Comcast and U-Verse Ask, What Cord-Cutting?

Has Comcast and AT&T U-Verse discovered the secret sauce to slowing down or perhaps even reversing cord cutting?  Well in each of their quarterly financials, both have reported increases in video subscriptions.  So while Time Warner Cable has lost customers, these two have added them.  Comcast reported an net add of over 40,000 video subscribers on the quarter, while "AT&T added 194,000 U-verse TV subs in the fourth quarter and 924,000 for all of 2013, extending its TV total to 5.5 million."  That is a huge annual increase.

As both Comcast and TWC are wired franchises that don't overlap, Comcast could not directly gain from Time Warner Cable's misfortune, but AT&T most likely did.  Content drop and poor service are certainly to blame.  For Comcast, Brian Roberts has credited the investment in the infrastructure.  How that encourages new customers to come in, I don't know, but perhaps it most likely kept current customers from deserting. 

AT&T faces issue of customers dropping wired telephone service, losing more than 800,000 telephone customers in the quarter.  While some switched to U-Verse, other simply left.  But AT&T also added over 800,000 wireless customers.  Having a video, broadband, and wireless platform should certainly continue to help AT&T to grow total subscribers. 

Are we seeing the making of a trend and is cord cutting slowing down or is this a blip that will continue to occur as cable companies annually raise their monthly cable subscription fees? Will a Supreme Court ruling later in the year over the Aereo business model affect them or is the infrastructure so strong that it can offer added value that keeps customers from switching off their cable subscription?  For now at least, Comcast and AT&T feel they are beating back the cord cutting phenomenon. 

Live From ..., Ratings Are Up

The savior of linear television, besides folks who simply like to watch what ever is on the tube, continues to be Live Television.  It causes appointment TV where viewers plan their time to be near the TV set to watch.  And the success of live TV can be seen as ratings continue to rise for spectaculars like The Sound of Music to Football games and to last Sunday's Grammy Awards program.  "The Grammy Awards telecast remains second only to the Academy Awards in terms of popularity, with Sunday’s show on CBS drawing a big 28.51 million viewers — up slightly from last year’s 28.38 million and the second largest audience in the last 21 years."

No doubt, I would expect more and more networks to augment their line-ups with special event live shows.  NBC has tried it already with live showing of 30 Rock and Fox has had success with American Idol.  Keeping viewers tuned to the channel also benefits the networks advertising abilities.  More viewers, more dollars charged, more revenue coming in.  But it is clear that TV needs more live programming also to keep cord cutters from growing more rapidly. 

Once networks build out an authenticated TV Everywhere experience that lets their networks get enjoyed on every screen, ratings growth could skyrocket.  So congrats on the ratings success; Live television continues to demonstrate the power that linear networks bring to the public. 

ESPN Driving Digital Content To Thwart Cord Cutting

Today's Wall Street Journal offers an in-depth piece on ESPN's strategic approach to the digital landscape.  Cutting to the chase, they recognized that cable revenue was at stake with the rise of streaming video on the web.  And no matter how much you raise your license fees to cover drops in cable subscription, eventually, cord cutting would impact its business.  The result, a digital network/app for cable authenticated customers, called WatchESPN.  "ESPN collects money for the app from pay-TV providers such as cable companies, which pay for the right to offer it to their customers. For ESPN, a second revenue stream comes from advertising on the app. "

Talk about a great extension of its linear channels.  An online app that cable operators pay a monthly license fee to ESPN and then market to its cable subscribers as an extension of their cable service.  And ESPN gets both some subscription revenue and advertising revenue from their digital business. 

Sports fans, especially ESPN fans, are most likely not the households dropping their cable subscriptions.  Consumers that are cord cutting tend to find non-sports content through other platforms.  So ESPN may be seeing loss of subscriber revenue because consumers are cutting off their cable subscriptions, but their ratings remain unchanged as their viewers are not the ones cutting the cord.  Ratings though could eventually drop as the cost of cable service eventually drives even the ardent sports fan away from cable.

For now, ESPN has created a smart digital business that retains cable subscribers and keeps cable operators happy while building out an ESPN digital business that could one day become a standalone subscription OTT network.  "ESPN is talking to broadband providers about other Internet products, such as an ultra-high-definition version of its TV channels that would be offered only to people who upgrade to faster tiers of broadband. "  ESPN seems to have found a way to straddle the cable and digital business; hopefully, they can keep their balance as consumers continue to adapt to a digital world.   

Apple Keeps Getting Away From One Size Fits All

When Steve Jobs was alive, he seemed intent on a one size fit all approach, for the iPad and iPhone.  But since his passing, Apple has listened more to the consumer.  A mini iPad was introduced and a slightly larger iPhone screen.  And now there are rumors that Apple will release more extensions of these products in more sizes.  That includes even larger screens for both of these products.  Would Steve Jobs approve?

Believe it or not, I think he would.  What set Apple products apart were its ease of use, speed, and seamless integration of design and function.  Seeing consumer demand for multiple size products to fit their needs, Jobs most likely would have followed the same course that Tim Cook has taken.  Ultimately, the size of the product can vary for it is what these Apple products can do that sets them apart.  So while Apple hasn't verified that new screen size products are coming in 2014, I would expect that we will hear about them come Spring and Fall.

My Television Is Already A Dumb Terminal

No matter how much television manufacturers try to smarten up their TV sets, I believe a vast majority only use it as a dumb screen connected to a smart box.  If essentially your remote is used to turn the TV on or off, raise or lower volume, or perhaps switch input devices, your screen is a dumb screen.  All the content that streams through it comes from another device, your cable box most likely, or perhaps a game box, blu-ray or DVD player, Apple TV, or some other separate box connected to your set. 

So why are we paying for smart TVs with WIFI and other content applications?  Because companies are hoping you will prefer an integrated experience, but history has proved otherwise.  In the old world of stereo entertainment platforms, some manufacturers offered us one box that combined turntable, amplifier, radio, and speakers in one; the more sophisticated devices were separate pieces that plugged together.  The best receiver, the best turntable, the best speakers, the best CD player for the price you wanted to spend.  So while some customers may like a smart TV, I believe most prefer the separate devices that fit their budget and their lifestyle.

Mark Arana, executive director for strategy and innovation at Walt Disney Studios, at an OTT panel at Streaming Media West, seems to believe that "television will become a second screen, essentially a dumb terminal for content streamed from mobile devices."  I'm quite surprised at this remark as a future occurance as it has been happening for more than a decade.  Just look at the penetration of cable boxes in the home, mostly happening years ago when cable operators switched from analog to digital and required a converter box to unscramble signals.  At that point, the TV became a dumb device.  Since then, more and more boxes have emerged, thanks to the rise of streaming, to offer more content choice into this same dumb box, as well as into tablets, smartphones, and laptops. 

Consumers can pick their platform and pick their device to view, no longer tethered to the TV set.  Its allure continues to be the bigger screen, but for consumers that demand mobility and more personal viewing, the TV set is simply one monitor choice.  But second screen, I don't think so; it still represents for many homes the central focal point for family viewing.  Its simply a dumb screen with many more content platforms to connect to it. 

Will Comcast Godfather A Charter And Time Warner Cable Deal?

Charter has some business interests in acquiring Time Warner Cable and it seems it makes sense to get some help from "The Godfather" or in this case, Comcast Cable.  As the largest cable operator, Comcast still has interests to improve its footprint and a possible result might be that Charter would spin off some markets for Comcast's financial support.  "Charter approached Comcast last week to discuss carving up Time Warner Cable's systems and subscribers, after the second-largest U.S. cable company rejected its offer, Reuters reported."

Consolidation in the wired space has become an important need, especially to compete against telco companies like AT&T and Verizon.  With Verizon's acquisition of Intel Media, it is becoming more and more clear that their plans are to expand its footprint beyond its FIOS footprint.  With an expanded wired footprint and wireless connections for authenticated users, Comcast and Charter could both win. 

Verizon On Internet Buying Spree

It seems that Verizon is on a strategic mission with aggressive plans to compete in the wired and wireless space.  The growing demand for access to content and the platform to support it has led Verizon on a buying spree.  Last month, Verizon announced its plan to acquire EdgeCast Networks, a leader in the CDN or content delivery space; Now Verizon has formalized a plan to acquire the Intel Media unit and its OnCue TV business from Intel.  The OnCue platform, set top box and applications, was Intel's attempt to compete in the OTT space.  "OnCue is designed to provide pay-TV programming over any high-speed Internet connection, making it a threat to cable-TV services that deliver shows over dedicated lines restricted by territory. Intel’s system includes servers, set-top boxes and applications that can stream content to televisions, phones and tablets."

Now under the Verizon FIOS umbrella, content may finally be available for the service.  Coupled with a CDN to support stream demand, Verizon seems to be acquiring the pieces to augment its FIOS business beyond the confines of a wired franchise.  Certainly Verizon FIOS, along with its cellular business Verizon Wireless, aims to be a more competitive business to the cable and satellite providers.

The biggest impediment remains content companies, especially broadcast and cable networks, that work hard to protect all their revenue streams by limiting licensing agreements to specific platforms and uses.  It is why OnCue was unable to create an OTT line-up of channels to market to consumers.  Verizon is fortunate enough to have FIOS agreements in place as well as content from Redbox Instant.  But I'm sure given the acquisitions that have already occurred, Verizon has a strategic plan in place for content too.  And perhaps that includes buying a content company like a Scripps or Discovery to fill the bucket.  That would be my guess. 

"How Do You Solve A Problem Like Maria" (or DVRs)

It seems that NBC recognizes the key to survival of linear television is live programming.  Credit sports, award shows, and now for NBC, Broadway musicals on television.  With the success of The Sound Of Music last December, NBC has announced its second live production, Peter Pan. 

Certainly casting will drive the buzz worthiness.  For Sound it was Carrie Underwood vs Julie Andrews; and for Peter Pan, the question will be who will play the role made notable by Mary Martin.  Viewers still willing to make appointment television, will enjoy these programming choices.  Peter Pan may not have the same fan base as Sound of Music, but it certainly has the name recognition.  Should this strategy prove another ratings hit, other Broadcast and Cable networks may soon try to overload us with this same approach.  And sometimes too much of a good thing is too much. 

There Is Nothing Like TV (Set)

Let's face it, despite the rise of tablets, smartphones, and laptops, we still like to watch out TVs.  There is nothing like a big screen HDTV to watch a movie, sporting event, or any number of TV shows.  But we must also separate where that content is coming from.  No longer is it being driven by antenna or cable operators directly into our TV set; instead, options have multiplied as more and more devices sync with our big screen monitor.  We have Roku, Apple TV, and gaming devices like XBox One and PS4, connecting video content to the set; We have Chromecast, Blu-ray players, and more all with streaming media capabilities.  And the choice of viewing is almost unlimited. 

More amazing, we also have choice when deciding whether to watch our shows on the big screen or our personal handheld devices.  TV Everywhere continues to make progress so that our linear networks are viewable where we are and not just on the TV.  Still, my original premise holds.  When we plan to be sedentary for a while, there is nothing like the size, sound, and detail coming from a big screen HDTV monitor and surround sound speakers that makes all the difference in the world.

Should Apple make an HDTV to compete in the space with Samsung and others?  Many expect a smart, internet enabled, HDTV, to be announced this year. But my recommendation.  If Apple must build a screen, make it a dumb monitor and put all the connectivity into its Apple TV box.  Its already built and besides, Apple is building so many different size screens for its iPad and iPhone, why not build a 55" screen for the living room.