What Box Do You Want Managing Your TV Set?

The mighty cable set top box, the dinosaur these days of connectivity to the TV set, has been getting a lot of competition of late.  There has been TiVo offering enhanced DVR and online streaming, there has been X-Box and Roku and Apple TV.  And we continue to wait for the introduction of Intel Media's new box.  Now comes a box so small that it fits like a flash drive into the back of the set.  Google's Chromecast may be the smallest and cheapest of the devices so far.  But according to articles, it also may lack a ton of notable content and limited to the Chrome browser, another Google product.  Still, the Chromecast is generating a lot of interest.

So competition is heavy for the box that consumers want to power and control their content on and off their TV screen.  And yet the mighty cable set top box continues to power almost every home that seeks to have cable television service.  Every channel is scrambled and access requires subscription.  While some channels are offering authenticated viewing without the cable box, access to on demand still mandates that a box be used.  Only recently have some cable operators enabled CableCards on TiVo premiere boxes to receive on demand programming.  Most other cable operators do not. 

So what is the consumer doing?  Are they bypassing one box for the other or are they most likely attaching multiple boxes to their TV set.  If the TiVo research study is valid, consumers are using streaming media content to augment their viewing experience from cable and not replace it.  So multiple boxes may for now be the future in the home.

No CBS Blackout Yet On Time Warner Cable

The ads are frequent.  No NFL, no Homeland, no US Open Tennis, no this, no that when CBS and its related networks like Showtime are dropped from Time Warner Cable markets.  The drop date was last night but as last minute negotiations continue, the networks have remained on the air as a sign of good faith negotiation.  This will not be the first time that a major broadcaster has been dropped from a cable operator.  "The blackout threatened to be the first of a top broadcaster by a major pay-TV carrier in New York, the nation’s largest TV market, since Cablevision Systems Corp. (CVC) shut down Fox for two weeks in 2010."

Will a deal be consummated and a drop averted or will TWC customers face a period of time without CBS?  What I can assure you is that a deal will be reached.  It is a symbiotic relationship between these two parties.  Each needs the other to maintain a customer base.  CBS needs TWC for ratings and ad revenue; losing the NY market, not to mention Los Angeles and Dallas, would be a major blow.  And TWC needs CBS especially with football and tennis scheduled to start and a market that might just embrace its satellite competitors, DirecTv and Dish,  as well as upstart Aereo.  And once the dust has settled and rate increases have been increased, the consumer will find their bills have gone up too.  And that is the circle of life.

Reports Say Netflix Doesn't Hurt Cable

In a surprising research study done by TiVo, it shows that Netflix does not hurt TV viewing.  In other words, Netflix is seen more as another "channel" choice and not as a replacement to cable networks.  According to TiVo Research and Analyst chief Mark Lieberman, “'The future of television may tell a different story, but as of today we’ve found that the Netflix subscribers in our study are not watching less traditional TV.'”In fact Netflix users watch more premium shows on HBO and Showtime than non-Netflix users.  In other words, Netflix appeals to the heavy TV usage who wants more choice and sees Netflix as a complement to cable TV and not a replacement.

This research study just might let cable operators breathe a little easier knowing that Netflix isn't a cause for cord cutting.  At the same time, consumers are cutting the cord to cable in an ever increasing stream.  If Netflix isn't replacing cable subscriptions then what is?  Perhaps this younger demo is bypassing TV altogether for gaming on their Xbox and tablets. 

Aereo and Dish's Hopper All Because Of The VCR

In today's New York Times, David Carr provides some context behind the legal challenges defending the practices of both Aereo and the Hopper.  Broadcasters are especially worried because their revenue is now based on both retransmission license fees charged to cable operators and the advertising dollars they earn.  Aereo takes those over the air signals without paying for them and sells them with DVR capabilities to consumers.  Dish does pay but the Hopper enables quick skipping over all commercials. 

So how can Aereo and the Hopper continue to operate? According to David Carr's article, the rise of the betamax and VCRs resulted in " a landmark Supreme Court case in 1984 (that) held that taping and time-shifting on the part of viewers was “'legitimate fair use.'”  In addition, Cablevision's plan to offer a cloud DVR platform, rather than a box in the home, to record programming was also affirmed by the courts.  The result, the VCR started a disruptive trend that leads us to today.

The VCR was indeed a game changer.  No longer did viewers have to wait for a re-airing of a show they missed.  VCRs put consumers in control of watching shows when they wanted, as long as you knew how to set the clock in advance; otherwise, you had to be present to press record before leaving your TV set.  Still, it enabled viewers to go out, not worrying that they would miss their favorite TV shows or movies.  And even better, consumers could fast forward through commercials to watch only the show.  It is because of the VCR that the DVR became so successful. 

Still, Carr's article does not argue the other element of the Aereo business model, the over the air capture and re-delivery of its signals into home for a fee.  That piece is certainly a different issue from the ability to record in the cloud.  The argument for Aereo is that the broadcasters use of the airwaves to provide a free signal over the air enables them to capture and resend.  It is their added value that they charge a fee.  So far, the courts have sided with Aereo.

Given the current fight between Time Warner Cable and CBS over license fees, a court ruling defending Aereo's use of signals could be a game changer, enabling cable operators to follow the Aereo model, to build there own antenna farms, an idea that I have written about before and Mr. Carr approves.  "You could easily envision a cable company buying the idea and technology behind Aereo as a way to work around big retransmission fees."  Of course, broadcasters could change their model too as the Fox Network has speculated and become a cable network as well. Or that might just be an idle threat. 

Is Redbox Not Growing Fast Enough

While the world of streaming media is moving faster than light, shareholders of Redbox are worried that they are not capturing any of the momentum.  Their mainstay product, DVD rentals from vending machines is still ongoing but its Redbox Instant business has not found its footing.  Analysts fear that the rollout of Redbox Instant, a joint venture with Verizon, is not being pushed out quick enough.  Certainly there has been little marketing to indicate that they are ready to compete head on with Netflix and Amazon. 

Expectations are high that the DVD business has room to grow.  "In Q3, studios will release DVDs for eight films that generated at least $100M at domestic box offices, up from three in the period last year, when studios didn’t want to compete with the London Olympics."  They also cite more closings of Blockbuster stores.  But the future for rentals lies in streaming content and Redbox Instant has yet to deliver its own exclusive video content to gain traction against its biggest rivals.  Netflix not only has original content but has also nabbed a number of Emmy nominations.  When awards are announced in September, Netflix will continue to get great media exposure for its service and exclusive content.  I'm sure Amazon is already pressing to build some possible nominees for next years awards.  Redbox Instant must deliver its own original content to remain a competitive threat. 

Streaming video networks are still a nascent industry; consumers are quick to sour on a platform as Netflix showed when it misplayed its DVD business.  But they were also able to bounce back.  For Redbox Instant and others hoping to compete in this space, the challenge is in building a great platform with compelling original and syndicated content that consumers are willing to shell out a monthly subscription to remain a member.  I see tremendous opportunities ahead for Redbox and others to compete in this space and to ultimately take more subscribers away from cable.  My one advice, history repeats itself; follow what cable did to take broadcast share and do the same to take share from cable. 

More Sports Networks, More Fees, More Problems

While Time Warner Cable is balking at the fee increase proposed by CBS, the real worry may be the rise of new sports networks and the associated fees that eventually get passed on to the consumer.  In today's Wall Street Journal, they describe the race to license sporting events and compete head to head with the leader ESPN.  Now we have Fox Sports 1, NBC Sports Network (formerly Versus), and the CBS Sports Network, along we each sports' own network including MLB and NFL. 

For original programming, Fox Sports is developing series that compete head to head with ESPN's Sportscenter.  "The 38-year-old (Jay) Mr. Onrait said his show, "Fox Sports Live" is striving for a more lighthearted approach than SportsCenter, while still tackling hard news."  NBC Sports, on the other hand, is busy licensing live events.  "NBC recently acquired the rights to English Premier League soccer in a three-year $250 million deal, and this week it announced its cable and broadcast networks will televise Nascar races alongside Fox beginning in 2015, taking over those rights from ESPN."  With Fox, NBC, and CBS competing for content, the increased demand will only lead to higher pricing to outbid the competition.  And those higher fees will be paid for through higher subscription fees.

According to the WSJ, ESPN license fees are more than $5 per subscriber per month.  The next highest is NBC at $0.33.  Once NBC, Fox, and CBS bring more programming and viewers to their channels, their license rate will no doubt get pushed higher too.  They can only salivate at the possibility of achieving a $5 per sub fee from cable operators.  Of course, those fees are direct costs to the cable operators.  They no doubt make sure to add their own reseller income margin to the consumer.  So yes, without sports in a cable line-up, fees to consumers can drop significantly. 

Now I am a big sports fan and would hate to see sport networks dropped from cable.  But the high costs of sports extend far beyond TV to the tickets to the game.  Why are seats in ballparks empty; families can't afford to go as often if at all.  Kids have found alternative interests including online gaming.  And it is the loss of the next generation of sports fans that will ultimately kick sports to the curb.  Maybe not now, but it may just be a generation away.

Hulu Not Selling To Time Warner Cable

Time Warner Cable (TWC) is certainly busy these days.  First, they are locked in a license fee battle with CBS for renewal with the current agreement set to expire August 1.  Already, the two are locked in a rancorous negotiation that has spilled over to the public.  And second, they couldn't come up with the price that Hulu wanted to gain a piece of the streaming action. 

To the Hulu purchase, I frankly wonder what the strategic plan would have been should they have acquired an ownership stake in the company.  "The Walt Disney Co., 21^st Century Fox and Comcast each own a one-third interest in Hulu."  That means being partners with folks that you also have license fee relationships with.  Would being teamed up with Hulu help future retransmission renewals with ABC and Fox?  As Comcast is a silent partner because they are both a cable operator and programmer, who could guess how negotiations would affect them.  Does Time Warner Cable need Hulu to support its TV Everywhere initiative or is owning them only seen as an investment for future revenue?  To the former, a TV Everywhere play does not seem to be the direction that Hulu wants to take.  More options are available as either a complementary service to cable or as a low cost content distributor for cable cordcutters.

Now that Hulu is off the trading block and TWC is out of the picture, Hulu can once again concentrate on competing in the streaming space against Netflix, Amazon, Redbox, and others.  Step one will be to pursue the subscriber business for Hulu Plus and step two, increasing its content library, with a bigger push toward original and exclusive programming.    And step three, if I can be so bold, the introduction of linear streaming programming; perhaps a subscription based 24/7 news channel.  Maybe Ted Turner might like to advise them on how to start a channel like he did in the early days of cable with CNN. 

Dish Might Finally Get To Buy More Wireless

Dish Network has been wanting a bigger stake in wireless and has failed in its last two attempts.  No Sprint and no Clearwire acquisition to show for all its effort.  But they might not strike out and could find themselves picking up LightSquared.  "According to documents filed with the U.S. Bankruptcy Court for the Southern District of New York, a group of LightSquared’s lenders have called for an immediate auction of the company, naming Dish as the 'stalking horse' bidder for the spectrum."  Whether Dish ultimately wins the final bid remains to be seen. 

At the same time, I expect that Dish will still be pursuing another cellular player with T-Mobile seen as the next target.  Such an acquisition would reshape Dish into a player with the resources to compete against other telcos and cable providers.  Of course, there are some that hope that Dish and DirecTv combine to take on the cable players.

Netflix Growing, Just Not Fast Enough For Investors

While Netflix continues to grow, it missed analyst expectation on subscriber growth.  "The company finished the quarter with 28.6 million paid domestic customers, a shade behind Time Warner Inc.'s HBO, which had 28.8 million as of March 31, according to SNL Kagan."  Still, Netflix is growing revenue Having "reported profit of $29 million, or 49 cents a share, a nearly five-fold increase from the same period a year ago."  The stock market is not what you have done but what you can do and investors are worried that subscriber growth will slow and profits will decline as Netflix finances more original content for its pipeline.  Yet Netflix should shortly pass HBO in total subscribers.

Like HBO, Netflix relies on subscription revenue to grow.  Both must handle churn and marketing support to retain current customers.  But Netflix might be able to add an advertising revenue stream if done in a non-intrusive way.  While I am not suggesting pre-rolls on streaming content to subscribers, perhaps the Netflix website could expand to showcase native and display advertising as well as previews with pre-roll.  Extra featurettes to shows and other added content could potentially come with sponsorship advertising.  And certainly future licensing of original series to other platforms could return some of the investment from the production.  These may be outlier advertising efforts but it augments the revenue growth without interfering with subscriber enjoyment of their content views. 

Time Warner Cable Pushes Aereo

With a retransmission fight looming and the threat of CBS being dropped from certain Time Warner Cable systems on August 1, TWC is offering a solution, augment your cable carriage with the Aereo service.  "While Time Warner Cable does not seem ready or willing to deploy Aereo-like technology, a spokeswoman, Maureen Huff, said Sunday that it would recommend Aereo to its New York subscribers if CBS was blacked out." 

It may be a veiled threat, though it has repercussions.  But be careful what you ask for TWC.  If consumers get so tired of these same negotiations year in and year out with networks, they might just drop cable service all together for Aereo.  Plus with the rise of original series on Netflix and Amazon, consumers may be finding that they can do without their cable subscription. 

Aereo continues to expand with plans to launch in Utah in August even before their Chicago launch in September.   Before we know it, Aereo will be across the country and neither CBS or Time Warner Cable will be happy with the way this disruptive technology is taking over. 

CBS, Inc and Time Warner Cable Clash Over Retransmission Fees

Time Warner Cable's current license fee agreement with CBS, Inc. expires June 30 and cable customers might find themselves without CBS and its owned cable networks two weeks from now.  "At issue is TWC’s right to carry the CBS television network and affiliated local stations including those in New York, Los Angeles, and Dallas-Ft. Worth (where TWC is the dominant local cable system operator), as well as the Showtime suite of networks, the Smithsonian Channel, CBS Sports Network and the former TV Guide Network, now called TVGN. CBS acquired a 50 percent stake in TVGN earlier this year (the other half is owned by Lionsgate) and acts as its operator.  The big hammer in these negotiations is CBS Sports, where NFL games are set to air starting in September."
Essentially, CBS wants more for their content and TWC wants to pay less. 

TWC hasn't been the first to have acrimonious negotiations with a broadcaster and they won't be the last.  Each time these agreements begin to expire, posturing begin and we as consumers are faced with ads criticizing the other for lack of good faith.  Here is the latest example:



One thing is clear, at some point, now or months later, these two sides will settle.  But what if Time Warner Cable decides to follow the model that Aereo has designed, building farms of mini antennas to capture the CBS broadcast signal and deliver to the consumer. It doesn't answer the problem of the the other cable networks at risk of being dropped but it does lower the cost of operations.  Perhaps a financial model is due to determine what savings might come by converting to the Aereo type model.  If significant, it could lead to a different balance of power.   Of course building farms if antennas would take a good deal of time and resources and consumers would still be without the content for a period of time.  That could lead to more drops of service before such a plan could be put in place. 

Of course these negotiations are more complicated then just right of access to programming.  "These deals also include other multi-platform aspects such as video-on-demand rights and TV Everywhere distribution rights."  Especially with VOD, Aereo can't offer this content.  But the amount of increase, whether a few pennies or dollars, add up quickly and are ultimately passed through to the consumer.  And it is the increased costs of cable service that continues to push consumers to services like Aereo and other OTT options like Netflix and Amazon. 

Apple TV - Partner vs. Competitor To Cable

It has been said that if you can't beat them, join them.  In the world of OTT, companies like Google, Intel, and others are trying to create competitive platforms to compete against cable with lower subscriber costs and better functionality.  But cable operators have a tight grip on programmers with license fee deals and growing revenue, despite drops in cable subscription. 

And while it is possible to get lower rated and off the chart programmers to make deals with the OTT overbuilders, the top networks may be reluctant to lose sure cable dollars for digital pennies.  Apple may have seen their own attempts to acquire programming fruitless and now seems to be aiming toward partnership with cable operators, not competition.

"Instead of trying to create an Internet-based pay-TV service, Apple is going to attempt to turn pay-TV into another application.... (New York Times writer Brian) Stelter says Apple is talking to big distributors like Time Warner Cable about doing applications for the current Apple TV, which is a little box that gets plugged into the television."  For me ideally, that would mean that I could replace the current cable TV set top box with an Apple TV box and get all the functionality of DVR, on demand, and more in a much more improved interface.  No more tree and branch interface, rather the ability to search, scroll, select, record and using my iPad, iPhone, and iPod and watch on these devices or on my big screen TV set.  How easy and how cool!  Add to that the ability to watch authenticated programming outside the home in a TV Everywhere world. 

Consumers could rent Apple TV devices from their cable operators or easily buy and install on their own.  As an added product extension, equip these devices with a hard drive to offer DVR recording along with N-DVR option.  Along with all the other apps that an Apple TV can offer and you have built a very strong reason for consumers to stick with their cable operator too.  So I am eager to see how Apple proceeds and which cable operators embrace this technology partner. 

Aereo Still Disrupting Cable Industry

The broadcasters are unhappy with Aereo. Aereo is taking their signal and not paying them a retransmission fee or providing any data on consumer usage.  So broadcasters can't sell a higher advertising reach or receive additional revenues.  And broadcasters believe that Aereo is reselling their service to the consumer without their consent.  And in a majority ruling the federal courts have sided with Aereo. "A New York federal appeals court has denied a bid by the major TV broadcasters to shut down New York-based tech startup Aereo, which picks up free, over-the-air TV signals and streams them onto the Internet." Aereo is disrupting normal business practices and if they are allowed to continue, broadcasters may be at risk of losing all their license fee revenue from cable operators. 

So is it stealing to take something that is offered for free over the air and repackage it, bundle it into a bigger package, put an interface around to enable programs to be recorded and viewed, enable it to be watched across multiple mobile devices, and sell it to consumers at a low price?  Aereo certainly adds unique incremental value to the broadcaster's antenna service and serves an audience seeking a low cost alternative to cable. 

Unfortunately, the Aereo win is the broadcaster loss.  Broadcasters in market are unlikely to offer broadband access when they are getting a fee from the cable operators in the DMA they serve.  And cable operators may have clauses in their agreements with broadcasters that actually prevent them from offering any kind of competitive Over The Top (OTT) offering of their signal.  If they don't cable operators might likely drop broadcasters that attempt to offer their own OTT access. 

So the likely next round for broadcasters and Aereo will be the Supreme Court.  "As of now, Aereo’s service is legal, according to the U.S. Second Circuit Court of Appeals."  Should the Supreme Court here the case, the case might just revolve around the FCC and the requirements of broadcasters to offer their signal without charge to consumers that seek access.  For those not willing to place their own digital antenna in their home, Aereo offers additional functionality for a fee, and that added value is what the consumer ultimately pays for.  As long as Aereo uses individual antennas for each account, they may ultimately be the winner.  And it may be up to broadcasters to negotiate an agreement to access usage data for a direct connection, no antenna farm required.

Hulu Might Still Sell A Piece To Time Warner Cable

Fool me once, shame on you, fool me twice shame on me is the adage and Hulu has delivered.  For the second time, they have pulled themselves off the For Sale block and disappointed a number of investors, including DirecTv.  And for all that work, these prospective bidders lost not only their time and money, but also their intellectual property as to what they might do with Hulu once acquired.  And so it goes.

At the same time, Time Warner Cable (TWC) may still have an opportunity to buy a piece of the business.  As the Hulu strategy may be all about offering a competitive streaming subscription model to cable, I am not quite sure how TWC could benefit other than as an investment for revenue to the bottom line.  Still, they might have something up there sleeve that adds more value to the TWC business model.  Such a partnership could happen with cable operators to stream through their cable box to enable greater content inventory to be offered to subscribers.  But that doesn't necessarily require an investment stake. 

It's Not TV, It's Netflix

Where broadcast couldn't swear or show nudity, HBO came along with quality programming that crossed that line while it delivered growing audiences.  By going against conventional wisdom, HBO proved that what they offered went beyond anything offered on television.  But since then, HBO has faced increasing competition, both from other premium providers like Showtime and Starz, and cable networks like AMC. 

But consumers are now moving beyond cable to streaming media and Netflix is proving itself as the go to source for streaming video content.  And according to Liz Shannon Miller of Paid Content, "Orange Is the New Black confirms: Netflix is the new HBO".  Truth is Netflix has been pushing the envelope, both with original content and renewals of a show like "Arrested Development."  Their push to delivering more content, both syndicated and original, has enabled them to grow their subscriber base and compete directly against premium content and basic cable.  

For consumers seeking content that follows them, a TV Everywhere approach, Netflix enables consumers to directly buy a subscription.  HBO, on the other hand, offers its HBO GO feature, but only to authenticated cable subscribers.  Good for cable operators but bad for consumers that don't want that buy through.  

Is Netflix the next HBO as Miller suggests.  For me, it may be too soon to tell. Amazon, Hulu and others are in this space too.  But I like the direction that Netflix has taken in driving original content to their platform.  It worked for HBO, it worked for AMC, and it will continue to drive traffic to Netflix as long as the quality remains high.

Can Radio Shack Survive?

The Radio Shack chain has been a perennial establishment when kids were building electronics and transistors and other quaint products.  But with the rise of computers and smartphones, radio shack has become less relevant as kids no longer build their own telephone or light/buzzer device.  Today, Radio Shack is seen as a place to sell smartphones and other small electronic appliances.  It seems the 21st century has left Radio Shack behind.

"RadioShack Corp. said it is in talks with investment banks on ways to bolster its finances, as the money-losing electronics chain works to remake its image and reverse sliding sales."  As a century old business with a century old name, the first course of business for Radio Shack is a name change.  No matter how you cut it, the name Radio connotes old technology and not the place to sell the latest and greatest.  Identities are hold to change but Bell Atlantic successfully became NYNEX and finally Verizon and Boston Chicken became Boston Market.  It is apparent to me that step one is a name overhaul and a strategic decision as to what kind of technology store you want to be.

Steps are already being taken, according to the article, to update the merchandise and modernize the store, but it needs a name change to complete the transformation.  It also faces the same issues that Best Buy and others face, competition from the web and price comparison shopping.  A new name, modernized stores, and better merchandizing just might draw a crowd to come in and keep visiting.  But I believe it can be done.

Hulu NOT for sale

After the bids were in and reviewed, the owners of Hulu have decided to stay their owners.  If they can agree on a strategy, they have the best chance to build a valuable content portal.  Per the New York Times, "the three companies that mutually own Hulu — 21st Century Fox, the Walt Disney Company and NBCUniversal — said they would make a new investment of $750 million and use Hulu’s technology to compete against other online distributors like Netflix."  

For the bidders, it represents a real loss as Hulu is seen as a key player in the streaming video business, going after Netflix, Redbox, and others, as well as attracting cord cutters leaving cable.  For one owner, NBC and its owner Comcast, is in an unusual position, straddling the line between cable distributor and content creator.  Neither Fox or Disney have such worries although they too have to consider what the success of Hulu means to their cable license deals.  Still, with windows and exclusivity, they can build agreements that keep the dollars flowing.  

As for other M&A deals, I expect to hear a cable or satellite deal before end of year, either with Charter - Time Warner Cable - Cablevision or DirecTV -Dish.  Hulu is off the market for now but something else should be started soon.  

A Must See, "The Way, Way Back"

It has not been my nature to use this blog to recommend particular content, but having just seen the movie, "The Way, Way Back", I can only say it is the must see movie of the summer and in my own top 10 list.



Co-Directed and co-written by Nat Faxon and Jim Rash, who both also have featured roles in the movie, it stars Steve Carell, Toni Collette, Sam Rockwell, and Allison Janney.  It is a coming of age story about a 14-year-old boy, Duncan, and his summer vacation with his mother and her boyfriend.  

My wife and I saw this movie last Saturday and was talking about all through our dinner that night, while seated at the bar at Grammercy Tavern.  Toward the end of our meal, two men sat at the bar next to us.  My wife remarked to one of them their similarity to an actor and while it wasn't him, it was indeed Mr. Faxon with Mr. Rash.  Their warmth and excitement at our enjoying their film was genuine and we knew we had to leave else we would be chatting with them all evening.  Still they provided added insight and made our enjoyment of the film that much more complete.

If I need one more reason to convince you to watch this film, they also co-wrote last year's Oscar winner, The Descendents.  So seek out this film at your local theater.  The Way, Way Back will make your top list, too.

Tribune Follows Others on Path To Split Print From Video

Tribune has emerged from bankruptcy with a plan eerily similar to others before it, separating the video business from print.  Following on Fox and Time Warner, Tribune sees more growth potential concentrating on the video platform and selling off the print one.  "The company offers familiar justifications for the spin off of its assets in the weakening print business to create a new company called Tribune Publishing".  Fox, Time Warner, and now Tribune all see more revenue growth in the video media side of the business, while print suffers through digital conversion. 

What is sad that none of these companies wish to use internal synergies to help the print business build out a new multi-media model to reflect the rise of digital distribution through the tablet and other mobile devices.  Unfortunately, as I have said before, Tribune's focus on broadcast and acquisition of the Local TV affiliates is based on the assumption of growing affiliate fees from cable subscribers.  Disruptive companies like Aereo and the rise of cord cutting could dampen that growth and limit profitability.  Ultimately, I am sure, those factors have been discussed by their senior management.

So we are seeing media companies splitting their platforms to focus more fully on video content and distribution.  Print companies will have to go it alone but perhaps open themselves to new partnership opportunities that will enhance the digital print business. 

Sirius Stays Strong

Sirius continues to grow as both the economy and car sales are rebounding.  Almost 750,000 new subscribers joined Sirius for the latest quarter, bringing their total subscriber base to over 25 million customers.  In a word, impressive. "In comparison, Netflix ended the first quarter with 29.17 million U.S. subscribers, and cable giant Comcast reported 21.94 million video and 51.9 million total customers."

Can this trend continue?  Sirius thinks so and is raising their year end numbers to match this growth.  Given that some of this quarterly growth reflects customers signing on with free trials, Sirius must continue to push to convert and keep subscribers paying their monthly bills.  For customers unhappy with the current variety of content on terrestrial radio, Sirius does indeed provide a wide range of programming for all to enjoy. 

Job Posting: CEO of Barnes & Noble

It seems that the CEO seat was too hot for William Lynch who resigned as Chief Executive Officer of Barnes & Noble.  "The board of directors tapped Michael Huseby as CEO of NOOK Media LLC and president of Barnes & Noble; Lynch’s title has not been filled, while the NOOK CEO post is newly created."  Why a CEO of Nook when they have scrapped the their tablet is questionable, but maybe to help with the plans to close the business.

What B&N needs is a leader that sees the potential that I believe B&N still possesses, a visionary to guide their business into the next generation of book seller and digital aggregator.  It will not be an easy road and success depends on building a brick and mortar business that adapts to a digital business while diversifying and managing a retail presence.  Others before them have failed;  Borders already with books, Tower Records and others with music.  But B&N still has a chance to defy those odds and stay a competitive threat.  Unfortunately, a change at the top was most likely necessary to start to adapt.  I wish them luck.

Boxee Cloud DVR Going Away

With the Samsung purchase of Boxee, the Cloud DVR feature will become a thing of the past.  According to the company, "Cloud DVR functionality we provided to certain Boxee TV users will be discontinued on July 10th".  Sad news for current Boxee owners that have saved content on their cloud DVR.  But it also got me thinking, if we don't physically own digital content, but save it in the cloud, then we don't really own it. 

Some might say that the DVR is a rental type service and we don't control it, but I think that you can still take the concept to the next level.  To truly own digital content, we must maintain our own physical storage for it; if we choose to keep it purely in the cloud, then should that company business go away, just like Boxee, we could lose our ownership of it. 

But back to Boxee, I must say I am surprised to read that Samsung doesn't want to keep the cloud DVR business alive and well.  For consumers seeking a TV Everywhere approach with their DVR content, the cloud provides it and more.  While Samsung might want to support the hardware DVR approach, there should seem no problem to offer the cloud as a software complement service.

Who Will Own Hulu?

With final bids due tomorrow, July 5, we should know shortly afterwards who will be buying Hulu.  Along with hedge fund and investment groups, companies like DirecTv, Time Warner Cable, and Yahoo are still interested in owning this streaming video aggregator.  "The big question is how much bidders will offer for Hulu.  Fox and Disney want about $1B."  Samsung's purchase of Boxee, on the other hand, is a tiny $30 million.  Hulu's value certainly depends on the length of the content deals, especially from the soon to be former owners of Hulu.  Once free of the shackles of distribution, they are free to charge whatever and to whoever they choose.  So once the current content deals expire, Hulu could just be an empty vessel.  Hopefully, the content deals include a long term life.

Who will the winner of Hulu be?  We shall know soon enough.

Apple TV Box Seeks Content Deals

Apple  may finally be putting more emphasis into its Apple TV box rather than building its own smart TV.  It seems they are ramping up their content deals and thinking more about working with cable operators than against them.  Adding authenticated cable subscription content like HBO GO and WatchESPN was the first step, negotiating with Time Warner Cable to enable the Apple TV device to receive authenticated access of its lineup is the next leap.  "Bloomberg said the companies expect to announce the deal 'within a few months,' adding that Apple has likewise hired Pete Distad from Hulu to help Apple strike deals with media and cable companies. " 

I believe that Apple TV can represent an import revenue stream for Apple and make the device an indispensable device for any home that also is an iTunes customer.  Connectivity and ease of use with iPads, iPods, and iPhones to search and watch lay the ground work for an improved experience, one that cable operators, like Time Warner Cable, desperately need.  Their current cable boxes are clunky and outdated; an Apple TV box with a cloud DVR and on demand access could be the ideal arrangement. 

Is The iWatch Coming?

Are we one step closer to Apple delivering an iWatch to consumers?  According to the report, "Apple Inc has applied for a trademark for "iWatch" in Japan, a patent official said on Monday, signaling the iPhone maker may be moving ahead with plans for a watch-like device as gadget makers turn their attention to wearable computers."  So what about a US patent?  I admit to ignorance to the trademark and patent game but find it interesting that it was in Japan unless a patent was already submitted in the US.  No announcements yet but I would love to see this product made available for this holiday season.

Media Merger Mania - Scale Matters

Small is nice, but large matters.  Small is hands on, large requires all the parts working in a coordinated fashion to achieve efficiency and economies of scale.  And while we start small, large always seems to be the goal, at least in business.

In the world of media and entertainment, survival of the fittest requires an eat or be eaten mentality.  And the more we eat, the larger we get.  Lately, we are hearing more and more stories of growth threw merger and acquisition.  Most recently, the desire by John Malone and his ownership stake in Charter, wanting to merge with Time Warner Cable and/or Cablevision to gain scale.  In book publishing, Penguin has merged with Random House to increase its penetration of the marketplace.  And today's news we hear that Tribune plans to acquire more local broadcast stations.  "The deal will add 19 television stations in 16 markets to Tribune Co.'s portfolio, making it the largest commercial television station owner in the U.S., with 42 properties across the country, reaching 50 million homes."  Again scale matters. 

This natural evolution of growth and scale is not without its pitfalls.  Many large companies have fallen to their knees and gone bankrupt because of both internal and external forces, from leadership issues to environmental and technological changes.  For cable operators, large does matter as long as their wired approach remains valuable to consumers.  They make their money on cable, broadband and telephone subscriptions.  Cord cutting already is starting to affect one stream.  Should consumers become more untethered and devoted to wireless, cable operators must adapt to remain competitive.  For Tribune, their hope is pinned on revenue in retransmission fees, the license fees cable operators pay for carriage of broadcast networks.  But companies like Aereo are disrupting the model and proving that there are no guarantees.  Cable operators could balk paying fees; if Aereo can create farms to capture signals, cable might consider the same approach to avoid paying fees.

Media mergers have and will continue to happen throughout history.  Size may matter initially but disruptive influences prove that nothing is for certain.  For Malone and Charter, for Tribune, and for others seeking partnerships to gain economies of scale and increased profitability, don't stop innovating.  It may be harder to change directions in a big ship than a small boat, but change matters.  Keep adapting to your environment.  Otherwise, as the story goes, David will beat Goliath. 

Saving Barnes & Noble

Today's Wall Street Journal poses the same question that I have already been trying to answer, "How to Rescue Barnes & Noble".  The article asked 5 experts and the answers included diversification of merchandise, deeper inventory, discounting, downsizing, and localization as a means to drive profitability.   So what is the secret sauce that can invigorate B&N to improve earnings and stockholder value?

I agree that B&N is a destination and a place for discovery, although searching for titles takes a keen eye, their local database, and sometimes their employees.  Activities and events that encourage adults and children to come visit is always an asset, provided that they reach into their pocket and buy something before leaving.  And more diversification of merchandise could help.  My idea, a partnership or merger with Learning Express to reach families. 

Encourage consumers to bring their Nook e-reader and iPads to the store for exclusive downloads and other digital downloads.  Buy the hard copy book and get the digital download at the store.  Or partner with Audible, a Microsoft company, to offer a free audio download with a hard cover purchase.  Giving extra value for in-store customers could be a great incentive to keep coming back to retail. 

As I have said in the past, I am a fan of B&N and only wish to see them transition successfully into a brighter future where hardbound and digital books are both available.