As One Show Moves To Cable, Two Move To The Web

The rise of online distribution means more content viewing choices; at the same time, cable and broadcast still are where most viewers look first to consume content.  We have seen the rise of original content going directly to streaming, like Netflix's "House of Cards", and now we are seeing shows move from one platform to another.  Actually, we are seeing three!

For soap opera fans, the loss of two long time series on ABC, “All My Children” and “One Life to Live”,  are finding new life and new original shows on streaming media.  According to the NY Times, "Some fans have set their alarm clocks for 5 a.m. Monday, the precise time when the shows will have their premieres on Hulu and iTunes — and complete the closely watched transition from TV to the Internet."  Will viewers follow these two shows?  Like Netflix did for "Arrested Development", rabid fans may be very happy to find new episodes can be found online.

But this trend to move a show from one platform to another is not a one way road.  For HuffPost Live, an online, live news program on the Huffington Post web site, a new audience may soon discover them.  Also according to today's NY Times, "The company announced Sunday night that Mr. Cuban’s cable channel AXS TV, previously known as HDNet, would soon carry HuffPost Live’s programming for six hours a day."  That means that HuffPost Live will extend its reach to around 41 million cable subscribers. Cable and broadcast networks, looking for potential new series can let online sites incubate new shows and take them to their audience once they mature.  The same could hold true for TV pilots being tested online. 

As much as cable and broadcast networks worry that online will steal viewers and subscription revenue, they may also find that working collaboratively can perhaps work, too.  For now, we can watch and wait as more original shows move back and forth between online and on TV. 

Netflix CEO Sees The End Of Linear TV

Netflix, despite its bumps and bruises, has navigated from a DVD subscription model to a digital one.  And according to their CEO, Reed Hastings, imagines a TV future that is all streaming and non-linear.  "People love TV viewing, but they hate linear TV, including DVRs and cable VOD services, argued Hastings: 'The linear TV channel model is ripe for replacement.' Stepping up to replace it are apps from companies like Netflix, HBO and ESPN, which deliver programming to multiple screens."And while I agree that the viewing model for consumers is changing rapidly, I believe that consumers will find a viewing experience balanced between linear and non-linear video consumption. 

As I read the article, I admit a bit of confusion when Hastings describes linear TV to include DVR and VOD. But I believe his description is more between the current cable/satellite model and a digital streaming one.  "Technical advances, including 4k streaming and personalized advertising, will speed up the transition from linear TV to app-based on demand programming, and TV Everywhere will make it easier for cable networks to transition into this new world." 

I prefer to describe linear TV as a sit back model where we are fed video that has been pre-programmed to air at a particular time and once aired is not accessible till its next airing.  A non-linear model for me is one that includes DVR and VOD and streaming services where the consumer chooses when and what to watch.  And  consumers are moving toward the streaming model because of the mobility and personalization factors.  But some streaming is in fact linear.  Huffington Post offers its HuffPost Live channel on its website.  And linear still matters for live events, especially sports, as well as news, weather, and other big events.  I expect broadcast and cable to deliver more live programming as a means to capture audience share from on demand.  With live comes an anything goes factor that is harder to edit out.  And for viewers that simply want a sit back TV experience, linear reduces the choices a viewer has to make.

So Hastings is right that streaming will impact viewing choices more and more.  And his decision to build a brand experience that defines and positions itself above the fray is a smart strategy.  "'For us to be hugely successful we have to be a focused passion brand. Starbucks, not 7-Eleven. Southwest, not United. HBO, not Dish.'”  Competition for audience will only get fiercer when you add up all the choices a consumer can access for their viewing pleasure.  And with so much non-linear choice, we may sometimes simply revert back to linear programming to simplify the viewing experience.

Set-Top Boxes Not Going Away

As much as TV sets come with a remote control, most of us rely on the remote from our set-top box to turn the channel and adjust the channel, even turn on and off the TV set.  Cable operators rely on their set-top boxes to unscramble signals, record programming for later viewing, and access video on demand.  We only tend to use the remote from our TV to switch inputs to our other devices. And it is those other "set-tops" that want a piece of our TV screen. 

Apple has its box, Apple TV, to access programming from our iTunes library and other streaming accounts.  And Rovi offers its own video streaming box. X-Box, Playstation, and Wii have their set-top box for gaming while also enabling streaming content to play.  And TiVo has built a solid DVR set-top box  while Boxee has a set-top box to record programming in the cloud; both with features that enable video streaming as well.  So, many of us most likely have more than one set-top box lurking around our TV set.  And more devices are arriving. 

Although it offers its video streaming Prime services to some of the above set-top boxes, Amazon is preparing to release its own Kindle TV set top-box.  "By building its own system, Amazon can put its content more directly in front of consumers while expanding its lineup of devices and giving developers another reason to create apps for Amazon’s digital ecosystem."  While set-top boxes have been around a long time, their functionality and ergonomics have improved greatly.  Which boxes the consumer prefers and how they wish to access their streaming content, whether through the TV set or other mobile devices, remains to be seen.  And most importantly, the exclusivity, variety, and amount of content accessible to consume will be where the consumer is most likely to dine and view.

When Is Apple's Next Big Thing

Apple released its earnings last night and while all signs point to a healthy business, its stock price reflects a drop in profits and and product growth.  Despite what appears to be a solid infrastructure of software and hardware, Apple is no longer seen as innovating, merely refining its product line.  In the last decade, prior to Steve Job's death, Apple successfully introduced the iPod, the iPhone, and the iPad.  But threats of a future new product line have yet to appear.  Rumors of an Apple TV set or iWatch have yet to be announced, or any other new device; instead, we get only bigger, lighter, and cheaper.  But once you reach a tipping point of growth, it is hard to ask consumers to keep buying new devices every two years.  iPhones may achieve some of that thanks to renewal contracts that offer discounted phones, but when faced with choice some new consumers opt for an older iPhone version that can be had for a cheaper or even no cost. I believe that consumers will be less likely to update their iPads as frequently.

So Apple shareholders face a market that is lowering the stock price, despite a financially sound company delivering a strong dividend.  Apple lacks the perception of future growth and that is the fear that depresses the price.  Should Apple surprise us this year with a new product that supports our technological hunger, then this new revenue stream will re-energize the share price.  Till then, we wait and watch hoping a new product release is in the cards.

Content Is King And A Good Investment

For makers of content, the demand has never been higher.  Consumers crave content to feed their entertainment hunger, on TV, on tablets, smartphones and laptops.  Where only a few decades ago, video content was limited to broadcast and a few cable networks, today the list has expanded to include premium nets like HBO, SHO, and Starz, video on demand services, and especially the rise of streaming services from You Tube, Amazon, Netflix, Redbox, and so many more, both subscription and free to view.  

And what appears to be the secret sauce in building a successful network or online service, original content that breaks through to become valued.  Broadcasts have felt that with American Idol and other hits, premium services like HBO felt it with Sopranos, and Netflix is feeling it with House of Cards and Arrested Development.  In fact, Netflix recent earnings are subscriber growth are results of this push toward original content.   Consumers are craving more and that desire never seems to get fulfilled.  For as one series fulfills, another takes over to attract demand. Not that every piece of original content achieves such status, but it seems that accessibility of content helps to drive viewership.

Wall Street might agree.  "Corporate and private equity firms will be looking to bulk up on entertainment, driven in part by tech companies’ need for content that provides 'a level of security on prospective cash flows,' the analysis says."  Comcast paid well for NBC; Disney paid well for Lucasfilms and their Star Wars franchise.  And Netflix has seen its stock price soar as a result of its push toward more original and exclusive content.  Today Sony has announced plans to create another  network to play its library of movie content.  You Tube has its original channel and Amazon is streaming original pilots to help find their next series to produce.  And consumers can't seem to get enough.  Of course, with so much new content being produced, the challenge to find the best gets more difficult.  Breaking through the clutter to be discoverable will take on a rising challenge for all these companies in the content creation and distribution space. 

CBS For Sale?

Broadcast is big business.  Comcast completed its full ownership of NBC from General Electric earlier this year, while Disney acquired ABC many years ago from CapCities.  Now comes word that CBS, part of Sumner Redstone's empire could be for sale with the likely buyer being Time Warner, Inc.  "Gabelli & Co. said buying the most-watched broadcast network would give Time Warner, owner of cable channels such as CNN and TNT, more negotiating leverage to win higher fees from pay-television systems that carry its programming."  In a world of aggregating and leveraging content to aid license deals, such a move makes sense.  Why Viacom split from CBS in the first place was always a head scratcher.  Could Viacom become another takeover target?

In the recent NCAA Basketball Championship, CBS and Turner (a division of TW) seemed to work quite well together, promoting each other's games.  Having a broadcast partner in CBS would bring great internal partnerships.  "Their strengths are complementary -- Time Warner runs Hollywood’s most-prolific studio and CBS has the highest broadcast TV ratings -- and both plan asset sales to focus on those areas."  Whether Sumner is ready to let go of CBS, like Ted Turner did many years ago when he sold his Turner empire to TW, remains to be seen.  But the timing seems right for both parties to come together.

Streaming Subscriptions Embraced By Higher Income Households

Perhaps not all streaming subscriptions lead to cord cutting.  it might just be that in some households, cable subscriptions and streaming subscriptions like Netflix, Hulu Plus, Redbox, Amazon Prime, and others can live side by side.  While the Nielsen research cited doesn't delve into that question, it suggests that price may not be an issue when it comes to getting access to more content choices.  "Homes with incomes of over $100,000 made up 37% of all U.S. homes with a streaming subscription service and were 85% more likely to subscribe than the general population."  The study also cites that "Homes with tablets also significantly over index and are 66% more likely to have the services."  It might be reasonable to suggest that higher income households are more likely to own tablets, perhaps even higher number of tablets in their home than lower income homes.  The demand for content to play on these devices might then lead to these same households purchasing more streaming subscriptions to satisfy that need.

For lower income households, cord cutting and cord shaving might indeed lead to streaming subscriptions replacing their cable subscriptions, not augmenting their selection.  The rise of tablets in the home will certainly continue to impact this these studies and perhaps further distinguish the haves from the have nots.  At the end of the day, income will still be a key decider in whether households take both cable and streaming subscriptions or ends up dropping one service for another.

Comcast Can Compete In The TV Everywhere World

Comcast's "Watchathon Week"  successfully demonstrated that consumers like to access their programming on demand, both on and away from the TV screen.  "The Watchathon, which ran from March 25-31, offered more than 3,500 episodes from 30 TV networks to Xfinity TV subscribers for no extra charge, including full seasons of current shows from premium channels HBO, Showtime and Starz."   According to their report, "It set new records on the Xfinity.com/TV site and the Xfinity TV Player app for tablets and smartphones (no specific numbers were supplied)."  Because it is an added cost to subscribers, it is likely that usage of this service will drop significantly post this free trial. 

Will customers pay more to buy this service, I highly doubt; but I do believe that if Comcast offered their Xfinity on demand platform with a digital subscription for free, customers may be more willing to return to the nest and help Comcast compete more effectively against IP only competitors. It is a good step in growing out the TV Everywhere model for cable.

Amazon Adds Original Content In TV Pilots

Have you ever thought you could do a better job picking TV pilots then some executives.  Amazon has found a way to both get original content exclusively on its platform and get social media to engage in which shows should become TV series.  "Starting soon, it will debut 14 of its own TV show pilots on its website, allowing anyone from the U.S., U.K. and Germany watch them for free. The company will ask for viewer input, and hopes the comments and critiques will help decide which shows live or die."  Sounds kinda fun. 

It also works perfectly in a TV Everywhere approach, letting viewers watch these shows on the device of their choice and at the time and day they desire.  And most importantly, it lets the audience discuss and vote on what they like or don't like.  Build enough consensus and a pilot can turn into an exclusive series on Amazon.  In the meantime, it expands the content library of the service. 

Ultimately, Amazon hopes that offering these shows adds value to their Amazon Prime offering.  "Amazon has been investing heavily to convince more people to sign up for Prime, and recently paid for the exclusive online rights to a number of shows including the second season of 'Downton Abbey' and the CBS show 'Under the Dome,' which will debut this summer."  And consumers that are drawn to buying an Amazon Prime subscription tend to buy more goods on Amazon.  Amazon wins with more subscription revenue, advertising revenue, and e-commerce revenue.