Apple TV

Apple’s ability to successfully force its way into the pay television business with a cord-cutter’s streaming TV solution has been left languishing since 2009, thanks to some of America’s largest cable and entertainment companies who think Apple is arrogant and out of touch.

The Wall Street Journal today published a story showing how Apple’s plans to challenge the cable TV industry much the same way it revolutionized digital music has rubbed the big and powerful the wrong way. Apple’s desire to launch a cheaper streaming video service with a slimmed down TV lineup and robust on-demand options has flopped, because executives have no interest in bending to Apple’s way of thinking.

In 2009, Apple decided it wanted in on the streaming pay-TV business. At the same time Time Warner Cable began experimenting with data caps, Apple was approaching local stations and broadcast networks and offering them premium payments — higher than what the cable industry itself paid — for Apple’s choice of stations and cable networks. The deal meant Apple would alone be free to pick only the channels it wanted to carry, a major departure from the industry practice of contract renewals that bundled popular networks with spinoff and lesser-known channels cable operators didn’t want to carry. Apple’s hard-charging negotiator, Eddy Cue, seemed to believe that if Apple was at the negotiating table, that alone would be enough to get a deal done. It wasn’t.

Two years later, Time Warner Cable approached Apple seeking to launch a joint TV venture that could compete nationwide with satellite and phone company competitors. The talks were at the highest levels at both companies, involving Time Warner Cable’s then-CEO Glenn Britt, Cue, and Apple CEO Tim Cook. Cook also approached Brian Roberts, CEO of Comcast, promising him the service would only be sold through cable operators — good news for Comcast but bad news for open competition.

This time, Apple sought money from the cable companies, not the other way around. Cable operators were told they would need to pay $10 a month per subscriber to Apple, with no guarantee that fee would not increase in the future. Just as concerning was Apple’s insistence that subscriber authentication would require customers to use their Apple IDs, a departure from the cable industry’s push to adopt TV Everywhere, where customers could unlock streaming video from any cable network simply by logging in with the username and password they set up with their pay TV provider. Apple was also characteristically secretive about their user interface and left cable industry executives flummoxed when they asked Apple to sketch out what the service would look like on a napkin. An Apple official would only respond that their interface would be great and “better than anything you’ve ever had.” The fact Apple refused to answer the question did not go unnoticed.

Nor did Cue’s unconventional way of negotiating with some of the most powerful entertainment executives in the country. When Jeff Bewkes, CEO of Time Warner (Entertainment) agreed to meet with Cue about Apple licensing Time Warner’s critical networks — which include HBO, CNN, and TNT — Apple’s negotiator showed up 10 minutes late. While Time Warner’s negotiators were smartly dressed in business attire, Cue turned up wearing jeans, a Hawaiian shirt, and sneakers with no socks. It went downhill from there, because Apple insisted on valuable on-demand rights to full seasons of hit shows and permission to let viewers store their favorite recordings on a massive cloud-based DVR that included features like automatic recordings of hit shows and advanced ad-skipping technology.

Crickets.

More than a few programmers used to having their way with cable operators were shocked by Apple’s ‘arrogance’ and unconventional way of doing business. The newspaper reports one former Time Warner Cable executive watched with amusement as stone-faced programmers were unimpressed with Apple’s demands.

Jon Lovitz offers a visual hint what Mr. Cue must have looked like meeting with high-powered execs at Time Warner (Entertainment)

“[They] kept looking at the Apple guys like: ‘Do you have any idea how this industry works?'” said the former executive.

Apple responded ‘doing new things requires changes that often are unsettling.’

A year later the negotiations were on life support, as Apple struggled with the arrival of 2015 with no slimmed down streaming TV package to offer Apple TV owners.

Apple’s demands flew in the face of decades of cable industry business practices, which give channel owners virtual guarantees of rate hikes with each contract renewal, the right to force their spinoff networks on the cable lineup in return for a comfortable renewal process, and the cable industry’s right to an assurance everyone was getting the same kind of deal (except volume discounts). Any deviation from this would result in panic on Wall Street, as investors’ dependence on perpetually improving quarterly financial results based on revenue boosts from new or higher fees would come crashing down if a company like Apple got a better deal.

One industry insider suggested once a company like Apple got a deal on sweetheart terms, every other distributor would demand the same deal (and many have contract provisions that require it). Apple may have assumed that because it managed to get the recording industry to agree to its iTunes digital music distribution deal 15 years earlier, so the cable industry would go. Except the road to cut-throat deals for entertainment programming is littered with dead-end business plans that had to be quickly modified when the discounts ended.

Netflix and Starz both learned expensive lessons when early discounts on licensing deals ended after Hollywood saw how much money those companies made from streaming. When licensing contracts expired, entertainment companies sought massive increases in licensing fees to “fairly share” the proceeds. Netflix ended up walking away from several studios, seriously impacting their online streaming catalog. Eventually, Netflix decided if they cannot beat the studios, they should join them, creating original programming to attract and keep subscribers.

Cue in real life

After almost a decade spent trying to get into the online cable business, Apple now seems more likely to follow Netflix, Amazon, and Hulu, and devote time and money on developing its own original programming. Instead of trying to license and bundle network programming, Apple TV today supports independent apps created by various networks. Viewers still get to watch their favorite shows, Apple does not have to pay for streaming rights, and there is a joint effort to create and support a single login so viewers can get access to content without constantly re-entering usernames and passwords.

Apple’s original shows include “Planet of the Apps,” a reality series, a miniseries being developed by Dr. Dre, and a spinoff of CBS’ “Carpool Karaoke.” The shows serve a dual purpose — entertaining viewers and helping push sales in Apple’s App Store and streaming music service.

Also under consideration are big budget, critically acclaimed original shows and series that could generate positive buzz for Apple TV, like “House of Cards” has done for Netflix.

Developing programming keeps negotiators like Apple’s Mr. Cue from having to challenge a very profitable pay television industry on their terms and spares Apple from creating a cable package of linear TV channels subscribers increasingly don’t care about. Viewers want on-demand access to the shows they want to see and don’t care that much about who supplies them and how.

So in the end, the intransigence of Big Cable and Hollywood studios that are now worried about cord-cutting may have done Apple an enormous favor, sparing them from being entangled in a business that buys and sells channels to fill a bloated and expensive cable television lineup more and more consumers are now deciding they can do without.

Updated: Link to WSJ story corrected.

It is hard to imagine there are still cable systems serving customers with nothing more than a slim lineup of standard definition cable television channels in 2016, but not if you live in three Berkshire towns over the New York-Massachusetts border where Charter Communications will finally introduce HD television and internet service starting next week.

Lanesborough, West Stockbridge, and Hinsdale all suffer from the pervasive lack of broadband common across western Massachusetts. But these communities, along with Charter’s cable system in nearby Chatham, N.Y., are benefiting from regulator-mandated upgrades as a condition of approving Charter’s acquisition of Time Warner Cable. Charter Communications has almost no presence in New York, except for 14,000 customers in Plattsburgh and the seriously antiquated system in Chatham that isn’t too far from the dilapidated systems serving the Berkshires on the Massachusetts side of the border. Like in Chatham, customers in the Berkshires pay for service similar to what cable customers received in the 1980s – no video on demand, no internet access, and a capacity-strained system that lacks enough bandwidth to offer HD channels.

The upgrades will cost about $6,000 per customer — numbering 2,500 in Chatham and another 800 in the three towns in Massachusetts. Charter is paying the bill. Charter’s acquisition of Time Warner Cable will make things easier for the cable operator, because it will extend fiber connections between the Charter systems and existing Time Warner Cable infrastructure nearby.

In Massachusetts, Charter’s upgrades require customers to install new set-top boxes in time for the switchover on Aug. 2. A week later, on Aug. 9, internet access will be available at the two speeds Charter traditionally offers — 60 and 100Mbps.

Most customers care a lot less about improved cable television and are more concerned about getting broadband. Western Massachusetts’ broadband problems have affected property values and kept businesses from relocating or expanding in the area. Few areas in the northeast have languished with inadequate internet access more than Massachusetts communities west of Springfield.

The large consortium of 44 communities working under WiredWest have spent years working towards community-owned fiber to the home service in the western half of the state, but the project ran into political interference at the state government level. Lanesborough had been part of the WiredWest collaborative effort, reports iBerkshires. With Charter’s upgrade, the community may decide to drop out of the project, even though it would likely deliver superior broadband service over what Charter will offer.

On a morning conference call with Wall Street analysts, Comcast continues to misrepresent its vision of broadband usage caps and usage-based billing, claiming customer preferences echoed through Comcast’s performance in the marketplace will tell the company what is “best for consumers,” and guide Comcast how to realize the most value for shareholders.

Wall Street is very interested in usage caps and usage-based billing because cable operators can protect video revenue threatened by cord-cutting and boost revenue earned from customers who exceed their allowance.

Vijay Jayant, and analyst at Evercore ISI, quickly zeroed in on the potential loss of anticipated revenue from Comcast’s recent decision to boost its data cap from 300GB to 1TB, something Jiyant characterized as a “hurdle” for future usage-related charges.

“Well we have one terabyte. We moved it up from 300 gigabyte to one terabyte in 14% of our markets where we have usage-based pricing,” responded Neil Smit, Comcast Cable’s president and CEO. “We think we’re going to continue to adjust and look at it as the market evolves and as usage evolves. We have different pricing models, some based on speed, some based on usage, and we’re going to be flexible and kind of let the market tell us which way is best for consumers and how we add the most value. We continue to add speeds. We’ve upped speeds 17 times in 15 years. We’ve built out the fastest Wi-Fi. So we’re going to continue to invest in the network to stay ahead of things.”

Smit’s response was incomplete, however.

Smit

Comcast’s usage and speed-based pricing models are hardly “flexible” and do not co-exist in the same markets. Customers are compelled to obey Comcast’s usage cap, face overlimit fees up to $200 a month, or pay an additional $50 a month to buy back their old unlimited use service. In Comcast markets without usage caps, the cable company only sells speed-based internet tiers with no enforced caps.

Comcast has consciously avoided allowing customers to choose between speed-based or usage-based tiers, because years of experience among other cable operators quickly proved customers intensely dislike usage caps of any kind. In fact, the largest percentage of complaints filed with the FCC about Comcast are about its compulsory usage cap trial and the fees associated with it.

One reason for that hostility may be that Comcast’s broadband prices do not drop as a result of the introduction of usage caps in a service area. The customer effectively receives a lower value broadband product as a result of its arbitrary usage limit, and the potential exposure to overlimit fees or a very expensive “insurance” plan to avoid the cap altogether. Earlier trials offered some customers a small discount if they kept usage under 5GB a month, a difficult prospect for most and in any case not much of a revenue threat for Comcast.

If Comcast was seriously interested in what its customers think about its usage cap trial, it need only review the FCC’s complaint database. According to a Freedom of Information Law request from The Wall Street Journal, nearly 8,000 complaints received by the FCC in the second half of 2015 were about data caps, and most of those were directed at Comcast.

Comcast’s claim it will let the marketplace decide only delivers a distorted view about usage caps, because many Comcast customers have only one other competitive choice, and there is a significant chance that provider caps customer’s broadband usage as well. AT&T, for example, caps its customers at a level even stingier than Comcast. Those caps have not been enforced with overlimit fees on customer bills (except for AT&T’s DSL customers), although AT&T suggests it is getting serious about collecting future overlimit fees. If Comcast gains new customers leaving AT&T to avoid smaller caps, Comcast executives seem to believe they can claim consumers have ’embraced’ Comcast’s usage billing. But we know that is about as credible as an election in North Korea.

Time Warner Cable has been one of the few honest players about usage billing, giving customers the option of keeping unlimited or switching to a capped plan for a discount. More than 99% of customers have chosen to stay with unlimited and only a few thousand have chosen to limit their usage for a small discount. An honest market test from Comcast would extend a similar option to customers. Keep unlimited or voluntarily limit usage for a small discount. Given this kind of test, we expect the overwhelming majority of customers would keep unlimited at all costs. Doing so would hurt shareholder value, however.

The only value Comcast is concerned with is how much more money they can charge customers for broadband service. In America’s broadband duopoly, where speed-based broadband pricing is already outrageously high, usage caps and usage billing are nothing more than a greedy cash grab. When money is at stake, reputation comes in a distant second at Comcast, as the company continues to prove its poor reputation with American consumers is well-deserved.

Broadband life in Alaska is usually a choice (if you live in Fairbanks, Anchorage, Juneau, or another significantly sized city) between usage-capped cable operator GCI or slow-speed DSL (if you can get it) from Alaska’s two telephone companies – ACS, where unlimited service is still available, or MTA, where a 10Mbps Internet plan starts at $50 and offers up to 50GB of usage a month.

GCI has traditionally been the fastest option, but the company’s usage caps and high prices have brought scores of complaints from customers over the years. A basic 10/1Mbps internet plan costs $59.99 a month and only includes 40GB of usage. Many Alaskans who want faster access with a more reasonable allowance have to spend $84.99 a month for 50/3Mbps access to get a 150GB usage allowance or $134.99 for 100/5Mbps service with 300GB of included usage.

Late last week, GCI announced it was boosting the usage allowance for just one of its plans, the premium-priced, limited availability 1,000/50Mbps plan ($174.99), which until recently included a 750GB usage allowance. The new usage allowance is 1TB (1,000GB).

“In today’s connected society, people are demanding more and more access to data at incredibly fast speeds,” said Paul Landes, GCI’s senior vice president/general manager of consumer services. “GCI is proud to have a product that keeps our customers connected in ways people in Boston and LA can’t even receive. Even better, we are able to provide these upgrades at no additional cost to our loyal customers.”

Alaskans face high prices for internet access from GCI, the state’s largest cable company.

Gigabit customers like Stop the Cap! reader Dave Langhorn certainly hoped so.

“This is long overdue,” said Langhorn. “For $175 a month, there shouldn’t be any data caps, considering unlimited gigabit plans in the lower-48 often sell for $70-80 a month, which is less than half what we pay and still get capped.”

Our reader Michael Horton is incensed that GCI managed a usage allowance boost for its most premium internet plan, while leaving everyone else with the same old service.

“We shouldn’t be allowing any ISPs to restrict usage on their networks,” said Horton. “You should be paying for the speed that you use and nothing more.”

Horton considers data caps anachronistic at a time when the digital economy is moving towards online distribution of products and services like movies, games similar to 벳엔드 사이트, software, and other digital products. Even Windows 10 has been more often installed from a download than from physical media.

GCI has promised to address at least one of Horton’s concerns, stating they are planning speed boosts and allowance upgrades for all of their internet plans at an unspecified time later this year.

GCI says the allowance boost comes in response to customer requests from surveys and “listening sessions.”

Horton and Langhorn both believe that those voices would be heard much louder if GCI had more significant competition.

“ACS is the only alternative if you want unreliable speed,” Horton writes.”They don’t have bandwidth caps, but you will be unable to use their service efficiently if you are a gamer or watch Netflix a lot.”

Sony PlayStation Vue has added live streams of CBS stations in nine new markets, expanding the reach of CBS-affiliated stations on the cable TV online alternative.

Effective immediately, subscribers can watch these CBS affiliates if you are located within the local coverage area (thanks to Cord Cutters News):

• California: KFMB San Diego
• Florida: WPEC West Palm Beach
• Michigan: WWMT Grand Rapids/Kalamazoo
• North Carolina: WBTV Charlotte
• Ohio: WKRC Cincinnati, WOIO Cleveland
• Pennsylvania: WHP Harrisburg
• Texas: KEYE Austin
• Utah: KUTV Salt Lake City

PlayStation Vue isn’t just for game consoles, available on PlayStation 4, PlayStation 3, Google Chromecast, Roku, Amazon Fire TV/Stick, and also available on the PlayStation Vue mobile app (iOS/Android). A seven-day free trial is available to U.S. viewers.

The service appears to be a more direct competitor to traditional cable television, offering a substantial number of traditional cable networks and an increasing number of local over the air stations:

PlayStation Vue Packages:

• Access: 55+ channels, including an assortment of cable, movie and sports channels for $29.99 per month ($39.99 if local stations are provided)
• Core: 70+ channels and regional sports networks for $34.99 per month ($44.99 if local stations are provided)
• Elite: 100+ channels, including all channels noted above plus Epix Hits and two other entertainment channels for $44.99 per month ($54.99 if local stations are provided)

Showtime is available a-la-carte. In smaller cities without live local station streaming, the service offers on-demand access to selected network shows.