Younger Audiences Prefer Their Online Content

While championship sporting events will continue to get huge audiences on the TV, everyday TV viewership has some serious competition. The next generation of key demographics are spending less time with network and cable programming and shifting a chunk of their viewing time to online. YouTube is drawing the largest audience with its assortment of channels and shows. "With 125 million viewers watching more than 1 billion of its videos a month, Machinima may be the most-watched channel that's not on TV." They are eyeballs diverted from traditional television.

It is this fundamental shift in viewing that will ultimately affect what exists in a cable line-up and what is best discovered online. Like the music industry that saw consumers prefer to consume songs over albums, viewers may be preferring to view shows over networks, in an on demand way. No more waiting for a show to start, these viewers want it when they want, where they want, and on the devices they want.

"Machinima is part of what's been called the "third wave" in video entertainment, each part of which revolutionized the entertainment industry, (Machinima Inc. Chief Executive Allen) DeBevoise said. ABC, CBS and NBC dominated the broadcast-television era. Cable and satellite technology opened the doors to new, more specialized entertainment channels, including HBO, ESPN, MTV and CNN. Now the Internet is poised to overturn the reigning paradigm yet again, he said." The platform before it does not die; but it must find away to adapt to compete in a changing landscape.

To me, that means that cable networks and shows must be made fully accessible across all devices, whether viewed in the home or not. Live programming must be accessible everywhere immediately and all other programming available to watch as demanded. Will consumers pay? Ultimately, consumers don't want to pay; some however may pay depending on the value that programming presents to them. But at today's cost for cable, the younger generation is turning away from that model to view online.

Machinima may just prove that an online network can not only exist outside the cable subscription world, but also succeed without a license fee revenue model piggybacked on its ad sales success.

Is Internet Shopping Unfair To The Retail Economy?

Smartphones and the web have been a consumer's friend when it comes to comparison shopping. It no longer requires a shopper to schlep from one store to another before settling on where to buy an item. Now that same shopper can read the tag on the item off their smartphone and find out if there is a better price. Others can do their shopping online from the comfort of their home before deciding whether to purchase right there or venture out to the store to pick up the item. But is some of it unfair and will it ultimately kill the retailer?

In regard to the unfair charge, retailers continue to argue that online immediately benefits by a discount know as the sales tax. Stores are required to charge this amount, but depending on the state, online does not. And depending on where you are from, that discount could be 7% or higher. With online stores offering free shipping, the only drawback may be the immediacy to receive an item.

For those consumers that are happy to buy in a store, they use online tactics to compare pricing on items. Is it cheaper to buy that item at Target or Walmart, Best Buy or PC Richards? Mass produced items available in many stores are most affected. And with information at a consumer's fingertips, there is no need to be over-charged again.

So how do retailers fight back? Certainly the push is on by them to convince both States and Congress to legislate sales tax for online purchases. Amazon has been fighting back for years. In the retail comparison fight, stores seek exclusivity of brands to differentiate. Mattress companies love to "create" lines that are exclusive to their store; you never see the same Serta model in Sleepy's vs. Mattress Discounters. Some do it with the creation of store brands. Costco loves to push their own Kirkland brand. And Target is pushing their own vendors too. "Target asked the suppliers to help it match rivals' prices. It also said it might create a subscription service that would give shoppers a discount on regularly purchased merchandise."

Change is forcing businesses to innovate and compete. While the sales tax example can be argued as an unfair playing field, comparison shopping has always existed. That it has become less burdensome for consmers to compare and contrast before purchase shouldn't be an issue. Consumers shop at certain stores for a number of reasons and price is not the only factor. Service, availability, specials, ease of returns, convenience and other factors all play into a successful retail business. Price is always one factor in sales, it just isn't always the only factor.

MSG Drop Continues, Time Warner Cable Still Isn't Carrying It

Three weeks and counting, and Time Warner Cable customers still aren't getting their Knicks or Rangers on MSG Network. Both teams are competitive this year, but what happens on the court or in the rink has no bearing on what is playing out between these two companies. Certainly the ads continue to populate the sports pages, but the longer it goes, does the loss become less and less relevant?

Are customers actually switching providers because TWC no longer carries these games? Some viewers simply drop by their local sports bar or visit a friend, some might find a website that carries the game, and others may decide that they can do without. Most likely, not many people have dropped their cable service. And certainly the ones that did leave didn't do much to hurt the bottom line. Eventually either MSG or TWC will blink, but both are also stubborn, so the battle may rage on for a while longer.

But this battle also symbolizes the issue facing cable operators, programmers and viewers. The rising costs of license fees quickly cause subscriber bills to rise. And the higher they go, the quicker consumers get fed up with the cost of cable and seek alternative distribution choices. It is the cable operators' ultimate worry that the rising costs of programming will cost them subscribers who cut their cable cord.

Will School Boards Embrace Apple's New Education Content Plan

The rise of the iPad, and of course the other Tablet clones, continues to grow in strength as more and more content populates its platform. Apple's announcement this week raises the bar with a plan to sell school textbooks online at a cheaper price than hardcover. "With students, school districts and universities snapping up iPads, Apple teamed up with publishers, including McGraw-Hill Cos. (MHP), to build interactive schoolbooks so the tablet can replace heavy tomes that have long weighed down backpacks."

Great news for college students that buy their own books; bad news for college bookstores who have enjoyed the revenue stream. Good news for school boards that buy books for their students; bad news for the parents that might be required to buy a iPad for their school aged children. A very expensive purchase depending on how much memory you buy. Good news for Apple who always seems to be the innovator; bad news to the other tablet clones that must race to close their own education deals.

Like any teutonic shift, a digital textbook movement will take some time. Most likely it will first happen at the college level where students already make book purchases. And like a computer, the tablet will become another required device for the college student. For the elementary and middle school student, the timing might take more time. Still having watched my son lug his backpack to and from school and carry in his arms huge notebooks and textbooks, an iPad might be quickly valued as a back saving device!

Could Kodak's Bankruptcy Have Been Prevented

It happens more times than not, industrial or technological change impacts an industry, opening doors for some and bringing others at the top of the hill to the bottom. Kodak, once a leader in the film and photography world, declared Chapter 11 today. Under the law, they get to wipe away some debt, restructure, and try to emerge leaner, meaner, faster, and smarter. But can the brand name, so tied to old technology and print material, change its brand perception to be seen as a future digital print leader?

So what are those plans? CEO Antonio M. Perez "said in a video statement on Kodak's website that the company has four objectives while in Chapter 11 -- obtaining the financing to reassure its employees, customers and other stakeholders that the company will stay in business; enabling it to pursue patent infringement claims against major companies including Apple Inc.; adjusting its "legacy costs" to a fairer level; and driving growth in the printing businesses Perez has declared are its future." So in English that means spend vast sums of lawyer fees to tie the courts up for years in patent disputes that they may or may not win, renegotiate pension payments, and continue onward in its printing business. Not so impressive.

Can Kodak find a new space to own? Between less documents being printed and more devices like smartphones able to take quality pictures, what does Kodak think it wants to be? Is it printers to rival HP, Canon, and others, or digital cameras that do more than a low priced Nikon, iPhone or Android device? Or is it an online platform to store pictures , create albums, and share like Flixter, Snapfish, and Shutterfly? Will they be consumer focused or will they pursue more commercial or industrial applications? It seems that while Kodak was trying to defend its core business, the world, the technology, and the consumer needs have shifted away.

And mind you, this has been going on for years. What has been Kodak been doing to remain a leader? Competition in the photography space has only gotten more intense as the world became digital. More vision will be needed by Kodak to rise from the ashes and emerge a leader again.

Linear Web Channels Keep Arriving

The world of the "connected" TV set relies on content to consume. Where short form content is best for "lean forward" viewing, the TV watching experience has always been about the "lean back", long form view. Once cable networks like Comedy Central, E!, MTV, and others started out with short form programming, but they recognized that their viewing and revenue success would be with full length shows.

As the web invades our TV screen, the ideal experience is "lean back" and web sites are complying with linear web networks with original shows. The latest addition to the linear web guide will come from AOL's Huffington Post, "preparing to launch a live over-the-internet video channel modeled on the 24-hour cable news networks." Where cable news nets like CNN, Fox News, and MSNBC receive cable license fees and advertising, a free web channel will attempt to survive on ad sales alone, while trying to draw viewers away from these cable nets to their web network.

With a web TV line-up growing with the addition of other web channels from YouTube and others, the internet is taking a direct shot at cable subscription fees and alternative programming distribution. Will these web channels further advance the cord cutting affecting basic cable subscription? Or is it simply the economic costs that are the real key driver of cord cutting? Clearly, the arrival of more web channels demonstrates the direction and push that is being taken to sample and perhaps one day fully switch over.

Online Nets Are A Disruptive Force To Cable

Remember when broadcast networks fueled our viewing interests and the Nielsen ratings. The rise of cable networks were seen initially as too niche to impact viewership; I mean, who would want to watch news beyond broadcast at the traditional dinner time and again 11 pm ET/PT hour. But cable networks kept scratching away and the rise of more and more of them began to peel off viewers from broadcast. Today it is cable who is known for its innovative, award winning programming while the broadcast share of total TV viewing continues to decline.

But time doesn't stand still and history repeats itself. That change in the TV landscape comes from the rise of web-based programming. Where cable took broadcast viewers, web programming will continue to attract the broadcast and cable viewer. And the web model has learned from its cable history; offering re-airings of older programming and sprinkling in some original shows.

Today that disruptive influence comes from Google and YouTube who are premiering two "web networks" and original shows with the "launch of new Hollywood-centric entertainment channels from Young Hollywood and a Penske Media-Ion TV partnership." These networks look to be distribute a linear schedule as well as offer programs on demand. "The launch of the two channels comes 24 hours after rival Hulu announced its latest original series, Battleground. The politically themed dramedy (executive produced by the guy directing Sony’s next big Spider-Man tentpole, Marc Webb) is Hulu’s first original scripted offering."

Like the early days of cable, some advertisers may shun this niche until it is more proven. Others will deem it experimental and siphon off a small piece of its budget to test its appeal. And like the early days of cable, the risk - reward model will likely pay dividends for the early adopters.

This technological shift toward broadband delivery does not necessarily have to hurt the cable and broadcast model. How readily they embrace it and pursue distribution that keeps them accessible across platforms is key. Even with the arrival of cable, most broadcast nets have survived (sorry CW and WB). The arrival of these web channels and programs will not result in a zero sum game. There will ultimately continue to remain room for the strongest in each distribution platform to survive.

Raising Cable Rates And Cord Cutting

Over the last few years, cable operators have watched their basic subscriber numbers drop as customers fled to alternative cable choices like satellite and telco. Operators would argue that while they lost "some" customers, others chose to buy into the full suite of cable, broadband, and telephone and the average revenue per customer had actually risen. But some are concerned that eventually the continued increase in cable subscription rates will cause these triple play customers to downgrade and eventually switch as well.

The recipients of these initial customer defections have been satellite and telco. Their base has risen at the expense of the cable operator. Their cost conscious customers may be in for a rude awakening. "DirecTV started notifying its nearly 20 million subscribers during this billing cycle that it will be charging more for its programming services starting Feb. 9." As programming fees increase annually, the need to keep profits in line causes this pricing change. But customers may object and how much it hurts their pocketbook may determine the future direction of basic sub growth or decline.

For customers, it means a big decision. Put up with the rising costs of TV programming or "cut the cord" and rely on alternative methods to watch your TV. For some it could be the installation of a digital antenna to retrieve over the air signals; for others a reliance on just a broadband connection to stream your shows and movies. And a number will try to negotiate with their provider citing competition and plan to switch unless a discounted deal can be offered. I admit to using this tactic a number of times.

And with the investment by streaming providers like Hulu and Netflix into original programming as well as a broader quantity and quality of TV programs, the choice to switch to a streaming model could get easier and easier. As customers buy only the streaming packages they want, they can get the shows they desire at a lower cost than a cable subscription. And that is what could ultimately upset the cable/satellite/telco operator cable subscription apple cart.

The Future of Programming Distribution Is On The Web

CES is winding down and the talk from the show is not 3D TVs as much as it is about connectivity to the web. Televisions, tablets, laptops, and smartphones all accessing online content, from social networking sites to YouTube and gaming. And even more pronounced, none of these discussions included partnerships with cable operators.

"YouTube announced in December that it logged 1 trillion hits in 2011 and is anticipating an even bigger year ahead as more politicians and newsmakers turn to the site to distribute Web ads, speeches and weekly video casts." Their push into niched channels seems a clear shot across the bow of the cable operator. And they are putting their money where their mouth is by investing tons of cash into acquiring content. Disruptive technology at its best. So you have consumers watching more and more hours online and web companies like YouTube delivering even more content to consume; where does that leave the cable operator?

The challenge facing operators is that the rising cost of network licensing fees are causing the subscription model to start to break. The easiest culprit to blame are the sports networks whose share of the costs is far greater than the bulk of other channels. It is why Time Warner Cable is fighting back so hard against MSG on a renewal fee that will only lead to a higher pass through cost to consumers. And the consumer isn't taking it anymore. They are striking back at their cable providers by cutting back on services or cutting the cord completely.

YouTube can expect to gain more viewership as TV manufacturers enable connectivity on their TV sets. With Apple expected to offer something as well, the roof could be blown off the industry. And as content quality improves, the best new series could be from folks like Google or Facebook. In addition, it will become far easier to surf and search the web for relevant content and viewers will begin to consume more web based content over cable networks. Networks that survive may have to learn a new business model, one that excludes a subscription fee but may instead discover a wider variety of new revenue streams such banner ads, mobile ads, and perhaps even product purchases, to enhance its :30 ad model.