Liberty Wants Barnes & Nobel

Dish goes after Blockbuster, a brick and mortar store with small piece in streaming media; now Liberty (aka Direct TV) sees value in another brick and mortar store, Barnes and Nobel, with a piece in streaming media. I sense a trend! "Put another way, Like satellite competitor Charlie Ergen, who surprised observers by acquiring Blockbuster from bankruptcy court for Dish Network, they are looking primarily at the part of the business that is growing and believe they can take advantage of the existing bricks-and-mortar business while managing a transition." And perhaps there is some synergy in owning a national chain and selling a content product.

All in all, this is a story about digital media. For both Liberty and Dish, the digital piece has the most growth potential, to help support content distribution, And for Liberty, who also has pieces in Sirius, Starz, and QVC, the book store could be of help in pushing further sales and marketing efforts. A good synergistic opportunity.

Will Liberty's offer be accepted and are their any regulator concerns to overcome? Heck if Comcast can get NBCU, then it seems like nothing should stop it, except for a rejection by B&N shareholders. A Liberty merger though seems like a smart move and a good thing for both parties. Of course a rejection will only take B&N closer to Border's DOA world.

Digital Books Beating Print Book Sales

The future of reading is digital. Not that printed books will vanish, just that folks may be particular about what books they want in printed form and what they want in digital. As consumers, we have become more and more enamored with digital technology and more and more comfortable reading on digital screens. And Amazon's Kindle has been one device that has thrived in this changing landscape. "Since April 1, for every 100 print books Amazon.com has sold, it has sold 105 Kindle books. This includes sales of hardcover and paperback books by Amazon where there is no Kindle edition. Free Kindle books are excluded and if included would make the number even higher." Is this 2 month worth of data trend or aberration; the sample size may be small but that shouldn't take away from a clear movement toward digital reading.

E-book readers and tablets are still considered early adopter products. Their costs continue to drop and demand for these products continue to rise. That lends itself to further increases in digital content consumption. In addition, more and more print content companies are distributing content in digital form. "More than 175,000 books have been added to the Kindle Store in just the last 5 months." Impressive numbers and spectacular growth.

In addition to the Kindle, Barnes and Noble's Nook also seems to have strong attraction. With rumors of a new, lower priced model scheduled to be released shortly, the Nook will attract more users. It's color model has also proved a hit and even a possible iPad competitor. And other e-readers and tablets will further push the demand for digital reading - for books, newspapers, and magazines. In a world where consumers are no longer patient for the paper to be delivered or the magazine to arrive in the mail or to go to the bookstore, digital content offers faster and easier distribution, more flexibility, and hopefully, more value.

DVRs Are Saving TV Shows

As I and others have written, the DVR is actually good for TV viewing, cable subscription and ad revenue. Consumers have been wanting more control of their viewing and prefer to watch what they want, when they want. It is what has made both the DVR and on demand an indispensable part of the TV experience. And consumers utilize that experience, enjoying the sit back nature of the big screen TV. DVRs offer the flexibility of watching when it is convenient to the viewer and not to the schedule. And brings in viewers that might not have sampled the show when it was on live. "On Monday NBC, renewed 'Parenthood' and Fox renewed 'Fringe,' but not on the strength of the shows ratings when they first air. The crucial factor for both these shows was the viewers they drew on DVR over the week after they debuted. When accounting for a week of DVR, ratings for both shows spiked more than 40 percent. This sends a message to the networks that the shows have broad reach and the potential to really take off." And in most cases, viewers are still watching the ads, even on DVR.

Still, as this week's upfronts have shown, the networks have done a good bit of bloodletting, dropping freshman shows left and right. Not that any of these shows were great, but the challenge is to find the ones that have the potential to be great. Both "Cheers" and "Seinfeld" were ratings losers in their first year(s), but some executive believed in them and let them continue. The result, two long running, successful sitcoms. With so much competition from cable and the web, shows need more support and better marketing to help them break through the clutter. The DVR can offer proof that viewers who save them for later viewing have a real interest in them. So congrats to the DVR, you went from being feared by the programmers to being hailed the hero.

Netflix Leads Bandwidth Usage

The concern regarding the rise in bandwidth usage is real and cable operators are concerned that their broadband pipeline is getting more and more crowded, especially having sold an "all you can eat" model and not being able to capitalize on this increased usage. "In North America, Netflix streaming video accounts for 29.7% of peak downstream Internet traffic and has become the largest source of Internet traffic overall, according to a study by bandwidth-management vendor Sandvine." Netflix has even surpassed BitTorrent in streams. And from all indication, Netflix usage will only continue to grow.

Will this research only push broadband providers to move away from the open buffet to a usage based model? For cable, the fear is that the consumer will prefer the dumb pipe and cut its cord to cable's linear and on demand model to simply become the conduit for a consumer's web access. "Earlier this month AT&T adopted monthly bandwidth limits (150 Gigabytes for DSL and 250 GB for U-verse Internet customers) and will charge $10 for each additional 50 Gigabytes used." Of concern for Netflix but of much interest to other providers.

Consumer acceptance of a usage based fee will encourage other cable companies to follow. And it will take the consumer back to the days when their "long distance bills" were too high and phone usage was timed. Not a pretty site. The days of unlimited broadband may soon be numbered as streaming starts to look a lot like a utility service and we pay close attention to how many bytes we use.

The Future Of Print Is Digital

It starts to sound like a broken record, the future of print is digital. But the nature of people is to reject change, not embrace it. The visionaries can see the future and can adapt quicker to it. The result is that some companies look like leaders and others like followers.

In the world of publishing, some companies find it harder to risk the loss of print subscribers so they delay adding a digital subscription. The Wall Street Journal was quick to build a digital subscription model; The New York Times slower. And more are finally beginning to come around. A new pricing model is finally developing. "Increasingly, publishers are charging premium prices for digital content, betting on a new breed of media consumer willing to pay for content on devices such as Apple Inc.'s iPad, and throwing in print at little or no additional cost." And I suspect that subscriptions will start to rise at a healthy pace.

Even Forbes recognizes that these "digital pennies" that Jeff Zucker once laughed at brings a significant revenue. "What is the main reason for (Steve) Forbes’s confidence? He revealed that digital revenues from Forbes.com now account for 50pc of Forbes magazine’s total revenues, having successfully sold advertising at a premium rate and attracted 19 to 20 million unique visitors per month. Forbes said that the company may experiment with paywalls and micro-payments in the future as it was important to have a 'hybrid model'”.

Apple's visionary push for a tablet, the success of the iPad, and the subsequent rise of competition in this space, coupled with other mobile devices, is having a revolutionary impact on the media landscape. It is reviving mature brands and enabling new users to easily purchase and consume. Certainly, this digital age has some negative repercussions. Less print means less paper and less physical manufacturing. It also means less paper being mailed and more loss for the Post Office. Change has repercussions; there is hurt and there is gain. But it must happen. For as we know, nothing stands still and change is the only constant.

iPad Consumers Will Subscribe To Print Content

The news confirms that the iPad and other digital devices can reinvigorate the newspaper and magazine industry. Growth is definitely their as well as a huge appetite to consume content. "We are excited to report that we're getting a totally new audience in our tablet editions. At Popular Science the data has proven that 2.1% of the email addresses that we have for our iPad subscribers match active print subscribers while 2.7% match expired print subscribers. So that says to us that something on the order of 95% of the iPad subscribers are new to subscribing to Popular Science." Yes, the tablet helps to reach new subscribers. And more eyeballs will only grow advertising revenue. Good news for print publishers.

As print content owners have gotten more secure with digital rights management and as they finally see a profitable business model, their product cycle is springing back to life! Digital media enables a convergence of data, print with video and audio, into a very robust subscription service. It also leads to a quicker ad conversion rate from awareness to e-purchase. Exciting times lie ahead for print publishers ready to recapture their readers.

Digital Wallet: Your Smartphone Is Your Credit Card

Check out this article on Huffington Post, especially near the end. "Visa is also working with cell phone companies to push forward phones equipped with Near Field Communications (NFC) technology. With NFC, a smartphone does the job of a credit card, so that instead of swiping a card, the shopper would be able to wave or tap a phone when paying for a purchase. While some smartphones, like the Google Nexus S, are set to have NFC technology baked in, Visa plans to offer cases and SD cards that provide compatibility for devices built in earlier times."

Who's ready to lighten or even replace their wallet? I know I am. As the article suggests, it is probably a "generational thing" how quickly someone would be willing to eliminate their wallet completely. For my son, it would be his preference. For my Dad, absolutely not.

NY Times Web Traffic Is Down...So What

Welcome to Economics 101 and price elasticity models and its effect on demand. Add a pay structure to a free web site and traffic to that site drops. Thus is the case with The New York Times website. Clearly, a pricing model to a formerly free website would have been strategized and measured. Without it, how could a subscription price be determined. The risks are measured, the loss of subs to the ad model against the gain from subscription pricing, and a price point that at most, led to a flat impact on the revenue projections. And according to the NYT, the actual results were anticipated. "An analyst also said today that the paywall may be working. 'Our framework suggests that even if The New York Times loses 20% of its web traffic, it will need to add about 107k subscribers to break even,' Citi analyst Leo Kulp said in a note to investors." Economic theory at work!

So what is left? Smart marketing. Building value of the product to the price point charged and satisfying the subscriber so that they remain loyal users. It is harder to find a new sub, easier to retain one. Keeping the website robust and its editorial invaluable are key. The rise of tablets and mobile devices and the demand for content should bring more subscribers to join up. Consumers want to make their iPads, Kindles, and Nooks as invaluable as possible and access to a NYT daily edition online can satisfy that demand.

Transitions from one technology to another can be difficult and in the short term, financially hurtful. But look at Netflix and see how they successfully moved from DVD toward streaming while its competitor, Blockbuster, was much slower to act. The same holds true for The New York Times. The long term gains should outweigh these short term struggles. The need to change to a digital pay model is necessary and can lead to a resurgence in subscriber growth.

Is Skype A Win For Microsoft?

With Microsoft paying a lot of money to acquire Skype, one has to wonder if this is a good investment of capital or a bad one. With its signature Office product, Microsoft may believe that a full integration of Skype into its suite will have enormous value to the business community. "Microsoft is betting that Skype can help change its fortunes. Skype is a leader in Internet voice and video communications, with 170 million users each month connected for more than 100 minutes on average. In the last year or two, video use has surged, now accounting for 40 percent of Skype’s traffic."

Skype helps make international calls cheaper. Skype helps grandparents see their grandchildren long distance. And while video calling has been the dream for telecommunication for years, most younger generation users prefer texting to calling. In the business would, video conferencing can work when you are also presenting powerpoint and other materials. In those instances, software like WebEx works well. But in most interactions between buyer and seller, the anonymity of a voice only call over video chatting remains the preference. We multitask so much when we are on a call and we don't want the other person on the call to know that we are not giving them our full attention. Otherwise, we might be caught reading our emails, drinking our coffee, or chatting with the mute button on to someone else in the room.

Can Microsoft take this expensive investment and find additional revenue? "Google, like Skype, has a free Internet phone call and video messaging service. So Microsoft, analysts say, is taking a bold step to grab a leadership position instead of risking falling behind Google in a crucial market and then facing the difficult task of trying to catch up." Is this space the best place for Microsoft to make this investment? Will users pay more for the Office Suite with Skype? Hopefully Microsoft has already put together a strategy to quickly capitalize on the software and make it, like the Office Suite, invaluable for the user. Or it may become for Microsoft another bust investment.