Summary: There is a possibility that DirecTV will lose the rights to broadcast Fox regional sports networks as well as some cable channels (including FX and National Geographic) this November due to a contract-renewal dispute. These disputes are becoming more and more commonplace due to the rising levels of competition within the television industry. Network owners are able to set higher prices, because there are more companies that want to enter contracts. Furthermore, traditional distributors are seeing a decrease in the expected growth of subscriptions due to newer venues for media such as Netflix and Hulu.
Fox broadcast network and Fox news will remain untouched until the end of the year and end January, respectively. Part of the problem in the current negotiations is that News Corp. (which owns Fox) wants to bundle these services to the regional sports networks, which will allow them to ask for a higher price - as much as a 40% increase on the side of consumers.
Analysis: This article is very rich in some major concepts of media and business:
1) High competition allows for high prices.
2) The entrance of online media into the market has created significant problems for traditional media.
Because of the higher competition, network providers are seeing the opportunity to increase their revenues by demanding higher prices from their customers. Since the products they are selling have very high brand loyalty (such as Fox news or Fox regional sports), they have a lot of leverage over service providers to extract the price that they want - especially since for these providers giving up a network means loosing customers to their competitors that choose to pay the new, higher, price.
However, now the competitors are not all equal. Traditional service providers face the challenge of competing against online media. Companies such as Netflix and Hulu (as well as possibly YouTube and Amazon in the near future) do not have the same amount of costs as do the traditional service providers since they do not need as much physical presence. This allows them to increase their profit margins or to keep the price of their products lower than that of traditional broadcasters while buying access to networks at the price demanded.
This is a really interesting article. It just goes to show that business is constantly changing. In this case, it looks like the future of cable and satellite will include higher prices for consumers and more constricting contracts for providers (and, alternately, more freedom and control for the television networks). This will be a fascinating turn of events to watch for as we begin to come out of the recession and as Netflix and Hulu gain popularity.
ReplyDeleteI think that this is a very interesting article too! The question that I have though, is how will the current consumers react to this increase and prices and how (possibly) will companies like Netflix and Hulu benefit from it (because if the consumers will turn away from cable and satelite companies, they are probably going to turn to Hulu and Netflix...)
ReplyDelete-Saida Khamidova