Federal Communications Commission FCC 13-99 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Annual Assessment of the Status of Competition in ) MB Docket No. 12-203 the Market for the Delivery of Video Programming ) FIFTEENTH REPORT Adopted: July 19, 2013 Released: July 22, 2013 By the Commission: Acting Chairwoman Clyburn and Commissioners Rosenworcel and Pai issuing separate statements. TABLE OF CONTENTS Heading Paragraph # I. EXECUTIVE SUMMARY.................................................................................................................... 1 II. INTRODUCTION................................................................................................................................ 12 A. Scope of the Report........................................................................................................................ 12 B. Analytic Framework ...................................................................................................................... 14 C. Data Sources .................................................................................................................................. 15 III. PROVIDERS OF DELIVERED VIDEO PROGRAMMING.............................................................. 17 A. Multichannel Video Programming Distributors ............................................................................ 17 1. Introduction ............................................................................................................................. 17 2. MVPD Structure...................................................................................................................... 21 a. Cable, DBS, Telephone, and Other Providers .................................................................. 22 b. Horizontal Concentration.................................................................................................. 34 c. Vertical Integration........................................................................................................... 38 d. Entry Conditions............................................................................................................... 40 (i) Regulatory Conditions Influencing Entry .................................................................. 41 (ii) Market Conditions Influencing Entry......................................................................... 68 e. Recent Entry and Exit ....................................................................................................... 74 3. MVPD Conduct....................................................................................................................... 79 a. Price Rivalry ..................................................................................................................... 80 b. Non-Price Rivalry............................................................................................................. 84 c. Business Models and Competitive Strategies of Select MVPDs...................................... 95 (i) Cable MVPD Business Models and Competitive Strategies...................................... 96 (ii) DBS MVPD Business Models and Competitive Strategies ..................................... 110 (iii) Telephone MVPD Business Models and Competitive Strategies ............................ 118 4. MVPD Performance.............................................................................................................. 125 a. Video Programming Pricing ........................................................................................... 126 b. Video Subscribers and Penetration ................................................................................. 128 c. Revenue .......................................................................................................................... 136 d. Investment....................................................................................................................... 141 e. Profitability..................................................................................................................... 142 10496 Federal Communications Commission FCC 13-99 B. Broadcast Television Stations...................................................................................................... 145 1. Introduction ........................................................................................................................... 145 2. Broadcast Television Industry Structure ............................................................................... 148 a. Horizontal Concentration................................................................................................ 155 b. Vertical Integration......................................................................................................... 161 c. Entry and Exit Conditions............................................................................................... 166 (i) Regulatory Conditions.............................................................................................. 167 (ii) Non-regulatory Conditions....................................................................................... 171 (iii) Recent Entry and Exit............................................................................................... 174 3. Broadcast Television Industry Conduct ................................................................................ 176 a. Price Rivalry ................................................................................................................... 177 b. Non-Price Rivalry........................................................................................................... 182 4. Broadcast Television Industry Performance ......................................................................... 193 a. Audiences........................................................................................................................ 197 b. Revenue .......................................................................................................................... 201 c. Profitability..................................................................................................................... 214 d. Investment and Innovation.............................................................................................. 217 C. Online Video Distributors............................................................................................................ 219 1. Introduction ........................................................................................................................... 219 2. OVD Structure....................................................................................................................... 223 a. Horizontal Concentration and Vertical Integration......................................................... 243 b. Conditions Affecting Entry and Exit .............................................................................. 245 (i) Regulatory Conditions.............................................................................................. 246 (ii) Non-regulatory Conditions....................................................................................... 251 c. Recent Entry and Exit..................................................................................................... 263 3. OVD Conduct........................................................................................................................ 269 a. Business Models and Competitive Strategies of Select OVDs....................................... 270 b. Non-Price Rivalry........................................................................................................... 276 4. OVD Performance................................................................................................................. 292 a. OVD Viewership and Subscribership............................................................................. 293 b. Revenue .......................................................................................................................... 297 c. Investment....................................................................................................................... 303 d. Profitability..................................................................................................................... 309 5. Consumer Behavior............................................................................................................... 310 IV. COMPARISON OF COMPETITION: RURAL VERSUS URBAN AREAS.................................. 320 A. MVPDs ........................................................................................................................................ 322 B. Broadcast Television Stations...................................................................................................... 327 C. OVDs ........................................................................................................................................... 328 V. KEY INDUSTRY INPUTS................................................................................................................ 329 A. Content Creation and Aggregation of Video Programming ........................................................ 329 1. Overview ..............................................................................................................................