Building the Road to Broadband Video Profitability

Last night's Broadband Video Leadership panel brought big networks, big distributor, and big advertiser together to assure us that big media was making money and all is right with the world. Sponsored by VideoNuze and NATPE, the evening was well attended and attentive. And the company line was well represented.

Digital is making money, more than the pennies, but still less than dollars, and for both the content distributor and content creators on the panel, additive to the bottom line. Most interesting, digital was not taking eyeballs away from TV, simply enhancing it, and profitable when packaged to advertisers as a multi-platform solution.

Nor do they see consumers switching off their cable subscription to rely primarily on broadband. "Today cable, satellite and telco TV providers pay an estimated $22 billion per year in programming fees, Karin Gilford noted. 'It's pretty hard to imagine that revenue stream going away,' she said. Asked about 'cord-cutting' -- the notion that cable customers would cancel their pay-TV service and obtain all their video content online -- Gilford said that remains a theoretical idea rather than a real trend."

Also asked was the effect of competition from Netflix, You Tube, and others on the cable business. Cable's variety and depth of content far exceeds what others might offer and user generated content will not surplant the premium content that cable serves. None of the panelists seemed concern about these video aggregators. But while they may not be taking huge bites, they may be nibbling away and shouldn't be ignored. TVs are now connecting directly to the web, bypassing the settop box to access online content.

The most interesting comment was about search. Currently, You Tube appears to be the choice for the initial search for video content. And cable has done little to provide an application that easily searches for video programs, movies, VOD, or clips through its platform. It seems that search, navigation, and recommendation may be the ultimate decider for the consumer on which platform, broadband or cable, best serves a viewer's need. Missed a Daily Show, click a button watch a clip, click another button, watch the full show, click another button, watch a preview of the guest's clip that they are hyping. Will Fancast be the site that does that first, will Hulu, will Facebook, or someone else? Search, navigation, recommendation seem to be the drivers that will shape who wins the race.

Sirius Still Up For The Fight

Now that Sirius has a little financial breathing room, can they make a profitable business model. The acquisition of XM Satellite may have given them more subscribers, but is it enough to survive. The answer to both questions, per Mel Karmazin seems to be yes.

He says that they currently have 19 million customers and that their churn remains low and manageable. Even more surprising, Sirius is moving into the black. "In the fourth quarter of 2008, a devastating one for most companies, Sirius XM recorded its first operating profit ever (measured by Ebitda, or earnings before interest, taxes, depreciation, and amortization), as well as its first significant slug of free cash flow."

The Liberty deal certainly comes at a high price, but it staved off bankruptcy and may bring with it long term synergies. "Plus, one of the benefits of the Sirius/XM merger - aside from the cost savings - is that several years from now, once all Sirius and XM customers are on the same system, half of Sirius XM's spectrum will be freed for other uses. ... Premium content wouldn't necessarily be limited to audio. Sirius XM currently offers a three-channel Backseat TV service for select Chrysler and Jeep SUVs. (For an extra $7 a month, Sirius subscribers can get mobile feeds of the Disney Channel, Nickelodeon, and the Cartoon Network.) If Sirius XM wanted to launch more video channels, it would probably have a willing partner in Liberty Media, which owns half of DirecTV as well as several cable networks, including QVC and Starz."

Will this distribution spectrum be more preferable than content received wirelessly through the web. Sirius currently competes with internet radio; the same will hold true in the video space as well. Why pay for subscription if it is available elsewhere for free. Sirius, like cable, may be facing similar challenges.

Will On Demand Content Kill Linear TV

Who has time to watch a full episode of TV. As a society we have gotten use to small bites as opposed to large mouthfuls. Wasn't that the very reason USA Today was created as a newspaper, to provide short articles, quickly read, to get our fill of news. And so the internet and video sites, like Hulu, have done the very same thing. They have offered us bite sized highlights rather than sitting through the full TV shows. From SNL to Daily Show, we can watch the highlights. And for those that like the flexibility to watch the whole show, where and when and how you prefer, full shows are accessible with "limited commercial interruptions". How nice!

And from this convenience comes the problem, the profit return is far less than from the traditional TV set. While USA Today may have been charging as much as other newspapers to get their version of the news, online video does not get the same amount of advertising dollars. And while more and more people are accessing the web for their videos, the numbers watching TV are dropping. "While more and more viewers are watching TV programming online, the networks aren't getting anywhere near the amount that they would earn from commercials that run the old-fashioned way. ... As a means of siphoning away traditional TV viewers, the Internet could soon make cable's threat to the Big Four nets seem like a cakewalk. In fact, the competition posed by online distribution is equally menacing to broadcast and ad-supporting cable channels, which could make the Internet the common enemy that finally unifies the smallscreen's rival factions."

And what is TV doing about it. They are actually putting more content online and literally training the consumer to seek content on less profitable platforms. So how does TV compete? Does all TV need to be live to add a bit of danger and anything can happen to the viewing experience? Will hi definition and bigger TV screens save the TV experience. And can new interactivity through the set top box make the big screen experience more preferable?

Will we buy our networks directly off the web or still work with our "broadband" provider to get packages of content. How advertising reaches us must get more creative too. Where once viewership was merely a sampling and estimate, it is moving toward true engagement and actual views, measuring action and purchase. New interactive opportunities could enable purchasing, couponing, sweepstakes, and feedback. Measurable and accurate. Perhaps that will improve the profit margin.

I Like Lists - Digital Organization

While there is a lot going on in the digital landscape, changes in media organization structures, and new applications for iPhones and others, I was just thinking, what I really need, or perhaps would like to see as a digital media device. No not a Kindle, or HD TV, though both would be nice. I think I speak for many when I say the kitchen is the center of my house. No, not physically the center, but where a majority of activity happens. And it is there that the family calendar is kept in an attempt to keep us organized and on schedule. Add to that pieces of loose paper nearby, recording upcoming shopping lists for the supermarket, Costco, and Target. Lists get written and rewritten, and checked against the schedule for other needs like birthday presents, drinks for one of the kid's teams, and so on. And of course there is always coordinating the home schedule with the work schedule. And all this is done the old fashioned way.

So what I want is someone to invent for me a device that is about the size of a calendar, that can hang on the wall, or sit on the counter, wireless compatible and networked to the home PC and printer and synced with my cell phone. It would be a calendar, list maker, and web device. Easy to write on and have my handwriting converted to text. Mobile devices can sync to it and download information like new dates or additions to the shopping list as well as upload the same. No more printing out the list when your phone can hold it for you. Sure include some nifty apps like a calorie counter, recipe keeper, or calculator, but its primary duty remains to organize the home. Press a button, look at the month or week, or that day. Add alarms to remind you not to forget to sign a kid's permission slip or pack a lunch. And when the screen is not being used, let the screen saver rotate through the family pictures. The key remains organization, connectivity, and information.

I'd take down the family calendar and replace it in an instant. Could it do more; perhaps, but I have other devices to watch TV or play videos. Oops, gotta run, the calendar says to pick up my daughter from art class and then take my son to guitar. Nice to be reminded, nice to have it on the calendar so I can schedule other thing around it.

Sirius XM Radio planning to stream to iPhone

As new car sales dwindle, and satellite radio growth falters, new subscription sources must be uncovered. If people aren't going into their cars, perhaps they are going into their pockets. Sirius hopes so and thus it's time to reach prospective customers on their most useful device, their phone. "By streaming its music, sports and talk channels to users of the iPhone and iPod Touch, Sirius can give its existing subscribers another way to access content and let new customers sign up without buying new radios, CEO Mel Karmazin said."

In today's economy, it's all about the price point. And while the article doesn't specify, Sirius needs to be aware that they are competing with other radio type applications on these devices as well. Content exclusivity may matter, but only for so much. That is the lesson learned from the automobile side of this business. Still the appeal of getting out of market games on a phone may be appealing. I also think that Sirius may expand its distribution by bundling its services with Direct TV.

The world exists outside the auto and Sirius is recognizing that they need to be everywhere.

Google To Let Consumers Edit Their Interests

Why do I have to see car ads. I just leased a new vehicle and I am absolutely not interested in getting another. The new hot metric in advertising is behavioral, targeted to interest and intent. But, wouldn't it be nice to proactively tell sites what I am interested in and what I absolutely don't want to see.

And while we try so hard to protect our privacy, our every tap on a pc is counted and tracked. "Perhaps to forestall objections to its approach, Google said it planned to offer new ways for users to protect their privacy. Most notably, Google will be the first major company to give users the ability to see and edit the information that it has compiled about their interests for the purposes of behavioral targeting. Like rivals such as Yahoo, it also will give users the choice to opt out from what it calls 'interest-based advertising.'"

Could this same behavioral web approach be adapted for TV. Through cable TV, the set top box offers the same opportunity to interact, to customize and to reach targeted audiences. I always keep wondering though, what would happen if I became an undesirable consumer.

How proactive will users be to update their profiles. Perhaps it depends on how often we are proactively reminded that we have the ability to edit. Like most things that run in the background, out of sight, out of mind. Even though I may opt out of certain types of ads, there is still no guarantee that they won't be run.

Time Warner Cable Delivers Primetime On Demand

Who needs a DVR or Tivo when you have VOD. A DVR is proactive, you must act on an interest and set up your recording options in advance. Of course with on-going series, that needs to happen just once and all future recordings occur. And you can control the trick features - fast forwarding and rewinding to your hearts content. The beauty of VOD is that it is reactive, that even though you missed it on the linear schedule, you can still watch it later, without any advance work. Great for viewers who no longer feel physically tied to a TV schedule, and great for the programmer, especially if their ads can still get noticed. And it is easier for the programmer to disable those trick features, forcing the viewer to stick with the ads that run.

So who gets hurt. Well for all cable programmers and cable operators, VOD seems a win-win all around; but for broadcast affiliates, especially those not owned and operated by the network, they may not be so lucky. Regional network affiliates rely on regional ads to run inside national broadcasts and for viewers to watch. If a network show is DVR'd, their regional ads still get captured. But what happens when a network VOD show runs across markets. CBS gets its national ads run, but the regional ads on WCBS in NYC or KCBS in Los Angeles, or in any regional DMA are simply not seen. They have lost the viewer and they have lost the ad revenue. The network affiliate is the one who gets hurt from national broadcast of TV shows on VOD.

The network affiliate model is being uprooted as the national programmer provides VOD as an alternative for its audience to watch its programming. It may assure eyeballs, but network VOD may just kill broadcast affiliate relations. VOD delivers what you want when you want it. But for the networks, it does have a cost.

Barnes & Noble Moving Into E-book

Change is constant and the digital age is moving us away from physical content to electronic. As a bookseller, Barnes & Noble must have asked themselves the question, what is my strategic purpose and how do I stay relevant in a changing world. They have created a physical place to purchase reading materials, audios and videos, and grab a cup of coffee. But that world is changing, slowly at first, but moving toward a digital direction. And so to remain relevant as purchase behaviors shift, Barnes & Noble recognizes the importance of being the distribution point, both with brick and mortar and with virtual. Their purchase of Fictionwise is that first step.

So how do they compete with Amazon and the Kindle. Will content be available to be read on a Kindle or Sony e-reader or all or something of their own making. Will it make deals to have exclusive digital rights to certain content? And should they integrate e-books into their physical stores so that the purchase of a book includes a free or discounted e-version as well. How do they differentiate from Amazon and others to remain competitive as usage patterns evolve.

Theaters didn't go away when movies were available directly in the home. Book stores shouldn't go away either. Consumers like to get out of the house and Barnes & Nobel provides a place to hang out, discover new ideas, and relax. Creating an impetus to come in the store to download as opposed to just downloading at home could keep this bookseller relevant to the tech savvy consumer. The growth of e-books is fast although the aggregate is still a sliver of total book purchases. Change may not be quick but it seems to be coming and Barnes & Nobel seems to recognize that they need to adapt as well.

WNBC goes digital in big news update with new channel New York Nonstop

WNBC, Channel 4 in New York City is unveiling a new digital channel on Monday, part NY1, a NYC local cable news outlet, part Headline News, part web-like content. This new channel, dubbed New York Nonstop will be out there on the digital cable line-up and over the digital airwaves as channel 4.2. As viewing habits move to DVR and VOD, the best way to survive is to be live and lively; and with a regional focus meant to provide relevant flavor in short, easy bites. "'You'll get your meat - your news, weather and headlines - every 15 minutes,' McGinn ( Meredith McGinn, senior manager of special projects for NBC 4 New York) said. 'In between those 15 minutes, you may have a two-minute segment, a two-minute pod, a five-minute pod. So the shows we're looking at are in little bits, not your traditional half-hour newscasts.'"

Will audiences in this market switch from NY 1 or News 12 to taste this new dish? Will they prefer the friendly faces of Channel 4 doing double duty at 4.2? In recent months, NBC has laid off a number of anchors, reporters, and weather people, replacing them most likely with less expensive talent. In a start up, keeping costs low is important.

Why is a regional channel being created in today's climate? Frankly, it's a first strategic step that sees the end of owned and operated networks and their eventual replacement with less costly regional news and lifestyle channels. As network programming finds its way as a national feed, accessible on demand, on the web and perhaps still as a linear stream, the regional networks will be left in the dust. And why should these network affiliates promote a national show if they are also competing with that same show on other platforms like Hulu or TV.com or Fancast? Shows like 30 Rock, Heroes, Chuck, and others are all available outside the gate of WNBC. New York Nonstop might just represent the natural next phase of the local broadcaster, no longer reliant on a relationship with its national partner, and programmed 24/7 on regional interests.

Technology has changed the entertainment landscape and the current model of national networks and regional affiliates may no longer be working. The evolutionary change may just be a digital news and lifestyle network, a la New York Nonstop in every DMA. Heck, their tagline says it all - Engaging consumers where they live, work and play.