You Can Resell An Album, But Not A Digital Album

It is Spring, whether the weather agrees or not and many use this time of year to clean out the house and sell old goods they no longer want.  For many, deals can be found in neighborhood garage and yard sales.  Some folks donate these items to "Gently Used" sales for fundraising purposes.  One could find used books, albums, and more for sale by owner.  So as the world has gone digital, we may find ourselves with digital books and music that we no longer desire and wish to purge from our system.

Unfortunately, the world of reselling goods in the physical form may not apply to those in the digital world.  "A federal judge in New York has dealt a blow to the nascent business of reselling digital goods like music and e-books, ruling that a small company’s secondary market for digital music infringes on the copyrights controlled by record companies."  Certainly, there is a physical difference in used real goods from digital ones.  Read a book and the pages get bent or torn, the cover bent or ripped.  Listen to an album and the record gets scratched or mishandled.  The notion of "used"  is something that has lost its pristine condition and is no longer untouched and perfect.  But digital copies can hardly be called used.  Usage of these items don't diminish the quality from one read or listen to another.  They remain in "perfect" condition.  And it seems that in that sense, they compete directly with original condition sales. 

"In addition to record companies, book authors have spoken out against the idea of a digital secondary market, saying that the presence of a 'used' but perfect digital copy of a book would cause prices to crash."  As the resell market is no different than the primary market, a direct competition does indeed exist.  The pricing model would be challenged as users would no doubt offer a reduced price to get back some value given the time they originally spent with the digital item.  The other fear is that while a physical item can be tracked and change hands, it is much more difficult to track that a digital copy resold does not continue to be held by the first buyer, and sold again and again and again.  And that is possibly the even bigger threat to the pricing model for the copyright owner. 

That the resale model is news reflect not only the digital world but still remains an issue in the physical space, too.  "The decision came less than two weeks after the Supreme Court upheld the first sale doctrine in the case of Kirtsaeng v. John Wiley & Sons, about a student who was importing and selling textbooks that he had bought at a lower price overseas."  And in NYC, the Yankees are fighting StubHub for reselling tickets to their baseball games at lower prices. 

Digital reselling is a new phenomenon.  In a world where "digital sharing" may be ok, digital reselling may be a no-no. 

Technology Makes Us A Nation Of Sharers

Have you liked an article or product or company recently on Facebook?  Do you share your playlists from Pandora or Spotify?  Have you assembled your Flipboard with plans to share as well?  It seems that we are becoming a nation of sharers.  As the breadth and depth of content continues to grow and overwhelm us, we begin to rely on expertise from others to help us navigate and discover new content, ideas, businesses, and more.  And we gain these recommendations from the social networks we live in.  Once there were book clubs, now there is Goodreads to recommend.  Technology has enabled us to more quickly and easily gather and share what we like to read, watch, and listen to.  And it allows us to gain recommendations and interests from our "friends" and "social networks".  How open we are to sharing is up to us; if our friends like something, we might too.  And with so much content clutter coming at us, its nice to have some guidance. 

Ad Banned As Promoting Cord Cutting

For consumers tired of paying the high costs of cable TV, broadcast networks can still be received over the air.  While homes used to get these networks with large antennas attached to their roofs, the transition to digital means that a much smaller antenna can do the same thing.  Today's generation has gotten so comfortable with cable that they may forget that these devices still exist.  The ad below is one example of how to save money by getting a digital antenna.



"Over-the-air antenna maker Antennas Direct recently wanted to buy some air time on Charter‘s cable channels to explain how TV viewers can access these channels without a pay TV subscription."  But Charter refused to take this media buy.  In addition to connecting an antenna to get local broadcast signals, customers in NY can buy broadband access to local broadcast through Aereo's streaming platform. For consumers not interested in top cable networks like AMC, Discovery, ESPN, Food Network, HGTV, Nickelodeon and others, an antenna offers a truly inexpensive, basic TV service.  And this is the worry of cable operators like Charter and others, that acknowledging these alternatives will hasten cord cutting.

But while cable operators are at risk of losing cable subscribers, they are also a key driver for broadband to the home.  Unless consumers are willing to pay for wireless access only, a broadband connection from cable or telecom company is the ideal way to get access to the web into the home.  And until these companies can build differentiation into their broadband platform, consumers will view it almost like a utility and see the product like a commodity.  And that will mean that the lowest price will win the consumers' business. 

Fox Building Another Entertainment Network

Add FXX Network to the stable of Fox Broadcast, FX Channel, and FXM Channel.  And hope you can tell them apart.  "FXX, which will replace and expand upon the current Fox Soccer Channel, will launch Sept. 2, targeting the "millennial" audience of adults ages 18 to 34."  So soccer out, general entertainment back in.  With an anticipated reach of 74 million homes, FXX will assure interest by moving over shows from the FX parent brand to the fledgling channel.  Those shows include "It's Always Sunny in Philadelphia, returning for a 10th season; The League, back for a sixth; Legit, to return for a second; and late-night series Totally Biased with W. Kamau Bell, which will expand to a five-nights-a-week talk show from its current weekly format."

These Fox Channels will be distinguished by the demographic they reach although not quite sure if anyone will notice.  Most likely the quality of the shows served will determine the value of each brand.  And given the resources of Fox, FXX will certainly get great brand engagement and awareness by the time they launch in the Fall. 

Online Content Pushing Eyeballs From Television

The brave new frontier for content is no longer cable TV; the web has been the newest ground for innovation and niche programming.  Content creators are embracing this new fertile platform.  "Filming for Web productions in L.A. rose 46% over 2011. Such content has evolved from short episodes to full-length TV productions, some with budgets comparable to conventional TV shows'." And this content is finding homes on You Tube, Netflix, AOL, Yahoo, and other online sites.  Online content is no longer about user generated content (UGC), although that still exists, but in professionally produced content meant to drive views and advertising and subscription dollars.

And the eyeballs for online content are growing as well to the point where cable operators are feeling the pressure of customers cutting their cable cord for online content only.  Original productions on Netflix and Amazon, original channels on You Tube are key drivers to audience interests.  They may start out attracting niche interests at first.  But like cable, the demand only leads to more broadly created content to attract larger, ad rated interests. 

It is the evolution in the media landscape, from radio to broadcast to cable to web that follows similar paths to becoming mainstream.  The rise in web content will not kill cable, but it will change usage patterns.  And for content creators, the growth in the web platform enables more choice and more opportunities for distribution.

Intel To Offer Pay TV Service

While many have speculated about the Apple TV with a Pay TV subscription, Intel may be farther along in talks with programmers to build a new service.  "Networks such as Time Warner’s CNN, NBC’s USA Network and Viacom’s MTV would give Intel critical mass to offer consumers an alternative to established pay-TV services. Using its own set-top box, Intel plans to offer an online product this year, Erik Huggers, Intel’s vice president for media, said last month. That would represent new competition for incumbent operators like Comcast Corp. (CMCSA) and DirecTV. (DTV)."  And working from scratch, Intel could avoid the problems plaguing these current distributors, by not offering expensive networks, especially sports networks, that raise the costs and hurt the profit margin.  With less linear channels and more access to on demand programming, Intel could build a low cost, higher valued Pay TV service that would attract price conscious households.

Also of interest, Intel would offer a DVR service in the cloud, rather than stored in their set top box.   Such an approach would make it easier to offer from the outset a TV Everywhere model for access of programming on all the household's devices.  These requirements are no doubt also being negotiated with the networks.  How fast Intel can build its model and whether Apple is working furiously behind the scenes to get to market first remain to be seen.  No doubt, the consumer interest for a better viewing experience is growing.

For Sale, One Streaming Video Service

As streaming video is the backbone of an aggregated media service, the field has been attracting new entrants to the market.  of course, there is Hulu, Netflix, Vudu, Redbox, and Amazon.  HBO GO is considering a streaming model without a cable subscription.  And yesterday, Spotify announced its plans to add to its music service with video streaming. So considering the interest and growth in this platform, one set of owners wants to cash out. 

"Hulu's board has approached companies that might be interested in buying the over-the-top video provider, Reuters is reporting."  Its owners, Disney/ABC, News Corp/Fox, and Comcast/NBC, have differing ideas of the business.  Comcast/NBC has limited involvement because of its cable ownership, "News Corp. would prefer a TV Everywhere model while Disney supports an ad-supported model."  And so, once a price is agreed upon, two of the partners might just sell their shares to the third, or all three will be exiting the business.  Perhaps, a download business that Apple iTunes has enjoyed might consider buying in as a quick entrance into the streaming field. 

Of course, this release is not new news; it has been in the press for some time.  But given the growth in the industry and the insatiable demand for online video content, doesn't even partial ownership of an aggregated model offer some enhanced benefits?  Do they each believe that the consumer will hop from site to site in search for content to consume rather than prefer a platform that can search and recommend across all content?  Given that each of these partners represent multiple networks, they may think consumers will be happy searching within the parent brand, but consumers care more about the title of the content, not who presents it.  Selling Hulu might just be for them a misstep. 

HBO Without A Cable Subscription

HBO has long been regarded as a major asset to cable operators.  As a premium cable service, it charges subscribers an incremental fee above a basic cable subscription, that is then split with the cable operator.  And viewers that want HBO must first buy cable.  Cable operators like this arrangement very much. 

HBO continues to draw viewers with its mix of movies and original series.  Its shows, like Game of Thrones, gets terrific press.  But HBO has its challenges, too.  For one, there is no traditional advertising on the network.  Content is shown without commercial interruption.  So HBO must find additional revenue through resale of content via syndication and DVD.  And as we know the DVD revenue model.  HBO must also recognize that cable subscription is dropping too.  "Increasingly, consumers are dropping traditional cable packages to rely solely on subscription services like Netflix or a la carte  services like Amazon Instant Video."  Ultimately, less cable customers means less customers buying HBO.

Seeing these changes in the distribution landscape and watching as their authenticated TV Everywhere approach, HBO GO, has found value.  "HBO GO users can access content via a laptop, tablet, phone, through a gaming console, or other streaming devices. The service has 6.5 million registered users versus 29 million for HBO as a whole."  HBO may just be considering a major new disruptive revenue model.  Offering HBO GO without an HBO subscription.  Not an easy change to make.  Current contracts with cable operators may have clauses that must be dealt with. Will HBO work with its cable operators to construct such a model or go outside the wall to sell directly to over the top (OTT) companies?

As HBO is owned by Time Warner and also sells its basic cable networks like TNT and TBS to cable operators, it may be problematic to work outside the existing model.  A collaborative, partnership model makes more sense for the large company.  At the same time, the web knows no geographic boundaries.  Cable operators would have to create an online partnership, like Hulu Plus for example, to sell and OTT only subscription to channels.  Broadband has been a real game changer to cable and the rules have yet to be written.  No opportunities continue to emerge.

Follow The Disruptive Trend

According to Mark Greenberg, head of EPIX TV, "the path forward for TV is to embrace change, competition, as well as consumer choice and control in order to be relevant to new generations."  Truth be told, the entertainment industry, just like every other business, and across every environment, follows Darwinism and the evolution of change.  Eat or be eaten, adapt to survive or perish.  By following that concept, Greenberg recognizes and adheres to that understanding for survival. 

And while there may be no timetable for the pace of change in the entertainment environment, that change is evident.  We see it today as alternative, over the top platforms are taking root, and cable companies are concerned that households are moving past the cable cord for the internet to consume media.  "The mantra of the digital age has been 'adapt or die,' Greenberg said. But the real mantra should be 'disrupt or be disrupted' and now is the time to 'get back into the disruption business.'” For both content and distributors that means figuring out how to make TV Everywhere a complete solution, regardless of the device.  It also means more flexible pricing models for consumers at price points that keep customers subscribed. 

Consumers are drawn to these newer disruptive models for entertainment for a number of reasons.  One, that You Tube channels and videos are attracting niche interests.  Videos on X box games or how to instruction attract a younger demo.  Two, the online social communities, like Facebook and Twitter, can promote and recommend interesting content and enable a viral demand to view.  Three, the rise of mobile platforms, tablets and smartphones, bring the content to us, rather than making us go to a TV room to view.  And Four, the growth of over the top (OTT) devices, like Xbox, Roku, Apple TV and others bring more than just broadcast and cable networks to the TV, they bring internet access to a larger inventory of short and long form programming, on demand and at our fingertips. 

So Mark Greenberg is right, "the path forward for TV is to embrace change, competition, as well as consumer choice and control in order to be relevant to new generations."  It is a classic rule of nature as old as Charles Darwin himself.  In that struggle to survive, one must adapt to change.  As Herbert Spencer, Darwin's contemporary,  once said, it is "the survival of the fittest".