Unlimited Viewing Choices, Lousy Maps

The 2008 Summer Olympics are really exciting this year. For those capable of watching many hours of TV, plenty of coverage. For those more discerning in which sports they watch, finding the content is harder than it looks. NBC is reporting huge ratings for its linear coverage and claiming strong broadband and mobile views.

Some of the stats through August 15:
—31.2 million video streams delivered totaling 4.7 million hours.
-31 million unique visitors; 6.5 million daily uniques.
-Users spend approximately 13 minutes per visit.

And yet for all this success, VOD usage is not as strong. Why? Are the better events being held back to promote the DVD packaging? Last night, I saw ads for both Michael Phelps on DVD as well as the opening ceremony. Unfortunately I missed some of the opening coverage but could only find limited web coverage of highlights and nothing else. In fact, that best web coverage of the ceremony was from a non NBC site.

With so much choice being offered to us - linear, vod, broadband, mobile - we need better navigation and experts to recommend for us some things we might enjoy. Whether its buying something or simply viewing thousands of hours of Olympic coverage on many different screens, we want service, we want speed, and we want value. Putting us in a giant store and left to our own curiosity, we may or may not find what we are looking for. Perhaps that is what the numbers are really telling us.

Content vs. Distribution

Back on August 10, I wrote that Content is King. And in that analysis of content verse distribution, I noted how many are pushing to separate the two. To date, Time Warner Entertainment is spinning off its cable distribution arm; shareholders at Cablevision want them to sell their programming arm, Rainbow Media. And per a Bloomberg report, analysts are reporting that Disney may sell its owned and operated television stations to focus strictly on content. "Disney owns stations in cities including New York, Los Angeles and Chicago. A sale would depend on at least those outlets in the biggest markets remaining affiliated with Disney's ABC TV network, Miller said. ABC has broadcast agreements with about 231 TV stations in the U.S., he said. ... Disney spokesman Jonathan Friedland called the report ``purely speculative'' and declined to comment."

So the chicken vs. egg question may now be settled; content is more powerful than distribution. Owning content allows more flexibility on how best to share it; by unlocking the distribution side, content creators are no longer limited to where they can place content. And yet, wasn't vertical integration once considered to be a very powerful foothold. To know confidently that you owned not only the content but also had a guaranteed distribution path to the consumer. But You Tube and the internet changed the environment that content creators work in. It eliminated the barriers to the user and opened the pathway to reach them in multiple ways. For Disney, it appears that they no longer need to own the broadcast network to distribute content.

So for Time Warner and maybe soon for Disney, the focus will be content. For Cablevision, shareholder sentiment is leading to a split. So will others follow suit? Will NBC take a similar strategic path and consider selling its O&O networks? Or must NBC first worry about whether GE wants to keep it as a business unit? That question will be settled first before any discussion of a split would occur. Still, it is fascinating to watch the entertainment landscape continue to change. Stay tuned.

Interesting news. Cablevision has just made an announcement, a quarterly dividend of $0.10 to improve its stock value. In the short term it should placate shareholders; in the long run, they still smell blood and want to further unlock the value of the company by splitting distribution from content. Will it happen? With Cablevision, you never know.

How Many Ports Does a Set-Top Box Need?

Once again the fight between Telcos and Cable centers on the interface between TV and the communications stream, the set top box. And it is why some companies, like Sony, want to bypass the box and enable their own TV set to talk to the web. The set top box, the device you love to hate, is today the device that controls what you can and what you can't receive. Tru2way has been described by the cable community as open access; Dish has agreed and is willing to work under this approach, Verizon is not.

"Most vendors, be they carriers, networking gear makers or computer manufactures, view the set-top box as the key to digital content for consumers as ports will dictate how easy it is for consumers to plug their boxes into a variety of networks without adaptors. So as the computer industry and the telecommunications companies get deeper into the digital TV and home networking market, we’ll wait to see if the FCC decides to make Ethernet ports mandatory. Even if they do, a showdown between those in favor of Ethernet and those on the side of cable’s tru2way standard is likely to ensure as each industry seeks to control the home network."

I want devices that can plug and play. Show me that multiple devices can easily talk with each other in a non-technical way, then the consumer will approve and seek out those devices. Make it consumer friendly, and you will get their vote.

Zuckervision

Fascinating article in the September issue of Portfolio on Jeff Zucker, CEO and President of Universal. Definitely worth the read. He has had some hits as well as taken some hits, but he clearly has a plan. From the acquisition of Oxygen and Weather Channel to the creation of Hulu, he has a definite vision of where he thinks NBC needs to be. And he certainly works hard at it. And the TV industry is so different today than it was just 10 years ago. Still, some would argue that while his cable strategy is sound, his broadcast strategy for NBC is not.

Can producing less pilots per year achieve better results. Financially yes, creatively hard to say. In this new world of on-demand, networks don't allow shows the time to develop as they once did. Seinfeld, Cheers and many other shows were not the ratings hits in their first years. But someone had the vision to keep them on. 30 Rock fits into that category today; luckily, a show that continues to get critical praise despite less than stellar ratings so far. Hopefully more people will find this very funny show. I feel that other shows though have been let go before their time and were not given the same time to grow and prosper. It is these tough decisions that Jeff and his team have to make to construct a successful schedule. The writers strike didn't help them, but every TV season provides the chance to have a do-over. So stay tuned for this Fall to see if the NBC magic is coming back.

The Line, Ep 1: The FutureSpace Showdown Begins

From the folks at SNL:



Very funny! There are 7 episodes to enjoy. Some great online content.

VOD vs DVD

When Pay Per View became popular, movie studios worried that movie theater revenue would decline. It didn't. Radio didn't kill TV, on-demand hasn't killed linear TV. Each finds its place as technology changes usage and preferences. And so to read that the movie studios are afraid of losing DVD revenue by releasing the same movies on-demand is simply misguided.

"'We believe VOD day-and-date with DVD would be a grave mistake for the movie industry, as it would dramatically increase the volatility of the business,' wrote Pali Research analyst Richard Greenfield in a report last year. Jeff Bewkes of Time Warner sees it differently, "'No, we have not seen cannibalization so far,' Bewkes said. 'I don't think it's right to think that the margins are lower. So we think that since we haven't seen cannibalization on sell-through, that it's going to increase margins and profitability going to day-and-date.'"

And while I understand Greenfield's fear, I agree with Bewkes. It is stopping their ability to maximize their revenue. As video stores close, consumers not interested in purchasing the DVD will remain patient till the VOD window opens up.

I do believe their are ways to differentiate the DVD experience from the VOD experience enough so that a day and date approach does not cannibalize each others profit margin. What makes the DVD different are the extras, additional footage and features, unique games, and other "exclusives" that simply have to be marketed correctly to the consumer. For the viewer who simply wants access to the feature film, VOD is not only profitable but may also offer another "opportunity" to sell the viewer to purchase later to take advantage of those extras. In short, VOD enables sampling and the ability to rent first before buying. To me, that represents the opportunity to own the customer twice!

Some studios remain cautious to this opportunity, others are embracing it. It remains our nature to be cautious about change; but it is happening and those that take advantage of it will benefit by leading the charge.

Kindle Has A Bright Future

Mobile, On-demand, Futuristic, and potentially, Economical, the Kindle looms as how print content is moving to be consumed. And when the financial community updates its forecast to see the upward potential, it optimistically represents the direction the consumer is headed. Citi's Mark Mahaney "thinks instead of being a $750 million business that accounts for 3% of the company's sales next year, the Kindle will be a $1.1 billion business that accounts for 4%." It could be the Christmas gift to get this year!

I'm interested to see what the next generation Kindle looks like and what Sony, Apple and others do to compete in this space. Kindle is to Amazon's print download as the iPod is to Apple's music download. When you recognize that bits are bits, Amazon should find a way to make its Kindle also be an audio and video device, while Apple creates a reader that embraces print downloads.

"Mahaney's projections are not predicated on Amazon releasing a new version of the device this year. But they are predicated on the Kindle moving 150,000 units in Q4 -- something that's only going to happen if the Kindle becomes a must-have holiday gift. But he figures that's a relatively modest bet, given the success of other gadgets in years past." Should Amazon release a new version prior to the holiday season, I wouldn't be surprised to see these estimates go even higher.

Content is King!

The success of The Dark Knight, the improved profit margin from VOD, premium networks like HBO, have finally convinced Time Warner Cable that its future success is dependent on creating great content. "If you build it, they will come", an oft quoted line from Field of Dreams is the mantra these days. "For now, Mr. Bewkes is staking the company’s future on three big content providers: Warner Brothers, Turner Broadcasting (which includes TNT, TBS and CNN) and HBO. To ramp things up on the entertainment front, he’s also been overseeing internal discussions about acquisitions in film and television — including a possible takeover of NBC Universal, should its parent, General Electric, decide to sell, according to executives and bankers who requested anonymity because they were not authorized to disclose details of the discussions."

At the same time, Time Warner is finally moving forward to unravel itself from AOL, a move that smelled rotten the moment it was announced that AOL was buying Time Warner and not the other way around. "Elsewhere in the company, it’s all about downsizing. Time Warner’s cable operation is being spun off, eviscerating the once-popular corporate notion peddled by business consultants and merger specialists that content and distribution should reside under one roof." Where previously owning and distributing content was a necessary synergy, now it appears that this combination no longer holds true. While Time Warner is spinning off its cable properties, Cablevision shareholders are at the same time discussing the sale or spin off of its programming arm, Rainbow Media. Will Comcast soon be announcing that it too will spin off its various programming nets, E!, Golf, Style, and others?

"For Mr. Bewkes and his team, the core of the strategy is a wager that the media pendulum will swing away from distribution and back toward content." And so we watch as others mimic this strategy and content and distribution separate. But mark my words, this is cyclical and within 10 years, that pendulum and the need for synergy will once again reunite content and distribution. That is the changing entertainment landscape.

Sirius XM: Tune in next year

What was Mel Karmazin thinking? Strategically speaking, they have been talking merger for more than a year. Six months ago, they got approvals from the Justice Department to merge. AND it took SIX months for the FCC to approve the final merger. So in ALL that TIME, Sirius hasn't been PREPARING for what seemed like an INEVITABLE future. Frankly speaking, they are missing the boat. To take another six months to release a new radio designed to receive both Sirius and XM transmissions is outrageous. Mel should be jumping up and down!

"This is a bit of a shocker even to analysts who follow the industry. The companies did promise that the merger wouldn't mean subscribers needed new radios. But some analysts expected broader programming changes and dual-mode radios to be available soon after the merger closed."

In six months, a new version of the iPod could be released. In six months, new phones and radios capable of receiving internet radio signals will be released, in six months, this merger could be the beginning of the end. I call this delay a true missed opportunity and one that they strategically should have been ahead of. Unless they have up their sleeve another method to provide current customers of each device all available content, they are in trouble. "Developing a new radio would have required manufacturers to make a big gamble on the merger's approval. Still, a nine month delay before a full fledged interoperable radio goes on sale could seem like a long time...Oddly, long before the merger, the Federal Communications Commission mandated that the two companies develop an interoperable radio. And in 2000, the companies said they put together a team to develop a dual mode radio. Progress on that front has been somewhat limited as the companies and the FCC spent years squabbling over the interpretation of the rule."