Wednesday, June 27, 2012

Cable Networks Believe Movies Stop Cord Cutting

An article in today's Paid Content states that today's basic cable networks believe that movies on their network help to keep viewers from dropping their cable subscription.    And while I love a good laugh, I don't see any logical correlation between the two.  Here's the quote "As basic cable original series prove to be important product differentiators for over-the-top services like Netflix, some of the networks that produce these shows are actually relying more on high-priced theatrical movie acquisitions to maintain or increase their subscriber counts and drive ad revenue."  

Movies are indeed a comfort staple on TV.  Put a compelling one on and sure enough viewers will stop  and view; it may bring ratings, it may bring ad revenue, but it is not the stickiness that keeps consumers subscribed to cable.  With many of these same titles available uncut and commercial free elsewhere, viewers are not subscribing just so they can see an ad every 5 minutes or a constant bug in the corner of the movie promoting your channel, or worse, a pop up announcing that a new show is coming up next.  Those in fact make me consider dropping cable to find the same movie without interruptions or distractions.

What does keep consumers from cutting the cord, live programming, especially sports, that are not available easily on the web.  Exclusivity of a show not yet available online.  Differentiation is key and movies are not differentiated especially when they are available on so many other platforms.

News Corp To Split, Like Viacom and Time Warner

It seems that News Corp will be taking a page from the divestiture handbook and split itself in half.  Like Viacom and Time Warner, the notion that bigger is better is not paying off and value can be best derived from splitting itself in half.  So where to make the cut?

"News Corp. is mulling splitting its 20th Century Fox film studio, Fox broadcast network and Fox News channel from its newspapers, book publishing assets and education businesses. News Corp.'s publishing assets include The Wall Street Journal, the Times of London, the Sun and The Australian newspaper, as well as HarperCollins book publishing."  So on one side are the future growth businesses with high potential profit margins and on the other, the older print media, with declining revenues and unsure growth.  And by splitting out the two businesses, the hope is also that it unleashes higher stock market valuation.

And yet both sides are content creator businesses, one more in the video side while the other is in print.  But doesn't print hold future promise in digital once consumers fully adjust to the transition of receiving its printed content exclusively through tablets, readers, and other online platforms.  Won't News Corp be missing out on the synergy that each side of the business brings to the other or is it true that big businesses just can't get out of their own way in making this kind of synergy effective.

Perhaps the challenge of companies getting to big in size is that they lack the flexibility and the focus to adapt quickly to changing landscapes and adjust more quickly.  By trimming down, management can better focus on their business and respond more quickly to new opportunities.  Is splitting in half enough or should they split again into even smaller pieces?

The other thought is that News Corp owner, the Murdoch family, may simply be seeking to use a split as an opportunity to divorce the phone hacking drama of its newspaper empire from its broadcast and movie empire.  And once the two businesses are separated and values are unlocked, the newspaper side of the business could be sold for an attractive price.  For now, we focus on the split, but its what they do next that really matters.