Playstation Venturing Beyond Gaming to Video

Given the competition between the Microsoft XBox One platform and Sony Playstation 4 platform, it comes as no surprise Sony is following Microsoft into the world of original video streaming.  They seem to be sharing the same strategy playbook, premiere gaming, original video content, and connectivity with other online streaming platforms.  What differentiates the one from the other certainly depends on the exclusivity and appeal of the games and content that they carry. 

"Sony's foray is the latest example of how videogaming devices are incorporating more entertainment features as they try to broaden their appeal in the living room. The PlayStation already allows users to buy an array of digital downloads, such as TV shows and movies, and can access streaming services. The company recently said it also plans to launch a service to stream games."  These gaming platforms would certainly love to be a cable box , but unlikely as the value of that connection is too important to the cable operator.  Still, we find ourselves with multiple OTT boxes connecting to our TV set, side by side with our cable box.


Original content, exclusive to one platform, will prove difficult for both Sony and Microsoft to demonstrate success. It certainly creates added value for the owner of these gaming devices but I contend that their primary motivation for owning is the exclusive games themselves.  Besides the fact that the content can only be found on one device, it competes for awareness against other OTT content distributors like Amazon, Netflix, and Hulu, that allow themselves to be watched through multiple OTT platforms as well as through mobile devices.  And given the ease of connecting to a show like Netflix's "House of Cards" verse a Playstation show like the newly announced "Powers", consumers will have a far easier time finding and connecting to Netflix. 

So does that mean that Microsoft and Sony eventually open up these "exclusive" shows to other platforms? By keeping them behind their own pay walls, they retain exclusive charm, but limit viewership.  And once they are syndicated to other sites like an Amazon or Netflix, lose their exclusivity and value to the gaming platform.  My advice to both Sony and Microsoft, stick strictly to exclusive games and let your boxes connect to other streaming services like Netflix or Hulu or MLB and compete head-on with the Roku's Chromecast and Apple TV as the preferred device. 

Pandora Following Amazon Price Increase

With so little backlash to the 25% Amazon Prime price increase, it comes as no surprise that other digital streamers would also follow along.  While I speculated that Netflix could easily do the same thing, word comes that Pandora is next to increase its digital subscription.  Pandora, currently the largest online music streamer thinks it can increase its rate even more than Amazon's 25%. 

"Listeners who now pay $36 a year for the service will be asked to pay $3.99 a month, Pandora said today on its blog. For new subscribers, the price will be $4.99 a month, starting in May."  So existing subscribers see a 33% annual increase while new subscribers will pay even more, a 66% increase from earlier pricing.  Customers already paying $3.99 will not see an increase but don't be surprised that even those $3.99 customers will find themselves by next year also paying a dollar more each month. And given how well the Amazon increase was delivered, this news will blow over just as quickly. 

What does it all mean?  As consumers get more and more value and enjoyment from their digital services, the companies can start increasing rates figuring that the value received will leave many to pay the higher amounts.  With revenue coming from either subscription or advertising, both must rise for them to continue to succeed.  And once consumers are loyal to the value of these services, we pay more in order to stay connected in order to continue to enjoy the content they deliver.  As a percentage, the increase seems high, but when seen as about a buck more a month, we are willing to accept it. 

Who Needs A Smart TV?

With so much video content accessible on the web, we all need our TV's to be smart, but we may not need smart TVs.  In a new book on Steve Jobs, we are hearing a different story regarding his interest in selling a smart HDTV.  Where the Isaacson biography said it was part of Job's vision, the latest book says it was not the future for Jobs or Apple, because of little profit margin and product longevity.

I have always felt that Apple shouldn't invest in a TV set; make monitors of many sizes, but an integrated, smart, cable ready HDTV set, no.  A smart TV becomes less important with the release of many connected products that can turn any monitor into a smart TV.  First is the Apple TV box, rumored to be refreshed shortly, that connects to an iTunes library, and other web content.  We also have the Google Chromecast and Roku stick, plus gaming platforms from Microsoft and Sony and of course TiVo.  And now more news of a connected device from Amazon, long rumored and possibly a must have device for Amazon Prime subscribers. 

With so many connected devices, who needs to upgrade their TV set to a smart TV?  Unless marketing can demonstrate to the consumer that a smart TV can deliver a better user experience, unlike what they could get from these other boxes, dongles, and sticks, then the added costs may not be justified.  Plus, it is about the content and the device that better connects to the sources of that content that matters most to the consumer.  Deliver with it a better search experience and recommendation engine, sharing and availability across all your viewing devices, and you have a very valuable connected device.  With Amazon's box launch, competition will only get fiercer. 

Lots Of International Cable Buying

Its seems that cable ownership is getting pretty popular lately.  Here in the US, we've been watching the potential acquisition of Time Warner Cable, first by Charter and now by Comcast.  And internationally, we are hearing more news.

First up, the news that Vodofone, having sold its ownership of Verizon Wireless back to Verizon, has now purchased has Spanish cable and telecommunications giant Ono.  Today comes news that Liberty Global "has agreed to purchase the remaining stake it does not already own in Chilean cable operator VTR".  And while owning the pipes for cable TV is valuable, also providing broadband connectivity makes these deals even more interesting. 

For Liberty and John Malone, ownership of a piece of domestic cable operator Charter as well as its international ownership, truly makes them a global player.  And who knows what the next possible target might be. 

Will Subscribers Drop Amazon Prime Because of Price Increase?

The question should really be how many because price changes obviously affect purchase decisions.  And while a 25% annual price increase sounds like a lot, the monthly increase is slightly more than a dollar.  Amazon Prime bundles both shipping and its video streaming business together so that the value proposition may be different for those that use the service primarily for shipping verse others that care more about online streaming.  Still, for the profitability of Amazon, such a move seemed necessary. 

Subscribers will complain about the price increase and others will likely drop the service.  But I suspect that these complaints quickly go away.  I'm confident that Amazon put all its economics and statistical research together and determined what the price elasticity of their product was to their bottom line.  As one analyst wrote, "He estimated that a quarter of the Prime base was highly sensitive and might rebel. That might cut $800 million, or about 1 percent, from Amazon’s revenue. On the other hand the increased fee from more easygoing customers would add $150 million to the bottom line, which for Amazon would be a lot."  That still results in a net differential of $700 million, a nice increase from subscription revenue. 

Don't expect that this increase will have the same backlash that Netflix felt when it thought to split its DVD mail business from its streaming one.  I suspect a number of Amazon Prime subscribers will not notice the increase when it goes into affect later this year.  It will appear on a credit card bill that will be dutifully paid without much question.  And once this increase is established and proved correct, don't be surprised to hear that Netflix makes the same choice to raise its monthly streaming fee from $7.99 to $8.99.  As a percentage, it may sound like a lot, but to most consumers its only a buck. 

Sports Nets Have Hard Time Getting Carriage

The high costs of sports programming has led to cable operators unwilling to carry their networks.  And since their license fees are among the highest compared to other entertainment networks, cable and satellite operators have found that not carrying these channels hasn't led to subscriber drops while keeping their programming expenses lower.  Time Warner Cable and Dodgers owned SportsNet LA is facing problems getting launched on other cable distributors.  "Armed with information about their customers' viewing habits, other distributors say the data doesn't support paying such a high price for a channel that an overwhelming majority of their subscribers won't watch regularly."

And their network isn't the only one facing these same distribution problems.  "DirecTV, as well as AT&T and other pay-TV providers, also have passed on carrying a new sports channel in Houston. There, too, subscriber outcry and action has been minimal, pay-TV executives say."  College basketball net Pac-12 isn't being carried on DirecTv for the same reasons.

The solution may not be to fans liking.  By charging a per subscriber fee for a network, the costs, though high, are spread out among the entire base.  While a la carte may appear to be an option for carriage, the costs to subscribe by a particular household would be considerably higher.  As an example, a license fee of $4 per month per sub could translate to a consumer buying a la carte as high as $40 to $50 per month, if not higher.  Pricing would obviously depend on the percentage of homes to available homes that subscribed.  And at that level, only rabid fans would be likely to purchase.  Others might wait till later in the season and judging by the success of their team, to decide whether to commit to purchase such an a la carte pacakage. 

And so sports networks are not likely to agree to a la carte terms.  For Dodger fans, they might have to wait for the season to start to see what kind of appeal they bring as well as bring pressure for the cable operator to agree to these higher fees. 

Diddy Might Want His Fuse TV

While previous speculation that AMC Networks could be for sale came last week, today we are back to word that the fuse network is close to being sold.  According to the report, "Sean Combs, the hip-hop mogul now known as Diddy, has bid about $200 million for the Fuse cable-TV channel".  He would combine it with his own music channel Revolt TV and gain wider cable distribution.  Will Jimmy Dolan sell?  Is there other motivation to make such a deal?

For those that don't know, fuse and MSG CEO Jimmy Dolan also fronts a band, JD and the Straight Shot.  If you saw the movie, August:Osage County, you may have actually heard some of their music.  Perhaps a move with Diddy helps JD get his music a wider awareness and notoriety.  Or it is simply the time to cash out.  But given Jimmy Dolan's love of music and the music scene, it is hard to believe that he would let go of fuse completely. 

XBox One Uses Exclusive Content To Drive Sales

Content is king reigns again as Microsoft uses this strategy to drive sales of its Xbox One platform.  The content is Titanfall, a shooter game played socially.  And because it is exclusive, it requires both XBox and membership in Xbox Live.  With all the hype behind the release, Microsoft should see a bump in sales.  But is it enough to overtake Sony and its Playstation 4 system.

Certainly XBox needs this kind of game to drive sales but what it a calculated move to wait almost half a year from the launch of its new platform to release it.  Would it have helped XBox to deliver this game with the initial launch?  I suspect the initial strategy may have been to do just that but that the game simply wasn't ready in time to launch it earlier.  But if it was, why did they wait?

Beside launching a more expensive gaming system then the PS4 and not initially allowing older games to play on this new device, this may have simply been a third strike in missed opportunities.  Clearly the XBox One is not a bad device, it just is not as popular to date as its rival.  Hopefully, the release of Titanfall will be the exclusive content that brings sales figures closer to Playstation.

As for gamers like my son who chose the PS4, they are clearly disappointed that the game is exclusive to the other gaming system.  Will they switch? Will they hope that PS4 has its compelling exclusive content to remind them of the value of their system?  Or will they use an old XBox 360 platform to play the game when it is finally released in that version?

This millennial audience may have a hard time waiting for the next big thing.  They have been raised on immediate consumption and the thought that a future game is on the horizon may be hard to wait for. How many PS4 gamers also buy the XBox One; you never know.

Is AMC Networks For Sale?

Deadline Hollywood posed the question and offered some ideas as to who might be interested in buying the company with networks including AMC, IFC, WE, and Sundance.  Possible acquirers included Scripps (also thought to be for sale), Sony, CBS and others.  But the real question is, do the Dolans want to sell.  For many years, they have been reluctant to consider selling their Cablevision business as well as MSG which included MSG and the Fuse Network.  Months ago, Fuse was also considered for sale but believed to be at a price point too rich for many to consider.  Now with this speculation in Deadline Hollywood, I wonder if there is any fact behind the story or simply something to write.

Of course, one day all these Dolan properties will be sold, Cablevision, AMC, and MSG.  But as a family business, they won't likely sell till they are ready to walk away.  And for son Jimmy Dolan, the prospect of selling MSG and his beloved Knicks seems remote.  One day AMC and Cablevision, but not his Knicks.