Monday, October 31, 2016

Why Apple Should Buy A Content Company

In a world where a box is just a box and distribution needs original and exclusive content to drive growth, media is big business.  And given the insatiable appetite for content affecting every consumer, content drives usage and multiple revenue streams.  Content can be purchased, it can be rented, it can be advertised; it can be downloaded and streamed and provide rich, measurable date about the user and usage.  And Apple should invest more in the business.

It is true that Apple has been dabbling in content with a trove of downloadable content on its iTunes platform.  And it has been build out a music streaming business.  But there is much more room to grown and acquisition may be the means to building a bigger better business model.  I have suggested a bid for Time Warner for its cable programming and theatrical distribution business and I have suggested other cable networks as a stepping stone into the media production and distribution universe.  Business Insider thinks that Apple should make a play for Netflix.  In the article, Stratechery analyst Ben Thompson says ""If Apple wants its usual ownership of end users it needs to buy its way in, and that means buying Netflix." With original and acquired content, Netflix's streaming model could enhance the Apple Music value, enabling packaging scenarios to drive further adoption of both models.  And it could also add value to the Apple TV business. 

Is Apple even looking at Time Warner, Netflix or other content creators and distributors?  The worry is that Apple is not innovating enough, not driving further adoption, not expanding, and facing increased competition from those eager to push Apple off the top of the mountain.  Maintenance and remodels of current products are not enough to remain a leader; rather, it says that you are treating your business more to maintain value than drive growth.  Beyond any possible plans to create a new technological product, Apple should look at content makers like Netflix to grow its business. 

Monday, October 24, 2016

Will AT&T Time Warner Deal Get Approved

The excitement caused by the latest media merger news of AT&T buying Time Warner has been tempered by concern of "too big".  And that the timing of such news is just two weeks before an important national election.  Politically speaking, both Democrats and Republicans are encouraged to speak out against the merger, as it on the surface looks to limit competition. Economically, it may be harder to press such a claim.

First, both AT&T and Time Warner will point to the Comcast NBC union as precedent to approve their deal.  Second, they will speak to the point that neither business directly competes with the other.  In fact, they each offer to the other a stronger vertical position with AT&T providing distribution through DirecTv, U-Verse, and AT&T Wireless, and Time Warner contributing strictly the content side with production, broadcast, and cable television networks, as well as some web sites.  Neither side currently plays in the other sides' world.  Third, this deal should also pass because Time Warner previously spun off their Time Warner Cable business, a direct competitor to AT&T, as a means to make their content business look more attractive.  Since then, Charter Communication picked up Time Warner Cable and that deal also passed regulatory approval.

So what will the FCC and Justice Department have to say about this merger.  Most likely, a lot with some need to set certain requirements to assure other distribution sites get equal availability to Time Warner content.  But it may be very difficult to outright deny such a deal given the above points.  Could this deal get derailed, possibly: especially if another player seeks to offer a higher priced bid.  Could that still be Apple or Google or maybe even Facebook?  Its been rumored that some of these folks have already kicked the tires a bit.  So stay tuned.

Saturday, October 22, 2016

UPDATE: AT&T Buys Time Warner

Time Warner has agreed to terms, according to multiple sources, to be purchased by AT&T.  According to USA Today, AT&T is acquiring "a diverse media portfolio that includes HBO, CNN, TNT, TBS, Warner Bros., theme parks, Bleacher Report and a 10% stake in streaming service Hulu, at about $105-110 per share."  Prior to the rumor, TWX was priced around $70 a share.  It rose to $90 on Friday and will see a nice bump on Monday.  Rupert Murdoch and his Fox Network had tried previously to acquire Time Warner with an offer near $85 a share about a year ago.

Once the paper is signed, expected to happen later this weekend, the next step is likely regulatory approval by the FCC.  I would expect that some requirements will be imposed but that, since the Comcast acquisition of NBC was allowed, AT&T should have no major problems getting this deal approved as well.  A great catch for AT&T; I still wonder if Apple even kicked the tires and if so, what prevented them from putting out a competitive offer.  We may never know.

What will be the next media merger?  Will CBS and Viacom recombine, will Scripps or AMC seek a larger partner to add leverage to their deals, and will other telcos seek to bring content into their family?  Verizon went the digital route with AOL and soon Yahoo, but it may be necessary for them to look at more traditional video media producers.  For now the merger of Time Warner and AT&T is just the next leap in media mergers. 

Friday, October 21, 2016

Time Warner For Sale?

If content is truly king, then its no wonder a distribution company like AT&T might want to buy Time Warner.  AT&T, who is now also the owner of DirecTv and U-Verse, recognizes the value content, especially exclusive content can bring to the distribution model.  DirecTv's deal with the NFL to exclusively offer all games, especially out of market games, to its subscribers, has been a hit.  Cable subscribers would love the chance to buy that package.  Now its parent, AT&T, may have set its eyes on a bigger content prize in Time Warner, Inc.

Time Warner, owner of the Turner cable networks including CNN, TBS, TNT and others, as well as HBO and the Warner Bros studio, may just be soliciting bids for purchase.  AT&T may be a prospective buyer and obviously believes they are also a good fit, but will they pull the trigger?  And who else may now be interested in obtaining such a prize?  I content that Apple should also look to purchase TW; a deal that would immediately give them more leverage in advancing their Apple TV platform.  Perhaps Trump might want to buy TW after the election and turn CNN into Trump TV.  And you never know what Google might do to drive both their fiber rollout as well as their Chromecast product.

Is Time Warner really for sale?  Some believe the company is actually open to a sale.  And so is the stock market. 

Tuesday, October 18, 2016

Google Smartphone Getting Strong Reviews

With the Samsung Galaxy Note 7 recall, timing is everything.  And Google may just capitalize on such timing with the release of its Pixel smartphone.  For Android fans who despise the Apple closed architecture, Google seems to have delivered a worthy alternative.  Of the reviews I have read, all seem to rate the Pixel phone a strong competitor.

Most seem to especially point to the Google Assistant, a Siri AI alternative to answer verbal questions at a touch of a button.  Per Walt Mossberg, former WSJ writer and now re/code co-founder, "the Assistant blew away every competitor I’ve tried. It shredded Siri, which has a five-year lead. It not only did on-phone tasks reliably — like launching an app, or creating reminders or notes, or playing music — but it understood most of the wider-world questions I asked it."  Impressive, although Siri is the least of the reasons today to purchase an Apple iPhone.

For other Android phone manufacturers, the release by Google of its own line of smartphones may cause trouble in the Android universe.  No longer is Google a partner offering an alternative operating system to Apple, it is a competitor as well using the same operating system to drive users to buy a Google smartphone.  And that may be troubling as smartphone wars seem to heat up between Apple and Google. 

Monday, October 17, 2016

Netflix Outperforms!

If the worry that Netflix has reached saturation and needed to spend more to stay even, then you guessed wrong.  Netflix just released quarterly results and they beat forecasts as well as Netflix's own guidance.  Both domestic and international subscription growth was up and both earnings and revenues are soaring. 

Is it the original content that they create?  Shows like Stranger Things and Orange Is The New Black continues to garner praise.  Is it the volume of TV shows and movies that they offer each and every month?  Is it the exclusivity that they maintain that draws users?  All these things seem to be contributing to their success.

But the market also measures future potential and how Netflix can continue to grow the base and increase its profitability.  The market certainly likes what it sees today but what is up Netflix's sleeve to further their expansion? 

Tuesday, October 11, 2016

UPDATE - Samsung Ends Galaxy Note 7 Production

Just yesterday, I shared in my blog that replacement Galaxy Note 7 Phones were exploding.  That has led to a rise in Apple share as folks are expected to switch from Samsung to Apple.  Well just this morning Samsung has announced that they are permanetly discontinuing the Galaxy Note 7.  Will Samsung customers stay loyal and switch to another Samsung phone or does it permanently hurt their smartphone business?

The Wall Street Journal sees Samsung losing a large sum of money from this move, "As the recall has gone from bad to worse for the world’s largest manufacturer of smartphones by shipments and sales, stock analysts have begun tallying up the likely financial hit for Samsung."  This is their Tylenol moment.  It is unfortunate that their fast move to issue recalls did not solve their problem.  But how they continue to respond from this setback will determine the future financial health of this electronic giant. 

For Apple, it is good news for now.  iPhone production should increase to assure supply meets demand and revenues for this quarter could likely "explode".  Sorry for the bad pun.  As to the stock market, shares this morning BEFORE the bell are already up almost $2. 

Monday, October 10, 2016

Galaxy Note Still Burning Customers

It seems that the release of the Apple 7 couldn't come at a more fortuitous time.  The latest Apple smartphone might just attract a whole new batch of customers as Samsung continues to have combustion issues with its mobile phone as its replacement phones may also be exploding.  Airlines don't want the phone on flights and customers may be wary of keeping one in their pocket.

Even wireless providers have given up on the Samsung Galaxy Note 7.  According to re/code, both AT&T and T-Mobile will no longer sell or exchange for another Galaxy phone.  Will customers choose to try another Samsung phone or is it more likely that they will switch to the Apple iPhone?  The stock market seems to believe they will switch and become Apple customers and that is making the stock price go higher.  In the last month, the stock price has risen almost 10%.

Can the Samsung smartphone business survive?  Could this help Google find a market for its new smartphone, the Google Pixel?  Timing is everything and the timing seems right. 

Tuesday, October 4, 2016

Netflix For Sale?

While no official word, the market is speculating that Netflix is for sale and that Disney is interested in acquiring them.  Of course, there is nothing yet to prove that Netflix is ready to be taken over or that Disney is ready to make an offer; still, it raises the question, is it a good fit or better for another company. 

Disney certainly is a content and distribution powerhouse with the capabilities to both produce and distribute great TV and film content.  With ESPN, they also bring a sports component to the mix and with the theme parks, another way to market and appeal to consumers.  But in building their brand, the House of Mouse has a particular identity. 

Netflix, on the other hand, streams content from everyone and creates unique content, some extremely graphic, that is not consistent with the Disney brand.  Netflix is Switzerland, not beholden on any particular cable network or studio, free to deliver content across all genres and all interests to all interested subscribers.  It seems to me that a Disney ownership has the potential to restrict that freedom and change Netflix to an identity that caters more to streaming Disney content.

Should Netflix be up for sale, I would suggest other companies could make a fit.  Apple and Amazon are the first two to come to mind.  Each would bring strong synergy to the mix and each could further grow the Netflix brand.  Others that might want to think about entering the streaming content fray include Microsoft, Intel, AT&T and Verizon.  For the longer term future of Netflix, I see these choices a better fit than Disney.  We will have to watch and see how serious this current rumor is.