When Is Apple's Next Big Thing

Apple released its earnings last night and while all signs point to a healthy business, its stock price reflects a drop in profits and and product growth.  Despite what appears to be a solid infrastructure of software and hardware, Apple is no longer seen as innovating, merely refining its product line.  In the last decade, prior to Steve Job's death, Apple successfully introduced the iPod, the iPhone, and the iPad.  But threats of a future new product line have yet to appear.  Rumors of an Apple TV set or iWatch have yet to be announced, or any other new device; instead, we get only bigger, lighter, and cheaper.  But once you reach a tipping point of growth, it is hard to ask consumers to keep buying new devices every two years.  iPhones may achieve some of that thanks to renewal contracts that offer discounted phones, but when faced with choice some new consumers opt for an older iPhone version that can be had for a cheaper or even no cost. I believe that consumers will be less likely to update their iPads as frequently.

So Apple shareholders face a market that is lowering the stock price, despite a financially sound company delivering a strong dividend.  Apple lacks the perception of future growth and that is the fear that depresses the price.  Should Apple surprise us this year with a new product that supports our technological hunger, then this new revenue stream will re-energize the share price.  Till then, we wait and watch hoping a new product release is in the cards.

Content Is King And A Good Investment

For makers of content, the demand has never been higher.  Consumers crave content to feed their entertainment hunger, on TV, on tablets, smartphones and laptops.  Where only a few decades ago, video content was limited to broadcast and a few cable networks, today the list has expanded to include premium nets like HBO, SHO, and Starz, video on demand services, and especially the rise of streaming services from You Tube, Amazon, Netflix, Redbox, and so many more, both subscription and free to view.  

And what appears to be the secret sauce in building a successful network or online service, original content that breaks through to become valued.  Broadcasts have felt that with American Idol and other hits, premium services like HBO felt it with Sopranos, and Netflix is feeling it with House of Cards and Arrested Development.  In fact, Netflix recent earnings are subscriber growth are results of this push toward original content.   Consumers are craving more and that desire never seems to get fulfilled.  For as one series fulfills, another takes over to attract demand. Not that every piece of original content achieves such status, but it seems that accessibility of content helps to drive viewership.

Wall Street might agree.  "Corporate and private equity firms will be looking to bulk up on entertainment, driven in part by tech companies’ need for content that provides 'a level of security on prospective cash flows,' the analysis says."  Comcast paid well for NBC; Disney paid well for Lucasfilms and their Star Wars franchise.  And Netflix has seen its stock price soar as a result of its push toward more original and exclusive content.  Today Sony has announced plans to create another  network to play its library of movie content.  You Tube has its original channel and Amazon is streaming original pilots to help find their next series to produce.  And consumers can't seem to get enough.  Of course, with so much new content being produced, the challenge to find the best gets more difficult.  Breaking through the clutter to be discoverable will take on a rising challenge for all these companies in the content creation and distribution space. 

CBS For Sale?

Broadcast is big business.  Comcast completed its full ownership of NBC from General Electric earlier this year, while Disney acquired ABC many years ago from CapCities.  Now comes word that CBS, part of Sumner Redstone's empire could be for sale with the likely buyer being Time Warner, Inc.  "Gabelli & Co. said buying the most-watched broadcast network would give Time Warner, owner of cable channels such as CNN and TNT, more negotiating leverage to win higher fees from pay-television systems that carry its programming."  In a world of aggregating and leveraging content to aid license deals, such a move makes sense.  Why Viacom split from CBS in the first place was always a head scratcher.  Could Viacom become another takeover target?

In the recent NCAA Basketball Championship, CBS and Turner (a division of TW) seemed to work quite well together, promoting each other's games.  Having a broadcast partner in CBS would bring great internal partnerships.  "Their strengths are complementary -- Time Warner runs Hollywood’s most-prolific studio and CBS has the highest broadcast TV ratings -- and both plan asset sales to focus on those areas."  Whether Sumner is ready to let go of CBS, like Ted Turner did many years ago when he sold his Turner empire to TW, remains to be seen.  But the timing seems right for both parties to come together.

Streaming Subscriptions Embraced By Higher Income Households

Perhaps not all streaming subscriptions lead to cord cutting.  it might just be that in some households, cable subscriptions and streaming subscriptions like Netflix, Hulu Plus, Redbox, Amazon Prime, and others can live side by side.  While the Nielsen research cited doesn't delve into that question, it suggests that price may not be an issue when it comes to getting access to more content choices.  "Homes with incomes of over $100,000 made up 37% of all U.S. homes with a streaming subscription service and were 85% more likely to subscribe than the general population."  The study also cites that "Homes with tablets also significantly over index and are 66% more likely to have the services."  It might be reasonable to suggest that higher income households are more likely to own tablets, perhaps even higher number of tablets in their home than lower income homes.  The demand for content to play on these devices might then lead to these same households purchasing more streaming subscriptions to satisfy that need.

For lower income households, cord cutting and cord shaving might indeed lead to streaming subscriptions replacing their cable subscriptions, not augmenting their selection.  The rise of tablets in the home will certainly continue to impact this these studies and perhaps further distinguish the haves from the have nots.  At the end of the day, income will still be a key decider in whether households take both cable and streaming subscriptions or ends up dropping one service for another.

Comcast Can Compete In The TV Everywhere World

Comcast's "Watchathon Week"  successfully demonstrated that consumers like to access their programming on demand, both on and away from the TV screen.  "The Watchathon, which ran from March 25-31, offered more than 3,500 episodes from 30 TV networks to Xfinity TV subscribers for no extra charge, including full seasons of current shows from premium channels HBO, Showtime and Starz."   According to their report, "It set new records on the Xfinity.com/TV site and the Xfinity TV Player app for tablets and smartphones (no specific numbers were supplied)."  Because it is an added cost to subscribers, it is likely that usage of this service will drop significantly post this free trial. 

Will customers pay more to buy this service, I highly doubt; but I do believe that if Comcast offered their Xfinity on demand platform with a digital subscription for free, customers may be more willing to return to the nest and help Comcast compete more effectively against IP only competitors. It is a good step in growing out the TV Everywhere model for cable.

Amazon Adds Original Content In TV Pilots

Have you ever thought you could do a better job picking TV pilots then some executives.  Amazon has found a way to both get original content exclusively on its platform and get social media to engage in which shows should become TV series.  "Starting soon, it will debut 14 of its own TV show pilots on its website, allowing anyone from the U.S., U.K. and Germany watch them for free. The company will ask for viewer input, and hopes the comments and critiques will help decide which shows live or die."  Sounds kinda fun. 

It also works perfectly in a TV Everywhere approach, letting viewers watch these shows on the device of their choice and at the time and day they desire.  And most importantly, it lets the audience discuss and vote on what they like or don't like.  Build enough consensus and a pilot can turn into an exclusive series on Amazon.  In the meantime, it expands the content library of the service. 

Ultimately, Amazon hopes that offering these shows adds value to their Amazon Prime offering.  "Amazon has been investing heavily to convince more people to sign up for Prime, and recently paid for the exclusive online rights to a number of shows including the second season of 'Downton Abbey' and the CBS show 'Under the Dome,' which will debut this summer."  And consumers that are drawn to buying an Amazon Prime subscription tend to buy more goods on Amazon.  Amazon wins with more subscription revenue, advertising revenue, and e-commerce revenue. 

Can Aereo Kill The Broadcast Model?

Broadcasters seem up in arm about the disruptive force behind Aereo.  At its heart, it encourages cord cutting of cable for online access of broadcast signals.  "The start-up Aereo has been at the center of a storm in recent months because its technology threatens to blow-up the existing model of pay TV, which is based on selling viewers a bundle of channels, that include over-the-air stations like NBC, ABC, CBS and Fox."  But is the solution to fight or adapt? I propose adapting to the consumer.

Consumers want a TV Everywhere approach at a reasonable price; some don't want all the other cable networks and are happy with access to a limited base of networks.  So why not offer to your current cable and satellite distributors an authenticated model for access online of the broadcast signal.  Revise your agreements to enable a broadcast only tier of services at a limited price point.  If the concern is that Aereo will take away paying customers, then revise your model.

At the same time, a broadcasters' responsibility is to serve the community and over the air bandwidth came with certain requirements.  If it is free to receive through over the air antennas, then why shouldn't Aereo have the same right to use and repackage for consumers.  The signal is not changed in any way.  And it encourages more broadcast viewership, enabling higher ratings and higher ad revenues.  Still,  if you want to beat Aereo, then support an authenticated stream through current distributors.   A court battle is not the answer; a marketing and technological shift is what will best help broadcasters. 

Twitter, 140 characters + Video

Twitter has discovered their secret sauce. If you plan to lead your users to water, you might as well make them drink it, too.   Their model is more than just short messages, but links to other Twitter sites to enable more advertising opportunities.  And the best way to do it is with high quality, valued content.  "Twitter Inc. is close to reaching partnerships with television networks that would bring more high-quality video content and advertising to the social site, according to people familiar with the matter." 

And video, depending on its length, can provide Twitter with multiple revenue opportunities, from pre-roll to overlays to banners and more.  What sponsored messages can't do, video links can.  And video means more time spent on the linked site.  Perfect too for mobile, both smartphones and tablets, to move Twitter users to other sites.   Most importantly, it could work to build their own aggregated platform of content, like Huffington Post, Yahoo, and other sites. What the final intention may be for Twitter has not been fully disclosed, although to me, the opportunities for them to grow are enabled with video partnerships.

My Son Has Found Defiance

While he is indeed entering adolescence, Defiance is not how he treats his parents; rather, it is a multi-media piece of entertainment that has entered our home.  Even before I knew of the TV series that premiered this week on SyFy, I knew about the game.  He pre-ordered it from Amazon and waited patiently (and a little impatiently) for its arrival to play on X-Box.  He got an early chance to play an online version before its arrival too.  And he was clear that we needed to record the series for his viewing pleasure.  He was hooked.

What is Defiance?  I have no idea.  I haven't watched him play it or had a chance to watch the show with him.  But I agree that it is more than just a TV show or online game.  "The game and show have been pitched as groundbreaking transmedia, thanks to how they have been designed to complement each other and build out the world of its characters. And digging into the way both elements have been created to co-exist, it’s hard to deny the potential in the approach."  To make this work takes a lot of collaboration.  Plot points must co-exist both on the TV screen and online.  For viewers and players like my son, they make for a far richer experience.  Matching game play to linear viewing may be the biggest challenge of them all.

But does it translate into greater monetization?  The game side of the business model doesn't seem to need a lot of pushing to do well.  Some game success can be equated to box office size returns.  But rating should swell if users are engaged with the online characters and buy in to them on the TV screen as well.   "That difference, according to (Syfy head of original content Mark) Stern, is by design. '[The show] is going for a broader, older demo, but [the game] is going for a younger and more male-skewed audience,' he said. 'Hopefully we’ll be able to pull more of that younger demo into our channel and push older audience into the game.'”  Building interest to the demographics is key to higher revenue returns.

Content creators are sure to watch this series and measure the value it produces.  The success of this "transmedia" approach may just foretell the future of television programming.  How well it works remains to be seen, but it may just be the beginning of more collaborative online and on-screen ventures.