For Consuming Content, Its All About The Pipe

Great article in Gigaom, entitled The Future of TV isn't TV, that should be must reading.  As far as consumers are concerned, its no longer about TV consumption, whether broadcast or cable, it is about their broadband and wireless access.  Ask any cable home that subscribes to the triple play of cable, data, and phone, and ask them which service is most valuable to them, the vast majority will point to their data or broadband connection.  The cable can go out and the TV can't get your favorite show; there will be grumbling till it is fixed.  But lose your broadband or wireless connection, and you can probably hear the yelling and screaming coming from the home.  Broadband is the most important product for the home.

The challenge as it faces government oversight is the same battle that has been around for years and years.  It is the intersection between content and distribution and whether these two businesses should have a common owner.  This discussion first came to head when movie studios had hard times getting their movies onto screens in local communities.  Studios that owned movie houses wouldn't let competing studios distribute their movies.  It became a legal antitrust battle that resulted in studios divesting themselves of theaters.

Today we have distribution companies also owning content.  Net neutrality laws tried to prevent distribution companies from showing favoritism to their content while slowing down the streaming of others.  It seems that antitrust permeates today new world of content and distribution.  "The two are now intertwined, so from a regulatory perspective the fight will now be about who holds the power in terms of relationships with consumers and in terms of their relationships with content companies." The author asks great questions to get to the heart of the battle and how to best serve consumer interests.  How much or little regulation we need is a political battle.  Some argue that a free economy and encouraging technological innovation will lead to solutions; others, that regulation is needed to protect its constituents.

The TV model has changed to a broadband one and content is being delivered to fill the demand.  How its distribution is enable, slowed down, or even denied, is what raises question for both sides of the problem.

Apple: Profit Taking Or Future Profit

The faster the ascent, the harder they fall; so seems to be the case recently with Apple and its stock price.  With its earnings call looming this evening, the stock price has dropped quickly.  Can Apple keep its momentum, how many more iPhones can they sell, and what is next in the pipeline? We should get some of those answers soon enough.   But unlike the internet bubble, Apple manufactures actual products, sells digital content and has a world to conquer.  One quarter may be slow...

But, the future for Apple remains bright.  I believe in the market predictors that see Apple's price rising to $800 or higher.  It is not just one product but the whole package they offer that causes customers to start with one Apple product and end up buying more.  Happy with your iPhone, buy an iPad.  Love your iPad, buy a Mac to replace your PC.  Love your Mac, buy an Apple TV.  And with multiple devices in the home, let the iCloud and purchases from your iTunes account bring content to each device.

So bring on the financials. At the end of the year when the next gen iPhone and other products are announced, Apple will once again be the technical and media darling of Wall Street.
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Post announcement - Another record quarter and Apple again delivers.  Looks like after close market has stock bouncing back.

Netflix Not Growing Fast Enough For Some

All companies seem to suffer from the same problem, the classic bell curve.  In its youth, the growth curve is steep; in its maturity, the growth slows and then declines.  For those companies that can spot the next new product or service, new growth emerges as company strategies shift.  Apple has found new growth with the introduction of new and improved product lines; Netflix has attempted to grow with its move from DVD to streaming business.  But for these and other companies, the question that shareholders and the stock market always ask is what will you do for me next?

In the world of media, Netflix's streaming business has grown to a size comparable to Comcast's cable subscription business.  At almost 25 million customers paying $9 or more a month, Netflix is not constrained by franchise or continent.  "The company is racing to add viewers to confront competition from Comcast Corp. (CMCSA)’s StreamPix and Verizon Communication Inc. (VZ)’s online venture with Coinstar Inc. (CSTR)’s Redbox. While Netflix may post a second-quarter profit, investors are focused on subscriber additions."  And there it is, that same question, what are you going to do next, where are you getting more customers.

While I don't own a position in Netflix, I do see that they have an advantage to others; they can operate internationally.  With content rights, they can go everywhere.  Streaming also enables a second stream of advertising revenue.  And a potential to push into e-commerce and other revenue programs.  Eventually subscriber growth has to stall, it is inevitable; the challenge is finding other revenue models and other businesses that start new growth trends.

Is NimbleTV The Next Generation Slingbox For TV Everywhere

There's a new service being talked about that could bring true TV Everywhere to the consumer, across any device, and without a set top box.  The service, NimbleTV, says on its website that they work with both content providers and content producers to accomplish that task.  To me, that means that the cost of the service is an additional fee to take your cable, satellite, or telco line-up and access it from the cloud.

In today's New York Times, NimbleTV is the next generation of Slingbox, as labeled by its former executive, Jason Hirschhorn.  "NimbleTV says it has the same functionality as a Slingbox and DVR, but without the actual boxes". But will the content distributors and producers accept this use of their product without some incremental payoff.  And like anything, those costs will only increase the total costs for content to the consumer.

Consumers do want TV Everywhere; they want the flexibility, the variety, and the access, so that content follows them and not the other way around.  But what they don't want is the cost.  Consumers are seeking ways to lower their bills, not raise them.  It is why consumers are flocking to You Tube, Netflix, and Hulu as lower cost alternatives that also give them mobility.  For those currently subscribing to cable, they want the added value of TV Everywhere, but not the added costs.  For them, their cable bill needs more value attached to it to accept the high costs of their cable bills.  Higher rates will only cause further cord cutting to these OTT alternatives.

Can NimbleTV find success?  If embraced by cable operators and networks, yes; but as they have yet to embrace Slingbox, I doubt they will find this next player a friend either.

Cablevision Brings Linear TV To The iPad And More

Untethered, but still required to be inside the home, Cablevision subscribers can now watch their linear TV without a set top box or big screen TV.  With an iPad, iPod, iPhone, laptop, or PC, the TV experience can now be watched in any room in the house.  Multichannel states "To use the software, a customer must have a subscription to iO TV and a Cablevision-supplied modem. (If a customer is not an Optimum Online customer, Cablevision will provide a specialized modem that allows access to the streaming TV apps but not the Internet.)"

The limitation is obvious, access is limited to the home.  For those that don't want to string a cable line to every room in the house, this feature brings a new benefit to the subscriber.  For others, it may not be enough.  For those that want access away from the home, "Dish Network provides similar functionality through its Slingbox-enabled products."

So far the Cablevision App has been downloaded more than 1 million times, indicative of a successful first step in bringing TV Everywhere to the customer.

CW Network Leading Push Away From Traditional TV

Terrific WSJ read today about how the CW Network is risking viewership on traditional TV to embrace new media.  With content clearly aimed to a younger, technology loving audience, the CW has recognized that its future growth rests with new media.  Like others before them, the CW must risk the loss of viewers in one platform for hopefully a bigger gain and more revenue in another. It is a risk Netflix also has been dealing with as it too has moved from a mail order DVD business to a streaming model.   Knowing that their audience is embracing mobile and web platforms and dropping their reliance on a cable subscription, CW is betting heavily on the strategy of getting its content quickly onto these other platforms.

While ratings on TV have dropped since 2010, views on Hulu, Netflix, and other apps have grown.  And it appears that revenue from these "deals has helped partially offset losses that in recent years had topped $100 million a year".  Embracing new media at the expense of the old may have short term problems; still, recognizing  that the consumer  has moved to these other platforms and that they need to be accessible, is in the long run a very smart move.  Like everything else, the question that looms is timing.

Keeping one foot in the old platform while stepping forward in the new comes with many dangers.  Old technology does not want to compete with the new and seeing content available in both platforms is not well received.  Cable operators of the CW will fight back to protect their "exclusivity" of content from online.  How much is shared and how recent is the content that is on TV before it hits online will result in plenty of fights when license agreements come up for renewal.  With the CW owned by both CBS and Time Warner, a larger fight could be looming.

There Is Money in VOD

Linear TV has  taken a backseat to on demand viewing.  Except for live programming, especially sports, waiting for 8PM for prime time programming to start in order to watch is ancient history.  Now we have VOD and DVR to watch what we want, when we want.  And as more and more households have embraced this technology, the money trail has certainly followed.  "With free video on demand usage continuing to surge, Rentrak estimates the platform represents at minimum, a $1 billion advertising opportunity."  Good news for content companies seeking a ROI from these different platforms.

Of course, all this on demand viewing is not limited to the TV screen.  Consumers also want to consume this content on other devices, including laptops and tablets.  This quoted ad dollar number may be limited to the TV screen which means that their is more ad dollars at play.  And at the end of the day, if you create great content, you will find a large audience willing to consume it.  The more flexibility you offer on where it can be consumed, linear, on demand, online, the more you can monetize it.

The iPad Is A Game Changer

The iPad has changed my media consumption behavior; but then again, so did my iPhone.  For each platform, my use of my previous technology has changed.  Where I once used the laptop for social media, gaming, email, and online viewing, I now prefer the iPad or iPhone.  For me, the iPad tablet has been the second screen that has overshadowed the traditional TV; but it only replaced the laptop before it.  That the study is suggesting that tablets are "an alternative to television and to other devices for users to watch full-length TV episodes" is true.  It is lighter than the laptop, easier to hold, and possesses a great screen for personal consumption.  The TV set continues to retain its hold for family or group settings with multiple eyes watching.  A tablet won't ever replace that experience.

The iPad is a game changer  because  it does an enable a more personalized, individual experience.  Great screen for game-playing both in size and clarity, touch screen for a different type of control that a mouse can't offer, and a jaw dropping amount of content, from apps to web browser, that provides what can only be described as an infinite number of opportunities.  And yet more continue to be developed every day.

Sure, it can work for full length episodes if that is what you are seeking; for others, it may just be You Tube clips or a downloadable game.  For me, it is a perfect way to watch my out of market games on MLB.  And yes, the big screen TV may still be on and occupying a space as background noise and the occasional look up from the iPad to see what was just said.

Are iPads and other tablets a threat to the TV platform; yes and no.  Yes, if your content is only available in one form on the TV, and No if your content is accessible across multiple platforms and in multiple forms.  The synergy of a full length show with previous seasons online and social networking and gaming connected to the video can make for a more valuable experience.  But for those that occupy their space in one platform as a one trick pony, online is a threat.  But it has been a threat long before tablets came along to overtake the laptop.  If this study has just discovered this trend now, then they are frankly too late.

Consumers Want A La Carte Programming So They Can Pay Less

Why the threat of cord cutting?  It is because consumers have grown tired of watching their cost of cable explode and are seeking alternatives to a cable subscription.  Those consumers in markets with telco overbuilders like to play the game of switching, or at least threatening to switch, in order to get discount pricing from their cable operator.  Others, according to the latest survey, would rather pay just for the channels they watch.

"U.S. consumers would overwhelmingly prefer to pay for just 19 TV channels at $1.50 a pop than their current multichannel packages, according to a new survey.  RBC Capital Markets found that 92% of over 1,000 respondents are interested in a a la carte TV offering that would cost them far less than the $84 they pay for access to at least 91 channels on average."  Unfortunately, a number of the notable networks would want much more than a $1.50 for their service.  And cable operators don't have the ability to unbundle networks and sell individually because of contractual issues.  Most networks require that they be offered to the largest group of customers and that their reach exceeds 90% of total homes that subscribe.  In today's marketplace, a la carte offerings by a cable operator are not realistically possible.

So consumers seek other alternative means to watch programs that they want at a price point that they are willing to pay.  Hulu just announced that their premium subscription service, priced at just $8 a month, already has over 2 million subscribers.  Netflix is offering its own low priced streaming service as well.  What percentage of these customers are also cable subscribers was not released; it would be interesting to learn if these customers are cord cutters or not.  Are these services complementary to cable or indeed upstarts?

Consumers may want to find alternatives to their cable subscription or they may simply want to complain and won't really act to cut that cord.  A la carte sounds like an ideal solution but it won't happen in the current cable operator model.