Could Cable Network Drops Become Permanent?

The cycle of cable network drops with license fee negotiations leading to eventual relaunch could soon be over.  The threat of cord cutting, the high license fees imposed by cable nets, and the desire to keep subscription prices in check could lead to cable operators dropping cable nets from their line-up, permanently. 

Viacom's networks, MTV, VH1, Comedy Central and others were dropped from Suddenlink in October, almost 6 months ago, without the cable operator losing a significant number of subscribers.  Given the savings and limited loss of revenue, Suddenlink may be in no hurry to relaunch Viacom networks.  The latest news is that Verizon's FIOS systems have decided to not renew The Weather Channel, replacing it with a more inexpensive weather service.  Should FIOS find this move to be financially successful, it too could appear to become permanent.

Given the rise of streaming services, the accessibility of network programming outside its TV line-up, and the need by cable operators to create lower priced, smaller packages of cable networks to limit cord cutting, some cable networks may be at risk of also being dropped from cable systems.  If Suddenlink and FIOS can demonstrate that they can drop nets, maintain their subscription penetration, while improving their net profits, the cycle of launch, negotiate, drop, re-launch may have finally be broke.  Should cable network drops become permanent, don't be surprised to see these same networks follow the HBO Now strategy of offering streaming subscription packages outside the cable line-up universe. 

HBO Not Worrying About Cannibalization

Yesterday, Apple formally announced an exclusive partnership (albeit only 3 months) when HBO Now will be offered strictly on Apple devices.  HBO's new streaming service will be offered to all consumers regardless of whether they are authenticated cable customers or not.  And like Netflix, Amazon Prime, and Hulu Plus, HBO Now hopes to capture the consumer desiring content on their digital devices.  But unlike these other streaming services, HBO is risking their current subscriber revenue stream.  Or are they?

The threat of cord cutting, the rise of the millennial audience, and perhaps a lucrative revenue model might just make this new approach by HBO a win-win scenario.  Its corporate owner, Time Warner, no longer owns a cable operator so there is no loss of synergy.  Cable operators are unlikely to drop HBO on their own cable platform as it is the most popular, highest purchased of the premium tier networks.  And the pricing model may just protect HBO regardless whether a customer purchases through a cable operator or through iTunes.  At $14.95 a month for HBO Now, and only a 30% share with Apple (per reports), HBO Now's net could potentially be higher than the net revenue per cable sub per month.  If that is true, cable customers that cut the cord but buy HBO No could give them a net revenue gain.

I don't expect cable customers with HBO to be motivated to cut the cord because of this new streaming service.  They already enjoy HBO on their mobile devices because of HBO GO, its authenticated streaming service.  This added value product has been accessible to cable customers for some time.  Rather, HBO Now is more focused on the 10 million or so non cable, internet customers seeking more online content, specifically exclusive content that HBO offers.  The new season of Game of Thrones is one such example.

How will HBO Now do?  Millennials, whose parents have cable with HBO, are likely using mom and dad's access to get HBO remotely.  But for those that aren't and see incremental value with HBO content may be eager to purchase.  For HBO, the launch of HBO Now seems to be all positive with limited downside risk.  

Will Apple Convince Us We Need An Apple Watch?

In just a few hours, Apple will unveil its latest product to the public.  Other than product refreshes, Apple hasn't released a new product since the iPad.  With today's press conference, we will finally learn about all the new features, functions, and benefits of the Apple Watch; and most importantly, the Apple Watch will reach its retail stores and the general public will be able to more closely see and feel them.

A number of questions come to mind as the Apple watch is released.  Will it deliver a uniquely different experience than other smart watches out already?  Will it do more than current health trackers like the Fitbit, Microsoft Band, Vivofit and others?  Will watch wearers replace their current watch with an Apple Watch and will non-watch wearers want to start wearing a watch?    Is the price point a stumbling block or a non-issue?  Can Apple convince consumers that the Apple Watch is a must have product?

Stumbling blocks for me are first and foremost the price.  Second is the utility and value that would drive me to need it.  And third is the battery issue.  If the Apple Watch can't last a full day without a recharge, then a dead device on one's wrist has no vale whatsoever.  If Apple can convince the public that they can't live without it and that it lasts the whole day, then they likely have another win on their hands; if not, it may be a major miss for Tim Cook and his team. 

TiVo Claims Better Solution to Comedy Subscription Service

A few days ago, NBCU announced plans to create a comedy subscription service for streaming users to enjoy programs like The Tonight Show, Saturday Night Live, and more.  With a proposed monthly fee of between $2 and $4 dollars, viewers without access to the broadcast channel can enjoy these shows.  The problem is they already do, on You Tube, on Yahoo Screen, and in the SNL 40 app.  Why pay for the cow if the milk is free?

Obviously, once these agreements expire, NBCU could make a case for exclusive access but aren't these online tools helpful in building subscriber loyalty and moving them to want to watch the latest shows.  Could advertising dollars suffer in trying to start a subscription service? And aren't there alternative ways to watch these great shows.

TiVo thinks so and is touting their aggregation marketing plan that brings comedy programming from all the broadcast channels to your digital devices.  Per Fox Business, "The 'Comedy Collections,' culled from ABC, CBS, FOX and NBC, will be customized by TiVo subscribers into bundles of favorite sitcoms and late night shows. According to Rogers, the cord cutters -- or TV viewers who get content over the air (OTA) without paying a cable company -- will be able to easily do their bundling as well, thanks to TiVo's Roamio OTA (Over the Air) device."  With a digital antenna and a DVR box like TiVo or Slingbox, anyone can achieve the same kind of collecting and viewing.

The challenge for cord cutters and any of us that use a DVR to record and playback later is that we have to plan in advance to record certain shows.  With a streaming service, we simply have to check that a show is available then click to watch.  No advance planning or set up required and that has been the beauty and simplicity of streaming content services. 

Content Networks Chasing The Cord Cutters

Cable operators and content networks have always had a difficult relationship as buyer and seller.  In the early days of cable, their relationship was more harmonious with launches coupled with marketing activities to assure that subscribers saw value from the network and networks built awareness and hopefully ratings.  But the proliferation of cable networks, a loss of brand as niche networks began looking more and more like UHF channels, and a price only mentality have turned these negotiations bitter and untrustworthy.  The result has been broadcast and cable network drops, followed by ads telling subscribers how horrible the other side is behaving, and then finally a relaunch.

Consumers are changing too.  No longer do they seek content simply from a cable operator; now, they can watch TV shows and movies via a broadband connection.  And while broadband subscription rises, cable subscription is dropping.  Cord cutting is a fact.  Recognizing that the cable operator is not the only distribution platform anymore, content networks are constructing deals on OTT platforms.  Most recently, it was announced that AMC, IFC, and Epix are joining the Sling TV digital platform.  For as little as $20 a month, subscribers can get these nets as well as ESPN, HGTV, TNT and a few others.  Less networks than a cable operator subscription package but at a lower cost to the consumer.

HBO has also announced that it too will offer its network without the requirement of a cable operator.  Tentatively titled HBO Now, it helps them to compete in the same new world that Netflix, Amazon Prime, and others compete in.  With cable nets building alternative avenues for access, the pressure for more cord cutting will only continue to mount.  And as negotiations with cable nets lead to drops on cable systems, the likelihood that these networks will relaunch may become a distant memory.  Networks can simply advertise an alternative way to get the networks they love without the cable operator as the middleman.

Cable operators have done little to compete in this changing media environment.  TV Everywhere is not available to subscribers for all its nets; rather only certain networks offer authenticated carriage, some only inside the home, and with no aggregated way to easily search across a line-up.  Cable boxes remain clunky and hard to navigate unlike IP devices.  New packaging is not being created to drive down the subscriber price point to enable stronger retention.  Rather, prices continue to go up to keep revenues stable.

What does the future hold?  I see cable operators dropping cable networks that don't perform.  Smaller packages of cable networks but at lower price points.  I see operators needing to invest in new generations of cable boxes, embracing the TiVo type boxes that access both cable and internet content and bring it to the TV screen.  And I see the emergence of a la carte pricing where a home can buy a particular network through their cable box for access across all their devices.

Connectivity Brings Le Freak Out

The issues of security and privacy will not go away; as long as there exists devices to stop unwanted entry, there are people destined to break in.  The latest security breach is called "Freak" and affects mobile devices including iPhones and Android, as well as Mac computers.  So get ready to Super Freak, to Get Ur Freak On, to Le Freak, or simply Freak Like Me.  Okay, enough song title references.

According to re/code, "The vulnerability in Web encryption technology could enable attackers to spy on communications of users of Apple’s Safari browser and Google’s Android browser, according to researchers who uncovered the flaw."  Once discovered, corrections are being made and software updates will follow.  But it is only a matter of time till another bug is discovered, another flaw exposed, and folks with dishonesty on their minds will seek to take profit from it. 

This cycle of hacking to exploit data for nefarious means will never end.  The more sophisticated the encryption, the bigger the challenge and drive to try and expose it.  Never ending, we will be faced with stories like these for many, many years.  Think The Imitation Game but with bad individuals hacking into our personal and financial information.  Perhaps The Matrix is right, we might need to consider getting off the grid. 

Will Wearable Devices Create More Security and Privacy Breaches?

Next week, Apple plans to unveil their Apple Watch with availability in April.  Already out in the market are other wearable devices including Fitbit, Pebble smartwatch and others.  In the meantime, we have become more and more tied to our smart phones and tablets and see opportunities for being connected to other devices as the next best thing.  But are there also risks and concerns?

The opportunities for wearables are tremendous. From collecting health information to replacing physical credit cards.  Apple Pay is a great new feature that makes purchasing more convenient.  Adding that functionality to its watch enables an even better experience.  But the idea of wearable devices can be extended to multiple applications.  It could unlock and even start a car as we get near it, unlock our front door without scrambling for our house keys.  Houses with alarms enabled could recognize the device and instantly disable without the need to punch in a code.  Heck, a wearable device could make physical keys a thing of the past. 

But what about privacy and security?  Are we opening up additional risk that these kinds of locks could be more easily opened with other sophisticated technology?  Will our health information, like our bank and credit card data, be at risk as well?  Is there something to be said for a physical lock as opposed to a digital one?  These seem like huge challenges that have not been fully addressed.  As more and more consumers suffer from credit card fraud, are we opening Pandora's box?

A lost key can be replaced.  It may be on a keychain but it tends to lack personal information that tells the name of the owner, where they live and how to reach them.  A smartphone or smartwatch could be a different issue.  These devices aggregate all our data with the possibility that once unlocked, could be very dangerous to our privacy and security.  Could we be possibly be opening ourselves to too much risk?

The risk verse reward balance of connecting our devices to the environment we move around in is a serious one.  How we can protect ourselves from stolen data, fraud, and possible invasion and theft is one that has to be baked into the technology.  And marketed in a way to allay our fears and demonstrate how much grander the rewards can be. 

FCC Rules ISPs Are A Utility

The internet is now classified as a regulated utility and net neutrality is enabled.  Certainly, for content creators and consumers, content must now flow freely and equally to your devices.  But what was the problem and do these regulations really solve them.  Weren't we getting access to all our content already?  Did you really see that certain content was not getting to you? 

While nothing will change immediately, what will not be a surprise will be how many lawsuits will arise to fight this new law before it can initiate.  Given how long it takes decisions to get through the court system, it should be tied up for quite a while.  The greatest example is the Janet Jackson Super Bowl example regarding on air decency.  That case took years to finally decide that there was no fine to be levied.  Still it clogged up the courts.  So too will this new internet regulation law.

The hope is that during that time that new innovation arises to improve speed and efficiency of broadband, new competitors grab a share of the marketplace via a wired and wireless approach, and that the fast pace of change in this industry makes the law irrelevant before it has time to take effect.  My biggest concern is that regulation only slows down innovation and growth, doesn't drive a competitive marketplace, or lower prices.  Yes, net neutrality as a concept is a good thing; all content should be able to reach its destination as fast as possible.  But wrapped in other regulations, the internet as a communication highway only gets hurt more. 

Net Neutrality Vote

Lately, our cell phone provider has been sending us messages telling us that we are reaching our covered monthly limit on our internet usage.  And the culprits tend to be our kids who forget to turn on their WIFI on their cell phones to watch You Tube or Netflix.  Truth is there are a limited number of providers for broadband service and so prices continue to rise.  Cable operators have done the best job of delivering high speed broadband service across a majority of the nation.  Telephone companies have managed with DSL service but it doesn't deliver the same speed as cable.  In some markets, FIOS and U-verse have overbuilt larger cities with alternative high speed service, many with fiber right to the home.  And some regional providers like RCN, WOW, and other also offer cable, broadband, and phone. 

But newer competition is rare.  The biggest entrant so far has been Google Fiber, starting first in Kansas City and expanding into a few other markets.  After that you have cell phone companies with data plans that get quickly used up on video consumption.  I know from firsthand experience.  Their speed is also no match to cable yet but the hope is that they can become a better provider. 

Today, broadband, like food, water and shelter, is being treated very much like a utility and so the government seems determined to regulate it as one.  Hence the vote today by the FCC to reclassify broadband service as such and assure that that all content delivered across the internet is delivered identically, whether a video stream or email message.  That is net neutrality.  But the concern of big government regulation in business is that it limits new entrants, innovation, and disruption. 

Consumers have very little choice in deciding what broadband service provider to use.  Where we live determines who is capable of supporting us.  Cable operators still strike franchise agreements to exclusively cover cities and towns.  More competition is needed.  New spectrum needs to be opened up.  Investments in technology to increase speed and capacity should be encouraged.  Net neutrality laws may seem like a short term fix but not a long term solution.  And as we continue to become a more connected universe, it is the long term that is more at stake.