Music In The Clouds

No big secret that Apple wants to be our connection to music and video. And we now know what Apple is doing with their cash. "Apple will fork over between $100 million and $150 million in advanced payments to the four major music labels in order to get its iCloud off the ground, three separate sources told The Post." That means that Apple will have put together a plan in time for it's big announcement next week. And it adds one more feather to the iPhone, iPod, iPad family; all your music available without needing to fill up your hard drive.

"One executive explained that the cloud service will initially be free to people who bought their music from Apple's iTunes store, but Apple is said to be considering a $25 a year charge in the future." Is Cloud access worth a $25 annual subscription? Or do we feel that purchasing the song or movie should entitle us to availability regardless of where it is stored? If consumers buy in to the iCloud as a subscription service, it means that Apple has uncovered another important revenue stream and has beaten their competition to the punch. Certainly Google must be worried that, despite announcing first, they couldn't get their cloud service out quickly.

Anytime Apple announces, devotees wonder what else will be released. While the early PR has all been on cloud computing, some are hoping for more news on their hardware products. Regardless, Apple continues to capture the public's attention with their eye focused squarely on future opportunities.

Time Warner Cable Sees Broadband Only Opportunity

Yesterday's blog talked about the loss of the "all you can eat" broadband consumption model and cable's hope to retain it's triple play business. It also touched upon new competition that could face cable in a broadband only model. And of course, once you hit send, there is an article about Lightsquared, Inc. hoping for approval to compete in this space. But where some cable companies may be fearful of a broadband only world, another seems to embrace it.

"Time Warner Cable Inc. Chief Executive Glenn Britt said Wednesday his company has an opportunity to win more broadband-only customers as broadband replaces TV as the cable industry's anchor product." Changing times require changing strategies and Time Warner Cable seems to get it. Like Netflix changing its model from DVD rental to streaming, TWC is taking its first steps to grow its broadband business as it's linear cable model is slowly declining. And like Netflix, TWC recognizes that this change takes time, but must be embraced. Otherwise, they begin to look like Blockbuster, late to the game, and hard to remain in play.

With Lightsquared planned release early next year, TWC and other cable companies need to redefine their business strategy to remain ahead of other competitive entrants. Knowing that these companies may try to underprice cable companies to encourage cord cutting, cable must strategize and market its competitive differences and push a pricing model that retains and grows subscribers. A usage pricing model is not the answer; TWC is trying hard to retain with its TV Essentials cable package as a way to keep consumers connected. Cablevision has used Optimum Rewards as a strategy to retain its best, triple play customers.

Cable Companies must understand that broadband access has become an important service for the consumer, even ahead of phone and cable. Strategies must continue to evolve to find the next consumer need. Yesterday was triple play, but not anymore. It is a broadband world and cable needs to build mobile accessibility to it and rethink its pricing models. Or like Blockbuster, this may be the start of their decline.

3D Movies More Fad Than Fancy

As I have written previously, I am not a fan of 3D movies, didn't consider buying a 3D HDTV, or have ever found the experience of watching 3D unbelievable. It seems I am not alone. "The novelty has apparently worn off and Americans are now opting for cheaper, less gimmicky 2D movies, such as the recent huge hit 'Hangover 2.'"

Is the economy partly to blame, perhaps. Is it that the experience of watching 3D requires special glass an issue; for me, absolutely. "Because 3D movies are significantly more expensive to attend, and because only a few movies like 'Avatar' have ever really made 3D seem truly amazing. For most movies, it's a lame add-on that doesn't add much." Hopefully, one day there will be a technology that supports a truly 3D visual experience. Once again, Star Trek may have had it right with their holodeck idea.

Entrepreneur Opportunity For Broadband Business

Attention Entrepreneurs! Seeking a continuous source of subscriber revenue? Interested in competing in a business where demand for consumption is only growing? Then have I got an opportunity for you. Because cable companies are fearful that their triple play business model is reducing to a pipe only world, they are seeking to clamp down on broadband usage by their current customers. "With companies like Netflix and Hulu threatening their subscription-cable business, companies including AT&T, Comcast and Charter no longer want to aid the competition by offering consumers all-you-can-eat broaband." And logically it makes sense, only it doesn't satisfy the consumers' need for more streaming. Charging on a per bit cost is reminiscent of the days when phone companies charged per minute for calls.

So who could ideally get into this business to compete with cable and provide consumers with an alternative broadband company. I have a couple suggestions. First would be for the utility companies to consider broadening their business. Electric, gas, and water companies already reach out to every home in their community. Using existing relationships and local service, they could build out a wired and wireless grid to offer competing broadband coverage.

Mobile phone companies could also offer more streams to homes and build out a WIFI platform in their communities. And lastly, let's build out a national WIFI network. No doubt, a subscription model could open up an ad sales opportunity as well bringing an additional revenue stream into the equation.

Clearly the cable companies have something at risk, with cord cutters and cord shavers scaling back their subscription for broadband access only. Offering an "all you can eat model" only hurts the cable subscription business structure. But there are consumers who only want broadband access, inexpensive and accessible. Hence a new business ripe for the taking requiring some capital expenditure to get it off the ground. Good luck. I'd love to help start it.

The Challenge of Vertical Integration for Comcast and Bloomberg

Back in the 1940's, an antitrust case was decided that had long lasting effects on distribution and content. In US vs Paramount Pictures, the courts decided that vertical integration, in this case the owning of both a studio and a movie theater, was illegal. Studios were forced to sell their theaters and an oligopoly was destroyed.

So it is of no surprise that the vertical integration of content and distribution is popping up once again in cable. That was the concern behind the merger of NBC Universal and Comcast and thus rises the latest accusation between Bloomberg and Comcast. "In order to win antitrust approval to purchase a controlling stake in NBC Universal, Comcast promised not to favor its dominant business news network, CNBC, over rivals such as Bloomberg TV. Bloomberg claims that as a condition of the deal, Comcast is obligated to place its business channel closer to other news channels, including Comcast's CNBC and MSNBC."

Smaller studios faced similar troubles. With big studios owning all the movie theaters, smaller studios couldn't get placement of their films. They were in blocked out. And while the media world has changed and digital has opened up distribution alternatives, cable remains the leader at the moment. Limiting or restricting viewership of cable channels is simply history repeating itself; vertical integration causing smaller networks to not get their content in front of audiences. While Bloomberg may have deep pockets to fight this battle, there are other networks paying close attention to this fight so as to demonstrate why they also deserve equal access.

Thus begins another chapter in cable, a fight over antitrust behavior. yes the entertainment landscape may have changed but history is a funny thing; when we don't learn from our mistakes, we repeat them.

EBIF Dying Part Two, Comcast Testing IP

How timely. Shortly after sending out my previous blog do I find this terrific article in today's Wall Street Journal. The old maxim, if you can't beat em, join em, seems to have prevailed as Comcast begins to accept that for now the future is IP over EBIF. "Using the MIT campus as its proving ground, Comcast in coming months will try delivering TV channels using the same standard used to deliver data over the Internet, known as the Internet protocol, or IP. Like other cable providers, Comcast currently delivers channels over less versatile digital television technology that sends the video in streams to set-top boxes and isn't compatible with the Internet." And should it prove a successful test, cable interactivity and convergence could take a large progressive leap forward.

"The new technology could enable Comcast to deliver video service to any customer with an Internet connection, regardless of whether they live in an area covered by Comcast's cable system. A move to do so would shake up the pay-TV market, where cable systems largely operate in separate regions of the country, known as 'footprints.'" It is this very notion of competition across the entire USA by cable operators that causes competing satellite companies to worry. Their competitive edge is to merge Direct TV and Dish and compete with cable universally.

And a web based approached better gives the consumer what they seek most, content what they want, when they want, where they want, and how they want. No set top boxes, better interactive guides, easier set up and servicing. Overall, an IP approach delivers a better experience than EBIF. So push that test and start rolling out.

Cable's EBIF Is Dying On The Vine

What happens when an industry is so resolute in its plans to protect it's turf against the competition that it draws a line in the sand only to see others attack from a different front. They lose. Such is the case in battle and so too in business. To stay so narrowly focused and unbending to changing external factors is a recipe in disaster. And so too the ultimate end of EBIF, Enhanced TV Binary Interchange Format, designed exclusively for cable.

"It was invented as a way to add more oomph to the fielded base of digital cable set-top boxes, which obsolesced almost before they were installed. Ten years ago." But the world became Internet Protocol (IP) based and TV and other consumer electronic manufacturers, found more flexibility working with IP than with the cable operators and their EBIF technology. The result are not helping cable with the rise of more over the top competitors offering similar video content. These competitors found the different front and did an end around on the cable operators.

Can EBIF and IP work together? Some Apps are working to make it so for better connectivity and TV on the go. But it may not be the ideal technological approach. Ever wonder what those blue pop up screens are that come up on your TV for on demand movies and other ads. They are achieved with EBIF. And they look like decades old graphics. Clunky and downright ugly. Certainly not as clean and easy to interact with as other means. Communication has changed and EBIF has not. The consumer seeks more convergence and ease of use in their interactions with their video content. EBIF has to change or cable operators will continue to lose.

Dish Desires Direct TV

Speculation has arisen yet again that the two major satellite players may look to merge. What once might have been thought of as unthinkable now seems possible, especially with others before them being approved. Look no further than the merger of Sirius Satellite and XM Radio, despite being the only two satellite radio companies. But they were approved because competition still exists via the web and terrestrial radio. Other mergers like Comcast and NBC Universal also demonstrates that even vertically integrated media companies get approved. So it seems that a merger of Dish and Direct TV could also pass because of wire and wireless competition.

"DirecTV has 19 million subscribers, while Dish has 14 million. Together, they would form the biggest pay-TV provider with enough clout to push back against rising programming costs." Currently Comcast has over 22 million subscribers; a satellite merger would make Dish-Direct TV number 1. For cable, the next step is clear to them, continued consolidation of cable operators. With Cablevision recently owning Bresnan and Charter selling its LA systems, MSOs and systems should be ripe for the taking. Logically, Charter, Cox, and Cablevision should be viewed as ripe for the taking.

Is the Direct TV - Dish merger speculation or reality? Today it may be just talk, but as the industry life cycle for cable continues to mature, consolidation and convergence are necessary next steps. It brings better synergies, better efficiencies, and lower costs to compete in an ever changing media landscape.

If Content is Sold Everywhere and Anywhere, Does It Become A Commodity?

Content deals are everywhere with sales to cable, Hulu, Netflix, Tivo, Apple,and others. Then it is repackaged and offered to the consumers. To compete in the mobile space, cable has now pushed its on demand extension onto iPads and iPhones. And as a consumer, we can decide where we want to watch our Spongebob episode, whether on TV, on our computer, on our tablet, or on our smartphone. With sales across all platforms and all devices, all this video content is becoming ubiquitous. Soon it could be at a tipping point where the content itself is viewed by the consumer as a commodity. With no exclusivity or other distinguishing differences, the consumer will make decisions on how to watch on a pricing basis. The cheapest viewing platform wins.

Could that hurt the cable model as content owners sell to mobile devices? The cable model is certainly not the cheapest and the threat of cord cutting already exists. Do these content deals simply increase the threat of more lost subscribers? For viewers, the concept of content everywhere and anywhere is appealing. For content platforms, like cable, it means figuring out new strategies to maintain a differentiated value to offset the content commodity issue.

Content creators are pursuing more platform deals to raise revenue. Distributors will find competition become more fierce. Over time, the big fish will swallow the smaller fish and the distribution choices will get smaller. It is the pattern of every industry and already at play strictly within the cable industry. It is the industry and product life cycles at play. With ultimately the many leading to the few.