Content Not King Confirmed By Yahoo

In last weeks blog, I speculated that content may no longer be king.  Well it seems that Yahoo also doesn't think content is king either.  They have just announced plans to shut down original content sites, including digital magazine sites covering food, parenting, travel and more, while cutting 300 jobs.  As to the original content sites they are keeping, news, finance and lifestyle, they will likely rely on more third party content sites then their own created material.  Ring the Content Is King death bell for Yahoo.

So original content costs more than syndicated content.  And proprietary content is more valuable to a site than open content.  And some combination of each makes a successful digital content strategy.  Just ask Netflix, Hulu, and Amazon Prime.  But Yahoo couldn't make it work with its Yahoo Screen app, another killed idea by a company that is declining quickly in the digital universe.  A once promising brand with a easy to remember brand name has lost its cache and its way.  What happens next to some of their remaining "stars", like Katie Couric and David Pogue?  The hour glass indicates their time at Yahoo may also be nearing an end. 

Security Versus Privacy

If you have been seeing the news lately, then you may have heard that the federal courts have ordered Apple to enable the FBI entry into the iPhone of the San Bernardino shooter.  A fairly simple request at first glance, but one that has serious repercussions.  It is a question about democratic freedom and the right to privacy verse security and the greater welfare.  As of today, Apple is defying an order to comply and create a means to get around its security features.

Security verse privacy is not just limited to this particular case, it is an issue that we face every day.  Our right to privacy, up to a point, but lost at times for the sake of security.  We face that test ourselves every time we go through a security line, at the airport, at a concert.  Whenever we are a part of a crowd, our privacy gets squeezed for the purpose of security.  When police go after potential threats and possible criminal behavior, they get judicial authorization to enter homes, to tap phones, to secure computer hard drives, and other means to restrict privacy for the security of the greater population. 

It seems they are on a scale that slides back and forth from one end to the other, from full privacy to full security.  There is little black and white these days in our world but many, many shades of gray.  In Apple's case, it is their Enigma Code, a proprietary security feature on their devices to remove threats of illegal entry.  Privacy AND personal security.  And to find a solution to such a code opens Apple up to removing consumer trust in their product and our personal data. By creating such a "master key" as Tim Cook says in the re/code article, all privacy could potentially be lost.  We face security issues and privacy invasion every day as hackers try to steal everything from credit card and bank information to social security and health records. Creating such a key could potentially open us all up to more threats. 

For the specific iPhone involved in the San Bernardino case, what answers the iPhone may yield are hard to know unless it is unlocked.  And what future privacy issues become created should Apple create a means to unlock its device, could be at stake.  It is a slippery slope and one that cannot be taken lightly.

If Content Is Not King, Then What Is

It seems that content is no longer deemed so kingly.  Viacom shares are down, as are CBS, Time Warner, Fox, and Disney.  The future TV viewer cares little for linear TV channels and we are all growing tired of intrusive and too many commercials.  Even this year's Super Bowl ads, usually the cream of the creative crop, were duds.  And given how fragmented viewership is these days, harder than ever to determine what successful content is.  It seems that content may have lost its crown. So who is King of Media?

In the tug of war between content and distribution, the distribution side has to now be carved out into different verticals.  Cable operators saw a reversal in their subscriber numbers, showing growth and a hopeful long term trend away from cord cutting.  But that will take a few quarters to decide.  The cellular companies have been pulling no punches in their ad messaging, with T-Mobile going hard against Verizon.  And digital content platforms like Netflix, Amazon and Hulu may need to find more revenue streams when subscriber growth wanes.  Of the three, Amazon may be more stable given its diversified business that goes beyond content distribution. 

So who is King?  If content has given up the crown, distribution has yet to show that it has more power.  Perhaps Comcast had it right all along; be both content and distribution, NBC Universal and Xfinity, and stay the course. 

Cord Cutting, What Cord Cutting?

Have the winds shifted?  Is cable television rebounding?  Are households watching cable TV and television advertising?  A look at the top 3 cable operators might indicate that the cord cutting trend has reversed.  According to each of their fourth quarter reports, cable subscribers, as well as data and phone are all increasing.  Charter announced that they increased subs by 33k in the last quarter and 11k for all of 2015.  Last month, Time Warner Cable announced that it gained 54K in Q4 which will make its soon to be owner Charter Cable very happy.  And Comcast Cable added 89K in Q4 although down for the total year by 36 K in 2015. 

Is this reversal simply a Christmas present to the top cable providers or an indication that 2016 could be a growth year for them?  Not raising rates to households might be an encouraging sign.  But should greed get in the way of a better marketing a customer service approach, these sub gains may be short lived.

What Should Apple Do Next?

The iPhones sales are slowing, so are the iPads and the Macs.  And the Apple Watch business is still quite young and not yet proven as the next big thing.  Apple Music is nice, but no one cares.  And Apple TV is still trying to create content distribution deals to become a more valuable box in the home. 

So what does Apple do next?  Do they really want to build their own car or would they be better off licensing their technology into other car companies?  Do they want to shift from content distributor to content creator and acquire a media company like Viacom?  Do they want to expand further into the cloud and enterprise space and consider buying a company like Microsoft, if such a move could get government approvals?  What will the next iteration of Apple be?

The car business seems to be on their radar although I would prefer they license their technology to others or offer their Siri and Music services in a subscription model like Sirius; perhaps a Sirius acquisition might be a nice alternative to their expansion in the auto industry.  The entertainment business is quite fickle. And owning a content network might make it harder to build a fully aggregated Apple TV business.  Is a Netflix acquisition too rich for their blood?  The cloud and enterprise space could be more lucrative as Apple products are more embraced in commercial and industrial spaces.  Microsoft may not be interested in a merger but maybe IBM might listen to a bigger future together.

What is clear is that Apple has the dollars and the resources to build its next new thing.  It continues to make a nice revenue and profit each quarter, but as growth in its mainstay products slow, it needs to expand into new spaces.  Change is coming and Apple needs to continue to evolve and change too. 

Apple - Growth Or Value Stock

Apple released its quarterly earnings and based on how you want to view their business, it was strong or disappointing.  They continue to generate an amazing amount of revenue while raising their gross margin.  They have new businesses that are generating monthly revenues and an ecosystem that has delivered a loyal customer base.  But the disappointment lies in its ability to continue to grow at a a high level quarter over quarter, year over year.    Apple may be a profitable, successful company, but it is seen less as a growth company and more as an old timer, value company.  They are no longer seen as Superman, simply as Clark Kent.

The challenge is that its mainstay product, the iPhone may have reached saturation.  Are there more non Apple users out there ready to buy and are current users ready to upgrade.  The level of each generation's improvement over the last no longer makes it so necessary to buy a new iPhone every year or two.  Like its iPad, we may be able to enjoy using it for 5 or more years before we need to upgrade. 

More importantly, investors are waiting for the next must have product for the home.  It is yet to be the Apple Watch or iPad Pro or Apple TV and it is hard to see it extending out to an Apple Car.  I've suggested Apple build its version of the Amazon Echo and deliver more of the Apple infrastructure into the home.  No word yet on that idea.  What 2016 will bring is next generations of each of their product lines.  Great for Apple loyalists, but less impressive for Wall Street. 

Google Pays Apple For Search

Bloomberg has shared some new information about Google and Apple.  In 2014, Google paid Apple $1 billion to be the search engine for the platform.  Its all part of a revenue sharing agreement between the two tech giants.  According to the story, this financial information was never meant to be disclosed.  It makes you wonder what other agreements Apple has that provide other incremental revenue streams. 

Its Time For Cable Operators To Transform Their Business

For cable operators to worry about the number of cable subscribers is old school.  It is time that they re-examine their business model and transform themselves for the 21st Century.  If you ask a cable operator what their business or mission is, the most likely response may be that they are the conduit for entertainment, communication, and data.  Unfortunately subscriber numbers are falling, growth across their businesses are slowing and they are consolidating to find greater efficiencies.

It is time for cable operators to be greater than the sum of their parts.  Just as Google has renamed itself Alphabet to become more than just a search engine, cable operators need to be more than just a conduit to bring wire and wireless to the home.  They need to make their mission Smart Home Makers.

As a Smart Home Maker, the business becomes more than just bringing a wire to the home, it involves being a full service provider from smart door locks to home security and video surveillance, from HVAC partnerships to data cloud security.  From full home wiring to high performance wireless streaming.  Cable and broadband become just another piece of being the Master of the Client's Domain.  Along with training to the homeowner, the cable operator becomes the key player in growing the smart home universe.  And the revenue comes from installation to maintenance and monthly service packages.

Viacom Activist Wants To Partner With AMC Networks

A Viacom shareholder questions the health of CEO Sumner Redstone and the future of the company.  According to Multichannel, he proposes a merger with AMC Networks as one way to solve Viacom's problems.  But does Viacom's networks, including MTV, VH1, CMT and Spike, bring any synergy to the AMC Networks family?  While AMC has done some previous acquisitions, including Sundance Channel and BBC America, I do not think that such a merger with Viacom has value to AMC.

Comcast, the largest of the MSOs has just announced its move of CMT and Spike from basic to a higher digital tier.  That does not speak well for future subscription growth.  MTV, once a must have network for key demographics, have lost their luster to other networks like the former ABC Family, now Freeform, as well as You Tube and other online websites.  It would require a significant investment to recapture its glory.  And VH1...well, enough said.

Lastly, is AMC Networks more likely a seller than a buyer?  Its owners, Chuck and Jim Dolan, have already sold Cablevision Systems and smaller networks like Fuse.  Jim Dolan might just want to keep his MSG and sports teams and sell off this next piece of their empire.  And for that reason I doubt that AMC would invest in Viacom.