Is The iWatch Coming?

Are we one step closer to Apple delivering an iWatch to consumers?  According to the report, "Apple Inc has applied for a trademark for "iWatch" in Japan, a patent official said on Monday, signaling the iPhone maker may be moving ahead with plans for a watch-like device as gadget makers turn their attention to wearable computers."  So what about a US patent?  I admit to ignorance to the trademark and patent game but find it interesting that it was in Japan unless a patent was already submitted in the US.  No announcements yet but I would love to see this product made available for this holiday season.

Media Merger Mania - Scale Matters

Small is nice, but large matters.  Small is hands on, large requires all the parts working in a coordinated fashion to achieve efficiency and economies of scale.  And while we start small, large always seems to be the goal, at least in business.

In the world of media and entertainment, survival of the fittest requires an eat or be eaten mentality.  And the more we eat, the larger we get.  Lately, we are hearing more and more stories of growth threw merger and acquisition.  Most recently, the desire by John Malone and his ownership stake in Charter, wanting to merge with Time Warner Cable and/or Cablevision to gain scale.  In book publishing, Penguin has merged with Random House to increase its penetration of the marketplace.  And today's news we hear that Tribune plans to acquire more local broadcast stations.  "The deal will add 19 television stations in 16 markets to Tribune Co.'s portfolio, making it the largest commercial television station owner in the U.S., with 42 properties across the country, reaching 50 million homes."  Again scale matters. 

This natural evolution of growth and scale is not without its pitfalls.  Many large companies have fallen to their knees and gone bankrupt because of both internal and external forces, from leadership issues to environmental and technological changes.  For cable operators, large does matter as long as their wired approach remains valuable to consumers.  They make their money on cable, broadband and telephone subscriptions.  Cord cutting already is starting to affect one stream.  Should consumers become more untethered and devoted to wireless, cable operators must adapt to remain competitive.  For Tribune, their hope is pinned on revenue in retransmission fees, the license fees cable operators pay for carriage of broadcast networks.  But companies like Aereo are disrupting the model and proving that there are no guarantees.  Cable operators could balk paying fees; if Aereo can create farms to capture signals, cable might consider the same approach to avoid paying fees.

Media mergers have and will continue to happen throughout history.  Size may matter initially but disruptive influences prove that nothing is for certain.  For Malone and Charter, for Tribune, and for others seeking partnerships to gain economies of scale and increased profitability, don't stop innovating.  It may be harder to change directions in a big ship than a small boat, but change matters.  Keep adapting to your environment.  Otherwise, as the story goes, David will beat Goliath. 

Saving Barnes & Noble

Today's Wall Street Journal poses the same question that I have already been trying to answer, "How to Rescue Barnes & Noble".  The article asked 5 experts and the answers included diversification of merchandise, deeper inventory, discounting, downsizing, and localization as a means to drive profitability.   So what is the secret sauce that can invigorate B&N to improve earnings and stockholder value?

I agree that B&N is a destination and a place for discovery, although searching for titles takes a keen eye, their local database, and sometimes their employees.  Activities and events that encourage adults and children to come visit is always an asset, provided that they reach into their pocket and buy something before leaving.  And more diversification of merchandise could help.  My idea, a partnership or merger with Learning Express to reach families. 

Encourage consumers to bring their Nook e-reader and iPads to the store for exclusive downloads and other digital downloads.  Buy the hard copy book and get the digital download at the store.  Or partner with Audible, a Microsoft company, to offer a free audio download with a hard cover purchase.  Giving extra value for in-store customers could be a great incentive to keep coming back to retail. 

As I have said in the past, I am a fan of B&N and only wish to see them transition successfully into a brighter future where hardbound and digital books are both available.  

Merger Mania For Cable Operators

With John Malone's investment in Charter Cable, many speculated that it was his way to get back into US cable operations.  Having owned TCI before selling it to Comcast and owning DirecTv before spinning it out into its own public company, Malone sees Charter as a means to an end.  Now that speculation has advanced to talks of mergers.  "Shares of Time Warner Cable and Cablevision Systems soared Thursday after reports that Liberty Media chairman John Malone was 'exploring scenarios' to construct a deal to purchase one or both companies through his latest cable holding, Charter Communications." 

Certainly a merger of all three cable operators, Charter, TWC, and Cablevision, would put them at a subscriber size just a couple million below Comcast Cable.  Time Warner Cable is already the second largest to Comcast, but with 10 million fewer.  This merger would put them squarely in equal footing to Comcast.  As a result, this new entity would see tremendous cost savings from lower licensing fees for network programming to better economies of scale in its infrastructure.  The one common piece to this three way merger is Charter CEO Tom Rutledge who has worked at all three cable companies. 

But good news for cable operators would mean bad news for the networks.  Lower revenues from existing business, fewer cable operators to sell to, and a more constrained business environment.  For the Department of Justice and FCC to approve such a merger, such requirements might be needed to be consumer beneficial such as allowing networks to sell to OTT platforms despite current license deals that may prevent or limit such arrangements through Most Favored Nation (MFN) clauses. That could mean that networks would be allowed to negotiate in good faith with Intel Media, Apple, Roku, Aereo, and others who offer a streaming video subscription business to consumers.  Of course that review will also lengthen the timeframe for such a deal to close. 

Eventually these types of consolidations and mergers need to occur for the cable business to compete in the face of changing technologies.  With the growth of broadband and wireless technologies to compete against the wired cable business, operators like Comcast and Time Warner and others need the cost efficiencies to adapt and compete in an ever changing environment. 

Aereo Finds A Fourth Market

Cable operators are afraid of cord cutting.  As much as the percentage of customers dropping cable is low, the trend points to it growing at faster and faster rates.  Operators have struck license deals with networks to limit them from selling to OTT providers.  These deals have made it hard for OTT companies like Intel Media and others from gaining access to these same networks.  But Aereo has found an elegant solution; take broadcast signals from off air through antenna farms and offer their streaming signals to homes in certain markets.  No payments to the broadcasters and Aereo successfully aggregates well known networks into a reasonable priced package of online entertainment.  And despite lawsuit attempts, Aereo continues to grow. 

Aereo is already in three large DMAs, New York, Boston, and Atlanta.  "At the TechWeek Chicago event, Aereo CEO and founder Chet Kanojia announced that the company plans to launch its services in Chicago on Sept. 13."  Some broadcasters have threatened to change their delivery model to thwart Aereo from taking their over the air signals but so far no one has followed through.  Consumers taking the Aereo service still have to subscribe to a broadband service, most likely from their cable provider.  And at some point, cable operators will stop selling a broadband only service or switch to a usage type model to capture back some of that lost revenue from customers who have dropped cable service for Aereo. 

Perhaps too cable operators need to start offering their networks to online devices and provide a true TV Everywhere environment.  "Aereo is currently supported on iPad, iPhone, iPod Touch, Chrome, Internet Explorer 9, Firefox, Safari, Opera, AppleTV (via airplay) and Roku devices, but not Android."  That may not stop consumers from switching because of price, but it may slow down some cord cutting.  It will certainly help demonstrate the value of being a cable subscriber. 

Strike Two For Dish Network - No Clearwire

Dish Network has been swinging but unfortunately also missing the ball.  Strike one was losing a bid for Sprint to Softbank and strike two is losing its bid for Clearwire to Sprint.  "The developments pose a dilemma for Dish Chairman Charlie Ergen as he tries to create a national wireless broadband service. He has been amassing airwave spectrum rights but has said that he needs additional licenses. He had hoped to secure that by acquiring a large minority stake in Clearwire –  and by acquiring Sprint."  So what to do next?  Does Dish Network have another swing left and who might it be?

Some are speculating that Dish may still have their eyes on Lightsquared, although that spectrum space has been questioned for its interference issues.  Others are speculating that dish may reach out to another wireless provider, perhaps T Mobile, to gain a national footprint.  And still others think the best course of action is for Dish Network and DirecTv to merge into a more powerful satellite competitor.  One wonders if this third scenario might raise the anti trade issues of a single consolidated satellite company, but if Sirius and XM could make it work, so should these two.  For me, I think the next step is a wireless play and perhaps a T-Mobile and Lightsquared combination may create synergies similar to what Sprint and Clearwire brought to the table.  For now, the next move seems to be Ergens.

Kids Content Helps To Drive Subscription Video

The race by video streaming aggregators to bulk up on content is on and ultimately could lead to more cable cord cutting.  The category that seems to get a ton of attention is kid friendly programming and deals are being cut left and right.  Netflix deal with Dreamworks Animation was yesterday's news; today, the latest content partnership deal is between Amazon and PBS. 

"Amazon says that the PBS KIDS shows will be available on its Kindle FreeTime Unlimited service, which, paradoxically for a service that bills itself as being 'unlimited,' is designed to help parents limit viewing time.  The new arrangement along with Amazon’s recent deal with Viacom to offer shows including Dora the Explorer, Go Diego, Go!, and The Backyardigans ”brings some of the most popular kids programming to Prime Instant Video, making it the perfect place for the whole family to catch up on all their favorites,” says Director of Digital Video Content Acquisition Brad Beale."  These are the same families that are using Amazon Prime to buy their diapers in bulk so it is a perfect fit.  Of course, not knowing the revenue model for such a partnership, the hope for each is that their is a ROI that makes sense for both parties.

So keep checking the boxes for kids programming.  Could Power Rangers be next or is a new provider lurking?  Stay tuned, same bat time, same bat channel.

Nook Tablet No More

Barnes & Noble has thrown in the towel in the tablet game, conceding to iPads and Kindles.  Consumers were no longer embracing their tablet and sales were plunging so B&N decided the best course was to stop producing them.  No doubt, Apple and Amazon are formidable competition and technology leader does not describe the core of B&N, a brick and mortar company.  Try as they might, consumers chose other devices.

And while the announcement calls for the en of their color tablets, B&N will still continue to build and sell their e-readers.  I am not sure I agree with that decision.  Amazon and Apple have built both the infrastructure and the device that consumers prefer.  The decision to keep Nook e-readers going is only delaying the inevitable.  Inevitably the B&N app will be an agnostic entry to downloading books, regardless of the device.  Or perhaps a closer partnership to Microsoft is in order if the decision is to embrace a proprietary library with Microsoft branded products. 

Sad too that the Nook did not save the B&N retail business.  "If Nook hadn’t done so badly, the poorly performing retail segment — which consists of both bricks-and-mortar stores and BN.com — would be getting more attention this morning: Retail revenues fell 10 percent for the quarter, to $948 million, and fell 5.9 percent for the year, to $4.6 billion."  More stores are closing than opening with the only bright spot being their college bookstores.

So what is next for Barnes & Noble?  I would profoundly miss their presence in the retail landscape.  While I buy digital books, I still also buy hard copies too.  B&N represents a place of discovery and entertainment.  I believe that while leaving the Nook business is the right move, diversifying merchandise in their retail stores to keep customers coming remains essential.    I want to see B&N survive and prosper. 

Are Cable Operators Beatable?

While cable operators are concerned about cord cutting and subscribers dropping cable services, they still have an ace in the hole with their broadband subscription service.  Add to that a telephone business for both homes and businesses, and cable operators like Comcast and Time Warner Cable are here for the long run.

And while consumers may be slowly dropping their cable service for streaming services like Netflix and Amazon and others, these same consumers may have a hard time accessing those big cable networks, like ESPN or Discovery, without a cable subscription.  Cable operators have negotiated agreements woth cable networks that make it hard, if not impossible, to sell these same networks to over the top (OTT) providers like Intel Media, Apple and others.  Consumers may be able to access certain shows through streaming but not the entire network.  And these cable operators are also trying to stop consumers from getting broadcast channels as well through streaming, just as Aereo is hitting multiple markets with their OTT service. Operators have responded with lawsuits to try and stop.

With so much control, cable operators may be making it difficult for OTT companies to create a competitive, "virtual MSO" model.  And Craig Moffett, of Moffett Research, believes that environment makes it difficult for companies like Intel Media to include top ranking cable networks on their streaming subscription service.  "And he thinks cable operators and other telecom providers remain well-insulated from virtual MSOs even under that third, most promising option."  Cable operators simply have to increase the price of their broadband service or change it to a usage-based system, making an OTT alternative a too costly alternative to traditional cable.

The only chance for survival may be when cable networks feel the loss of subscriber revenue from consumers cord cutting for these other sources of online entertainment.  Consumers have become more show loyal then network loyal and as that trend continues, networks may be less relevant than online show aggregators like Netflix. Will cable networks all go away; absolutely not.  The big networks will survive, but the smaller ones may just feel the need to chance it on these "virtual MSOs" to increase their subscription size.