It may have taken getting the iPhone approved for carriage on its service for T-Mobile to start to find new growth opportunities. That and the introduction of new flexible pricing policies to enable earlier upgrades of phone models have been gold to a company that has been seen as an also ran to the two biggest players, Verizon Wireless and AT&T. The result, "Total branded customer net additions of 678,000, the strongest growth in four years (and) Record low branded postpaid churn of 1.58%, a decrease of approximately 50 basis points year-over-year". Two KPIs that challenge every subscription service, higher year over year growth and low churn of existing customers. A win for T-Mobile on both fronts.
Certainly the other carriers are paying attention to T-Mobile's differentiated approach to upgrades and contracts. They are already changing their plans while charging customers more upfront to upgrade earlier. How consumers embrace this new pricing plans will determine the ongoing growth of these companies. Clearly T-Mobile is out to take away market share and prove that they can compete with product and service.
Friday, August 9, 2013
Thursday, August 8, 2013
AOL On The Right Track
AOL may have just turned the corner from being a distribution platform to an advertising one. For a company once known by the slogan, "You've Got Mail", it has been a struggle to adapt from a dial up world to broadband. Still, AOL kept out it, and seems to be emerging victorious.
Financially, all appears better than anticipated. " AOL’s quarterly results, were announced early Wednesday morning, showed earnings per share of 35 cents, which was two cents higher than analysts had predicted. Its overall revenue was up 2 percent from a year ago." Revenue is now more dependent on advertising than monthly subscriber fees. And AOL seems to have read the trends and put more energy and effort into video advertising over display. That is indicative of their planned acquisition of Adap.tv, a company focused on video advertising. While display advertising rates see downward price pressures, video advertising gets more noticed and higher values. And done well, it can be valued by consumers, too. Plus video streaming continues to grow as more video content finds its way to the web.
While AOL's Patch has had difficulty finding profitability, its other sites, like The Huffington Post, have built a successful formula of content aggregation, both words and video, frequently updated, and consistently visited by consumers. Its foray into live streaming programming as well may just prove to be a very profitable experiment. The "new" AOL has indeed turned the corner and embarked on a forward path that seems destined to be very successful.
Financially, all appears better than anticipated. " AOL’s quarterly results, were announced early Wednesday morning, showed earnings per share of 35 cents, which was two cents higher than analysts had predicted. Its overall revenue was up 2 percent from a year ago." Revenue is now more dependent on advertising than monthly subscriber fees. And AOL seems to have read the trends and put more energy and effort into video advertising over display. That is indicative of their planned acquisition of Adap.tv, a company focused on video advertising. While display advertising rates see downward price pressures, video advertising gets more noticed and higher values. And done well, it can be valued by consumers, too. Plus video streaming continues to grow as more video content finds its way to the web.
While AOL's Patch has had difficulty finding profitability, its other sites, like The Huffington Post, have built a successful formula of content aggregation, both words and video, frequently updated, and consistently visited by consumers. Its foray into live streaming programming as well may just prove to be a very profitable experiment. The "new" AOL has indeed turned the corner and embarked on a forward path that seems destined to be very successful.
Wednesday, August 7, 2013
Cord Cutting A Growing Problem
Cable operators are fighting to save their economic model. The challenge is that the costs of business, from programming increases (including the current Time Warner Cable and CBS negotiation) and other expenses, require a continual increase the monthly subscription fees paid by consumers. In the midst of saving consumers from a CBS fee increase, Time Warner Cable has already raised the monthly fee of renting a modem box. Consumers have grown tired of these high cable subscription fees while embracing the wired broadband stream that these same cable operators also offer. The result, cord cutting, or more specifically cable subscription cord cutting. While broadband subscriptions rise, cable subscriptions drop.
"(Moffett Research founder Craig) Moffett estimates that 911,000 U.S. homes have cut the cord over the past 12 months, versus 258,000 in the 12 months ending a year ago." And the rate of drops are only increasing. Some cable operators hope to remain competitive through a strategy of merging operations. And so we hear of a possible Dish-DirecTv combination as well as Charter with Cox or Time Warner or Cablevision. Bigger operations, more synergies, more cost efficiencies including possible lower programming fees.
But it may not be enough. The cable business model, while providing a valuable aggregation of content, has become too limiting and too expensive. Consumers have sought other options; some have found cheaper packages from overbuilders like the telcos, FIOS and U-verse. Others have dropped cable altogether for broadband services including Netflix and Amazon. With new players including Aereo, some consumers have been able to get broadcast and cable channels at a much lower price. And some are even going back to over the air, digital antennas.
The model is a convoluted one. As networks have found new revenue streams from OTT platforms, they risk losing substantial revenue from the traditional models. The short term solution of raising license fees to maintain revenue of a shrinking base will ultimately cause the cable business to crash. Unfortunately, it appears to be headed down a path of no return. Ala carte cable pricing won't help consumers; the difficult but necessary path for cable operators might just be to offer a smaller selection of channels at a much lower price point. That seems to be a path Time Warner Cable has started with the dropping of Ovation. But it must require a more serious dropping of a large number of networks. And for Time Warner Cable that might just extend even to a broadcast network like CBS. If it leads to a healthy lowering of the cable fee, consumers might just be willing to retain their cable service.
"(Moffett Research founder Craig) Moffett estimates that 911,000 U.S. homes have cut the cord over the past 12 months, versus 258,000 in the 12 months ending a year ago." And the rate of drops are only increasing. Some cable operators hope to remain competitive through a strategy of merging operations. And so we hear of a possible Dish-DirecTv combination as well as Charter with Cox or Time Warner or Cablevision. Bigger operations, more synergies, more cost efficiencies including possible lower programming fees.
But it may not be enough. The cable business model, while providing a valuable aggregation of content, has become too limiting and too expensive. Consumers have sought other options; some have found cheaper packages from overbuilders like the telcos, FIOS and U-verse. Others have dropped cable altogether for broadband services including Netflix and Amazon. With new players including Aereo, some consumers have been able to get broadcast and cable channels at a much lower price. And some are even going back to over the air, digital antennas.
The model is a convoluted one. As networks have found new revenue streams from OTT platforms, they risk losing substantial revenue from the traditional models. The short term solution of raising license fees to maintain revenue of a shrinking base will ultimately cause the cable business to crash. Unfortunately, it appears to be headed down a path of no return. Ala carte cable pricing won't help consumers; the difficult but necessary path for cable operators might just be to offer a smaller selection of channels at a much lower price point. That seems to be a path Time Warner Cable has started with the dropping of Ovation. But it must require a more serious dropping of a large number of networks. And for Time Warner Cable that might just extend even to a broadcast network like CBS. If it leads to a healthy lowering of the cable fee, consumers might just be willing to retain their cable service.
Tuesday, August 6, 2013
Cable Ala Carte Pricing A Nightmare
Do you really want to manage your cable subscription like a menu of choices? A cable ala carte menu might just start to look like a
Chinese menu where you pick 10 choices from column A, 20 from column B and 30
from Column C for one low price with sports networks sold separately.
If that approach doesn’t suit your fancy, perhaps it
looks more like a sushi menu instead:
Broadcast Networks $1.00 each
ABC ____
CBS ____
FOX ____
NBC ____
PBS ____
WB ____
Entertainment Networks: $0.50 each
AMC ____
Bravo ____
Comedy Central ___
Discovery ____
E! ____
TNT ____
Children/Teen Networks: $0.75 each
ABC Family ____
Disney ____
MTV ____
Nickelodeon ____
Sprout ___
Sports Networks: $2.50 each
CBS Sports ___
ESPN ___
ESPN2 ___
Fox Sports 1 ____
NBC Sports ___
Regional Sports Networks: $5.00 each
MSG ___
YES ___
Managing this approach would be a nightmare. And as you can see, the cost for receiving every
channel would soon be astronomical.
Consumers would ultimately be paying more for less.
Is Print Poised For A Comeback?
In the last couple weeks, major newspapers and publications, including The Boston Globe, Newsweek, and now The Washington Post, have been sold at deep discounted prices. At the same time, Time Warner is ready to jettison the Time, Inc. business. Print revenues overall are down and many wonder what the future hold. But I believe that print is poised for a comeback.
Print content distributors are at a crossroads between traditional hard copy and digital distribution. Younger consumers are embracing the web and have found their content without paging through a newspaper or magazine. It is the older demographics that still enjoy getting their newspaper and sorting through each section finding the articles they want to read. The challenges that face these new owners and print overall are many, but there are also opportunities.
The Washington Post, like other publications, still have a powerful brand name. Their history and years of publication make them a very credible resource. And it is that brand that has to push deeper into the digital universe. Newspapers are recognized by the region they serve. They may offer national and international news but it is their regional and local news reporting that identifies them so strongly. That localism can be used to better sell them in their market.
For newspapers and for magazines, these publications must redefine their distribution strategy as they slowly move away from traditional media. I recommend a strategy where every print subscriber is automatically a digital subscriber. Let the consumer then decide how they wish to receive their copy. Print must also embrace a multi-platform approach with plenty of video and interactive content to highlight the info and articles. The tablet and phone have become ideal mechanisms for consumers to access their subscriptions. Make its access ergonomically attractive and easy to use. And lastly, embrace your content and the writers that create it. Make them exclusive to your platform and market their value and uniqueness of the stories they tell and the news they write. These journalists are part of your brand value, too.
Digital has lowered the barriers of entry and brought more competition against print. It is hard to sell subscriptions when websites offer their content free. That scenario faces other businesses as well. The bottom line I believe is staying true to the quality of the journalism and to let that uniqueness and exclusivity drive the value proposition. What Howard Stern is to Sirius, David Carr is to the New York Times and Walt Mossberg is to the Wall Street Journal. Push that exclusivity. Consumers will pay if they believe there is value received. And print delivers a lot of value. It may be a slow road back, but the "new" newspaper should soon be ready for its close-up.
Print content distributors are at a crossroads between traditional hard copy and digital distribution. Younger consumers are embracing the web and have found their content without paging through a newspaper or magazine. It is the older demographics that still enjoy getting their newspaper and sorting through each section finding the articles they want to read. The challenges that face these new owners and print overall are many, but there are also opportunities.
The Washington Post, like other publications, still have a powerful brand name. Their history and years of publication make them a very credible resource. And it is that brand that has to push deeper into the digital universe. Newspapers are recognized by the region they serve. They may offer national and international news but it is their regional and local news reporting that identifies them so strongly. That localism can be used to better sell them in their market.
For newspapers and for magazines, these publications must redefine their distribution strategy as they slowly move away from traditional media. I recommend a strategy where every print subscriber is automatically a digital subscriber. Let the consumer then decide how they wish to receive their copy. Print must also embrace a multi-platform approach with plenty of video and interactive content to highlight the info and articles. The tablet and phone have become ideal mechanisms for consumers to access their subscriptions. Make its access ergonomically attractive and easy to use. And lastly, embrace your content and the writers that create it. Make them exclusive to your platform and market their value and uniqueness of the stories they tell and the news they write. These journalists are part of your brand value, too.
Digital has lowered the barriers of entry and brought more competition against print. It is hard to sell subscriptions when websites offer their content free. That scenario faces other businesses as well. The bottom line I believe is staying true to the quality of the journalism and to let that uniqueness and exclusivity drive the value proposition. What Howard Stern is to Sirius, David Carr is to the New York Times and Walt Mossberg is to the Wall Street Journal. Push that exclusivity. Consumers will pay if they believe there is value received. And print delivers a lot of value. It may be a slow road back, but the "new" newspaper should soon be ready for its close-up.
Monday, August 5, 2013
Have Cable Operators Painted Themselves Into A Corner?
The cable business model may just be broke. As the very public spat between CBS and Time Warner Cable has shown, regardless of the outcome, the consumer has lost. They have lost today as the CBS broadcast network and its sister cable networks like Showtime are dropped off the air and consumers will lose when they are put back on with higher license fees that will translate into higher subscriber fees. It is a no win situation for all.
When cable television started, it was to provide broadcast signals to places that could not easily receive them over the air. In addition, this wired service enabled a better signal and an opportunity to distribute more and more channels. And so new cable networks emerged, some with little more than old shows and old movies. ESPN's best show just might have been ping pong back then. Consumers embraced this new distribution platform and happy to pay for a service that aggregated channels and sent them to the TV set. New content programming was launched and our 13 channel universe doubled and doubled and doubled and doubled again. And as audiences found these networks, so did advertisers. Better programming was produced, higher fees were asked, and more channels kept coming. And we as consumers couldn't be satiated. We got on demand and DVRs to access and watch more and more content. We hit the 1000 channel mark and surpassed it. Unfortunately, the price grew too at a better than inflationary rate. This aggregated model has now become bloated and costly.
And then came broadband and a new streaming model that allowed content to be viewed away from the TV set. This disruptive technology lowered the barriers to entry and new content was created, mainly UGC, user generated content, but now it has become the home for professionally produced content as well. And consumers have found other aggregated content distribution models from You Tube to Netflix to Amazon. And they have found a la carte from Apple and others. This streaming model is an unlimited one as consumers no longer are limited to which distributor they want to buy their content from.
With so much streaming content competing for eyeballs with cable and broadcast, consumers can seek other options. Exclusivity of programming will certainly prevent some content to be seen without a subscription but that seems to be the price that we must pay. It is why Netflix charges a monthly subscription fee and why CBS is demanding higher fees as well. As consumers, we can decide whether we want to pay it or not. The current cable distribution platform model is broken and the future is beginning to look more and more like streaming and a la carte.
When cable television started, it was to provide broadcast signals to places that could not easily receive them over the air. In addition, this wired service enabled a better signal and an opportunity to distribute more and more channels. And so new cable networks emerged, some with little more than old shows and old movies. ESPN's best show just might have been ping pong back then. Consumers embraced this new distribution platform and happy to pay for a service that aggregated channels and sent them to the TV set. New content programming was launched and our 13 channel universe doubled and doubled and doubled and doubled again. And as audiences found these networks, so did advertisers. Better programming was produced, higher fees were asked, and more channels kept coming. And we as consumers couldn't be satiated. We got on demand and DVRs to access and watch more and more content. We hit the 1000 channel mark and surpassed it. Unfortunately, the price grew too at a better than inflationary rate. This aggregated model has now become bloated and costly.
And then came broadband and a new streaming model that allowed content to be viewed away from the TV set. This disruptive technology lowered the barriers to entry and new content was created, mainly UGC, user generated content, but now it has become the home for professionally produced content as well. And consumers have found other aggregated content distribution models from You Tube to Netflix to Amazon. And they have found a la carte from Apple and others. This streaming model is an unlimited one as consumers no longer are limited to which distributor they want to buy their content from.
With so much streaming content competing for eyeballs with cable and broadcast, consumers can seek other options. Exclusivity of programming will certainly prevent some content to be seen without a subscription but that seems to be the price that we must pay. It is why Netflix charges a monthly subscription fee and why CBS is demanding higher fees as well. As consumers, we can decide whether we want to pay it or not. The current cable distribution platform model is broken and the future is beginning to look more and more like streaming and a la carte.
Sunday, August 4, 2013
CBS Off The Air On Time Warner Cable
Once again a network is negotiating with a cable operator and once again they have been taken off the air. Regardless of which side of the fight you choose, Time Warner Cable subscribers in multiple CBS DMAs are no longer getting their TV shows. "CBS cable properties Showtime, TMC, Flix and the Smithsonian Channel
also went dark across Time Warner Cable’s 12-million subscriber
footprint. The cable networks are also off the systems owned by Bright
House Networks, which participates in Time Warner Cable's programming
deals." So what is household to do?
Certainly it is the summer and folks may be taking vacations or at least spending more time outdoors then in front of the TV; still, it is an inconvenience to those that pay their cable bills and expect to see their shows appear. I suspect that a vast majority of Time Warner Cable households will do nothing; they will not switch to Aereo, they will not call or write TWC, they will not switch to FIOS or U-Verse or DirecTv or Dish Network. They will suffer silently and wait patiently for the two sides to finally agree and for the signal to turn back on. TWC hopes for this too. CBS hopes that enough of the minority does raise their voices and switch to another service although they should be careful what they wish for. If customer decide to take Aereo or buy a digital satellite, CBS will not see any additional license fees or will they get any strong set top research data to support their ad revenue model. In fact, this drop will certainly hurt them even though it is the summer. A projected drop could potentially go into September and the new Fall TV Season although I highly expect that an agreement will be hammered out within a couple weeks.
Could a drop go longer, you bet. TWC knows that any increase in fees will result in a higher subscriber fee and consumers are already mad. Their wish is to drop underperforming networks and reduce these license costs. TWC has already dropped Ovation Network and certainly has more in their sights. How far apart CBS and TWC are in finding common ground remains to be seen. Certainly the dropping of the networks were delayed past the actual expiration date but it appears that they got no closer an so a service drop was initiated. For now, CBS seems to be inundating the media with ads pushing consumers to react. As I am not a TWC subscriber, I have not seen any ads in newspaper or other media presenting their side. Perhaps their strategy that silence is golden may be the best approach. Because once these two sides do reach agreement, all will be forgiven (until the next renegotiation).
Certainly it is the summer and folks may be taking vacations or at least spending more time outdoors then in front of the TV; still, it is an inconvenience to those that pay their cable bills and expect to see their shows appear. I suspect that a vast majority of Time Warner Cable households will do nothing; they will not switch to Aereo, they will not call or write TWC, they will not switch to FIOS or U-Verse or DirecTv or Dish Network. They will suffer silently and wait patiently for the two sides to finally agree and for the signal to turn back on. TWC hopes for this too. CBS hopes that enough of the minority does raise their voices and switch to another service although they should be careful what they wish for. If customer decide to take Aereo or buy a digital satellite, CBS will not see any additional license fees or will they get any strong set top research data to support their ad revenue model. In fact, this drop will certainly hurt them even though it is the summer. A projected drop could potentially go into September and the new Fall TV Season although I highly expect that an agreement will be hammered out within a couple weeks.
Could a drop go longer, you bet. TWC knows that any increase in fees will result in a higher subscriber fee and consumers are already mad. Their wish is to drop underperforming networks and reduce these license costs. TWC has already dropped Ovation Network and certainly has more in their sights. How far apart CBS and TWC are in finding common ground remains to be seen. Certainly the dropping of the networks were delayed past the actual expiration date but it appears that they got no closer an so a service drop was initiated. For now, CBS seems to be inundating the media with ads pushing consumers to react. As I am not a TWC subscriber, I have not seen any ads in newspaper or other media presenting their side. Perhaps their strategy that silence is golden may be the best approach. Because once these two sides do reach agreement, all will be forgiven (until the next renegotiation).
Friday, August 2, 2013
Connected TVs Enable New Ad Platforms
As the cable set top box ever so slowly fades into
the distance, viewers have discovered that their television sets don't need these boxes anymore. The rise of internet connected
television sets to the web enable a new set of viewing experiences. For
some, TVs rely on another connected box to access web based
programming, from devices like a Roku box, Apple TV, XBox and Google’s
Chromecast. Even CE devices like DVD players and TiVo boxes offer
content directly from the web. And then there are Smart TVs themselves,
like Samsung and its Smart Hub system. Each of these different devices
acting as platforms to aggregate and display all types of content.
Our connected television sets can
connect online to a host of applications, games, websites, as well as content
providers like Netflix, You Tube, Hulu, Redbox, and others for video
content. It also opens up accessibility to new advertising
and monetization possibilities. These connected sets expose us to new types of display
advertisements, overlays, interactive ads, ad viewing in exchange for
digital content access, and new commerce options. But with so many
devices, it is easy to see that this new marketplace is still quite
disjointed with no common standards yet like the IAB has put into place
for the web. It is a young business, but one that is growing quite
rapidly.
We have become quite
accustomed to shopping on our laptop and mobile devices and we accept
commercials on our TV shows. So why not combine the two? Samsung and other providers are working with entertainment e-commerce company Delivery Agent on
a shopping app called ShopTV that lets you buy merchandise from your TV
set. While the idea has been around since the days of Friends
(buy Monica’s couch or Rachel’s dress), the timing might now be right.
To tie merchandise sales into the shows and ads that you are watching
could become an effortless and enjoyable buying experience for
viewers/consumers.
The connected TV opens up
a whole new platform of advertising and commerce options. While cable
operators have been attempting to create an ideal advanced
advertising model, they have had limited success. As more and more
consumers gravitate to their connected devices to watch content on their
TV sets, the potential for new revenue growth from this interactive
advertising model is enormous and bound to skyrocket.
Cable Television Subscribers Unsubscribing
Both Time Warner Cable and DirecTv reported their quarterly earnings and each share similar news. For Time Warner Cable, a loss of 191,000 cable subscribers in the second quarter and for DirecTv, a loss of 84,000 cable subscribers. Where once cable customers were seen switching among cable TV providers, from cable to dish to telco, now it may be that there is the serious threat of cord cutting. It seems that broadband access is more important to consumers then cable; broadband connects to TV like services including Netflix, Hulu, Amazon Prime, Aereo, and You Tube. And the recent introduction of Google's Chromecast has led to an unprecedented demand for this inexpensive little device.
The notion of the cord cutter has a small drip from the dam may just be turning into a minor stream. But it is that fear that has cable operators shaping the conversation to investors to say that they are focusing on the better customer with the higher average revenue returned. Maybe for now the cheaper customer is leaving now, enabling the average revenue to rise for the remaining customer base; still, that customer loss will ultimately hurt the total revenue model.
Subscription prices are rising as networks keep demanding increases to their license fees. And customers, upset by these high costs are preferring an a la carte model to buy only the service they wish to watch. The iTunes model of selling singles over albums has been embraced for music and perhaps it will be embraced for TV as well.
The notion of the cord cutter has a small drip from the dam may just be turning into a minor stream. But it is that fear that has cable operators shaping the conversation to investors to say that they are focusing on the better customer with the higher average revenue returned. Maybe for now the cheaper customer is leaving now, enabling the average revenue to rise for the remaining customer base; still, that customer loss will ultimately hurt the total revenue model.
Subscription prices are rising as networks keep demanding increases to their license fees. And customers, upset by these high costs are preferring an a la carte model to buy only the service they wish to watch. The iTunes model of selling singles over albums has been embraced for music and perhaps it will be embraced for TV as well.
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