Tuesday, November 29, 2016

Cord Cutters Rejoice In Competition

For those that have cut the cord to cable TV, a new competitor may be trying to woo you back.  The acquisition of DirecTv by AT&T has opened up a new streaming service of cable channels called DirecTv Now.  And with an introductory price of just $35 a month, subscribers will get access initially to 60+ channels; spend a little more and get more packages of services.  Of course there is the added fee of broadband access and AT&T is offering its customers no data charges to access the service.  That is a huge win for AT&T Wireless and DirecTv Now customers. Data streaming costs could potentially add to customer spending should they choose these streaming services over cable. 

DirecTv is the latest entrant in the streaming business for live channels.  They will be competing with Dish Network's Sling TV and Sony's Playstation Vue.  If live isn't important and on demand is what you care about, then you can always continue subscribing to Netflix, Amazon Prime, Hulu, and others.  But should live streaming become a lucrative business, expect these services to try and build out their business to include access to live channels, too.

Can cable television operators like Comcast and Charter find subscribers coming to them or fleeing for these streaming services?  It depends on what low cost packages they offer to retain their value proposition.  Unfortunately where I live, Comcast has announced plans to raise fees for its various services.  Comcast and others will have to rely on its other businesses to grow.  What affect this cable price increase has on its subscriber base will be seen next year in its quarterly earnings statement.  I fear they may be hurt as streaming services like DirecTv Now take a bigger and bigger bite from their cable business. 

DirecTv Now isn't taking their new business for granted.  Reaching out to younger demo audiences, they have created an exclusive channel around pop music star Taylor Swift.  Expect more content exclusivity to be announced across all competitors to woo customers to subscribe and retain their respective services.  Competition will be good news overall for customers.

Wednesday, November 23, 2016

Should Amazon Add A Sport Tier?

If there was a piece of content that truly helped to drive usage, then it must be live sports.  It has been both a blessing and a curse for those that seek to license it and distribute it.  Sunday Night NFL on NBC has helped the broadcast network build audience share and promote other content offerings.  Major league sports, including the Olympics have driven up bidding wars to attract audiences to their respective networks.  But it has come at a huge cost, too.

Look at ESPN and the success it has had over the years from live sports.  From picking up baseball games and Monday Night Football to major tennis and soccer coverage, ESPN has built a large following and become an important network on any cable providers' line-up.  But the cost to license this content has also driven up their license fees to those same providers which then increase their subscriber fees to the customer.  And finally the customer has pushed back, through cord cutting, and ESPN finds itself losing its subscriber base.  ESPN's parent company, Disney, may now be mulling spinning or selling off the ESPN brand. 

 Enter the next technology platform post cable called streaming which is attracting those cord cutters to subscribe and watch.  Amazon Prime offers movies and TV shows but may now see that to compete in this space it must offer live content too.  And they potentially see the answer in sports content.  According to the Wall Street Journal, "the e-commerce giant has been in talks with heavy hitters like the National Basketball Association, Major League Baseball and the National Football League for the rights to carry live games, according to people familiar with the matter. It also has talked with soccer, lacrosse and surfing leagues, the people said." 

Any streaming rights deals negotiated by Amazon might lead to lower license fees for ESPN's cable carriage.  Or Amazon might consider talking to Disney about buying ESPN.  Still given the already high costs of sports content, one worries if any profit can be squeezed out.  With rising costs, both on TV and at the respective sporting event, customers can no longer afford to go to the game keep a cable subscription with a sports package.  Ratings have leveled off, if not dropped, and sports content may have lost some value. 

Is sports the right move for Amazon to grow its streaming business?  Will customers pay more for content that once was free on broadcast TV and less free on cable.  Or will it ultimately shrink the customer base, lessen interest and shift viewer interest to other content.  Interestingly, this year's political coverage did just that, shifting eyeballs away from the game to the debates and other election coverage.  And it ultimately showed that even sports can be beat. 

Thursday, November 10, 2016

Malone Speculates A Different Future For Disney

Given the high cost of sports content and the decline in subscriber numbers, ESPN may no longer be the darling brand of the Disney organization.  And at a recent conference, John Malone, Chairman of Liberty Media speculated "that The Walt Disney Co. could spin off ESPN, merging the rest of its operations with a deep pocketed suitor, perhaps Apple", according to Multichannel.  But is ESPN such an albatross and does a sale make sense.

Truthfully, sports programming costs are high and continue to go higher.  It has forced the channel to continue to raise subscriber fees and advertising rates, and push more ad minutes into every hour.  The result has been consumers no longer watching and a drop in ratings.  Still, could ESPN be fixed instead of sold.  They could drop expensive programming deals like NFL and pursue other programming choices.  They could deliver a streaming model, ala HBO Now, with exclusive content not accessible elsewhere.  Sports has been a driver of consumer interest and the opportunity to recapture eyeballs seems viable.

Regardless of whether Disney sells or spins off ESPN or not, a partner like Apple does seem to make sense.  The two had a very close relationship when Steve Jobs was alive and sold Pixar to Disney.  And content is what Apple needs to drive its Apple TV device.  Hopefully other synergies, including the theme parks would help to drive Apple product sales.  Malone claims to not have an inside scoop to this idea, but he certainly sees the possibility, as do I. 

Saturday, November 5, 2016

The Demise Of Cable TV

The threat of cord cutting is affecting many cable operators and networks.  Nielsen just announced that ESPN lost 621,000 subscribers in just a month.  And other networks are feeling similar losses of subscribers and the fees they receive.  Many attribute cord cutting to the high costs of a cable subscription but there may be other influences.

In the early days of cable TV, many homes were lucky to get more than 35 channels delivered to their cable box.  They included your local broadcast channels, and nets like USA, ESPN, MTV, and CNN.  Over time, more channels were created and technology was pushed to add more channels to the home.  Each new channel tried to offer something new to the mix.  Unfortunately over time, as channels proliferated, they stopped looking niche and different and started to morph into general entertainment.  Bravo once represented a high arts and culture channel, MTV was short form music videos, and TV Land was classic TV shows.  Not anymore.

The NY Times wrote of another channel that has made the same switch from its core programming to general entertainment.  SundanceTV, once known as the Sundance Channel, a showcase for independent film and documentaries, will be presenting a daily daytime block of classic TV shows including All In The Family, The Mary Tyler Moore Show, and M*A*S*H.  Shows already found on other broadcast nets as well as other cable nets like Me-TV and Decade.  Shows that once were the staple of the TV Land channel, but no longer as they have delved into new original programming.  This is not to criticize these particular channels since every other channel is doing similar moves to broaden their appeal with general entertainment style programming to appeal to the widest audience and drive ratings and ad dollars.  But it leaves viewers dissatisfied. 

As The NY Times correctly states, "The truth is that a day is about 20 hours too long for many cable channels to sustain a coherent identity."  And so they fill the majority of their day with programming that could be placed on any other channel.  Channel brands get lost as they all start to look alike.  No longer is AMC a movie channel, no longer is A&E high arts and entertainment, no longer is CMT country music.  They have become generic wannabees of each other without focus.  The industry let too many channels to form with similar formats and once they got tired of competing within their niche went forward to compete with every other channel. And to do that they needed to broaden their reach with general entertainment shows. 

Add to that a bigger load of commercials every hour and the TV viewer has become disenchanted with cable television and network brands.  They all look alike and so our search for something to watch has become purely program based and not channel based.  And it has opened the door to subscription services like Netflix and Amazon that let us pick particular shows to watch with no commercial interruption. 

Cable networks have lost their way.   The move by Sundance to add a classic TV programming block is just one example of what they are all doing.  A move from a focused genre to a "broadcast" mindset.  Too big, too many, too vanilla. It is no wonder that viewers keep pushing away from cable TV.  And it may be too late for the industry to fix itself. 

Monday, October 31, 2016

Why Apple Should Buy A Content Company

In a world where a box is just a box and distribution needs original and exclusive content to drive growth, media is big business.  And given the insatiable appetite for content affecting every consumer, content drives usage and multiple revenue streams.  Content can be purchased, it can be rented, it can be advertised; it can be downloaded and streamed and provide rich, measurable date about the user and usage.  And Apple should invest more in the business.

It is true that Apple has been dabbling in content with a trove of downloadable content on its iTunes platform.  And it has been build out a music streaming business.  But there is much more room to grown and acquisition may be the means to building a bigger better business model.  I have suggested a bid for Time Warner for its cable programming and theatrical distribution business and I have suggested other cable networks as a stepping stone into the media production and distribution universe.  Business Insider thinks that Apple should make a play for Netflix.  In the article, Stratechery analyst Ben Thompson says ""If Apple wants its usual ownership of end users it needs to buy its way in, and that means buying Netflix." With original and acquired content, Netflix's streaming model could enhance the Apple Music value, enabling packaging scenarios to drive further adoption of both models.  And it could also add value to the Apple TV business. 

Is Apple even looking at Time Warner, Netflix or other content creators and distributors?  The worry is that Apple is not innovating enough, not driving further adoption, not expanding, and facing increased competition from those eager to push Apple off the top of the mountain.  Maintenance and remodels of current products are not enough to remain a leader; rather, it says that you are treating your business more to maintain value than drive growth.  Beyond any possible plans to create a new technological product, Apple should look at content makers like Netflix to grow its business. 

Monday, October 24, 2016

Will AT&T Time Warner Deal Get Approved

The excitement caused by the latest media merger news of AT&T buying Time Warner has been tempered by concern of "too big".  And that the timing of such news is just two weeks before an important national election.  Politically speaking, both Democrats and Republicans are encouraged to speak out against the merger, as it on the surface looks to limit competition. Economically, it may be harder to press such a claim.

First, both AT&T and Time Warner will point to the Comcast NBC union as precedent to approve their deal.  Second, they will speak to the point that neither business directly competes with the other.  In fact, they each offer to the other a stronger vertical position with AT&T providing distribution through DirecTv, U-Verse, and AT&T Wireless, and Time Warner contributing strictly the content side with production, broadcast, and cable television networks, as well as some web sites.  Neither side currently plays in the other sides' world.  Third, this deal should also pass because Time Warner previously spun off their Time Warner Cable business, a direct competitor to AT&T, as a means to make their content business look more attractive.  Since then, Charter Communication picked up Time Warner Cable and that deal also passed regulatory approval.

So what will the FCC and Justice Department have to say about this merger.  Most likely, a lot with some need to set certain requirements to assure other distribution sites get equal availability to Time Warner content.  But it may be very difficult to outright deny such a deal given the above points.  Could this deal get derailed, possibly: especially if another player seeks to offer a higher priced bid.  Could that still be Apple or Google or maybe even Facebook?  Its been rumored that some of these folks have already kicked the tires a bit.  So stay tuned.

Saturday, October 22, 2016

UPDATE: AT&T Buys Time Warner

Time Warner has agreed to terms, according to multiple sources, to be purchased by AT&T.  According to USA Today, AT&T is acquiring "a diverse media portfolio that includes HBO, CNN, TNT, TBS, Warner Bros., theme parks, Bleacher Report and a 10% stake in streaming service Hulu, at about $105-110 per share."  Prior to the rumor, TWX was priced around $70 a share.  It rose to $90 on Friday and will see a nice bump on Monday.  Rupert Murdoch and his Fox Network had tried previously to acquire Time Warner with an offer near $85 a share about a year ago.

Once the paper is signed, expected to happen later this weekend, the next step is likely regulatory approval by the FCC.  I would expect that some requirements will be imposed but that, since the Comcast acquisition of NBC was allowed, AT&T should have no major problems getting this deal approved as well.  A great catch for AT&T; I still wonder if Apple even kicked the tires and if so, what prevented them from putting out a competitive offer.  We may never know.

What will be the next media merger?  Will CBS and Viacom recombine, will Scripps or AMC seek a larger partner to add leverage to their deals, and will other telcos seek to bring content into their family?  Verizon went the digital route with AOL and soon Yahoo, but it may be necessary for them to look at more traditional video media producers.  For now the merger of Time Warner and AT&T is just the next leap in media mergers. 

Friday, October 21, 2016

Time Warner For Sale?

If content is truly king, then its no wonder a distribution company like AT&T might want to buy Time Warner.  AT&T, who is now also the owner of DirecTv and U-Verse, recognizes the value content, especially exclusive content can bring to the distribution model.  DirecTv's deal with the NFL to exclusively offer all games, especially out of market games, to its subscribers, has been a hit.  Cable subscribers would love the chance to buy that package.  Now its parent, AT&T, may have set its eyes on a bigger content prize in Time Warner, Inc.

Time Warner, owner of the Turner cable networks including CNN, TBS, TNT and others, as well as HBO and the Warner Bros studio, may just be soliciting bids for purchase.  AT&T may be a prospective buyer and obviously believes they are also a good fit, but will they pull the trigger?  And who else may now be interested in obtaining such a prize?  I content that Apple should also look to purchase TW; a deal that would immediately give them more leverage in advancing their Apple TV platform.  Perhaps Trump might want to buy TW after the election and turn CNN into Trump TV.  And you never know what Google might do to drive both their fiber rollout as well as their Chromecast product.

Is Time Warner really for sale?  Some believe the company is actually open to a sale.  And so is the stock market. 

Tuesday, October 18, 2016

Google Smartphone Getting Strong Reviews

With the Samsung Galaxy Note 7 recall, timing is everything.  And Google may just capitalize on such timing with the release of its Pixel smartphone.  For Android fans who despise the Apple closed architecture, Google seems to have delivered a worthy alternative.  Of the reviews I have read, all seem to rate the Pixel phone a strong competitor.

Most seem to especially point to the Google Assistant, a Siri AI alternative to answer verbal questions at a touch of a button.  Per Walt Mossberg, former WSJ writer and now re/code co-founder, "the Assistant blew away every competitor I’ve tried. It shredded Siri, which has a five-year lead. It not only did on-phone tasks reliably — like launching an app, or creating reminders or notes, or playing music — but it understood most of the wider-world questions I asked it."  Impressive, although Siri is the least of the reasons today to purchase an Apple iPhone.

For other Android phone manufacturers, the release by Google of its own line of smartphones may cause trouble in the Android universe.  No longer is Google a partner offering an alternative operating system to Apple, it is a competitor as well using the same operating system to drive users to buy a Google smartphone.  And that may be troubling as smartphone wars seem to heat up between Apple and Google.