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