Verizon To Sell A Mobile Cable Subscription

With the purchase of Intel's OnCue business, Verizon is embarking on a plan to offer a mobile version of a cable subscription business according to Wireless Week. Using their LTE mobile spectrum, Verizon plans to deliver a cable-like platform of channels for consumers.  And while launch date, subscription pricing, and other information is yet to be announced, it appears that Verizon sees an opportunity to attract cord cutters with a new approach. 

Cord cutting continues to grow as 150,000 households shed their cable subscription as of July 1 of this year.  According to Mashable, Time Warner Cable and Comcast were hit the worst.  Verizon's new pay-TV service could further attract cable customers to shed their physical cord for a mobile cable experience.  Verizon already understands the overbuild mentality as it markets its FIOS business in markets with cable providers.  Verizon's mobile business could potentially cannibalize some of its own FIOS customers although cable opertaors are more at risk.  And FIOS could market a mobile package that delivers the ultimate in a TV Everywhere approach. 

As OTT continues to mature, and platforms like Hulu and Netflix attracting subscribers, networks like HBO, SHO, and CBS are developing their own OTT models.  Verizon's mobile platform could be a boon to these networks and others.  It may also allow Verizon to start over to build and bundle services that consumers actually want to watch at a price point that is acceptable to them.  And if successful, this new business could truly disrupt the cable subscription model. 

Data May Be True King When It Comes To Success

Having content to view may not be the same thing as having content that people watch.  And when it comes to measuring success, how many watch, who they are, what they like, and where they go may ultimately determine how successful any piece of content can be.  The data behind the content, the analytics and insight derived from who is watching a piece of content is imperative to financial success.  It is reminiscent of the adage asking if a tree falls in the forest and no one is there to hear it, did it make a sound.  That data is crucial especially when it drives advertising dollars.

The buzz on measurement of content, whether linear, on demand, streaming, or download requires that it is properly being collected, that it is accurate and correct, and that the time frame in which it is collected is relevant to the process.  And for media buyers, that reaching an audience is not just a size based proposition, but also efficiency to a segment of the population you are trying to reach, whether age based, gender, income, purchasing behavior, etc. 

The system today seems far from perfect.  Do we count live only views, Live and same day delayed, or +3 day or +7 views.  Did the pre-roll play, was the sound on, was it fully visible, and is it a real impression?  Questions of fraud remain part of the conversation.  Still, with verified data, the value is essential in making content profitable.

Like iPods Product Line, iPhones Will Also Lower iPad Sales

Technological cannibalization seems to be the norm and no one is more aware of this impact than Apple.  When they introduced the iPhone, many worried that iPod sales would be hurt.  And they were right.  But the innovation of the iPhone, while cannibalizing iPod sales, also enabled Apple to succeed.  The same cycle is now repeating with the iPad.

While iPods continue to sell, they represent a smaller business then before.  With the introduction of the iPhone 6 and 6 Plus, Apple recognizes that it will cannibalize sales of its iPad.  In fact, it could lead to the drop of the iPad Mini model.  At the same time, the iPad may fine more uses in business sectors then in the consumer market.  And as iPhone sales makes iPads less desirable, they may also help sell more laptops.

With the MacBook Air and MacBook Pro getting lighter and more powerful, Apple users may find these products, linked with their larger iPhones as the perfect combination.  MacBook sales in general have been rising as PC sales are declining.  This trend seems likely to continue.

For Apple, they seem to have no problem letting cannibalization occur.  It is in their best overall interest to not try to save declining products but to focus on the synergy of their total product line.  With the introduction of the iWatch in 2015, that synergy is likely to continue.

Net Neutrality Laws Not The Answer

Do we have a problem with our internet, the simple answer is yes.  But regulating access to assure that all content gets equal access may not be the correct course.  As many like to say, too much government interference, limits growth, and if treated like a utility, would hamper innovation.  Our problem is not that some traffic on the internet superhighway gets clogged; rather, that the whole highway is a traffic jam.

As the Huffington Post pointed out last month, "Americans pay far more and get far less when it comes to the Internet than many other people around the world." Broadband connectivity in the United States is more expensive than other countries and our overall speeds are slower, too.  With more and more devices trying to get online, the highway can come to a noticeable stop.  In my home, watching a video on a tablet causes other computers in the house to stop loading web content.  Too many users on a cable broadband line slows overall speeds. 

How do we improve the broadband highway.  Not through regulation, but by lowering the barrier to competition.  Eliminate cable franchises and open spectrum.  Let overbuilding encourage more competition.  More competition drives better pricing models and gives consumers more choice.  Too much regulation is not the answer.  We've recognized the problems but need better solutions. 

Obama Wants Net Neutrality

With two years left on his presidency, President Obama has decided now is the time to speak out on net neutrality.  He has asked the FCC to pursue full net neutrality and to enable free and equal internet traffic for all.  Whether a data heavy, video driving site like Netflix or a low graphics, easy downloaded website, consumers should be able to access both equally as fast.  No HOV lanes, no slow downs by ISPs.  I'm almost surprised that he didn't try to have all broadband as a utility, subject to the same rules as water, gas, and electric.

The real challenges for the US regarding internet access are speed and price.  Shouldn't more be done to encourage wire and wireless competition.   Is net neutrality the better policy course to driving innovation and superior service?  Shouldn't the FCC focus instead on opening up more spectrum for more ISPs to enter and compete for users.  If internet speeds can be improved, then all traffic will thrive, whether they are in a slower or faster lane.  Then how fast any one piece of content is over another will be meaningless if there is no perceptible difference. 

Should Cablevision Seek A Buyer?

Cablevision announced its third quarter financials and the news suggests trouble.  While revenues rose through price increases, growth has stopped.  Like other cable operators, Cablevision faced another quarter of cable subscriber drops, losing 56,000 households.  The trouble for Cablevision is that while other cable operators see growth in their broadband subscribers, they encountered a drop of 23,000 homes.  That spells major trouble.  Price increases to current homes may mask some concern, leading to Q3 revenue growth of 3.7%,  but continued cable and broadband subscriber drops cannot be overcome with more price increases.  The dam may be ready to burst.

So is there an exit strategy?  Is CEO Jim Dolan still committed to Cablevision or is he willing to finally jettison the asset and concentrate on his main loves, MSG and his music?  Do they have the ability to right this ship? Or is it time for Cablevision to find a buyer?

Cablevision lost a strong leader in Tom Rutledge a few years ago when he left Cablevision to run Charter.  Could Ruttledge be interested in acquiring Cablevision and once again taking control over the troubled empire?  With Comcast and Time Warner Cable busy on their merger plans, Charter could be the likely front runner.  And Rutledge seems to have the Midas touch when it comes to cable operations.  Given Cablevision's stumble, the timing might be right to consider making a bid.  And the answer to the title is yes, Cablevision should start seeking a buyer. 

Ad Spend Shifts To Reach Consumers

Today's Wall Street Journal reports on the shifting dollars of ad spending.  The concern is that ad dollars are flowing away from television and toward digital content.  And while it is described as shaky, it is hardly earth shattering.  Truth be told, these shifts are simply part of long term trends that have affected media buying for quite some time.  And those media that don't remain flexible to changing viewership patterns eventually become irrelevant. 

Old technology gets replaced by new technology; the horse drawn carriage by the automobile or the train by the jet.  For those that can predict the shift comes the ability to take a product or service from birth to maturity.  And while old technology like the train may lose some market share to the jet, it still can survive as a mature business.

Back to advertising, media has watched audience usage shift from print to radio to broadcast to cable to digital.  All media platforms remain available, but start to be used differently.  Radio is no longer the home for 30 minute sitcoms or dramas; today they are music, news, talk, and sports.  Those long form shows shifted to television as audiences demanded first video, then color over black and white.  Today those viewers now want portability, personalization, and on demand, something that digital can do very well.  But TV is not dead or even on shaky ground.

According to the research from MoffettNathanson, broadcast and cable are still growing, simply at a slower rate.  It is the maturation of the TV platform as another takes over.  Viewers are a fickle bunch; one year they love the content you offer on your broadcast or cable or theatrical platforms and the nest year, interest has waned with your content and moved to another content creator.  And digital platforms like Netflix and Hulu and Amazon and others let viewers watch shows and movies on their terms.

Still this shift of viewership from TV to digital could change the cable landscape.  In the beginnings of cable television, networks were created to reach segmented interests.  You had an arts channel, a sports channel, a comedy channel, a movie channel, and so on and each channel had a clear segmented identity.  Where broadcast networks reached a broad audience base, a cable network could reach a smaller, albeit passionate viewer segment.  But as cable grew up, it started to want a bigger share of the pie.  Those individual identities began to soften as networks widened their reach with more varied programming categories.  Today, most cable networks look like broadcast networks.  And with so many lookalike networks, segmentation turned into fragmentation.  It seems the next step for cable TV may be for consolidation as smaller networks get dropped off the line-up.

TV ad spend will continue to shift as new platforms emerge and audiences embrace these new ways to interact with content.  Broadcast felt it as cable networks gained better programming and more viewership.  And TV as a whole will feel it as digital gains better programming too.  The shift is inevitable and like before, the trend will only continue.  The smart content distributors will embrace digital and capture the dollars regardless of the platform its content is on.  HBO and CBS offering unique digital subscription models is one such example.  Hulu Plus, a consortium of broadcast media ownership is another.  Their is nothing wrong with TV ad spend, it is just following the same trends that have affected it before. 

Spotify Loses While Taylor Swift Gains

Aside from her musical talent, Taylor Swift could also be described as a marketing expert.  Faced with digital disruption in the music industry, she caused a disturbance in the streaming music industry that helped to drive her album sales.  Fans couldn't listen to her album without paying for it, so they opted to pay for it.  The result, 1.3 million album sales in the first week.  We can only expect for total album sales to go higher.

Certainly Spotify was not truly hurt by the loss of one artist.  The challenge will be that others will follow the Taylor Swift strategy of promotion, limited streaming availability, and other marketing tactics.  Access to current musical content could cause Spotify and others to remodel themselves to maintain subscription growth. 

By the way, Swift's album 1989 was the first album to top a million in its first week in 2014 and currently ranks as the "second-highest seller overall, behind the Frozen soundtrack." 

Dish Network Not Afraid To Drop Channels

Last month, Dish Network dropped most of the Turner Networks, the most notable being CNN, especially given this being an election year.  And while, they reported a small drop in subscribers for the third quarter, the belief was that the loss of Turner nets was not a big deal.  Rather, according to the Wall Street Journal article, "Subscriber growth has been hurt by quality-of-service issues, Dish said, including not meeting its own standards for installations, answering subscriber calls in an acceptable time frame, and equipment reliability. The company warned that these issues could affect revenue growth in the future."

Cost control is a driving factor in the cable game as consumers fight the high cost of cable television by dropping their service for OTT programming.  Dish recognizes the challenge of keeping their subscribers and limiting price hikes, especially those caused by higher license fees.  At the same time, Dish is focusing on the online market with possible plans to build out their own low priced video service.  That may be a hard business to pull off unless Dish can integrate its license fee deals for online content with its satellite deals to assure the best rate for license fees. 

Turner won't be their only problem.  The article reports that the CBS deal will also expire by year end.  Watching what happened to Time Warner Cable after its war with CBS, Dish may be more willing to negotiate with a broadcaster like CBS, then with a cable programmer like Turner.