With cord cutting becoming a palpable threat, Comcast is testing a streaming strategy to keep customers from dropping all their cable channels. Called Stream, it will offer to its own broadband customers an alternative to a cable subscription a package of broadcast channels and HBO streamed to their devices. And at $15 dollars a month, the cost for just HBO, the consumer gets that plus ABC, CBS, NBC, PBS and a few other channels, plus on-demand and cloud DVR features. If it sounds a little bit like Aereo, it could certainly be confused for it. One can only wonder if the broadcast networks agreed to this streaming solution. And why shouldn't current Comcast cable and broadband subscribers be entitled to the same streaming service as part of their more expensive subscription.
Comcast plans to rollout the service first in Boston before expanding it into other markets according to Huffington Post. Will Comcast customers who have dropped or plan to drop their cable package while keeping their broadband service like this low cost alternative or have they already found value from other current OTT streaming services like Hulu, Amazon and Netflix? I look forward to seeing the marketing that Comcast employs to sell this new OTT service. How fast it succeeds or fails in Boston may likely change the timing of other markets.
One thing is clear, cable networks like ESPN and other expensive networks may not like that their channel will no longer be in the "streaming basic line-up". Lawyers may be pouring over contracts to see if this new tier violates current programming contracts. As my previous blog noted, ESPN and others are already seeing a loss in basic subs due to cord cutting. This new Comcast Stream service could contribute to the percentage of cord cutters.
Monday, July 13, 2015
Friday, July 10, 2015
Cable Networks Hurt By Cord Cutting
Consumers are shaving down their cable tiers or dropping their cable service altogether. And today's Wall Street Journal shares how the leak in the dam is showing a measurable loss in basic subscriptions across a number of the most popular cable channels. As the graph below shows, over the last 4 years, subscription levels have dropped 4-11%, with some of the more expensive networks, including ESPN, facing the larger losses.
As cable networks are paid a monthly license fee on basic subs, each drop gets multiplied month after month, year after year, causing larger and larger losses. For ESPN, it means dropping some talent, rethinking studio moves, and finding further cost efficiencies. Given the rising costs of license fees that cable nets charge, further losses will be felt, For some networks the higher fees, coupled with lower subs, can create a revenue plateau. But over time, sub drop increases will over take any license fee increase to result in a total revenue loss. And fee increases will only drive a larger number of drops. Nets are in fact killing the golden goose, slowly and methodically, with annual increases.
Networks that have seen this trend are already embracing streaming as a means to recapture customers lost through cord cutting. HBO Now is a perfect example of embracing new distribution platforms. Others are also following in those footsteps. When we look at this snapshot again in a couple years, it will become more evident that the speed of cord shaving and cord cutting has quickened. That is the trend we are facing.
As cable networks are paid a monthly license fee on basic subs, each drop gets multiplied month after month, year after year, causing larger and larger losses. For ESPN, it means dropping some talent, rethinking studio moves, and finding further cost efficiencies. Given the rising costs of license fees that cable nets charge, further losses will be felt, For some networks the higher fees, coupled with lower subs, can create a revenue plateau. But over time, sub drop increases will over take any license fee increase to result in a total revenue loss. And fee increases will only drive a larger number of drops. Nets are in fact killing the golden goose, slowly and methodically, with annual increases.
Networks that have seen this trend are already embracing streaming as a means to recapture customers lost through cord cutting. HBO Now is a perfect example of embracing new distribution platforms. Others are also following in those footsteps. When we look at this snapshot again in a couple years, it will become more evident that the speed of cord shaving and cord cutting has quickened. That is the trend we are facing.
What is Television?
Ask a 60 something to define what television is and they will likely point to their living room TV screen with the cable box hovering above or below it as an example of it. Ask a 10 year old and the likely answer could be their smartphone or tablet. The simple definition of television may refer to the transmission of sight and sound to a screen with that transmission enabled by an antenna or wire. Another may refer strictly speaking to the box itself that turns on and off and is capable of displaying multiple channels of content.
But it seems that with the rise of digital and wireless technology, both the traditional transmission of content and the screen it displays on has changed dramatically in the past decade. Channels are no longer just linear or even on-demand, they are streamed to devices of any shape or size. And the content itself is no longer just long-form or short-form, but starting to contain more interactive elements. The water cooler has been replaced by social media apps like Twitter and Snapchat and others. And we no longer have to wait a week to see the next episode of a particularly intense show; rather, we can binge the entire season or seasons whenever and wherever we choose to watch.
The television is no longer tethered to the living room or kitchen or bedroom. It can follow us to the bathroom or the park or to Starbucks if we choose. And so we measure viewing of this content across all these screens of television with same day, +3, +7, streams, on-demand views, and whatever measurement captures who is watching a piece of content for a length of time. And that content can appear on what we traditionally saw to be TV, on a linear channel airing at a particular day and time to on-demand viewing from our cable box to seasons worth of episodes on a subscription service.
Television, the distribution and content displayed, is monetized like never before. With cable bills and downloads, streaming subscriptions and commercials, native sponsorships, display ads and overlays. Today's concept of television is much broader than 50 years ago, or even just 10 years ago. But no matter the screen we use, large or small, and no matter the location of the screen, living room or smartphone, and no matter the time we watch, pre-set or at our discretion, it is all television. And what will tomorrow's television look like? I look forward to finding out.
But it seems that with the rise of digital and wireless technology, both the traditional transmission of content and the screen it displays on has changed dramatically in the past decade. Channels are no longer just linear or even on-demand, they are streamed to devices of any shape or size. And the content itself is no longer just long-form or short-form, but starting to contain more interactive elements. The water cooler has been replaced by social media apps like Twitter and Snapchat and others. And we no longer have to wait a week to see the next episode of a particularly intense show; rather, we can binge the entire season or seasons whenever and wherever we choose to watch.
The television is no longer tethered to the living room or kitchen or bedroom. It can follow us to the bathroom or the park or to Starbucks if we choose. And so we measure viewing of this content across all these screens of television with same day, +3, +7, streams, on-demand views, and whatever measurement captures who is watching a piece of content for a length of time. And that content can appear on what we traditionally saw to be TV, on a linear channel airing at a particular day and time to on-demand viewing from our cable box to seasons worth of episodes on a subscription service.
Television, the distribution and content displayed, is monetized like never before. With cable bills and downloads, streaming subscriptions and commercials, native sponsorships, display ads and overlays. Today's concept of television is much broader than 50 years ago, or even just 10 years ago. But no matter the screen we use, large or small, and no matter the location of the screen, living room or smartphone, and no matter the time we watch, pre-set or at our discretion, it is all television. And what will tomorrow's television look like? I look forward to finding out.
Thursday, July 9, 2015
The Future of Microsoft
Paul Allen left a while ago, Bill Gates prefers his charity work, Steve Ballmer is focused on the Los Angeles Clippers, and now the Microsoft company has been in the hands of Satya Nadella for a little over a year. And he seems to have a big job on his hands, how to shape the future of Microsoft.
Along with a renewed focus on the cloud and a shift away from product, his latest major shift has been to undo Ballmer's purchase of Nokia with a write down and the loss of almost 8000 jobs. Sometimes you have to get smaller and focus before you can start building again.
But what will Microsoft look like in 5 years. Certainly not a hardware company and likely no branded Microsoft smartphone. They still have the Surface tablet but most tablet makers think that larger smartphones will upend that product line. As for internet advertising, the deal with AOL pushes that business out too. And while Microsoft has a successful gaming venture with XBox, they have already decided to no longer invest in original content. The likely outcome is that XBox gets spun off or sold.
Microsoft Office is pushing further into the cloud space. But the license fee model is being challenged head on by Google with its free programs. Many schools today use Google docs and other online collaboration tools with their students to enhance education. Bottom line, kids are becoming more proficient on these programs and less so on Microsoft Office.
Software and cloud computing remain the future of Microsoft but that world continues to change rapidly. What is in the pipeline over the next few years remains to be seen. Given their capital war chest, they have the resources to create or buy to maintain their dominance. But given the missteps they have been making in the past, the next right step will really matter.
Along with a renewed focus on the cloud and a shift away from product, his latest major shift has been to undo Ballmer's purchase of Nokia with a write down and the loss of almost 8000 jobs. Sometimes you have to get smaller and focus before you can start building again.
But what will Microsoft look like in 5 years. Certainly not a hardware company and likely no branded Microsoft smartphone. They still have the Surface tablet but most tablet makers think that larger smartphones will upend that product line. As for internet advertising, the deal with AOL pushes that business out too. And while Microsoft has a successful gaming venture with XBox, they have already decided to no longer invest in original content. The likely outcome is that XBox gets spun off or sold.
Microsoft Office is pushing further into the cloud space. But the license fee model is being challenged head on by Google with its free programs. Many schools today use Google docs and other online collaboration tools with their students to enhance education. Bottom line, kids are becoming more proficient on these programs and less so on Microsoft Office.
Software and cloud computing remain the future of Microsoft but that world continues to change rapidly. What is in the pipeline over the next few years remains to be seen. Given their capital war chest, they have the resources to create or buy to maintain their dominance. But given the missteps they have been making in the past, the next right step will really matter.
Wednesday, July 8, 2015
Mobility And Personalized Second Screen Favored By Young
A study discussed in today's Multichannel News confirms what my family already knows, that the second screen is preferred over the big TV screen. And while the study focuses on children ages 2-12, my slightly older children also prefer their handheld devices over the big screen TV set. Their study finds that 57% of parents find that their children would choose their mobile device over a TV screen.
I can also share that in my household my children seem to choose their iPhone over their iPad to view certain content. It may be because of convenience, they always carry their smartphone, or perhaps simply laziness. I'm not quite sure. But what I do see is that they prefer these devices because of content that appeals to them from sites ranging from Netflix to You Tube. That they can binge view and watch commercial-free. That they can watch the same video multiple times and they can watch where ever they decide to sit, from the stairs to the bed to the desk. It is the ultimate what you want, when you want, where you want, how you want to watch.
And while I don't personally approve, I see these parents of younger children hand off their smartphone in restaurants, supermarkets, and other establishments as entertainment distractions from other activities. It becomes the ultimate babysitter. I am not a fan, especially in a restaurant where I restrict use of these devices. The dining table is for conversation and social interaction, not for independence and anti-social behavior. It may distract the 4 year old, but it is not a good habit.
This preference for the mobile screen over the TV set is what scares cable distributors the most. If enough desired content can be found away from the cable box, consumers may no longer see the price - value of being a cable subscriber. Until cable can gain more content exclusivity, more cord cutting is destined to occur as these next generations of consumers no long value the cable box in their home.
I can also share that in my household my children seem to choose their iPhone over their iPad to view certain content. It may be because of convenience, they always carry their smartphone, or perhaps simply laziness. I'm not quite sure. But what I do see is that they prefer these devices because of content that appeals to them from sites ranging from Netflix to You Tube. That they can binge view and watch commercial-free. That they can watch the same video multiple times and they can watch where ever they decide to sit, from the stairs to the bed to the desk. It is the ultimate what you want, when you want, where you want, how you want to watch.
And while I don't personally approve, I see these parents of younger children hand off their smartphone in restaurants, supermarkets, and other establishments as entertainment distractions from other activities. It becomes the ultimate babysitter. I am not a fan, especially in a restaurant where I restrict use of these devices. The dining table is for conversation and social interaction, not for independence and anti-social behavior. It may distract the 4 year old, but it is not a good habit.
This preference for the mobile screen over the TV set is what scares cable distributors the most. If enough desired content can be found away from the cable box, consumers may no longer see the price - value of being a cable subscriber. Until cable can gain more content exclusivity, more cord cutting is destined to occur as these next generations of consumers no long value the cable box in their home.
Tuesday, July 7, 2015
Cellphones and Driving Simply Don't Mix
We have developed a Pavlovian instinct to reach for our cellphone every time we hear one ding, buzz, or beep. It may not even be our own, but we seem intent on looking, even when we are driving. And that few second distraction to look down at a screen or type a quick response can change lives forever, not just the person being hit, but the driver as well. But 20-20 hindsight will not change the result.
Our car is already loaded with screens; they seem to have replaced simple gauges to tell us more than just mph or miles driven. Songs, stations, titles, temperature, driving directions and maps. Helpful, yes. So why not put the drivers text on the same screen with an automatic response saying "Behind the wheel, will text you later" A simple elegant solution, tied to your phone that would also prevent unwarranted use. Could it help? Well given the statistics, it can only try to improve the process.
Wednesday, July 1, 2015
Apple Watch Is Part Of A Marathon Not A Sprint
The recent article in Business Insider headlines a weak demand for the first generation Apple Watch. But like any first generation product, it first attracts an early adopter before the masses descend. And the masses must see the price-value to take the next step and purchase the product. With every generation improvement in hardware and software, demand increases and sales grow. Apple has seen this across their product lines. The Apple Watch is no exception.
I did not buy an Apple Watch but I expect that it will be a future purchase in a generation or two. As it delivers more functionality, improves battery life, and demonstrates a need to own, the Apple Watch will gain more customers. As one analyst states, "Even if the watch is a flop, it doesn't matter. The iPhone is killing it for Apple, and that's how the company makes money. Any sales of the watch are a nice bonus. It's possible the watch just isn't going to be a major product, at least not right away. It may take years of refinement before it really breaks out." I believe that the latter is a more likely outcome.
While the meat of Apple is their iPhone product, the connectivity that they create across all their product lines is what turns a consumer into an Apple household. The iPhone plays best with an iMac, an iPad, and even the iPod. The connective tissue remains iTunes and the iCloud, syncing and sharing content across devices. Phone calls, iMessages, photos, music, videos, calendar info, etc.; you name it, they share it. The Apple Watch is just one more connection to the fiber of the household.
As to what is next for Apple, the release of Apple Music is step one of another revenue stream of music subscription services. A new Apple TV box would mean the next opportunity for a video streaming service. And of course new generations and new sizes of the iPhone and iPad. And when we look back at the Apple Watch product line in 5 years, we may not even recognize what it has become. There was once a time when a computer was seen as simply a better typewriter in the home. Not anymore.
I did not buy an Apple Watch but I expect that it will be a future purchase in a generation or two. As it delivers more functionality, improves battery life, and demonstrates a need to own, the Apple Watch will gain more customers. As one analyst states, "Even if the watch is a flop, it doesn't matter. The iPhone is killing it for Apple, and that's how the company makes money. Any sales of the watch are a nice bonus. It's possible the watch just isn't going to be a major product, at least not right away. It may take years of refinement before it really breaks out." I believe that the latter is a more likely outcome.
While the meat of Apple is their iPhone product, the connectivity that they create across all their product lines is what turns a consumer into an Apple household. The iPhone plays best with an iMac, an iPad, and even the iPod. The connective tissue remains iTunes and the iCloud, syncing and sharing content across devices. Phone calls, iMessages, photos, music, videos, calendar info, etc.; you name it, they share it. The Apple Watch is just one more connection to the fiber of the household.
As to what is next for Apple, the release of Apple Music is step one of another revenue stream of music subscription services. A new Apple TV box would mean the next opportunity for a video streaming service. And of course new generations and new sizes of the iPhone and iPad. And when we look back at the Apple Watch product line in 5 years, we may not even recognize what it has become. There was once a time when a computer was seen as simply a better typewriter in the home. Not anymore.
Tuesday, June 30, 2015
Apple Should Expand Its Streaming Business
The big news on Apple the last couple of weeks was the Taylor Swift fiasco that turned quickly into a marketing bonanza. From chastising Apple on refusing to pay artists during their three month free preview to gaining her content on the Apple Music Service. Not on Spotify or Pandora, Swift agreed to stream her music with Apple. And Apple's introduction into the monthly music streaming business will provide them with another ongoing revenue stream, month after month after month.
Apple will get a taste of what the cable industry has enjoyed for years, a regular, measurable, monthly stream of revenue. And I believe that once Apple starts to see the trickle of dollars explode into a sustainable business, they will start to expand this corner of the business. That means that Apple TV will be released with an OTT line-up of video content to compete against other video subscription services. Of course, if Apple chooses, they have the free cash to just buy an existing business. Should Apple start pursuing Netflix or Hulu? Perhaps partner with Sony to grow their Playstation Vue service or with Dish and their Sling TV subscription service? Or as it may appear, simply build a video OTT subscription service from scratch.
The allure of subscription revenue is surpassing purchase and download. Consumers seem to like the connect and access model for receiving content. And as more consumers access mobile to connect, the cellular companies especially enjoy watching data plan usage soar and revenues rise. And as consumers, we pay twice, once for our monthly subscription and second to pay for more data usage.
Apple will get a taste of what the cable industry has enjoyed for years, a regular, measurable, monthly stream of revenue. And I believe that once Apple starts to see the trickle of dollars explode into a sustainable business, they will start to expand this corner of the business. That means that Apple TV will be released with an OTT line-up of video content to compete against other video subscription services. Of course, if Apple chooses, they have the free cash to just buy an existing business. Should Apple start pursuing Netflix or Hulu? Perhaps partner with Sony to grow their Playstation Vue service or with Dish and their Sling TV subscription service? Or as it may appear, simply build a video OTT subscription service from scratch.
The allure of subscription revenue is surpassing purchase and download. Consumers seem to like the connect and access model for receiving content. And as more consumers access mobile to connect, the cellular companies especially enjoy watching data plan usage soar and revenues rise. And as consumers, we pay twice, once for our monthly subscription and second to pay for more data usage.
Friday, June 26, 2015
Approval Expected For AT&T - DirecTv Merger
According to reports, the FCC will be approving the merger of AT&T and DirecTv sometime next week. While it has been more than a year since its announcement, the need for the FCC to first address the Comcast bid for Time Warner Cable likely was a factor in moving forward with this acquisition. Still, little seems to be in the way for a new AT&T/DirecTv to begin.
Certainly next on the FCC plate is Charter's bid for Time Warner Cable. Unlike the issues surrounding Comcast, the FCC is also likely to approve this deal, too. Many don't expect final approval for Charter and TWC till year end if not early 2016. Once completed, the big three of Comcast, Charter, and AT&T will dominate the cable distribution industry. And then we can watch to see what happens to Dish Network, Cablevision, Cox, FIOS, and the other players.
Certainly next on the FCC plate is Charter's bid for Time Warner Cable. Unlike the issues surrounding Comcast, the FCC is also likely to approve this deal, too. Many don't expect final approval for Charter and TWC till year end if not early 2016. Once completed, the big three of Comcast, Charter, and AT&T will dominate the cable distribution industry. And then we can watch to see what happens to Dish Network, Cablevision, Cox, FIOS, and the other players.
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