Time Warner To Comcast: Some Mergers Don't Make Sense

Time Warner's CEO Jeffrey Bewkes doesn't think NBCU makes sense as an acquisition target for Comcast. Their experience with AOL is prime example that synergy is not easy to come by. And content and distribution together may be a deadly combination. They recently separated the two into different companies, Time Warnr Cable for distribution, Time Warner for content. "Mr. Bewkes pointed to Time Warner Cable's recent spin-off from its corporate parent as a sign of media disaggregation done well." The two didn't play well together in the same sandbox.

Should Comcast heed this advice. Does an NBCU-Comcast entity make sense? Can Comcast compete with ESPN in one area of its company and work closely with them in another. "Speaking at a keynote Q&A at TV Week's Innovation 360 conference in New York, Mr. Bewkes described NBCU as a "very complicated" business that might not make total sense for a cable company such as suitor Comcast with a portfolio that includes a broadcast network and a movie studio." Perhaps it is worth listening to this wisdom. Perhaps content and distribution work better separately, than together.

Bloomberg Wins Business Week

Mike Bloomberg has done extremely well in his career. Building a business, running a major metropolitan city, noticing opportunities and making a mark in the world. His latest, the purchase of Business Week Magazine. "With the move, Bloomberg takes on BusinessWeek’s faltering financial situation, plummeting ad sales and all—and gains its resources, products, standing and valuable brand. Bloomberg’s execs expect to strengthen Bloomberg Television, using that brand and the magazine’s “world-class” journalists, and the company’s web presence." It is a shot in the arm for magazine publishing.

What it says to me is that there is a profitable business opportunity to be exploited. Bloomberg's multimedia approach recognizes that content can live and breathe in multiple forms. His financial backing demonstrates that with better management, a keener approach to using its content and credibility across platforms, and vision of what may be possible with the web and e-books, Business Week can live on quite well. I'm excited for what Bloomberg can accomplish with this well regarded magazine.

Lather, Rinse, Repeat as Needed (Same With Your Cable Box)

Now that the digital conversion has taken affect, every TV requires a cable box to receive channels once accessible directly to the TV set through the cable wire. And now with more boxes, more problems. So why call the cable company for assistance when the answer is always the same: unplug the box, wait 30 seconds, plug back in. What it didn't work; repeat, try again. That is the number one solution for every cable problem! Is it that the cable box is overworked or just a brick in sheep's clothing. These problems don't occur nearly as often with computers, Tivos, Playstations, Wiis, or other devices; the cable box needs continual rebooting. Stuck channel - reboot; no cable guide - reboot; no service - reboot.

Frustrating to say the least. And does it seem that every cable box that gets put in the field has been refurbished. Who is getting the new boxes? And when will Comcast finally get me a Tivo guide in their cable box at my home? I remain frustrated, ready to switch providers and missing the days when I had a Tivo directly connected to the TV WITHOUT a cable box to slow me down. Why do customers switch providers; cost may be one reason, but service and connectivity is definitely another.

Is Leno at 10pm Working?

It is still too early to judge whether the NBC experiment, replacing 5 hours of scripted series with a talk show, is genius or stupidity. But rumblings and aftereffects are being felt. One is a scripted series, Southland, that was meant for 10pm but forced to fill a 9 pm slot. It has been quickly cancelled. Another is the ratings at 11pm of the local newscast that follows Jay. "Late newscasts on local stations affiliated with NBC are reporting significant ratings declines, at least partly because of a ratings drop-off in the 10:30 half-hour that precedes them." And third is a drop in ratings of its perennial late-night staple, The Tonight Show. NBC still says it is bullish on The Jay Leno Show and says it needs to be judged over a year in order to measure its success. For NBC, the bottom line measure is the net profit it delivers; despite lower revenues, Jay' much lower costs will give it greater value to NBC. In isolation, that may be true; but, if other shows are also affected and the TOTAL bottom line of NBC is lower because of Jay's ancillary effect on newscasts, syndication, and late night revenue, then it may not be as successful as first thought. Yes NBC, time will tell.

Is NBCU The Best Fit For Comcast?

Comcast wants content and NBC Universal is for sale, but does that make it the best strategic fit? As the article suggests, Comcast seeks to expand its cable networks, but NBCU is more than just that; it includes broadcast and affiliates, a movie studio, theme park, and more. Would Comcast then have to spin off these non core assets to pare down to what they want. Sure NBCU may be motivated to sell cheap, but cheap doesn't necessarily get you a great deal.

Comcast needs to really determine what business they want to be in and whether this deal strategically, and not just financially, makes sense. And do they really want to own a broadcast channel with local affiliates. Could that add a whole new wrinkle to their distribution business? I'm sure it will raise an eyebrow or two with the FCC. There are plenty of other cable networks that could be ripe for acquisition. The article mentions some, including Discovery and Scripps, but others exist. Those acquisitions come with far less headaches and far more synergy.

"Still, Roberts is an opportunistic dealmaker, and sources said he thinks he can steal NBCU because parent company General Electric is essentially a distressed seller." Sometimes if a deal is too good to be true, it is too good to be true. Comcast must concern itself with its core business, cable distribution, and there they have much bigger issues. If this is a fundamental switch toward content AND away from distribution, that is one thing; but, if it is about both, and NBCU acquisition will cause many more problems and thin out resources, just as Comcast faces growing competitive problems from Verizon and AT&T. Strategically speaking, Comcast needs to decide which battle they want to fight, telco or FCC!

Cable's Loss Is Telco's Gain

I came across this website through an associate and when I scrolled down saw this chart of basic sub growth from Q3 2008 through Q2 2009. It indicates a serious problem for the cable operator:



Over the four quarters cable basic subscription has dropped, while the telcos, AT&T and Verizon, and Direct TV has shown growth. In fact, telco and dish basic growth is greater than cable's loss, indicating that there are still homes that are new to cable television.

Of the cable operators, only Insight has for the most part gained subscribers for three of the four quarters. Comcast has consistently had the most loss for the same period. While cable may be selling more services to their current customers, data and telephone - the triple play, it is finding itself selling to a smaller and smaller universe.

In summary, the incumbent has a serious challenger in the telcos and better do more to reverse this trend or will find itself selling less of its other products and losing serious revenue. Today, AT&T and Verizon's share of the cable universe remains small, but the indication is that they are growing fast. Per the JD Power report, telcos and satellite are beating cable for customer satisfaction. The trend should be disturbing to cable and they need to act FAST or risk losing their lead in the next few years. Customers are dissatisfied with the service, choice, quality, and price. Cable is zero for four and has built for itself a bad reputation in the marketplace. It is time to re-evaluate and change internally, then market that new approach to win back customers. Otherwise, the leak in the dam will only continue to grow!

Google Android Versus Apple iPhone

Will the iPhone ever be offered on the Verizon Wireless network? Certainly a partnership with Google seems to indicate that Apple won't join Verizon any time soon. "Verizon Wireless and Google said Tuesday that they will partner to co-develop a bevy of Android-based devices. Verizon Wireless also said that it will tightly integrate its network with Google apps—including Google Voice." Sounds like a direct frontal assault to the Apple App store to me. It certainly is directly aimed at Apple and iPhone. Given the headstart that Apple has, it may not be such a fair fight. It may depend on how open the device is and how many third party developers come on board to help load it with interesting and useful application.

Will it preclude a future deal with Apple for Verizon. Let's just say, I believe a Line has been drawn in the sand. It may depend who blinks first. And this staring contest could go on for a while.

Condé Nast Doesn't See A Future With Magazines

In a true blow to the magazine industry, Condé Nast threw up their hands and says "No Mas" to a number of long time, popular magazines. The axe hit some notable titles including Gourmet, Modern Bride, Elegant Bride and parenting magazine Cookie. Rather than sell these title to another entity, Condé Nast will just shut them down and lay off its employees. This move isn't new to them. "Condé Nast in the past year closed its Portfolio, Domino and Golf for Women magazines. It folded Men’s Vogue into Vogue magazine."

Certainly the ad market for magazine has slowed although some are seeing it turn the corner. And subscription has taken a toll as well, especially when it competes against free content on the web. Still, Kindle and other portable devices are growing rapidly and need content to grow more. A subscription service does make sense on these devices and could work well.

Condé Nast may have suffered as none of their magazine brands have broadened outside their media. Scripps seems to have done a better job tying in their cable network brands with magazines including cooking, home repair, etc. Could Condé Nast have done more to be part of the trend and not left behind it. It seems more could have been done.

It seems too that this business decision was made because of a consultant's recommendation. "Condé Nast hired consulting firm McKinsey & Co. in July to evaluate its magazine properties and other aspects of its business, said Maurie Perl, a spokeswoman for the publisher." Was this the best decision they could come up with. I sometimes wonder if all consultants do is create change to justify their fee; did they ever evaluate the choice of status quo. And was a sale of the brands even a possibility. Was the ending of Gourmet, Modern Bride, and others truly the best course of action.

Should Magazines Follow The Hulu Model?

It seems print media wants a recharge and they think aggregating their digital content onto one site, a la Hulu, is the solution. "The new service, as yet unnamed, would serve as a digital storefront for magazines, possibly newspapers and other publications and is expected to be announced in about a month. The launch is planned for 2010, people familiar with the plan said." And I ask why.

Hulu is fraught with problems for the video industry. it offers free content, and enables consumers to drop their cable subscription for free programming. Hulu takes viewers away from the networks own brand into a new one. Thus you can watch The Office without caring whether it came from NBC or Fox or somewhere else. It disrupts the current subscription model, not extends it. The TV everywhere concept at least attempts to force consumers to first be subscribers before they get to view content.

So why buy the magazine if the content is free elsewhere? And how can individual print brands be maintained as this new entity develops an overlaying umbrella brand? And finally, why will the consumer subscribe, if the content is free? Rather, these same content creators should instead pursue a store approach that competes with Amazon and Apple and sells digital copies of their pages over different media devices. Support Kindle, E-reader, Iphone, and others with both a digital and print copy for one low price. Offer single copies and subscriptions at different price points and benefits. Use these readers to your advantage; they are the future for printed content. A Hulu-like web site is not the best solution.