Another Brick & Mortar To Bite The Dust

Big box stores are having tough times. We have seen the close of many retail chains including Circuit City, Linens'n Things, Office Depot, and now Borders Book Stores. "Borders’ defeat marks the beginning of a new era, where online book sales and digital downloads for e-readers dominate the market." But is technological change the only reason for their demise? While these "stores" have closed, their competitors continue to do business. Best Buy, Bed Bath & Beyond, Staples, and Barnes & Noble are still here.

All businesses must adapt to changing conditions, both internal and external forces. Technological change did not only affect big box stores. AOL has suffered because they too couldn't adapt to changing conditions. Borders could have survived if they had recognized early enough that their business was changing. Barnes & Noble took that chance, by building an e-reader, the Nook,and learning to compete in the online space. There next challenge is how to better integrate online and big box into a successful business strategy. Different merchandising, in-store deals with Nook owners, etc.

The future of big box, brick and mortar stores should not be at risk, but they need to integrate online and offline shopping with better marketing. And perhaps too, a level playing field might be helpful, where goods are subject to tax, even when purchased online. That seems a battle that Amazon and others will eventually lose. Consumers like to shop both at stores and on their computers, they like value, and they like service. Successful retailers will figure out how to adapt and integrate for a better online and offline shopping experience.

Will The Rupert Murdoch Empire Crumble

Certainly the media world is all over the hacking charges, the closure of News Of The World, the resignations of top officials, and now the resignation inside Scotland Yard. So one has to question, can we say with "certitude" that this has reached the pinnacle or will more bad news follow.

If it is uncovered that hacking of phones also occurred in the USA, which won't be surprising, then the answer is obviously no. But what does it mean for the Murdoch empire? With NOTW out of business, will other Murdoch properties also get undone. Are the future of The Wall Street Journal and Fox News (and News Corporation) also in the cross hairs?

"Founder Rupert Murdoch, 80, has long expressed a wish to hand his publicly traded News Corp. to his offspring, and he retains the voting power to make key decisions. But shareholders and board members are said to be troubled by revelations of wrongdoing on Murdoch's watch, and feel the U.S.-based company needs fresh leadership." How much change will happen and how quickly? Will it be simply a management change or something far worse? Not that they will close, but will Murdoch be forced to sell off his empire in order to survive? The empire is in disarray and that could open them up to an uprising or an attack from another land. John Malone and Liberty Media, are you dressing for war?

TV Everywhere Gaining Traction With Cable Operators

First it was about live streaming of TV networks inside the home, on untethered devices. With it came contract breakdowns, lawsuits, and limitations. But some networks found a value added opportunity. HBO built an app, HBO Go that when authenticated by your cable operator, enabled viewers to watch HBO movies, series, and specials on demand. And that was a good start.

But viewers want their TV anywhere and everywhere. The challenge to watch a live broadcast outside the home concerned programmers because they can't measure viewership. "Others are concerned that new devices, such as tablet computers, aren't included in Nielsen Co.'s TV ratings, which are used to set advertising rates. Some channels also lack Web rights to some of their programming." And some programmers are trying to renegotiate their license fees with operators for additional rights outside the home.

Well the needle keeps moving forward and Turner is taking the plunge with two of its networks, CNN, and Headline News (HN). "It will be available at launch through six pay-TV providers, with a total of about 50 million subscribers, according to SNL Kagan. But it isn't available through Time Warner Cable Inc., the country's No. 2 cable operator by video subscribers." Ironic given that Turner was once part of the Time Warner Cable family before they split into two separate companies, TWC and TWX, last year.

While news networks like CNN control almost their entire content, many other networks' content deals are far different. Their rights or windows may not allow them on demand or streaming. A web stream of their live channel will require networks to go back to all their content deals and renegotiate for those rights as well. So while it may be easy to stream CNN, TNT and TBS may be far tougher networks to offer streaming rights.

Regardless, mobile viewing and out of home access will be the next push by cable operators to retain and grow their cable subscription base. Live TV streaming to authenticated cable subscribers is a great first step in a changing entertainment landscape.

Lower Cost Tablets Should Spell More Customers

In the age of competition, there are two classic marketing approaches - product differentiation and lowest cost. Each work and the consumer is left to decide the price/value proposition. Apple has led the revolution with a highly differentiated, higher priced iPad tablet, and competitors are coming out of the woodwork with their versions. From Toshiba, Rim, Samsung, and others have come competitive touch pad products. From Nook and Kindle first came the e-reader tablet and most recently from Nook a color tablet.

So now it is Amazon and Kindle's turn to release it's color, touch pad model. "According to a source who 'works with Amazon,' the company is keeping the tablet’s price low by building it 'with the bare necessities inside' (no built-in camera, limited memory). Another unidentified source, an Amazon executive with close ties to CEO Jeff Bezos, says Bezos decided last year that Amazon’s tablet would compete with the iPad on price—both of the device itself, and of the 3G connectivity." And also too with Barnes and Noble who's color Nook beat Kindle in sales volume in the first quarter of this year.

So an influx of competitors and low cost competition indicates to me that the tablet acceptance by consumers also leads to more need for content. Web access is nice, so too for video access to TV shows and movies, but the tablet size is most ideal for the consumption of newspapers and magazines. Color tablets reflect the look of the glossy publication and the interactivity that can come with the download of each issue enables a more robust and enjoyable reading experience. It also allows editorial to remain relevant, especially as consumers demand grows for updates, moment by moment. Lastly, it is the ideal platform for the convergence of all types of content, print, audio, video, all connected and interactively accessed.

Tablet growth is zooming and if content is indeed king, so too will subscription based programming opportunities. The content can't all be free and while micro-payments are nice, content companies need longer relationships with their customers, ones that works best in a subscription model. Tablets are leaving the plane of early adopters and reaching for mass appeal. Content companies should also be ready.

Netflix Knows What They Are Doing With Price Hike

If you are questioning why Netflix chose to execute a hefty price increase, don't think that this is another New Coke moment. Netflix knows exactly what they are doing and that there were going to be short term repercussions. Some subscribers will drop the service and others will downgrade. But the future for Netflix is not as a mailer of DVDs; no, it is to be a streaming media network. It is why the management structure has also changed to operate these two businesses more independently.

Notice that Netflix quickly announced a new deal with NBC for streaming content. "NBC Universal has renewed its deal with Netflix Inc., ensuring that programs such as "The Office" and "30 Rock" stay available on the popular service as it comes under pressure to pay more for its content and catches flack for a price hike." I suspect more announcements will follow.

And Wall Street seems to think that a price hike, despite a drop in subscribers, will not hurt Netflix. The physical costs of insertion of disks into envelopes and the high mailing costs certainly hurt the profitability; streaming involves far lower operating costs and thus a better margin. And given the consumers appetite for more, more content to view, those savings can help drive additional NBC-like deals. Remember too that Netflix is getting into the original content game as well, using the HBO/Starz/Showtime approach to differentiate itself from other content providers.

Netflix is proving itself a forward thinking company, willing to take short term risks to maintain a leadership position. It is ultimately a growth move to drive more investment and marketing to this mobile, online marketplace. Physical DVDs are past, streaming is the present and future.

Will Netflix Hurt Itself and Slow Down Cord Cutting?

Have you mailed a letter lately? Are you emailing birthday cards instead of mailing them? Do you think $0.44 for a stamp seems like a crime? Well Netflix seems to want to move it's customer base away from mailings as well and to a streaming only model. That was the strategic decision a couple years ago when a streaming strategy was deployed and a change in the pricing model is only a next step in pushing consumers to wholly embrace streaming only. Why else insist on raising monthly membership fees by 60%.

"Netflix shared the news in a blog yesterday, explaining, 'We are separating unlimited DVDs by mail and unlimited streaming into separate plans to better reflect the costs of each.'" In addition, they are separating out the management teams into two silos, ultimately to grow one business while managing the maturity and downfall of the other.

And while there is initial outrage, the younger consumer has been more focused on streaming only anyway. It is their older customer who has been still using mailed DVDs. The Netflix move is to gear itself more toward that next generation consumer. But Netflix must also bolster its library of streamed products to remain competitive. Complaints abound that newer films aren't available for streaming and the library of product still pales against cables' on demand library.

But it is that $8 streaming price point, far cheaper than cable, that still will factor into cable cord cutting. Netflix will grow its library and compete effectively against cable. Customers will complain about the increases; some will downgrade service, others will still pay it. Netflix has a future strategy and it is clear that this move is short term pain for their long term gain.

Apple's Fourth Screen, the HDTV?

Terrific article today in AllthingsD.com on speculation that Apple will manufacture and sell Hi Def TV sets. "At $328 billion, Apple’s market capitalization is the second largest among U.S. companies. How much higher can it go? Plenty — particularly if the company launches that Internet-connected HDTV it’s rumored to be developing." An Apple TV set would stand with the Mac, Ipad and iPhone as a fourth screen for the consumer. The key, as the article notes, is differentiation. Unlike the other devices, an Apple HDTV set would have to manage TV viewing in a whole new way. And it is hard to imagine a big screen set with touchpad technology, so important in the other three devices.

What I would love to see from Apple is more of their Airplay and cloud technology incorporated behind the TV set enabling any TV to easily share content from numerous sources, the mac with iPhoto slide shows or iMovie videos, from the iPhone with recently taken pictures, or from the cloud with iTune theatrical movies and TV shows. Some might call that the essence of the Apple TV. Where Apple excels is the simplicity of connection, the easy of use, and the mobility across devices. Why build a TV set when so many other manufacturers are already selling at many different price points.

The article contends that the lack of cord cutting may make an Apple HDTV a non issue. I believe that more innovation and marketing of the AppleTV, currently available, is the connection Apple needs to own the fourth screen and the home.

Foursquare Adding New Partnerships

In a move that seems to have great appeal but little profit, Foursquare is partnering with Groupon, Living Social, and Gilt to provide daily discounts to costumers who check in at certain stores. "Through these accounts, merchants are able to deliver specials, including discounts and freebies, to users who check in at their locations." For a Foursquare user who "checks in", these surprise savings are sure to please. But as a marketing tool, I question the motive.

Coupons and deals are meant to drive consumers, some not previously planning to shop, to stores to take advantage of a special program. It seems to not make sense for the merchant to provide a savings to a customer already in the store, when other marketing tactics are available to drive purchase behavior, without resorting to discounting. Hopefully there is more to this program than meets the idea.

I could imagine when you open Foursquare you might be instructed to first check out the deals and that might then encourage you to travel to the store to take advantage of the discount. It might prioritize discounts based on location so that the nearer ones are highlighted first. Merchants might pay for better positioning and Foursquare would highlight them first, similar to a Google or Indeed listing. "Foursquare recently passed the 10 million user milestone." And that base could be useful for geographic marketing.

DirecTV's Theatrical Movie VOD Test Not Appealing

Movie houses were in an uproar that their theatrical business was once again being impacted with a shrinking window and a theatrical VOD push. But at a hefty price tag to view a movie at home, consumers seemed to balk. "Initial consumer response has been tepid to an experiment by four studios that signed up with DirecTV to offer movie rentals at home for $30 as little as 60 days after theatrical release, executives from three of those studios acknowledged privately because they were not authorized to speak on the record." Will this test continue, probably. Other price points will be tested and theatrical windows pushed again.

Mostly, I think the issue is timing. Given the bad economy, $30 can be a lot to spend. And when folks need to get away from their troubles, they can spend a little less and get to watch these same films in a better theater experience. And since these titles being tested are available almost everywhere, it is just as easy to travel than watch at home. For smaller, independent titles, that are in limited release, the idea of a theatrical VOD film being made available is much more desirable. When films are only seen in major cities, the rest of the country can only wait. For those kinds of titles, theatrical VOD makes much more sense today.