Will SiriusXM Fall Into The Netflix Hole?

As we are proud to say, "it's the economy, stupid", we still seem to follow the same mistakes rather than learn from them. Netflix clearly fumbled the ball with a huge price increase at the wrong time. And Netflix continued to heap on more misery upon itself with a whole changing of the business model. So is it Sirius' turn to fumble with a price increase?

Sirius had troubles this past quarter with subscriber growth and a price increase on January 1 will only further erode subscription. "The company also had a harder time getting customers to commit to its service once its promotions end. It acquires most of its new subscribers by offering free trials of its service when people buy new cars. The conversion rate of trial subscribers who became full paying subscribers fell to 44.4 percent in the third quarter, down from 48.1 percent a year earlier." The price elasticity model is in place whether these companies want to see it or not. Consumers are rebelling at higher prices by seeking cheaper alternatives or cutting off altogether.

But it seems clear that Sirius is not about to change its pricing policy. CEO Mel Karmazin has said that the company has not heard any issues with its price increase; then again, they haven't put it into effect either. Once consumer receive their bills, there will no doubt be backlash. How it willcompare to what happened with Netflix we can only wait and see.

Content Companies Follow The Money

Whether streaming media deals encourage cord cutting or not, content companies still want to maximize their ROI on produced content. For Disney, that means selling TV content to OTT (over the top) platforms including Amazon and renewing with Netflix. For Amazon, deals like this one and others drive value for their new Kindle Fire. Content is the gas that runs the engine.

For Disney and other content companies, negotiating these deals requires a complex series of windows that give cable operators their first window for TV content and allows enough time before this same content is accessible on OTT devices. How long that window needs to be has most likely been determined through extensive research. Consumers willing to wait till content hits this secondary window will be more willing to cut the cord with their cable operator. Content companies are banking that the choice isn't a zero game of one platform or another and that these content deals only increase the revenue on produced content.

But the demand by Amazon, Netflix, Apple, and other OTT platforms for access to TV content will only put pressure on Disney and other content creators to keep shortening the windows so that fresher content reaches their smaller screens. This trend is already occurring with theatrical films reaching on demand, premium, and basic cable in shorter and shorter windows. TV content deals will most likely follow in a similar pattern and that will continue to cause more cord cutting by consumers from their cable providers.

Is Cable Cord Cutting An Economic Or Digital Response?

As cable operators announce their quarterly earnings, it comes as no surprise that cable subscriptions are declining. But rather than cite the rise of broadband and OTT content, the decline of subscribers is attributed to the poor economy. Poor housing starts, unemployment, and household budgeting are the rationale behind cable subscription drops as well as to cord shaving, removing higher priced premium services and digital tiers from the bill. The truth is that cord cutting is a result of BOTH the economic slowdown and the rise of web content.

Broadband has become the most important of the three services coming into the home; cable phone and cable networks lag behind it. That connection to the web brings a ton of short and long form content, what you want, when you want, where you want, and at a fraction of the cost. And younger consumers especially are gravitating to the digital model. The economy will come back but the younger consumer will have been weened off of cable and onto web content.

Google is banking on that transition and recently announced their launch of new digital channels. Web content partners as well as Hollywood celebrities are jumping on board to each "program" their own "channel". Should any of this content prove compelling, their niche could become mainstream.

Cable companies are adapting by looking anew at their cable line-ups and figuring out ways to lower their costs. Time Warner Cable has built a lower cost basic model giving consumers the entry to a smaller tier of networks and to keep them connected to on demand. And the growth of broadband subscribers comes with a larger profit margin. But it may not be enough. Operators must continue to push their role as the ultimate aggregators of content, not just in the home, but also through a mobile platform. That means constructing deals with networks that enable both linear and on demand access to all programming. Operators are competing with the web for revenue. Want access to the NFL Redzone, buy the app from Verizon; want to watch a baseball game, buy the MLB web package. Alternatives to cable are popping up and consumers are finding more choice than every before.

Higher Cable Bills Encourage Cord Cutting

Whether it's the appeal of over the top distribution platforms or expensive cable bills, consumers are cutting off their cable bill. Time Warner Cable's quarterly report echos what other cable operators have been seeing a decline in their cable subscription business. At the same time, internet subscription has been rising.

Frankly, part of the problem comes from us as consumers; we have a growing appetite for more. Whether consuming food, cable, or apps, we are not satisfied with what we have; we want even more. And perhaps it is time to go on a diet. Asking for more is not always a problem - more bandwidth, faster internet speeds - sometimes we should just go on a diet.

And perhaps that is what cable operators may have to start to consider doing. Going on a diet with the number of cable networks on the line-up. With the average cable networks' license fees rising 3.5% annually, those costs are being forced on to higher cable bills to consumers. Cable operators are starting to look at ways to either move basic cable networks to higher, separately priced tiers, for consumers to choose to buy or not, or to consider the unthinkable, dropping cable networks. The latter is probably much harder to do but as contract renewals come up, certainly a consideration.

But where to cut? Does a network with a Nielsen rating less than .5 get pulled? Does a Network group get told we are only taking your top 2 or 3 channels? How many movie networks does a channel line-up need, or general entertainment networks, or women's networks, and yes even sports networks. As Networks have grown up they have broadened and spun off niche networks that have broadened and spun off their own niche networks. Perhaps it is time for cable network consolidation.

Certainly cable operators are being faced with the unenviable task of deciding what to do with their cable packages to retain subscribers. In today's economy, cost is clearly a factor. But once we get back to economic prosperity, no doubt gluttony and the desire for more will comeback again. And that being the case, networks and operators could hold out and not make any of these drastic cost cutting moves in the short term.

Content Always On And Available...Not Always

Pulling a page from the Disney marketing strategy, Warner Brothers has decided that the best way to create need is to create want. This is being done by pulling film titles out of general circulation so that a renewed desire is created. Disney has been successful at pulling their animation films out of circulation only to re-release them to a new audience. They have repeatedly done this, the most recent being the re-release of "The Lion King" in 3D. A DVD re-release is soon to follow. A whole new audience got to enjoy this film in a whole new format. And for little marketing cost, Disney saw a huge return.

Now it is Warner Brothers' turn with the Harry Potter franchise. With DVDs everywhere and the films constantly being played on ABC Family, it seems time to hide them away for a few years and build some new want for the movies. Can these movies, aimed at an older audience than Disney films achieve the same kind of renewed demand. It certainly is a strategy worth testing. At the same time, the concern could be that this franchise could be usurped by another franchise. As there are no new Harry Potter books to come out, audiences may prefer to watch other more relevant book to movie titles. Percy Jackson are you listening?

Could Siri Be The Brains Of The Apple TV?

With the death of Steve Jobs and the release of his biography comes word that Apple has been working on building a new kind of TV set. No official word from inside Apple, but a ton of speculation around what could be the neatest thing to hit TV sets, voice commands. Just as Siri is taking the iPhone to new heights, rumors are that Siri could also be the extra pop in the next evolution of TV manufacturing.

It makes me think of old Start Trek movies. Scotty speaking to the pc, "Computer,get me...". So why can't we simply get the TV to first recognize our voices and then reply as we address it. "TV, turn the channel to Bravo" or "TV, record all episodes of Saturday Night Live." "TV, display DVR recordings or TV, search web for Daily Show clips". No more remote. No more buttons. All voice commands. Siri may just be the future of TV.

Will An Internet Sales Tax Change The Consumers Use of E-Commerce?

A research question popped into my head as I watched Amazon report lower earnings and see its stock price drop 10%. Sales were up but profits dropped due to higher spending on production, technology, and acquisition. So the good news is that consumers enjoy shopping online on Amazon and other websites. And it made me ask, would consumer spending change should an internet sales tax ever be established. Certainly some states already charge a sales tax and California is pushing one, but for the most part, we save money by not paying tax with our purchase. In fact, when I purchase online, I also see if shipping is free as well, another factor in deciding whether it might be cheaper to simply drive and buy at the store.

What economic impact on internet spending would result if an internet sales tax was established? Obviously we would continue to make digital purchases online, music, videos, and of course, books. But would we continue to buy material goods through the web if the cost (with tax and shipping) actually exceeded what it cost from a store? Would Amazon and other web retailers' profits suffer even more?

Today's politicians are discussing new tax models and an internet sales tax could be one of those pieces of their puzzle. And while an internet sales tax might bring in additional revenue, it might also act as another barrier to our economic recovery. An e-commerce sales tax may sound like an easy solution but it might also come with many consequences.

Smaller Cable Co-op Seeking TV Authentication

The big cable MSO's aren't the only ones seeking a TV authentication model, so cable subscribers can access programs on non-TV devices. The smaller cable operators want the same thing, too. The NCTC, Costco for the smaller cable operators, creates deals in bulk with cable programmers. The more customers that take the network, the better and lower the license fee costs. So as a next step, the NCTC "has launched a plan to create a centralized authentication platform for multi-screen services like HBO Go or those planned around the the 2012 Summer Olympics in London." And per the Light Reading article, they are trying to build the service from the ground up rather than buy or latch on to another.

But the challenge that they will really need to work through will be the content deals associated with TV Everywhere. Unfortunately, these same networks will not be humming the Jessie J song Price Tag:

"It's not about the money, money, money
We don't need your money, money, money
We just wanna make the world dance,
Forget about the price tag"

Rather, each network will be asking for incremental fees to enable access to content. Some will offer on demand only, others may be willing to deliver a linear feed. But they each would like additional monies.

Ultimately though, content companies have to buy into TV authentication as a condition of maintaining an audience. Without TV authentication, subscribers will be more inclined to cut the cord and leave cable, reducing the total license fees that cable networks receive. At the end of the day, it's about the money. Subscription fees have hit the wall and customers are getting tired of paying more for cable.

Don't believe me. The perfect example is happening in the news today. Netflix a few months ago raised their prices to a point that caused widespread disenchantment with the product. The result, Netflix lost 800,000 subscribers. TV authentication is a means to give customers another reason to remain loyal to their cable provider. But if the price continues to rise, loyalty will erode, just as it did for Netflix. At the end of the day, it is about "the money, money, money".

We Still Use Cellphones When We Drive

Despite laws and fines, I continue to see people talking on their cellphones while they are driving. One woman refused to make the turn at the left turn light because she was too busy chatting. And my beep to remind her that the light was short and others behind her and me also wanted to turn, was met with the flipping of the bird. But her cellphone and driving use is not unique; people make and receive calls, read and write texts, and perhaps even surf the web. I have been guilty of cellphone use in the car and my wife has cured me of that habit. We are now always connected, but sometimes we should unplug.

We have gotten so comfortable being in an always on world, that we forget that it is sometimes to our advantage to be off the grid. For drivers it is the safety of the road, for them and us, and for users, it is not social media to engage when others are trying to engage us in person. Yes, I am guilt of that too. We look down at our cellphone rather than in the eyes of those that are talking to us. Socially wrong, yes, but not illegal.

Driving and using the cellphone is illegal. But whether it was or wasn't, it is simply unsafe. For ourselves and others on the street. We don't have to be always connected. And if we must, pull over and return the call.