Could Streaming Network TV Boost Advertising

With the planned release of Apple's TV subscription streaming service, networks might just be greeted with an advertising opportunity, the ability to dynamically insert commercials to specific households.  Thus one commercial spot could be sold to reach a certain household based on relevant data while the same spot could be sold again to a different set of households.  Advertisers would pay a premium but would have more certainty that their ad was reaching a relevant audience.  And networks could sell the same ad spot multiple times.  In addition, different ads could be served based on the device being used to watch the program, one for the Apple TV box, another to the iPad or iPhone.  Ads could be dynamically inserted on linear as well as on-demand and DVR programming.  The likely results, higher engagement, higher viewership, and more revenue. 

Do Cord Cutters Care About Linear TV

The desire to capture a digital friendly audience begs the question, do they even care about linear TV, either broadcast or cable channels.  Many that are cutting the cord to cable tend to be Millennials that have found that they can watch most of their shows free, without paying a subscription fee.  From clips to full length episodes, consumers can watch on You Tube, Crackle, and many more as well as on a slew of pirated sites.  And those willing to pay a small monthly fee per month have access to tons of shows and movies on Netflix, Hulu, and even Amazon Prime.  Borrow a friend or parent's passcode and you get HBO GO.  For those that don't need to watch shows on a linear network can eventually get these same shows on other sites.  It begs the question, do these cord cutters, these Millennials, even need linear TV?

Sling TV, PlaystationVue, and now Apple TV seems to think that this audience will pay for content offered via their platforms.  That the content can be streamed to any device, saved for future airing, and watched when, where, and how the user wishes may drive a value that isn't currently being offered.  And access to some live programming, like sports and events, that needs to be watched as it airs may be a driver to purchase these OTT platforms.  It is the cost/value proposition that will ultimately determine if the Millennial audience sees value to purchase. 

Comcast Leadership Threatened By Disruption

As the leader in the industry, Comcast is facing the same kind of threats that have faced other leaders for years.  Whether a technological change, environmental, external, internal, or even a change in consumer demand, businesses are challenged to retain its core business or risk losing core revenue to drive new revenue growth.  It is why some well known leader brands are no longer around.  They fought so hard to retain their business model while consumer fled to new competitors.  Examples include Sears, Radio Shack, Prodigy, just to name a few.  Feel free to add to the list.  It is an epic reminder of the classic business novel, Who Moved My Cheese?.

Some companies have successfully adapted to change.  Netflix was a DVD mailing company who was able to change to be the streaming content leader.  Apple was willing to let the iPod decline to introduce the iPhone.  And they did it again with the larger iPhone, a possible killer of the iPad mini.  But change is constant and to stay relevant these and other brands must continually look to adapt and change.

Cable operators face those same challenges as a result of the growth of streaming and the launches of new competitors, including PlaystationVue, Sling TV, and Apple, as well as HBO Now, CBSN, Netflix, Amazon Prime, and Hulu.  Consumers can now leave cable, cut the cord, and get a smaller package of relevant content, at a hopefully lower price, and on any device they choose.  It is the cord cutting nightmare driven by a TV Everywhere approach.  So what to do?

For Comcast and other cable operators to compete in this ever changing entertainment landscape, they will have to reassess how they are delivering their content to the home, what business they want to be, a pipeline or a content aggregator/distributor, and how they want to differentiate to maintain a healthy and profitable subscriber base.  The loss of cable subs means a loss of a monthly subscriber revenue stream as well as a loss of ad revenue from a declining base of users.  As more and more streaming services appear, each building packages of broadcast and cable networks and other programming, more and more consumers will be siphoned off.  The percentage of cord cutters continuing to grow.

To compete successfully, it is time to throw out the old cable boxes.  For Comcast, to push out the IP enabled X1 box, or to offer a TiVo box solution, and enable all programming to be authenticated and offered across all mobile devices, on and off the TV set.  Update your packaging model to encourage consumer choice.  Some homes will always want to buy all programming at one price, but others want to pick and choose their package of service.  Market the availability and accessibility of choice, with online access to quickly pick and choose the networks you want for your personalized package at variable price points.  Let consumers change within their package at a moment's notice or upgrade or downgrade at will.  Make Choice, Accessibility, Variety, Availability, and Simplicity your mantra.  Could CAVAS become the next buzzword?

If consumers are choosing Apple TV over cable TV it will be because Apple enabled consumers to buy a smaller package of content and the choice of where, when, and how to watch.  Comcast can do the same if it wants to save its cable business model and be the ultimate aggregator and distributor of all content.  Or it can become a dumb broadband pipe provider.  More competitors are coming to take your cable business away.

Apple's Subscription Platform A Disruptive Force

Given the Apple infrastructure of retail, a full line of products from Apple TV to Apple Watch, plus its iTune interface and AirDrop capability, it is no wonder that the news of it's entry into an online cable subscription service has created quite a stir.  From traditional cable operators, like Comcast, to other technological rivals, like Google, Amazon, and Microsoft, Apple has challenged their current business models.  How?  Let us see.

Comcast may be concerned on a number of fronts.  While NBC is currently not in the mix for services on the new Apple subscription platform, they may be forced to launch based on their agreements with the FCC.  According to the NY Post, "As part of Comcast’s deal to acquire NBCUniversal in 2011, the cable giant agreed it would make its content available to online video distributors on a “comparable” basis to its rivals."  For Comcast, the debut of Apple TV could cause a rash of cord cutting as consumers decide they prefer the TV Everywhere advantage of Apple, the simplicity of use across all their devices, and the mobility.  They also undercut Comcast with lower subscription fees for a scaled down but desirable list of networks.  Add HBO Now and Netflix and consumers mayjust prefer the Apple TV box or iPad or iPhone over a cable TV box tethered to a single television set.  How does Comcast compete?  With an Apple launch scheduled for the Fall, they have about 6 months to build a new business and marketing plan.

As to the other streaming networks, Apple will compete with Sling TV and Playstation Network.  Amazon may feel they have lost a step.  They have the smart phone and tablet devices, but don't have the broadcast nets and most of their streaming is tied to their Prime subscription model.  Microsoft has XBox, but they have already disbanded the content side of that business to concentrate on cloud computing.  Building an infrastructure of content partners and a streaming subscription service may not be part of their current focus.  And Google has concentrated on building out fiber in limited markets.  They have Google Play and can reach outside the Apple closed infrastructure through the open Android platform.  But by being open, it may lose some control.

Still, the speed of change has increased greatly and mass adoption continues to occur at a quicker and quicker rate.  All of these technology companies have the ability to commit to change and focus on driving digital consumption.  And moving off of cable boxes and onto personalized devices delivers richer data about who is watching, when, where, and how, coupled with the same users using these same devices to make purchasing decisions.  Apple's infrastructure and usage base could potentially give them a huge edge in capturing a sizable subscription audience and rich data to drive advertising revenue. 

Apple To Become Online Cable Operator

For years it has been speculated that Apple wanted to get into the television viewing business.  But in the last few years, the word television has changed its definition.  Watching content, whether on cable TV or through Netflix, whether on a big screen set or on a mobile device, all seems to fall under the umbrella of television viewing.  Rumors that Apple wanted to build big screen sets or a cable friendly set top box have all been bandied about.  The latest news might just be the direction Apple has decided to take.

The Wall Street Journal says that "The technology giant is in talks with programmers to offer a slimmed-down bundle of TV networks this fall, according to people familiar with the matter. The service would have about 25 channels, anchored by broadcasters such as ABC, CBS and Fox and would be available on Apple devices such as the Apple TV, they said."  Like Sling TV and Playstation Network, announced at the CES, and other aggregators, Apple hopes that its Apple TV device, recently reduced in price from $99 to $69 is the means to drive adoption.  Under the Apple ecosystem, subscribers of the service would be able to view content on any of its devices, from iPod to iPhone, from iPad to Apple TV.  Truly a TV Everywhere approach!

Interestingly, the one content provider not included at the moment is NBCUniversal, home of the NBC broadcast channel, Bravo, Syfy, USA, CNBC, and others.  Also NBCU is owned by Comcast, the largest cable operator, soon to be larger with the acquisition of Time Warner Cable.  While the new service is not planned to launch till later in the year, so too is the approval of the cable operator merger with the FCC.  Could this issue add an extra wrinkle to the approval process?  We must wait and see.

For consumers seeking a cheaper alternative with a smaller set of channels but access to content anywhere and everywhere, and additive premium content from Netflix and HBO Now, this new subscription service could be highly welcomed by the millennial audience.  Ideally this online audience would prefer to pick and choose the nets it wants within the package.  The concern over time will be as more nets do deals to be on the subscription service causing Apple to need to raise its monthly fees.  That is one of the issues that led to cable cord cutting.  That, and the inability to watch content away from home.  With this new online subscription service, TV Everywhere becomes a true reality. 

What Do Millennials And Generation Edge Want

I saw an interesting stat posted on Twitter from an article in the Wall Street Journal:

While it took 75 years for the telephone to reach more than 50 million users, Facebook took only 3.5 years, and Angry Birds only 35 days.  With each generation becoming more and more tech savvy, early adoption can grow quite steadily into mainstream usage.  A successful product, like the iPhone, becomes a global must-have product, Google Glass still seeks to prove its value in order to achieve mainstream adoption.



By understanding the Millennial and Generation Edge audiences, their current consumption habits and future desires, companies can better deliver products and services that they desire.  In today's Wall Street Journal, researchers focused specifically on Millennial online activities and habits.  "The three most popular digital activities among the survey respondents were checking and sending email (72%), keeping up with what friends are doing (71%), and streaming music, TV, or movies (68%)."  Connectivity has become more and more crucial to our lives.  Authorized sharing has become very important while privacy becomes an issue for controlling who we let in to our circles. 

For the younger generation, being part of what is cool and trending has weight, especially, when our circle approves.  Shows on Netflix, new apps, products and services all get discussed and reviewed and approved or disapproved.  Gaining that buzz and affirmation, especially from this younger generation will drive future growth. 

Happy Pi Day

March 14, 2015 or 3-14-15, for math geeks a once in a blue moon chance to honor Pi, 3.1415

So how about a video or two to celebrate...

More Cable Consolidation In 2015

With Comcast buying Time Warner Cable and AT&T buying DirecTv, the cable oligopoly continues to grow smaller.  The latest acquisition plan comes from Charter Communications.  There is speculation that they will bid to acquire Bright House Networks, a mid-size cable operator with about 2.5 million subscribers.  That could potentially bring Charter to over 6 million subscribers as well as increase the size of its footprint. 

Putting another cable operator in play also brings up the notion that other cable operators could be buyers or sellers.  Of those, the biggest question mark is Cablevision Systems, with over 2.5 mm subscribers, mainly in the New York DMA and a highly desirable market.  Cox Communication, with over 4 million customers and systems spread across the US, from New England to California, could also be of interest.  There are still a number of smaller cable operators with more regional footprints that might finally decide to seek a buyout partner.

While the FCC still mulls the fate of the two big acquisitions above, as well as work with new net neutrality rules, their plate could only get fuller.  Cable and broadband infrastructure across the US requires size to gain efficiency.  These deals only seek to build larger footprints to capitalize on cost efficiencies and revenue gains.

 

Commercial-Free Streaming Services Hurting Cable

We have watched as cable television has, almost purposely, tried to kill itself.  Money seems a powerful aphrodisiac and the desire to squeeze as much of it as possible has turned consumers away.  Where broadcast TV offered viewers free content in exchange for watching ads, cable TV existed on a diet of both subscription fees and ad dollars.  Broadcasters became jealous and moved from must carry status to retransmission consent in exchange for license fees too.  Cable then found more ways to add revenue from adding more ad spots per hour to squeezing content together to open more ad time.  Everything from running end credits and opening credits simultaneously to now speeding up actual content of shows.   Unfortunately, greed is not good.

What started as a slow erosion of cable subscribers off television has led to alternatives that deliver content, complete, unfiltered, and without interruption.  Technology has helped to disrupt the TV game and homes are increasingly changing their routines.  Per the Nielsen results in the NY Post,

• "The amount of time US viewers spend watching live TV has plummeted by 20 minutes a day since 2013;
• Homes with subscription streaming services are watching 50 minutes of TV a day more than those without;
• Subscription video services are now in 40.3 percent of households"

According to the research, since 2012 cable operators have seen almost 5 million households drop their cable subscription packages.  Broadband connections are now more essential to the home than cable.  And as more content finds its way to streaming services, viewers will find more reasons to devote more time to streaming choices.