The only constant is change. In Physics, change is also a component of time. But in Nexflix case, strategic change seems to be forcing time to speed up. Understandably, Netflix sees its future in streaming media. It won fans and gained strength as a company because of its DVD rental model. And its fans appreciated that Netflix has embraced streaming to its distribution platform.
The big but is that they do not appreciate that pricing is going up at a level that sent a clear message: "Out with the old, in with the new." Netflix clearly wants to position themselves in the new media world. But the change that they are embracing seems to be on caffeine. They are speeding up the transition faster than the consumer cares for and that could hurt the new business. It is clear strategically what they are doing. Price the old DVD model to pay the high shipping costs and to push consumers to convert to the streaming model. Second, spin off the old DVD model into a separate business, now called Qwikster. A separate brand to not impact the core streaming brand of Netflix. And lastly, most likely within the next year or two, disband Qwikster and make it go away. A new name so that when it does fold (and my prediction it will fold soon), it is less associated with Netflix.
The challenge remains the speed in which Netflix wants to make this change. Hence the Physics angle. And so we must add another component, Force. The force of this change is negatively affecting consumer sentiment. Netflix is hoping that this negative reaction will dissipate, but what if it doesn't. The speed of force of change to the consumer may have long lasting effects and help the competition to rebound. If Blockbuster, Redbox, and others can break through this opening, Netflix could lose valuable business. And like Physics, result in a reaction.
Tuesday, September 20, 2011
Friday, September 16, 2011
Netflix Strategic Shift - Were The Results Expected
Netflix made a strategic move to shift from DVD mailings to a streaming model, but did they expect the backlash. By pricing the DVD/Streaming subscription package 60% higher, Netflix was in fact telling subscribers that the future was not mailing. At the same time, they cut the cost for subscribers who only took the streaming option by $2 a month. Clearly a pricing strategy designed to move customers toward streaming. But in the analysis, did they anticipate and account for those customers that would drop the service entirely?
"The Los Gatos, Calif., company now believes that its domestic streaming business will total 9.8 million customers versus its July 25 estimate of 10 million, while its DVD business would also be down from 3 million to 2.2 million." That amounts to a decrease of one million subscribers. A hard pill to swallow especially when content deals, like the one with Starz, have dried up. Content drives the model, and exclusivity of content helps to beat competition. And while Netflix is taking a hit, its competitors are trying to reap the benefits. With Redbox offering an inexpensive DVD model, along with Wallmart, Amazon, Apple, and yes, even cable VOD, competition is only getting fiercer.
Only Netflix can answer whether this customer hit was within their range of expectations. It is unlikely that Netflix will reverse their strategic position. The future for them and others is a streaming model. But now Netflix must go back into their planning stage to determine how best to win back those lost customers and how to grow as the leader in the space. Choices range from partnerships with retailers like Target or Barnes and Noble to offer a free month of streaming with purchase or even to take the partnership to a more corporate level. Content deals remain essential to success. Opportunities with Tribeca Film or other Festivals to share indie films with customers. And don't forget an ad model to further improve the revenue stream.
It is not the end of the world for Netflix, only a bump in the road. The future of rentals is streaming and Netflix has only pushed for faster change.
"The Los Gatos, Calif., company now believes that its domestic streaming business will total 9.8 million customers versus its July 25 estimate of 10 million, while its DVD business would also be down from 3 million to 2.2 million." That amounts to a decrease of one million subscribers. A hard pill to swallow especially when content deals, like the one with Starz, have dried up. Content drives the model, and exclusivity of content helps to beat competition. And while Netflix is taking a hit, its competitors are trying to reap the benefits. With Redbox offering an inexpensive DVD model, along with Wallmart, Amazon, Apple, and yes, even cable VOD, competition is only getting fiercer.
Only Netflix can answer whether this customer hit was within their range of expectations. It is unlikely that Netflix will reverse their strategic position. The future for them and others is a streaming model. But now Netflix must go back into their planning stage to determine how best to win back those lost customers and how to grow as the leader in the space. Choices range from partnerships with retailers like Target or Barnes and Noble to offer a free month of streaming with purchase or even to take the partnership to a more corporate level. Content deals remain essential to success. Opportunities with Tribeca Film or other Festivals to share indie films with customers. And don't forget an ad model to further improve the revenue stream.
It is not the end of the world for Netflix, only a bump in the road. The future of rentals is streaming and Netflix has only pushed for faster change.
Thursday, September 15, 2011
Retrans Rates Good For Broadcasters, Bad For Cable
On debate teams, you learned that there were 2 sides to an argument and one had to learn how to argue each position, both for and against. Helpful too for attorneys who need to anticipate the other side of the case in order to best clarify their position. Well Steve Burke, formerly on the Comcast side and now on the NBC broadcast side, finds himself arguing for retransmission fees when he once argued against them. "Comcast bosses Brian Roberts and Burke, according to sources, have made a calculation that they’re better off focusing on creating value on the content side of their business than on the cable side because valuations are much better for content businesses." What that seems to mean is that those increased fees for broadcast add to the revenue line and those higher fees charged to cable can be matched with equal increases to cable subscription prices. Good for the company and bad news for the consumer.
It works in Comcast's favor because they own both the content and distribution platform. A position that creates a very powerful vertical strategy in entertainment. Other cable companies, like Time Warner and Cabevision have recently split their two platforms into two separate public companies. And smaller cable operators have not been so lucky as to own a piece of content. Mediacom has long argued that retrans fees are not in the best interest of the consumer.
In the past broadcasters didn't ask for fees for their broadcast channels. Some chose the must-carry rule, others used broadcast as leverage to get new carriage of their cable networks. But now that these cable networks (specifically those owned by today's broadcasters - NBC, ABC, Fox, CBS, Univision) are carried everywhere, the next avenue of growth for broadcasters is fee based.
So Steve Burke and Comcast have come to grips with retrans consent; the consumer has not. The threat of cord cutting could cause customers to stop taking cable programming. They could get their broadcast channels without fee through a digital antenna and watch their programs via a broadband connection. An increase in fees passed on to consumers may only exacerbate the situation. That seems to be what Netflix is feeling right now.
It works in Comcast's favor because they own both the content and distribution platform. A position that creates a very powerful vertical strategy in entertainment. Other cable companies, like Time Warner and Cabevision have recently split their two platforms into two separate public companies. And smaller cable operators have not been so lucky as to own a piece of content. Mediacom has long argued that retrans fees are not in the best interest of the consumer.
In the past broadcasters didn't ask for fees for their broadcast channels. Some chose the must-carry rule, others used broadcast as leverage to get new carriage of their cable networks. But now that these cable networks (specifically those owned by today's broadcasters - NBC, ABC, Fox, CBS, Univision) are carried everywhere, the next avenue of growth for broadcasters is fee based.
So Steve Burke and Comcast have come to grips with retrans consent; the consumer has not. The threat of cord cutting could cause customers to stop taking cable programming. They could get their broadcast channels without fee through a digital antenna and watch their programs via a broadband connection. An increase in fees passed on to consumers may only exacerbate the situation. That seems to be what Netflix is feeling right now.
Sirius Raising Its Rates
While Sirius had announced a planned rate increase, the amount was never mentioned...til now. "Sirius XM to raise price of basic package 12 percent to $14.49; first increase since launch". In hard numbers that represents $1.54 more each month. Certainly not as much as Netflix and this increase shouldn't cause any significant loss of subscribers, a concern facing Netflix today.
Still, in this economy, any price increase is hurtful. And a 12% increase, even when viewed as over 3 years, is still greater than any inflation rate these days. Perhaps, with this increase, Sirius will also announce product enhancements to help sugarcoat the medicine.
Still, in this economy, any price increase is hurtful. And a 12% increase, even when viewed as over 3 years, is still greater than any inflation rate these days. Perhaps, with this increase, Sirius will also announce product enhancements to help sugarcoat the medicine.
Wednesday, September 14, 2011
Can The Patch Hurt Local Newspapers?
For most of us, the national newspapers have been our source of information for world, national, and even region coverage. With the rise of the digital age, subscriptions have dropped as consumers get this same news through online websites, blogs, and tweets. So it seemed that the next opportunity was at the local level, replacing local radio and local papers with hyper local websites. But perhaps that isn't the case just yet. "Some 8,000 weekly papers still hit the front porches and mailboxes in small towns across America every week and, for some reason, they've been left out of the conversation."
In my own area, we have a local website, Maplewood Online, that acts as both a conduit of information on likes and dislikes, where to go, and who to use for a home fix it. We also have the Patch, an AOL owned site that tries hard to be local, but remains dependent on each town's local editor for its quality of local articles. Otherwise it is more a patchwork of web articles from nearby towns. And of course, the local paper, a paid model, that seems a must-have for each home. Local news, town events, an occasional picture of your own child at the pool or school. And frankly, even today, a must read. In fact, its website simply links back to a broader regional web site, northjersey.com.
Can The Patch and others beat local newspapers? Certainly the opportunity is there. Local newspapers will be more resilient as they benefit from lower costs, and tons of goodwill. "The business models of these small-town papers are just as intriguing as the local news. In 2010, the National Newspaper Assn. provided some heartening survey statistics: More than three-quarters of respondents said they read most or all of a local newspaper every week. And a full 94% said they paid for their papers." The best success may just come from these same weeklies as they launch companion websites. "Many weeklies, from the Canadian Record in the Texas Panhandle to the Concrete Herald in Washington's Cascade Mountains, are charging for their Web content, and, because readers can't get that news anywhere else, they're willing to pay." The Patch and others may survive in this hyper local world, but it may be a hard battle to win.
In my own area, we have a local website, Maplewood Online, that acts as both a conduit of information on likes and dislikes, where to go, and who to use for a home fix it. We also have the Patch, an AOL owned site that tries hard to be local, but remains dependent on each town's local editor for its quality of local articles. Otherwise it is more a patchwork of web articles from nearby towns. And of course, the local paper, a paid model, that seems a must-have for each home. Local news, town events, an occasional picture of your own child at the pool or school. And frankly, even today, a must read. In fact, its website simply links back to a broader regional web site, northjersey.com.
Can The Patch and others beat local newspapers? Certainly the opportunity is there. Local newspapers will be more resilient as they benefit from lower costs, and tons of goodwill. "The business models of these small-town papers are just as intriguing as the local news. In 2010, the National Newspaper Assn. provided some heartening survey statistics: More than three-quarters of respondents said they read most or all of a local newspaper every week. And a full 94% said they paid for their papers." The best success may just come from these same weeklies as they launch companion websites. "Many weeklies, from the Canadian Record in the Texas Panhandle to the Concrete Herald in Washington's Cascade Mountains, are charging for their Web content, and, because readers can't get that news anywhere else, they're willing to pay." The Patch and others may survive in this hyper local world, but it may be a hard battle to win.
Tuesday, September 13, 2011
What if SiriusXM integrated with OnStar?
I was just wondering, if SiriusXM and OnStar combined their technologies into one device, you'd have a tremendous entertainment tool combined with interactivity, GPS, and voice. When the system was not being used for emergency purposes, it could relay local area alerts, including traffic updates. Too much for one device or an ultimate opportunity to sell OnStar and Sirius on non-equipped cars.
All Hail Social Networking - News, Shopping, Gaming, Gossip
I think social networks are an addiction; but in this case, that may not be a bad thing. A check on Twitter, Facebook, and other sites and I can get updates on breaking news, sport score, friends' birthdays, and much more. I can post an update, ask a question, and get feedback when I need it. "Social networks and blogs are taking up more and more of Americans time online, now accounting for nearly a quarter of our time spent on the Internet, according Nielsen's social media report." The article suggests that gaming on social sites is carved out, but I am not sure I agree. In fact I was heartbroken to learn that Scramble will be shutting down on Facebook.
It's funny, when I started using Twitter I was less impressed. But as I found more interesting accounts to follow, the value of Twitter soared. Some people simply like to Tweet inane comments, others try to be funny, some overdue the number of Tweets per day, and some are invaluable. I care little where someone is currently having their cup of coffee, but appreciate when they share an article of interest. And some just bring a chuckle during the day. But most importantly, I feel that I am up to date when important news is released.
Is there enough revenue to go around? Those that link into web sites for more depth of coverage will find more success. Advertising and paid subscription on mobile devices to quickly get to more information. And apps to "bookmark" for later reading or viewing on a device of our choice when we are finally ready to consume it.
Social networking lets us share. We seem less concerned with revealing more and more of ourselves these days through these sites. True, even politicians have been exposing themselves through these sites. But despite that, if you believe the motto that "information is power", social networking delivers the information.
It's funny, when I started using Twitter I was less impressed. But as I found more interesting accounts to follow, the value of Twitter soared. Some people simply like to Tweet inane comments, others try to be funny, some overdue the number of Tweets per day, and some are invaluable. I care little where someone is currently having their cup of coffee, but appreciate when they share an article of interest. And some just bring a chuckle during the day. But most importantly, I feel that I am up to date when important news is released.
Is there enough revenue to go around? Those that link into web sites for more depth of coverage will find more success. Advertising and paid subscription on mobile devices to quickly get to more information. And apps to "bookmark" for later reading or viewing on a device of our choice when we are finally ready to consume it.
Social networking lets us share. We seem less concerned with revealing more and more of ourselves these days through these sites. True, even politicians have been exposing themselves through these sites. But despite that, if you believe the motto that "information is power", social networking delivers the information.
Monday, September 12, 2011
Does NBC Need Hulu; TV Everywhere Takes Another Step Forward
Despite being a partner in Hulu, NBC is moving forward with its own mobile app for nbc.com through the iPad. "NBC upgraded its iPad app Thursday so users can watch entire shows on their tablets." Good news for viewers and hopefully more viewers for NBC TV shows. This new follows on the heels of other articles touting TV Everywhere, including the NY Times article on Turner. While NBC isn't requiring viewers to have cable subscriptions, TBS and TNT will offer its shows to authenticated cable customers through apps. Certainly NBC represents a broadcast network while Turner has cable network. Still NBC affiliate stations are pushing for license fees from cable markets and free web viewing could possibly affect those carriage deals. Will all these same shows be available as well for on demand viewing through the cable box?
The other question is what about Hulu. Will NBC offer these same full length shows through Hulu or will nbc.com have some exclusive product? "The new app also offers customization features that let you follow a show and have it automatically update in the app, rather than having to search for a new episode." Will Hulu viewers gravitate to NBC for these features? And I wonder does this news indicate a change in strategy for NBC and Hulu.
So the recent news of mobile viewing is good news to viewers seeking TV shows that follow them on their schedule. And it certainly continues to increase the value for tablets. TV distribution continues to push itself outside the cable box and away from linear watching. Viewers watch on our terms and this availability is overall good news.
The other question is what about Hulu. Will NBC offer these same full length shows through Hulu or will nbc.com have some exclusive product? "The new app also offers customization features that let you follow a show and have it automatically update in the app, rather than having to search for a new episode." Will Hulu viewers gravitate to NBC for these features? And I wonder does this news indicate a change in strategy for NBC and Hulu.
So the recent news of mobile viewing is good news to viewers seeking TV shows that follow them on their schedule. And it certainly continues to increase the value for tablets. TV distribution continues to push itself outside the cable box and away from linear watching. Viewers watch on our terms and this availability is overall good news.
Friday, September 9, 2011
Liberty Media Should Buy Tivo
There is wide spread speculation what Liberty Media should do one it spins off some of its assets. According to Malone and Maffei, Liberty will have quite a bit of cash available for acquisitions. "Asked if shareholders should expect Liberty to delve into companies outside the realm of traditional media, like its recent investments in book retailer Barnes & Noble, Malone said the goal is to invest in or acquire businesses where its management can have an impact." The article suggests Sirius, but I would think that Tivo could be a target, too.
With a worldwide distribution platform, including DirecTv, Tivo is a perfect fit. In fact, Tivo technology is already utilized in DirecTv boxes. So why not expand that reach. A purchase would give them the push to embrace Tivo in a wider platform footprint as well as encourage more innovation with IP connections and content. And it seems it could lead to higher long term value.
Is Tivo being mentioned publicly? Not that I have been reading. But it seems a brand that could do well with a relationship with a company like Liberty. Since Comcast never took my urging in an earlier blog to buy, Liberty could be the next best bet.
With a worldwide distribution platform, including DirecTv, Tivo is a perfect fit. In fact, Tivo technology is already utilized in DirecTv boxes. So why not expand that reach. A purchase would give them the push to embrace Tivo in a wider platform footprint as well as encourage more innovation with IP connections and content. And it seems it could lead to higher long term value.
Is Tivo being mentioned publicly? Not that I have been reading. But it seems a brand that could do well with a relationship with a company like Liberty. Since Comcast never took my urging in an earlier blog to buy, Liberty could be the next best bet.
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