How Much Is Hulu Worth?

Lots of news these days of consumers dropping their cable and satellite services for an internet only connection to the home. And that cord cutting is affecting license fee revenue to networks. Some of those same networks, NBC, Fox, and Disney, today also own a piece of Hulu, a web platform for streaming TV shows and movies. And now Hulu's investors are waiting their big pay day as they put their platform up for sale and "are expecting bids of at least $1.5 billion for the site and its licenses."

But perhaps because of cord cutting, these same content companies might want to retain a piece of the web platform for future revenue growth. "It’s possible, for instance, that some of Hulu’s owners could hang on to their stakes, which could push the purchase price down. Alternately, a buyer could ask the company’s network owners to increase the length of Hulu’s exclusive online license, and end up paying even more for those rights." For buyers, the length of the existing deals and future deals will determine the value of Hulu. Without enough meaningful content and some agreement to offer exclusivity of content for a period of time, it's valuation may not be as high as possible. Web users have an insatiable appetite for video consumption, and Hulu's content partners may need to go even deeper into their libraries to satisfy the consumer demand.

The list of buyers that may be interested include Apple, Google, Yahoo, and Amazon. For each, the question remains, can they negotiate better license fee deals for content rather than buy through Hulu? Is the Hulu platform better than what they are each currently using? Is the Hulu value justified over a period of time? And will Hulu's premium subscription continue to find future growth? As the financial wizards sharpen their pencils, the strategic thinkers need to envision how the Hulu platform can benefit their business plans.

Amazon Also Bypasses Apple App Store

Yesterday, it was Wal-mart's Vudu service that was bypassing the Apple App Store to enable rental and download distribution on the iPad. Apple's 30% fee for revenue gained through an app has led others to find end around approaches as well. Amazon's Kindle reader can now buy from the web and read books on an iPad. "This new web application is Amazon's way of deftly getting around Apple's restrictions on in-app purchases without giving Apple a piece of the action. Rather than pay Apple their cut, Amazon pulled the iOS Kindle app's in-app link to the Amazon Kindle store. You could still buy Kindle books, but you would have to surf to the Amazon Web site in a browser to actually buy them and send them to you device."

Did Apple shoot itself in the foot with its high fee? It seems when individuals and companies feel threatened, they often find ways to build a better mouse trap to get around the problem. For Amazon, Wal-mart, and others, an easy web approach can work, especially if purchasing can occur with few clicks. The Apple App Store is keen on that, but a website approach, done well, could be just as satisfying for the end consumer.

As the article notes, this innovation now takes the conversation away from apps and back to web browsers. "As adoption of HTML5 matures, I'm sure there will be far fewer drastic differences between browsers as all of their implementation reach a stable plateau. Still, there's always a way to do things "better"--how long will it be until browsers start breaking away with their own extensions, just like the HTML add-ons that plagued users during the first browser war?" A fascinating next step.

No App, No Problem!

As if spouting a line from the movie Blazing Saddles, Wal-mart's Vudu service says, "We don't need your stinking apps" to Apple. But they do want to be seen via the web on Apple iPad devices. "Last month, Wal-Mart -- the world's largest retailer -- integrated Vudu into Walmart.com, which now provides links to the streaming-video service alongside DVD search results. Movies are available from Vudu to rent for 99 cents to $5.99 or to buy starting at $4.99. No app, but accessed, rented or bought via the website and watched on an iPad or other approved CE device, "including the Sony PlayStation 3 and Internet-connected HDTVs and Blu-ray Disc players from Funai Electronics (Magnavox, Sylvania), LG Electronics, Mitsubishi Digital Electronics, Panasonic, Philips, Samsung, SANYO, Sharp, Sony, Toshiba and Vizio."

With deals from most every major movie distributor, this service truly competes with Apple's not yet announced rental service. The challenge and opportunity for Apple will be to present a better, more ergonomic viewing and library experience. An Apple app can potentially mean less clicks; it could also enable a better search engine to find most efficiently exactly what you are seeking. But Vudu's advantage is that it has been released first and has the opportunity for better awareness through the Wal-mart store.

At the same time, Wal-mart made another decision. "Separately, on Tuesday Wal-Mart announced that it is exiting the digital music business and will stop selling digital music online effective Aug. 29." Funny to leave a business that could benefit from working with Vudu. To consumers, a digital download is a digital download whether it is video or music. To drop the music side of the program makes little to no sense.

So the digital video distribution platform is getting more crowded - Vudu, Netflix, Hulu, Apple, and of course cables' VOD, all offering movies and shows on multiple devices. The DVD business may be in decline, but streaming media is only growing.

You Can Re-Negotiate Your Cable Bill

Yesterday's blog focused on Cablevision's quarterly loss, but the problems in cable are not limited to Cablevision. "Cable, satellite and phone companies that provide TV services lost a combined 380,000 video customers in the second quarter, up from the 162,000 subscribers they shed in the same period a year ago." Today's print edition of the NY Post has a chart outlining all the deals that cable is offering to lure new customers to join. Among them, free access to NFL Sunday Ticket, cashback offers, and multi-platform discounts. But what should you do if you don't want to switch cable providers.

Certainly the cost to switch in terms of time spent waiting for the installer to show up at your door may offset the financial gain. But nothing should stop current customers from re-negotiating their monthly bill. That's right, just pick up the phone and threaten to switch. It may take a couple passes from customer service rep to manager to win-back department, but the half hour on the phone could shave multiple dollars off your bill or give you free upgrade to premium content from HBO, Showtime or Starz. Deals may last six months, some a year, but they can give you the same level of serve for less money.

Cable companies don't want to lose any more customers and it is cheaper to discount in order to retain than to install a new customer. So if you have some time, make the call and push for your best deal.

Competition Cuts Cablevision

In such difficult economic times, its hard enough to watch the stock market plummet and tons of shareholder value evaporate. Harder still to watch a company become what everyone asked and watch the business model change as well. Such is the case for Cablevision. Asked to spin out networks, both the Rainbow arm, to be renamed AMC Networks, and the MSG arm, are separately owned companies, and Cablevision is a "pure-play" cable distribution operator. But it didn't help in the second quarter, "losing 23,000 basic video customers and missing analysts' consensus on practically every growth metric in the period."

Well Cablevision is also one of the smartest cable operations in the country and their marketing group has delivered innovative programs to the market place. The triple play idea was successfully pushed first by Cablevision; Optimum Rewards gave their best subscribers additional savings. Sure they have stumbled some, but their batting average remains high.

Well as Cablevision most likely knows, it comes down to either new users, new uses or higher prices. With competition from FIOS and the web causing cord cutting and cord shaving, price increases may only exacerbate the video subscriber drop problem. The pipe to the home still has value and perhaps Cablevision is already considering new uses to sell like security systems and better ways to capture business customers. And even perhaps new price packaging to win-back customers from competition.

As Cablevision has been a leader in the cable industry, the news out of Cablevision's quarterly report may only reflect what is also being felt across every other cable operator today. Cable customers taking broadband but dropping subscription services. It is a pattern that has been going from quarter to quarter to quarter.

Nook Smart Marketing To Students

My son is not yet a teen, but he is clamoring for an e-reader. He's away at camp, but he will be very jealous when he sees that his mom has a Nook. Well, he and other students may have another reason to purchase one, Barnes and Noble has put together a promotion that offers some nice freebies with the purchase of a Nook. "Users who register their new Nook by October 31 will receive coupon codes for twelve Barnes & Noble Classics e-books, twelve SparkNotes e-books (which, oddly, do not match the selection of Classics), three Nook Study Guides and four Nook Color apps. B&N values the content at $107.28." B&N is not being overly generous with their gifts, the titles available are self-published.

"This promotion is an interesting reminder that Barnes & Noble is also a book publisher, and although it is publishing public domain works, it can still find interesting things to do with them." Smart marketing to build value of the Nook brand. At the same time, I would love to see how B&N uses it's Nook to also bring consumers back into their stores. Sure the key to owning an e-reader is the ease of downloading without leaving your home. Still, the success of brick and mortar stores will depend on blending together on-line with in-store.

This latest marketing push by B&N should certainly cause it's competitors, like Amazon, to react. Amazon is not encumbered with a store presence and may have more flexibility in its marketing approach. And as it comes to the student consumer, the company that can get e-book versions of high school and college textbooks may be the real winner at the end of the day.

Magazine Newsstand Sales Down in 2011

Coming as no surprise, newsstand sales of magazines are down this year. According to the article, the first half saw an 11% decrease in single issue sales while subscription sales appears to be flat. But should this newsstand decrease be a surprise to anyone. It doesn't take much of a crystal ball to see that bookstores like Borders that sell magazines aren't doing well. With businesses cutting costs to manage profit margins, business travel has declined. So too has personal air travel given the high costs to fly. Few stories, with the exception of the royal wedding, are notable enough to push readers to buy a magazine, especially when these same stories are accessible on the web.

We are seeing changing readership patterns. The challenge and the opportunity lies in the content and its exclusivity behind walled gardens. That means that a story on Justin Bieber may seem important but it is most likely covered numerous times. We need to make the writers behind the story more notable so that it is equally important who is telling the story that makes it an important read. And changes in distribution platforms need to be embraced as well. The web opens up opportunities for single and subscription sales. It also enables a multi-media approach to storytelling with better pictures and videos to accompany the words. Add to that the promise of always up-to-date so that every story that is time sensitive has the most accurate facts and information to share.

We can't rely on newsstands to return to former days of glory. New marketing partnerships need to be enhanced. A couple examples: Bring your Nook to Barnes and Noble and get a special deal on an in store download of an issue. Or bring your iPad into an Apple store and get special digital content from a magazine. Or bring your Kindle to a Hudson Newsstand at the airport and download a code for a discount on your next Amazon purchase with any in-store digital purchase. Hopefully integrated marketing strategies can lengthen the life of the newsstand while embracing single issue sales.

In these turbulent times, with a slow economy, a downturn in travel, bankruptcy of our bookstore chains, and a transition from print to digital content, newsstand sales may not ever fully recover. Their impact may need to transition to a marketing approach to encourage a digital sale rather than to push a magazine sale into the shopping cart.

Is Hulu A Good Acquisition Target?

It seems that a lot of big companies are kicking the tires on a Hulu acquisition. We've read about Apple and Google having some interest. Now comes word that DirecTV is considering a purchase. "One more potential Hulu acquirer has thrown its hat in the ring, with DirecTV admitting it has joined Apple, Yahoo, Google, Verizon, AT&T and Amazon in taking a look at the online video site’s financials. But while it’s an interesting opportunity, according to DirecTV CEO Mike White, he said the satellite TV firm has yet to determine if Hulu’s long-term business model makes sense for an acquisition." This news just when DirecTV announced a bad quarter for subscriber acquisition. Is Hulu the right fit with DirecTV let alone with any of the companies mentioned?

Apple may be kicking the tires for sport only as there is speculation that they are building their own rental business from scratch, licensing content from all the major studios and networks. DirecTV has linear and perhaps some on demand deals in place with the same content companies as Hulu. As the cable operators are fighting for streaming deals as extensions of their programming rights, DirecTV may be best served doing the same thing. Hulu may prove to be an added cost, but not the best means to promote the DirecTV brand. For Yahoo, it may be the only move left to compete with Google and You Tube.

Hulu wants to be sold because it's current partners most likely can't get along. Its hard to be a competitor in the network arena while acting as a partner in the digital space. Their best move is to sell out, take their money, and run. It just might not be the best long term deal for the buyers. Time will only tell.

Add Print, Box Store, and Digital, Then Stir

I am always intrigued when new partnerships emerge, especially when they seem so out of box. To me the latest announcement that Esquire and JC Penney are working together strikes me as a terrific opportunity. "Clad, a new e-commerce partnership between JC Penney and Esquire magazine, will launch later this month." I like it for both parties for a number of reasons. The JC Penney brand comes with a ton of pre-conceived notions; perhaps, too, so does Esquire. Each brand is known for its particular space, but less impact in the digital, e-commerce world. The two together brings upscale print with merchandising and distribution. And an e-commerce site ideally captures new business without hurting the existing business strategies of each company.

Obviously I wonder if the recent hiring of the head of Apple's retail stores to JC Penney helped to initiate such a deal. Whether it had an effect or not, it brings JC Penney further into the present and matches the editorial style of the Esquire brand. Like what you see, why not easily buy it.