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Fox Sports writer Clay Travis wrote a fantastic piece about sports TV and the potential bubble. In that article he did a good job of summing up why the current model is superior to a la carte. It sounds great. But it will eventually lead to a decrease in the quality of content and chase to the lowest common denominator.

While you probably receive in excess of 100 channels, most of us watch only 16 or 17 channels in a given month. If you're a single girl without kids, you probably don't watch Sprout and if you're a single guy you probably don't watch Lifetime, but you pay for every channel you receive. In practice this leads to much better television, because channels can go after small audiences with powerful and compelling programming that might not otherwise be financially feasible. For instance, hardly anyone watches "Mad Men," in the grand scheme of ratings. It's a very smart, slow-paced, intellectual program that appeals to a relatively small audience. On average less than four million people watch each episode of "Mad Men." That leaves over 90 million people who receive the channel and the show but don't watch. Yet these non-viewers subsidize "Mad Men," by paying for AMC. Since most of us receive over 100 stations yet watch only 16 or 17, we all pay for in excess of 80 stations that we don't watch. One positive result of the cable bundle has been a tremendous amount of money rolling into television programming and the flourishing of great shows that wouldn't necessarily work if ten million or more people had to watch. That's why I've written before that I support the idea of cable television bundles, everyone subsidizes everything meaning that the quality of programming is stellar across the television landscape. We may not all like the same shows, but all of us have never had better options. We've been in the midst of the golden age of television.

Well, Mad Men cost an estimated $2.85M per episode (which costs were estimated after Season 4, when it was pulling in an average rating of 2.27M viewers each episode). At $2.99 an episode a la carte, that breaks even at 0.95M. The only season it averaged ratings lower than break-even was the first season, where it averaged 0.90M viewers per episode. This doesn't count the additional profits from streaming licenses and DVD sales, promotional marketing, etc, which are estimated to add well over $1M more per episode.

Maybe that sports columnist chose a bad example, but Mad Men is exactly the type of show which would thrive in an all-a-la-carte world.

I should add that sports in general does get the short end of the a la carte stick, because over 50% of all money going to pay for content in the current bundling scheme goes to funding sports, and sports constitute far less than 50% of the entertainment viewing hours each week. A sports columnist thus has a very significant vested interest in the status quo, because without it the actual costs of the sports he covers would be apparent and likely fewer people would consume as much sports as they do today. In fact, at the link above he clearly states that sports fans are getting massive subsidies from the rest of us.

From a general economics perspective, his argument fails. I'll avoid drawing unflattering parallels between what he is proposing and what his politics likely deem to be evil political systems of the world. Essentially, though, capitalism works best when there is a clear "vote with your dollars" ability on the part of the populace. That is, if someone doesn't like something, they don't buy it. That makes it very clear which products are succeeding today and which are not, so that development dollars tend to go more to those which are successful rather than being wasted on things no one finds valuable (late-night filler or instance). Now, projects can still be funded if there is not an audience for them; that is how the entire production side of the entertainment industry already works. And, if there are projects with socially redeeming value despite low viewer interest those too can be funded via social funding means (NEA grants, etc).

In any case, bundling of services is almost universally seen as consumer-hostile in the world of economics. The only place where bundling is beneficial to the customer when that bundling is itself a service - a way to reduce complexity from an untenable level to something the customer can easily understand and intelligently evaluate. A la carte content purchases are nowhere near untenably confusing, so there is no value in that aspect to bundling. Which leaves us just with the costs of bundling. Which means that a bundling solution is always, on average, worse for the consumer than an a la carte solution.

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Yes, but Netflix is largely reruns and things have made money (both advertising and subscription fees/ticket sales) when it first ran.

Think of Netflix like a company that agreed to buy day old leftovers from a bakery. They sell all you can eat leftovers for a small price. Customers who don't want the fresh items think it's fantastic. They can binge on all the stuff they want for an incredibly low price. The bakery likes it because they've already made money off the stuff they sold fresh and any extra money they get is gravy.

The problem is the day old bakery customers start thinking they should pay that price for all content...not understanding the incentive for the fresh bakery was the large money they get for fresh content.

Add to the mix, the day old bakery is now wanting to make a few fresh items. That's great for the day old bakery customers...but is starting to ruffle some feathers at the fresh bakery....who doesn't like them competing in that market.

It's fine if you like Netflix, I do too. But don't think that the model financially supports the quality of the programs you watch on it.

Of the 11 shows nominated for Golden Globes in the Drama and Musical/Comedy areas this year, 3 were on HBO ($15/mo), 2 on Netflix ($9/month), 2 on Amazon Prime ($8.33/month), and 1 on Hulu ($8/month). With just over $40 in (generally redundant) subscription costs, you have 72% of the best TV out there fully funded (or for just $32.50 you have 64%). And this is assuming that the rest of the stuff on those services (the redundant movie libraries) take none of the subscription revenues to fund themselves, which is of course ludicrous. While this is still bundling, it shows just how inefficient the multi-level bundling operation (shows -> channels, channels -> multi-channel cohorts, multi-channel cohorts -> packages) is at providing what most people consider "good TV".

I don't think the Netflix model is quite as horrible for quality television as you seem to believe it is.

That said, I'd much rather buy each of those shows separately ($40/season on HBO for instance, which is just under 3 months' of the service) to avoid paying for the redundant movie and TV show back-catalogs on multiple services. Since doing so for some of them means I have to wait a year after airing, instead we just binge-watch shows in 1-2 month subscription "bursts" to keep our overall subscription costs per month under $20 reliably.
 
I know how you feel. FanTV had the same kind of deal with TWC. they had the best streaming set top box and UI. But TWC did its best to keep it hidden from its customer base.


well around 7-8 years ago i searched for the time warner app and used it ever since
 
Who wants channels? It's the SHOWS you want, right?

Channels are an old-fashioned delivery method that broadcasts fixed content on a fixed schedule.

8pm... one show... 8:30pm... another show.

DVRs help... but it's still a silly model if you think about it. You record that one episode... but you need to wait until they decide to broadcast other episodes in order to see the rest of them.

People say cable sucks because they're paying for channels they don't want. But even if you got to choose a la carte channels... those channels are still broadcasting 24/7. That includes shows and movies you don't want either.

Let's say it was possible to subscribe to just AMC when Mad Men was popular. And let's say, in this fantasy world, that it only cost $5 a month. Well guess what... you'd be paying for the Mad Men you want and you can watch it when it airs or DVR it. But you'd also be paying for fine movies like American Gangster, Armageddon and US Marshals that AMC is broadcasting. And dozens of other TV shows you may care nothing about.

You'd be paying for that content even if you didn't watch it. Isn't that the problem you're trying to solve? If you think cable bundles suck... channels can suck too.

We live in an on-demand world now. I think what people really want is a streaming service where they can watch any TV episode or movie whenever they want.

The concept of "channels" is antiquated. Even a la carte channels.
I wouldn't mind having channels. My kid watches Nick Jr. We put it on and she seems to like whatever it's showing.

We also like Comedy Central. Okay many of their shows are dumb but some make me laugh, some of which I've stumbled onto randomly. You lose that kind of discovery if you only buy shows you know about.
 
You are in the tiniest minority of people for whom Netflix serves every need.

That tiny minority as you claim represents the huge percentage of people who have cut the cord and continue to cut the cord. Or does the Netflix and Hulu subscription facts lie?

I cut the cord 2 years ago and it was the best decision for my family. I have never looked back.
I was paying 200 dollars for cable visions triple play.

High speed internet: $60
Sling: $25
Netflix: $9
Hulu: $11

By my math that's 105 dollars a month plus tax. Still cheaper than what I was paying Cable for.
And Sling has 98 percent of the channels I need for 25 dollars a month including ESPN.
And Network TV is available to me one day after it plays live with Hulu.

All my TV needs are met in Sling, Netflix, and Hulu. Keep paying for your overpriced cable bill. Id rather be in the minority saving my money and totally happy.
 
It's inevitable that Apple will end up buying out a huge company at some point. Either something to boost their car project or something to assist a different product, such as in this case. Apple are enormous and they have the ability to buy some of the world's largest companies.

When they hit the one trillion mark they'll not go for a large company it would be more advantageous taxwise to make a move on a small country, I'm betting Luxembourg would fit their portfolio nicely.
 
Time Warner Inc. and Time Warner Cable are two separate companies. This article is clearly about Time Warner Inc. But, you are further confusing readers by using TWC's logo.
 
I wouldn't mind having channels. My kid watches Nick Jr. We put it on and she seems to like whatever it's showing.

We also like Comedy Central. Okay many of their shows are dumb but some make me laugh, some of which I've stumbled onto randomly. You lose that kind of discovery if you only buy shows you know about.
Yeah... live channels are great if you just wanna sit down and watch whatever they decide to show.

But you're obviously not one of those "I'm paying for stuff I don't want" people. Channels like Nick Jr and Comedy Central are still broadcasting even when your child is at school and you're at work. You'd still be paying for those channels even if you don't intend to watch everything.

As for the discovery thing... I was talking about a subscription service where you have access to thousands of movies and TV shows on-demand. You just click on whatever you want and can start watching anything for one flat fee. Lots of options for experimenting.

That's different than buying individual episodes or seasons from something like iTunes. You kinda gotta know what you want before you buy something like that.
 
Yeah... live channels are great if you just wanna sit down and watch whatever they decide to show.

But you're obviously not one of those "I'm paying for stuff I don't want" people. Channels like Nick Jr and Comedy Central are still broadcasting even when your child is at school and you're at work. You'd still be paying for those channels even if you don't intend to watch everything.

As for the discovery thing... I was talking about a subscription service where you have access to thousands of movies and TV shows on-demand. You just click on whatever you want and can start watching anything for one flat fee. Lots of options for experimenting.

That's different than buying individual episodes or seasons from something like iTunes. You kinda gotta know what you want before you buy something like that.
I think maybe a happy medium would be "on demand" for each channel. Give me a deeper selection of what is available to me now via my cable company. A bigger choice of Nick Jr on demand, open the Comedy Central vaults , etc. Channels, but go deep in each one.
 
I really hope they can put together a streaming service that is competitive in price and that has a deep catalogue.

I find the current way is just to much like hard work. Having multiple apps for each channel is just messy and complicated plus once you add up all the diff subscriptions services its almost as much if not more thank cable itself i.e. netflix, hulu, hob, showtime etc

I always think it needs to pass the granny test - can a older person 60's + be shown it and understand it. My mother in law can't at the moment because if she wants to watch something she has to remember to check which service has it free.. normally she ends up paying for it!
 



Apple-TimeWarner.jpg
Time Warner CEO Jeffrey Bewkes reportedly told investors on Monday that he would entertain a sale of the media company, and Apple is a possible suitor, according to the New York Post. AT&T, which owns DirecTV, and Fox are also said to have shown interest.Time Warner owns a large number of assets that could lay the foundation for Apple's much-rumored streaming TV service, including CNN, HBO, TBS, TNT, NBA TV, Cartoon Network and its Warner Bros. division. A deal could allow Apple to offer a skinny bundle of channels airing popular TV shows for all ages like Adventure Time, Game of Thrones, Sesame Street, Silicon Valley and Veep.

Apple's streaming TV service has reportedly been placed on hold due to its difficulties in securing deals with content owners, but striking a deal with Time Warner would allow the company to reconsider offering a skinny bundle of channels through a Netflix-like service for Apple TV, Mac, iPad, iPhone and other devices.

Apple has previously been in talks with CBS, ABC, Fox, Disney, Viacom, Discovery and others about launching a web-based streaming service that would bundle approximately 25 channels for $30 to $40 per month, but content owners have been reluctant to give up control of the living room up to this point.

For now, fourth-generation Apple TV owners can stream select on-demand content from tvOS apps like ABC News, CNNgo, Fox NOW, HBO NOW, MLB.TV Premium, NBC Sports Live Extra, PBS, PBS Kids, USA NOW, Watch ABC and WatchESPN, but most require authenticating with a cable or satellite TV subscription.

Article Link: Apple Shows Interest in Buying Time Warner Assets for Streaming TV Service
Businessmen do whatever makes money. That's normal
 
Well, Mad Men cost an estimated $2.85M per episode (which costs were estimated after Season 4, when it was pulling in an average rating of 2.27M viewers each episode). At $2.99 an episode a la carte, that breaks even at 0.95M. The only season it averaged ratings lower than break-even was the first season, where it averaged 0.90M viewers per episode. This doesn't count the additional profits from streaming licenses and DVD sales, promotional marketing, etc, which are estimated to add well over $1M more per episode.

Maybe that sports columnist chose a bad example, but Mad Men is exactly the type of show which would thrive in an all-a-la-carte world.

I should add that sports in general does get the short end of the a la carte stick, because over 50% of all money going to pay for content in the current bundling scheme goes to funding sports, and sports constitute far less than 50% of the entertainment viewing hours each week. A sports columnist thus has a very significant vested interest in the status quo, because without it the actual costs of the sports he covers would be apparent and likely fewer people would consume as much sports as they do today. In fact, at the link above he clearly states that sports fans are getting massive subsidies from the rest of us.

From a general economics perspective, his argument fails. I'll avoid drawing unflattering parallels between what he is proposing and what his politics likely deem to be evil political systems of the world. Essentially, though, capitalism works best when there is a clear "vote with your dollars" ability on the part of the populace. That is, if someone doesn't like something, they don't buy it. That makes it very clear which products are succeeding today and which are not, so that development dollars tend to go more to those which are successful rather than being wasted on things no one finds valuable (late-night filler or instance). Now, projects can still be funded if there is not an audience for them; that is how the entire production side of the entertainment industry already works. And, if there are projects with socially redeeming value despite low viewer interest those too can be funded via social funding means (NEA grants, etc).

In any case, bundling of services is almost universally seen as consumer-hostile in the world of economics. The only place where bundling is beneficial to the customer when that bundling is itself a service - a way to reduce complexity from an untenable level to something the customer can easily understand and intelligently evaluate. A la carte content purchases are nowhere near untenably confusing, so there is no value in that aspect to bundling. Which leaves us just with the costs of bundling. Which means that a bundling solution is always, on average, worse for the consumer than an a la carte solution.



Of the 11 shows nominated for Golden Globes in the Drama and Musical/Comedy areas this year, 3 were on HBO ($15/mo), 2 on Netflix ($9/month), 2 on Amazon Prime ($8.33/month), and 1 on Hulu ($8/month). With just over $40 in (generally redundant) subscription costs, you have 72% of the best TV out there fully funded (or for just $32.50 you have 64%). And this is assuming that the rest of the stuff on those services (the redundant movie libraries) take none of the subscription revenues to fund themselves, which is of course ludicrous. While this is still bundling, it shows just how inefficient the multi-level bundling operation (shows -> channels, channels -> multi-channel cohorts, multi-channel cohorts -> packages) is at providing what most people consider "good TV".

I don't think the Netflix model is quite as horrible for quality television as you seem to believe it is.

That said, I'd much rather buy each of those shows separately ($40/season on HBO for instance, which is just under 3 months' of the service) to avoid paying for the redundant movie and TV show back-catalogs on multiple services. Since doing so for some of them means I have to wait a year after airing, instead we just binge-watch shows in 1-2 month subscription "bursts" to keep our overall subscription costs per month under $20 reliably.

I totally agree about the sports point. In fact the main theme of his article (which I didn't post) is that ESPN and the sports networks are a financial bubble. He wasn't supporting the model, he was pointing out they charge (by far) the highest subscription fees and have forced their way on to the basic tier. At some point people non-sports fans are going to stop subsidizing the model. ESPN is heavily leveraged into live sports rights, mainly huge new contracts for the NFL and NBA. If the number of base subscribers decreases and/or an alternative comes for them to not have ESPN on the basic tier, it'll implode the system. Hopefully Disney is selling a lot of Star Wars stuff to make up the difference.

I think the point he was making about quality is that a show like Mad Men doesn't get made without the security blanket of channel subscription fees paying the freight. Would the makers of a show like Mad Men, Breaking Bad, Walking Deal - critically acclaimed shows that took a bit to gain their audience, wouldn't get greenlit if they solely relied on ala carte fees to get them going? Taking the audience they gained by widespread distribution and extrapolating that the same audience as being willing to pay a $2.99 episode fee (highly unlikely) doesn't work. It assumes the network will take a chance on a show thinking it will gain that audience, then give it time to grow enough to recoup it's fees. And the per episode model likely drives the smallest number of customers. Many would rather get the show in a bundle or wait for it on Netflix, then buy the entire series a la carte.

It works for a channel like HBO...who's customer base is used to paying a separate fee. But does it work for a basic cable channel...who's customers aren't' used to paying a separate cost?
 
...I'm not sure why Apple wants to become Sony...

Funny, I've been thinking since before Jobs passed, that this would be the ultimate direction Apple would take - that Apple will become Sony. Design focused, but increasingly flawed, quirky and unwieldy with little collaboration (and often conflict) between departments.

That should be their new internal mantra "Don't be Sony"
 
I think maybe a happy medium would be "on demand" for each channel. Give me a deeper selection of what is available to me now via my cable company. A bigger choice of Nick Jr on demand, open the Comedy Central vaults , etc. Channels, but go deep in each one.
Agreed!

The only problem might be the cost of one or two channels worth of content in that manner.

It's funny you mentioned Nick Jr and Comedy Central. They both belong to Viacom... and Viacom has 25 channels in their stable.

Right now Viacom gets pennies per channel from the cable companies... but that's pennies times 25. So for Viacom... they get a pretty hefty chunk every month from the cable companies... whether you watch them or not.

If you were able to select one or two channels... I wonder how much that would cost? And would you even be able to select just two of their channels? Or would you have to get all 25 ?

When someone cuts the cord... that's one less person paying Viacom through the cable companies. So Viacom would probably charge at least 20X for a standalone service.

That's why so many channels have apps... but you have to be a cable subscriber in order to use it. The channels are getting paid from the cable companies in aggregate from their millions of subscribers.

Take that away... and the channel would have to recover those costs somehow. (well we know how... they would charge $5 a month for a single channel... yikes!)

HBO can sell a standalone service because their entire channel is a pay channel.

But traditional "cable" channels operate under the aggregate model.

Big shifts are certainly possible. Look at the music industry. They went from selling "bundles" of songs on plastic discs... and now you can buy individual songs or even get on-demand services like Spotify.

Something similar could happen to shake up the cable industry.
 
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Will we see the day when Apple just buys EVERYTHING, like the whole USA?
It would be funny. United States of Apple.
 
Never-ever going back to any form of live ad/commercial supported television service. if it isn't on-demand and commercial free I'm not interested. All I see here is Apple trying to bring live tv with commercials to AppleTV. No thanks. I've evolved past that.
 
I'd love to see this happen. Apple TV has always been my go-to content provider when it comes to Netflix, Hulu, or HBO. If they were to acquire a whole asset it would allow for much more streaming using the Apple TV or even perhaps as a native option on their iOS and Mac apps.
 
Dan Frommer has a good article on why he thinks it would be a mistake for Apple to buy Time Warner.

http://qz.com/593729/could-apple-buy-hbo-parent-time-warner-obviously-should-it-no/?utm_source=YPL
But should Apple buy Time Warner?

Probably not, and that’s why it likely won’t.

The most basic reason, as Re/code’s Peter Kafka notes, is that Apple already has access to HBO shows, via the HBO Now service, which it has already integrated into its Siri search and iTunes billing systems.

Actually owning HBO, meanwhile, would introduce an entire set of problems that Apple shouldn’t want to worry about, such as maintaining relationships with the cable and satellite providers that still generate the vast majority of HBO’s revenue.

More broadly, owning Time Warner would mean figuring out those problems for several cable networks, which seems like an unnecessary distraction. The Turner networks generate more than half of their business from cable and satellite subscription fees, and almost another half from television advertising—neither of which is a business Apple should be investing in.

Does Apple media head Eddy Cue really want to preside over winding down a cable group or shifting CNN to a digital business model? Those don’t sound like exciting projects—certainly not worth taking on for access to a few more TV shows. (And if Apple does buy Time Warner and jump into this situation, you’d really have to wonder if it’s losing its focus.)

Eddy Cue was supposedly at some Rupert Murdoch private party at CES. Murdoch owns the NY Post. It's widely known that Fox has been interested in purchasing TW. I get the feeling this rumor may have been started by Murdoch or someone in his organization.
 
Time Warner spun off Time Warner cable in 2009. They're completely separate companies.

I never said that they weren't, I know the difference.

It makes more sense to buy TWC than it does to buy the actual movie studio/Parent company. You buy the studio you get maybe 1/5 of the American film library and you become a competitor against NBC/Universal/Comcast; FOX; Disney; Paramount; Sony etc.

It wouldn't make sense to buy Time Warner/WB. Though it would be interesting to see what happens if Apple owned DC comics.
 
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Teleco's tend to operate around a 10% profit margin. No way in heck Apple wants to deal with that type of profit.


With all due respect, you are thinking small. Cable with its huge infrastructure is 'old' in any way you think of it. Cellular, at least, is growing, bandwidth and all. Currently the only alternative to cable is cellular. Just as I have a camera that is a smart phone, I also have a TV that is a smart phone or smart tablet. If I had an Apple TV that could connect to T-Mobile like my iPhone does than I could Binge on TV, not just Pandora or TuneIn radio. Why do you think AT&T just bought Direct TV? If Apple wanted to think big, it would have bought Direct TV. Need better coverage, put up a satellite. Forget wiring the country or building cell towers. 'Wire' the world...now that's reach.
 
Most new TV episodes are already sitting on Apple's servers for rental or purchase through iTunes.

So what deals would Apple have to make in order to stream those in a monthly package?

Streaming is considered rebroadcasting. As such Apple will have to negotiate for each market it wants to stream in.
Remember iTunes is just a store not a subscription service.
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That tiny minority as you claim represents the huge percentage of people who have cut the cord and continue to cut the cord. Or does the Netflix and Hulu subscription facts lie?

I cut the cord 2 years ago and it was the best decision for my family. I have never looked back.
I was paying 200 dollars for cable visions triple play.

High speed internet: $60
Sling: $25
Netflix: $9
Hulu: $11

By my math that's 105 dollars a month plus tax. Still cheaper than what I was paying Cable for.
And Sling has 98 percent of the channels I need for 25 dollars a month including ESPN.
And Network TV is available to me one day after it plays live with Hulu.

All my TV needs are met in Sling, Netflix, and Hulu. Keep paying for your overpriced cable bill. Id rather be in the minority saving my money and totally happy.

You just proved that poster's point. His quote basically said "the tiniest minority who Netflix serves their every need".

Meaning people who have Netflix ONLY.

You don't fit in that category.
 
I never said that they weren't, I know the difference.

It makes more sense to buy TWC than it does to buy the actual movie studio/Parent company. You buy the studio you get maybe 1/5 of the American film library and you become a competitor against NBC/Universal/Comcast; FOX; Disney; Paramount; Sony etc.

It wouldn't make sense to buy Time Warner/WB. Though it would be interesting to see what happens if Apple owned DC comics.
I wasn't aware Time Warner Cable was for sale. I thought they www combining with Charter. Owning that doesn't make sense to me either. Nobody likes their cable company and isn't that a capital intensive business?
 
With all due respect, you are thinking small. Cable with its huge infrastructure is 'old' in any way you think of it. Cellular, at least, is growing, bandwidth and all. Currently the only alternative to cable is cellular. Just as I have a camera that is a smart phone, I also have a TV that is a smart phone or smart tablet. If I had an Apple TV that could connect to T-Mobile like my iPhone does than I could Binge on TV, not just Pandora or TuneIn radio. Why do you think AT&T just bought Direct TV? If Apple wanted to think big, it would have bought Direct TV. Need better coverage, put up a satellite. Forget wiring the country or building cell towers. 'Wire' the world...now that's reach.
With all due respect, we're talking about two totally different things. Nothing you said is going to change the profitability aspect I was referring to in my post. As to your post: Cellular networks require "huge old infrastructure" as well. Building out and maintaining a network is a costly, time consuming endeavor. Hence the low margins. Also a system dependent upon cellular networks (like your ATV connected to TMo example) would be a congested nightmare. The network load would be darn near unbearable, until a ton more infrastructure was available (eating into that profit that Apple likes). We haven't even addressed the crowding of the wireless spectrum, the overhead of tons of techs, customer service departments, etc. Apple's overhead is minimal compared to their revenue. It ain't like that with the arena you're proposing they join. Proft margins in the high teens, low twenty's look a lot different that profit margins in the upper thirty's.

Apple is a great consumer products company. They really don't want to dig into that highly gov't regulated realm. It's not even close to being worth it. Imo, of course.
 
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