My Son Wants An XBox One

As a teenager, my son has become addicted to the gaming platform.  Casual games are nice, but he truly loves the immersive experience and the big screen to play his games.  We started with Wii and Playstation and graduated to XBox 360 just as he became a teenager.  And with the release of new gaming systems from Sony and Microsoft, he has been vacillating between buying the next generation Playstation and XBox One.  It has not been an easy decision. 

So in our latest conversation, the XBox One is currently in the lead and he is disappointed that he is past the window pre-ordering at Game Stop and worriend that they will be out of stock for weeks after its launch.  But his choice for gaming system never took into consideration the added non-gaming features.  "The Xbox One is designed to support a TV content ecosystem that will generate ongoing revenue for Microsoft in parallel with the video game ecosystem at the core of the Xbox franchise."  He could care less.  For my son, the choice is all about the next generation of games and which box his friends might get in order to have a shared social experience in the game. 

And so I wonder, is a box capable of handling more than just its core function of gaming, of value to the consumer or not.  Will they appreciate that their same box can access videos as well as exclusive content from a Microsoft library or do they just want a box for gaming?  Can this all-in-one box give Microsoft new entry into a competitive product to Apple, Amazon, and Google, as well as synergy to its Surface tablet, or will consumers find limited interest outside the gaming platform?  Once in the home, I am interested to see how my son embraces these added features.  Certainly, it is the direction that Microsoft needs to take and I wish them well in driving this strategic plan to a successful end. 

Netflix Should Consider Adding a Transactional Movie Service

With an Emmy under their belt and an eye on a possible Oscar documentary, Netflix continues to emerge as a leader in the OTT streaming space.  With a monthly subscription service and a growing library of video content, Netflix continues to attract a larger paying audience.  The cost to acquire content will only increase as more competition emerges to challenge them in this space.  So what else is on Netflix's plate?

"First-run films would add a dimension to Netflix’s formula of offering viewers a mix of original series, with a library of movies and reruns."  But is there intention to offer these films as part of their subscription or to perhaps consider adding a transactional business to let consumers rent first run films, on-demand, at a per movie fee.  It would certainly shake-up cable's on demand presence and attract studio attention, especially if it included a more lucrative split to gain an exclusive window.  Cable operators are already feeling the heat of the battle from cord cutters choosing OTT over cable; this business model would be the next logical step in disrupting the status quo of on demand movies.  Consumers have already shown a strong interest in on demand through their cable service; a Netflix on demand model on top of their subscription service might just be happily received for access to first run content. 

Is It Time For Just 2 Time Zones?

I just read this article and thought it was worth sharing.  Given the rise of digital technology, communication and immediacy has become more and more important.  "Frequent and uncoordinated time changes cause confusion, undermining economic efficiency. There’s evidence that regularly changing sleep cycles, associated with daylight saving, lowers productivity and increases heart attacks."  How nice would it be to schedule calls between the two coasts and not worry about a 3 hour time difference.  

And how easy would the coordination of broadcast with east coast and west coast feeds to be able to have one feed for the entire country.  Live events at 8 pm on the east coast would be at 7 pm on the west coast.  The recently completed World Series games could actually start an hour earlier and still be prime time on both coasts. 

Ultimately, as the author points out, "The purpose of uniform time measures is coordination. How we measure time has always evolved with the needs of commerce."  It seems it might just be in our economic interests to consider such a plan.

Time Warner Cable Needs A Partner in Charter

Hit em when they are down.  The loss of both cable and broadband subscribers for Time Warner Cable has opened up the box once again for a potential merger with Charter Cable.  That TWC's losses were attributed to blacking out CBS and its sister channels for a month does not spell good news for any cable operator.  Each and everyone faces similar battles when license fee negotiations come up for renewal.

A friend from Los Angeles recently shared his story with me.  His family was a Time Warner Cable subscriber till CBS was dropped.  It was for them the last straw.  And being in a major DMA, they were fortunate enough to have alternatives.  TWC was limited in their response.  They offered a measly free movie to try and appease them.  Instead my friend switched to DirecTv for cable and AT&T for broadband and phone and discovered two immediate benefits, more channels and a total lower monthly cost.  Of course, I asked what he would do when or if CBS or another broadcaster was forced off their line-up as well.  He responded, with a wait and see attitude.  And what did TWC do to save the account.  Nothing when they notified them of their switch and nothing when they delivered their set top boxes back to TWC.  What irked them more, was a call placed by TWC to their home at 8am on a Saturday morning to try and win them back.  It was met with a firm hang up and a reminder that they had in fact made a good decision.

Consumers annoyed with current tactics and dropped channels will continue to seek alternatives.  Can a Charter merger save TWC? Not unless, once combined,  they go back to the drawing board with new, lower pricing models that take advantage of economies of scale.  That and a desire to do business differently or watch as more consumers leave, first for cheaper alternatives offered by competition, and soon enough streaming OTT platforms with enough content to encourage a steady stream of cord cutters.  That means not dropping channels unless you plan to keep them off.  Reducing the profit margin on cable subscriptions.  Better customer service and cheaper packages.  The trend toward OTT instead of cable is moving quickly and current operators are doing little to change their strategies. 

Both Time Warner Cable And CBS Hurt By Blackout

When contract negotiations failed and CBS was blacked out for a month on Time Warner Cable systems, the results proved disastrous for TWC.  For the third quarter of this year, TWC lost 306 k cable subscribers and 24 K broadband customers.  And given that TWC is in both Los Angeles and New York, consumer were able to switch to satellite or telco providers like U-Verse and FIOS.  It clearly hurt TWC in the financial wallet, but I speculate that CBS also felt it, with lost license fee and advertising revenues as well as higher marketing expenses to tell consumers to switch providers.  How fast consumers switched and how much CBS was hurt has yet to be heard.  But at the end, both sides lost.

So where does TWC go from here? The threat of competition from other cable providers as well as from streaming platforms, the continued loss of subscribers quarter over quarter, and the need to keep margins by lowering costs.  Is consolidation a sound strategic fit?  John Malone believes it to be so and would like to merge TWC with Charter to find more efficiency and lower license fees with a larger footprint to serve.  It may still end badly as customers are not happy with the high cost of cable and the wish to cut those costs through a la carte and lesser number of channels in cheaper packages. 

Also, consumers are placing more importance on broadband service and higher speeds than on its cable subscription.  And that may soon turn our cable companies into dumb pipeline providers.  Unless the pricing model for cable subscriptions gets reworked, that is the future we are seeing. 

Is Facebook In Trouble?

Yesterday, Facebook announced that its teen demographic is using Facebook less.  The once shiny toy has perhaps lost its luster, partly because older demographics have been embracing Facebook for casual gaming, picture sharing, and commenting on political and social issues.  The author speculates that a number of reasons have led to this decrease including, parents as friends, permanence of their posts, and seeing their "Facebook’s mobile app as bloated".  Still the news that teen usage was declining caused the stock market to sell the stock.  But is Facebook in trouble?

Certainly, the Facebook company saw competition coming to steal this core audience and as a result it acquired Instagram.  I find it likely that those Facebook teens as well as new users are finding Instagram as a preferred alternative.  The author agrees.  "Compare this to slimmer services like Snapchat and Instagram where it’s obvious what you’re supposed to do — view and share photos and videos."  For my own children, early teens, I prefer them having Instagram over Facebook.  Its simplicity allows me to see what is being posted and commented on.  While some argue Snapchat quickly deletes posts, it is not as temporary as some teens and their parents would like. 

Is Facebook in trouble; not really.  Facebook made the right move in buying Instagram; its two products now seem to reach different audiences and offers more revenue opportunities.  Still the shiny new thing may only be temporary as the next new social app emerges.  The one thing we know, teens are a fickle animal, likely to move on to the next shiny object.  But for Facebook, the real revenue opportunity, the 25 - 49 year old, remains strong and should serve Facebook for years to come. 

Could Intel Media Merge with Verizon And RedBox Instant?

Unfortunate as it might be, Intel is having a difficult time getting major content companies to agree to carriage deals on its new streaming platform.  Broadcast and cable networks don't want to risk their current relationships with cable operators that already pay them substantial license fees.  Intel Media is not alone; Apple has been trying the same strategy with little or no movement either.  So with a major investment in technology and a brand new set top box, what is Intel Media to do?

Well, according to All Things D, Intel is in talks with Verizon to sell or create a partnership with its Intel Media division.   "People familiar with the talks say the two companies are in advanced negotiations."  For Verizon, Intel Media comes with a new set top box that may be seen as more desirable than FIOS' current one, offering access to both linear and streaming video content, including Verizon's partner, Redbox Instant.  And Verizon's marketing muscle could help to deploy the Intel Media service, using their "OnCue" or another new brand name, beyond the FIOS wired footprint. 

But is the Intel built set top box enough for Verizon?  It comes with no big content deals or subscribers yet, it is a pure start up.  Where is the value that Verizon thinks it can unlock?  And if it is the box, would other boxes, like the new TiVo box, which essentially does linear and streaming like Intel, as well as DVR functionality, be an easier and better fit?  Certainly questions being asked in these high level negotiations. 

As a fan of streaming platform services being created by folks like Intel Media, Amazon, Samsung, Apple, and others, the key to success continues to be strong content.  The networks are not likely to risk their current revenue model with a disruptive technology that could hurt their revenue line.  OTT success is in distributing original content and exploiting highly valued content that may become available, like potentially the NFL Direct Ticket that DirecTv currently offers.  It will be only after streaming providers become more prominent that cable networks will crave the chance to be added to their service. 

Netflix Picks Up Dexter

When HBO's signature series, The Sopranos, left the premium channel, it found its next window of airings on basic cable on A&E.  The rise of streaming video has opened a new platform of distribution with Showtime announcing its deal for making available all seasons from Dexter on Netflix.  "A Netflix spokesman said it is an 'exclusive, multiyear' deal."  But certainly, once this deal expires, basic cable could be its next home.  But no longer is basic cable the next stop after pay channels.

The rise of video streaming with competition from Amazon, Hulu, and Netflix has created a new syndication window that has bumped cable and other windows down a peg.  How lucrative this window is for content makers and distributors remain to be seen.  Certainly, given the demand for streaming content, strong shows like Dexter, "set a ratings record for Showtime, averaging 2.8 million viewers", are important for demonstrating value that Netflix is delivering to its current and prospective customers.  Certainly we should expect future syndication deals coming to Hulu and Amazon soon.  And it continues to justify the notion that content is king.

Apple's Cash Problem, What To Do

With Apple's quarterly earnings report expected at close of day, investors wonder what Apple should do with all its cash. In fact, Carl Icahn has been pushing hard for more stock buyback to drive up share prices.  But like the author of today's WSJ article, Farhad Manjoo, I believe that is a short sighted move.  As a very small Apple shareholder, I want to see Apple us its funds to remain innovative in a fickle, changing digital marketplace.  Manjoo has some great suggestions for other uses of these dollars from building a Google search engine competitor to buying a cellular network.  Of his ideas, I like the latter better.

Apple has always prided itself in owning the complete product, hardware and software; the rise of the iPad has meant that introduction of third party apps, but they follow a rigorous approval process.  The piece that Apple lacks is the connection between consumer and device.  Buying or building a cellular/broadband network to best run its devices, from the Apple TV to the iPhone, would close the loop and prove a complete consumer solution.  Consumers need a network that can drive our wireless connectivity and assure our video streams and communication paths get to all our devices.  It is why Google is testing out its Google Fiber program in a few markets.  And why Apple should be in this space too.  A short term rise in the stock price; why bother.  I want more innovation and growth.