Digital media growing fast, study says

"As readership and revenues shift onto the Internet, experts said on Tuesday that top news media executives must seek new digital opportunities without neglecting their traditional print publications by rushing headlong into cyberspace."

Timing. Isn't that the age old advice. Knowing when to change course and how fast to shift direction. Clearly the advice given is to not lose sight of current revenue streams through print while embracing the rise of digital content. Moving to fast might just result in turning "dollars into pennies."

Yet reacting too slow will turn dollars into bupkiss. Regardless of the distribution, print or digital, it is the content that consumers wish to consume. Making that content relevant in the most preferable ways will maintain brand loyalty and grow revenue.

Unfortunately, the lessons learned from change are often repeated. As the book, Who Moved My Cheese notes, we get fat and comfortable when the current model is full. But unless we are careful, that model can change quickly and we can be starving as wee look for the next piece of cheese. The print model has enjoyed subscription and advertising as a dual revenue stream. Even cable has enjoyed this dual approach.

But the shift to digitized content will require new thinking on how to maintain a healthy revenue and profit stream. Will the subscription model still work or are other revenue models needed? It's all about timing. Change may not happen overnight, but if you don't stay proactive to it, you'll be without your cheese while others are getting full bellies.

Digitized Content is Changing All Business Models

Digitized music content changed the cd business, Tower Records is no more, and consumers purchase digital downloads for their iPods.

The web has brought news and entertainment information directly to the masses and consumers have responded by purchasing less newspapers and magazine subscriptions.

Amazon has been pushing their Kindle as the device to replace the printed book, digital downloads of your favorite author. Borders Bookstore is facing extinction as revenues from the brick and mortar business drops.

And now we look at digital video downloads and a potential shakeup of the two tier model for revenue to the content networks, license fees and advertising fees. As cable programmers are willing to provide full length episodes of their shows through the internet, consumers can bypass their cable line-up for their web line-up. And as set top boxes and TV sets get open access to the web, those same shows can be seen on their big screen TV.

Most likely, the long tail of content programmers will be the first to embrace this open distribution platform as they receive far less in license fees. Larger networks may be more reluctant unless they can replace the loss of license fees with another revenue stream. Perhaps taking back the local spots offered to cable operators is one way to offset that loss.

Will cable operators look at this shift as an opportunity to charge more for access to high speed. And will their business model also have to change to replace the cable piece of their business with another home application, say security protection. Already profit margins on the cable business is lower than either telephone or hi speed. If cable operators successfully prepare for this change in applications, their profitability can continue to thrive. New business opportunities utilizing the pipe into the home and combined with incremental wireless is cable's future.

It seems inevitable, given how digital content is changing other businesses, that it will also change the cable business for video content. Cable programmers and cable operators need to strategize for this impending shift to remain competitive and rlevant to the consumer. To be forewarned is to be forearmed.

John Dvorak's Second Opinion: Why Disney should buy TiVo

From Market Watch:

"...But TiVo has become a verb and holds all the best patents on this sort of technology -- and it is addictive.
More importantly it can be effortlessly turned into a conduit for the next generation of TV -- IPTV. This is television delivered via an IP connection either over the Internet or over a private closed IP network.
Everyone knows that eventually IPTV will become the dominant form of TV show distribution. Just as news distribution is being converted online because you save money on paper, ink, printing presses and delivery trucks, a similar change will take place in broadcast media.
With online broadcasting you don't need expensive transmitters, antennas, licensed personnel and government licenses to operate. IPTV makes things cheaper.
That said, the form that IPTV will eventually take is not certain. The Web made the online newspaper popular since the web was a perfect platform for print-style content. This is not the same for video content.
Video content on the web is a novelty, a diversion. There has to be some link to the TV set in the den for the IPTV initiative to ever take off. This means some sort of set top box or a direct connection between the TV and the Internet.
TiVo is sitting in the sweet spot. And when I see a company like Disney playing around with a company like TiVo I begin to wonder if Disney is getting its feet wet in advance of a buyout deal. With a market cap just under a billion it might be too much to swallow, but it would give Disney a technology it could use and leverage.
While some observers in the movie business see Disney as moving away from the content creation business insofar as movies are concerned, it seems to be solidly into TV content which is perfect for TiVo. And it does have movies that need distribution.
Besides giving the company more control over content by controlling such a device it might find it a good vehicle for delivering targeted advertising to the viewers. This has been the holy grail of broadcast advertising. The possibilities are endless if you can control a box like this and make it even more popular.... "

Tivo has superior controls and easily links to cable and online content. It intuitively saves programming of interest and may be able to truly target it saudience with ad messages they want to see. A Disney Tivo partnership seems to have a lot of great potential.

Barnes & Noble launches mobile site

While it is important for Barnes & Noble to enter the mobile space, I'm not sure that they are solving a need by offering users more mobility to search for items online, place and track orders, locate Barnes & Noble stores and check stores for an item's availability. I was hoping to read that they were going to develop a competitive device to Amazon's Kindle that enabled consumers to both purchase hardbound and digital versions of books and magazines.

On my wish list would be to see Apple develop the competitive hardware and work jointly with B&N on software and downloads to gain another foothold in this digital space.

Lastly, there is no reason for B&N to purchase Borders, a competitive brick and mortar book store. I fear that most locations simply overlap and that they gain no additional synergies. The future is digital, not land.

Nets Should Embrace VOD

VOD vs DVR. It seems that in this changing entertainment landscape, consumer control is gaining traction. For networks to survive and expand their revenue base, it is obvious that they need to push VOD applications. With DVR, the consumer will fast forward commercials and cost nets money. But VOD needs to do more than disable fast forward and other trick features that eliminate the ad message. It needs to become the preferred choice of consumers. Make it easier to find, search, and play. Allow it to be more interactive and customizable so that the content remains relevent for the user. Don't assume that they want to see the ads; they don't. So the ads have to be either much more entertaining and feel less intrusive. Avoid clutter and create unique features that DVRs can't copy. Find the win-win and consumer will stop pre-recording and start reaching for their VOD button!

Why Do Consumers Dislike Their Cable Box

For the most part, consumers seem to like new electronics. If we deem it cool and desirable we are quick to purchase. So homes add devices to their TVs like Wii, Playstation, Xbox, Tivo, Slingbox, DVD players, VCRs, etc. But when it comes to the cable box, it is not put into that former category. In my own home, I own a number of TVs, but only one cable box, despite owning multiple TVs. And I prefer my Tivo to my cable DVR. The cable box has never been viewed as consumer friendly or desirable.

The problem seems to be that the cable box simply overlaps the functionality of the TV set, while those other devices prefer incremental benefit and value. And so, the announcement that Sony, along with other consumer electronic companies, are embracing tru2way, means that those cable functions can now exist inside the TV set, enabling the TV remote to be the singular means to access TV programming.

“The agreement will encourage the development and distribution of interactive and high-value digital content” that can plug into cable without set-top boxes, Sony said. “Key elements of the agreement relate to the deployment of a platform for ‘write once, run anywhere’ applications and to the incorporation of secure digital interfaces that protect consumers' home recording rights, along with copyright owners' rights to secure their digital content.”

Of course that gain means that the cable box will go away. So what will Motorola and Scientific Atlanta do about this loss of business. Eliminating their device, while helpful to consumer adaption of interactive television, means a significant change to their business model. In the short run, most consumers will not go out to replace all their sets, so cable boxes will still be required for some time to come. But change is in the air and bringing plug and play to the TV set will make all these devices far easier to manage from a single remote. And maybe the single remote is really what is most appealing to the consumer.

Content vs Distribution

Great article in Fortune about "The Jeff's" - Bewkes, Immelt, and Zucker - and the planned spinoff of Time Warner Cable from Time Warner Entertainment.

Where verticle integration was once key to control, Time Warners separation of content from distribution seems to indicate otherwise. Each entity would be free to go after more of its own to get larger and stronger. For Time Warner Entertainment, the chance to increase its content holdings with the acquisition of NBCU from GE. And for Time Warner Cable, the chance to work toward the acquisition of the Cablevision Systems, 3.0 million strong, in the NYC metro. Viacom made the decision to sell its cable systems a decade or so ago to concentrate on content ownership.

So, which would you rather be, content king or distribution king?

A look at other industries affected by technological change may provide a clue. For the railroad owner, changes in transportation made the airline owner more convenient and faster. The horse and carriage trade lost out to the automobile. Speed and convenience was again a factor in consumers switching providers. And with the internet, broadband beat dsl and dial-up; speed and convenience.

So now comes the entertainment industry. Cable pricing is going up faster than inflation. Consumers are tired of all the choice and would prefer a la carte, provided that the total cost remained cheaper. Content owners have found a way to directly reach viewers through an internet connection. Just watch the usage rates at Hulu continue to soar. While those that rely on a license fee are reluctant to change the model; aggressive upstarts with nothing to lose are reaching viewers directly through IPTV. As content owners separate from content distributors, watch as a new battle begins to emerge.

Ad-Hungry Nets Develop On-Demand Rivals To Tivo

No matter how easy the DVR and Tivo is to set, viewers would prefer to not have to do anything. And when shows go over their allotted time, these recording devices are not yet smart enough to automatically adapt. Just consider what happened this past week with the American Ido finale. Viewers that didn't add time to the back end heard Ryan Seacrest get cutoff as he announced that the winner was David ... How frustrating!

The downside to not pre-recording shows and relying on the cable VOD version of broadcast is that they can disable the trick features, including fast-forward. So you never miss a show, but you never miss the commercial either.

I still believe that most viewers would prefer to let their VOD manage all recording for them. Especially if it also enables the show to follow the viewer from TV set to TV set. The mobility of the recording is not yet offered with the DVR and this added flexibility could also be marketed as a benefit to the viewer. Start the show in your living room, finish it in the bedroom.

While I don't believe this broadcast VOD service would completely replace the DVR, it would enable viewers to watch shows that they forgot to record only to later here the water coller chatter the next day how funny or engaging the previous night's show has been. Or when the last 10 minutes were not recorded. Now the viewer can tune in and catch up with the shpw.

Cable's Next Revenue Stream

Apple and Steve Jobs are known as the innovators of next generation products, built to be ergonomically designed and easy to use. And so it is easy for folks to speculate where Apple will go next; and inside the home is the next frontier. But as it involves wire and wirless communication, it is also an opportunity for the cable industry. Cable has built the pipe to the home and it is time for them to design the communication inside the home as well. Devices need to speak to all the cable devices: cable box, modem, etc. Apple may try to build the product, but cable should manage the flow.

Today in the home, cable is barely scratching the surface when it offers to show the phone number of the telephone call on the TV set. How about easily pushing content from TV to TV; or letting me see who is at the front door while I'm watching TV in the kitchen.

Apple can build the product; cable can interconnect them in a meaningful way. The business must become more interactive and service oriented. Cable companies have the staff to deliver that exceptional service to make all the devices in the home, whether its the cable box or the pc, the picture frame or the refrigerator, the security system or the wireless phone or the clock radio, talk to each other.