Sirius XM Is in a Serious Bind

Sirius XM stock is hovering below $1 and their growth prognosis is limited; so why did it take so long for the FCC to approve the Sirius XM merger. Clearly the time it took has hurt their ability to be competitive in a quickly changing world. Perhaps the shareholders should sue the FCC for this delay because surely it has hurt them. The push toward HD radio, itunes, and even internet radio makes it hard to build and maintain a subscription radio model.

How compelling is Howard Stern, Martha Stewart, and now Chris "Mad Dog" Russo to the equation. In the past, I've argued that content is king; at the same time, the content has to be regarded as differentiated and valuable. With these personalities and other "exclusive" sports programming, Sirius XM should be fine. Still it would have been nice to have approved this merger a year ago so they could compete effectively.

DVDs Account For 81% of Video Spending

So DVD sales still represents a solid majority of sales verse the internet. It breaks down like this, "41% of the amount consumers pay for movies and video is spent on DVD movie purchases; 11% for purchases of TV programs on DVD; 29% on DVD rentals (including from Netflix)." And of the total, only 0.5% are paid downloads. The research also says that over the last three months, most consumers watched a DVD they purchased or rented, while only 18% watched a VOD movie, and even less watched a downloaded movie.

But does this research paint an accurate picture and where are the trends? In my household, VOD movie surpasses DVD movies 9 out of 10 times. In fact, we are more likely to check out VOD titles before going back into our DVD library. And VOD usage as well as internet usage continues to increase. So where are the trends/ Is my household leading the trend or are we behind it? I believe the DVD, while a great device, is fading. While DVDs already fill a number of bookcase shelves, (and more can fit as they are smaller than their predecessor, the VHS tape), it is time to replace them with an even smaller device. Is it a flash drive or smaller. Will all my movies fit on an iPod to be connected to the TV or PC when I need a bigger screen? Try taking a portable DVD player with you on a trip and try to fit all the DVDs that you might like to watch with you.

People are still watching their DVDs, but are they purchasing them at the same rate as last year or the year before. Their DVD libraries aren't going away, but are they getting any larger. Maybe that is the real trend to watch.

No Reissuing of Digital to Analog Coupons?

Will the transition of Digital to Analog happen on February 17, 2009? Are consumers ready for the conversion or will the government need to delay the date. As a cable customer, I have done nothing. Two of my sets are on a converter box, the rest are not; we get our unscrambled signal through the wire directly into the TV set. And while we aren't getting every channel on those sets, we get enough of the ones we watch to satisfy us. And I like the remote that came with the set far more than I like the one that works with the cable box. And the one set has a Tivo to record the broadcast shows we watch.

As long as the cable company leaves well enough alone, I will remain loyal. But once they force me to put a box on every set, I will revisit my decision and may find that the impetus to switch from Comcast to Fios.

And for those poor souls with an antennae still on their roof, well let's just say that the NCTA is not making it easier or you. "The head of the National Telecommunications and Information Administration told Congress the NTIA still does not have the inclination or authority to reissue digital-TV-to-analog converter-box-subsidy coupons to households that did not or could not redeem them before the 90-day expiration date." How nice. This conversion will not be easy and the NCTA is not helping.

Best Buy To Acquire Napster

Best Buy sees the future and it is not limiting itself as an electronic retailer. Acquiring Napster allows it to diversify into web based applications. "The acquisition, set to close in the fourth quarter, includes Napster's 700,000 digital entertainment subscribers, Web-based customer-service platform and mobile capabilities." In general, consumer electronic companies have had a hard time staying in business. As electronic prices fall, it becomes harder and harder to grow sales revenue. Watch how the price of TV sets have decreased. And while new products emerge, it takes more sales to make up for lower prices. If a 40" TV cost $500 a year ago, today it costs $400. The list is long with defunct electronic stores: The Wiz, The Good Guys, Silos, Highland Appliances, Crazy Eddie, Comp USA, Lechmere, and many others.

While Napster may not be the ideal acquisition, strategically it seems right. Best Buy and others need diversification to offset equipment sales. It is about the content on those machines and Best Buy could use this acquisition to build a valuable synergy. Buy a mp3 player from Best Buy and get a unique deal from Napster. Free downloads to Best Buy customers. Build loyalty, build a separate advertising model; it could be a winning formula.

Plugging away at world with no wires

How many power cords do you own? Too many to count I bet. Chargers for the cell phone and telephone, digital camera and video camera, game boy and DS, portable dvds, ipods and the rest; old ones to old devices that are still in a basket wrapped around new ones in a tangled jumbled pile. Well it seems someone might just be listening. "Hoping to usher in a new era of communications freedom, researchers at MIT, Intel and elsewhere believe they can do for charging your cell phone or laptop what WiFi did for information delivery -- that is, get rid of those annoying wires."

Now don't get too excited, change is not coming in the next few months, but it is being discussed and I bet consumers might choose a device with a wireless power back up over a wired one. Just ask yourself, would you rather have a bluetooth headset or a wired ear plug for your cell phone? How it is done, I'll leave to the scientists; but I certainly would prefer a wireless charger to a wired one.

But the question I ask is how do you charge for power consumption. And how can you prevent unauthorized users of your power source from stealing from you. Will power consumption revenue models emulate the wiFi model? Will power be advertising supported? Change is in the air, so to speak; how it is effectively delivered and paid for remains the challenge.

YouTube vs. Everyone Else: No Contest

While online viewing is still a nascent business, trying to find a revenue model to support its growth, trends are already appearing. And over the last year, You Tube continues to increase usage, while the rest of the market is flat. Year over year, You Tube has doubled in size, and moving from 26% market share to 44%. The rest of the market "declined from 6.8 billion monthly views a year ago to 6.4 billion in July. And that includes Hulu.com, which started at nothing in March and grew to more than 100 million monthly views in four months."

To me, it seems to indicate the viewer prefers the web for shorter form content. While it may be interesting to catch up on full length episodes of shows, the web makes it easier to search for titles, but most prefer to watch these longer shows on their bigger TVs. There is still a growth market on the web and ad dollars will follow. "Google is making money from a tiny fraction of YouTube's videos, while sites like ABC.com or Hulu.com earn advertising revenue from every video streamed." Web viewing remains a fraction of total TV viewing. And over the last year, the web viewing trend remains flat.

The Future of TV Remains Bright

While the buzz remains on how to successfully converge the web and TV, the financial state of television today remains healthy. The growth of large HDTV screens, the consumer preference for a "sit-back" experience for longer content, and the social elements of families viewing together, means that the ad dollars continue to be effectively spent on TV viewing, live as well as on-demand. And as Reuters suggests, "TV advertising sales are weathering the current economic storm better than media categories like radio and publishing, and perhaps even the Internet."

The writers strike may have hurt broadcast TV today, but once they get their machines running effectively again, good content should return. In the meantime, cable TV continues to offer a diverse listing of content appealing to unique audience segments. Clip viewing may be ideal for the computer, but most viewers would rather watch a half hour or longer program on a big screen. As web shows are easily downloaded to the big screen, the viewer will only have more choice to confuse them. It will then take a great on-screen navigation device and an expert or list of recommendations to help find relevant and targeted content based on the individuals likes and dislikes.

TV uniquely brings a multimedia experience to the consumer that other media do not. "For advertisers, the big advantage that TV holds over other media is that it still allows them to reach the biggest audiences at any given moment in time. It's also familiar to advertisers, who have decades of experience with 30-second spots and vast research about audience behavior." Its no secret that newspaper and magazines have seen advertising and subscription revenue fall. "Other traditional media have not held up as well, with radio and publishing both hard hit by the downturn, continuing trends that were evident even in a healthier economy. Local advertising has been the culprit, deteriorating faster than national advertising across media, even TV."

How content reaches the TV screen, from the cable company or directly from the web, may matter to the technologists. The average viewer seeks a plug and play device that simply delivers the content to their ideal screen, simply and in a straight forward way. That convergence will also enable a more accurate measurement of usage. The content that attracts the largest audience, relevant to a target demo, will appeal to advertisers, regardless of the device they view it on. And advertisers will embrace a more targeted approach to effectively reach its core demos.

Synergies or Spin offs

What's a major corporation to do - get larger or slim down. Find vertical or horizontal collaborations and build cost efficiencies or sell or spin off assets into separate and distinct entities. And is either strategy good for the goose or for the gander; that is, does it benefit the health of the company or the shareholder. And are the two beneficiaries on the same page or at odds with one another.

That seems to be the question as more companies are choosing to shed assets or being pushed by shareholders to do so. From Time Warner to Liberty, the move is on to split. For Cablevision, investors are grabbing stock with the hope that by spinning off Rainbow, the stock price will rise. For GE, shareholders believe that NBC should be spun off as it is unrelated to its other business ventures. But maybe it is being done for another reason. As Business Week speculates, "some of the world's top media companies may just be shedding noncore or incompatible businesses to give themselves leeway to nab new assets in growing areas, such as the Web and digital television." But does that mean that distribution and content are incompatible while staying a pure content company is more strategic.

At the end of the day, it is about unlocking value and companies may see the spin off of one entity to acquire another better aligned with its future endeavors. "Time Warner's cable unit, which officially spins off later this year, could become an acquisition machine if its stock—separated from Time Warner's advertising-intensive businesses—takes off. Maybe the new company makes a bid to buy Cablevision, the New York-area cable system it has long coveted." At any rate the entertainment landscape seems to be changing rapidly.

NBC Teams Up With Google

NBC is testing letting other companies sell its advertising by enabling Google time on some of its smaller cable channels. No you can't buy an ad through Google on NBC or even on USA, but you will be able to buy through Google on MSNBC, Sci Fi, Sleuth, Chiller, and Oxygen. For Google, it is a "desire to sell ads in different places besides next to its search engine, and NBC's efforts to get access to advertisers who currently advertise online through Google but don't place any ads on TV."

How long this "test" will last, only NBC will know. Will they decide to take back this inventory once they realize that they have the ad team in place to handle TV or because of the large number of cable channels they own and the even larger number of spots needed to fill, they have more than enough supply and it represents a chance to eke out a bit more revenue. Will NBC release more supply from some of its bigger properties or not? Time will tell. Once Project Canoe is fully functioning, this partnership may not be necessary.

Google is also using data from its partnership with Dish to gain more insight into targeting the ad to the viewer. Whether the Dish sample is enough to claim reliable, statistically relevant data, I wonder, but it is what they have available at the moment. For the time being though, Google can measure what ads are working and who may be watching.

I give credit to NBC for trying new ways to bridge the gap between internet and TV. They are clearly thinking about the future of TV.