Customers love their TV content. But ask a cable company executive and they all point to a drop in basic subscribers quarter over quarter. They don't call it cord cutting; rather, a bad economy, unemployment, and low housing starts. Except those customers still want their TV content and they are in fact cord switching to telco and satellite providers. In fact, they have captured subs from cable operators as well as found new consumers, too.
"The growth was driven by telecom-based services AT&T (NYSE: T) U-Verse and Verizon FiOS, which added 208,000 and 194,000 video customers during the fourth quarter, respectively. Satellite companies DirecTV (NYSE: DTV) (up 125,000) and Dish Network (NSDQ: DISH) (added 22,000) also contributed to this growth." So while Comcast, Time Warner Cable, Cablevision, Charter and others lost basic subs, telco and satellite grew.
If the cable excuses hold, then the reasoning to why seems clear. Telco and satellite are offering similar services at a lower cost. Consumers may be regarding cable tv providers as a commodity industry and in such cases, the lowest price prevails. Cable companies have tried to adapt by building out lower priced entries into basic subscriber packages but it may not be enough for consumers to switch back.
And Cablevision in their recent Q4 financials announced that they may not even try this route. "Cablevision also will eliminate deep discounting for new customers, which should ease the financial impact on the company." It may lower costs, but it will lower revenue and sub numbers too. For now, they may not be cord cutting, but will only continue to switch to the lowest cost provider of TV services.
Wednesday, February 29, 2012
Should Broadband Usage be Priced Like A Utility
Homeowners don't seem to bat too much of an eye at their utility bills. Water, electicity, and gas bills come due monthly and we tend to not pay much attention to them unless the price changes radically. We know that prices are regulated and there is little we can do but watch how much water, electricity, and gas we use. They are tightly measured and unless there is a leak, they are secure.
But is broadband usage a different story? Should homeowners be expected to pay for broadband usage as others offer unlimited access? Can we be sure we are measured accurately and can we completely control how it is being consumed? As more and more content becomes accessible through the web and with pushes and notifications, we may be somewhat at the mercy of the app. True most content is not nearly as big as long form video content; still, we are getting more and more addicted to our web connectivity.
Unlike other cable operators, Time Warner Cable still wants to try and push through a broadband fee based on usage. While some try to throttle high users of broadband, Time Warner wants to incent low users to get measured by usage and receive a benefit for not using the web too much. They have a new test in the works. "Under the new pricing plan, consumers will get a $5 reduction in their monthly bill if they accept a cap of five gigabytes monthly." Of course, should they exceed their limit, they will pay a penalty. At only a $5 monthly savings, I find it hard to believe that any family would grab on to such a deal.
The wireless companies are all trying to get more dollars for usage billing. Unlimited access may become a thing of the past. Certainly cable would like to find more revenue by charging this way as well; Time Warner Cable may be the most aggressive, but others are watching the test.
But is broadband usage a different story? Should homeowners be expected to pay for broadband usage as others offer unlimited access? Can we be sure we are measured accurately and can we completely control how it is being consumed? As more and more content becomes accessible through the web and with pushes and notifications, we may be somewhat at the mercy of the app. True most content is not nearly as big as long form video content; still, we are getting more and more addicted to our web connectivity.
Unlike other cable operators, Time Warner Cable still wants to try and push through a broadband fee based on usage. While some try to throttle high users of broadband, Time Warner wants to incent low users to get measured by usage and receive a benefit for not using the web too much. They have a new test in the works. "Under the new pricing plan, consumers will get a $5 reduction in their monthly bill if they accept a cap of five gigabytes monthly." Of course, should they exceed their limit, they will pay a penalty. At only a $5 monthly savings, I find it hard to believe that any family would grab on to such a deal.
The wireless companies are all trying to get more dollars for usage billing. Unlimited access may become a thing of the past. Certainly cable would like to find more revenue by charging this way as well; Time Warner Cable may be the most aggressive, but others are watching the test.
Tuesday, February 28, 2012
Netflix Not About The Flix
Movie distributors are trying hard to save their business. The digital distribution field has changed the very model of how content is viewed. And pay content distributors like HBO, Showtime, and Starz walk a fine line in licensing content to cable operators, OTT providers, and other distributors like Redbox and Netflix. So when the latest agreement between Starz and Netflix expires, Starz has decided they don't wish to renew.
Netflix has used Starz movies as a driver to pursue subscribers. But knowing that this deal was not long term, Netflix determined that a better future may be in TV shows and original content. "TV series now account for more than half of all Netflix viewing. That helps to explain why this Wednesday — the long-awaited moment when motion picture classics like “Scarface” and newer hits like “Toy Story 3” will vanish from the streaming service — is not the doomsday that it was once expected to be."
This strategy for Netflix of focusing on original content is reminiscent of what HBO, Showtime, Starz, Epix and others are doing in the cable space. As movies move from one distributor to another, they no longer best represent the lifeblood of the network. Today, HBO is known for Sopranos and Game Of Thrones, Showtime for House of Lies and Dexter, and Starz for Spartacus. So naturally, Netflix needed to get into the same space with their own original series, Lilyhammer. How else to define a network than by the original series it represents.
The flix may be less a part of the Netflix brand, but it still remains a piece of the puzzle. As digital has lowered the barriers to entry and enabled more ways to access movies, it better suits Netflix and others to use original content, both TV series and original movies, to attract a loyal customer base.
Netflix has used Starz movies as a driver to pursue subscribers. But knowing that this deal was not long term, Netflix determined that a better future may be in TV shows and original content. "TV series now account for more than half of all Netflix viewing. That helps to explain why this Wednesday — the long-awaited moment when motion picture classics like “Scarface” and newer hits like “Toy Story 3” will vanish from the streaming service — is not the doomsday that it was once expected to be."
This strategy for Netflix of focusing on original content is reminiscent of what HBO, Showtime, Starz, Epix and others are doing in the cable space. As movies move from one distributor to another, they no longer best represent the lifeblood of the network. Today, HBO is known for Sopranos and Game Of Thrones, Showtime for House of Lies and Dexter, and Starz for Spartacus. So naturally, Netflix needed to get into the same space with their own original series, Lilyhammer. How else to define a network than by the original series it represents.
The flix may be less a part of the Netflix brand, but it still remains a piece of the puzzle. As digital has lowered the barriers to entry and enabled more ways to access movies, it better suits Netflix and others to use original content, both TV series and original movies, to attract a loyal customer base.
Monday, February 27, 2012
Rutledge Sees Opportunity From Charter Homes Passed
With the lowest penetration of basic subs to homes passed in the industry, new CEO Tom Rutledge sees basic sub growth for Charter Cable. According to Rutledge, "It's got a huge runway in terms of opportunity and it can be a much larger company without any kind of change in potential marketplace."
With a coverage of 12 million and only 4.1 customers, a push to build out connections is necessary. But why haven't they taken advantage of the Charter offer in the past and what are customers currently using for cable, broadband and telephone. It is an obvious base to draw from, but a clear strategy to change customer habits is clearly needed. Do prospective customers have a pricing issue with Charter or is it service? Why have they been avoided and how do they overcome a possible negative sentiment. Its been a rocky ship that needs firm guidance to right.
With a coverage of 12 million and only 4.1 customers, a push to build out connections is necessary. But why haven't they taken advantage of the Charter offer in the past and what are customers currently using for cable, broadband and telephone. It is an obvious base to draw from, but a clear strategy to change customer habits is clearly needed. Do prospective customers have a pricing issue with Charter or is it service? Why have they been avoided and how do they overcome a possible negative sentiment. Its been a rocky ship that needs firm guidance to right.
Friday, February 24, 2012
Dish Aims To Be A Disruptive Innovator
Dish Network seems ready to compete in the next generation of connectivity. While subscription to its satellite service is growing again, it saw a yearly net loss of subs. It purchased Blockbuster Video Stores but is now ready to close 500 of them to concentrate on the streaming content business. And it sees the future of its operations as a wireless venture. "The company is awaiting approvals from the Federal Communications Commission that will let it to use the satellite spectrum it purchased from TerreStar Networks Inc. and DBSD North America Inc. to build a wireless network." To compete successfully against cable and telco, the push must be toward two way communication. A wireless network provides the backbone to compete on services to offer to the consumer and the home.
Dish's Chairman, Charlie Ergen, seems to relish this role. "'We have a history of being disruptive in the video business. I think we will be disruptive in the wireless business'", he said. With LightSquared future in doubt, Dish could be the ones to best offer a competitive package to the consumer seeking access to content and communication wherever and whenever they want. The wire is a nice tether when we are in the home; but outside, it, we want to roam free. Dish could just be a disruptive innovator to the current marketplace.
Dish's Chairman, Charlie Ergen, seems to relish this role. "'We have a history of being disruptive in the video business. I think we will be disruptive in the wireless business'", he said. With LightSquared future in doubt, Dish could be the ones to best offer a competitive package to the consumer seeking access to content and communication wherever and whenever they want. The wire is a nice tether when we are in the home; but outside, it, we want to roam free. Dish could just be a disruptive innovator to the current marketplace.
Thursday, February 23, 2012
Is Google Fiber A TV Solution?
As I read the first line of the Gigaom article, I wondered if this was the smartest strategic move for Google. Here it is, "Google has filed for a video franchise license, which if approved could allow it to take on cable providers in markets in which it’s hoping to deliver fiber-enabled Gigabit broadband services." And I wonder if the capital expenditure makes sense.
The cable business, despite a drop in basic subscription, remains healthy. Cable operators, who invested in cable to the home, have been able to find multiple platforms to leverage this expense. The same wire used to provide cable now provides broadband and telephone service. Some are even looking to use this pipe for home security systems. Verizon FIOS has been able to use its pipeline too. First for telephone and then for DSL. But the cost to convert to fiber has added high costs and the conversion of new subs slow. To that end, they have limited their build out to focus on increased penetration of current markets.
So for Google, a fiber build out means starting from scratch with high costs and no subscribers. Add to that the high cost to acquire cable programming channels. With no subscribers to leverage, the license fees for programming will be higher than those offered to Time Warner or Direct or Dish in the market. Will enough consumers switch to make a business model work?
Lastly, why a fiber build? With the push to cloud and streaming, why a fiber connection. If the commitment by Google is to provide video service, why not partner with a company to provide nationwide wireless streaming and build out an authenticated technology to control who can access the stream. Make your programming deals and push the opportunity to reach a national platform. Now that would truly drive a competitive stake into the current cable/broadband model.
The cable business, despite a drop in basic subscription, remains healthy. Cable operators, who invested in cable to the home, have been able to find multiple platforms to leverage this expense. The same wire used to provide cable now provides broadband and telephone service. Some are even looking to use this pipe for home security systems. Verizon FIOS has been able to use its pipeline too. First for telephone and then for DSL. But the cost to convert to fiber has added high costs and the conversion of new subs slow. To that end, they have limited their build out to focus on increased penetration of current markets.
So for Google, a fiber build out means starting from scratch with high costs and no subscribers. Add to that the high cost to acquire cable programming channels. With no subscribers to leverage, the license fees for programming will be higher than those offered to Time Warner or Direct or Dish in the market. Will enough consumers switch to make a business model work?
Lastly, why a fiber build? With the push to cloud and streaming, why a fiber connection. If the commitment by Google is to provide video service, why not partner with a company to provide nationwide wireless streaming and build out an authenticated technology to control who can access the stream. Make your programming deals and push the opportunity to reach a national platform. Now that would truly drive a competitive stake into the current cable/broadband model.
Wednesday, February 22, 2012
Canoe Ventures Dropping Interactive Ads Business
As the content community embraces the cloud and Cisco plans to sell its S-A set top box business, Canoe Ventures has announced that it is giving up on EBIF. "The decision to abandon ITV ads and dramatically pare back Canoe's mission came after a review by its cable operator owners, according to a Canoe spokeswoman." The push for better connectivity to the web, more cloud based operations, including N-DVR and VOD, and perhaps even Comcast's push into a rival Netflix streaming business, all demonstrate that the set top box is history.
Also too, advertisers didn't find much interest in overlays that intruded on top of video commercials. With the primary goal to click a button for more information, the boxes looked intrusive and the clicks weren't coming. And advertisers and viewers weren't embracing the added value feature either. So what is next for Canoe? "Canoe's more narrow goal, at this point, will be to build a way for MSOs and national programmers to generate revenue from dynamically inserting ads into on-demand content across both VOD inside the home and TV Everywhere outside the home." But with other companies, like Seachange and others, already in this space, can Canoe re-model and survive? It just doesn't look promising.
Also too, advertisers didn't find much interest in overlays that intruded on top of video commercials. With the primary goal to click a button for more information, the boxes looked intrusive and the clicks weren't coming. And advertisers and viewers weren't embracing the added value feature either. So what is next for Canoe? "Canoe's more narrow goal, at this point, will be to build a way for MSOs and national programmers to generate revenue from dynamically inserting ads into on-demand content across both VOD inside the home and TV Everywhere outside the home." But with other companies, like Seachange and others, already in this space, can Canoe re-model and survive? It just doesn't look promising.
Google vs Apple Heads To The TV Set
When Apple was younger and the PC was the big push, the biggest competitor to Apple was Microsoft. Today, that fight has taken a back seat as Apple has extended itself more firmly into mobile devices and soon the TV set. And perhaps their biggest competitor is not Microsoft, or even Amazon or B&N, but Google.
And Google is adding another line in the sand verse Apple, Voice controlled connected television. "In what could be the biggest boost to couch potatoes since the remote control, Google Inc. is developing a technology that would allow a viewer to tell a TV, by voice, to change the channel or even seek out a favorite show or movie."
Google is aggressively competing with Apple in the software side of the business, a strategy used by Microsoft in the PC wars. But Google is going a step further when it buys manufacturing companies like Motorola to build out Google products. How this affects Google's licensing with other brands remains to be seen. Companies don't like to have competition from their own supplier. Still Google continues to advance while Apple follows its own path. How fierce the competition between these two grows remains to be seen. But with Google testing a pay subscription service in Kansas City, no doubt they are declaring war in the video space.
And Google is adding another line in the sand verse Apple, Voice controlled connected television. "In what could be the biggest boost to couch potatoes since the remote control, Google Inc. is developing a technology that would allow a viewer to tell a TV, by voice, to change the channel or even seek out a favorite show or movie."
Google is aggressively competing with Apple in the software side of the business, a strategy used by Microsoft in the PC wars. But Google is going a step further when it buys manufacturing companies like Motorola to build out Google products. How this affects Google's licensing with other brands remains to be seen. Companies don't like to have competition from their own supplier. Still Google continues to advance while Apple follows its own path. How fierce the competition between these two grows remains to be seen. But with Google testing a pay subscription service in Kansas City, no doubt they are declaring war in the video space.
Tuesday, February 21, 2012
Broadcasters Do Not Prefer Cordcutters
Today's WSJ article may be all about the rise of cord cutting, but it may not be in the best interest of broadcasters. Sales of digital antennas are expected to double this year and OTT providers like Boxee and Aereo are offering online streaming of broadcast channels. And consumers, eager to lower their video bills, may cut the cord to cable, as these alternatives gain speed.
But it may not be in the broadcasters' best interset to encourage non-cable reception of their programming. One simply has to look at the ownership of each network to understand why. ABC owns a ton of cable properties including Disney, ESPN, and others, all getting a monthly subscriber fee. NBC is owned by Comcast, the largest cable operator, and also owns multiple cable networks as well. Fox owns regional sports networks, FX, Fox News and more. And while CBS spun off its Viacom properties (MTV, VH1, etc.) it still retains Showtime and CBS Sports Network. And even Univision, a Spanish broadcast network, distributes cable network. Plus each of these broadcast networks get their own monthly license fee for cable distribution. Why would they want to encourage cord cutting.
And the government may also make it hard for consumers. "The value of spectrum used by broadcast TV has been hotly debated in the past couple of years, as the FCC has looked for ways to add spectrum for wireless broadband. Last year FCC Chairman Julius Genachowski said the percentage of viewers watching broadcast over the air, rather than through cable or satellite, has fallen to less than 10%, in contrast to the precable-TV days when it was 100%." While those spectrums help wireless, they hurt over the air reception. Will broadcast TV access be available to only those that can afford to access it?
The money is in cable TV and authenticated web viewing. The profits on over the air and OTT are less enticing. And broadcasters are more likely to do what ever they can to impede cord cutting and support this cable model.
But it may not be in the broadcasters' best interset to encourage non-cable reception of their programming. One simply has to look at the ownership of each network to understand why. ABC owns a ton of cable properties including Disney, ESPN, and others, all getting a monthly subscriber fee. NBC is owned by Comcast, the largest cable operator, and also owns multiple cable networks as well. Fox owns regional sports networks, FX, Fox News and more. And while CBS spun off its Viacom properties (MTV, VH1, etc.) it still retains Showtime and CBS Sports Network. And even Univision, a Spanish broadcast network, distributes cable network. Plus each of these broadcast networks get their own monthly license fee for cable distribution. Why would they want to encourage cord cutting.
And the government may also make it hard for consumers. "The value of spectrum used by broadcast TV has been hotly debated in the past couple of years, as the FCC has looked for ways to add spectrum for wireless broadband. Last year FCC Chairman Julius Genachowski said the percentage of viewers watching broadcast over the air, rather than through cable or satellite, has fallen to less than 10%, in contrast to the precable-TV days when it was 100%." While those spectrums help wireless, they hurt over the air reception. Will broadcast TV access be available to only those that can afford to access it?
The money is in cable TV and authenticated web viewing. The profits on over the air and OTT are less enticing. And broadcasters are more likely to do what ever they can to impede cord cutting and support this cable model.
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