If Content is Sold Everywhere and Anywhere, Does It Become A Commodity?

Content deals are everywhere with sales to cable, Hulu, Netflix, Tivo, Apple,and others. Then it is repackaged and offered to the consumers. To compete in the mobile space, cable has now pushed its on demand extension onto iPads and iPhones. And as a consumer, we can decide where we want to watch our Spongebob episode, whether on TV, on our computer, on our tablet, or on our smartphone. With sales across all platforms and all devices, all this video content is becoming ubiquitous. Soon it could be at a tipping point where the content itself is viewed by the consumer as a commodity. With no exclusivity or other distinguishing differences, the consumer will make decisions on how to watch on a pricing basis. The cheapest viewing platform wins.

Could that hurt the cable model as content owners sell to mobile devices? The cable model is certainly not the cheapest and the threat of cord cutting already exists. Do these content deals simply increase the threat of more lost subscribers? For viewers, the concept of content everywhere and anywhere is appealing. For content platforms, like cable, it means figuring out new strategies to maintain a differentiated value to offset the content commodity issue.

Content creators are pursuing more platform deals to raise revenue. Distributors will find competition become more fierce. Over time, the big fish will swallow the smaller fish and the distribution choices will get smaller. It is the pattern of every industry and already at play strictly within the cable industry. It is the industry and product life cycles at play. With ultimately the many leading to the few.

Two Screens Are Better Than One

Count me in the majority, I look at my smartphone when I am watching TV. "About 70% of tablet owners and 68% of smartphone owners said they use their devices while watching television, according to Nielsen’s mobile connected device report for the first quarter of 2011". And I suspect this percentage will only continue to grow. What are we doing with our devices while concurrently watching TV. For me, it is to catch up on email, get scores of out-of-market baseball games, and play Words With Friends and other silly games. Commercial breaks become an obvious time to sneak a peak but I also escape to my second screen in program. The reasons seems to be that most content on TV is what I call "low involvement" programming. It requires little attention to know what is occurring and one can drop in and out of viewing the show and still feel engaged in the plot. On the other hand, "high involvement" programming requires more attentiveness to remain engaged in the on-screen plot. Losing focus causes the viewer to feel lost in what may have transpired on the screen. For these types of programs, less 2 screen viewing would seem to occur.

Would viewers want to engage with the TV program on their smartphone or tablet? I see a fit with those who want that water cooler social approach during the show. Others may simply want related content pertaining to on-screen action on their handheld device. For now, the second screen provides unrelated content to the TV screen, but still of interest to the user. For the moment, we are building a comfort level with a 2 screen viewing approach and I doubt that will ever diminish.

Nook Nabs Niche

Ok, not quite a niche, but the Barnes and Noble Color Nook seems to have caught the eye of the female demographic. Whether a purposeful strategic approach or not, the Nook seems to have drawn in a far larger skewing female audience. "On the surface, the reason for the strong performance of female-oriented publications on the Nook is relatively straightforward. Generically speaking, the iPad and other tablets are men's toys, while the Nook Color and other e-readers are more popular with women. According to data from Forrester Research, 56 percent of tablet owners are male, while 55 percent of e-reader owners are female." Is this because of a technological need or a content one?

Certainly, Barnes & Noble's marketing push has aimed squarely at the female audience to start. "And Barnes & Noble has marketed the $249 Nook Color toward females. Ads show women and girls reading it in various states of relaxation and repose: at the beach, in bed, on the couch." Executives at B&N have also been more collaborative with magazine publishers, with both the negotiation of the pricing model and with the actual production to get the print repurposed to digital. They recognized that content was needed to make the devices more valuable to its audience. More female magazines, more female readers, more female Nook purchasers.

It seems where the Apple iPad has excelled has been in mobile web application. But with printed content, the e-book readers have been excelling. Also too, Apple has been slower to approving subscription models for its iPad then the Nook or Kindle has been for their devices. Consequently, female readers have flocked to e-books to get book and magazine content in a digital form while male web users have flocked to the iPad. If we consider that all of these devices are still in their early acceptance stages, once content availability becomes ubiquitous across all devices, so should the percentages of male and female users also split evenly across all these same devices.

At that point, will consumers feel the need to own both devices or will the preference be to have tablets and e-readers start to look and work more like the other? For now, each is defining it's space and having a successful time doing it. And that may mean we own both a table and a e-book reader.

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.