Subscribers Taking Programming From Telcos Not Cable

Paid Content has shared an interesting chart from their article on Cable Subscription Growth.  While total multi-video subscription grew in 2011, the biggest news was that cable operators saw a smaller than expected loss in Q4 while others saw a smaller than expected increase.  Still, when you look at the numbers, the top cable operators all saw a loss of basic cable subs last year, along with Dish Network; the losses were less than the gains that Verizon FIOS, DirecTv, and AT&T U-Verse achieved in the same period.

Historically, the cable operators have been losing subs for more than a few years now while telco and satellite have been doing a better job of growing subscribers.  Cable operators have been able to manage this loss because telephone and broadband subscription have been growing and the profit margins on these two businesses are higher than cable.  

As to the causes, housing starts, unemployment, and costs of service are all to blame.  As overall subscription has been rising, many argue that cord cutting is not a factor.  But as more and more programming finds itself on the web, consumers may just start to move over to these OTT platforms.  For now there is movement, but within the cable platform from operator to satellite to telco platform.

Free Wireless, Not Quite

Not too many wireless options out there for consumers.  Beyond the telcos and WIFI access from a cable provider, the choices are limited.  The latest marketing push comes from an unlikely source, NetZero, the former dial up company.  The owners of NetZero, United Online, are offering "free" monthly wireless access, but free may be a misnomer.  "The free accounts are limited to 200 megabytes of data per month_ enough for some email and Web surfing, but little else."  The push is on to "upgrade" to data plans that may not be as competitive as other telco plans.  And to take advantage of this "free" offer also requires a cost; a digital antenna or mobile hotspot is needed to access the signal.  That cost can range from $50 and higher.  So free access actually costs some money.  Well the re-emergence of NetZero at least adds another player to the mix.

Busy Week For Apple

It has been a very busy week for Apple and it is only Tuesday.  In 4 days, the new iPad has generated over 3 million sales.  Not reported, the number of new sales of the reduced price iPad 2.  And with sales to start in more countries, the number of iPads sold is expected to continue to rise dramatically. "Apple sold more than 40 million iPad units in 2011, and several analysts expect the number to top 60 million for the current calendar year."  While laptops and desktops get to be shared  among the family, each family member wants to own their own iPad, iPod, and iPhone device.  Brilliant.

Also on Monday came word that Apple was reinstating a dividend that had been stopped after Steve Jobs had re-entered Apple.  Ironic that it comes back to shareholders months after Steve Jobs has passed away.  For Tim Cook, CEO of Apple, it is the right course to return income to shareholders and to reach a new set of institutional investors.   And along with a stock buyback, it is still just a dent in the free cash that Apple carries.  So what will be announced next quarter?  A new iMac, a stock split?  With Apple, there is always the next announcement.

Taking The Video Fight To The Clouds

There's a fight brewing for video purchases and sides are being drawn up.  For Apple, it has always been about the iTune library.  Consumers purchase and download or store in the Apple cloud for use on any device with iTune access.  For the studios, the push has been to maintain the DVD business by augmenting it with the UltraViolet cloud.  And there is Amazon who is designing both their own cloud business as well as building compatibility with UltraViolet.  


Retailers, trying to keep DVD sales alive, are also looking at the best approach to take.  Wal-mart has decided the UltraViolet cloud working with Vudu works best.  "The retail behemoth last week teamed up with five Hollywood studios in an effort to stem the continuing decline in DVD sales."  Vudu customers can take their previously purchased DVDs to Wal-mart and for a minimum fee, gain a digital cloud-based version.  Will Apple try to collaborate with UltraViolet or stay the course through iTunes?

And what does the consumer want?  Is it necessary to own the content anymore when titles are accessible anytime, anywhere, through cloud-based rentals.  Does Netflix and others offer a better rental alternative and should Apple consider building a rental program into their iTune model?  I like the closed architecture approach that has made Apple successful.  At the same time, I believe a rental model could work very well for Apple.  And as far as the DVD business is concerned, with the exception of kid videos that are watched over and over and over again, the rental market accessible on demand will continual to over shadow purchase.

College Students Prefer Digital To Print

Sometimes it takes research to confirm what we already know, students enjoy digital over print for reading.  "The majority of U.S. college students now prefer digital formats whether they’re reading textbooks or “fun” books, according to a new survey from the Pearson (NYSE: PSO) Foundation." 


Technology is embraced more quickly by the younger demo and with that comfort level comes increased satisfaction in consuming more content on them.  The influence of Apple and its line of mobile products continues to fill the consumers' shopping basket. Amazon and Barnes and Noble may be farther behind, but they too recognize the trend and have been pushing forward long before this analysis was conducted.  With today's release of the new iPad and reduced pricing on iPad2, even more devices will be out in the marketplace with consumers ready to use them for reading and watching content.  And Apple's announcement a few months  ago in New York of plans to put college textbooks on the iPad is an important step to gaining an even higher percentage of users in the near future.  


In a couple more years, this same study will most likely indicate that 80% or more of students prefer digital over print.  The change is happening quickly especially as more and more devices are getting into student hands.  

Is There Broadband Competition?

With Sprint pulling out from its partnership with LightSquared, it may signal the ultimate end of a possible competitor in the wireless and broadband arena.  With the release of Apple's iPad today, the rise of OTT distribution platforms, and the consumer desire to be mobile and untethered, the choice of wireless and wired providers remains small.

We have the wireless companies, most trying to sell us usage plans that cause us to spend more for connectivity as our consumption rises.  And there are the cable operators, offering wired broadband access coupled with WIFI to authenticated consumers in the communities they serve.  But who else can we turn to for connectivity.  It seems the FCC should be doing more to encourage more competitiveness in what is becoming a vital communication highway.  But by pushing aside LightSquared and recently Dish network's wireless plans, it seems that the FCC does not want competition.

Will broadcast networks give up their portion of the airwaves for wireless or will GPS?  Are there other solutions that will enable free flow of streams with bandwidth constraints?  Ultimately our broadband and wireless devices will not work properly if we have a bottleneck in the flow.

Did Someone Yell Fire (ing) At Cablevision?

It seems it may take more than one hand to start and name all the top Cablevision employees that are "retiring" these days.  Late last year came CEO Tom Rutledge and his right hand man John Bickham.  Recently EVP of marketing, Jonathan Hargis and now EVPs of engineering and operations, Jim Blackly and Kathleen Mayo.  And just to add more fuel to the firing, from their spinoff of MSG comes the Knicks Coach Mike D'Antoni.  Watching the leadership of the ship all jumping overboard, one has to ask is Cablevision about to sink?  What is causing this mass exodus?

Is it because they are all good soldiers, they are retreating with their captain,Tom Rutledge, away from the battle or is it that they don't believe they can prosper under  the re-emergence of Jim Dolan to the day to day operations?  It surely can't be because they know that Cablevision may soon be for sale.  Why leave a possible financial package on the table?  There must be more and my guess is that it is directly based on current leadership.

In any business, the leader sets the agenda, the tone, the culture.  As much as employees try to influence cultural change from the bottom up; ultimately, top down sets the course.  And based on that knowledge, I suspect that the heavy hand of Jim Dolan back into operations, replacing the style and approach of Tom Rutledge, is the cause for the exodus.  Are these resignations or firings; we may not know for sure.  I wouldn't be surprised to eventually here that there may have been a little push.  For now leadership change is in the air at Cablevision and more resignations are likely to follow.

Can Wal-Mart and UltraViolet Save The DVD Industry

The movie industry has enjoyed  a long history of selling  first laser disks, then VHS tapes, and DVDs to consumers seeking to build a personal library of content to watch at a moments notice.  But the rise of on demand and streaming content has made the concept of ownership less necessary.  Add to that the space a video library takes up on bookcases and the idea of ownership on digital devices or in the cloud becomes far more convenient with much less clutter.  And as consumers, there is less of a need to buy a DVD player with the rise of digital access to video content.  


When my kids were younger, we made sure our car had a DVD  player with screens in the backseat to entertain during long trips.  Today, that system is unnecessary.  Instead, we have iPads and iPods to provide that personal entertainment platform.  And they can each watch what they want..  No DVD  required.


But like all of us, we tend to be reluctant to embrace change, preferring to hold onto it as long as possible till it is too decomposed to even recognize it any more.  Do stores even sell VHS tapes anymore?  So how much life is left in the DVD industry and is it time to quicken its death or prolong it through UltraViolet?


Companies like Netflix, Apple, and Amazon are moving forward on a digital only strategy.  But Wal-Mart is still staying the course and working together with UltraViolet to push a dvd/cloud partnership.  " Wal-Mart is launching a disk-to-digital service, aiming to drive adoption of Ultraviolet, and DVD purchases, rather than lower-margin rentals, and to prevent piracy."  As long as consumers are expected to buy a physical DVD, I don't expect it to succeed.  Why buy a disk only to immediately throw it away once the digital copy is accessed.

Can UltraViolet exist post DVD?  With the rise of multiple cloud services and digital being the platform of choice, the movie industry may best be served selling itself to other retailers unless it can come up with a compelling approach to make UltraViolet a better consumer choice.  For now, perhaps it deserves a better brand name.

Intel Wants To Enter The Cable Distribution Field

Google wants to sell its Motorola set top box business; Cisco wants to sell its S-A set top box business as well. And Apple wants to build a TV set to manage TV content without a box.  Now comes Intel with its own plan to build a box and its own web-based cable TV platform.  The end of EBIF technology perhaps and the rise of web based applications.


"The entry of Intel -- with its large bankroll -- into over-the-top video would add another potentially serious competitor to traditional pay-TV services, as consumers face a growing number of options for receiving video content over broadband from the likes of Netflix, Apple, Amazon.com and others." There sure is a lot of change in the cable landscape occurring these days.  But what each of these companies, Intel included, lacks, is the wireless platform to run it.


Cable built there TV business first and now the pipeline used is capable of delivering TV, internet, and phone. And customers rely on this pipeline for the web.  So what broadband stream will Intel and others use to get content through their box and onto the screen?  And what will the access cost be to the consumer?  Because if the cost for buying access on top of the course for an Intel box is higher than traditional cable, customers may be reluctant to switch.  


The other concern for Intel, Apple and others will be the cost to acquire content.  Cable operators enjoy best, lowest rates because of the number of subs they cover.  For start ups to traditional cable programming, their license costs per sub will most likely be higher.  And  that will not help them to bring a competitive offer to the consumer.  


For those two reasons, lack of a broadband pipeline and higher costs for acquiring content, may be what ultimately stops them from competing effectively.  The solution, for Intel and others, may be to work with cable operators, and not to compete.  For now, all we can do is sit back and watch.