Ultimate Synergy - Marketing Owning The Medium

The worst part of advertising are ads that are perceived as ads. Low credibility, negative relationship, and an intrusion on the content. And while adults are more savvy (we hope) to ad messages, children are not. To them, everything told to them is true. marketing to children then is a tricky process.

So what may be perceived as smart marketing may also be looked at as deceptive and disingenuous; that is the ownership by a toy manufacturer of a TV network. "Discovery Communications (DISCA.O) and toy maker Hasbro Inc (HAS.N) said on Wednesday their new joint-venture cable network The Hub, to launch next month, would target an under-served market of children aged 11 and younger." Shows featuring toys ripe for purchase have that air of credibility but unlike an ad, doesn't necessarily differentiate between fantasy and reality.

So what is the difference between a manufacturer that owns a network airing shows of its characters and a network not owned, but whose characters were licensed to appear on a TV show. Probably not much. Perhaps the key difference is the ownership factor. Promotion of the toy may be more important than the rating of the TV program. Hence a 24/7 advertising model. Thus, the channel can afford less advertising "commercials" as the whole time is essentially a toy advertisement.

Still Hasbro and Discovery may have a point that they are not the first to enter this space. "Hasbro Chief Executive Brian Goldner said rival children's cable network owner Walt Disney Co (DIS.N) is the third-largest toy maker in the world while Viacom Inc's (VIAb.N) Nickelodeon is the fifth-largest." In those two cases, the content came first and the toy making came second; in this case, the toy is driving the content.

Can The Hub be successful? At the end of the day, TV content needs to be engaging and watchable, regardless of the toy it is promoting; otherwise, it won't be of interest. And without interest, toy sales will drop. Make solid programming investments, develop good stories, and high production values and the audience should grow.

The Merging of Broadcast and Cable

So what is the difference between say ABC and Bloomberg, or NBC and USA. To today's audience, they are both simply networks on their cable line-up. One may be more general interest, one may or may not be more niche. This merging into one box called TV content may signify the greater trend occurring. In fact, broadcast networks own cable nets just like NBC owns USA.

So that there is news that broadcast and cable news operations may combine is simply the beginning to full scale ownership of the operation. CBS and CNN sharing news resources, great; how about one corporation simply merging with the other. "It’s all understandable: With the news industry battered by a still-foundering economy and splintered media landscape, questions of whether such marriages of convenience and economic viability are the future for broadcast news become inevitable."

To me, it is inevitable that content companies will continue to merge to find their economies of scale. Both in news and entertainment content. Where there used to be many cable operators in the market, today the top 5 own a vast majority of the marketplace. For content companies, some mergers have occurred and more seem forthcoming. At the same time, the merging of contet companies with distributors may be the end result of this slippery slope. With a Comcast and NBC merger comes also the concern that too much power in the hands of too few will limit new growth and innovation, especially that Comcast owns the broadband pipeline as well as the cable connection. Or lead to the death of TV at the hands of a wireless revolution.

Sirius needs Howard, does Howard Stern need Sirius

There was once a time when all negotiations were done behind closed doors; but today, most seem to occur across the media. The same holds true for the Howard Stern and Sirius negotiations. "While some speculate that Stern on Thursday was merely beginning the process of negotiating in public, the shock jock also indicated that he has no desire to bash his employer like he did before he ditched terrestrial radio for satellite radio." Of course, his agreement doesn't expire till the end of the year, so all this could simply be posturing for the best possible deal.

But exclusive content can drive distribution and so it seems that Sirius needs Howard more than Howard needs Sirius. Howard has many more choices although restarting in a new medium requires more energy than perhaps even Howard isn't willing to give. Going back to broadcast for Howard may be fodder that Howard made a mistake going to Sirius and is in need to reclaim his "King of all Media" crown. I expect that at the end of the year, Howard and Sirius will renew their vows.

New TV Season

Okay, it's September and time for the TV premieres. I'm sorry, was that the sound of a pin hitting the floor. That now seems to describer the state of broadcast TV these days. Little buzz, little fanfare. While cable revs up in the summer, broadcast snoozes. And rather than push big messages about the coming of new shows, premiere week may simply drift by. Has broadcast given up? Will new shows be seen and quickly yanked because viewership didn't come quickly. Who knew they showed up in the first place. If broadcast ratings drop, they have only themselves to blame.

Net Neutrality Regulation

Terrific article in this Saturday's NY Times, and certainly worth the read. "Net neutrality, of course, is the principle that Internet service providers should not be allowed to favor some Internet content over other content by delivering it faster." And yet, as Joe Nocera describes it, "that this was a big mess?"

He presents a clear understanding of what is happening with net neutrality. Two points stick with me after reading it. One is that equal availability of content doesn't exist in cable, so why should it be equal in broadband. Your cable provider decides whether you can see a certain channel or not and prices it accordingly on a basic, tier or premium level of service. Think every home is capable of receiving a channel like Hallmark Movie Channel or Epix. The answer is no. But with competition, you can decide which provider you want for cable carriage. And perhaps part of that decision is predicated on a particular channel they carry.

The second point that is conveyed is that the consumer should have the ultimate power. "Consumers have come to expect an open Internet, and companies will violate net neutrality at their peril. That is just the way the Internet has evolved." Allowing a free market where businesses that offer broadband can decide how to offer it. Favor one content piece over another; why not. What is most important for the FCC is that their are low barriers to entry for providing broadband service. Encourage utility companies like electric and water to expand their offerings to also bring broadband into the home. Let telcos and other overbuilders ease of entry as well. Enable multiple companies through tax breaks to build the infrastructure to provide wire and wireless broadband everywhere. And then let free market decide how to proceed. One company signs a deal to give Hulu priority stream; another gives it to Netflix. The consumer ultimately decides which broadband service they prefer.

It seems an open market will solve the problem, not a heavily regulated one. Until then, Nocera is right, it is a big mess.

Disney and Time Warner Cable Deal Renewed

A done deal. No dropped signals. Consumers kept their ESPN. In fact, they get their ESPN3! "In the deal announced on Thursday, 12.7 million Time Warner video subscribers and 2.4 million Bright House Networks video subscribers will get access to ESPN3.com without an extra charge." I'm sorry, without an extra charge. This is not really truthful. For the moment, the consumer will not spend extra to receive this internet channel, but trust me, they will spend more. "Disney also won a cash payment for granting Time Warner Cable the right to retransmit signals from four ABC stations and secured carriage of a new 24-hour channel called Disney Junior, a rebranding of its SOAPnet channel, when it starts up in 2012." These "extra costs" will be quickly bundled together and the cable bill will go up by even more than the amount spent. Heck, you gotta keep those margins up.

It certainly helps position Time Warner as the aggregator for branded cable and web content, working through Time Warner to authenticate these users to watch their ESPN 3 on a computer or other mobile device. Perhaps it is how TV Anywhere will ultimately be monetized.

Apple Again Innovates

While still no news on the Verizon version of the iPhone, Apple did come to the press conference with a number of improvements. Apple TV is back with a Netflix rental deal, the iPod Nano has a touch screen, and Apple has launched a music oriented social networking site. "Unlike other social networks used with Web browsers, Ping requires iTunes software on a computer or an Apple device. Apple could face an uphill battle convincing customers who already invest time updating and keeping track of friends in other social networks to also do so through Ping."

But wait, doesn't My Space also go after the music fan. To me, the key here is the convergence of the music to the networking. This natural link could easily bring people over to Ping. As iTunes dominates the music listening space, the key benefit is in the simplicity of communicating while your listening. Will consumers embrace Ping? It seems the infrastructure already exists and that Apple has little to lose in trying.

As to the rest of the announcements, the biggest story had been the re-introduction of Apple TV. To me, Netflix online seems everywhere and adding one more distribution device doesn't mean much. Normally, Apple is first in to the market, but this makeover seems less exciting than his other announcements. Will consumers rush back to embrace Apple TV? Apple needs to tell its base all the impressive things that this device can do that others can't. I need a real reason to buy it and I don't see one yet.

Time Warner and ABC Still Negotiating

The bad news is that the renewal has not been completed; the good news, they continue to negotiate in good faith. And by that I mean, they have not resorted to shutting down channels. Time Warner Cable customers can still get their programming despite being out of contract. Let's hope that discussions don't turn acrimonious at the last minute and that either side leaves the table. Dropping signals does not help either party.

Content v Distribution - Another Channel Dropped

Sorry, the news today isn't about ABC and Time Warner as that deal appears to be done; no, in this case it is between an independent network, Hallmark, and a telco, AT&T U-Verse. And as a renewal couldn't be reached before expiration of the contract, the channels of Hallmark were taken off the air. "For its part, the programmer said the telco had dropped Hallmark Channel and Hallmark Movie Channel from its channel lineup at 12:01 due to an inability to reach a new carriage agreement."

AT&T did replace Hallmark with two other channels, but is dropping channels the expected choice of action. What of the consumer. Are negotiations always so acrimonious that the last resort, dropping signals, becomes the first choice of action. Couldn't they at least agree to keep on air for the sake of the consumer as a sign of good faith negotiation. Unfortunately, in this case, and a majority of others, the consumer comes last.

I do understand the negotiation process and I respect both sides; but this drama is bigger than both the two current combatants. it seems to be replayed with each negotiation as part of the playbook. At some point content creators will get tired of this dance and reach out directly to the consumer. And if they do that distributors will have a harder time getting linear and on demand product. It will simply be streamed directly to the viewer's device from Hallmark and others.

Distributors and Content have a symbiotic relationship that relies on each other to be successful. Aggregated content enables costs to be shared and provides more choice (hopefully) for a better price. Thus the argument against a la carte pricing. But technology shifts also lower the barrier to entry so that the content company can bypass distribution and talk directly to a customer. At the same time, Distribution can control the flow of streams and could favor one stream over another. Hence the argument for net neutrality. And so these content and distribution negotiations are all impacting a slippery slope. Better to work together than to push forward potential distribution alternatives.