It's Not Cord Cutting, It's Cord Switching

Customers love their TV content. But ask a cable company executive and they all point to a drop in basic subscribers quarter over quarter. They don't call it cord cutting; rather, a bad economy, unemployment, and low housing starts. Except those customers still want their TV content and they are in fact cord switching to telco and satellite providers. In fact, they have captured subs from cable operators as well as found new consumers, too.

"The growth was driven by telecom-based services AT&T (NYSE: T) U-Verse and Verizon FiOS, which added 208,000 and 194,000 video customers during the fourth quarter, respectively. Satellite companies DirecTV (NYSE: DTV) (up 125,000) and Dish Network (NSDQ: DISH) (added 22,000) also contributed to this growth." So while Comcast, Time Warner Cable, Cablevision, Charter and others lost basic subs, telco and satellite grew.

If the cable excuses hold, then the reasoning to why seems clear. Telco and satellite are offering similar services at a lower cost. Consumers may be regarding cable tv providers as a commodity industry and in such cases, the lowest price prevails. Cable companies have tried to adapt by building out lower priced entries into basic subscriber packages but it may not be enough for consumers to switch back.

And Cablevision in their recent Q4 financials announced that they may not even try this route. "Cablevision also will eliminate deep discounting for new customers, which should ease the financial impact on the company." It may lower costs, but it will lower revenue and sub numbers too. For now, they may not be cord cutting, but will only continue to switch to the lowest cost provider of TV services.

Should Broadband Usage be Priced Like A Utility

Homeowners don't seem to bat too much of an eye at their utility bills. Water, electicity, and gas bills come due monthly and we tend to not pay much attention to them unless the price changes radically. We know that prices are regulated and there is little we can do but watch how much water, electricity, and gas we use. They are tightly measured and unless there is a leak, they are secure.

But is broadband usage a different story? Should homeowners be expected to pay for broadband usage as others offer unlimited access? Can we be sure we are measured accurately and can we completely control how it is being consumed? As more and more content becomes accessible through the web and with pushes and notifications, we may be somewhat at the mercy of the app. True most content is not nearly as big as long form video content; still, we are getting more and more addicted to our web connectivity.

Unlike other cable operators, Time Warner Cable still wants to try and push through a broadband fee based on usage. While some try to throttle high users of broadband, Time Warner wants to incent low users to get measured by usage and receive a benefit for not using the web too much. They have a new test in the works. "Under the new pricing plan, consumers will get a $5 reduction in their monthly bill if they accept a cap of five gigabytes monthly." Of course, should they exceed their limit, they will pay a penalty. At only a $5 monthly savings, I find it hard to believe that any family would grab on to such a deal.

The wireless companies are all trying to get more dollars for usage billing. Unlimited access may become a thing of the past. Certainly cable would like to find more revenue by charging this way as well; Time Warner Cable may be the most aggressive, but others are watching the test.

Netflix Not About The Flix

Movie distributors are trying hard to save their business. The digital distribution field has changed the very model of how content is viewed. And pay content distributors like HBO, Showtime, and Starz walk a fine line in licensing content to cable operators, OTT providers, and other distributors like Redbox and Netflix. So when the latest agreement between Starz and Netflix expires, Starz has decided they don't wish to renew.

Netflix has used Starz movies as a driver to pursue subscribers. But knowing that this deal was not long term, Netflix determined that a better future may be in TV shows and original content. "TV series now account for more than half of all Netflix viewing. That helps to explain why this Wednesday — the long-awaited moment when motion picture classics like “Scarface” and newer hits like “Toy Story 3” will vanish from the streaming service — is not the doomsday that it was once expected to be."

This strategy for Netflix of focusing on original content is reminiscent of what HBO, Showtime, Starz, Epix and others are doing in the cable space. As movies move from one distributor to another, they no longer best represent the lifeblood of the network. Today, HBO is known for Sopranos and Game Of Thrones, Showtime for House of Lies and Dexter, and Starz for Spartacus. So naturally, Netflix needed to get into the same space with their own original series, Lilyhammer. How else to define a network than by the original series it represents.

The flix may be less a part of the Netflix brand, but it still remains a piece of the puzzle. As digital has lowered the barriers to entry and enabled more ways to access movies, it better suits Netflix and others to use original content, both TV series and original movies, to attract a loyal customer base.

Rutledge Sees Opportunity From Charter Homes Passed

With the lowest penetration of basic subs to homes passed in the industry, new CEO Tom Rutledge sees basic sub growth for Charter Cable. According to Rutledge, "It's got a huge runway in terms of opportunity and it can be a much larger company without any kind of change in potential marketplace."
With a coverage of 12 million and only 4.1 customers, a push to build out connections is necessary. But why haven't they taken advantage of the Charter offer in the past and what are customers currently using for cable, broadband and telephone. It is an obvious base to draw from, but a clear strategy to change customer habits is clearly needed. Do prospective customers have a pricing issue with Charter or is it service? Why have they been avoided and how do they overcome a possible negative sentiment. Its been a rocky ship that needs firm guidance to right.

Dish Aims To Be A Disruptive Innovator

Dish Network seems ready to compete in the next generation of connectivity. While subscription to its satellite service is growing again, it saw a yearly net loss of subs. It purchased Blockbuster Video Stores but is now ready to close 500 of them to concentrate on the streaming content business. And it sees the future of its operations as a wireless venture. "The company is awaiting approvals from the Federal Communications Commission that will let it to use the satellite spectrum it purchased from TerreStar Networks Inc. and DBSD North America Inc. to build a wireless network." To compete successfully against cable and telco, the push must be toward two way communication. A wireless network provides the backbone to compete on services to offer to the consumer and the home.

Dish's Chairman, Charlie Ergen, seems to relish this role. "'We have a history of being disruptive in the video business. I think we will be disruptive in the wireless business'", he said. With LightSquared future in doubt, Dish could be the ones to best offer a competitive package to the consumer seeking access to content and communication wherever and whenever they want. The wire is a nice tether when we are in the home; but outside, it, we want to roam free. Dish could just be a disruptive innovator to the current marketplace.

Is Google Fiber A TV Solution?

As I read the first line of the Gigaom article, I wondered if this was the smartest strategic move for Google. Here it is, "Google has filed for a video franchise license, which if approved could allow it to take on cable providers in markets in which it’s hoping to deliver fiber-enabled Gigabit broadband services." And I wonder if the capital expenditure makes sense.

The cable business, despite a drop in basic subscription, remains healthy. Cable operators, who invested in cable to the home, have been able to find multiple platforms to leverage this expense. The same wire used to provide cable now provides broadband and telephone service. Some are even looking to use this pipe for home security systems. Verizon FIOS has been able to use its pipeline too. First for telephone and then for DSL. But the cost to convert to fiber has added high costs and the conversion of new subs slow. To that end, they have limited their build out to focus on increased penetration of current markets.

So for Google, a fiber build out means starting from scratch with high costs and no subscribers. Add to that the high cost to acquire cable programming channels. With no subscribers to leverage, the license fees for programming will be higher than those offered to Time Warner or Direct or Dish in the market. Will enough consumers switch to make a business model work?

Lastly, why a fiber build? With the push to cloud and streaming, why a fiber connection. If the commitment by Google is to provide video service, why not partner with a company to provide nationwide wireless streaming and build out an authenticated technology to control who can access the stream. Make your programming deals and push the opportunity to reach a national platform. Now that would truly drive a competitive stake into the current cable/broadband model.

Canoe Ventures Dropping Interactive Ads Business

As the content community embraces the cloud and Cisco plans to sell its S-A set top box business, Canoe Ventures has announced that it is giving up on EBIF. "The decision to abandon ITV ads and dramatically pare back Canoe's mission came after a review by its cable operator owners, according to a Canoe spokeswoman." The push for better connectivity to the web, more cloud based operations, including N-DVR and VOD, and perhaps even Comcast's push into a rival Netflix streaming business, all demonstrate that the set top box is history.

Also too, advertisers didn't find much interest in overlays that intruded on top of video commercials. With the primary goal to click a button for more information, the boxes looked intrusive and the clicks weren't coming. And advertisers and viewers weren't embracing the added value feature either. So what is next for Canoe? "Canoe's more narrow goal, at this point, will be to build a way for MSOs and national programmers to generate revenue from dynamically inserting ads into on-demand content across both VOD inside the home and TV Everywhere outside the home." But with other companies, like Seachange and others, already in this space, can Canoe re-model and survive? It just doesn't look promising.

Google vs Apple Heads To The TV Set

When Apple was younger and the PC was the big push, the biggest competitor to Apple was Microsoft. Today, that fight has taken a back seat as Apple has extended itself more firmly into mobile devices and soon the TV set. And perhaps their biggest competitor is not Microsoft, or even Amazon or B&N, but Google.

And Google is adding another line in the sand verse Apple, Voice controlled connected television. "In what could be the biggest boost to couch potatoes since the remote control, Google Inc. is developing a technology that would allow a viewer to tell a TV, by voice, to change the channel or even seek out a favorite show or movie."

Google is aggressively competing with Apple in the software side of the business, a strategy used by Microsoft in the PC wars. But Google is going a step further when it buys manufacturing companies like Motorola to build out Google products. How this affects Google's licensing with other brands remains to be seen. Companies don't like to have competition from their own supplier. Still Google continues to advance while Apple follows its own path. How fierce the competition between these two grows remains to be seen. But with Google testing a pay subscription service in Kansas City, no doubt they are declaring war in the video space.

Broadcasters Do Not Prefer Cordcutters

Today's WSJ article may be all about the rise of cord cutting, but it may not be in the best interest of broadcasters. Sales of digital antennas are expected to double this year and OTT providers like Boxee and Aereo are offering online streaming of broadcast channels. And consumers, eager to lower their video bills, may cut the cord to cable, as these alternatives gain speed.

But it may not be in the broadcasters' best interset to encourage non-cable reception of their programming. One simply has to look at the ownership of each network to understand why. ABC owns a ton of cable properties including Disney, ESPN, and others, all getting a monthly subscriber fee. NBC is owned by Comcast, the largest cable operator, and also owns multiple cable networks as well. Fox owns regional sports networks, FX, Fox News and more. And while CBS spun off its Viacom properties (MTV, VH1, etc.) it still retains Showtime and CBS Sports Network. And even Univision, a Spanish broadcast network, distributes cable network. Plus each of these broadcast networks get their own monthly license fee for cable distribution. Why would they want to encourage cord cutting.

And the government may also make it hard for consumers. "The value of spectrum used by broadcast TV has been hotly debated in the past couple of years, as the FCC has looked for ways to add spectrum for wireless broadband. Last year FCC Chairman Julius Genachowski said the percentage of viewers watching broadcast over the air, rather than through cable or satellite, has fallen to less than 10%, in contrast to the precable-TV days when it was 100%." While those spectrums help wireless, they hurt over the air reception. Will broadcast TV access be available to only those that can afford to access it?

The money is in cable TV and authenticated web viewing. The profits on over the air and OTT are less enticing. And broadcasters are more likely to do what ever they can to impede cord cutting and support this cable model.

Cable TV Without A Set Top Box?

For cable operators, most of their cable box shipments come from Scientific Atlanta, currently owned by Cisco. The other set top box company, Motorola, will soon be owned by Google. Now comes a report that Cisco doesn't see much of a future with its S-A division and is seeking to sell it. "Much has changed in the set-top box business since Cisco acquired S-A, most of all the streaming of Internet content and the race to introduce video on multiple platforms." With the rise of cloud computing, network DVR plans, and an emphasis on connected TV sets, does an external box improve the viewing experience or simply interfere with it? Most likely, the viewer would not prefer to have one. And Cisco's business plan is moving toward the cloud as well.

If S-A goes up for sale, who will buy it? The article speculates that private equity firms are most likely to bid. But what about a bid from a cable company or group of companies. With so much investment in EBIF, they need a set top box to distribute and interface with the TV experience. Maintaining that exclusive hold on the cable subscriber requires keeping the box in the home.

Google certainly is not buy Motorola for its cable box business. For them it is all about mobility and access to products that the consumer uses in and out of the home, phones and tablets especially. Their eye is certainly not on the cable box, but on the internet.

So what will happen to the S-A box business and how will the cable industry respond. The future is in the clouds and cable may eventually have to catch up and drop the box. Authentication of the consumer can still happen; it may not need a box anymore to make it so.

Big Brother, No Really Big Business, Is Watching

When George Orwell wrote 1984, he may have been concerned that government was watching individuals. Perhaps if there was a modern rewrite, the issue would be that big business is watching and tracking our online movements. In today's news, Google is the one with their hand in the cookie jar. "Google has been "tricking" Apple's Safari browser into letting Google monitor Apple users' web-surfing behavior, the WSJ reports--even users who want this kind of tracking to be blocked." But they are not the only one out there.

With our "permission" or not, we are being tracked. On our smartphones, we are encouraged to let apps track where we physically are, when we surf the web, we are tracked on what we watch and read, and on cable, on what we watch on TV. And sophisticated programs take that data and predict what interests us and targets ads that may appeal to us.

Helpful or not, we are no longer invisible to big business. As we have become an online, mobile consumer, we no longer seem to mind who is tracking us; in fact, we are even sharing pieces of ourselves on social media sites. The thinking seems to be that as long as our financial data isn't compromised and it doesn't cost us anything, we are unconcerned. This news about Google doesn't seem to be getting much consumer response, but perhaps we should be more outraged.

Can Comcast Winback Cordcutters?

Comcast shared some exciting fourth quarter news and the stock market likes what it hears. It reported its lowest drop of cable customers along with an increase in broadband and telco subscribers. "Speaking to investors Wednesday morning, Comcast CEO Brian Roberts attributed the declining defections to added channels and better customer service. He also said that as housing growth improves, actual subscriber growth may return, too." Is the combination of an aggregate of content networks combined with a broadband pipeline enough to stem the loss of cable subs? Will a better economy cause consumers to return to Comcast or will basic losses continue to persist because the cost is too high to justify and alternative content platforms serve their purpose?

As competition for broadband service remains limited, compelling packages of cable subscription with broadband may just be enough to reverse the cord cutting trend. Once you add up the costs of individual premium services - Roku, Netflix, Amazon Prime, Redbox, with the cost of a streaming platform, the overall cost may just exceed the packaged cost from cable. And perhaps it comes down to access to the latest and greatest available content on cable verse older library content that the other streaming services provide.

Will 2012 prove Comcast right that the trend of cord cutting has reversed and basic subscribers will return to cable or is the Q4 2011 small loss simply a temporary pause in the deepening crack in the dam? We can only wait and see.

Does The FCC Want Competition In Telecommunication Or Not

First the FCC bans the merger of AT&T with T-Mobile because it will reduce competition in the telecommunication space; yet, now it bans LightSquared from moving forward despite the fact that it can increase competition and add to the economy. "A proposed wireless broadband network that would provide voice and Internet service using airwaves once reserved for satellite-telephone transmissions should be shelved because it interferes with GPS technology, the Federal Communications Commission said Tuesday." Not having an engineering background, I can simply ask, is there not room for both?

As companies are pursing new streaming businesses, the demand on the current infrastructure is becoming stressed. Current broadband and mobile companies want to change the all-you-can-eat system to usage data billing, and costs for streaming will only steadily rise. Alternative distribution choices, like LightSquared, hope to keep the system in check. But without them, consumers face a limited choice of businesses to choose from for their wireless access.

Just yesterday, IAC introduced Aereo, a new service to stream broadcast television signals to multiple platforms and devices. While the fee for the service may be low, it still relies on a wireless service to enable the connection. And cable companies that provide broadband and cable will no doubt want to charge a ton more for broadband only customers. Wireless providers also want to charge us for access to their 4G sytream. No doubt bundled services from cable and telco will make their package pricing a better value than for customers buying services a la carte.

And without a competing national wireless provider, like LightSquared, how can they consumer build their best valued combination of distribution and pipeline providers. If the FCC truly wants to enhance competition in the wireless space, why aren't they doing more to enable it? Encourage competition or not, but make up your mind!

The @Home Brand Is Coming Back

Twenty years ago, a joint venture of TCI, Cox, and Comcast formed a high speed broadband business to get homes on the web faster than dial up. It was known as Excite@Home but like other cable joint ventures, it had difficulty operating. But it started a trend. Email addresses ended with @home and AOL and Prodigy were being usurped by broadband. This venture ended a decade ago and each cable company moved over to their own exclusive broadband business. With it came the rise of triple play - cable, telco, and broadband and a new revenue stream. The Exite@Home company was quickly forgotten by most consumers.

Well it seems Google is ready to resurrect the brand name. "Among the projects, revealed by a review of public records by this newspaper, are a lab to test a new consumer product under the brand name '@home' that will wirelessly stream music or data to other household devices, apparently similar to a prototype home audio service Google demonstrated publicly last year." Despite the similar name, I doubt most consumers even remember the first @home incarnation. It is clear that Google has their eyes set to compete with Apple in the product and wireless streaming space.

Apple Over $500 A Share As New Upgrades Expected

As Apple shares closed over $500 for the first time, investors are excited for new releases of their tablet and smartphone. "It was the latest step in a rally that began more than two weeks ago, when the company reported staggering sales and profits for the holiday quarter." An iPad 3 is anticipated to be released next month as the iPhone 5 later this Summer. Rumors abound on what these next iterations will look like. And as consumers pick up these devices, they are sucked into the Apple brand and thus encouraged to also purchase laptops and other Apple products. And frankly it is hard to buy just one. An Apple device for every member of the family, from ipods to iPhone, iPads and laptops. Our homes are looking like an Apple showroom. And as Apple keeps innovating, we continue to want to own the next generation of product. As long as Apple keeps getting it right, the stock price should continue to soar.

Capitalize On The Digital Trend Or Get Left Behind

There are those businesses that are unwilling to see the trend and commit to change before it is too late. Kodak most recently comes to mind as a company that actually invented the digital camera but was afraid to commit to it for fear of losing its film business. Well they lost their film business anyway and are now bankrupt.

The same holds true in the TV business as other platforms for entertainment have grown. There is one thing that will never change. There are only 24 hours in a day. And a good portion of that is spent sleeping. The reminder is divided numerous activities including our entertainment needs. And that time with the TV set has changed. "Americans ages 12 to 34 are spending less time in front of TV sets, even as those 35 and older are spending more, according to research that will be released on Thursday by Nielsen, a company that tracks media use."

Clearly the younger demo is more relevent as their behavior will be tracked longer. "It has long been predicted that these new media would challenge traditional television viewing, but this is the first significant evidence to emerge in research data. If the trends hold, the long-term implications for the media industry are huge, possibly causing billions of dollars in annual advertising spending to shift away from old-fashioned TV."

Cable companies are striking deals to give content access to "authenticated" customers to multiple devices. Most of those devices though are restricted to inside the home. Still it is a first step in keeping customers engaged with their distribution across multiple platforms. Next step though is similar access away from the home. At the same time, this younger base is questioning the value of that product. WHile triple play is valuable to an older demo, the younger generation cares less about a hard line phone; those needs are handled by their smartphone. They care most about broadband access, but whether that comes from their cable provider or from a 3G or free WIFI access will continue to determine who gets their entertainment dollar. And as long as these customers buy a broadband subscription from their cable operator, cable companies should remain profitable.

Content Remains King as Time Warner, Fox, Viacom All Grow

Content is King in this entertainment world. Smart content creators that recognize the mantra to "follow the customer" have recognized that they are being led to digital media. What you watch, where you watch, when you watch, and on what device you watch. And it is these content creators that are finding success as distribution platforms attract audiences. Thos that do are rewarded; those that don't only see their revenue decline.

So it is valuable to note that the financial news from Time Warner, Fox, and Viacom indicate growing deals with new media providers. Yes to traditional distribution outlets, and yes also to deals with Netflix, Amazon, Hulu, Apple, and others. DVD profitsmay be suffering but streaming is advancing. Customers are buying subscriptions and seeking content for their tablets, smartphones and laptops, as well as their TVs. They are still purchasing and consuming content; it is simply in new forms.

The latest deal, with Viacom and Amazon, offers Amazon Prime subscribers "access to TV shows from MTV, Comedy Central, Nickelodeon, TV Land, Spike, VH1, BET, CMT and Logo". The more content being offered, the more value perceived, the more desire to subscribe, and hopefully more satisfaction. How exclusive this deal is and how it affects Netflix, Hulu and others remains to be seen. Still, Viacom is not the only content company and opportunities still exist to make content deals.

And this new intersection of content and distribution offers new revenue opportunities to draw from. Most importantly, it is necessary to not view these new platforms as a zero sum game. The TV experience will not go away and customers will work best with those distributors that offer them the content they want on the screen(s) they want. The only thing that will kill it is pricing access at a point where viewers move to the next best value proposition.

MSG Drop On Time Warner Cable Not An Issue

Despite not carrying the MSG Network since January 1, Time Warner Cable seems content with not pursuing a renewal agreement. With a shortened NBA season and teams that aren't as competitive as in previous years, the effect on subscription may just be negligible. And to demonstrate just how low a concern this seems to be, "MSG Media president Mike Bair told analysts Wednesday, adding that no meaningful discussions have occurred between the parties since the network went dark on TWC systems in New York on Jan. 1." Once TWC dropped MSG it was simply time to move on to other deals. Will negotiations ever ramp up; it may not be an issue once the basketball and hockey season ends in a few months.

Another News Channel Competing For Attention

Move over CNN, Fox, Bloomberg and MSNBC; watch out online, another news operation may be forming. With the Hispanic population growing, and third generation Hispanics speaking more English while staying in touch with their Hispanic routes, a new need may have been uncovered. ABC and Univision are talking about combining their news operations to create an English language cable news channel with a Latin attitude.

"The new channel would tap into the growing population of English-speaking Hispanic viewers, a source noted. That demographic has been fueling ratings for Univision and rival Telemundo in recent years." Brilliant! Will cable operators pay a fee? With the need to capture this segment of population, offering this channel seems a no-brainer.

Amazon Adding a Retail Business

As Barnes and Noble tries to fight Amazon in the digital hallways, Amazon is fighting back by competing head on with a brick and mortar retail presence. "Quidsi, an online retailer Amazon acquired in 2010, opened its first retail store in Manhasset, New York, last year to sell expensive cosmetics and perfumes under the BeautyBar name.
Amazon also plans to open a physical store in its home town of Seattle in coming months to showcase and sell its growing line of gadgets, including the Kindle Fire tablet, industry blog Good E-Reader reported this weekend."

Despite the e-commerce push, retail still seems to matter and Amazon recognizes that stores count. B&N has a great physical presence, one that will take Amazon years to emulate; at the same time, B&N has to figure out how to evolve it into the next winning formula. It is what JC Penny is doing by taking Apple's retail guru to update its stores. B&N must do the same as well. Amazon recognizes that retail is a component of success.

Still No Knicks/Rangers For Time Warner Cable Customers

Tom Brady announces that he watched last year's Super Bowl from an illegal website and Time Warner Cable customers may be needing these sites with their MSG Network cut off their air for over a month. So in wanting to watch their beloved Knicks or Rangers, they most likely are also watching through these sites as well. Well I guess it has gotten a little tougher. "Investigators seized 16 sites and brought criminal charges against a Michigan man who controlled nine of them."

As the TWC and MSG dispute continues, no NY doubt sport fans are seeking alternatives like these websites to watch their games. And as these sites are stopped, will others simply pop up and take their place.

The Cost Of Streaming

Let's face it, we are becoming data hogs. With our tablets, e-readers, smartphones and laptops, we are consuming more and more data. Cell phone companies want to charge us more for our exceeding our monthly use and broadband companies would like to charge us like a utility. The buffet may soon end as our streaming habits grow and each piece of content requires more data in it. This is especially true with video and the move toward streaming HD content.

There are a number of solutions. We could reduce our usage although that seems unlikely, especially as more connected devices are being manufactured and bought. The cell companies want us to use WIFI as much as possible to avoid their caps and usage bills. A short term fix but eventually even free WIFI may one day come to an end. Or rely on more innovation to make our streaming and downloading less bulky and more efficient.

Netflix is doing just that and I wouldn't be surprised to see more companies join in. "The movie and TV show streaming company is the first client of Palo Alto-based start-up eyeIO, a maker of a video encoding system it claims reduces the bandwidth needs of Netflix streams by more than 50 percent without sacrificing picture and sound quality." That is a significant improvement for the moment but in a few short years, as users and usage doubles, a quantum leap must occur to vastly improve streaming efficiency. For the moment eyeIO seems the company to bet on for a better streaming experience and lower broadband costs.

Facebook IPO - A Stock To Buy?

Investors seem to be going gaga over the initial public offering of Facebook (FB). While institutional investors and will be first to buy, should the average investor get in early or wait for the early hype to die down? And ultimately will Facebook become the next Google or Apple in terms of rising stock value or a dud like My Space became for News Corp? The one thing for certain, on paper, Mark Zuckerberg will become a very rich man.

"Facebook mostly depends on display advertising, which amounted to $3.154 billion in revenue during 2011. However, revenue from sources other than ads have grown from 10 percent a year ago to 17 percent today. The documents also reveal that Facebook is highly dependent upon its partnership with Zynga. Zynga accounted for about 12 percent of Facebook’s revenues in 2011, as the leading third-party developer also generates a large number of pages that the social network displays advertising on, according to the filing."

Has Facebook overcome the hurdle and moved from fad to necessity? The numbers indicate that users still frequently visit their FB page as well as use it as a portal to online games. But what if Zynga no longer wants to play in the sandbox with FB? Or we become more reliant on our other iPhone apps for casual gaming and bypass FB. Or will the continual changes on the FB screen or issues with personal security finally turn us away from FB. We are a fickle bunch that could drop FB for the next big thing. Is FB here to stay?

That is the risk of the stock market, forecasting the future of a company based on present information. For those that believe that Facebook has more room to conquer and new revenue opportunities to expand on, the stock price will continue to reflect a positive direction. But if one expects that the lower barrier to entry into the digital world means that it is easier to compete in the social and gaming media space, and that consumers can switch their loyalty in a heartbeat, then a FB investment may not be as profitable as other investments.

Could A Broadband MSO Replace A Cable MSO?

A terrific read in Light Cable Reading of the rise of Virtual MSOs. If the definition of an MSO is one that aggregates and bundles licensed content and then resells to subscribers, then we may not find one that will offer the same abundance of content as cable. Most of the best networks license their content based on volume and the costs to get these providers to deliver the same content at rates being offered for MSOs the size of Time Warner or Comcast is quite unlikely. The rate per sub for reaching 10 million customers is far less than the rate per sub to a smaller MSO with say 1 million customers.

But the world of the virtual MSO aggregating content via the broadband platform may not need to duplicate cables' lineup. Rather, it simply needs to enable the connection. Xbox, Boxee, Tivo, and other OTT devices already use broadband to watch content from YouTube, Netflix, Hulu, and other streams. In essence, a "virtual MSO". TV manufacturers are doing the same to create a "connected" TV. And Boxee is enabling their box to bring digital broadcast signals to the TV set. Between these channels and streaming web programming, an alternative aggregator has been enabled already.

Still, if it is about duplicating the cable programming line-up, the costs must be absorbed until the "virtual MSO" gets up to a significant number of active subscribers. Perhaps the NCTC (National Cable TV Cooperative) would be willing to take one of these new entrants into their group. "There's seemingly no shortage of candidates that have the scratch, and perhaps the will, to give it a go. Not Microsoft (see above), but maybe Apple Inc. (Nasdaq: AAPL), Google (Nasdaq: GOOG) or Amazon." The one concern for a customer switching to a "Virtual MSO", they still have to pay their current broadband/cable provider for their broadband service. And no doubt that broadband cost would rise should they drop their cable service.

Cellular Verse WIFI, The Heart Of The Issue

What a great editorial in today's Wall Street Journal called The Wireless Equivalent of Fracking. In a wonderful analogy to the fracking process to release more natural gas, he offers a wireless comparison. "The mobile equivalent of fracking is Wi-Fi. Wi-Fi is free, unregulated spectrum, separate from the regulated spectrum that mobile operators buy from the government." And the most serious question he asked, why did the government need to block a cellular merger when access to WIFI is cheaper and becoming more abundant.

Web streaming is growing more steadily. Larger data files are being downloaded. Cellular monthly bills attempt to charge more for exceeding caps on usage. And these same companies remind us to use our WIFI often so as to not exceed their own caps. But be careful what you push; as WIFI becomes more prevalent and easier to stay constantly connected, consumers might just drop their cellular companies and communicate solely via WIFI. Hello Skype, goodbye AT&T cellular service.

Need a connection, sit down at your Starbucks. Waiting at the train station, chat through a Comcast or Time Warner Cable WIFI connection. In fact, a great added value for broadband cable customers to access the web away from their home. As more free wireless hot spots pop up, the need to be on 3G or 4G diminishes. Such a relief to listen to Pandora or watch a movie on Netflix without running up a cellular usage bill.

"Cellular operators offer the highest-cost path to the Internet; customers have both motive and opportunity to shift demand to other paths. The operators themselves have not been slow to figure this out. AT&T, the nation's second-biggest cell carrier, is also its biggest operator of Wi-Fi hot spots because it's a cheaper way to meet the data demand of its iPhone customers." So why worry that AT&T wants to buy T-Mobile? The cellular industry, like the cable industry, an oligopoly with fewer and fewer companies. But technological changes have meant that the cellular industry now has new competition from cable, and perhaps soon, Lightsquared. Rather than stopping the merger, the government should be working with other industries to encourage more investment in wireless alternatives. Cellular vs. WIFI, as costs for cellular usage rises, consumers continue to embrace their cheaper WIFI hot spots.