Could Microsoft Spin Off XBox?

With Steve Ballmer's announcement that he will retire within the next 12 months as Microsoft's CEO, investors may be clamoring for more value from the stock.  According to the report, a possible scenario could have Microsoft spinning off XBox into a separate business.  Certainly, XBox has been one of the true winners in recent years for Microsoft.  And while their operating system has been their main source of revenue, the decline in computer sales has put pressure on the business.  Microsoft needs XBox as well as other new innovations.  Whether their Surface Tablet can achieve that status remains to be seen, but till then, a spin off of XBox seems quite short sighted. 

Amazon Seeks New Wireless Connections to Its Content

The biggest challenge facing OTT content companies like Amazon and Netflix, OTT boxes like Roku, Apple TV, and Aereo, and even smart TV manufacturers like Samsung, is that they all rely on existing broadband providers.   That means that even cable cord cutters still must get their broadband service from their cable or telco provider.  We've seen that when a customer drops cable service, the price of their broadband service rises because they no longer get the discount advantage.  I continue to say that new competition in broadband service is needed to keep price points low.  Well Amazon might just be on the same page. 

"The wireless network, which was tested in Cupertino, California, used spectrum controlled by satellite communications company Globalstar Inc. (GSAT), said the people who asked not to be identified because the test was private."  How far Amazon wants to get into this space remains to be seen although it might make sense, give the capital costs, to partner with other OTT companies to create a wireless/broadband competitor to cable and the telcos.  And while Google is building a fiber based business in Kansas City, a wireless competitor that can effectively handle video streaming would be ideal.  Certainly Dish had been trying this route in trying to acquire Clearwire.  Should GSAT have the spectrum to handle such capacity, Amazon may have found a new business model and a seamless connection from consumer directly to their content. 

Microsoft Post Steve Balmer

While not earth shattering, Microsoft revealed that its CEO, Steve Ballmer, will retire in the next 12 month.  No successor has been named to succeed him in the role.  Many have believed that Microsoft has needed new leadership to compete in a more mobile marketplace.  While its Office software and operating system dominate the business world, consumers have moved to more free-based software from Google and others.  PC sales have also been declining and Microsoft has not been able to break through the tablet or smartphone world with a winning product.  Its biggest success continues to be XBox and it is looking forward to higher revenues from the release of its newest platform. 

So how will the stock market react later today to this news?  Hopefully NASDAQ opens today without a hitch and I suspect analysts will see more positives out of this long term transition.  There is plenty of time to announce a successor.  And time will tell if the next CEO can best steer Microsoft to new highs. 

Political Debates Encourage Temporary Reprieve

While the Time Warner Cable and CBS saga goes on past 2 weeks, both sides have agreed to an exception to their blackout in New York City.  Political elections outweigh US Open Tennis and NFL Football it seems as three different debates will be allowed to air from CBS onto the TWC system.    "The comptroller debate will air Thursday, August 22, from 7 to 8 p.m. The GOP mayoral debate will air at 7 p.m. on August 28 and the Democratic runoff debate at 7 p.m. on Sept. 23." 

Whether the two sides have gotten closer to resolving the renewal has yet to be seen.  To appease viewers, TWC is airing Tennis Channel coverage of the US Open and opening up premium access to some Starz programming.  Of course, consumers would also love to see a decrease in their bills as a sign of passing the savings to the customer.  How long this blackout remains in effect could depend ultimately on the start of the Fall TV season.  Still, CBS must be losing significant revenue from political advertising being pulled off their schedule as a result of not being watchable.  With the first regular season NFL football game and premieres, the amount of losses can only increasing.  What that breakeven is to those losses to the increase in license fee revenue is one the accountants at CBS are likely analyzing on a near constant basis.

TiVo Adds Slingbox Capabilities, Are More Cable Partnerships Coming

TiVo has announced its latest DVR box that seems to do everything from show live and on demand programming to watching streaming video from the web and pushing it out to the TV screen or to any mobile device.  While expensive, with the top of the line box costing $600, it also seems to deliver the kind of rich media experience that heavy video users want, high capacity recorder, TV Everywhere capabilities, and cable and streaming connections.  And of course TiVo is known for a recommendation engine that records shows that might also interest you. 

"The Roamio enhancements could also help the cable industry slow the wave of consumer defections, known as cord-cutters."  The challenge of the cost and the ease of interface with cable operators still matters.  Most cable customers expect their cable operator to deliver them a box ready to plug in and use, with easy installation and service from the company.  Those cable operators already partnering with TiVo deserve praise for seeing the value this option gives to their customers.  Other cable operators need to also start partnering with TiVo.  It becomes too much trouble to make the consumer go through too many steps to get a TiVo and ensure that it works correctly on their cable system.  From getting a CableCard to correct installation and handshake with the cable technology creates trouble.  We should be beyond that for authentication purposes.  It is time for cable operators to get on the TiVo bandwagon and embrace what is an anti-cord cutting machine. 

Netflix Proving Content Is King

In the growing challenges facing cable operators, the rise of OTT content continues to help drive cord cutting.  And when consumers are determining which online content provider to follow, Netflix has been driving the differentiation strategy with a focus on content.  In the latest deal, "Netflix says it's reached a multi-year agreement with The Weinstein Co. that will give it the exclusive streaming rights to the company's first-run films starting in 2016."  Given the Weinstein Brothers' track record of distributing quality, Oscar worthy films like The King's Speech and The Artist, the odds seem good that Netflix is gaining a high quality partnership that will certainly differentiate it from Amazon, Redbox, and even cable networks like HBO, Showtime, and Starz. 

Cord Cutting No Myth

Second quarter cable subscription numbers dropped for both cable operators and satellite operators.  And while Verizon FIOS and AT&T U-Verse did add cable customers in the second quarter, more consumers left cable then switched providers.  "Over the past year, multi-channel video providers lost about 100,000 subscribers, versus a gain of about 380,000 over the prior year, according to LRG."  While the number that cut the cord completely is miniscule, a tenth of one percent, it seems indicative of bigger problems.  It seems that no one will be surprised if third quarter shows a growing trend of customers completely cutting the cable cord. 

Streaming TV Competing with Cable Networks

While video certainly didn't kill the radio star, the growth of new technologies definitely disrupt old technologies.  Broadcast television changed consumers use of radio in the home and cable changed how people watched TV.  This disruption doesn't always kill the old method, but it certainly changes  consumers' behavior.  Today in the the world of cable TV, it is the growth of broadband that has disrupted viewing patterns and usage.  Now we find that consumers can watch shows on other devices and on demand.  But what still has been missing has been an online video channel that mimics cable and broadcast with a linear schedule of programming.  And now, one is breaking through.

"As HuffPost Live enters its second year—its first birthday was earlier this week—the fledgling video news network may look to establish a Web version of appointment TV with more regularly scheduled programming, said Roy Sekoff, president of HuffPost Live and The Huffington Post's founding editor."  For viewers that don't want to pick a show to watch but simply turn on their device to watch regularly scheduled programming, HuffPost may be that go to online video network.  And for consumers that have officially cut the cord on paying cable subscription fees, this channel is free without additional subscription charges. 

It is a model that cable networks don't want to offer because it would cost them important license fees from cable operators.  That cable operators want networks to give them the digital rights to their networks to stream to "authenticated" customers is a retention tactic to provide additional value to the current customer base.  HBO GO and other channels have had positive results in keeping and growing their cable subscription base with this online feature.  Some may wonder that customers user names and passwords are shared with non customers but it is not deemed problematic at the moment to HBO. 

Still as costs for cable rise and viewers increasingly drop their cable service, more companies will start experimenting with streaming linear schedules of programming, most likely augmenting the on demand nature of services like Hulu and Netflix.  Consumers still like scheduled programming and HuffPost Live may be on to a winning opportunity with its linear programming line-up. 

Even OTT Providers Need The Cable Operator

With the price of a cable subscription rising year over year, consumers might just be cheering that new companies are offering content that allows them to bypass their cable subscription.  From the recent news that Sony has forged a programming deal with Viacom for its linear networks, to Netflix and Amazon offering video content to consumers through their Apple TV, Roku, XBox or other OTT device, streaming content is growing.  But to access this content requires a broadband subscription, BYOB or Bring Your Own Broadband, and that service comes from the same company that you were getting your cable content from.

Certainly cable operators worry that consumers will cut their cable cord, but they aren't cutting their broadband cord, literally the same wire that runs into the house.  And cable operators are likely going to penalize customers that drop their cable service.  In the past, they created the Triple Play marketing campaign of cable, broadband, and phone to discount services, but take one service away and the discount goes away and the total price for service will rise.  Cable operators are also testing usage based broadband fees, charging more for heavy users of broadband.  And since we know that video streaming uses more data then say e-mail, streaming broadband access costs will only rise at a faster and faster level.  Ultimately, customers that think taking an OTT service instead of cable service may actually find themselves paying a higher fee for a lesser number of channels and shows. 

The best opportunity for BYOB customers that are dropping cable subscriptions for OTT video is that new broadband providers can enter the industry.  Whether that is LightSquared or Clearwire or Google, the industry needs competition to keep broadband streaming prices in check.  Otherwise the broadband industry will look just like the airline industry, an oligopoly with limited choice and rising prices, not only for seats, but any extra legroom.  And that is not in OTT video's best interest and so for now, OTT providers need the cable operator.  

CBS Off Time Warner Cable 2 Weeks and Counting

In major markets like New York, Los Angeles, and Dallas, CBS network as well as its sister network Showtime and others have been off the Time Warner Cable line-up for two weeks.  And it appears the blackout will continue.  Since August 2 when extensions ended, the networks have been dropped while the advertising hasn't let up.  Each blames the other for a list that seems to include digital rights and higher than normal increases in license fees.  Regardless of which side you might take, the result has left consumers without their shows. 

Interesting, CBS has contended that their ratings have not suffered greatly despite the drop.  I'm not sure if that is good news or bad. Does that mean that Time Warner Cable customers weren't watching much CBS programming or that the rating mechanisms aren't completely factual.  Argued one way, customers aren't missing much or have found work around methods to get their programming, from the purchase of digital antennas to illegal websites to get content streaming.  I doubt too that consumers have dropped their Time Warner Cable service or switched quickly to other cable providers.  Most consumers are likely taking a wait and see attitude to this fiasco.  Certainly it is summer and new programming as well as regular season football is not scheduled till next month.  Consumers might also be on vacation or spending more time outdoors than in front of their TV set.  But the end result remains that this drop is part of a much larger issue that plagues all of the cable industry, programmer and operator alike. 

The pressure to raise rates for content and for subscription each are hurtful to the economic model.  The industry has gotten use to a two tier model of subscription and ad revenue to build its business.  Yet we seem to be reaching a tipping point where consumers would rather do without and pay less or worse cut the cord completely and seek content through other channels.  What the cable industry desperately needs is a third revenue arm to help absorb other costs.  Operators have found revenue from cable, telephony and broadband subscriptions.  Some operators are looking at security services as an additional stream of revenue. 

But networks reliance on advertising and license fees for revenue now requires a third inflow.  Selling to OTT operators has helped although it also competes with their current cable customer base.  And that has had a negative impact on these ongoing partnerships.  Those digital rights are just one of the points involved in the CBS TWC negotiations.    And while networks try to raise their fees, the well is starting to go dry.  Cable operators are balking and the result, they are being taken off the air.  Networks must find new sources of revenue to continue to grow; reliance on raising rates won't be enough.  Whether digital platforms are an answer or commerce opportunities arise remains to be seen.  It is apparent that cable operators might finally be putting the brakes on excessive license fee increases. 

What Does Apple Have In Store For Matcha.tv?

Companies grow through internal innovation as well as by acquiring new companies and their technology.  For Apple, known to have a large cash base and a desire to compete more in the television space, the acquisition of Matcha.tv might be a nice step in supporting the next phase of their television platform initiative.  At its core, Matcha provides a complete source of online and on TV programming for search and recommendation.  "Matcha.tv was an iOS app that provided a comprehensive overview of everything that’s available to watch via cable TV providers (Comcast), streaming video services (Netflix, Hulu, Amazon Prime), and digital video stores (iTunes, Amazon). Additionally, you could manage what you watched from a universal queue, get video recommendations, and connect with social networks to see what your friends were watching/liking." Given the multitude of options now out there, such a service could prove quite user friendly.

How Apple plans to integrate this application into Apple TV or other future products remains to be seen.  Apple has a terrific product in its Apple TV box although talk continues that Apple would like to compete in the television manufacturing space with its own TV set.  Certainly Samsung is ahead of Apple with its own Smart TV platform on its manufactured sets.  The question, do consumers want to upgrade to an integrated internet connected set or do they like the ability to add boxes, from Apple TV to Roku to XBox to their TVs to enable a connection.

Walt Mossberg's article in today's Wall Street Journal provides a terrific overview of today's available internet options for their TV.  Bottom line though, they all require a broadband connection and that means a subscription from your cable or telco provider.  Video streaming requires bandwidth and to make sure your viewing experience is enjoyable and without buffering issues means paying more for more bandwidth.  I see that problem today when multiple users are streaming videos while others are trying to download content. 

Twitter Is The Water Cooler

The more we talk about something, the more people pay attention and watch.  Stand outside at a corner and stare up at a building and others will soon look up too.  It seems that Twitter has that same effect.  The more people that stare up and talk about a TV show, the more likely people will stop and tune in, too.  "A new independent study by Nielsen provides, for the first time, statistical evidence of a two-way causal influence between broadcast TV tune-in for a program and the Twitter conversation around that program."  The correlation certainly seems to make sense as Twitter enables a whisper down the lane approach through retweeting and favoriting interesting tweets.  Extended circles begin to receive this messages and the results lead to viewer actions.  As shows gain more widespread comments, they encourage others to want to also be in the know and have a "shared experience." 

What is also interesting is that there is a two-way causal relationship occurring.  An increase in tweets enhances ratings and ratings growth encourages more tweeting.  A chicken and egg scenario, indeed. A water cooler approach occurring not the day after a show airs but concurrently with the show's time period. 

Twitter, Facebook, and other social media outlets are fast becoming an ideal low cost means to influence TV ratings as well as media including the movies.  We want to know what others think, not just professional critics, but "folks like us" exchanging insights on what they watch, liked or hated. 

BlackBerry, The Company, For Sale

Despite the fact that there are still many that like the BlackBerry keyboard and are loyal to their BlackBerry smartphone, more consumers still prefer Android and iPhone devices.  While they have successfully update their phones, BlackBerry continues to lose market share.  "BlackBerry had 4.4% of the U.S. market in June, down from 10.7% in the same month last year, according to comScore MobiLens data."  And so it seems management is exploring other strategic alternatives, namely selling the company.  A shame for a great company that once owned the business marketplace. 

Is there a company that sees a future for BlackBerry and willing to inject more capital to find new innovation?  Truth is the future of BlackBerry is very much dependent on innovation.  Samsung has successfully gained share through its technological and marketing efforts.  Apple, like BlackBerry, is reeling the heat of competition and the need to refresh and update its phones to remain a preferred choice.  And both Samsung and Apple have the benefit of a broad app library because of Android and iOS respectively.  BlackBerry's library is still catching up.  In fact, my friend did recently get a new BlackBerry only to discover that it did not yet have a Starbucks app.  Frankly, it did not make him happy.  And enough missteps could have him and others switching back to another phone. 

3D Without Glasses

If you are like me, you are not a fan of the 3 D experience in movie theaters.  Besides the fact that it costs more to watch, it does not deliver a valued experience.  I partly blame the glasses, uncomfortable for me, especially because they need to be worn over my regular glasses.  But the filmmakers' use tends to be extraneous adding little to the film plot or experience and meant more as an a ha moment.  Most times it seems over used and sometimes, one wonders why it is even presented in such a format. 

Other seem to agree as 3D movies and revenue are down this year.  But there may be hope if the 3D experience can be improved.  First, get rid of the 3D glasses and that is where technology is headed.  According to this recent article, "Researchers have developed a way to create a 3D image through a single lens, without moving the camera. ...  It could also provide a cheaper method to create 3D films for the big screen."

I also believe that the value of 3D can be enhanced when combined with large IMAX screens to create a truly immersive viewing experience.  Consumer like me would be more apt to pay a premium price for a truly premium experience.  Of course, this new technology could one day lend itself to the television as well as to tablets and other devices.  And that would be quite impressive. 

T-Mobile Finding New Growth Enjoyable

It may have taken getting the iPhone approved for carriage on its service for T-Mobile to start to find new growth opportunities.  That and the introduction of new flexible pricing policies to enable earlier upgrades of phone models have been gold to a company that has been seen as an also ran to the two biggest players, Verizon Wireless and AT&T.  The result, "Total branded customer net additions of 678,000, the strongest growth in four years (and) Record low branded postpaid churn of 1.58%, a decrease of approximately 50 basis points year-over-year".  Two KPIs that challenge every subscription service, higher year over year growth and low churn of existing customers.  A win for T-Mobile on both fronts. 

Certainly the other carriers are paying attention to T-Mobile's differentiated approach to upgrades and contracts.  They are already changing their plans while charging customers more upfront to upgrade earlier.  How consumers embrace this new pricing plans will determine the ongoing growth of these companies.  Clearly T-Mobile is out to take away market share and prove that they can compete with product and service. 

AOL On The Right Track

AOL may have just turned the corner from being a distribution platform to an advertising one.  For a company once known by the slogan, "You've Got Mail", it has been a struggle to adapt from a dial up world to broadband.  Still, AOL kept out it, and seems to be emerging victorious. 

Financially, all appears better than anticipated.  " AOL’s quarterly results, were announced early Wednesday morning, showed earnings per share of 35 cents, which was two cents higher than analysts had predicted. Its overall revenue was up 2 percent from a year ago." Revenue is now more dependent on advertising than monthly subscriber fees.  And AOL seems to have read the trends and put more energy and effort into video advertising over display.  That is indicative of their planned acquisition of Adap.tv, a company focused on video advertising. While display advertising rates see downward price pressures, video advertising gets more noticed and higher values.  And done well, it can be valued by consumers, too.  Plus video streaming continues to grow as more video content finds its way to the web. 

While AOL's Patch has had difficulty finding profitability, its other sites, like The Huffington Post, have built a successful formula of content aggregation, both words and video, frequently updated, and consistently visited by consumers.  Its foray into live streaming programming as well may just prove to be a very profitable experiment.  The "new" AOL has indeed turned the corner and embarked on a forward path that seems destined to be very successful. 

Cord Cutting A Growing Problem

Cable operators are fighting to save their economic model.  The challenge is that the costs of business, from programming increases (including the current Time Warner Cable and CBS negotiation) and other expenses, require a continual increase the monthly subscription fees paid by consumers.  In the midst of saving consumers from a CBS fee increase, Time Warner Cable has already raised the monthly fee of renting a modem box.  Consumers have grown tired of these high cable subscription fees while embracing the wired broadband stream that these same cable operators also offer.  The result, cord cutting, or more specifically cable subscription cord cutting.  While broadband subscriptions rise, cable subscriptions drop.

"(Moffett Research founder Craig) Moffett estimates that 911,000 U.S. homes have cut the cord over the past 12 months, versus 258,000 in the 12 months ending a year ago." And the rate of drops are only increasing.  Some cable operators hope to remain competitive through a strategy of merging operations.  And so we hear of a possible Dish-DirecTv combination as well as Charter with Cox or Time Warner or Cablevision.  Bigger operations, more synergies, more cost efficiencies including possible lower programming fees.

But it may not be enough.  The cable business model, while providing a valuable aggregation of content, has become too limiting and too expensive.  Consumers have sought other options; some have found cheaper packages from overbuilders like the telcos, FIOS and U-verse.  Others have dropped cable altogether for broadband services including Netflix and Amazon.  With new players including Aereo, some consumers have been able to get broadcast and cable channels at a much lower price.  And some are even going back to over the air, digital antennas. 

The model is a convoluted one.  As networks have found new revenue streams from OTT platforms, they risk losing substantial revenue from the traditional models.  The short term solution of raising license fees to maintain revenue of a shrinking base will ultimately cause the cable business to crash.  Unfortunately, it appears to be headed down a path of no return.  Ala carte cable pricing won't help consumers; the difficult but necessary path for cable operators might just be to offer a smaller selection of channels at a much lower price point.  That seems to be a path Time Warner Cable has started with the dropping of Ovation.  But it must require a more serious dropping of a large number of networks.  And for Time Warner Cable that might just extend even to a broadcast network like CBS.  If it leads to a healthy lowering of the cable fee, consumers might just be willing to retain their cable service.

Cable Ala Carte Pricing A Nightmare

Do you really want to manage your cable subscription like a menu of choices?  A cable ala carte menu might just start to look like a Chinese menu where you pick 10 choices from column A, 20 from column B and 30 from Column C for one low price with sports networks sold separately.  

 If that approach doesn’t suit your fancy, perhaps it looks more like a sushi menu instead:

Broadcast Networks $1.00 each

ABC ____

CBS ____

FOX ____

NBC ____

PBS ____

WB ____

Entertainment Networks: $0.50 each

AMC ____

Bravo ____

Comedy Central ___

Discovery ____

E! ____

TNT ____

Children/Teen Networks: $0.75 each

ABC Family ____

Disney ____

MTV ____

Nickelodeon ____

Sprout ___

Sports Networks: $2.50 each

CBS Sports ___

ESPN ___

ESPN2 ___

Fox Sports 1 ____

NBC Sports ___

Regional Sports Networks: $5.00 each

MSG ___

YES ___

Managing this approach would be a nightmare.  And as you can see, the cost for receiving every channel would soon be astronomical.  Consumers would ultimately be paying more for less.

Is Print Poised For A Comeback?

In the last couple weeks, major newspapers and publications, including The Boston Globe, Newsweek, and now The Washington Post, have been sold at deep discounted prices.  At the same time, Time Warner is ready to jettison the Time, Inc. business.  Print revenues overall are down and many wonder what the future hold.  But I believe that print is poised for a comeback.

Print content distributors are at a crossroads between traditional hard copy and digital distribution.  Younger consumers are embracing the web and have found their content without paging through a newspaper or magazine.  It is the older demographics that still enjoy getting their newspaper and sorting through each section finding the articles they want to read.  The challenges that face these new owners and print overall are many, but there are also opportunities.

The Washington Post, like other publications, still have a powerful brand name.  Their history and years of publication make them a very credible resource.  And it is that brand that has to push deeper into the digital universe.  Newspapers are recognized by the region they serve.  They may offer national and international news but it is their regional and local news reporting that identifies them so strongly.  That localism can be used to better sell them in their market. 

For newspapers and for magazines,  these publications must redefine their distribution strategy as they slowly move away from traditional media.  I recommend a strategy where every print subscriber is automatically a digital subscriber.  Let the consumer then decide how they wish to receive their copy.   Print must also embrace a multi-platform approach with plenty of video and interactive content to highlight the info and articles.  The tablet and phone have become ideal mechanisms for consumers to access their subscriptions.  Make its access ergonomically attractive and easy to use.  And lastly, embrace your content and the writers that create it.  Make them exclusive to your platform and market their value and uniqueness of the stories they tell and the news they write.  These journalists are part of your brand value, too.

Digital has lowered the barriers of entry and brought more competition against print.  It is hard to sell subscriptions when websites offer their content free.  That scenario faces other businesses as well.  The bottom line I believe is staying true to the quality of the journalism and to let that uniqueness and exclusivity drive the value proposition. What Howard Stern is to Sirius, David Carr is to the New York Times and Walt Mossberg is to the Wall Street Journal.  Push that exclusivity.  Consumers will pay if they believe there is value received.  And print delivers a lot of value.  It may be a slow road back, but the "new" newspaper should soon be ready for its close-up.

Have Cable Operators Painted Themselves Into A Corner?

The cable business model may just be broke.  As the very public spat between CBS and Time Warner Cable has shown, regardless of the outcome, the consumer has lost.  They have lost today as the CBS broadcast network and its sister cable networks like Showtime are dropped off the air and consumers will lose when they are put back on with higher license fees that will translate into higher subscriber fees.  It is a no win situation for all.

When cable television started, it was to provide broadcast signals to places that could not easily receive them over the air.  In addition, this wired service enabled a better signal and an opportunity to distribute more and more channels.  And so new cable networks emerged, some with little more than old shows and old movies.  ESPN's best show just might have been ping pong back then.  Consumers embraced this new distribution platform and happy to pay for a service that aggregated channels and sent them to the TV set.  New content programming was launched and our 13 channel universe doubled and doubled and doubled and doubled again.  And as audiences found these networks, so did advertisers.  Better programming was produced, higher fees were asked, and more channels kept coming.  And we as consumers couldn't be satiated.  We got on demand and DVRs to access and watch more and more content. We hit the 1000 channel mark and surpassed it.  Unfortunately, the price grew too at a better than inflationary rate.  This aggregated model has now become bloated and costly.

And then came broadband and a new streaming model that allowed content to be viewed away from the TV set.  This disruptive technology lowered the barriers to entry and new content was created, mainly UGC, user generated content, but now it has become the home for professionally produced content as well.  And consumers have found other aggregated content distribution models from You Tube to Netflix to Amazon.  And they have found a la carte from Apple and others.  This streaming model is an unlimited one as consumers no longer are limited to which distributor they want to buy their content from.

With so much streaming content competing for eyeballs with cable and broadcast, consumers can seek other options.  Exclusivity of programming will certainly prevent some content to be seen without a subscription but that seems to be the price that we must pay.  It is why Netflix charges a monthly subscription fee and why CBS is demanding higher fees as well.  As consumers, we can decide whether we want to pay it or not.  The current cable distribution platform model is broken and the future is beginning to look more and more like streaming and a la carte. 

CBS Off The Air On Time Warner Cable

Once again a network is negotiating with a cable operator and once again they have been taken off the air.  Regardless of which side of the fight you choose, Time Warner Cable subscribers in multiple CBS DMAs are no longer getting their TV shows.  "CBS cable properties Showtime, TMC, Flix and the Smithsonian Channel also went dark across Time Warner Cable’s 12-million subscriber footprint. The cable networks are also off the systems owned by Bright House Networks, which participates in Time Warner Cable's programming deals."  So what is household to do?

Certainly it is the summer and folks may be taking vacations or at least spending more time outdoors then in front of the TV; still, it is an inconvenience to those that pay their cable bills and expect to see their shows appear.  I suspect that a vast majority of Time Warner Cable households will do nothing; they will not switch to Aereo, they will not call or write TWC, they will not switch to FIOS or U-Verse or DirecTv or Dish Network.  They will suffer silently and wait patiently for the two sides to finally agree and for the signal to turn back on.  TWC hopes for this too.  CBS hopes that enough of the minority does raise their voices and switch to another service although they should be careful what they wish for.  If customer decide to take Aereo or buy a digital satellite, CBS will not see any additional license fees or will they get any strong set top research data to support their ad revenue model.  In fact, this drop will certainly hurt them even though it is the summer.  A projected drop could potentially go into September and the new Fall TV Season although I highly expect that an agreement will be hammered out within a couple weeks. 

Could a drop go longer, you bet.  TWC knows that any increase in fees will result in a higher subscriber fee and consumers are already mad.  Their wish is to drop underperforming networks and reduce these license costs.  TWC has already dropped Ovation Network and certainly has more in their sights.  How far apart CBS and TWC are in finding common ground remains to be seen.  Certainly the dropping of the networks were delayed past the actual expiration date but it appears that they got no closer an so a service drop was initiated.  For now, CBS seems to be inundating the media with ads pushing consumers to react.  As I am not a TWC subscriber, I have not seen any ads in newspaper or other media presenting their side.  Perhaps their strategy that silence is golden may be the best approach.  Because once these two sides do reach agreement, all will be forgiven (until the next renegotiation).

Connected TVs Enable New Ad Platforms

As the cable set top box ever so slowly fades into the distance, viewers have discovered that their television sets don't need these boxes anymore.  The rise of internet connected television sets to the web enable a new set of viewing experiences.  For some, TVs rely on another connected box to access web based programming, from devices like a Roku box, Apple TV, XBox and Google’s Chromecast.  Even CE devices like DVD players and TiVo boxes offer content directly from the web.  And then there are Smart TVs themselves, like Samsung and its Smart Hub system.  Each of these different devices acting as platforms to aggregate and display all types of content. 

Our connected television sets can connect online to a host of applications, games, websites, as well as content providers like Netflix, You Tube, Hulu, Redbox, and others for video content. It also opens up accessibility to new advertising and monetization possibilities.  These connected sets expose us to new types of display advertisements, overlays, interactive ads, ad viewing in exchange for digital content access, and new commerce options.  But with so many devices, it is easy to see that this new marketplace is still quite disjointed with no common standards yet like the IAB has put into place for the web.  It is a young business, but one that is growing quite rapidly. 

We have become quite accustomed to shopping on our laptop and mobile devices and we accept commercials on our TV shows.  So why not combine the two?  Samsung and other providers are working with entertainment e-commerce company Delivery Agent on a shopping app called ShopTV that lets you buy merchandise from your TV set.  While the idea has been around since the days of Friends (buy Monica’s couch or Rachel’s dress), the timing might now be right.  To tie merchandise sales into the shows and ads that you are watching could become an effortless and enjoyable buying experience for viewers/consumers. 

The connected TV opens up a whole new platform of advertising and commerce options.  While cable operators have been attempting to create an ideal advanced advertising model, they have had limited success.  As more and more consumers gravitate to their connected devices to watch content on their TV sets, the potential for new revenue growth from this interactive advertising model is enormous and bound to skyrocket.  

Cable Television Subscribers Unsubscribing

Both Time Warner Cable and DirecTv reported their quarterly earnings and each share similar news.  For Time Warner Cable, a loss of 191,000 cable subscribers in the second quarter and for DirecTv, a loss of 84,000 cable subscribers.  Where once cable customers were seen switching among cable TV providers,  from cable to dish to telco, now it may be that there is the serious threat of cord cutting.  It seems that broadband access is more important to consumers then cable; broadband connects to TV like services including Netflix, Hulu, Amazon Prime, Aereo, and You Tube.  And the recent introduction of Google's Chromecast has led to an unprecedented demand for this inexpensive little device. 

The notion of the cord cutter has a small drip from the dam may just be turning into a minor stream.  But it is that fear that has cable operators shaping the conversation to investors to say that they are focusing on the better customer with the higher average revenue returned.  Maybe for now the cheaper customer is leaving now, enabling the average revenue to rise for the remaining customer base; still, that customer loss will ultimately hurt the total revenue model. 

Subscription prices are rising as networks keep demanding increases to their license fees. And customers, upset by these high costs are preferring an a la carte model to buy only the service they wish to watch.  The iTunes model of selling singles over albums has been embraced for music and perhaps it will be embraced for TV as well. 

Netflix Launches Profiles, So Should Others

Netflix has finally realized what many other subscription companies have not, that we share our accounts.  Families share their Netflix account just as we share our cable service and DVR usage, our iTunes account, our Amazon account, and other subscriptions.  And because we share, our viewing habits look like one big aggregated experience, hard to decipher. 

Well Netflix has uncovered an easy solution.  "In an attempt to fix this, Netflix today begins rolling out profiles, a free feature that allows any of the company's 37 million subscribers to create up to five different profiles on one account. Each profile will be treated like its own account, so recommendations will be more aligned with a single person's interests." Now a parents more mature interests won't be linked to their children.  That means a better, more accurate understanding of each family members' viewing interests. 

Amazon should steal this idea ASAP.  Not just for their Amazon prime feature but for their other business as well.  My wife and I each keep a different Amazon account just so our children who each receive gift cards can know who has what balance.  An account for each kid under each of our names.  How nice it would be if I could keep separate balances for each child under one master account.  And how much better Amazon could be for using this same profile engine to make better recommendations. 

So congratulations to Netflix for putting real world application to their subscription model.  I'm confident it will be quickly copied. 

Facebook says Time For This Commercial Break

How many times do you check your Facebook page?  How many devices do you use, your phone your tablet, your computer, or perhaps all three?  And how would you like your social network experience to be interrupted by a commercial message.  Facebook will try and find out by offering short form commercials as you access their site.  Although the commercial length is scheduled to be 15 seconds, acceptance of this interruption could lead to longer spots, or perhaps more than one ad. 

While it is not clear how the spot is pitched, it could come over in the top of their News Feed or worse be shown as an overlay that can't be removed till after the ad fully runs.  Facebook plans to only run ads a maximum of three times per user per day.  Whether that is dependent on the device used may also make a difference.  Three ads per three different devices could mean that a user is subjected to an ad nine times per day, each time they check in.  How consumers react to such intrusion will have to be monitored by Facebook. 

Will consumers get so upset by this influx of advertising that they drop Facebook for other social networks or do they put up and shut up?  I suspect we are so deeply rooted in our Facebook connection that users will prefer the latter.  And that is partly what Facebook hopes, too. Video advertising revenue could be the secret sauce that propels the earnings and ultimately the stock price of Facebook to higher levels.  That is, unless users actually rebel and disconnect from the service.