Why Is Dish Dropping All AMC Networks?

As cable, satellite, and telco cable providers seek to keep subscribers signed on, the concern by some may be that they shouldn't have to compete against web offering the same content. For networks, offering access to programs on other platforms brings new revenue streams but is also argued as a way for viewers to "catch up" on series that they haven't watched from the beginning.  Missed Season 1 of "Mad Men"; rent on Netflix, or others and be caught up to watch the latest season from your cable provider.

So why is Dish Network threatening to drop all of AMC Networks, including AMC, WE, IFC, and Sundance,  channels from its line up? Is it because: 1)  the rates are too high, 2) their shows are available on competing platforms, 3) viewership is too low across the networks, or 4) Get back at their ownership for the court loss they faced regarding the Voom lawsuit?  AMC claims it is #4, while Dish is arguing that it is the first three.

Certainly the first three arguments can be applied to every cable network on Dish and every other cable provider. Arguments regarding rates, exclusivity of shows, and viewership affect every contract negotiation.  Unique to these proceedings is the previous relationship between Dish and Cablevision regarding their Voom partnership, a satellite service that offered 100% original  HD channels. Unfortunately it was a failed business model that was structured in a way that  limited additional distribution.  With our regular channels finally offering HD feeds, these original channels were deemed less valuable and Dish pulled out.  So the  fight with AMC, even though it has spun away from Cablevision, may be a way to get back at its common owners, the Dolan family.

Regardless, these fights between networks and distributors are common place.  They tend to take longer and longer to work out, but eventually they all do.  A fight like this one may take even longer though as it may not be about the business but about personal feelings.

Cablevision Empire May Get Even Smaller

Cablevision is spending more money to retain subscribers and while the cost is high, they did report sub gains while other operators posted sub losses.  But their low cost pricing strategy and high marketing costs were not kind to the bottom line as profit and cash flow dropped.  The result perhaps of a strategy that former leadership chose not to follow and thus have been departing from the team.

Cablevision, once known as both a programmer and distributor, has been spinning off assets to concentrate itself as a pure play cable operator.  First came the spin off of MSG Network, followed close behind by Rainbow Networks, renamed AMC Networks.  And now comes word that its Clearview Cinema movie chain is being pushed out next.  "Chief Financial Officer Gregg Seibert said on a conference call that the company planned to explore strategic alternatives with its Clearview Cinemas movie theater chain, which had 45 theaters in the New York tri-state area including the Ziegfeld Theater in New York City."

For a company that once owned Nobody Beats The Wiz stores, today's Cablevision is looking quite different.  Will Newsday be the next asset to be discarded?  And is all this being done to make Cablevision easier for selling it to another cable operator?  All I know is that there is always something interesting going on at Cablevision.

Content's Long Tail Gets Longer And Longer

New content is competing for consumer attention thanks to the rise of the web.  As broadband speeds get faster, content creators have found they can bypass the broadcast and cable distribution model to get their content viewed.  Many have entered the fray already, from NextNewNetworks, which was acquired by Google to My Damn Channel. Hulu and Netflix has announced new original shows exclusive to their platform.  And You Tube has been churning out more original content as well and now Amazon has announced plans to create new content.  "Starting now, Amazon is accepting ideas for TV shows from anybody who has a pilot script, an idea for five or six episodes, and an Internet connection. Amazon says that it wil be selecting one idea per month to put into development."

But with all this clutter of content, a two-fold challenge remains for viewers, how to find out about shows (recommendations and marketing) and where to find them (which distribution aggregator or unique website). Like our TV line-ups, we will have to surf or find guides to help us learn what is on and where it is located.  The audience to watch all these programs will only get more and more fragmented.  The likely winners should continue to be cable networks, provided they expand their linear and on demand viewing to a TV Everywhere, multi-platform  approach.  But they will see lower ratings as the fringe viewership is swayed to the growing pile of programming now being created for web consumption.  Hence a longer and longer tail of content choices.

The web has clearly lowered the barrier to entry for distribution of content.  It has led to cord cutting and new ways to watch content.  Like broadcast changed  the radio model, and cable changed the broadcast model, so too will web programming change the cable model.  History ultimately repeats itself.

For Comcast, The Growth Comes From High Speed Subscriptions

Just last week, my post on Time Warner discussed the growing value on the pipeline for broadband and telco subscription verse the cable subscription.  Today's news from Comcast strengthens my point.  While cable subscriptions dropped in the quarter, both high speed data/broadband and telco subscription grew.  Like Time Warner Cable, Comcast is watching their cable subscription business decrease as viewers seek lower cost alternatives for video consumption.  Their own broadband pipeline being the ideal means to watch their web based programming from Netflix, Hulu, and others.

As a content producing company, Comcast sees growth from its content creation business, NBC.  With double digit revenue growth, NBC benefits by getting business from its parent company's rivals including DirecTv, U-Verse, and FIOS, as well as from streaming deals.  Comcast subs may be dropping but NBC viewership can be gained from these competitors and other platforms.

Still, for Time Warner Cable, Comcast, and other cable distributors, the value of the business is the pipeline.  While it was initially built for cable subscription, it will one day be overtaken by high speed and telephone subscription.  Taking advantage of the pipeline, cable companies must invest in other businesses that can take advantage of these connections between home and plant.  And adding value by supporting home connections with WIFI mobile hotspots will only increase its demand.

As cable subscription costs continue to rise, consumers will seek ways to lower their bills.  It may be smaller packages of services; it may become a la carte.  As programming license fees continue to rise, the old cable model is breaking apart.  Subscribers will continue to flee the cable model as costs continue to rise. The future is the broadband pipe.

Content Producers Look Like Winners

Earning reports are coming out and the big news seems to be that companies creating and selling content are big winners.  Time Warner is doing well because of its film and TV units. NBC's unit inside of Comcast is also reporting higher than expected earnings.  And even CBS has reported huge earnings increase from streaming fees for its television content.  Content is king.

Perhaps it also reflects a better economy that is pushing rates higher and the  rise of digital platforms and new streams of revenue.  Still, as more content producers like ABC, Fox, and others report, we can truly say that it is good content that is driving the bus.

Is Cablevision In Trouble?

More defections at Cablevision as another top executive leaves the team.  The latest is Barry Frey, EVP of Advance Advertising, who is following David Kline, President of Media Sales, who left last month.  Will the revolving door ever stop?

Also announced the team of Rutledge and Bickham have reunited.  The former Cablevision COO is joining the former Cablevision CEO at Charter Communications. Both now have their same titles at their new cable firm.

Will the reunion at Charter shortly include Kline and Frey?  As the Cablevision senior team members depart, one has to wonder if it is time for Cablevision to finally put up the For Sale sign.  Should Time Warner Cable come in with an offer and try to complete its ownership of the NY DMA?  Or will the arrival of Rutledge and Bickham to Charter give them reason to want an pick up their old system to add to Charter's system list?

Somethings happening at Cablevision to lead to such a mass exodus.  Perhaps we should soon get a whiff of what the trouble is that  is causing all these departures.

Will Microsoft Sell Products In Barnes & Noble Stores?

There are obvious gains for Microsoft to partner with B&N.  It gets a footprint in the e-book space, it offers an app store to compete with Apple, and it eventually puts its new operating system into new devices.  But it also gets access to retail space, in bookstores and especially in college bookstores.  But will Microsoft take advantage of the brick and mortar side of this partnership or are all efforts directed strictly to the digital business?

Just as Apple has gained great traction with its stores, Microsoft now has a retail partners to offer a similar relationship.  Areas can be built up within these locations to sell all sorts of Microsoft products, including its new Nokia phones and XBox systems.  And B&N stores need diversification as physical book sales are declining.  A Microsoft presence gives another push to enter a store.

Shareholders like to look strictly at value that is perceived by spinning off and combining assets. Whether the Nook business is spun off or not for unlocking value may be a financial goal; but, for the overall health of the  business, the synergies of the store and digital presence are key to their mutual survival.

Microsoft Sees A Future With The B&N Nook

Microsoft just took a position with the Nook, Barnes and Noble's stock is rising and Liberty Media must be feeling good too.   The resulting investment by Microsoft to Nook adds a well needed boost to help it expand in the e-book and tablet space and fight off Amazon and Apple.  So will the Nook technology improve?  Will Windows 8 become its operating system?  And how will the added dollars help to win customers from its rivals?

Some see this investment as the push to separate Nook from its physical bookstore.  "Some on Wall Street see the Nook as a fast-growing technology asset trapped within a slower retail stock. They have theorized that Barnes & Noble would spin off the Nook business to give it a chance to trade at a higher valuation." I wonder if the Nook is a stand alone business would it only hasten the loss of the Barnes & Noble Bookstores.  And that would be a sad day.

For now, Nook and B&N must feel a sigh of relief with this new investment.  This added capital will certainly help to speed up innovation and bring better products to market.  It could be the kick in the pants that the Nook needs to be competitive.

Hulu Could Stop Being Free

It's time to teach the younger generation one of the great tenets of business, nothing of value is given for free.  Everything has a price and that price will continue to rise as more and more entities want their fair share of the revenue.  So for those that have enjoyed quality long form content from the cable pay model for free on Hulu, it may one day be time to announce that the "free lunch is over".

"In fact, the move by Hulu toward the new model — called authentication because viewers would have to log in with their cable or satellite TV account number — was behind the move last week by Providence Equity Partners to cash out of Hulu after five years, these sources said." As the NY Post has  reported, the cable companies are seeking to stop cord cutting, customers dropping their cable subscriptions, by turning Hulu from a digital competitor to its partner  in TV Everywhere.

But the move to authentication may take a while to coordinate.  "To be sure, Hulu’s slow move toward authentication comes amid a jumble of cable and network game plans for streaming — which remain a strategic nightmare thanks to the complicated nature of the TV Everywhere initiative, which is aimed at keeping top shelf digital video exclusive to pay-TV subscribers."

For customers tired of paying  high rates for cable subscriptions, quality programming is being created for other OTT distribution; for example, You Tube is building out live channels.  But as we have discovered, nothing stays free and as we look ahead a decade, all this free content will eventually find itself behind different types of pay models.  For now, enjoy the free lunch while it lasts.