. If a movie opens on 30 screens, like Sideways or Million Dollar Baby, there is obviously no way it can achieve the results of a movie opening on 3,000 screens. And how do studios motivate millions of moviegoers—mainly under 25—to go to the 3,000 screens on an opening weekend to see a film no one else has yet seen or recommended? With a successful advertising campaign.

    Studios spend $20 million to $40 million on TV ads because their market research shows that those ads are what can draw a movie’s crucial opening-weekend teenage audience. To do that, they typically blitz this audience, aiming to hit each viewer with between five to eight ads in the two weeks before a movie’s opening. The studios also spend a great deal of money testing the ads on focus groups, some of whom are wired up to measure their nonverbal responses … “

    Comment by JohnD -

  31. im usualy surfing cable or the internet and to not have a lot of channels to surf would look bad to me the customer

    Comment by jeffys plannet -

  32. With technology getting better and cheaper, I agree that people can and currently are making their own movies. The difference now than 8 – 10 or more years ago is that the availability of those movies are to everyone… via the internet. (“Star Wars Kid” and “Numa Numa” are simple examples) .. Which is turning the tables in the whole entertainment world.. and tv included.

    Before it is was the movie studios putting out movies they think we want to watch. NOW, people are creating what we want to watch… and if the movie studios were smart, they would listen.

    A couple of weeks ago we VOD on cable “Madagascar” about NY zoo animals wanting to get out and explore the world. … I just saw a trailer for a Disney flick out this weekend I think about NY Zoo animals wanting to get out and explore the world …. 2 things going against this movie for me… 1)It’s Disney (They haven’t put out a good movie in along time.. and my 4 year old doesn’t like the mouse) 2) I just watched “Madagascar” – before I say this I probably should watch the new Disney flick (Can’t remember the name).. because I am only going off of the trailer.. BUT, the trailer is supposed to be designed to get me to want to watch it.. so, with that said. I absolutely have no desire to go see another movie like “Madagascar” .. can’t they be original.. oh I forgot.. Disney is trying to give us movies they think we want to watch and I am guessing (Didn’t follow) that “Madagascar” did good… Hey… deju vu.. I think some studios did this same thing on “Bugs Life” and “Ants” .. right??? Hmmmm I only own one in my video collection.. why own both?

    And a tip to Disney – - “You better not touch Pixar.. let them do their thing!! Good job on the “Little Einsteins” tv show!! – my 4 year old son is a tough critic and loves it!! He hums the tunes all the time!”

    (For those who don’t know… Disney bought all the rights to the “Baby Einstein” series from this mother who created them in her spare time for $20 mil and created a new tv show targeted for little kids)

    Anyway… I think Theaters are missing the boat.. Why go… it stinks.. sticky floors and OVER PRICED FOOD!!! $3.00 for a tiny bottle of water.. JOKE. I think they are totally missing the boat. What about merchandising!!!! One of the reasons we like to go to Universal City Walk during an opening weekend of a cool movie is because we get to shop!!! “Star Wars Episode I” .. We bought a light saber for $50 bucks.. impulsive buying.. for my son.. AND in most any store that carries toys, they have toys created after media… movies and tv EVEN BEFORE the movie is out!!! … When I worked in the bakery.. a kid movie comes out.. everyone wants cakes made like that movie. The studios make more on MERCHANDING!!!! Why doesn’t the theaters get into that???? Stop jacking up the food and have a little or big section of merchandise!!! Makes since to me… while I wait for the movie to start… I could shop.. or (Worse for me) my kids sees an item he has to have!!

    Look at “Harry Potter”… kids showed up in costumes and carried toys TO THE THEATER!!! They could have bought them at the theater instead! Oh and what about the kids that see the other kids’ toys… they want them!!!

    Going to the theater should be about an experience.. more than just seeing the movie… because the movie creates an experience and the theater should carry that over. I don’t want to be mad because I had to pay $3.00 for a tiny bottle of water.. $1.00 ok… $1.50.. hmmm ok…. $2.00 K … BUT $3.00 I am not coming back because all the food prices were like that…the Candy, Popcorn, Soda. – Disgusting. It’s not that I don’t like spending money.. It’s that.. I don’t like getting ripped off!!! It’ll be on DVD in six months or sooner so, Ha!! Then I can own it for far less that the food cost!!!

    Thanks for the vent.. little off topic.. but, I feel better.. it’s been bugging me for a while.

    I have to run.. need to lay down the music track on my video… ;)

    Comment by Wild Flower -

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