Be as bad as it gets. That shouldnt change the overall picture that the rate of decline has dramatically accelerated for Traditional Television and it doesnt seem to be any question that were in a new normal with the rate of decline for the traditional system is probably 5 or so per year which is an extraordinarily rapid decline for something thats been around as long as traditional paytv distribution trend what youre talking about cable and satellite primarily, correct . Guest thats right. Traditional distribution the cable and satellite. Whats really interesting and maybe the most interesting part of the story is, if you went back a year ago you wouldve said that the virtual mvpd, so the you tube tv and hulu live and that sort of thing were really what was driving this migration away from traditional linear tv. Today it looks like that thesis was probably wrong and the uptake of those Virtual Services is not terribly strong actually and that what youre seeing is people just defecting entirely from live television. My suspicion is that what we are seeing is a bifurcation between entertainment and sports, and that where we are headed is that sports programming, which needs to be live for obvious reasons, will increasingly spiral higher and higher and higher in price simply because the distributors, or i should say the programmers of sports, a fixed cost contracts with the leagues with the nfl and with the nba in Major League Baseball and what have you. As the number of subscribers for those Services Decline they have no choice but to raise prices faster and faster and faster. That makes the system increasingly punitive for people who are not sports consumers. What youre going to assist people who are entertainment all the consumers simply saying i dont need live tv anymore. I can simply entertain myself with subscription videoondemand services like, today, netflix but increasingly disney plus an hbo max and a whole raft of services that are coming. You will see this complete separation between the sports and news universe on one hand and the entertainment universe on the other. You are just beginning to see that now in the numbers. Host to help us explore some of those issues is cats from the washington post. Thanks for having. A lot of the Silicon ValleyTech Companies are picking up on these trends you mentioned. Wanted to ask you, next week were expecting apple to unveil more details about its streaming services thats coming soon. Whats the significance of these logiTech Companies like amazon and apple get into the content game . Guest the are a couple of things. First to state the obvious they have awfully deep pockets. That means have staying power that the traditional players dont have. Directv, for example, launched directv now. Streaming overthetop service about two years ago. It were losing by all accounts convinced amount of money doing it. Sling tv at dish network was loosing a tremendous amount of money. Its hard for the good Shell Companies to sustain those kinds of losses and so they reprice upward, the growth falls off and they hauled away as competitors to some extent. The players like google, like amazon like apple who are offering something of a different game can afford to subsidize this this is much longer. Google thesis you can assume is it were going to make money directly by selling television. Its that by selling television we can bolster our advertising business both by directly placing ads on the programming but also knowing what you watch. If i know which you want i can target ads to better and i can charge more for those ads to all the other places where i can reach you. Thats going to be the thesis that google come very likely to be the thesis at amazon where amazon wants to know what you watch because they can help sell you things or they could be better served in some new things if they know what you watch. Apple is probably a different business model. They have always been a hybrid of a Subscription Company and the hardware company. There were probably have elements to both of those things in their new model. Likely to be subscriptionbased but it is part of an Apple Ecosystem where there are all kinds of theories beyond just want to sell tv for a profit. On your point is companies can sustain losses on this business for a long time, looking longterm, ten years, what is my tv package going to look like . What happens to the traditional bundle model that weve seen . Guest the bundle is all referring around the edges. But interestingly, part of the reason that the virtual mvpds are struggling and are now losing some of that early traction is because they fall into the same trap as traditional distributors did, which is they end up with these bloated packages of channels. If you think about the value chain for a second, the value chain start with producers of content, the studios and even upstream from that is actors and athletes and what have you. But its created in studios. It is aggregated together in Cable Networks, if we focus on the cable value chain for second. Aggregated together in Cable Networks, though shows. The Cable Networks are aggregated together into media conglomerates, so viacom or fox or disney would have you. Those media conglomerates are aggregated together into the bundle that we all know and hate. Increasingly for a while you saw this push toward disaggregating the bundle. What happened is the bundle has reaggregated and all the virtual players have been forced to take all of the program, all the programming and networks they didnt want, have largely been stepped on the throat by the content companies who said you cant get the good stuff without also taking the bed. They have created these bloated bundles customers are now rejecting in the same with the rejected those bloated bundles and traditional linear television, and so theyre moving increasingly to subscription videoondemand and thats what i say my suspicion is, again, that you will see the light tv model only survive for sports and news, and that almost Everything Else will move toward ondemand models. The purveyors of content, like entertainment content or streamed realtime entertainment is to young people, its an oxymoron to begin with, the ideas there is a time of day for a particular show is sort of an odd concept for anything other than the sporting event. Or an Award Ceremony something. That model i think will increasingly disappear and you are going to see skinnier bundles of sports and content, sports and news, very expensive probably because sports content is so expensive to procure, and that the other stuff will be crowded out. Host mr. Moffett, whats the motivation for reestablishing these larger bundles . Guest its negotiating leverage. Its the content owners that have, that own ten, 12, 18, 20 networks, have two or three that it must have programming. Instead of saying i will sell those three, able to in order to get those three you have to take the other 16. What you end up with is a bloated set of networks. And again its that Network Aggregation layer that is aggregating a bunch of shows into the cable network. Its a weird concept. It exists almost entirely because of schedules. It is created around the concept of leadin and lead outs that was when we Program Television 20 years ago. Its not the way people consume television anymore. Some of those Cable Networks have meaningful brands, discovery has the brand separate and apart from its schedule. Espn has a a brand separate and apart from its schedule. But you shouldnt lose sight of the fact Cable Networks are still primarily scheduling mechanisms. They are aggregations of content with the schedule, and schedules are increasingly anachronistic. What does that mean for consumers wallets . I think the whole promise of cord cutting at first was this will save me some money each month, but now that were so many services. If you point from a short hbo are paying for that, in addition to netflix, maybe amazon, too. Longterm, our consumers going to save money or not with all these new services, available . Guest they may spend somewhat less money but they let less content. I think realistically, look, it was never a terribly compelling argument from microeconomics perspective to think that the cost of procuring content would go down as the bundle broke. Theres actually really interesting thought experiment where you could imagine what would happen if we were any world where the polar opposite, where everything was all a card, and you had a handful of all card chamfer certain price. It would behoove some players in a system to say im going to make my content available for free for a lot of other people if they subscribe to this channel, ill also give them that channel for a while in hopes they get hooked on it, they watch it and i can sell incremental advertising. I would have extra distribution for that additional channel and that would at least partially pay for itself to other competitors would see that strategy and said i want to do that, too. You would end up with what started as an a la carte system. Blowing up into the kind of model ability complains of today saying i cant believe i have to pay for all these channels that i dont watch. A simple example the grass is always greener. People will poke holes in the idea that if you like im paying for a bunch of channels that i dont want, but the reality is you are probably not. Youre probably getting a a bunch of channels you dont consume very much for Something Like free, and for the same price you get the channels you watch but you wont get all those other channels that might be fun to watch sometimes, and add some measure of value. You just wont get all that stuff anymore. Inevitably, you will be paying about the same amount of money and have little less choice and probably feel worse about it rather than better when this whole transition is done. Host whats the strategy for the comcast and the kocsis of the world to prevent this . Guest i dont know the Cable Operators necessarily care about preventing it anymore. I think, so lets think about the world and a couple of different categories of distributors for a second. The Cable Operators have never been Media Companies. They are infrastructure providers, and increasingly they view the lens to the profitability of the Different Services or the view the world through the lens of the profitability of Different Services that they sell. They dont make money much money on video and so increasingly they are disinclined to try to stem the erosion. If customers want to leave video, then thats okay, let them leave video and deepen the relationship with them around broadband and some highquality broadband service. Thats probably at least as good an outcome as trying to be all things to all people. Satellite operators on a much tougher position because they had no business of them video, and so for directv and dish network it is a very, very challenging future as a number of people subscribing to traditional tv decline. Theres simply no place for them to go. But the world looks very different through those lenses. The real pressure, and comcast has a foot in both camps, is on the Media Companies. The Media Companies, there is simply no good argument for how a decline in traditional distribution is good news for a media company. A few of them, disney in particular, may have a lifeboat in the form of a direct to consumer strategy where is the selling of direct to consumer subscriptions they can plug the hole in their statement, income statement that is created by the loss of traditional distribution. But for most Media Companies its a very, very challenging future to see linear distribution start to decline or accelerate its declines, and with no realistic alternative for direct to consumer strategies. Of this companies you mentioned like comcast and may be doubling down on the broadband business at a time where consumers are maybe leaving their traditional tv tv packages behind, cable tv packages behind, is that good or bad for a company like comcast . Guest well, you meet is the tech lash good or bad . Well, heres the way i would think of it. If i think about the history of the last ten years or so of Public Policy debate around the Cable Operators, it has been dominated by the Net Neutrality debate. And Net Neutrality as ive said on your show in prior years was to me never a battle over First Amendment rights and freedom against blocking and things like that because those issues were never really in question. It was really a commercial dispute between one set of companies, google, facebook and netflix in particular, who were perceived as the good guys and you want to make sure the transport for them was free. One set of companies who proceed to be the bad guys, verizon, at t, comcast, who were self transport the want to transport to have price. This conflict between transport is free or transport has a price, was essentially encapsulated in the Net Neutrality debate. When it was good guys versus bad guys, it was an easy Public Policy when to say we are on the side of the good guys, white hats, google and facebook and netflix, and everybody was against the bad guys, at t, verizon and comcast. There are no good guys left in the room. The white hats have left and google, facebook in particular are no longer viewed as good guys in anybodys book. But argued just as suspiciously as the Cable Operators and the telephone companies. In some ways that debate has lost its Emotional Energy for most voters. Tech lash is really directed not so much at the isps but directed at the googles and facebooks and the edge providers of the world. In that sense it has relaxed some of the Public Policy pressure that used to be on the isps. Now, if, in fact, we lurch left in the next election and some of the policies that have been espoused by the more leftleaning candidates in the democratic primaries, sanders and warren, would suggest it is still going to be a regulatory unattractive time for the Cable Operators where they it will be subject to much more regulation than they have in the past. But the Net Neutrality debate per se is i think noticeably absent from most of the Campaign Rhetoric among the democrats because its not an issue that energizes the base anymore now that its no longer become framed in this good guys versus bad guys framework. Host when you look ahead at potential legislation or regulation, where does section 230 come down . Guest you know, i dont know. Its not a a topic that i folld as closely. Its hard to be optimistic about any kind of legislative progress for much of anything right now in the current congress. And so whether its the satellite reauthorization or the markup on the cband, unfortunately its just that much coming out of legislatively, out of congress. And on your point that you totally has candidate a more quite issue on the campaign trail this year, i wanted to follow up and ask about antitrust because we have seen the tech policy debate shift toward at the trust, and right now in Washington Congress is holding a lot of hearings on this issue and both Republicanled Senate of the democrat led house with investigations going on within federal agencies. I just want to ask what the increased antitrust scrutiny of Silicon Valley might mean for the current cable landscape . Guest you can think about antitrust and a couple of buckets. There is antitrust with respect to mergers and acquisitions, and obviously right now that is highly topical for sprint, tmobile and the state attorney general lawsuit. Im probably a bit further or a bit less convinced that i think most people are that that you will actually survive this day challenge. I think the state challenge has reasonably good odds of winning, probably less than 5050 that better odds than most people are giving it. To digress for a second, i think in my mind its because the original deal that was proposed in that case by the companies and accepted by the chairman pai of the fcc, that is the divestiture of prepaid subscribers to come at that time it was an Unnamed Company that later became dish, was flatly rejected by the department of justice and is they spent the t two months negotiating fixes to a deal that had to go beyond simply a reseller agreement. At the end of the day what came out two months later was the same reseller agreement with a few bells and whistles to change the optics, but its hard to see it as meaningfully different than the deal that the doj has always had was not sufficient. I have some doubts about whether judge marrero in the state ag case will conclude that that deal satisfies or that solution i should say satisfies the clayton act. I think theres a reasonable chance that that you would end up being rejected. Thats a very separate proposition that though, that him and a driven antitrust, its very separate him in a what you do about companies that are already perceived to be too big, google facebook, and to this companies be either subjected to additional Regulatory Oversight or alternatively even broken up . Truth be told, as much as that is an issue that is likely to energize an awful lot of people in washington, as best we can tell, the tools available for breaking up those companies arent terribly wellsuited for breaking them up. The idea that google or facebook is going to be broken up by antitrust warriors is a little hard to see, given our current antitrust laws. Do you think that congress will overall the current antitrust laws to address the unique Business Models these companies have . Guest i think to state the obvious, for much of anything big to happen in congress you would need to have a unified congress, either republican or democrat, and an administration of the same party. Unless we have that i just, and with sufficient majority to get legislation like that done, i just, i have a very hard time it in a world where issues that used to be entirely nonpartisan, almost any telecom issue and most antitrust issues, used to be nonpartisan issues. Its hard for me to find the issues that are nonpartisan anymore. Host Craig Moffett in a few minutes remaining of what it is a couple other topics. 5g is on the horizon. True or false . Guest it depends on how far out the horizon is. I think the idea that 5g is a very nearterm phenomena is very unrealistic. Or i should say differently. The idea that 5g as a Transformational Technology as a nearterm phenomenon is unrealistic. So i g is predicated in part on millimeterwave spectrum, and lot of the functionality of 5g, particularly the blazing fast speed, less so the latency issue, but the blazing fast speeds depend a very wide blocks of spectrum and were still a few years out from anything close to that in the been so youre talking about millimeterwave. And the Business Case for deploying millimeterwave outside of dense urban areas just isnt there yet. You will see 5g coverage but you will be done in relatively narrow blocks of mid band spectrum or traditional sized blocks of ten, 20 megahertz white blocks and thats not going to be transformational from User Experience perspective. I do worry that the hype of an 5g has gotten so far ahead of the reality that what should be viewed as a logical and actually quite positive evolutionary step for Telecom Networks will be viewed as a huge disappointment because theres been so much overpromising. Host and could further a Digital Divide if there is such a thing . Guest it almost has to further a Digital Divide if we talk about the divide between urban and rural. There are a lot of we to think about the Digital Divide, whether it is based on income, demographics, or what have you. But one of them is urban and rural, and its incredibly hard to imagine a scenario where the revenues associated with 5g, which lets face it, right now there is no real revenue model associate with 5g anywhere. Where incremental revenue support and criminal investment. Its sort of if you build it they will. There against networks of relatively small cells with short distances are a tough sell in cities that they are impossible outside of cities. The economics dont make any sense. So yeah, i think its hard for me to imagine a scenario now again you can fill in the map with red if you or verizon are if your at t, by doing it in lower frequency spectrum bands, but those wont give the kind of User Experience upgrades that some people are trying to say are everyones godgiven right in 5g. Do you think well see this issue of the growing Digital Divide come up on the 2020 campaign trail . Guest sure. Its only been talked about by the one campaign and by other campaigns as we need to bring and it is couched as there has been a failure of the companies to bring broadband out to Rural America. One could quibble with that way of constructing the argument. If the economics for bringing broadband to Rural America dont work, its hard to imagine why you would think companies would therefore do it. But there is a view that there has been a failure by not bringing broadband to Rural America, and up to now there hasnt been all that much appetite for three huge amounts of money at it, but in some of the first leftleaning plans among the democratic candidates, there is a willingness to do rather grand infrastructure plans that would probably include quite a lot of money to close the Digital Divide. Again, at least if measured by urban versus rural. Probably also by income demographics as well. How do you think i will play out on republican side as their developing their plans and targeting rural voters . Guest you know, its tough. The traditional republican arguments about fiscal discipline and what have you have lost a fair amount of currency. But if there is a republican strategy, as it seems there certainly is one from the Trump Administration to contrast the Current Republican Party to the extreme left as categorized by, say aoc and the open quote the squad. To the extent extensive infrastructure plans and big Spending Plans for healthcare and broadband and education and what have you are viewed as being espoused by that part of the democrats, theres almost certainly a bid for, we will stand for something the opposite to that, that will become a big part of the republican platform. Host finally, mr. Moffett, with google, facebook, twitter, netflix, et cetera, so big in producing so much video, do you see mergers somewhere down the line . Guest well, possibly. There is always a desire to say that the only way to survive is to cut costs and to keep concentrating. And in the traditional model that is also meant you could a lot more leverage. But it depends where your talk about in the value chain. The business of creating content is not a terribly scale intensive business. Its scale intensive in the sense that you need to be reasonably large to be able to survive the vagaries of a good year and arranger, and a good year and a lean year. But you dont necessarily get to make a movie all the, or a tv show all that much cheaper because youre making eight or nine others. So the economys of scale logic at that layer of the value chain are not terribly compelling. At the layer of the value chain of aggregating entertainment networks, so aggregating the aggregators, if you were, there its all about negotiating leverage. And that feels to increasingly like a strategy of simply trying to defend a sinking ship. Im not sure that it may work for a little while but its not going to change the trajectory of the business, and i dont know that you will see a huge number of mergers for that reason. Its going to be harder to sell big deals into boardrooms because theres going to be less appetite for more exposure to those businesses. Host as always, Craig Moffett, telecom analyst, we appreciate you coming on the communicators. Cat zakrzewski of the washington post, u. S. Well. All communicators programs are available as podcasts. Are cspan campaign 2020 2020 busking is traveling across the country visiting key battleground states in the 2020 president ial race asking voters, what issues they what president ial candidates to address the campaign. And i wish washington and congress would work on infrastructure. Every other generation of american leaders have funded airports or subways or roads and bridges, and we are to do our part. This would be the first generation of elected leaders will be left are infrastructure and worst conditions of what we got in, and we should work and demand that our leaders in d. C. Invest in infrastructure and make sure we protect another generation of americans, and put people to work at the same time. Thats the great thing about investing in infrastructure in this country. One of the Biggest Issue do with all americans across all spent the economic and education is the use of credit scores. Its use on the automotive entranceway, life insurance, housing and employment. Most dont relist this but your automotive entrance is more to do with her credit score than your driving record. If want to apply for job your credit score is applied. If you want to apply for an apartment or credit score is pulled. Asking for a place to lay ahead at night. If youre Fresh GraduateCollege Student with zero credit and a lot of bills, your credit score will be quite low and your access to apartments because of his right as gore, not because your payment history, that because of your job prospect or not how much money your bringing in, its your credit score. The issue i would like to see discussed more in washington, d. C. Is the importance of bipartisanship. We as americans have more in common than we probably have disagreements on. I would like to see us talk much importance of reaching across the aisle and this point we dont disagree, fine, grant goes on when we can move the nation forward is to work together. Voices from the campaign trail, part of cspans battleground states tour. With the rise of synthetic opioid in valdez, drug policy experts talk about the trend in ways to lower the number of deaths. They spoke adding that hosted by the rand corporation