Microsoft Playing Catch Up

Microsoft has legacy to thank for its prosperity. The PC operating system, its Office suite of services, keep getting updated to attract more money. And with every PC sale, Microsoft revenues grow. But when it comes to new devices, Microsoft is a step behind. The iPod, the iPhone, and now the iPad all show Apple's ingenuity and understanding of the consumer's need. Compare that to the Zune.

"Bringing Windows-based slates to market 'is job one urgency around here,' said CEO Steve Ballmer at the company’s Financial Analyst Meeting Thursday. 'No one is asleep at the switch….We have got to make things happen. Just like we had to make things happen on netbooks, we have to make things happen on Windows 7 and slates.'” Unfortunately, looking at Microsoft history means seeing that they have never been able to catch up. In fact, their strategy is not to bring product and software first to the market; rather, there strategy has been to bring it to market cheaper and stronger than the other guy. It just doesn't seem that ideas originate at Microsoft, they are copied.

That is not to say that Microsoft is not successful. Their approach has been and will likely continue to be a very profitable one. But nothing lasts forever, and with Apple and Google and others eating at the fringes of Microsoft's world, the day will come when they are not as relevant. It seems a new sense of entrepreneurism and innovation is needed from Microsoft. Otherwise, we won't be needing their OS, Office suite or other products.

Cheaper Kindle

How low can you go, how low can you go. So goes the refrain and so goes the price of the Amazon Kindle e-book reader. Figuring a low price strategy is the one sure fire way to beat Apple and others, Kindle has built a faster device at an even lower price. "This new Kindle, Amazon's third generation, is smaller by 21 percent, and 15 percent lighter too....To date, all Kindles have used a wireless connection to a 3G network to get books and manage subscriptions. The new ones have Wi-Fi inside, so that people at home or at a coffee shop could log on via that network instead. One Kindle still costs $189, and has both 3G wireless and Wi-Fi inside. The cheaper $139 model only connects through Wi-Fi — and only comes in graphite."

So, does the new Kindle at a low price get you excited to buy one? Or is your heart still set on an Apple iPad, despite its higher price. As my briefcase seems to get heavier, I am liking the idea of a e-book device to read by as well as lighten by bag. At the same time, I like the versatility of the iPad vs. the Kindle. Am I ready to buy. I think I need one more generation shift. But regardless, I think it will be the iPad.

Hulu Usage Dropping

Hulu, the darling of internet streaming of TV shows, is losing its appeal. According to Comscore, Hulu usage dropped 45% in June. That drops their ranking down to 10th place. This is a big drop from a site that was recently at the top of the mountain. "The new figures are expected to affect Hulu's ability to win additional advertisers." Couple that with a desire to move users into a subscription package and you have users leaving in droves. Naturally advertising dollars will drop as well.

Is this simply due to Summer viewership trends and the Fall will see a bounce? Or is it something deeper. The rise of VOD and DVR usage that allows users access to the same shows on their bigger TV sets. And as cable operators, like Comcast, enable users to stream these shows through Fancast, Hulu becomes an afterthought.

iPhone Users Can Become Jailbreakers

For as much control that Apple likes to control, you can't outrun the law. And in this case it comes from, of all places, The Library of Congress. "The Library of Congress, which has the power to define exceptions to an important copyright law, said on Monday that it was legal to bypass a phone’s controls on what software it will run to get “lawfully obtained” programs to work." In truth, it is the United States Copyright Office, a division of the Library. And while Apple can disallow its warranty, it can't stop free enterprise from offering to provide more apps and even repair, if needed.

In a bizarre twist, this ruling could make the Apple iPhone even more profitable. "In addition to this decision, the Library of Congress also granted an exception to artists who remix copy-protected video content for noncommercial work, and renewed its approval for cellphone owners to “unlock” their phones or lift controls that restrict use to one wireless carrier." For Verizon, that could just mean more users and for Apple, more phones sold.

Does Sirius Need More Exclusive Content

What's it going to take for Sirius to win the hearts of both viewers and shareholders. A new contract with Howard Stern? More sports? Some suggest the answer is more content. "Sign on a big-name personality in an exclusive fashion that has a huge following on the radio --- moving over from terrestrial radio to satellite radio, following the same exact Howard model." But is that the answer?

First, Sirius should re-sign Howard Stern. That is their first obstacle. Second, they must continue to push how they differ from over the air radio. To me, more commercial free programming is the big win, especially with music. Listen to the genre you want without the interruptions of annoying ads. Push the quality of the sound, the ease of use, the endorsements. Oh and more exclusive content can only help, too!

Is ABC Time Warner Cable Fight Turning Nasty

Another broadcast contract expiring, another round of ads reminding viewers that they have choices. So goes the fight between ABC/Disney and Time Warner Cable. ABC has adds reminding viewers that while they negotiate their renewal, the contract expires September 2, and viewers may lose their signal. But there are other choices including Direct TV, Verizon FIOS, and of course over the air. If not already, Time Warner Cable will have their own ads reminding us that they want to control their costs so that the consumer doesn't see higher prices. How magnanimous. If it feels like deja vu all over again, it is because we have seen this tactic before.

Will viewers switch their cable provider in advance of what is often reconciliation at the 11th (or 13th hour). Or as I suspect, viewers will do nothing and simply get angry when, or if, their signals are temporarily dropped. In either case, this won't be the first time, or the last, that this scenario gets played out.

And just for thought. If Comcast and NBC merge, will Comcast have this same fight internally, including the potential of dropped signals and ads offering viewers the option to switch providers? And is that a good thing? Just wondering.

Interactivity Through The Set Top Box

A lot of work is happening to improve the functionality of the TV screen. The opportunity to press your select button on your TV remote to get information sent to your home, request a coupon, vote on your favorite actor, and one day order that QVC shirt right from the screen. All with a press of a button. But does the viewer want to talk to the TV or are they now accustomed to keeping their laptop open while they watch and interacting through their computer. Or even better, through their mobile phone. And once the iPad finds itself on every coffee table, through that or another table top device. Has the set top box missed the opportunity? Are they too late to the dance?

Given the cluckiness of the TV experience with buttons that can only be accessed left, right, up, or down, and no keyboard to type easily, the set top is an imperfect device. And the corresponding TV remote is so filled with buttons that it takes a moment to figure out which button is the right one to press. Take too long, miss the opportunity to interact. On the other hand, the mobile phone has fewer buttons and has become more ergonomic to use. The rise of the "jagtag" lets consumers take a picture and send to request anything they want. The phone shares where info can be sent. Does interactivity on the set top beat that experience? Can it be rebuilt to be a better experience? Cable must build a better mousetrap for set top interactivity in order to find success.

Netflix Profits Up, Revenues Down in Q3

Netflix is growing subscribers, Earnings per share is rising, but the rise of internet streaming has caused subs to downgrade their service. As a result, Netflix revenues are down in the third quarter. And here is the rub, because customers are streaming more and taking less DVDs, their plans cost less but the margins go up as mailing costs go down.

"Netflix said 61% of its subscribers are now streaming more than 15 minutes over the Internet, up from 55% in Q1 and 37% in the year-ago quarter. This trend will obviously continue as more Netflix subscribers stream more movies over the Internet. This could potentially force Netflix to raise their fees, or just to deal with lower revenue per subscriber." And with Redbox entering the internet streaming business, it will be hard for Netflix to raise fees to compete. Better margins, higher profits, lower revenue. And competition to boot, which could eat into profits. It is easy to see why the stock market lost favor in Netflix.

Redbox Challenging Netflix AND Cable

As Redbox enters the internet world to compete with Netflix, there is another competitor that they will challenge as well. "The company, the biggest division of Coinstar Inc., may use a Web service to expand its library beyond the 200 or so titles crammed into each of its 24,000 or so DVD dispensers, President Mitch Lowe said in an interview from Redbox’s headquarters in Oakbrook Terrace, Illinois." Certainly they are entering Netflix's space but it is really the space owned by cable's VOD platform. Neither Netflix nor Redbox offer the volume of titles accessible through cable, but they are seen as a cheaper alternative.

In a struggling economy, the consumer is willing to spend more time to find a cheaper alternative. Cable needs to review its pricing policy and offer a range of pricing that demonstrates to the consumer that cheaper choices are available on their TV set and they don't need to look any further.

Of course, Redbox and Netflix aren't the only other players in what is proving to become a very crowded field. "Redbox also faces competition from Apple Inc. and Best Buy Co., which sell movie downloads. Wal-Mart Stores Inc., the world’s largest retailer, bought the Vudu Inc. online entertainment service in February and Sears Holdings Corp., the largest department store owner, said on June 22 it plans to sell and rent movies online through an agreement with Sonic." For the consumer, there is good news. More competition causes price wars and results in lower prices to the consumer. Unless a real quality differentiation strategy is demonstrated, consumers will always look for the lower price choice.

Why Isn't Sirius Stock Price Rising

Despite good news on subscriber data earlier this month, Sirius can't seem to push its stock price over a buck. According to some reports there is bearish pressure pushing the stock price down. Can Sirius survive in the long run? Can it adapt to meet the changing consumer who prefers mobile to auto. Can Sirius find new revenue streams to grow its business or should it dress itself up for a future sale? Is it time for John Malone and Liberty to take it over and invigorate the brand. A great brand languishing deserves some fresh blood.

Kindle Sales Beat Hardcover Book Sales

This should be no surprise to anyone that electronic book sales by Kindle outsold its hardcover sales at Amazon. This is what technological change does. If anything, the biggest surprise may be how quickly it took for this change to occur. According to Jeff Bezos, Amazon CEO, Kindle has been selling for less than 3 years while Amazon has been selling hardcover books for over 15 years. "In the past three months, 143 Kindle books were sold for every 100 hardcovers, but when that time frame is narrowed to a month, it's 180 Kindle books for every 100 hardcovers. Total e-book sales tripled from the first half of 2009 to the first half of 2010."

But let's be clear. While this news shouldn't be surprising it should also be looked at more closely. The news is strictly about Amazon sales and doesn't look at the sale of paperback books. Overall paperback book sales have always been stronger than hardcover. The Kindle numbers also include free downloads, so a sale to sale relationship is not being measured. In addition, book sales are still growing for hardcover so it is not spelling disaster for books just yet. For most, the news is most likely meant to show that Amazon's Kindle is not losing the battle to other e-book readers, most notably, the iPad. And yet, Kindle continues to lower its price to compete so competition is clearly forefront on their mind.

So congrats to Kindle on a successful run. But keep innovating. It's time for a color monitor and more ergonomic features. It's time to look sleeker and more hi tech. Otherwise, your success might be short-lived.

Reincarnation Through Facebook

Who says you can't still communicate after death. With Facebook, death may be a physical end, but it doesn't have to stop you from sharing. In fact, Facebook hasn't figured out how to remove members after they die. "Facebook, the world’s biggest social network, knows a lot about its roughly 500 million members. Its software is quick to offer helpful nudges about things like imminent birthdays and friends you have not contacted in a while. But the company has had trouble automating the task of figuring out when one of its users has died."

Obviously the user can't remove himself prior to death so who is to tell them after the fact. So even after death, you will live on in the Facebook world.

Apple IPhone Response - Will It Be Too Little Too Late

Later today, Steve Jobs will hold a press conference in response to the iPhone antenna proble. As his initial response rubbed many the wrong way, his "second" chance should prove most interesting. Already speculation is that their will not be a recall, but what should he do? I suggest he go over the top to put customer ahead of dollars. He should offer to every iPhone customer a free casing to protect the device from disruption. And not just any casing, but one perceived as quality and value. Offer multiple colors, put the Apple logo on it, and hey, offer to print on it a free monogram or the user's name. In addition, offer an immediate and free software upgrade to correct the signal feature and improve reception. And lastly, offer a huge apology for not initially respecting his customers with a promise to never under estimate their loyalty. As a marketer, this response will have long term effects on the Apple brand.

So what will Steve say at his press conference? We must wait and see.

IPhone Blunder And Google Android Wins Fans

Many, like me, have been waiting for Verizon to get the iPhone. But now, with other smartphones gaining ground, I wonder if it makes more sense to separate the phone from the Apps. I want my phone to work as a phone. I want the battery on the phone to last as long as possible so as to never miss a call. I want my iPod device to play music, watch videos, surf the web, etc. So why not keep two devices; why marry the two? Especially when other smartphones may work just as well.

Verizon has been growing despite the lack of the Apple iPhone. "Despite the pull of the iPhone, Verizon has managed to steadily increase its share of the smartphone market, to 26 percent in May, from 20 percent in late 2008. In the same period, AT&T’s market share slipped to 40 percent, from around 45 percent, according to comScore. Those numbers do not take into account the impact of the popular iPhone 4, released last month....Verizon has since collaborated closely with Google to develop six phones running Android, helping to give Google’s mobile operating system 13 percent of the smartphone market in the United States." And the NY Times likes the Google Android.

Add to that the bad press Apple has gotten for its antenna problem AND its response to the problem, and competitive marketing is taking the phone wars to another level. I can live with two devices. I can keep my music and my videos separate from my phone. I can surf on either device and with two devices, I have a back up when one phone's battery drains. Maybe I don't need to wait for an iPhone on Verizon's plan after all.

Be Careful What You E-Mail

Starz's president, Chris Albrecht, has really demonstrated how careful you need to be with email. I am sure many people have mistakenly sent emails to people not intended to receive them. With programs that help to fill in the remainder of an address as you start typing, it is too easy to let a name slide by and not re-check that the list is accurate. Hence, never write anything in an email that couldn't be read by anyone.

Unfortunately, Chris did not heed that advice. He sent an email about the pending firing of two executives to the entre company email distribution list. And who should read it, the two people who he was targeting. "Realizing his goof, Albrecht immediately called Bill Myers, president of Starz Entertainment, to inform him of the error. During their conversation, McGurk called Albrecht and told him that he had seen the e-mail. Later that day, McGurk and Rosett tendered their resignations." They fell on their swords, an honorable way for the two execs to leave. For Chris Albrecht and others, a painful lesson to learn.

Cursing Allowed

George Carlin is turning over in his grave; his 7 words you can't say on TV can now be said on TV! "A federal appeals court struck down a Federal Communications Commission policy on indecency Tuesday, saying that regulations barring the use of “fleeting expletives” on radio and television violated the First Amendment because they were vague and could inhibit free speech." While this ruling will most likely reach a higher court, it temporarily allows poor language to be used.

And you know what I say - hooray! It is time for a bit of self-regulation. Have we lost our way in the polite way to speak. Sure there are those that only know curse and need to populate each other word in their sentences with one; but for others, the English language holds unlimited word choices to convey our emotions, attitudes, and desires. And let the consumer and economy determine whether they will listen to poor language or not. These curse words will never go away. But we can make a conscious choice in our behavior, especially on TV and radio, not to lean on them too heavily. Do we really need government regulation to be the judge? If you don't like what you are seeing or hearing, turn the dial or the channel. That is ultimately how you can shape content.

Can Apple Face A PR Nightmare

First, Apple admits to antenna issues with the iPhone 4; then Steve Jobs comes out with a silly fix - hold the phone differently. Now Consumer Reports comes out with its findings on the phone and gives it a thumbs down. "Consumer Reports has confirmed in its own tests that there is a problem with the iPhone 4’s reception and thus does not recommend the device." How will Apple handle this situation? Do they proceed as if everything is fine or do they offer to provide a free case to every customer. And what do they do with their next version to correct their problem.

And will this negative review hurt the Apple brand and ultimately the share price? As we have learned in the past, a quick response with corrective action is the best move. Sweeping the problem under the rug never works. Let's hope Apple speaks up soon!

Content vs Distribution Fighting Again - Should They Really Merge

On Wednesday, AT&T U-Verse license deals with Rainbow Media will expire. Rainbow, who owns cable networks AMC, WE tv, IFC, Sundance, and others, may be dropped from the channel line-up if renewal agreements are not approved. But that is not the only story in town. ABC/Disney is also negotiating carriage renewal agreements for both its broadcast channel and its cable networks with Time Warner Cable. And rather than sit back and watch, Verizon is taking a proactive competitive stance to woo customers, assuming channels will be dropped. "In a move that underscored the shifting nature of these Big TV brawls, Verizon ads warned consumers that Time Warner’s contract with Disney — supplier of ESPN, ABC and Disney Channel — expires on Sept. 2. Referring to ABC’s dispute with Cablevision in March, when millions of viewers were deprived of part of the Oscars, the ads asked people to pre-emptively switch to Verizon’s FiOS service." How Bold!

Now these two negotiations are being aired in public light just as Comcast and NBC are negotiating their merger with the FCC and DOJ. Are content and distribution meant to live under the same roof? Does enabling such cohabitation hurt other relationships? How can NBC negotiate a fair deal with Time Warner, Verizon, AT&T, and others, when it is owned by a fellow cable company. What is the fair market price? Who gets hurt more, the shareholder or the customer?

These public negotiations allow consumers to see that any license fee increase will raise the subscription price of the cable service. Cable companies will not swallow the increase and reduce its profit margin. So when the negotiations are internal, who knows what the fair market price becomes. How can the other distributors be sure they are negotiating a fair market rate? Are we heading down the path where Verizon will need to buy a broadcast network in order to compete on level ground with Comcast? Does Time Warner buy a third network? And does AT&T buy the fourth. Four mega-content and distribution companies controlling media, what is released and where. Is this the direction the FCC and DOJ want to go? It is the slippery slope that comes into greater focus when content and distribution companies negotiate their license deals by the light of the day.

Will Cable Subscription Prices Drop?

As the media moguls socialize this week in Sun Valley, one inkling of cable news has emerged. "Cable operators and entertainment companies are talking about selling cheaper cable TV packages with fewer channels to attract and keep customers trying to save money in a weak economy." What, lower prices for cable. Ahhh, lower prices for less channels. But do cable agreements allow them to move networks off the lowest tier and create a new basic level of service. For some networks, programming license fees could rise should actual subscription as a percentage of total basic homes drop below a certain level. That could lead to higher programmer fees per unit. Would cable really want to be charged higher license fees?

So while this rumor sounds interesting, I doubt it can truly happen. If cable companies lower their cable pricing, then it will be used to protect their subscriber base from cord cutting and other competition. Lower profit margin from cable, higher from broadband and phone. Isn't that what the triple play bundle is all about.

Sirius XM's 2Q Subscriber Base at Record High

Sirius is showing signs of recovery. As car sales grow, so too do Sirius customers. They had one of their best quarters in a long while. "The satellite radio company ended the second quarter with a record 19,527,448 subscribers, marking an increase of more than 1.1 million subscribers since June 30, 2009." That is more than a half a million customer adds in the last quarter. Sirius is revising third quarter growth estimates higher as a result.

While I am not a Sirius customer, I am a Sirius stockholder. I remain cautious given the growth in wireless and the ease of bringing mobile devices like blackberries, ipods, ipads, and others into the car. Since these devices receive internet radio, why buy a Sirius subscription. As sports, music, and news are just as easily received through these devices, will the customer prefer to buy content for a mobile device that can go into the car. That remains the bigger challenge for Sirius to overcome.

Tivo Adds Another Cable Partnership

While Tivo patiently waits for Comcast and Cox to make Tivo its primary DVR partner, it has found another friend with Suddenlink. "Suddenlink, the eighth-largest MSO in the U.S. with 1.2 million basic video subs, will offer TiVo Premiere DVRs as well as non-DVR set-tops from TiVo." Great news for Suddenlink customers to get more functionality and easier controls from their settop box and for Tivo to get further into the cable model. Add Suddenlink to the DVR list that includes Direct TV, RCN, as well as other international operators.

At the same time, Tivo continues to fight the patent issues with Dish along with recent suits against Verizon and AT&T. I'm excited to see Tivo grow and only wish that my own cable provider would bring the Tivo technology into their settop box.

Wall Street Journal King of Digital Media

Talk about adapting to the digital age. While some newspapers and magazines look backwards at how wonderful the past was and "if only" we could relive the good old days, others are embracing new media. The Wall Street Journal leads that category. Unlike others, they resisted giving too much away for free and were quick to institute a subscription model for the web. It is that forethought that has led them to success in the e-book platform. "The Wall Street Journal has by far the highest e-reader circulation of any newspaper in the U.S., according to Audit Bureau of Circulations data cited in a recent report by the World Association of Newspapers. The Journal had sold 414,025 e-subscriptions as of April 2010, up 8% from 383,199 in April 2009." The New York Times is at #3, but their digital e-book circulation is one-fifth that of WSJ.

In addition, WSJ is leading in iPad apps as well. "As we've recently reported, The Journal is killing it in the iPad department, with more than 10,000 subscriptions sold, and $2.4 million in revenue generated from them, as of June. The Journal's iPad app costs $17.99/month. The Times' is free." Seems like a heckuva subscription revenue model that will only grow as the iPad becomes more universally embraced.

Something for magazines to pay attention to as well. The WSJ model is working and it is time to duplicate their success.

VOD Price Wars

Cable has more than Redbox and Netflix to worry about. Now they have Dish getting more aggressive with lower pricing for hit movies. "Through July 7, the No. 2 DBS provider is offering the following films on Dish Cinema for 99 cents: Alice in Wonderland, She's Out of My League, Green Zone and Hot Tub Time Machine. The movies are presented in the standard- and high-definition formats, with Green Zone and Hot Tub Time Machine available weeks before they are available on Netflix and Redbox, according to Dish officials."

Should cable worry? Is Dish setting precedent for lower pricing for first run VOD? Or is this just a temporary break and won't make a ripple in viewership or cable subscription.

Apple TV Coming Back

Plenty of buzz from unnamed sources but no official word on the next iteration of Apple TV. What is also speculated is that Apple must gear itself for a less memory-centric model and move to a cloud computing world where info is centralized and not kept in individual devices. "So it’s almost certain that an iOS / A4-based Apple TV is on the horizon, but it will only be ready once Apple completely revamps iTunes for the cloud." Is that in the clouds or the next reality?

For me, the Apple TV device should connect with the cable box to extend its range and value and bring the internet to the TV and TV to Apple devices in the home. A server of sorts that can talk to iPads, iPhones, iMacs, etc. Sharing shows, videos, movies, calendars, and more. And making the cable set top box easier to navigate, working behind the TV and not in plane view.

What does Steve Jobs have planned for Apple TV? It seems something is coming.

Fuse On Receiving End Of What Dolan Dishes Out

Distribution platforms like Cablevision, Dish and others don't like paying for content. Contract negotiations tend to be acrimonious and ultimately the consumer is affected. Recent events with Cablevision and Time Warner resulted in channels being dropped off of cable line-ups while negotiations continued past deadlines. Ads got nasty and ultimately settlement got reached. And consumers found themselves with higher cable bills as a result of this outcome.

So now, Cablevision, who recently spun off Fuse into its own company, yet still owned by the Dolan Family, are on the opposite side of the negotiation table with another distributor. "After playing hardball in talks with Scripps Networks over carriage fees, Dolan now finds himself in a fee fight with satellite-TV operator Dish Network over his Fuse music channel." Now it is Fuse's turn to ask for higher license fees and for Dish to turn of the channel while negotiations continue.

Dish and Dolan have had a bad relationship of late. A previous HD service, Voom, was dropped by Dish. Bad blood, lawsuits, and most likely hurt feelings still remain. Fuse may simply be the next nail in the coffin by Dish to go after Dolan. Is either party right in this negotiation? No. But the old adage of what goes around comes around seems to apply. Yes programming fees go up as do ad rates. Yes Operators want costs down to keep margins up. And ultimately the consumer pays these higher costs anyway!

Is Hulu Competing With Cable?

Is there no profit in a single revenue stream business? Hulu has done the math and now plans to offer a pay subscription model to bring in a second revenue stream. "For $9.99 a month, subscribers of Hulu Plus get access to a full season's worth of their favorite TV shows--and even past seasons in some cases--and 'not just a handful of trailing episodes' that the free-version of Hulu offers, according to CEO Jason Kilar, who wrote the note." So in essence, a cheaper alternative to cable programming than cable.

Will consumers pay $10 a month for programming that is available elsewhere? As cable puts more and more product on demand, as DVRs fill up, and as DVDs line the shelves with season after season of TV shows, will the consumer pick Hulu as their paid model of choice? With cable companies, like Comcast, putting more of its programming online too, aren't the owners of Hulu competing with themselves as they offer their product free on demand, on TV and online, to cable subscribers. Viewers love free. Viewers love added value. Viewers love the ability to watch what they want, when they want, and where they want. But will they pay $120 for the service?

Those consumers that currently have cable may be encouraged to switch to a cheaper provider in Hulu, but I doubt that the value proposition works in Hulu's favor. Those consumers that have already cut the cord on cable did so because they couldn't justify the value and liked what was available free on the web. It is hard to imagine that they will find a Hulu paid service differentiated enough to part with their cash. So how successful can a free model, converting to pay, be? I am skeptical that this is their winning formula. I doubt that Hulu can reach scale with a paid subscription service to justify this new endeavor.