Is Microsoft Preferring Best Buy Over B&N?

In a move to expand its distribution of product and software, Microsoft is working closely with Best Buy to sell the value of its brand.  "The store-within-store format inside Best Buy will help Microsoft get its brand seen by electronics shoppers without having to make a big investment and sign a 10-year lease for a proper storefront."  And Best Buy becomes the aggregator of products for consumers to test and buy.  Best Buy is already offering space for Samsung and Apple to sell its products.  Now all Best Buy has to do is compete on price points, especially with online sellers of these same products.

Of course Best Buy makes great sense, although Microsoft is utilizing a follower strategy, being later to the market in this retail strategy.  Microsoft had an early opportunity to use its partnership with Barnes and Noble to do the exact same thing.  And with a number of B&N stores on college campuses, a chance to talk directly to a strong customer base.  A missed opportunity indeed.  But that partnership, built more closely around Nook, has gone nowhere.  Instead, B&N seems to be lowering prices on Nook and some have speculated that they will soon exit the tablet and e-reader space.  So is Microsoft backing out of B&N, too?

The Microsoft retail strategy to partner with Best Buy seems a necessary step as they may have bitten off more than they could chew by trying to open their own stores.  It may not differentiate Microsoft from others, but it enables better comparison shopping.  And hopefully on product and value, Microsoft will achieve its strategic goals. 

Dish Wants Wireless Distribution, DirecTV Wants Content

In the game of Who'd You Rather, the question to Dish Network would be who do you want more, Sprint or Clearwire.  While Dish's intention is clear, it seems to me the answer is both. Having the Sprint infrastructure along with additional wireless capacity from Clearwire would certainly help Dish to compete for wireless/streaming customers.  And SoftBank, the other pursuer of Sprint, sees it that way too.  And while Sprint is backing Softbank, Clearwire is backing Dish.  According to Bloomberg, "Ergen, the chairman and co-founder of the satellite-TV company, is angling for both Clearwire and Sprint as part of a plan to expand into wireless services."  And perhaps by controlling the wireless spectrum piece, Dish makes a Sprint deal less attractive for Softbank.

While Dish is angling for the wireless platform, DirecTv wants more content.  And they can achieve that by acquiring Hulu.  "Several sources with knowledge of the ongoing Hulu acquisition talks tell PandoDaily that a deal is imminent and that DirecTV is the likely victor."  Certainly, that acquisition has the potential of providing DirecTV with revenue streams from both subscription and advertising.  But it has pitfalls too as the current owners who are the content makers could limit the content that Hulu has been receiving.  Cable operators are writing agreements that potentially limit how networks can distribute their content outside the cable platform.  That can severely hurt companies like Hulu that rely on gaining access to these series. 

And so we have two different satellite companies taking different strategies to improve their overall business model.  And in the long run, that might be most beneficial should these two companies ever partner together to compete more effectively against cable and telco operators.  Because as far as the industry is concerned, size matters and consolidation is key. 

Is 3D TV A Thing Of The Past?

I have frankly never been a fan of 3D, whether in the movies or TV.  Perhaps it is because I have never liked the glasses or found the effects to improve the story.  And why wear glasses if you don't need them.  (I hold that same judgment for Google Glass).  So it appears that I am not alone and for 3D TV, the end is near.  ESPN has announced that their channel, ESPN 3D will disappear by the end of this year.  "Viewer demand aside, adoption among cable providers was also mixed; Comcast, DirecTV, Verizon FiOS have all carried ESPN 3D at various points. AT&T, however, pulled the plug in 2011, claiming the high costs of carrying the channel were outweighed by low demand."  And so lets expect that other 3D channels, if there are any, are soon to end as well.  Not surprising since TV manufacturers have been also moving away from producing 3D TV sets.

Where 3D interest has declined, web streaming interest has skyrocketed.  Recent reports have cable operators putting requirements into their programming carriage agreements to limit the rise of streaming network services like Aereo, Intel Media, and a possibler Apple TV service.   Concerning too for TV manufacturers building connected TV sets to easily play web based programming.  3D may be dead, but the battle for streaming media is alive and well.

If Content Is King, Why Is News Corp. Splitting?

News Corp, home of Fox Broadcasting, 20th Century Fox, The Wall Street Journal, and The New York Post, is splitting its publishing and entertainment businesses.  Thus the first two companies won't be connected to the latter two, post split.  So why doesn't a content company not want to take full advantage of its wide range of content creating businesses? "Last year, News Corp. decided to split itself after years of shareholder pressure to spin off the lower-growth publishing side of the business."  That's right, not all content is created equal in the eyes of shareholders.

As the printed word seems to have less value than video, print-based companies are finding it harder and harder to transition to a successful digital business.  And yet, I hope that this thinking is simply short sighted.  The printed word, regardless of the platform it is presented on, is a very powerful instrument.  Print has been especially hurt by the web and the glut of free content, like this very blog.  The old adage, why buy the cow when the milk is free, has been haunting all content, both print and video.  But exclusivity and uniqueness of content still impresses consumers enough that they are willing to buy it.  And there is still synergies of tying together print and video in a subscription service.

Perhaps the challenge of print is that the digital ad and subscription revenue has not yet caught up with the current model.  And the transition, while slow, is creating lower profit margins.  But I believe there is a light at the end of this tunnel and digital print subscription services can survive, especially if constructed with a multi-media array of content. 

News Corp print side could blossom with a stronger synergistic approach and new strategies to compete.  But without that ownership holding it together, it also opens the print side to engage in wider partnerships that it may have been dissuaded from entering under the current umbrella.  I believe that there is still a future in newspaper and magazine subscription businesses, especially when tied with related content that better utilizes the digital platform, and new strategies that grow incremental and additional revenue streams.  So despite an expected split, each side of News Corp can continue to prosper. 

More MSO Mergers In Our Future

As programming costs, that is the costs for all the channels on your cable line-up, continue to rise, more cost efficiencies must be found.  And at this week's National Cable Television Association's (NCTA) The Cable Show, one way to do it is through consolidation of cable operators.  "Doug Mitchelson, managing director at Deutsche Bank Securities, said that to the extent increases in TV content pricing 'becomes abusive, the industry will consolidate.' He suggested that eventually there could be three large U.S. MSOs, with two other big players besides Comcast, a trio that would have much more leverage to keep rates down."  That trend has been occurring for the last 20 years.  Today, Comcast and Time Warner Cable together cover over 50% of the cable universe already. 

Among the systems being discussed, John Malone's recent investment in Charter Cable has some speculating that more investment is in order.  "Industry sources have independently confirmed to Variety that Malone is interested in TWC, with the caveat that he is surveying the entire cable landscape for potential deals and has not engaged in formal due diligence on such a deal."  For years, Time Warner Cable (TWC) has been interested in the Cablevision properties and the chance to gain Long Island and their coverage in the NY DMA.  Behind Comcast and TWC is Cox Communication, the third largest cable operator with over 6 million basic customers.  A privately held company, Cox Cable  may at some point decide that they no longer wish to compete in this space.

Of course consolidation alone will not help improve profit margins.  Time Warner has already started paring down the smaller networks that they deem not valuable to their audience.  At some point, operators may have to make deeper cuts as they try to keep their subscription prices in line with consumer expectation.  If prices rise too rapidly, that may encourage more cord cutting, something cable operators are currently facing.  "Cord-cutting is worse for programmers than operators, (Marci) Ryvicker (managing director at Wells Fargo Securities) said, because cable providers have the option of offsetting video losses by increasing broadband pricing."  Unfortunately, sometimes short term profits get in the way of long term vision. 

As far as consolidation is concerned, it is an absolute certainty.  Beyond the small market mom and pop single cable systems, the industry will operate within a decade with three to five major cable operators of 1mm or more subscribers, 2 telcos (FIOS and U-Verse), and 1 or 2 satellites (DirecTv and Dish).  The FCC will certainly have their hands full while they enable all this consolidation to occur.  Because at the end of the day, broadband and streaming will become the key issue. 

Did XBox Hurt Its Future?

The Xbox One has yet to be released, but it certainly has raised the voices and irked a number of gamers.  "Earlier in the day, Microsoft had elicited groans from gamers when it announced restrictions on used games for the Xbox One and said players had to log onto the Internet for authentication."  With a price tag hitting $500 and an always on and connected platform, some wonder who the audience for the new box really is.  Perhaps too it is trying to be more than what gamers really want from a device, trying to replace the cable box in the home.  Will current XBox 360 owners upgrade or not and will the XBox One attract new users?

For Sony, the release of a new Playstation 4 at this time might just encourage some loyalties to switch to them.  First, the PS4 will cost $100 less.  "Sony also drew cheers from the audience at the Electronic Entertainment Expo (E3) in Los Angeles when it said the PS4 would run secondhand games and did not require an always-on Internet connection."  If gamers find compelling titles and a welcoming user experience, they might just find the share of market shift to their favor. 

Given the two different directions each platform is taking, the gloves are coming off, and a fight is imminent.  For other platforms, like the Nintendo Wii, timing is crucial for them to share how they wish to compete in a very tough gaming battle.  For this household, I can only share what my son, a current XBox user, is thinking.  He hates the authentication and always on issue as well as the fact that older games won't play on the new device.  It might just be time to look at the PS 4 and its games.  Put head to head, it will be fascinating to see which new platform, XBox One or PS4 wins this battle.

Social Media Can Hurt DVR Viewing

For live events and high involvement, edge of your seat viewing, it is harder and harder to watch them on a DVR on a delayed basis.  That is if you are also socially connected to sites like Twitter and Facebook.  So we are reminded in this story entitled "Game of Spoilers".  "The VCR, DVR and video on demand have freed us from the tyranny of TV schedules but the Internet imposes its own dictatorship — at least if the show is worth it. Raging at tweets for spilling the beans, or shouting "Shut up! I haven't watched it yet!" at your co-workers, proves increasingly futile."

Truth is, we have faced this issue for some time.  Want to watch a baseball or football game a few hours after the game may have already ended, don't check your Facebook feed.  But also don't turn on sports radio.  Want to watch the Oscars or last night's Tony Awards, stay away from Twitter as well as the next day's TV or newspaper.  Spoilers can get exposed at all times, especially for shows that knowing how it ends effects the enjoyment of the show itself.  Social media simply provides another means for revealing those spoilers.  And perhaps because it is so immediate and so pervasive, it is harder to ignore when we are delayed in viewing certain programming.

The article also correctly points out that not all shows possess the spoiler issue.  "Spoiling 'Big Bang Theory' is never an issue, says Thompson, even though its got a far larger audience than "Game of Thrones" — 18.68 million vs. 13.6 million, according to Nielsen."  Knowing its outcome doesn't hurt the comedy of the show. 

For advertisers hoping to keep their audience engaged and overcoming the other concern of the DVR, like fast forwarding through commercials, live and appointment viewing type programming can assure that a majority will watch at the immediate time and day the show is being presented.  And that means better ratings and higher ad revenue. 

TiVo's Win Is A Loss To Some Shareholders

TiVo may be the premier DVR on the market.  It may have the edge on the technology and the patents to back it up.  And they may be winning their legal fights, either by court order or by settlement, but sometimes good isn't good enough.  And shareholders not happy with the verdict sold their shares and watched the stock price go markedly lower.  Apparently, they expected a bigger payday.

Today, TiVo has a superior product; yet, as we all know, that technological superiority only lasts till the next technical improvement or disruption comes along.  TiVo still need to get deeper in with the cable operators where the heart of their growth lies.  TiVo needs to be integrated in every cable set top DVR box.  That is where the subscription revenue, ad revenue, and research revenue lies. 

Until consumers can buy their TiVo box at retail and install without a cable truck roll to get connectivity to the cable pipe, most consumers will let their cable company give them a generic DVR box.  If it is too much of a hassle, a majority of consumers won't take the extra time to do it themselves.  Should TiVo get the cable operators to agree to a simple connectivity and authorization online without a CableCard, then consumers might just be willing to buy their own set top box.

Shareholders may be bothered short term by the outcome, but long term, TiVo still offers a great product. 

How To Stop Cord Cutting And Raise Revenues

Want to hear an old idea that keeps popping up.  An idea that wants households to spend more and depress the growth in online streaming.  It is called broadband usage fees and it means that heavier streaming users would pay more, depending on the number of bytes fed through the system.  Think utility bills like electricity, gas, and water; this time for broadband.  "Some Wall Street analysts have suggested that cable operators could eventually start charging subscribers or broadband video providers based on broadband usage."  And John Malone, Chairman of Liberty Media, seems fully behind "'various tiers of connectivity,' possibly with built-in video offerings or bundles." And I am sure that these fees are hoping to encourage cable customers to retain their cable subscription and take advantage of lower cost bundles of broadband service.

Current streaming is already clogging the broadband pipeline and cable operators are charging more for higher speeds.  Not happy with unleaded, pay more for ultra supreme.  But consumers who find themselves charged by actual usage will want to have a counter attached to their system to keep track of how much cost is flowing out.  Hit your peak before the end of the month and you might feel the need to turn off broadband till the new billing cycle starts.  And don't forget to password protect your home WIFI; no one wants to pay for non-family members.

It harkens back to the day when we feared making a long distance phone call for an extended length of time. It took some time before we moved to an all you can call phone bill.  And no one wants to move backward.  We can only hope that through technological innovation and more competition, broadband access becomes ubiquitous and the cost of a stream so low that usage fees won't matter.