Darwin Asks Why Stop Acquisitions

The NY Times Editorial, A Cable Merger Too Far, worries that allowing Comcast to buy Time Warner Cable would create a too powerful entity with a huge controlling stake in cable and broadband service.  I say, so what?  Isn't this exactly what Darwin discovered in the animal kingdom that big animals eat little ones; we either conquer or adapt to survive.  It works the same way in business.  We have seen acquisitions and mergers across every industry as they grow from entrepreneurial to mature.  The big eight accounting firms are no more, the airline industry has fewer and fewer competitors, the auto makers almost died out from bankruptcy if not for the help of the US Government.  So why should the cable industry be any different.

While it would be nice to have more competition for cable service; frankly, we never really did.  Cable operators bought franchises to gain exclusivity and as a result, Comcast never competed head to head with Time Warner cable.  As a consumer, we were lucky to have the choice of a cable operator, telco, or satellite provider.  That choice doesn't go away with a Comcast acquisition. 

What should the FCC do?  Darwin still remains relevant.  The FCC should be encouraging new innovation, technology and new types of connectivity.  Adapt, change, or be eaten.  The future of content connectivity lies with new entrants with new technologies that can topple old technology off the mountain.  You can't stop the natural instinct to grow through acquisition but there are other means.

TiVo Strategic Shift To MSO Working

As a standalone set top box, TiVo worked hard to build a market and attract consumers willing to buy their DVR recorder.  The need for CableCards and costs to own limited the interest and appeal.  It was the Porsche of set top boxes but for a business seeking growth, a slow road.  The decision to attract cable MSO partnerships to offer a TiVo rental box to households has enabled TiVo to grow much faster.  " TiVo swung to a first quarter profit as the DVR pioneer and video software company set a record by signing on 341,000 subscribers through partnerships with pay-TV partnerships, enough to nudge its total sub base past 4.5 million for the first time."  As a result, TiVo has over 3.5 million cable subscribers through this partnership and less than a million subscribers through direct purchase.  

Unfortunately, the top cable MSOs have been reluctant to offer TiVO set top boxes.  Currently, "

TiVo is only about 5% penetrated with its current batch of U.S. cable partners."Should TiVo start to do deals with Comcast, Time Warner Cable, Cablevision, and others, future growth of TiVO could be enormous.  

TiVo swung to a first quarter profit as the DVR pioneer and video software company set a record by signing on 341,000 subscribers through partnerships with pay-TV partnerships, enough to nudge its total sub base past 4.5 million for the first time. - See more at: http://www.multichannel.com/news/technology/tivo-adds-record-341000-mso-subs-q1/374733#sthash.G4sFsn1j.dpuf

Media Merger Mania - What Will Dish Do

Talk about being left out in the cold.  Comcast wants Time Warner Cable and AT&T wants DirecTv.  Charter gets more subscribers from the Comcast merger and ownership in a newly created cable Spinco company.  Some hope that a Sprint and T-Mobile merger will drive more wireless competition to the industry leaders.  And let's not forget Verizon who recently purchased the remainder of its wireless business from former partner Vodafone.  So what about Dish Network?

Certainly Dish tried to merge with DirecTv a decade or more ago but was denied by the FCC.  Different times indeed.  And while they would have loved to do a deal with AT&T, Dish's spectrum business seemed to produce a conflict.  Some hoped that Verizon would respond to say they were interested in Dish, but they were quick to vehemently deny those rumors. So with all the media merger mania occurring, Dish sits like a wallflower on the sidelines.

So what comes next for Dish?  There has been speculation that Dish could make a play for the NFL Sunday Ticket package and wrestle it from DirecTv.  That could both hurt subscribers and give an out to AT&T to terminate their acquisition efforts.  Perhaps other cable companies might be interested in acquiring Dish.  Should Charter have enough access to capital, they might consider making a run at Dish.  Whether the FCC thinks fondly of that deal is unclear.  Cablevision, who once tried their hands at satellite with Voom, might consider a Dish purchase as a means to augment their subscriber numbers as well.  That would certainly propel them into double digit subscriber numbers.  And then there are the hedge fund guys who see future value in picking up Dish for the time being.

For now, Dish sits idly by as the FCC ponders two huge acquisition issues.  But I doubt very much that Dish is being idle.  We shall wait and see what is up their sleeve. 

Success Of Linear TV: Eventize

With so much shows to watch on broadcast and cable, on demand, DVR,  and streaming, its a wonder we get any sleep at all.  In the golden age of TV, choice was limited to broadcast and every show was special.  But today we go through TV shows quickly and if they don't show any chance for audience share, they are thrown away and replaced with the next show.  Just look at the list of cancelled shows that are quickly buried.

To adjust to a very competitive landscape of content choice, networks have embraced live programming.  From baseball and football to Olympics, sports promises good audiences and linear viewing.  NBC has bought all three of the Triple Crown horse races and audiences are tuning in.  Reality shows with live voting and results from shows like American Idol, Dancing With The Stars,  and The Voice have helped as well.  Saturday Night Live has been live for years, although not in prime time.  And NBC with its Broadway push through Sound Of Music last year and Music Man this year are meant to excite audiences to tune in.  Fox is copying this strategy with their production of Grease.  The term for all these big live events, eventize, which could arguably be both a noun and a verb. 

I expect that we will see all the networks eventize their programming schedule.  Perhaps one day, one sitcom will be programmed live every week and not as a special event, as was done a couple times by 30 Rock.  Unfortunately, like all good things, the notion of live programming will get so overdone by all the networks that the viewer will grow tired of this too and move on to the next new thing. 

The Decline Of Physical Media

We used to pride ourselves on our collection of media.  Whether it was books on the shelf, our music collection, whether tape cassette, album or cd, even our video collection of VHS movies or DVDs.  Friends that would enter our homes could marvel at the books we read, music we listened to, or movies we watched.  And these collections became our hobbies and our passions.  

We still pride ourselves on these collections but now use social media to share our latest media connections.  We simply no longer need the physical clutter; all of this content is accessible through cloud streaming or digital storage.  And so the devices we use, especially for music and movies have changed.  For example, "Streaming media players, for the first time ever, outnumber Blu-ray players in U.S. households, and have become the new tip of the spear connecting consumers to the Internet and online video."  Devices like Apple TV, Roku, and Google Chromecast, as well XBox and Playstation, become the more preferred devices for our digital collections.  

We have seen for a while this decline in physical media occurring.  Fewer sales of cds and dvds, fewer books too as our tablets and e-readers become a more acceptable substitute for carrying around heavy books.  But because our collections are no longer easier to be seen, we can't peek at the cover of the book being read on the subway and we can't look through the latest album covers of newly purchased music.  We must proactively share our playlists and reading lists and comment on our latest interests.  The landscape continues to change and we are changing with it. 

Streaming media players, for the first time ever, outnumber Blu-ray players in U.S. households, and have become the new tip of the spear connecting consumers to the Internet and online video. - See more at: http://videomind.ooyala.com/blog/researcher-streaming-stbs-leading-drive-connect-consumers-content#sthash.SZNRYJva.dpuf

Unbundling Cable Not A Cost Savings

If you ever thought that your cable bill would drop if your provider let you just buy the networks you watched should read today's New York Times' article on Unbundling Cable.  In it, the writer Josh Barro provides a clear understanding of the cause and effect of a la carte pricing for cable programming.  The conclusion, overall costs would not go down and consumers would eventually pay more for less programming.  Cable bundling overall has helped to keep prices lower.

The only problem is that the article doesn't address the fact that cable subscription costs are still increasing and that lately the cost of bundled cable has led to decisions by some households to cut the cable cord entirely.  So if the solution to lower cable bills isn't unbundling and a la carte pricing, then how else can a household lower their bills? 

For many, a strategy has been to switch providers.  In some markets, like NY and LA, a telco overbuilder like AT&T U-Verse or Verizon FIOS, competes head to head with the incumbent cable provider, Comcast or Time Warner.  Deals are offered to switch and savings mount until the promotional pricing ends and consumers seek new deals to switch back.  Other households look at satellite providers like DirecTv and Dish for cheaper cable programming. But as you can see, the cable industry is monopolistic with few alternatives.  It is the same problem facing broadband access as well.

The challenge of cutting the cord completely to cable and relying on broadband for streaming access to platforms like Netflix, Amazon Prime and You Tube, is that broadband providers want to switch from an all you can eat model to usage based pricing.  Given the heavy load of video streaming, and discussions regarding the demise of net neutrality, costs to stream will rise and so will subscriptions to broadband services.  And frankly, most users want all the content they can get, cable and streaming, and cord cutting doesn't serve that purpose.

So great explanation Mr. Barro on why unbundling cable doesn't work.  But you left out the most important question, how can cable customers save money and still enjoy their programming. 

Early Adopters Beware, Google Glass May Not Be Worth It

According to reports, Google might finally be moving ahead to sell their Google Glass product to consumers.  The retail price tag appears to be $1,500 which would make it a very expensive toy.  Cost wise, reports indicate that it may be way overpriced.  But if you have the money burning in your pocket, you may not care.

I just wonder if it really will deliver the value that you expect from the product.  You may in fact see signs popping up in places telling you that Google Glasses are prohibited.  These places could include movie houses, Broadway theaters, and every bathroom. And hopefully no one will be driving while wearing a pair of Google Glasses either.  "There are a lot of reasons not to buy Google Glass. It's super weird looking. It might get stolen off your face. People might think you're a creep." 

So will a Google Glass release become a hit.  Over time, prices will come down and hopefully it will demonstrate more capabilities that uniquely make it a must have product.  For now, it looks questionable. 

Cable Distribution Becoming A Chess Game

The result of the potential Comcast and Time Warner Cable merger has led to the cable industry becoming a chess board for strategic moves to level the playing field.  AT&T has decided to extend its reach through acquisition and has targeted DirecTv as the means to expand its footprint domestically as well as internationally.  This combined entity would nearly match the size of a larger Comcast.  And for DirecTv, provide them with an important component, namely an integrated broadband and communication arm to support its video business.  How will the FCC react and will it make a decision to enable Comcast to move forward with Time Warner Cable an easier one to approve.  I think so.  But I also wonder what the next piece will be that moves on the chess board.  Is it time for Charter to also make a play for Cablevision or Cox to expand its footprint beyond what Comcast would sell to them.  The board is in play and I suspect more moves are coming.

Apple Beats The Wearables But Needs More Acquisitions

Of all the talk about Apple releasing a wearable product like an iWatch, perhaps the planned acquisition of Beats and their headphones could count, too.  The more I think about a "connected" watch, the less excited I seem to get.  For those of us who are watch wearers, I am not sure I would want to replace it on my wrist.  So I would have to think it would occupy my opposite wrist should I ever consider buying one.  And for those who use their smartphones as their timepiece, I wonder if they would finally succumb to a smart wrist watch.  And lastly, I think I would get aggravated plugging in my watch every evening, next to my iPad and iPhone.  So now I would need a third outlet and cord.  Yes, the more I think about an iWatch, the less enamored I become.

At the same time, the news that Apple wants to acquire Beats, their hardwear and streaming subscription service, seems like a logical fit to the Apple music model and a natural extension to its own line of iPod, iPhone, and iPad products.  For those seeking a better set of speakers and headphones, Beats is a good fit.  Plus the talent of its owners could play well in the Apple sandbox. 

Perhaps Apple should also consider more synergistic business opportunities to extend its brand across more platforms.  And with that in mind, why not look to acquire Sirius Radio as a means to truly be mobile, as in the automobile space.  Use its satellite technology to drive Apple usage for radio and subscription product.  Need another acquisition target, Apple should look at TiVo.  It is the ultimate cable and OTT set top box and could be a great big step into the cable infrastructure.  In the payment space, Apple could look at PayPal or even Square, a product that already fits well with Apple's devices.   They may not be wearables, but each of these companies offer subscription or usage based revenue to grow. 

Unless Apple can make an iWatch a must have product, something others have yet to figure out, its efforts may best be served in acquiring more companies in the streaming and digital space.  For me, a Beats acquisition makes great sense for Apple.  But we all want to know, what's next.