Even Digital Content Is King

Not satisfied with owning a leading broadcast network, cable networks, and a movie studio, NBC Universal and its parent company Comcast want to own digital content creation companies too.  The latest on their radar are Buzzfeed and Vox Media.  Buzzfeed has positioned itself as a leader in creating social commentary, news, and entertainment with an eye to creating eye-catching, shareable, viral content.  Vox Media has created some well known sports blog along with its recent acquisition of re/code.  In an ironic twist, it is re/code passing on some of this news on the potential partnership plans.  

For NBCUniversal, adding a stable of digital content companies to its video rodeo seems like a good fit.  Synergies between networks, shows, advertising, and promotion could all help drive viewership and usage gains.  But synergy is also a tricky animal that in many cases culture and personal politics can end up building roadblocks to success.  Done well, digital content, like any other content, is king and as many believe is what drives consumers to certain platforms.  Should this deal succeed, it will be fun to watch how it is utilized. 

Yelp Needs Help

As far as the stock market is concerned, Yelp is the sound a dog makes.  Earnings don't look so good and the stock price is falling drastically.  But the problem isn't that consumers aren't using the service or that revenue is falling, the opposite is true; the problem is that they are not growing fast enough.  

I am an active user of Yelp.  I use it for restaurant suggestions, I use it for hotels.  I even just looked at online reviews on Yelp for local car dealers.  It is a useful and practical service.  But I can see on the business side, the difficulty they must have in growing revenue.  As it's main charm is social media, users posting personal reviews, companies with great reviews don't need to advertise on it as social media is providing a credible ad message without them paying for it.  And a company with bad reviews may simply want to not advertise on a site that is badmouthing it.  Rather, they can just respond to specific reviews.  So the old adage, 'why buy the cow if the milk is free', seems to come into play with Yelp.

It may be that the future success of Yelp comes from synergy it can create by merging with another entity.  Could Google, Facebook, or Twitter be interested in joining forces with yelp/  It seems that a partner is needed if Yelp is to have future financial success.  For now, I will continue to use Yelp; I love it and appreciate getting important feedback and reviews
on different businesses.

What If ESPN Became A Stand Alone Service

Disney/ESPN CEO Bob Iger admitted earlier this week that ESPN could one day offer itself like HBO Now.  Given the loss of cable subscribers, primarily due to cord cutting, Iger expects that they could recapture homes with a streaming sports service.  But sports content is one of the most expensive line items resulting in nets like ESPN charging the highest amounts for a cable network compared to other cable license fees.  And it is those costs that consistently rise annually resulting in cable bills rising as well.  That is one of the likely causes of cord cutting.

So would non-cable customers pay about $30 a month, according to the Huffington Post article,  for a streaming ESPN service?  Those consumers that cannot live without their sports are not likely the ones cutting the cable cord.  So I find it highly doubtful that consumers would pay that much.  It seems that $10 per month might be the threshold that some would pay.  I say that given that Netflix and Hulu are able to get away with fees at that level.  Overall, sports fans tend to retain a cable subscription, while non sports fans are the bigger cord cutters. 

In the meantime, ESPN will likely follow more austere cost cutting measures, with a larger percentage going to the big sport leagues, to counter the loss of cable subscribers and a drop in revenue.  The rising costs of sports programming, leagues, players, games, TV rights, etc. is making access to these games, through broadcast or in-person tickets, more expensive and harder to enjoy.  Over time, fan interest continues to fall, and consumers will be harder to reach. 

Podcasts Make for Great Listening

First of all, I admit to not having Sirius in my car.  With no daily commute driving, most trips tend to be short, with the exception of vacation driving.  My friends, on the other hand, with longer commutes, love to share the latest on Howard Stern, a Sirius favorite.  So without Howard, most trips are made with the news station on or a pop radio format playing the same songs over and over and over again.  No matter how good a song they might be, they start to irritate at some point.

Last year, our longer vacation driving trips were made enjoyable by listening to Serial, a podcast that most everyone has either listened to themselves or at least heard about.  If you haven't, it is exceptional in its telling of a murder and the accused, his trial and incarceration, and whether he is truly guilty or not.  This year, my wife and I decided to try out a couple other podcasts for our longer car trips.  Some were excruciatingly bad, with comedians talking to much about themselves or with others and some were made worse with bad audio that made them either too hard to hear followed by screaming into the mic.  My wife and I easily agreed that we had given each one enough time to decide that we had heard (or not heard) enough.

And while we found a couple that were enjoyable in their recounting of the early days of movies and their stars, one such podcast really made us laugh throughout our rides this summer.  What caught our attention and kept us coming back to download more episodes was the podcast By The Way, In Conversation With Jeff Garlin. While we knew some of his work from Wall-E to Curb Your Enthusiasm, we have yet to really watch his latest TV show, The Goldbergs.  But that will certainly change after listening to his podcast.

They are not for younger audiences filled with endless curses throughout, but his style of speaking, his easy-going nature, and his interaction with his guests are stream of consciousness, funny and fast. From a chat with Larry David to Amy Poehler, Jon Favreau to Bill Burr, each hour or so goes by with tears running down our faces.  It is at times like "Olde Time Radio" for the 21st Century.  And as entertaining as you could expect.  We may have become a video nation and some podcasts seem to forget that we are listening to them and not watching, but for others like the Garlin program, it is a treat to listen to.  If you are looking for a good laugh or need some interesting listening for a long car ride, a podcast may be just the answer. 

Comcast Broadband Subs Exceed Video Subs

With its release of quarterly earnings, Comcast Cable has watched its number of broadband subscribers grow while its video subscribers continue to drop. And for the first time, the total of broadband subs at 22.54 mm is now higher than video subs at 22.3 mm.  That differential is only expected to widen for some time as video cord cutting accelerates.  At the same time, Comcast also said that the increase in both broadband and phone subscriptions are also slowing, according to the Multichannel article.  Of interesting note, Comcast currently sees 37% of its subscribers taking the triple play products, video, broadband, and phone. 

As consumers continue to embrace streaming to the home and to their mobile devices, companies that provide broadband or cellular platforms to the consumer are few and far between.  There is still only a few choices for a broadband subscription, depending on where you live, from a franchised cable provider like Comcast and perhaps an overbuilder like RCN or FIOS or U-verse, to a cellular provider like Verizon Wireless, AT&T, T-Mobile or Sprint, or your phone company's DSL offerings, a slower version of broadband.  And most of us likely take advantage of both a broadband subscription and a cellular subscription. 

Cell companies today enjoy offering data plans that let them charge more as you exceed certain usage benchmarks.  Cable still provides an all-you-can-eat model for broadband usage.  Given the loss of video subs, at some point the economic model for Comcast and others will be to pursue a more stringent broadband usage model that charges more as more data is consumed.  But given the limited competition for broadband offerings, there seems little the consumer can do today to fight back as broadband fees continue to rise. 

Mobile Winning Over Settop Devices

Multichannel just shared a telling study by Arris on consumer video viewing patterns.  Their research "found that 59% of consumers now watch mobile TV, a figure that jumps to 72% of 16-24 year-olds."  And older consumers 65+ are also embracing mobile to watch video.  And while this study sampled 19,000 consumers in 19 countries, it certainly supports the value that mobile viewing is playing in our lives.

Of course it would be helpful to know more about this study including which devices are being used, percentage of mobile verse wired viewing, which video platforms are gaining usage, and more.  And a better definition of mobile which I believe is meant to include WIFI and cellular platforms.  The rise of short form video on Facebook, long form content on Netflix, Hulu, and Amazon, and viewership platforms like Apple TV, Roku, Chromecast, Sling TV, tablets, and smartphones are all an integral part of the trend in viewing away from the settop box.  

It seems clear that with a younger demo embracing mobile over other platforms, consumers will continue to re-evaluate the value of their cable subscription, their investment in more data packages on cellular, the speed of their broadband and WIFI connection, and content aggregators to drive further adoption.  And the trends described at the end of the article strengthens the argument that more devices are being connected for WIFI viewing and more usage is being diverted to streaming media.  The TV Everywhere mentality is arriving. 

The NFL On Apple TV

Apple releases its quarterly earnings later today and while many are wondering how well the Apple Watch and iPhone are doing, some also are looking forward to what Apple may soon be saying about its Apple TV service.  The box itself has already been discounted from $99 to $69 and some retailers have added other incentives.  And the big rumor around the Apple TV device is that it will get all NFL games on-demand. 

According to MacRumors, "As of July 31, 2015, Game Rewind is being discontinued in favor of Game Pass, a consolidated service that will offer all 256 NFL season games on-demand as well as access to live out-of-market preseason games."  Just to be clear, the regular season games will not be offered live through the Apple TV, but accessed after the game is played. DirecTv and Verizon Wireless still offers live coverage.  One can hope that one day, consumers can stream any game, local or out of market, and can buy either a single game or entire season, without a cable or satellite subscription. 

Netflix Subs Greater Than Comcast

Last night, Netflix released its financial numbers and they were quite impressive.  With over 65 million subscribers, both in the US and abroad, Netflix is the undisputed leader in video distribution.  In fact, Comcast, the largest cable subscriber in the US has about 22.5 million cable subscribers, a number slowly dropping as a result of cord cutting.  Comcast has about the same number, 22.5 million broadband subscribers.  So even combined, Comcast has only two-thirds the customers of Netflix. Another fact, Netflix has about 42 million here in the US, almost double the number of Comcast cable subs. 

As to growth, many believe that Netflix will exceed 200 million subscribers globally in the next 7 -10 years.  The beauty of their business model is that it only derives its income from subscriber fees, it has yet to embrace any ad model that could significantly add to its bottom line.  And while it may have to pay some transmission fees, it does not have to pay franchise fees, which are required by cable companies.  Netflix's streaming business model has also priced itself under $10 a month, unlike a cable subscription that can be far more expensive.  Netflix could easily raise their prices only a dollar and gain an incremental $65 million dollars monthly with very little backlash.  The future for Netflix seems very rosy.

And streaming is still considered to be cutting edge.  It is eerily reminiscent of Internet's move from dial up to broadband.  As consumers continue to embrace streaming media to their devices, the allure and strength of Netflix content offerings will continue to attract more of the population. 

An Apple TV Subscription Service

Yesterdays announcement of the Comcast Stream OTT service for cord cutters to get some TV networks and more, may be more a defensive strategy.  Not just against the increasing loss of cable subscribers to cord cutting, but to the rise of competitive OTT services.  While Sling TV does not offer broadcast nets and TabletTV relies on a digital antenna to capture OTA digital broadcast nets, the real competitor has yet to announce. 

Many outlets have been reporting that Apple is successfully negotiating broadcast network and affiliate deals for local broadcast market channels.  That means a person living in Des Moines would get their local ABC affiliate while the person in Syracuse would get their local ABC network.  With deals being finalized, Apple is said to have the platform ready to go to give consumers a low cost streaming line-up of channels for access across all devices.  It just may be that Comcast knows more of Apple's streaming plan as a result of its ownership of the NBC Broadcasting Network.  And knowing that NBC has FCC requirements to force it to follow what other broadcasters agree to may be why Comcast has announced its Stream service quickly.  Apple may make its own announcement later this Fall per The New York Post. 

The days of jiggling an antenna on the roof to get best signal quality may be decades behind us; still, the transmission of TV signals continues to improve dramatically.  The rise of streaming enables more interactive options, more screen choices, more flexibility, and perhaps more revenue opportunities too.  And Apple could change the very notion of what a cable franchise once meant.

Comcast To Test A Streaming Strategy

With cord cutting becoming a palpable threat, Comcast is testing a streaming strategy to keep customers from dropping all their cable channels.  Called Stream, it will offer to its own broadband customers an alternative to a cable subscription a package of broadcast channels and HBO streamed to their devices.  And at $15 dollars a month, the cost for just HBO, the consumer gets that plus ABC, CBS, NBC, PBS and a few other channels, plus on-demand and cloud DVR features.  If it sounds a little bit like Aereo, it could certainly be confused for it.  One can only wonder if the broadcast networks agreed to this streaming solution.  And why shouldn't current Comcast cable and broadband subscribers be entitled to the same streaming service as part of their more expensive subscription. 

Comcast plans to rollout the service first in Boston before expanding it into other markets according to Huffington Post.  Will Comcast customers who have dropped or plan to drop their cable package while keeping their broadband service like this low cost alternative or have they already found value from other current OTT streaming services like Hulu, Amazon and Netflix?  I look forward to seeing the marketing that Comcast employs to sell this new OTT service.  How fast it succeeds or fails in Boston may likely change the timing of other markets.

One thing is clear, cable networks like ESPN and other expensive networks may not like that their channel will no longer be in the "streaming basic line-up".  Lawyers may be pouring over contracts to see if this new tier violates current programming contracts.  As my previous blog noted, ESPN and others are already seeing a loss in basic subs due to cord cutting.  This new Comcast Stream service could contribute to the percentage of cord cutters. 

Cable Networks Hurt By Cord Cutting

Consumers are shaving down their cable tiers or dropping their cable service altogether.  And today's Wall Street Journal shares how the leak in the dam is showing a measurable loss in basic subscriptions across a number of the most popular cable channels.  As the graph below shows, over the last 4 years, subscription levels have dropped 4-11%, with some of the more expensive networks, including ESPN, facing the larger losses. 

As cable networks are paid a monthly license fee on basic subs, each drop gets multiplied month after month, year after year, causing larger and larger losses.  For ESPN, it means dropping some talent, rethinking studio moves, and finding further cost efficiencies.  Given the rising costs of license fees that cable nets charge, further losses will be felt, For some networks the higher fees, coupled with lower subs, can create a revenue plateau.  But over time, sub drop increases will over take any license fee increase to result in a total revenue loss.  And fee increases will only drive a larger number of drops.  Nets are in fact killing the golden goose, slowly and methodically, with annual increases. 

Networks that have seen this trend are already embracing streaming as a means to recapture customers lost through cord cutting.  HBO Now is a perfect example of embracing new distribution platforms.  Others are also following in those footsteps.  When we look at this snapshot again in a couple years, it will become more evident that the speed of cord shaving and cord cutting  has quickened.  That is the trend we are facing. 

What is Television?

Ask a 60 something to define what television is and they will likely point to their living room TV screen with the cable box hovering above or below it as an example of it.  Ask a 10 year old and the likely answer could be their smartphone or tablet.  The simple definition of television may refer to the transmission of sight and sound to a screen with that transmission enabled by an antenna or wire.  Another may refer strictly speaking to the box itself that turns on and off and is capable of displaying multiple channels of content. 

But it seems that with the rise of digital and wireless technology, both the traditional transmission of content and the screen it displays on has changed dramatically in the past decade.  Channels are no longer just linear or even on-demand, they are streamed to devices of any shape or size.  And the content itself is no longer just long-form or short-form, but starting to contain more interactive elements.  The water cooler has been replaced by social media apps like Twitter and Snapchat and others.  And we no longer have to wait a week to see the next episode of a particularly intense show; rather, we can binge the entire season or seasons whenever and wherever we choose to watch. 

The television is no longer tethered to the living room or kitchen or bedroom.  It can follow us to the bathroom or the park or to Starbucks if we choose.  And so we measure viewing of this content across all these screens of television with same day, +3, +7, streams, on-demand views, and whatever measurement captures who is watching a piece of content for a length of time.  And that content can appear on what we traditionally saw to be TV, on a linear channel airing at a particular day and time to on-demand viewing from our cable box to seasons worth of episodes on a subscription service.

Television, the distribution and content displayed, is monetized like never before.  With cable bills and downloads, streaming subscriptions and commercials, native sponsorships, display ads and overlays.  Today's concept of television is much broader than 50 years ago, or even just 10 years ago.  But no matter the screen we use, large or small, and no matter the location of the screen, living room or smartphone, and no matter the time we watch, pre-set or at our discretion, it is all television. And what will tomorrow's television look like?  I look forward to finding out. 

The Future of Microsoft

Paul Allen left a while ago, Bill Gates prefers his charity work, Steve Ballmer is focused on the Los Angeles Clippers, and now the Microsoft company has been in the hands of Satya Nadella for a little over a year.  And he seems to have a big job on his hands, how to shape the future of Microsoft.

Along with a renewed focus on the cloud and a shift away from product, his latest major shift has been to undo Ballmer's purchase of Nokia with a write down and the loss of almost 8000 jobs.  Sometimes you have to get smaller and focus before you can start building again.

But what will Microsoft look like in 5 years.  Certainly not a hardware company and likely no branded Microsoft smartphone.  They still have the Surface tablet but most tablet makers think that larger smartphones will upend that product line.  As for internet advertising, the deal with AOL pushes that business out too.  And while Microsoft has a successful gaming venture with XBox, they have already decided to no longer invest in original content.  The likely outcome is that XBox gets spun off or sold.

Microsoft Office is pushing further into the cloud space.  But the license fee model is being challenged head on by Google with its free programs.  Many schools today use Google docs and other online collaboration tools with their students to enhance education.  Bottom line, kids are becoming more proficient on these programs and less so on Microsoft Office. 

Software and cloud computing remain the future of Microsoft but that world continues to change rapidly.  What is in the pipeline over the next few years remains to be seen.  Given their capital war chest, they have the resources to create or buy to maintain their dominance.  But given the missteps they have been making in the past, the next right step will really matter. 

Mobility And Personalized Second Screen Favored By Young

A study discussed in today's Multichannel News confirms what my family already knows, that the second screen is preferred over the big TV screen.  And while the study focuses on children ages 2-12, my slightly older children also prefer their handheld devices over the big screen TV set.  Their study finds that 57% of parents find that their children would choose their mobile device over a TV screen.

I can also share that in my household my children seem to choose their iPhone over their iPad to view certain content.  It may be because of convenience, they always carry their smartphone, or perhaps simply laziness.  I'm not quite sure.  But what I do see is that they prefer these devices because of content that appeals to them from sites ranging from Netflix to You Tube.  That they can binge view and watch commercial-free.  That they can watch the same video multiple times and they can watch where ever they decide to sit, from the stairs to the bed to the desk.  It is the ultimate what you want, when you want, where you want, how you want to watch. 

And while I don't personally approve, I see these parents of younger children hand off their smartphone in restaurants, supermarkets, and other establishments as entertainment distractions from other activities.  It becomes the ultimate babysitter.  I am not a fan, especially in a restaurant where I restrict use of these devices.  The dining table is for conversation and social interaction, not for independence and anti-social behavior.  It may distract the 4 year old, but it is not a good habit. 

This preference for the mobile screen over the TV set is what scares cable distributors the most.  If enough desired content can be found away from the cable box, consumers may no longer see the price - value of being a cable subscriber.  Until cable can gain more content exclusivity, more cord cutting is destined to occur as these next generations of consumers no long value the cable box in their home. 

Cellphones and Driving Simply Don't Mix

Despite laws against texting and driving or using a cellphone that is not hands-free, today's drivers simply don't seem to care.  Tickets, public service announcements, news about accidents, simply don't dissuade people from using cellphones while driving.  Last month's Huffington Post shared some alarming statistics - 25% of car accidents involved a cellphone, 33% admitted in a survey that they texted while driving, and worse that 9 people are killed every day as a result of this deadly practice.  And even though 46 states have laws banning texting while driving, it is a common occurrence to watch drivers on their phones.

We have developed a Pavlovian instinct to reach for our cellphone every time we hear one ding, buzz, or beep.  It may not even be our own, but we seem intent on looking, even when we are driving.  And that few second distraction to look down at a screen or type a quick response can change lives forever, not just the person being hit, but the driver as well.  But 20-20 hindsight will not change the result.

Our car is already loaded with screens; they seem to have replaced simple gauges to tell us more than just mph or miles driven.  Songs, stations, titles, temperature, driving directions and maps.  Helpful, yes.  So why not put the drivers text on the same screen with an automatic response saying "Behind the wheel, will text you later"  A simple elegant solution, tied to your phone that would also prevent unwarranted use.  Could it help?  Well given the statistics, it can only try to improve the process. 

Apple Watch Is Part Of A Marathon Not A Sprint

The recent article in Business Insider headlines a weak demand for the first generation Apple Watch.  But like any first generation product, it first attracts an early adopter before the masses descend.  And the masses must see the price-value to take the next step and purchase the product.  With every generation improvement in hardware and software, demand increases and sales grow.  Apple has seen this across their product lines.  The Apple Watch is no exception.

I did not buy an Apple Watch but I expect that it will be a future purchase in a generation or two.  As it delivers more functionality, improves battery life, and demonstrates a need to own, the Apple Watch will gain more customers.  As one analyst states, "Even if the watch is a flop, it doesn't matter. The iPhone is killing it for Apple, and that's how the company makes money. Any sales of the watch are a nice bonus.  It's possible the watch just isn't going to be a major product, at least not right away. It may take years of refinement before it really breaks out."  I believe that the latter is a more likely outcome.

While the meat of Apple is their iPhone product, the connectivity that they create across all their product lines is what turns a consumer into an Apple household.  The iPhone plays best with an iMac, an iPad, and even the iPod.  The connective tissue remains iTunes and the iCloud, syncing and sharing content across devices.  Phone calls, iMessages, photos, music, videos, calendar info, etc.; you name it, they share it.  The Apple Watch is just one more connection to the fiber of the household.

As to what is next for Apple, the release of Apple Music is step one of another revenue stream of music subscription services.  A new Apple TV box would mean the next opportunity for a video streaming service.  And of course new generations and new sizes of the iPhone and iPad.  And when we look back at the Apple Watch product line in 5 years, we may not even recognize what it has become.  There was once a time when a computer was seen as simply a better typewriter in the home.  Not anymore.