Apple TV - Partner vs. Competitor To Cable

It has been said that if you can't beat them, join them.  In the world of OTT, companies like Google, Intel, and others are trying to create competitive platforms to compete against cable with lower subscriber costs and better functionality.  But cable operators have a tight grip on programmers with license fee deals and growing revenue, despite drops in cable subscription. 

And while it is possible to get lower rated and off the chart programmers to make deals with the OTT overbuilders, the top networks may be reluctant to lose sure cable dollars for digital pennies.  Apple may have seen their own attempts to acquire programming fruitless and now seems to be aiming toward partnership with cable operators, not competition.

"Instead of trying to create an Internet-based pay-TV service, Apple is going to attempt to turn pay-TV into another application.... (New York Times writer Brian) Stelter says Apple is talking to big distributors like Time Warner Cable about doing applications for the current Apple TV, which is a little box that gets plugged into the television."  For me ideally, that would mean that I could replace the current cable TV set top box with an Apple TV box and get all the functionality of DVR, on demand, and more in a much more improved interface.  No more tree and branch interface, rather the ability to search, scroll, select, record and using my iPad, iPhone, and iPod and watch on these devices or on my big screen TV set.  How easy and how cool!  Add to that the ability to watch authenticated programming outside the home in a TV Everywhere world. 

Consumers could rent Apple TV devices from their cable operators or easily buy and install on their own.  As an added product extension, equip these devices with a hard drive to offer DVR recording along with N-DVR option.  Along with all the other apps that an Apple TV can offer and you have built a very strong reason for consumers to stick with their cable operator too.  So I am eager to see how Apple proceeds and which cable operators embrace this technology partner. 

Aereo Still Disrupting Cable Industry

The broadcasters are unhappy with Aereo. Aereo is taking their signal and not paying them a retransmission fee or providing any data on consumer usage.  So broadcasters can't sell a higher advertising reach or receive additional revenues.  And broadcasters believe that Aereo is reselling their service to the consumer without their consent.  And in a majority ruling the federal courts have sided with Aereo. "A New York federal appeals court has denied a bid by the major TV broadcasters to shut down New York-based tech startup Aereo, which picks up free, over-the-air TV signals and streams them onto the Internet." Aereo is disrupting normal business practices and if they are allowed to continue, broadcasters may be at risk of losing all their license fee revenue from cable operators. 

So is it stealing to take something that is offered for free over the air and repackage it, bundle it into a bigger package, put an interface around to enable programs to be recorded and viewed, enable it to be watched across multiple mobile devices, and sell it to consumers at a low price?  Aereo certainly adds unique incremental value to the broadcaster's antenna service and serves an audience seeking a low cost alternative to cable. 

Unfortunately, the Aereo win is the broadcaster loss.  Broadcasters in market are unlikely to offer broadband access when they are getting a fee from the cable operators in the DMA they serve.  And cable operators may have clauses in their agreements with broadcasters that actually prevent them from offering any kind of competitive Over The Top (OTT) offering of their signal.  If they don't cable operators might likely drop broadcasters that attempt to offer their own OTT access. 

So the likely next round for broadcasters and Aereo will be the Supreme Court.  "As of now, Aereo’s service is legal, according to the U.S. Second Circuit Court of Appeals."  Should the Supreme Court here the case, the case might just revolve around the FCC and the requirements of broadcasters to offer their signal without charge to consumers that seek access.  For those not willing to place their own digital antenna in their home, Aereo offers additional functionality for a fee, and that added value is what the consumer ultimately pays for.  As long as Aereo uses individual antennas for each account, they may ultimately be the winner.  And it may be up to broadcasters to negotiate an agreement to access usage data for a direct connection, no antenna farm required.

Hulu Might Still Sell A Piece To Time Warner Cable

Fool me once, shame on you, fool me twice shame on me is the adage and Hulu has delivered.  For the second time, they have pulled themselves off the For Sale block and disappointed a number of investors, including DirecTv.  And for all that work, these prospective bidders lost not only their time and money, but also their intellectual property as to what they might do with Hulu once acquired.  And so it goes.

At the same time, Time Warner Cable (TWC) may still have an opportunity to buy a piece of the business.  As the Hulu strategy may be all about offering a competitive streaming subscription model to cable, I am not quite sure how TWC could benefit other than as an investment for revenue to the bottom line.  Still, they might have something up there sleeve that adds more value to the TWC business model.  Such a partnership could happen with cable operators to stream through their cable box to enable greater content inventory to be offered to subscribers.  But that doesn't necessarily require an investment stake. 

It's Not TV, It's Netflix

Where broadcast couldn't swear or show nudity, HBO came along with quality programming that crossed that line while it delivered growing audiences.  By going against conventional wisdom, HBO proved that what they offered went beyond anything offered on television.  But since then, HBO has faced increasing competition, both from other premium providers like Showtime and Starz, and cable networks like AMC. 

But consumers are now moving beyond cable to streaming media and Netflix is proving itself as the go to source for streaming video content.  And according to Liz Shannon Miller of Paid Content, "Orange Is the New Black confirms: Netflix is the new HBO".  Truth is Netflix has been pushing the envelope, both with original content and renewals of a show like "Arrested Development."  Their push to delivering more content, both syndicated and original, has enabled them to grow their subscriber base and compete directly against premium content and basic cable.  

For consumers seeking content that follows them, a TV Everywhere approach, Netflix enables consumers to directly buy a subscription.  HBO, on the other hand, offers its HBO GO feature, but only to authenticated cable subscribers.  Good for cable operators but bad for consumers that don't want that buy through.  

Is Netflix the next HBO as Miller suggests.  For me, it may be too soon to tell. Amazon, Hulu and others are in this space too.  But I like the direction that Netflix has taken in driving original content to their platform.  It worked for HBO, it worked for AMC, and it will continue to drive traffic to Netflix as long as the quality remains high.

Can Radio Shack Survive?

The Radio Shack chain has been a perennial establishment when kids were building electronics and transistors and other quaint products.  But with the rise of computers and smartphones, radio shack has become less relevant as kids no longer build their own telephone or light/buzzer device.  Today, Radio Shack is seen as a place to sell smartphones and other small electronic appliances.  It seems the 21st century has left Radio Shack behind.

"RadioShack Corp. said it is in talks with investment banks on ways to bolster its finances, as the money-losing electronics chain works to remake its image and reverse sliding sales."  As a century old business with a century old name, the first course of business for Radio Shack is a name change.  No matter how you cut it, the name Radio connotes old technology and not the place to sell the latest and greatest.  Identities are hold to change but Bell Atlantic successfully became NYNEX and finally Verizon and Boston Chicken became Boston Market.  It is apparent to me that step one is a name overhaul and a strategic decision as to what kind of technology store you want to be.

Steps are already being taken, according to the article, to update the merchandise and modernize the store, but it needs a name change to complete the transformation.  It also faces the same issues that Best Buy and others face, competition from the web and price comparison shopping.  A new name, modernized stores, and better merchandizing just might draw a crowd to come in and keep visiting.  But I believe it can be done.

Hulu NOT for sale

After the bids were in and reviewed, the owners of Hulu have decided to stay their owners.  If they can agree on a strategy, they have the best chance to build a valuable content portal.  Per the New York Times, "the three companies that mutually own Hulu — 21st Century Fox, the Walt Disney Company and NBCUniversal — said they would make a new investment of $750 million and use Hulu’s technology to compete against other online distributors like Netflix."  

For the bidders, it represents a real loss as Hulu is seen as a key player in the streaming video business, going after Netflix, Redbox, and others, as well as attracting cord cutters leaving cable.  For one owner, NBC and its owner Comcast, is in an unusual position, straddling the line between cable distributor and content creator.  Neither Fox or Disney have such worries although they too have to consider what the success of Hulu means to their cable license deals.  Still, with windows and exclusivity, they can build agreements that keep the dollars flowing.  

As for other M&A deals, I expect to hear a cable or satellite deal before end of year, either with Charter - Time Warner Cable - Cablevision or DirecTV -Dish.  Hulu is off the market for now but something else should be started soon.  

A Must See, "The Way, Way Back"

It has not been my nature to use this blog to recommend particular content, but having just seen the movie, "The Way, Way Back", I can only say it is the must see movie of the summer and in my own top 10 list.



Co-Directed and co-written by Nat Faxon and Jim Rash, who both also have featured roles in the movie, it stars Steve Carell, Toni Collette, Sam Rockwell, and Allison Janney.  It is a coming of age story about a 14-year-old boy, Duncan, and his summer vacation with his mother and her boyfriend.  

My wife and I saw this movie last Saturday and was talking about all through our dinner that night, while seated at the bar at Grammercy Tavern.  Toward the end of our meal, two men sat at the bar next to us.  My wife remarked to one of them their similarity to an actor and while it wasn't him, it was indeed Mr. Faxon with Mr. Rash.  Their warmth and excitement at our enjoying their film was genuine and we knew we had to leave else we would be chatting with them all evening.  Still they provided added insight and made our enjoyment of the film that much more complete.

If I need one more reason to convince you to watch this film, they also co-wrote last year's Oscar winner, The Descendents.  So seek out this film at your local theater.  The Way, Way Back will make your top list, too.

Tribune Follows Others on Path To Split Print From Video

Tribune has emerged from bankruptcy with a plan eerily similar to others before it, separating the video business from print.  Following on Fox and Time Warner, Tribune sees more growth potential concentrating on the video platform and selling off the print one.  "The company offers familiar justifications for the spin off of its assets in the weakening print business to create a new company called Tribune Publishing".  Fox, Time Warner, and now Tribune all see more revenue growth in the video media side of the business, while print suffers through digital conversion. 

What is sad that none of these companies wish to use internal synergies to help the print business build out a new multi-media model to reflect the rise of digital distribution through the tablet and other mobile devices.  Unfortunately, as I have said before, Tribune's focus on broadcast and acquisition of the Local TV affiliates is based on the assumption of growing affiliate fees from cable subscribers.  Disruptive companies like Aereo and the rise of cord cutting could dampen that growth and limit profitability.  Ultimately, I am sure, those factors have been discussed by their senior management.

So we are seeing media companies splitting their platforms to focus more fully on video content and distribution.  Print companies will have to go it alone but perhaps open themselves to new partnership opportunities that will enhance the digital print business. 

Sirius Stays Strong

Sirius continues to grow as both the economy and car sales are rebounding.  Almost 750,000 new subscribers joined Sirius for the latest quarter, bringing their total subscriber base to over 25 million customers.  In a word, impressive. "In comparison, Netflix ended the first quarter with 29.17 million U.S. subscribers, and cable giant Comcast reported 21.94 million video and 51.9 million total customers."

Can this trend continue?  Sirius thinks so and is raising their year end numbers to match this growth.  Given that some of this quarterly growth reflects customers signing on with free trials, Sirius must continue to push to convert and keep subscribers paying their monthly bills.  For customers unhappy with the current variety of content on terrestrial radio, Sirius does indeed provide a wide range of programming for all to enjoy.