Is Apple Finally Launching A Streaming Music Service?

It's one thing to offer downloads, it's another to offer a subscription service.  Why Apple has been slow to enter this space is unclear, but Apple may be reconsidering.  "Apple Inc has held talks with Beats Electronics LLC, the audio technology firm co-founded by influential hip-hop producer Dr Dre and music mogul Jimmy Iovine, on a potential partnership involving Beats' planned music-streaming service, three people familiar with the situation told Reuters."  

It is time for Apple to announce a full fledged subscription service - music, video, info - available across its product line.  As Apple has never worried about cannibalizing its current offerings, there should be no fear that a subscription service may affect download purchases.  The iTunes store will continue to survive and thrive.  And an Apple subscription service guarantees a measurable monthly revenue stream, something Wall Street would be pleased to see.  

Can we expect movement quickly?  It seems that Steve Jobs had been considering before his death.  "(Jimmy) Iovine said Jobs didn't want to pay the record companies enough, and thought the price would come down eventually."  The resurgence of music, thanks partly to iTunes, shows that not to be the case.  It seems that now might just be a good time, given recent stock performance, to pull the trigger and announce a subscription service. 

Media Has A Social Soundtrack

Great article in Huffington Post from Deb Roy called "Television's Future Has a Social Soundtrack"  As Twitter and Facebook enable immediate sharing of our thoughts and concerns, it provides great social measurement of events in our lives.  Since television offers us a window to the world, from presidential debates to award shows, from the Super Bowl to The Walking Dead, the second screen enables social commentary to share with the world.  "Just in the United States, tens of millions of people are talking to each other as they watch TV. This year's Super Bowl alone spurred over 24 million tweets."

Count me in the group.  I tweeted as well during the Oscars and enjoyed reading others' snarky tweets.  It also added to my engagement in the show I was watching. And as Roy points out, social media opens us up to other viewpoints and feedback. It also provides an expertise and recommendations to new programming.  "Hearing chatter about a show is becoming a common way to discover new programs and decide what to watch."  

This "social soundtrack" becomes for the user an important added value to our viewing behavior.  " If you are not part of the soundtrack yet, chances are that you will be soon."

The Fragmentation Of TV Sports Networks

No doubt that the cost of monthly cable service is becoming a major concern for households.  For some, it is becoming expensive to the point where consumers are cutting the cord and relying on the web for their video entertainment.  One of the biggest contributors to the cost of cable is sports programming.  License fees for sports networks are among the highest expenses for the cable operator.  And of course those fees get passed on to the consumer.

Sports programming also attracts an audience that offers more advertising opportunities. So where once sports was only found on broadcast channels, programming has pushed down to national and regional cable networks, as well as to the college and high school level.  And from a few sports networks, now we have many.  ABC has the leader in national sports with ESPN while NBC and CBS has been pushing forward their networks as well.  Now comes Fox Networks trying to build out their own national sports net.  "Fox has spent months working to convert Speed, a motorsports-centric network with 81 million subscribers, to Fox Sports 1. A companion service, Fox Sports 2, will replace another niche channel, Fuel."

But it is more than just national sports networks, the regional nets demand their monthly fees as well. NY has YES and MSG, Philly has Comcast Sportsnet, Boston has NESN.  And don't forget the rise of networks from the professional leagues as well, including the NFL Network, MLB, And NHL.  Even TBS and Turner get higher fees for their carriage of basketball and baseball.  College sport fans can also enjoy watching their teams on the Big Ten and Pacific-12 Networks.  And MSG has a network devoted to high school sports.  Is their fragmentation?  No doubt. 

Ultimately the costs of fragmenting can only lead to trouble. As costs of carriage rise, consumers will have a hard time paying for all these channels. At some point consolidation must occur as larger segmentation returns.  But that might take some time.  

Can The iWatch Save Apple?

First came talk of an Apple TV and now the push is on for an Apple iWatch; bottom line, is there another product in the line-up that can restore Apple to coolness and pull back up the stock price?  According to unconfirmed reports, the iWatch is coming with some valued features.  "Features under consideration include letting users make calls, see the identity of incoming callers and check map coordinates, said one of the people, who asked not to be identified because the plans aren’t public. It would also house a pedometer for counting steps and sensors for monitoring health-related data, such as heart rates, this person said." 

Would the younger audience even where a watch?  Would the older demo replace their current watches for an Apple iWatch?  For me, I am probably more likely to wear a watch then wear a pair of Google glasses.  Heck, I despise wearing the 3D glasses in movie theaters.  Wearable computers are certainly the fashion of the future.  But perhaps we should take our cue once again from Star Trek and look instead at a device that also acts like a pin.  If Captain Kirk wears one, maybe we should too.

NBC Considering Linear Distribution With OTT Providers

As companies have learned, sometimes you need to cannibalize the product in order to continue to grow.  Apple was willing to push iPhone sales knowing that it would cannibalize on iPod sales.  And NBC may be considering a similar strategy, cannibalizing on current distribution to achieve greater growth and hopefully larger revenue.  That means offering the linear feeds of its broadcast and cable channels to internet platforms. 

And there certainly would be takers.  Apple has been considering an Apple TV set for years and getting NBC channels distributed would add value to their efforts.  "Intel, for one, has publicly discussed plans to launch an over-the-top pay TV service in 2013 and says it has approached major programming providers." Sure NBC's cable arm Comcast has a large percentage of the US cable geography; still offering it to an internet platform would provide more access to the entire country, beyond the communities that they currently cover. 

The challenge would be for NBC in the agreements with distributors already in place.  There are most likely most favored nation (MFN) clauses that might interfere with offering their networks to IP platforms.  There might also be higher costs for carriage making the networks more expensive for the consumer to purchase.  But it could also be the first step in unraveling bundles of programming to consumers interested in cherry picking the channels they wish to watch.  That Comcast/NBC is "negotiating several 'full freight' requests" might just legitimize the next phase of network distribution in the IP world. 

The Monetization Of Digital Content

As content gets digitized, whether from print, audio, or video, it essentially loses its wrapping, the pieces around it that differentiate it from something else.  For books, it can be hard cover or softcover with any number of covers to make it appealing.  For music, it can be presented as album, cd, cassette, etc.  And as video, as VHS, DVD, or presented by a TV channel with wraps and intros to keep us tuned in.  But the content itself is intact and unchanged, except perhaps for special Director Cuts or extended versions. 

For distributors cutting deals to sell this digitized content, the classic marketing decisions must be made.  For cable distributors, it is aggregating the mix of channels at a price point that works and building a platform that assures that the service is always on.  For music, it is sold as a standalone song or within an album, and the ease of streaming or download.  And book sellers on having a large library of content and the ease of purchase and download.

The challenge for all distributors is figuring out how to best appeal to the consumer so that they choose your infrastructure to buy from and to create a hopefully long term, loyal customer base.  But consumers can be fickle and their interests can change with any internal or external force, from pricing changes to technological innovation.  The successful distributor can react as well as be proactive to assure that their relationship with the consumer continues to grow. 

And that is what makes the entertainment and media landscape so interesting and appealing to me; the constant change that enables innovation and growth.  For cable, the rise of video on demand and interactivity on the TV set; for book sellers, the rise of e-readers and tablets, and for music, different ways to consume and enjoy, from downloading and purchase to streaming online or from Sirius and even still from radio. 

Change is the constant force that assures that nothing stays the same forever.  Consumers love innovation that improves the quality of their lives.  We no longer can wait for the newspaper to be delivered to our door or for our news telecast at 11 pm, we need it now and digital has enabled instant accessibility.  It is hard to imagine getting it any faster, but I'm sure we will.  We also want it at an affordable price, willing to pay more if we can be convinced it provides greater value.  And we want the extras that make the experience that much more satisfying.  The challenge is figuring out what all those things are for all of the content we seek to consume.

Amazon Prime Adds More VOD Content

Content creators, even established networks like HGTV and Food Channel, are constantly seeking new distribution growth to build revenue streams.  Cable has been for a while the predominant way to view video content and the development of video on demand (VOD) offered consumers more ways to access and view.   But consumers are dropping cable and the web has become the destination for today's and tomorrow's viewer.  To reach those consumers, Scripps Interactive has partnered with a new distribution partner, Amazon.

Subscribers to Amazon prime will now have access on demand to multiple series from HGTV and Food.  Not only can they stream and watch, but consumers can purchase and download episodes as well.  While this is clearly good news for both Scripps and Amazon, I must wonder what Scripps' current distributors, Comcast, Time Warner, Cablevision and others think of this deal.  True, shows are being available to paid subscribers to Amazon Prime, but it must still feel like a competitive threat.  And while it is strictly on an on demand basis and not a linear feed of the network, viewership is moving more and more to an on demand world with the only exception being live programming.

Kudos to the Scripps team on what will be seen by many in the cable industry as playing with fire.  In the long run, deals with these alternative platforms, the ones currently disrupting the media industry, should ultimately keep the Scripps brands accessible to every home. And distribution is certainly the name of the game.

Apple, We're Waiting

Here's hoping the bloom is not off the rose, or that the shine not off the Apple.  At yesterday's shareholder meeting, Apple CEO Tim Cook admitted that while the stock price isn't where it should be, the company is performing well.  "True to Apple's secretive nature, Cook didn't provide any further product details, although at one point he said the company is considering entering other categories besides its popular line of digital music players, smartphones and tablet computers."  Of course there has been a lot of speculation as to what that next product might be, like an Apple TV set or an iWatch.  

But as other companies come out with their versions of these products ahead of Apple, I must wonder if that is indeed where Apple is headed.  They have had a tendency to lead the market with revolutionary new products, not merely spit out a copied product.  What might Apple possible be able to include in an iWatch that would make it better than the other products already in the marketplace like Pebble and others. And why hasn't Apple released a competing subscription music and video service to compete with Pandora and Netflix.  What is their next big thing?

For many of the shareholders, there is still a lot of confidence in what Apple has up their sleeve.  Others are expecting more immediate moves.  I can only hope that patience will be well rewarded.

TiVo Cable Strategy Working

Working with cable operators rather than around them seems to be working for TiVo.  While some consumers might be willing to buy their own standalone DVR box, most prefer to let their cable provider include and install.  Building set top deals with these distributors has enabled TiVo to roll out more and more boxes.  

"The DVR company added 222,000 net new customers through cable partners during the period, its fourth quarter of fiscal 2013, to reach 2.12 million. It lost 13,000 TiVo-owned subs to stand at 1.03 million. ... TiVo’s biggest MSO customer by far is Virgin Media in the U.K., which added nearly 900,000 net TiVo subs in 2012 to reach 1.3 million total, or 35% of its video-subscriber base."  Ultimately, that led to a healthy increase in revenue for the company.  

While internationally TiVo appears to be doing well, they must still solidify their Virgin Media relationship now that Liberty is acquiring Virgin.  Domestically, TiVo still has work to do to get into the leading cable operators like Time Warner Cable and Comcast. As the Mercedes of set top boxes, they deserve to be offered by cable operators to their subscribers.