To accelerate. Interestingly we published a couple of weeks back a note that said we might see the acceleration in the short term and this might be as bad as it gets but that should not change the overall picture that the rate of decline has dramatically tolerated for Traditional Television and there does not seem to be any question that we are in a new normal for the rate of decline for the traditional system is 5 or so a year which is extraordinarily rapid decline for something thats been around as long as traditional att division. Host youre talking cable and satellite primarily, correct . Guest correct. Traditional distribution via cable or satellite. What is interesting and most interesting part of the story is if you went back a year ago you would have said the virtual and bpd so the youtube tv and the who live in that sort of thing were really what was driving this migration away from traditional linear tv. Today it looks like that thesis was wrong and the uptake of those Virtual Services is not terribly strong and that what youre seeing are people defecting entirely from live television. My suspicion is that were seen 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 in price simply because the distributors or i should say, the programmers of sports, have fixed costs contracts with the leaks with the nfl and with the nba Major League Baseball and what have you. As the number of subscribers for the Services Decline they have no choice but to raise prices faster and faster. Right . That makes the system increasingly punitive for people who arent sports consumers. What you will see are people who arent entertainment only consumers simply saying i dont need live tv anymore and i can entertain myself with subscription videoondemand Services Like today netflix but increasingly disney plus and hbo max and a whole raft of services that are coming. You will see this complete separation i think between the sports and news universe on the one hand and entertainment universe on the other and youre just beginning to see that now in the numbers. Host to help us explore the issues is [inaudible] of the washington post. Guest thank you for having me on the show. Craig, i think Silicon Valley tech economies are picking up on these trends that you mentioned and i wanted to ask you next week we are expect apple to unveil its more detailed about its streaming Service Coming soon and what is the significance of these Larger Tech Companies like amazon and apple getting into the content game . Guest i think there are a couple things. First, to state the obvious they have awfully deep pockets. That means they have staying power that the traditional players dont have so directv, for example, launched directv now is streaming over the top service about two years ago and they were losing, by all accounts, a tremendous amount of money and seem to be lost money and its hard for the Traditional Companies to sustain those losses and so they reprice upwards and the growth falls off the table and they fall away as competitors to some extent. The players like google and amazon and apple who are playing something of a different game can afford to subsidize this business much longer so google thesis isnt that we will make money directly by selling television but that by selling television we can bolster our advertising business by directly placing ads on the program but also knowing what you want. If i know what you watch can target as to better and charge more for those ads through all the places where i can reach you. That will be the thesis at google and very likely to be the thesis at amazon where amazon wants to know what you watch because they can help sell you things or be better served in selling the things if they know what you watch. Apple is probably somewhat different Business Model. They have always been a hybrid of a Subscription Company and a Hardware Company that will help elements to both those things or of both of the things in their new model likely to be subscription based but its part of an Apple Ecosystem where there are all kinds of modernization theories beyond just i want to sell tv for a profit. Guest on your point that these companies can sustain losses for a long time looking at longterm, ten years what is my tv package going to look like . What happens to the traditional bundle model that we seem . Guest the bundle is already frame around the edges. Interestingly part of the reason the virtual and bpds are struggling and are now losing them of that early traction is because they have fallen into the same trap as traditional dish of peters dead which is the end up with these bloated packages of channels. If you think about the value chain for a second, value chain starts with producers of content the studios and even upstream from that as actors and athletes and what have you but its created in studios and aggregated together and Cable Networks if we focus on the cable value chain for second and aggregated together in Cable Networks though shows the Cable Networks are then aggregated together into media conglomerates so viacom or fox or disney or what have you and those media conglomerates are aggregated together into the bundle we all know and hate. Increasingly for a while you saw this push towards disaggregating the bundle and what has happened interestingly is the bundle has re aggregated and the virtual players have been forced to take all the programs and networks they did not want largely been stuffed down the throats by content companies with said he cant get the good stuff without also taking the bad so they created these bloated bundles the customers are now rejecting in the same way they rejected those bloated bundles in traditional linear television. They are moving increasingly to subscription video on demand and thats why i say my suspicion is again, you will see the live tv model only survive for sports and news and that almost Everything Else will move towards ondemand models. The purveyors of content Light Entertainment content or streamed realtime entertainment is to young people an oxymoron to begin with. The idea that there is a time of day for a particular show is an odd concept for anything other than a sporting event or awards ceremony and that model, i think, will increasingly disappear and you will see skinnier bundles of sports and content in various sports and news and very expensive because sports content is so expensive to procure and that the other stuff will be crowded out. Host and mr. Moffat, whats the motivation for reestablishing the large bundles . Guest its negotiating leverage. Its the content owners that have that own ten, 12, 18, 20 networks have two or three that are most at programming instead of saying how sell those three they will say 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 moyer layer is aggregating shows into a Cable Network its a weird concept. It exists almost entirely because of schedules. Its created around the concept of legions and lead out the way we Program Television 20 years ago but its not the way people consume television anymore. Some of the Cable Networks have Meaningful Brands and discovery has a brand separate and apart from its schedule and espn has a brand separate and apart from its schedule but you should not lose sight of the fact the Cable Networks are still primarily scheduling mechanisms and primarily aggregations of content with the schedule and schedules are increasingly agonistic. Guest what does that mean for consumers wallets . The promise of cord cutting at first was this will save me money each month but now there are so Many Services if you have one favorite show on hbo you pay for that in addition to netflix and maybe amazon, too. Longterm will consumers save money or not with all these new Services Becoming available . Guest they may spend somewhat less money but they will have less contents. I think realistically look, it was never a terribly compelling argument for microeconomics perspective to think that the cost of procuring content would go down as the bundle broke. There is a really interesting thought experiment where you can imagine what would happen if we were in a world where the polar opposite where everything was a la carte and you had a handful of all the cart channels for certain price. It would behoove some players in the system to say im going to make my content available for free to a lot of other people if they subscribe to this channel and ill give them that channel for a while in the hopes they get hooked on it, watch it and i can sell incremental advertising. Increasingly i would have extra distribution for that additional channel and that would at least partially pay for itself. Other competitors would then see that strategy and say 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 that everybody complains about today saying i cant believe i have to pay for all these channels that i dont watch. Its a simple example that the grass is always greener and people will poke holes in the idea that i feel like im paying for a bunch of channels that i dont want but the reality is you are probably not. Getting a bunch of channels you dont consume very much for something for free but for the same price you get the channels you actually watch we wont get all that other channels that might be fun to watch sometimes and add some measure of value but you just wont get all that stuff anymore and so inevitably you will be paying about the same amount of money and have less choice and feel worse about it rather than better when this transition is done. Host mr. Moffat, whats the strategy for the comcast and content of the world to prevent this . Guest i dont know the Cable Operators care about preventing it anymore. Lets think about the world in a couple of different categories of debaters for a second. The Cable Operators have never been Media Companies. Cable operators are structure providers. Increasingly i think they view the lens through the profitability of the Different Services or view the world through the lens of the profitability of Different Services they sell and they dont make much money on video and so increasingly i think they are disinclined to try to stem the erosion. If customers want to play video and thats okay and let them leave video. Let them deepen the relationship with him around broadband and sell them high quality broadband service. That is probably at least as good an outcome is trying to be all things to all people. Satellite operators are in a much tougher position because they have a business other than video and overactivity and does not work it is a challenging feature as a number of people subscribe to traditional tv declines. Theres a place for them to go. The world looks different from those two lenses and the real pressure, i think, and comcast has a foot in both camps is the Media Companies. 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 consumer strategy or if they sell enough direct to consumer descriptions they can plug the hole in their income statement from that is created by the loss of traditional distribution but for most Media Companies its a very challenging feature to see linear distribution start the decline or accelerate the decline and with no realistic alternative for direct to consumer strategies. Guest for those committees you mentioned like comcast that might double down on their broadband business at a time when consumers are leaving their traditional cable tv packages behind this current tech clash in washington where we are seen little pressure on the Tech Companies is that good or bad for a company like comcast . Guest doing is the tech clash 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. Net neutrality as i said on your show in prior years was to me never a battle over First Amendment rights and freedom in their blocking and things like that because those issues whenever really questioned but its a commercial dispute between one set of companies, google and facebook and netflix in particular who were perceived as the good guys and who wanted to make sure the transport for them was free and one that accompanies perceived to be the bad guys verizon, at t, comcast who were sellers of transport who wanted transport to have a price. This conflict between transport is free, or transport has a price was essentially encapsulated in the Net Neutrality debate and 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, the white hats, google and facebook and netflix and everybody was against the bad guys at t, verizon and comcast. There were no good guys left in the room and the white hats had left in google, facebook in particular are no longer viewed as good guys in anybodys book. But are you just a suspiciously as the Cable Operators and Telephone Companies and in some ways that debate has lost its Emotional Energy for most voters. They view tech clash extracted not just as the isps but directed at the googles and facebooks and the edge providers of the world and in that sense it has relaxed some of the publicpolicy pressure that used to be on the isps. If in fact we lurch left in the next election and some of the policies that are been espoused by the more left leaning candidates in the democratic primary with sanders and warren its thought to be a regulatory time for the Cable Operators will be will be subject to more relations that have in the past but the Net Neutrality debate 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 flammable and thats good guys versus bad guys framework. Host mr. Moffet, when you look ahead a potential legislation for regulation where the section 230 come down . Guest i dont know. Its not a topic i followed as closely and its hard to be optimistic about any kind of legislative progress for much of anything right now in the current congress. Whether it is the satellite reauthorization or the markups on the seat beyond but unfortunately its not much coming out of legislatively out of progress. Guest on your point that neutrality is funny or quite issue on the campaign trail i want to follow up and ask about antitrust. We certainly have seen the tech policy debate shift toward interest in right now in Washington Congress is holding a lot of hearings on this issue and the both again led senate and democrat let house and we got investigated going on with federal agencies and we wanted to ask what the increase antitrust scrutiny of Silicon Valley might need for the current cable landscape. Guest i think antitrust in a couple of buckets and there is antitrust with respect to mergers and acquisitions and obviously, right now thats highly topical for sprint tmobile and the state attorney general lawsuit. Im probably a bit further or a bit less convinced and i think most people are that that deal will actually survive the state challenge but i think the state challenge has a reasonably good odds of winning, less than 5050 but better odds than most people are giving it. To digress i think in my mind its because the original deal that was proposed in that case by the companies and accepted by chairman pai at the sec the divestiture of prepaid subscribers to, at the time, Unnamed Company later became was probably rejected by the garment of justice and he spent the next two months negotiating fixes to a deal that had to go beyond simply a reseller agreement. At the end of the day came out too much later was the same reseller agreement with a few bells and whistles to change the optics but its hard to see it is meaningfully different than the deal that the doj had said was not sufficient and so i had doubts about whether the judge and the state ag case will conclude that that deal satisfies or that solution satisfies the clayton act and so i think theres a reasonable chance that that deal will end up being redacted. Thats a very separate proposition. M and a driven antitrust is very separate from the what do you do for companies that are already perceived to be too big, google or facebook and should those 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 the bes