Wednesday, January 25, 2012
Media M&A Activity May Grow This Year
The economy may slowly be improving, Apple reported phenomenal earnings, and the financial community is eager to see some merger and acquisitions in 2012. Will Apple buy a media company with almost $100 billion dollars in cash on hand; is Yahoo considered an acquisition with the loss of Jerry Yang? According to this article, "merger and acquisitions activity in the entertainment and media sector is expected to rise this year, according to PwC, spurred by OTT and social-networking companies, as well as online gaming firms." While last year saw the merger of NBC and Comcast, AT&T was not allowed to buy T-Mobile. So who is a likely buyer and who may likely get bought or merged? It is the start of a new year and we just might see a rise in M&A activity.
How Does Cable Stop Basic Sub Drops?
When you finally recognize that the economic model for delivery of cable programming is broke, how do you fix it to stop drops and start to again realize basic sub growth? For Cox Communication, the solution is a lower priced entry point into a basic cable subscription, "a low-cost video tier, rolling out a 20-channel package dubbed 'TV Economy' in several markets for $34.99 per month." Most notably absent is ESPN. Time Warner Cable and Comcast have already built a more basic package as well.
Given that most license fee agreements with programmers are based on penetration levels of its network to the total available base, Cox, like TWC and Comcast, must not be worrying that this package might be so popular that it will result in some networks monthly fees going higher due to missing a threshold benchmark. That is to say, that ESPN as an example, as a result of the popularity of this TV Economy package, reaches as a result less than 90% of the Cox total universe.
What is clear is that more must be done to reverse cables' trend of losing basic subscribers. As a cable VP of Marketing once shared with me many years ago, you can't sell someone more services until they are actually a basic customer. Once they are a basic customer, it is possible to sell in additional tiers of channels, premium networks like HBO and Showtime, and of course additional services like telephone and broadband. These basic subscribers also mean more potential eyeballs and more potential advertising revenue as well. The work starts at the basic sub level and this new "basic package" may be the means to reverse the declining sub trend. And while Cox is duplicating the efforts being tried by TWC and Comcast, so far basic sub decline has continued, although some may argue at lesser levels then before. Still a loss is a loss.
Given that most license fee agreements with programmers are based on penetration levels of its network to the total available base, Cox, like TWC and Comcast, must not be worrying that this package might be so popular that it will result in some networks monthly fees going higher due to missing a threshold benchmark. That is to say, that ESPN as an example, as a result of the popularity of this TV Economy package, reaches as a result less than 90% of the Cox total universe.
What is clear is that more must be done to reverse cables' trend of losing basic subscribers. As a cable VP of Marketing once shared with me many years ago, you can't sell someone more services until they are actually a basic customer. Once they are a basic customer, it is possible to sell in additional tiers of channels, premium networks like HBO and Showtime, and of course additional services like telephone and broadband. These basic subscribers also mean more potential eyeballs and more potential advertising revenue as well. The work starts at the basic sub level and this new "basic package" may be the means to reverse the declining sub trend. And while Cox is duplicating the efforts being tried by TWC and Comcast, so far basic sub decline has continued, although some may argue at lesser levels then before. Still a loss is a loss.
Tuesday, January 24, 2012
Verizon FIOS 6th Largest Cable MSO
Verizon FiOS is growing basic subscribers as the other cable MSOs report basic sub drops. "Verizon Communications is now a bigger pay-TV provider than Charter Communications, after the telco pulled in a solid net gain of 194,000 FiOS TV customers in the last three months of 2011 to stand at 4.17 million total." That increase moves FIOS to sixth place in number of basic subscribers. The top ten list is as follows:
1. Comcast Cable
2. Direct TV
3. Dish (Echostar)
4. Time Warner Cable
5. Cox Communication
6. Verizon FiOS
7. Charter Cable
8. AT&T U-Verse
9. Cablevision
10. Bright House
How far the cable industry has matured? The 10 largest cable operator, Bright House, is about one-tenth as large as the number 1 cable operator, Comcast. And the top 5 cable operators, currently both satellite providers and 3 cable operators, cover about 75% of all cable subscribers. Shortly, Insight, 13th largest MSO, will be sold to Time Warner Cable and others will likely merge as well. Consolidation in the cable universe coupled with shifting viewership from cable to satellite and telco providers.
1. Comcast Cable
2. Direct TV
3. Dish (Echostar)
4. Time Warner Cable
5. Cox Communication
6. Verizon FiOS
7. Charter Cable
8. AT&T U-Verse
9. Cablevision
10. Bright House
How far the cable industry has matured? The 10 largest cable operator, Bright House, is about one-tenth as large as the number 1 cable operator, Comcast. And the top 5 cable operators, currently both satellite providers and 3 cable operators, cover about 75% of all cable subscribers. Shortly, Insight, 13th largest MSO, will be sold to Time Warner Cable and others will likely merge as well. Consolidation in the cable universe coupled with shifting viewership from cable to satellite and telco providers.
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.
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.
Monday, January 23, 2012
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.
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.
Saturday, January 21, 2012
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.
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.
Friday, January 20, 2012
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!
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!
Thursday, January 19, 2012
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.
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.
Wednesday, January 18, 2012
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.
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.
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