Capsule: Apple's share price hit $204 last week on the possibility of a March 2010 tablet debut supporting an Apple networked internet TV service. The New Year promises to dazzle us with more transformative media news. Beyond the stock market-friendly headlines, will 2010 bring new media business models that actually work? A 360-degree-review of the last decade reveals more laggards than stars. Even the best have destroyed as much commercial media value as they've created--an unfortunate reality we've been taught to accept as part of the creative destruction accompanying technological evolution. Would we be better off acknowledging new media as an extension of what came before? Could the sustainability of the media as a whole be more important than the sum of its parts? Viewed in their proper perspective, could builders like new FCC Chairman Julius Genachowski and legendary Comcast Vice Chairman Julian Brodsky be as important to our future as Steve Jobs and Eric Schmidt?
The Financial Times (FT subscription/registration required)
FCC Bio
In her nearly-perfect Q4 2009 new movie release "Julie and Julia," author and movie-maker Nora Ephron profiles culinary and broadcasting legend Julia Child (Meryl Streep) through the eyes of new media writer Julie Powell (Amy Adams.) In Ephron's movie, based largely on real events, blogger Powell uses Child's magnum opus "Mastering the Art of French Cooking" as the inspiration for a loving tribute to the master chef.
Through brilliant craftsmanship, Ephron lets us watch modern-day Julie Powell (circa 2002) master the art of writing by preparing and writing about the creation of each of the legendary Julia Child's 1950's and 60's culinary masterpieces. Interspersed with a personal story about Powell's growth into maturity, we watch Child's past brought to life on screen, including a recreation of her early broadcast cooking shows depicted as beautifully relevant even in today's multiplexed top-chef TV world. The artistic dance between past and present is beautifully actualized; the borders are softened for us to see the cohesive whole of human experience in the unity of these two characters, as complementary as we may yearn for them to be.
How will the internet dominated media world of our new decade look back on the relevance of what came before? New FCC Chairman Julius Genachowski can exert a strong influence on the memory prism we all use to look back on digital media's critical evolution. Comcast and its founders may also have a substantial say in how we view our modern media reality. In initiating the purchase of NBCU from GE at the close of the decade, Comcast has made an inexorable claim on the beginnings of the 21st century media landscape.
Genachowski's biography is a rich romantic combination of historic symbolism and forward-looking ideals. Genachowski's father and mother are Eastern European Jews who survived the holocaust. One of his cousins is an Orthodox rabbi. His wife, Rachel Goslins, is a documentary filmmaker. He was a "notes editor" at the Harvard Law Review when President Barack Obama was its editor.
Genachowski's career is more wide-ranging and at the same time determinedly focused than seems possible for a 47-year-old father of three. He's an old hand at analyzing the legal implications of FCC rules, having served as Chief Counsel to FCC Chairman Reed Hundt in the 90's. Before his long-running FCC service, Genachowski clerked for U.S. Supreme Court Justices David Souter and William Brennan. He also worked for Senator Charles Schumer when Schumer was a Congressman on the select committee investigating the Iran-Contra Affair.
Genachowksi also earned stripes in the business sector, most notably as Chief of Operations and a member of the Office of the Chairman at Barry Diller's IAC/InterActiveCorp. He has served on the Boards of Expedia.com, Hotels.com, Ticketmaster and Common Sense Media and as an advisory board member to Environmental Entrepreneurs.
In his role as FCC Chairman, Genachowski will be asked to reconcile the burgeoning growth of a handful of today's new media companies with the stability and scale of their traditional media counterparts. As is often the case in industrial evolution, the newest internet-based media products seem to be overtaking traditional media, having created a new scale of consumerism--audience measurement and engagement--that favors digital technology. Once again, in the name of progress, the game has been changed.
Unfortunately, the pace of technological innovation is moving so fast as to shred evolutionary progress in favor of displacement. Our minds can't keep up with the realm of possibility. The sweep of technology encourages almost religious devotion to exploring every digital possibility in the form of new media products, regardless of their value or sustainability. We've thrown the narratives that we use to understand the world aside because the stories can't quite keep up with the rapidly changing historical context.
Comcast may provide a helpful bridge between past and rapidly changing present with its persistent presence as a content and distribution giant. Founded in 1963, Comcast franchised, built and bought its way to the top of the US cable industry. Today, the company provides cable television, broadband internet and telephone service to millions of residential and commercial customers. Comcast is commonly ranked on the top rated lists of US destination workplaces. The company is well-regarded by Wall Street, growing revenues by a 6x multiple between 1999 and 2009 and nearly doubling its share price in the decade.
Comcast's incredible growth story powered the company to 25 million television subscribers, 15 million internet and over 6 million residential telephone subscribers--making Comcast the third largest US telephone company--serving 39 of 50 states. The Roberts family assisted by Julian Brodsky, as Vice Chairman and CFO in the early years, orchestrated Comcast's growth by buying and assimilating a Who's Who list of traditional broadcast, cable and telephony media brands including parts or all of: Group W, Storer Communications, American Cellular Network Corp., Metrophone, Maclean-Hunter, AT&T, Vulcan Venture's Tech TV, MGM/United Artists, Adelphia Cable, Susquehanna Communications, Patriot Media, the Platform and Plaxo.
What new role might Comcast play in the interplay between digital and traditional media? In its assumed ownership of NBCU, Comcast will likely have a chance a year from now to change the culture of a company with more traditional roots than its own. Comcast has the size and influence to move NBCU into the position of a digital content buyer, growing in the same way Comcast grew--through a financially conservative but interpersonally aggressive deal-making strategy in a new media commerce field with relatively inexpensive content choices. Since Comcast has the best distribution position in the media today, it will attract content deals looking for distribution advantages. Depending on the direction of management and the economy, NBCU could find itself in the most enviable content seat of the decade, firmly in the ranks of Disney and Fox.
If it does, US media policy and the industry itself may benefit from the representative presence of a new media company with firmly entrenched roots in traditional business values. Comcast could make a success of its latest gutsy choice, especially if it keeps its customers and prospects as a priority equivalent to its balance sheet. If it does, it may earn the increased gratitude of the equity and debt markets as they reconstitute and advance. And Julius Genachowski and the FCC could have a context marker to learn from, exemplifying a pure evolution play, with reasoned controls applied to the media's characteristic disintermediation and collateral damage.
Sunday, December 27, 2009
Monday, December 21, 2009
Up in the Air
Capsule: Perhaps the biggest 2009 media accomplishment has been the spectacular value appreciation of a few major companies specializing in cloud computing. The big brands of the last decade--Amazon, Apple, Google and Microsoft--have lifted media markets to the clouds from the somewhat scorched earth of the recession. Have the wired digital distributors been left up in the air on future direction? Maybe it's time to reimagine the wired distribution business as if it were already in the clouds, providing some of the services it's been building toward for over 30 years.
Mobile Symmetry
Jim Patterson, CEO and Co-founder of Mobile Symmetry, reports on the top trends of 2009 in December 15th's RCR Wireless newsletter. Patterson reads the honor roll of 2009 value creation, headed by Amazon.com, whose public shares rose from $51.28 in December, 2008 to $134.15 in December, 2009, bringing shareholders a whopping 162% return on a market capitalization increase of $35.9 billion. Amazon's stellar performance came during one of the worst performing retail years in commercial history--for everyone it seems but Amazon. The least amongst the big four media performers, Microsoft, added $92.8 billion to its market capitalization, offering investors a 54% 2009 return.
In contrast, network distribution companies--including Sprint, Clearwire, Qwest, Time Warner Cable, Comcast, Verizon and AT&T--delivered a market value appreciation of $7.5 billion for the entire category, with Sprint leading the pack on 2009 percentage return increases at 122%, followed by Clearwire (25%,) Qwest (13%,) Time Warner Cable (9%,) and Comcast (5%.) AT&T and Verizon lost market value with 2009 investment returns dropping by 2% and 1% respectively.
The highest December 2009 share prices in the media distribution category reported by Patterson were those of Time Warner Cable at $42.38, followed by Verizon at $33.73, AT&T at $28.01 and Comcast at $17.64. The lowest cloud computing company share price reported was Microsoft at $29.85--fitting right into the middle of the wired distribution media's largest and best valued companies. However, Microsoft handily beat the wired field with a 2009 market capitalization gain of $92.8 billion on a record 8.9 million shares outstanding, outperforming wired giant AT&T and its loss of $2.9 billion in 2009 market capitalization on 5.9 million shares.
While the rest of the media trade press reports their 2009 top ten lists atwitter on Twitter, friending Facebook's revenue rise and agog over the reading appetites of early adopter Kindle, nook and Sony e-book buyers, Patterson's simple chart on the 2009 value creation achieved by the media's top companies--headlined "The focus on market leadership shifts from network to cloud"--says it all.
Where could the wired distribution world go from here? It may be time to introduce some of the products and services AT&T first advertised in its famous 1993 "You Will" campaign or that Time Warner Cable (then Warner Amex) demonstrated in Orlando, Florida a decade before. What if the media's broadband service providers finally took an appropriate bow for all of the free content other companies have been bringing to the media market for the last decade? If wired broadband didn't exist, virtually none of the most compelling internet content powering billions of dollars in commerce and advertising could exist in its present form.
For all of the broadband internet revenue that media distributors like Comcast, Time Warner, Cablevision, Verizon and AT&T empower, they collect about $30 a month per subscriber in their franchised territories. One way of increasing revenue production would be to extend past franchise limitations with complete broadband portability.
Each of the major cable broadband distributors is building a companion wireless product with limited service inside their franchise areas, regrettably priced at "free." The telco broadband distributors also have free wireless brand extensions without the limits of wired franchises. Alternatively and perhaps profitably, numerous low-priced and seemingly limitless wireless service extenders with extras are coming to market. A notable potential market leader has just been introduced by Sprint, threatening to blur the distinct value the wired broadband companies hope to build through free wireless with limits.
Could there be a better plan for the earth-bound broadband companies? For purposes of argument and imagination, let's create one. What if a new portable broadband service was brought to market by an imaginary broadband consortium named "Omega.com." Omega.com might be a consortium of today's wired distribution companies, joining as unlikely bedfellows brands as diverse as Comcast and AT&T, as well as all of the cable and telco participants in between. Alternatively, Omega.com might be a pairing of Google and Amazon or Apple and Microsoft. But for the purposes of sharing the wealth, let's imagine wired distribution taking its own trip up in the air into the cloud.
The new broadband service, "Velocity.com"--a name we can use in a blog where we don't have to reserve our ideas with special service marks--would offer the greatest available velocity in its wired incarnation, as well as a brandable set of wireless portable service advantages that customers could count on anywhere in the US and a guaranteed gateway to the best news, sports, entertainment, gaming and retail content on the web.
Velocity.com in its introductory form would include web-based versions of most but not all of the TV entertainment available through cable and telco TV today. Its navigation would be web-like, because it would be served as an internet media product, but it would include important navigation extras, showcasing the profound intelligence of television entertainment honed as a cool fire for group viewing in the living room as well as the greased lightning of personal interaction on the web.
Velocity.com would require an internet connection from a local cable or telco broadband company. These local wired internet connections would come in three forms--basic, expanded basic and premium speeds, priced for illustrative purposes at $40, $75 or $125 per month. The local carriers' broadband service speeds would correspond to the level of Velocity premiums available to subscribers.
Basic broadband would operate Basic Velocity, a broadband pay content tier that would include free navigation, a free level of wireless service with the same geographic limits built into today's cable and telco plans, free e-mail and a TV Everywhere "free" match of broadband TV content with everything purchased on cable or telco TV.
More Velocity would match up with expanded basic broadband service from a local carrier. It would include everything inside Basic Velocity, as well as a high-quality wireless router and choices from an assortment of $9.95 per month content and service options: including, unlimited Voice calling for $9.95 per month with enhanced internet-based directory navigation; HBO online for $9.95 per month, with enhanced internet features and content extras; Hulu for $9.95 per month, including unlimited Hulu content choices; Netflix for $9.95 per month, including its streaming video content as well as access to as many as 10 mailed "rental" new release DVD's per month; etc. Volume discounting might apply for a la carte monthly subscription choices amongst cooperating content brands.
Unlike Basic Velocity, where content choices would have to match up TV-Everywhere-like with products and services ordered and billed through wired TV plans, More Velocity would offer customers the opportunity to rebuild an internet-served assortment of TV and rich media content choices independent of other wired or satellite TV, radio or print subscriptions. SiriusXM for home or car would be an added More Velocity $9.95 per month choice, as would the complete library of content from individually-billed internet and, where desired, internet-and-print-or-ereader subscriptions to every newspaper and magazine from The Economist to The Wall Street Journal to The New York Times to The New Yorker, Time magazine, Bazaar, Esquire, USA Today and Dog Fancy.
More Velocity would also include network storage of a defined library capacity of video and rich media content inside a customer's personalized and internet accessible library vault. Network storage including all kinds of content from video to games to past games played to voice-mails and e-mails to historic editions of favorite news brands would be endowed with a meaning far richer than what customers know today from the DVR.
More Velocity would also have an assortment of billing options, including credit and debit cards as well as direct billing from the local carrier with current electronic on-screen billing information and enhanced credit relationships introduced through special credit and bank promotional channels.
Extreme Velocity, the king-of-the-hill of internet speed and content, would match up with premium broadband service from a local carrier. It would include the highest speeds available on its primary wired network as well as a portable high speed wireless hub for up to five internet connected devices in a household or business. Extreme Velocity would include a range of business-level services, all priced individually by Velocity.com and billed by either Velocity.com or, through special arrangement, the local carrier. In this way, Extreme Velocity and the local carrier would acknowledge the merging of business and personal communication and the need for the easy rapid portable mixing of both worlds according to each customer's desires.
Extreme Velocity would be a trip to the mall and to the movies without leaving home. Extreme Velocity "theaters" would bring new releases to customers' TV's or PC's as well as to the lap-tops or other portable devices of subscribers with the best device-and-location-dependent quality of service possible. It would also be a trip to school or to the office or to the offices of others, with advanced video teleconferencing and stored library product to augment internet-based training and accreditation as well as the enhanced security required by most companies for discrete group communication.
All three pay broadband layers of Velocity.com would include enhanced advertising, rich, interactive and addressable, with opt-in personalized premiums chosen by shopping-savvy bargain-hunting customers. Building enhanced advertising and shopping on the internet and appropriating the enhancements into a cable-broadband-and-wireless model will jump most of the advertising and commerce hurdles represented by the still frenzied patchwork of set-top-boxes and local network architecture in the wired-to-home world.
What other dreams may come to a real-life Omega.com introducing a Velocity.com collection of services without borders as early as 2010? More importantly, what profits may come? If the wired distribution and content players in today's media world want to see what life can be like in the clouds, they'll have to learn to fly. To begin again, the media may have to break off pieces of themselves to operate like start-ups or, even better, like mature internet based content/distribution hybrids. While it may not be possible to lose the weight of gravity inside large successful cable and telco operations, it may be necessary to achieve some level of media weightlessness for value growth, especially if the goal is to create a new profit-making product vision of modern scale.
Mobile Symmetry
Jim Patterson, CEO and Co-founder of Mobile Symmetry, reports on the top trends of 2009 in December 15th's RCR Wireless newsletter. Patterson reads the honor roll of 2009 value creation, headed by Amazon.com, whose public shares rose from $51.28 in December, 2008 to $134.15 in December, 2009, bringing shareholders a whopping 162% return on a market capitalization increase of $35.9 billion. Amazon's stellar performance came during one of the worst performing retail years in commercial history--for everyone it seems but Amazon. The least amongst the big four media performers, Microsoft, added $92.8 billion to its market capitalization, offering investors a 54% 2009 return.
In contrast, network distribution companies--including Sprint, Clearwire, Qwest, Time Warner Cable, Comcast, Verizon and AT&T--delivered a market value appreciation of $7.5 billion for the entire category, with Sprint leading the pack on 2009 percentage return increases at 122%, followed by Clearwire (25%,) Qwest (13%,) Time Warner Cable (9%,) and Comcast (5%.) AT&T and Verizon lost market value with 2009 investment returns dropping by 2% and 1% respectively.
The highest December 2009 share prices in the media distribution category reported by Patterson were those of Time Warner Cable at $42.38, followed by Verizon at $33.73, AT&T at $28.01 and Comcast at $17.64. The lowest cloud computing company share price reported was Microsoft at $29.85--fitting right into the middle of the wired distribution media's largest and best valued companies. However, Microsoft handily beat the wired field with a 2009 market capitalization gain of $92.8 billion on a record 8.9 million shares outstanding, outperforming wired giant AT&T and its loss of $2.9 billion in 2009 market capitalization on 5.9 million shares.
While the rest of the media trade press reports their 2009 top ten lists atwitter on Twitter, friending Facebook's revenue rise and agog over the reading appetites of early adopter Kindle, nook and Sony e-book buyers, Patterson's simple chart on the 2009 value creation achieved by the media's top companies--headlined "The focus on market leadership shifts from network to cloud"--says it all.
Where could the wired distribution world go from here? It may be time to introduce some of the products and services AT&T first advertised in its famous 1993 "You Will" campaign or that Time Warner Cable (then Warner Amex) demonstrated in Orlando, Florida a decade before. What if the media's broadband service providers finally took an appropriate bow for all of the free content other companies have been bringing to the media market for the last decade? If wired broadband didn't exist, virtually none of the most compelling internet content powering billions of dollars in commerce and advertising could exist in its present form.
For all of the broadband internet revenue that media distributors like Comcast, Time Warner, Cablevision, Verizon and AT&T empower, they collect about $30 a month per subscriber in their franchised territories. One way of increasing revenue production would be to extend past franchise limitations with complete broadband portability.
Each of the major cable broadband distributors is building a companion wireless product with limited service inside their franchise areas, regrettably priced at "free." The telco broadband distributors also have free wireless brand extensions without the limits of wired franchises. Alternatively and perhaps profitably, numerous low-priced and seemingly limitless wireless service extenders with extras are coming to market. A notable potential market leader has just been introduced by Sprint, threatening to blur the distinct value the wired broadband companies hope to build through free wireless with limits.
Could there be a better plan for the earth-bound broadband companies? For purposes of argument and imagination, let's create one. What if a new portable broadband service was brought to market by an imaginary broadband consortium named "Omega.com." Omega.com might be a consortium of today's wired distribution companies, joining as unlikely bedfellows brands as diverse as Comcast and AT&T, as well as all of the cable and telco participants in between. Alternatively, Omega.com might be a pairing of Google and Amazon or Apple and Microsoft. But for the purposes of sharing the wealth, let's imagine wired distribution taking its own trip up in the air into the cloud.
The new broadband service, "Velocity.com"--a name we can use in a blog where we don't have to reserve our ideas with special service marks--would offer the greatest available velocity in its wired incarnation, as well as a brandable set of wireless portable service advantages that customers could count on anywhere in the US and a guaranteed gateway to the best news, sports, entertainment, gaming and retail content on the web.
Velocity.com in its introductory form would include web-based versions of most but not all of the TV entertainment available through cable and telco TV today. Its navigation would be web-like, because it would be served as an internet media product, but it would include important navigation extras, showcasing the profound intelligence of television entertainment honed as a cool fire for group viewing in the living room as well as the greased lightning of personal interaction on the web.
Velocity.com would require an internet connection from a local cable or telco broadband company. These local wired internet connections would come in three forms--basic, expanded basic and premium speeds, priced for illustrative purposes at $40, $75 or $125 per month. The local carriers' broadband service speeds would correspond to the level of Velocity premiums available to subscribers.
Basic broadband would operate Basic Velocity, a broadband pay content tier that would include free navigation, a free level of wireless service with the same geographic limits built into today's cable and telco plans, free e-mail and a TV Everywhere "free" match of broadband TV content with everything purchased on cable or telco TV.
More Velocity would match up with expanded basic broadband service from a local carrier. It would include everything inside Basic Velocity, as well as a high-quality wireless router and choices from an assortment of $9.95 per month content and service options: including, unlimited Voice calling for $9.95 per month with enhanced internet-based directory navigation; HBO online for $9.95 per month, with enhanced internet features and content extras; Hulu for $9.95 per month, including unlimited Hulu content choices; Netflix for $9.95 per month, including its streaming video content as well as access to as many as 10 mailed "rental" new release DVD's per month; etc. Volume discounting might apply for a la carte monthly subscription choices amongst cooperating content brands.
Unlike Basic Velocity, where content choices would have to match up TV-Everywhere-like with products and services ordered and billed through wired TV plans, More Velocity would offer customers the opportunity to rebuild an internet-served assortment of TV and rich media content choices independent of other wired or satellite TV, radio or print subscriptions. SiriusXM for home or car would be an added More Velocity $9.95 per month choice, as would the complete library of content from individually-billed internet and, where desired, internet-and-print-or-ereader subscriptions to every newspaper and magazine from The Economist to The Wall Street Journal to The New York Times to The New Yorker, Time magazine, Bazaar, Esquire, USA Today and Dog Fancy.
More Velocity would also include network storage of a defined library capacity of video and rich media content inside a customer's personalized and internet accessible library vault. Network storage including all kinds of content from video to games to past games played to voice-mails and e-mails to historic editions of favorite news brands would be endowed with a meaning far richer than what customers know today from the DVR.
More Velocity would also have an assortment of billing options, including credit and debit cards as well as direct billing from the local carrier with current electronic on-screen billing information and enhanced credit relationships introduced through special credit and bank promotional channels.
Extreme Velocity, the king-of-the-hill of internet speed and content, would match up with premium broadband service from a local carrier. It would include the highest speeds available on its primary wired network as well as a portable high speed wireless hub for up to five internet connected devices in a household or business. Extreme Velocity would include a range of business-level services, all priced individually by Velocity.com and billed by either Velocity.com or, through special arrangement, the local carrier. In this way, Extreme Velocity and the local carrier would acknowledge the merging of business and personal communication and the need for the easy rapid portable mixing of both worlds according to each customer's desires.
Extreme Velocity would be a trip to the mall and to the movies without leaving home. Extreme Velocity "theaters" would bring new releases to customers' TV's or PC's as well as to the lap-tops or other portable devices of subscribers with the best device-and-location-dependent quality of service possible. It would also be a trip to school or to the office or to the offices of others, with advanced video teleconferencing and stored library product to augment internet-based training and accreditation as well as the enhanced security required by most companies for discrete group communication.
All three pay broadband layers of Velocity.com would include enhanced advertising, rich, interactive and addressable, with opt-in personalized premiums chosen by shopping-savvy bargain-hunting customers. Building enhanced advertising and shopping on the internet and appropriating the enhancements into a cable-broadband-and-wireless model will jump most of the advertising and commerce hurdles represented by the still frenzied patchwork of set-top-boxes and local network architecture in the wired-to-home world.
What other dreams may come to a real-life Omega.com introducing a Velocity.com collection of services without borders as early as 2010? More importantly, what profits may come? If the wired distribution and content players in today's media world want to see what life can be like in the clouds, they'll have to learn to fly. To begin again, the media may have to break off pieces of themselves to operate like start-ups or, even better, like mature internet based content/distribution hybrids. While it may not be possible to lose the weight of gravity inside large successful cable and telco operations, it may be necessary to achieve some level of media weightlessness for value growth, especially if the goal is to create a new profit-making product vision of modern scale.
Sunday, December 13, 2009
The Price is Right
Capsule: Media companies want to find the right price for their newest media products. While deciding how much pricing energy should go into rebranding old media through a slew of market-opening new media products, content and distribution will focus on the profitable navigation of today's digital rights management architecture. Recognizing that new profits must also be built on the continued attractiveness of traditional brands, the media should resist losing track of the diminishing value of their traditional lines. Is it time to reset pricing in old media with new media clearly in mind?
Seth Godin
Feed the Pig
CreditCards.com
Feed the Pig--the pro-savings messaging effort of The Ad Council and the American Institute of Certified Public Accountants (AICPA)--is tough to like, even in these financially troubled times. Feed the Pig is a public service marketing campaign designed to teach grown-ups and kids a healthy respect for savings over spending at a time when credit card defaults and restructuring continue at an unhealthy pace, following the desert storm of mortgage defaults and restructuring that led in the last New Year.
Although the nation's consumers have successfully increased their savings rate for five consecutive quarters over the last two years, it's hard to imagine that Feed the Pig's talking Piggy Bank helped. Oh for the sophistication of that old media brand, Jim Henson's Muppets, and its wise creative. The Muppets' creators knew that Miss Piggy, that most memorable of media pigs, had to be warm, humorous, gluttonous and narcissistic in equal measure in order to appeal to the pig in all of us. In contrast, Feed the Pig's talking Piggy Bank, promoted heavily through Ad Council spots on Bloomberg News and company, is just scary, at a time when watching financial news is scary enough.
As we clear the smaller-than-anticipated debris of retail casualties from 2009's holiday season anticipating the 2010 effects, a slew of new products will be lining up to grab our wallets before we "feed the pig." In the media world, new products will arrive in the wireless, mobile, portable media sphere, as well as in the alternative subscription media businesses selling movies, TV, newspapers and magazine content through rich media over broadband--and, by extension, wireless--distribution. As good as video and rich media hooks into the cable-dominated broadband business can be over time, the most vibrant retail video is unprofitable for distribution companies at the outset because of the bandwidth it demands and the competitive pressure it puts on the value of traditional TV.
How can the most savvy media companies hedge against the tough competitive transitions they'll have to make moving their traditional product lines into preferred profit-making positions in a digital retail world? Seth Godin, one of America's most popular digital marketing brands, suggests a possible starting place in his recent blog on dynamic pricing.
Godin reminds media marketers that they don't have to imagine their digital product lines as exact extensions of their historic predecessors. With some creativity, Godin's idea--that digital products can be dynamically priced according to different physical and brand rules than the print, broadcast and cable products on which they're based--can break important new ground for content and distribution products debuting in 2010.
What if cable companies chose to base the pricing of their current TV packages, delivered to the living room in the same basic way since 1979, on customer tenure? If long-term customers paid less for their cable services than newer customers, could cable stem the expensive tide of competitive TV defection? A price break for long-term customers makes great business sense. Long-timers are stable, carry generally lower credit risks and have already developed an ingrained loyalty to traditional products. They also may need and will likely appreciate a loyalty benefit as they age and see some aspects of their disposable income shrink.
Today's cable and print subscription pricing moves in the opposite direction. Long term customers carry the major costs of the media business and receive regular rate increases on the products they appear to love most. The economic forces of the last two years will likely change the intelligence of this approach. Budgetary constraints on home-owners as well as long-term renters will loosen the loyalty tethers between older customers and the best, most expensive media brands they buy. The new tide will rush in in favor of a more economic consumer plan requested by the media's best customers, urged on by friends and media-savvy family.
What to do? If preferred pricing is offered to all print and cable subscription customers with a tenure of three years or longer, based on loyalty discounts served up as immediate cash back rewards, what benefits can be built into our traditional media foundation? For starters, customers who have the means and the appreciation to afford the solid foundation services on which new digital products are being built will be locked into place by the largest media distributors who have the scale to afford this type of dynamic pricing.
In addition, the pricing of traditional products bought by new customers can float upwards within recession-reason in acknowledgement that the best and most profitable traditional customers have been protected. Since it's most likely that new customers will be more focused on the digital facsimiles of traditional subscription products anyway--i.e., they were the most likely to leave the subscription business in favor of a la carte no matter how the pricing cookie crumbled--a true dynamic pricing schema can be put into place where the newer adopter will pay to play. Digital media savvy internet enthusiasts are the most likely to move off traditional brands because of their inclination towards paying less for content and their new willingness to pay more for windows, location-based services and media fusion from mashed up texting and voice to exciting new video and gaming combinations.
Print subscription businesses might follow a similar path, granting the greatest print pricing and content benefits to their long-term customers--and those prospects that profile like them--while creating a service-and-product-based pricing symphony with carefully crafted variation in the digital world. Separating the revenue strategies between the old and the new will also lead to more productive business strategy. Separating the costs of old and new media will lead to a clear understanding of which businesses produce a profit and which require a ground-breaking reset in order to start making sense.
Today, both old and new media have pricing that doesn't make sense when real costs are taken into account. Often, new wireless and digital products are offered for free even though rate-less pricing encourages a perception of value-less products and services. Traditional media carries high pricing for the customers most likely to enjoy their cable and print subscriptions as a way of subsidizing cheap acquisition promotions that generate expensive "new" customer growth. What many of these promotional discounts, all dynamically priced, do produce is constant rate pressure on the packages most loyal customers buy inside today's unhealthy media business models.
In order to build healthy and growing content and distribution futures, the media might best be served by helping customers choose the right price and the right products to engender loyalty and, where loyalty stops being profitable, to promote profitable short-term satisfaction. There's major money to be made in the immediate gratification business inside digital media. The best and the brightest marketing and business strategists will find ways to turn it loose if they think about their business as multiple distinct businesses with independent pricing, product features and customer demographics.
Remember a time when nobody thought customers would pay for television? If you do, you're probably in the high loyalty demographic that should get a subscription TV price break. While maintaining a healthy, symbiotic relationship with free tv, cable and satellite progressed their pricing models 20 years ago by recognizing that they had invented an entirely new business.
Digital media is a 2010-series of new businesses waiting for the right customer experiences at the right prices to seed the future. If we get the prices right, we'll take an essential giant step toward sustainable digital media products that can drive content and distribution economics for generations to come.
Seth Godin
Feed the Pig
CreditCards.com
Feed the Pig--the pro-savings messaging effort of The Ad Council and the American Institute of Certified Public Accountants (AICPA)--is tough to like, even in these financially troubled times. Feed the Pig is a public service marketing campaign designed to teach grown-ups and kids a healthy respect for savings over spending at a time when credit card defaults and restructuring continue at an unhealthy pace, following the desert storm of mortgage defaults and restructuring that led in the last New Year.
Although the nation's consumers have successfully increased their savings rate for five consecutive quarters over the last two years, it's hard to imagine that Feed the Pig's talking Piggy Bank helped. Oh for the sophistication of that old media brand, Jim Henson's Muppets, and its wise creative. The Muppets' creators knew that Miss Piggy, that most memorable of media pigs, had to be warm, humorous, gluttonous and narcissistic in equal measure in order to appeal to the pig in all of us. In contrast, Feed the Pig's talking Piggy Bank, promoted heavily through Ad Council spots on Bloomberg News and company, is just scary, at a time when watching financial news is scary enough.
As we clear the smaller-than-anticipated debris of retail casualties from 2009's holiday season anticipating the 2010 effects, a slew of new products will be lining up to grab our wallets before we "feed the pig." In the media world, new products will arrive in the wireless, mobile, portable media sphere, as well as in the alternative subscription media businesses selling movies, TV, newspapers and magazine content through rich media over broadband--and, by extension, wireless--distribution. As good as video and rich media hooks into the cable-dominated broadband business can be over time, the most vibrant retail video is unprofitable for distribution companies at the outset because of the bandwidth it demands and the competitive pressure it puts on the value of traditional TV.
How can the most savvy media companies hedge against the tough competitive transitions they'll have to make moving their traditional product lines into preferred profit-making positions in a digital retail world? Seth Godin, one of America's most popular digital marketing brands, suggests a possible starting place in his recent blog on dynamic pricing.
Godin reminds media marketers that they don't have to imagine their digital product lines as exact extensions of their historic predecessors. With some creativity, Godin's idea--that digital products can be dynamically priced according to different physical and brand rules than the print, broadcast and cable products on which they're based--can break important new ground for content and distribution products debuting in 2010.
What if cable companies chose to base the pricing of their current TV packages, delivered to the living room in the same basic way since 1979, on customer tenure? If long-term customers paid less for their cable services than newer customers, could cable stem the expensive tide of competitive TV defection? A price break for long-term customers makes great business sense. Long-timers are stable, carry generally lower credit risks and have already developed an ingrained loyalty to traditional products. They also may need and will likely appreciate a loyalty benefit as they age and see some aspects of their disposable income shrink.
Today's cable and print subscription pricing moves in the opposite direction. Long term customers carry the major costs of the media business and receive regular rate increases on the products they appear to love most. The economic forces of the last two years will likely change the intelligence of this approach. Budgetary constraints on home-owners as well as long-term renters will loosen the loyalty tethers between older customers and the best, most expensive media brands they buy. The new tide will rush in in favor of a more economic consumer plan requested by the media's best customers, urged on by friends and media-savvy family.
What to do? If preferred pricing is offered to all print and cable subscription customers with a tenure of three years or longer, based on loyalty discounts served up as immediate cash back rewards, what benefits can be built into our traditional media foundation? For starters, customers who have the means and the appreciation to afford the solid foundation services on which new digital products are being built will be locked into place by the largest media distributors who have the scale to afford this type of dynamic pricing.
In addition, the pricing of traditional products bought by new customers can float upwards within recession-reason in acknowledgement that the best and most profitable traditional customers have been protected. Since it's most likely that new customers will be more focused on the digital facsimiles of traditional subscription products anyway--i.e., they were the most likely to leave the subscription business in favor of a la carte no matter how the pricing cookie crumbled--a true dynamic pricing schema can be put into place where the newer adopter will pay to play. Digital media savvy internet enthusiasts are the most likely to move off traditional brands because of their inclination towards paying less for content and their new willingness to pay more for windows, location-based services and media fusion from mashed up texting and voice to exciting new video and gaming combinations.
Print subscription businesses might follow a similar path, granting the greatest print pricing and content benefits to their long-term customers--and those prospects that profile like them--while creating a service-and-product-based pricing symphony with carefully crafted variation in the digital world. Separating the revenue strategies between the old and the new will also lead to more productive business strategy. Separating the costs of old and new media will lead to a clear understanding of which businesses produce a profit and which require a ground-breaking reset in order to start making sense.
Today, both old and new media have pricing that doesn't make sense when real costs are taken into account. Often, new wireless and digital products are offered for free even though rate-less pricing encourages a perception of value-less products and services. Traditional media carries high pricing for the customers most likely to enjoy their cable and print subscriptions as a way of subsidizing cheap acquisition promotions that generate expensive "new" customer growth. What many of these promotional discounts, all dynamically priced, do produce is constant rate pressure on the packages most loyal customers buy inside today's unhealthy media business models.
In order to build healthy and growing content and distribution futures, the media might best be served by helping customers choose the right price and the right products to engender loyalty and, where loyalty stops being profitable, to promote profitable short-term satisfaction. There's major money to be made in the immediate gratification business inside digital media. The best and the brightest marketing and business strategists will find ways to turn it loose if they think about their business as multiple distinct businesses with independent pricing, product features and customer demographics.
Remember a time when nobody thought customers would pay for television? If you do, you're probably in the high loyalty demographic that should get a subscription TV price break. While maintaining a healthy, symbiotic relationship with free tv, cable and satellite progressed their pricing models 20 years ago by recognizing that they had invented an entirely new business.
Digital media is a 2010-series of new businesses waiting for the right customer experiences at the right prices to seed the future. If we get the prices right, we'll take an essential giant step toward sustainable digital media products that can drive content and distribution economics for generations to come.
Monday, December 7, 2009
Must Pay TV
Capsule: All hail the financial wisdom of Comcast's NBCU acquisition. Its investor-friendly structure is being celebrated by Barron's and UBS this week with enough elan to deliver a nice fat bump in equity value to the Christmas stockings of the American media investor. This has been a poor year for media stocks, less out of turbulence than boredom. Comcast NBCU comes at a good time, enticing investors with the possibility that this combined management team and asset family may get it right. More good news: Sprint is rising from the ashes of the wireless telephony wars on a tide of 3G and 4G business plans and products, including Skiff, a collaboration with Hearst Publishing to build the multimedia storefront of the future for the reading public. Are we finally seeing enough new media business models to support a rising and profitable revenue tide?
The Business Insider
Advertising Age
Barron's on Sprint
Barron's on Comcast NBCU
The FT on Bloomberg
The Mall of America is a commerce wonder 15 minutes outside Minneapolis/St. Paul, including over 500 stores, amusement park rides and enough surrounding hotels and restaurants to make it a vacation destination. Unfortunately, today's retail, travel and vacation sales are all soft enough to make the Mall of America into America's retail museum. Would that this biggest of big boxes had a virtual identity that could expand and contract according to the country's retail spending capacity. In contrast, e-commerce on a cable-powered broadband and TV platform suggests a new retail model that should move sustainably with the times.
Comcast may be in line to become a profitable virtual mall developer with its announced NBCU expansion. While the headlines feast on the cash flow growth prospects of NBCU's cable networks, Comcast's cable systems may have a new media role to play in building its commercial future.
What if profit and product growth turn out to be as sure for Comcast as understanding how to combine old and new media through a familiar money-making formula? Comcast's giant stature as a cable MSO has come from a keen understanding of television's ability to expand and contract based on its interlocking free and paid content layers. Broadcasting networks and stations like those owned by NBCU compose the free TV layer. On top, there are at least two paid cable layers--one for basic, ad-supported cable channels and "free" VOD and one for premium networks and paid VOD.
When the economy and advertising revenue are strong, the broadcast TV layer and the two paid basic and premium cable TV layers are interchangeable, mostly because they're all delivered to most Americans via a paid cable platform. When the economy and advertising rates weaken, the "free" broadcast television layer feels the worst financial effects, but cable's subscription revenue--supporting its original TV products and its re-syndicated TV series and movies through both cable networks and VOD--continues to grow.
Comcast NBCU will soon be in a uniquely favorable position to augment its financial prospects by creating a third pay cable TV layer programmed through its ample content assets and advertising scale; and, based on its broadband distribution networks. The broadband pay TV layer can include access to hundreds of basic and premium TV programs, interactive ads, hit movies and "longtail" entertainments and communal viewing-sharing-buying experiences produced and distributed through the "cloud." Bloomberg Media's extraordinary growth and profitability depends on a collection of products both traditional and unique, now being managed to make Bloomberg's content the most expansive collection of news programming in the world. Comcast and its distribution brethren will need a new broadband pay cable TV layer to facilitate Bloomberg as it expands, as well as other similarly inspired profit-driving media producers.
In a more profitably distributed media world than today's, the "cloud" will come to mean a collection of several flexible closed communications systems that bring the best of the internet into a quality-of-service-controlled and commerce-enabled environment. These flexible closed systems will operate much like today's wired cable systems, with common wireless and mobile authentication, powering customer choice, retail opportunity and commercial product growth.
Today's cable broadband infrastructure will require capacity upgrades and server-based infrastructure augmentation to create a new high capacity interactive pay TV layer. But the technology upgrades necessary to build and operate this important new broadband commerce engine can be iterative, gradual and capital-efficient.
As more TV choices and interchangeable targeted advertising become available on the broadband pay TV layer, the best network operators will be able to move customer orders, authentication, playback and payment systems onto efficient servers with familiar replicable commerce front-ends. They will also be able to leave costly set-top boxes and DVR's in transition for the most basic of services, while broadband pay TV is operated from inside the distribution network powering a range of personally-selected modems, routers, PC's, screens, MAC's, personal storage and wired and wireless playback systems.
Most importantly, these new systems will facilitate new pricing and payment plans of greater value to the consumer and higher aggregated profit potential--including more profitable versions of traditional cable products now limited by their release timing, lack of porting, personalization and billing flexibility and device constraints.
Much of the reporting on why Comcast NBCU makes sense is leaving an important part of the future revenue basis for this transaction--the development of this new pay TV broadband distribution and product layer--out of the story. Maybe, with the economy slowly awakening from its two-year slumber, financial and media reporters lack confidence in technology. Maybe the media lacks confidence in its own product development flexibility. Maybe advertising rates have fallen so far inside today's Grand Canyon of multimedia inventory that a revenue recovery looks unlikely.
Sprint's determined re-entry into the land of the wireless living is a reminder of how long it can take to execute on a forward-thinking plan. Post-Nextel merger, Sprint had a lot of work to do re-rationalizing its financial structure and its consumer product strategy. Sprint's confidence in its ability to operate a superior wireless commerce network was formed during its most challenging years. Sprint was the first nearly flawless "whispernet" operator powering Amazon's Kindle.
Now the Kindle facilitates automatic book purchasing through AT&T; and, Sprint has moved to support Skiff in partnership with Hearst publications and a number of attractive wireless device manufacturers. If they're successful, Sprint and Hearst will take on Amazon with a notable assortment of book, magazine and newspaper content partners looking for a new commerce marketplace with equitable returns.
As it builds the wireless products hooked into its broadband pay TV layer, Comcast might finally and fully rationalize its own wireless network partnerships. Comcast's broadband pay TV layer will likely include commerce capabilities for all of its customers over time, first at home and quickly after via wireless networks and devices from anywhere customers choose.
The nation's biggest MSO has the core network attributes, the technology partnerships, the scale and the paid customer relationships to build a new "must see TV" service that takes the best of NBCU into a new media dimension. Comcast might even bolster the advertising business enough to support the revenue engine powering the broadcast networks and stations at the heart of the NBC brand. Most likely, the merger's magic will be worked on the cable level, strongly supported by a reinvention of Comcast's distribution networks as well as its glittering NBCU content.
The Business Insider
Advertising Age
Barron's on Sprint
Barron's on Comcast NBCU
The FT on Bloomberg
The Mall of America is a commerce wonder 15 minutes outside Minneapolis/St. Paul, including over 500 stores, amusement park rides and enough surrounding hotels and restaurants to make it a vacation destination. Unfortunately, today's retail, travel and vacation sales are all soft enough to make the Mall of America into America's retail museum. Would that this biggest of big boxes had a virtual identity that could expand and contract according to the country's retail spending capacity. In contrast, e-commerce on a cable-powered broadband and TV platform suggests a new retail model that should move sustainably with the times.
Comcast may be in line to become a profitable virtual mall developer with its announced NBCU expansion. While the headlines feast on the cash flow growth prospects of NBCU's cable networks, Comcast's cable systems may have a new media role to play in building its commercial future.
What if profit and product growth turn out to be as sure for Comcast as understanding how to combine old and new media through a familiar money-making formula? Comcast's giant stature as a cable MSO has come from a keen understanding of television's ability to expand and contract based on its interlocking free and paid content layers. Broadcasting networks and stations like those owned by NBCU compose the free TV layer. On top, there are at least two paid cable layers--one for basic, ad-supported cable channels and "free" VOD and one for premium networks and paid VOD.
When the economy and advertising revenue are strong, the broadcast TV layer and the two paid basic and premium cable TV layers are interchangeable, mostly because they're all delivered to most Americans via a paid cable platform. When the economy and advertising rates weaken, the "free" broadcast television layer feels the worst financial effects, but cable's subscription revenue--supporting its original TV products and its re-syndicated TV series and movies through both cable networks and VOD--continues to grow.
Comcast NBCU will soon be in a uniquely favorable position to augment its financial prospects by creating a third pay cable TV layer programmed through its ample content assets and advertising scale; and, based on its broadband distribution networks. The broadband pay TV layer can include access to hundreds of basic and premium TV programs, interactive ads, hit movies and "longtail" entertainments and communal viewing-sharing-buying experiences produced and distributed through the "cloud." Bloomberg Media's extraordinary growth and profitability depends on a collection of products both traditional and unique, now being managed to make Bloomberg's content the most expansive collection of news programming in the world. Comcast and its distribution brethren will need a new broadband pay cable TV layer to facilitate Bloomberg as it expands, as well as other similarly inspired profit-driving media producers.
In a more profitably distributed media world than today's, the "cloud" will come to mean a collection of several flexible closed communications systems that bring the best of the internet into a quality-of-service-controlled and commerce-enabled environment. These flexible closed systems will operate much like today's wired cable systems, with common wireless and mobile authentication, powering customer choice, retail opportunity and commercial product growth.
Today's cable broadband infrastructure will require capacity upgrades and server-based infrastructure augmentation to create a new high capacity interactive pay TV layer. But the technology upgrades necessary to build and operate this important new broadband commerce engine can be iterative, gradual and capital-efficient.
As more TV choices and interchangeable targeted advertising become available on the broadband pay TV layer, the best network operators will be able to move customer orders, authentication, playback and payment systems onto efficient servers with familiar replicable commerce front-ends. They will also be able to leave costly set-top boxes and DVR's in transition for the most basic of services, while broadband pay TV is operated from inside the distribution network powering a range of personally-selected modems, routers, PC's, screens, MAC's, personal storage and wired and wireless playback systems.
Most importantly, these new systems will facilitate new pricing and payment plans of greater value to the consumer and higher aggregated profit potential--including more profitable versions of traditional cable products now limited by their release timing, lack of porting, personalization and billing flexibility and device constraints.
Much of the reporting on why Comcast NBCU makes sense is leaving an important part of the future revenue basis for this transaction--the development of this new pay TV broadband distribution and product layer--out of the story. Maybe, with the economy slowly awakening from its two-year slumber, financial and media reporters lack confidence in technology. Maybe the media lacks confidence in its own product development flexibility. Maybe advertising rates have fallen so far inside today's Grand Canyon of multimedia inventory that a revenue recovery looks unlikely.
Sprint's determined re-entry into the land of the wireless living is a reminder of how long it can take to execute on a forward-thinking plan. Post-Nextel merger, Sprint had a lot of work to do re-rationalizing its financial structure and its consumer product strategy. Sprint's confidence in its ability to operate a superior wireless commerce network was formed during its most challenging years. Sprint was the first nearly flawless "whispernet" operator powering Amazon's Kindle.
Now the Kindle facilitates automatic book purchasing through AT&T; and, Sprint has moved to support Skiff in partnership with Hearst publications and a number of attractive wireless device manufacturers. If they're successful, Sprint and Hearst will take on Amazon with a notable assortment of book, magazine and newspaper content partners looking for a new commerce marketplace with equitable returns.
As it builds the wireless products hooked into its broadband pay TV layer, Comcast might finally and fully rationalize its own wireless network partnerships. Comcast's broadband pay TV layer will likely include commerce capabilities for all of its customers over time, first at home and quickly after via wireless networks and devices from anywhere customers choose.
The nation's biggest MSO has the core network attributes, the technology partnerships, the scale and the paid customer relationships to build a new "must see TV" service that takes the best of NBCU into a new media dimension. Comcast might even bolster the advertising business enough to support the revenue engine powering the broadcast networks and stations at the heart of the NBC brand. Most likely, the merger's magic will be worked on the cable level, strongly supported by a reinvention of Comcast's distribution networks as well as its glittering NBCU content.
Thursday, November 26, 2009
Freeconomics
Capsule: Of all the strange 2009 developments in our sideways media world, Rupert Murdoch may save the day for the advertising business. First, he'll try to save the day for newspapers, starting with his own. Murdoch's threat to de-list The Wall Street Journal from Google in favor of paid access through Microsoft's Bing should start a gold rush of expensive content to search engines willing to pay something for the privilege. How will the new world order assemble when there are 32 flavors of free and all of them cost something?
Silicon Valley Insider
The Financial Times
FreeSat
Silicon Valley Insider
The Financial Times
FreeSat
The tenet of basic economics that teaches that any price drop or give-away of a product forces prices down across the entire relevant business sector appears to have been forgotten in the mad rush to internet freedom. Free-conomics--not to be confused with Steven Levitt's and Stephen Dubner's two-book marvel with a similar-sounding name--has taken the media world by storm over the last five years and more's the pity.
As if our global economic crisis wasn't enough to destroy media value on a catastrophic scale, we had to help it along by forgetting about economics in the fanciful world of free. The collapse of the media's advertising value followed the introduction of free online newspaper content, promoted by internet search that isn't free in fact even if it appears free to the reader.
Search engines like Google siphon off advertising revenue from every internet listed source and operate in a new marketplace where they own over 70% of the land. What's more: they decide how much all of the land--or online advertising space--costs to a degree that infects advertising rates across the distribution landscape and around the world. Your exposure to search advertising is what you pay to find The New York Times on Google. What you're about to pay for The New York Times as it struggles to rebuild its economics on a solid paid foundation will also include a premium for all of those free online reads of yesteryear.
Bubble economics unite the housing and credit crises we're still surviving with the online content bubble created by Google's extraordinary ingenuity. A bubble occurs when there is surplus capacity in the marketplace, like too many houses, too much low-cost credit and too many free news stories. Like most bubbles, there isn't a single burst, but a series of blow-outs that presage value destruction beyond the bubble's primary participants.
Google's true genius surpasses even the majestic source of its bubble creation: its search algorithm and supporting process. In its quest to catalogue the world's information, Google invented a new airplane. The fact that no search competitors have been able to catch up tells you how much we've all aided Google's rise, kind of like everyone who bought or built a second home by borrowing heavily on the value of the first.
We took cash out of the publishing business in order to put it into online search and we bear some responsibility for the gum on our face that used to be our online bubble. We'll bear more than embarrassment to put things right. We'll bear the subsequent cost of saving an ailing news business that contributes substantially to our quality of life and perspective in an increasingly complex global environment.
But hasn't free news content exposed a broader world audience to the best of America's fourth estate? The broad exposure argument in favor of free only works if there are no costs associated with making the products that are then turned into the marketplace, their value compressed, for free.
Beyond losing money, freeconomics sacrifices context. A paid newspaper or magazine, for all of its flaws, provides a contextual economic model along with the editorial context that adds value to information. Reading the news from a group of free headlines and condensed online digests navigable only through free search and free e-mail solicitation is a context-free friction-free experience. No one realizes the true value or the true cost of what they're taking in with online news. That could be fine if we were all toddlers in the hands of brilliant caring parents (or Glenda, the good witch in The Wizard of Oz) who could supervise our growth into sophisticated adults before turning us loose (or sending us back to Kansas.)
It isn't only newspaper and magazine content that has become free. Everywhere, media distribution is hawking a free or two-fer deal in the hopes of talking consumers into buying something more. Cable distribution keeps running towards free phone service offers, knowing full well that there's a scaling piper waiting to be paid. Right now, the cost of a free phone is showing up on consumers' broadband and wired TV bills. As free internet and mobile video move to prominence, their costs will show up in higher broadband fees and, potentially, international calling charges, reinforcing a rich and poor divide that limits access to the best information to the monied classes and communication to the local neighborhood.
A potential savior with a delightfully unexpected saving grace, Rupert Murdoch is contemplating a structural moat around his news properties, separating them from the free frontier. There's something very smart and grown-up about the choice. It's consistent that News Corp. executives were the first to speak to the media about charging for Hulu content at some near term point. While everyone gasped, News Corp. boldly began providing context for online video services that, like online print, appear free but carry the potentially destructive lagging thrust of all of the costs associated with making movies and TV.
The harshest criticism to date of Murdoch's quest has been dismissive. Google can live without The Wall Street Journal, sniff the free marketeers. Maybe. But if Google's real goal of cataloguing the world's information is to be believed, a Google without News Corp. will be a wildly different creature.
A likely scenario predicts Google will join Microsoft's Bing to determine a sustainable structure for paid online content. The major TV and movie distributors should crash the party and demand a seat at the design table right away. As Google and Microsoft start to design the passage of products that were born free into a healthy paid adulthood in the new media world, Comcast, NBCU, Verizon, Time Warner, AT&T, Disney and the rest should join the grown-up table and set a sustainable example for a better future.
Saturday, November 21, 2009
You've Got Mail
Capsule: How drastic a transformation will most media companies make to grow again? As AOL announces 2,500 planned lay-offs on a base of 6,900 employees pre-December-9th spin-off, what's the message inside the medium? Will an ailing media and advertising world once warned unveil dramatic new business plans or return to its fundamentals or both? How about broadband distribution giving some thought to graduated mail delivery charges as a start? (http://www.thewrap.com/article/bloodbath-aol-2500-cuts-announced-10409)
AOL is in the news again along with its new Google-harvested leader Tim Armstrong. Within the past few weeks, AOL has chosen a new post-spin-off Board that includes the usual media luminary suspects while announcing its massive lay-off plans to skinny down the company as a new independent investment prospect. While skinny-ing down will help the new AOL throw off cash, it won't guarantee its ability to improve its top-line financials quarter after quarter as Wall Street ultimately requires.
Control Video Corporation and Quantum Computer Services were AOL's earliest screen names, circa 1983-1985. AOL didn't become American Online until 1989, only eleven years before the fateful 2000 merger with Time Warner that spurred many a story, book, modern investment crisis and good old-fashioned ulcer.
Within four years of the AOL Time Warner marriage, AOL had 20,000 employees. More important, it had close to 27 million subscribers in the 2002-2004 timeframe. A whole "You've Got Mail" generation, today's 20-somethings, was formatively raised on the iconic blue triangle, the running man, the killer IM app and the transformation that consumer-friendly brilliantly designed dial-up internet brought to American mass media.
Looking back, everyone knows that the AOL Time Warner merger was a barn-burner of a mistake. What made it a mistake is judged differently according to which tour guide of the American media landscape you use. The structure of the deal and the valuations of the principals were clearly flawed: AOL's future potential was grossly over-stated and Time Warner's potential was judged roughly as rich as it has turned out to be, but only as a media company benefiting from its opportunistic mating with an internet juggernaut.
In spite of its AOL marriage, Time Warner and its spin-off Time Warner Cable have turned out to be tremendous assets on a fundamental level. Time Warner has understood the necessity of content innovation through its cable networks to a level unmet by any other US content company with the possible exception of Disney. It's still struggling to get its magazine properties to a point of either fundamentally solid growth or radical innovation within the internet and mobile space. But Time Warner's magazines have the benefit of time and financial support from their wealthy cable network partners.
Time Warner Cable has continued to grow both organically and through savvy M&A transactions. Since AOL was knee-high-to-a-grasshopper, Time Warner Cable has been a US growth leader through well-conceived and managed mergers and through a fundamental understanding of the core cable distribution business that is arguably superior to the entire cable field, with the possible exception of Comcast.
Why couldn't Time Warner and Time Warner Cable save AOL from its shrinking fate? Since 2002, in seven years, AOL has lost 21.3 million subscribers, bringing its customer base from 26.7 million down to 5.4 million today. Most of these customers upgraded from AOL's dial-up service, most memorably priced at just under $25 per month, to cable broadband service, priced on offer roughly $5 above AOL and over time at least $15 higher, and marketed, sold and serviced by Time Warner Cable and Comcast. The next best alternative during the period of AOL's troubles was telco DSL, priced as low as $15 a month, but without the fast track expansion capability or the speed of its cable competition.
What's the lesson here? It may be that you have to respect fundamentals even while you're worshiping at the altar of change. AOL was a subscription business with an ingenious design and a high respect for quality service as long as it was inside its comfort zone of dial-up internet connectivity. With the emergence of cable distribution exemplified by partner Time Warner Cable and pals, AOL seems to have sustained a broadband meteor hit that left it at least partially frozen in time.
There are hundreds of examples of media and service companies on ice past the point of having been bested by the competition. Broadcasting got iced with cable's expansion, particularly because of the advertising competition offered by cable content. Rather than sit on ice, broadcasters started leveraging their government-support fundamentals early to force their way onto the competitive cable menu.
What makes AOL excruciating is that it wouldn't transform itself into a true broadband service that competed on content while partnering on distribution. AOL's original genius was in understanding its symbiotic reliance on dial-up internet. Once mastered, AOL refused to understand its new symbiotic reliance on cable.
The stumbling block: the broadband conquerors' requirement that AOL surrender a piece of its subscription profit to its cable benefactors. To make this happen, AOL would have had to increase its capacity to include a new revenue source based on either better content or better product attributes in a cable broadband world. You would think that a company with at its height 27,000 US employees--many of whom brought the internet from a science experiment to a mass media marvel by, of all things, inventing a better game of post office--would have been able to take its game to the next level.
How much of AOL's intransigence was its own hubris versus its merger-magnified hubris once inside the legendary warrior walls of Time Warner is open to debate. The most important takeaway is not for AOL; it's already setting its course as a smaller cash distributor that, once transformed, may live to fight another day.
AOL's larger lessons can benefit the whole media content universe as well as monster distributors Google and Yahoo/Microsoft, Time Warner Cable, Comcast, Verizon and AT&T. When your business models fail, you need to fix what's broken in traditional capitalist terms (the fundamentals part); and, you need to introduce new products and business models that will siphon off revenue and cash flow from alternative sources. Cable siphoned off revenue from dial-up internet by undoing AOL as dial-up's brand face. Emboldened in victory, cable went on to undo most of its subsequent telco DSL competition. In doing so, it played more than a few crucial hands in determining the extent of Google's growth.
Despite their transformational power proven over media generations, today's cable distributors are moping around a bit about their inability to claim the revenue they believe they deserve as an offset to increasingly costly bandwidth utilization by their customers. Capping bandwidth won't work and shaping utilization will only work to a point. More vexing, cable has an AOL problem. It needs to develop a new business model that presages the transformation of its video business from a small oligopoly with a very small number of cable, satellite and telco tv players to an open frontier business where customers can get TV from twice the number of distributors in market today.
Maybe part of the answer can be gained by playing post office, just like AOL did when it jumped on top of telephony distribution to claim its fortune. Today's US Postal Service is upside down, threatening to go belly-up by increments, beginning with the elimination of Saturday mail. As traditional mail deteriorates, cable and telco broadband are becoming our new post office. As if the global warming effects of all those retail catalogues aren't enough to herald a transformation, AOL's existential irony may be enough to inspire a new business model for something as basic and high-utilization as e-mail.
What if broadband charged for the transmission of certain types of mail--mail with large attachments, mail delivered over long distances, mail from commercial sources, mail with heavy bandwidth links? It would have to offer something more in the transformation in order to protect its customer relationship fundamentals. But, if broadband internet could make more and ultimately increase its delivery capacity and quality by taking on a very fundamental model--paying for the delivery of a message of varying weight across varying distances--it might accomplish a great future transformation for itself, as well as potentially for the government apparatus it's replacing, in the process.
AOL is in the news again along with its new Google-harvested leader Tim Armstrong. Within the past few weeks, AOL has chosen a new post-spin-off Board that includes the usual media luminary suspects while announcing its massive lay-off plans to skinny down the company as a new independent investment prospect. While skinny-ing down will help the new AOL throw off cash, it won't guarantee its ability to improve its top-line financials quarter after quarter as Wall Street ultimately requires.
Control Video Corporation and Quantum Computer Services were AOL's earliest screen names, circa 1983-1985. AOL didn't become American Online until 1989, only eleven years before the fateful 2000 merger with Time Warner that spurred many a story, book, modern investment crisis and good old-fashioned ulcer.
Within four years of the AOL Time Warner marriage, AOL had 20,000 employees. More important, it had close to 27 million subscribers in the 2002-2004 timeframe. A whole "You've Got Mail" generation, today's 20-somethings, was formatively raised on the iconic blue triangle, the running man, the killer IM app and the transformation that consumer-friendly brilliantly designed dial-up internet brought to American mass media.
Looking back, everyone knows that the AOL Time Warner merger was a barn-burner of a mistake. What made it a mistake is judged differently according to which tour guide of the American media landscape you use. The structure of the deal and the valuations of the principals were clearly flawed: AOL's future potential was grossly over-stated and Time Warner's potential was judged roughly as rich as it has turned out to be, but only as a media company benefiting from its opportunistic mating with an internet juggernaut.
In spite of its AOL marriage, Time Warner and its spin-off Time Warner Cable have turned out to be tremendous assets on a fundamental level. Time Warner has understood the necessity of content innovation through its cable networks to a level unmet by any other US content company with the possible exception of Disney. It's still struggling to get its magazine properties to a point of either fundamentally solid growth or radical innovation within the internet and mobile space. But Time Warner's magazines have the benefit of time and financial support from their wealthy cable network partners.
Time Warner Cable has continued to grow both organically and through savvy M&A transactions. Since AOL was knee-high-to-a-grasshopper, Time Warner Cable has been a US growth leader through well-conceived and managed mergers and through a fundamental understanding of the core cable distribution business that is arguably superior to the entire cable field, with the possible exception of Comcast.
Why couldn't Time Warner and Time Warner Cable save AOL from its shrinking fate? Since 2002, in seven years, AOL has lost 21.3 million subscribers, bringing its customer base from 26.7 million down to 5.4 million today. Most of these customers upgraded from AOL's dial-up service, most memorably priced at just under $25 per month, to cable broadband service, priced on offer roughly $5 above AOL and over time at least $15 higher, and marketed, sold and serviced by Time Warner Cable and Comcast. The next best alternative during the period of AOL's troubles was telco DSL, priced as low as $15 a month, but without the fast track expansion capability or the speed of its cable competition.
What's the lesson here? It may be that you have to respect fundamentals even while you're worshiping at the altar of change. AOL was a subscription business with an ingenious design and a high respect for quality service as long as it was inside its comfort zone of dial-up internet connectivity. With the emergence of cable distribution exemplified by partner Time Warner Cable and pals, AOL seems to have sustained a broadband meteor hit that left it at least partially frozen in time.
There are hundreds of examples of media and service companies on ice past the point of having been bested by the competition. Broadcasting got iced with cable's expansion, particularly because of the advertising competition offered by cable content. Rather than sit on ice, broadcasters started leveraging their government-support fundamentals early to force their way onto the competitive cable menu.
What makes AOL excruciating is that it wouldn't transform itself into a true broadband service that competed on content while partnering on distribution. AOL's original genius was in understanding its symbiotic reliance on dial-up internet. Once mastered, AOL refused to understand its new symbiotic reliance on cable.
The stumbling block: the broadband conquerors' requirement that AOL surrender a piece of its subscription profit to its cable benefactors. To make this happen, AOL would have had to increase its capacity to include a new revenue source based on either better content or better product attributes in a cable broadband world. You would think that a company with at its height 27,000 US employees--many of whom brought the internet from a science experiment to a mass media marvel by, of all things, inventing a better game of post office--would have been able to take its game to the next level.
How much of AOL's intransigence was its own hubris versus its merger-magnified hubris once inside the legendary warrior walls of Time Warner is open to debate. The most important takeaway is not for AOL; it's already setting its course as a smaller cash distributor that, once transformed, may live to fight another day.
AOL's larger lessons can benefit the whole media content universe as well as monster distributors Google and Yahoo/Microsoft, Time Warner Cable, Comcast, Verizon and AT&T. When your business models fail, you need to fix what's broken in traditional capitalist terms (the fundamentals part); and, you need to introduce new products and business models that will siphon off revenue and cash flow from alternative sources. Cable siphoned off revenue from dial-up internet by undoing AOL as dial-up's brand face. Emboldened in victory, cable went on to undo most of its subsequent telco DSL competition. In doing so, it played more than a few crucial hands in determining the extent of Google's growth.
Despite their transformational power proven over media generations, today's cable distributors are moping around a bit about their inability to claim the revenue they believe they deserve as an offset to increasingly costly bandwidth utilization by their customers. Capping bandwidth won't work and shaping utilization will only work to a point. More vexing, cable has an AOL problem. It needs to develop a new business model that presages the transformation of its video business from a small oligopoly with a very small number of cable, satellite and telco tv players to an open frontier business where customers can get TV from twice the number of distributors in market today.
Maybe part of the answer can be gained by playing post office, just like AOL did when it jumped on top of telephony distribution to claim its fortune. Today's US Postal Service is upside down, threatening to go belly-up by increments, beginning with the elimination of Saturday mail. As traditional mail deteriorates, cable and telco broadband are becoming our new post office. As if the global warming effects of all those retail catalogues aren't enough to herald a transformation, AOL's existential irony may be enough to inspire a new business model for something as basic and high-utilization as e-mail.
What if broadband charged for the transmission of certain types of mail--mail with large attachments, mail delivered over long distances, mail from commercial sources, mail with heavy bandwidth links? It would have to offer something more in the transformation in order to protect its customer relationship fundamentals. But, if broadband internet could make more and ultimately increase its delivery capacity and quality by taking on a very fundamental model--paying for the delivery of a message of varying weight across varying distances--it might accomplish a great future transformation for itself, as well as potentially for the government apparatus it's replacing, in the process.
Wednesday, November 11, 2009
Get Serious
Capsule: The culmination of a major 2008 media merger, SiriusXM had a tough 2009, particularly on growth. The satellite music, sports and talk radio service must find a way to balance falling new car sales, rising subscription fees and customer growth requirements. Can advertising revenue make a difference with a changed product design that places ads into even the ad-less music channels? Where can a one-way entertainment service for your car take you on today's two-way media streets? (http://www.siriusradio.com/)
It's been a tough 2009 for advertising-based media. Even when advertising has been supported by subscription revenue, growth for many media businesses has been anemic. Because the advertising business has lost its rate-setting floor in favor of an aspirational web-based currency still missing a few zeros, tons of pressure and pride have been placed onto subscription revenue models.
When subscription revenue forms the core of a dual-stream revenue business, customer growth must be strong and predictable, up to the hundreds, the thousands and the millions of potential subscriber-delivered dollars. There's a delicate balance between rates and customer growth that can get unglued when growth machinery sputters; or, when there's too much promotional discounting complete with churn-inducing rate increases when the promos expire. It's hard for businesses without a lot of prior subscription experience to get that balance right.
SiriusXM lost customers this year, moving from 19 million down to 18.5 million since December, 2008. The merged satellite radio company points to the collapsed US auto business which is its main sales channel and dramatically reduced new car sales, just as most advertising-dependent media businesses have. But for SiriusXM, a decline in new US auto sales means more than lost advertising opportunity. It means a serious dent in new customer additions. SiriusXM, carrying at least two points of monthly churn throughout 2009, needs a healthy annual crop of car buyers to maintain customer counts, no less to grow.
The satellite monolith also needs an alternative to entry price discounting, an offer policy that up-ends predictable customer growth performances with serious Year One churn. The discontinuity of first year promotional churn can be absorbed by a business with a majority of seasoned customers, but not by a relatively new business with a long growth road ahead and few feeder paths.
Today, most SiriusXM customers buy the service along with a new car lease or purchase, enjoying a first free year as a bounty courtesy of BMW, Volvo, Chrysler or any of the participating dealers in the Sirius and XM crowd. Once that first free year ends, customers who can't afford the service or who don't see its value in a tough economic climate move on. The attractive satellite radio growth that comes with new car purchases can be bumped by a bad economy into unrecoverable loss territory, forcing a need for even more aggressive growth among the next prospects in the new car buying universe to create the right fundamentals for SiriusXM's growth and health.
Since loyalty from the car buying behavioral segment is the linchpin for SiriusXM, one would expect the company to be setting the standard for product marketing and sales inside the new car buying experience. Given the amount of convincing, informing and educating involved in the typical new car purchase, the sale of SiriusXM is difficult to place. Satellite radio doesn't have a direct sales presence inside the auto dealership, forcing it to rely on brand and product superiority to justify its price and make and keep its customers.
But SiriusXM's large growth objectives seem to anticipate an acquisition machine akin to that of big distribution generally, including cable, satellite, telco tv, broadband and VoIP. Unfortunately for satellite radio, the model doesn't hold. The growth cycles of these fundamental subscription businesses have been built on product disruption that competes vigorously with entertainment alternatives. As attractive a product as satellite radio has been, its disruptive bona fides have been stronger in the world of promotion--where radio rules and Howard Stern holds court--than in its marketing or product definition.
Perhaps the biggest distinction between SiriusXM and its distribution brethren is a key dedication on the part of the TV and broadband set to sales and marketing machinery and support costs. Since SiriusXM is embedded in so many high-end new car sales, the company is already paying a premium for acquisition, forcing it to control SAC by being more conservative on marketing and sales than most distribution companies. Without a consistent and major commitment to the operational work that feeds customers into a business at a rate surpassing churn, satellite radio suffers from a non-productive growth cycle, as well as from competition from preferred alternative media.
According to SiriusXM's pitch around its earnings reports, its worst economic challenges are ending. Expenses have been pared and the economic efficiencies of the Sirius XM merger will begin to bloom within the next two quarters. But SiriusXM's debt load is so substantial as to risk distracting the company from creating the necessary environment for organic growth. Early in 2009, Liberty Media bailed the satellite radio giant out of its second major debt crisis following the 2008 merger. Whether Liberty ends up maintaining its substantial stake in SiriusXM or permanently diluting current shareholders in some alternative transaction, the company's growth needs are substantial, requiring dedicated investment to be met. How can SiriusXM surmount these structural limitations to create the growth stability they need to last?
Today's reconstituted SiriusXM products include two sturdy satellite radio line-ups, backseat TV for the kids, an online streaming service that can be played on an iPhone or alternative MP3 player and the portability to move from dealer-equipped cars to any car and to the home through a variety of mobile devices. It has hundreds of entertainment choices, including major league sports coverage from XM, major celebrities like Howard Stern from Sirius--at least until his contract expires in the 2010-2011 timeframe--and enough alternative news, talk and music formats to fill out a monthly ARPU of just under $11. Spread across over 18 million customers nationwide, SiriusXM's revenue base is substantial.
But to compete in a new digital media universe, SiriusXM will need even more. A complete sales, marketing and service infrastructure akin to the media distribution companies whose growth it hopes to imitate will be a new requirement for a product and service approaching maturity. The one-year free promotional offers that shoveled customers into the business at its inception might be rethought in favor of an upfront cost and reduced monthly rates for the first 12 to 24 months.
And, Sirius XM's products will need to evolve as a demonstration of its ability to sustain a growing business beyond its original premise. To support the operational infrastructure of a thriving business, SiriusXM will have to introduce new ancillary revenue streams beyond its current subscription and advertising loads. A likely opportunity source: distribution collaboration with satellite, cable and telco broadband services that can take elements of SiriusXM's products and bring them to life inside the home in a way that placing the service on the internet or an iPod alone will not.
Even the most robust new products and improved marketing and sales will have to carry a lot of water to help re-restructure SiriusXM's serious debt load. In today's economy, the company may struggle to rationalize the set-up expenses necessary for a product, marketing and sales transformation. But there are few good alternatives. We could all wait for the US auto business to fix itself, aided by tax dollars. It could be a long wait as each major US car brand has steeled us for reduced production and consumption. It's unlikely that even the healthiest Ford Motors will return to its former numbers anytime soon. Unless SiriusXM finds the structural resources to support a new product development and organic growth process, the once assumed inevitability of satellite radio may fizzle against the backdrop of a radically transformed media future.
It's been a tough 2009 for advertising-based media. Even when advertising has been supported by subscription revenue, growth for many media businesses has been anemic. Because the advertising business has lost its rate-setting floor in favor of an aspirational web-based currency still missing a few zeros, tons of pressure and pride have been placed onto subscription revenue models.
When subscription revenue forms the core of a dual-stream revenue business, customer growth must be strong and predictable, up to the hundreds, the thousands and the millions of potential subscriber-delivered dollars. There's a delicate balance between rates and customer growth that can get unglued when growth machinery sputters; or, when there's too much promotional discounting complete with churn-inducing rate increases when the promos expire. It's hard for businesses without a lot of prior subscription experience to get that balance right.
SiriusXM lost customers this year, moving from 19 million down to 18.5 million since December, 2008. The merged satellite radio company points to the collapsed US auto business which is its main sales channel and dramatically reduced new car sales, just as most advertising-dependent media businesses have. But for SiriusXM, a decline in new US auto sales means more than lost advertising opportunity. It means a serious dent in new customer additions. SiriusXM, carrying at least two points of monthly churn throughout 2009, needs a healthy annual crop of car buyers to maintain customer counts, no less to grow.
The satellite monolith also needs an alternative to entry price discounting, an offer policy that up-ends predictable customer growth performances with serious Year One churn. The discontinuity of first year promotional churn can be absorbed by a business with a majority of seasoned customers, but not by a relatively new business with a long growth road ahead and few feeder paths.
Today, most SiriusXM customers buy the service along with a new car lease or purchase, enjoying a first free year as a bounty courtesy of BMW, Volvo, Chrysler or any of the participating dealers in the Sirius and XM crowd. Once that first free year ends, customers who can't afford the service or who don't see its value in a tough economic climate move on. The attractive satellite radio growth that comes with new car purchases can be bumped by a bad economy into unrecoverable loss territory, forcing a need for even more aggressive growth among the next prospects in the new car buying universe to create the right fundamentals for SiriusXM's growth and health.
Since loyalty from the car buying behavioral segment is the linchpin for SiriusXM, one would expect the company to be setting the standard for product marketing and sales inside the new car buying experience. Given the amount of convincing, informing and educating involved in the typical new car purchase, the sale of SiriusXM is difficult to place. Satellite radio doesn't have a direct sales presence inside the auto dealership, forcing it to rely on brand and product superiority to justify its price and make and keep its customers.
But SiriusXM's large growth objectives seem to anticipate an acquisition machine akin to that of big distribution generally, including cable, satellite, telco tv, broadband and VoIP. Unfortunately for satellite radio, the model doesn't hold. The growth cycles of these fundamental subscription businesses have been built on product disruption that competes vigorously with entertainment alternatives. As attractive a product as satellite radio has been, its disruptive bona fides have been stronger in the world of promotion--where radio rules and Howard Stern holds court--than in its marketing or product definition.
Perhaps the biggest distinction between SiriusXM and its distribution brethren is a key dedication on the part of the TV and broadband set to sales and marketing machinery and support costs. Since SiriusXM is embedded in so many high-end new car sales, the company is already paying a premium for acquisition, forcing it to control SAC by being more conservative on marketing and sales than most distribution companies. Without a consistent and major commitment to the operational work that feeds customers into a business at a rate surpassing churn, satellite radio suffers from a non-productive growth cycle, as well as from competition from preferred alternative media.
According to SiriusXM's pitch around its earnings reports, its worst economic challenges are ending. Expenses have been pared and the economic efficiencies of the Sirius XM merger will begin to bloom within the next two quarters. But SiriusXM's debt load is so substantial as to risk distracting the company from creating the necessary environment for organic growth. Early in 2009, Liberty Media bailed the satellite radio giant out of its second major debt crisis following the 2008 merger. Whether Liberty ends up maintaining its substantial stake in SiriusXM or permanently diluting current shareholders in some alternative transaction, the company's growth needs are substantial, requiring dedicated investment to be met. How can SiriusXM surmount these structural limitations to create the growth stability they need to last?
Today's reconstituted SiriusXM products include two sturdy satellite radio line-ups, backseat TV for the kids, an online streaming service that can be played on an iPhone or alternative MP3 player and the portability to move from dealer-equipped cars to any car and to the home through a variety of mobile devices. It has hundreds of entertainment choices, including major league sports coverage from XM, major celebrities like Howard Stern from Sirius--at least until his contract expires in the 2010-2011 timeframe--and enough alternative news, talk and music formats to fill out a monthly ARPU of just under $11. Spread across over 18 million customers nationwide, SiriusXM's revenue base is substantial.
But to compete in a new digital media universe, SiriusXM will need even more. A complete sales, marketing and service infrastructure akin to the media distribution companies whose growth it hopes to imitate will be a new requirement for a product and service approaching maturity. The one-year free promotional offers that shoveled customers into the business at its inception might be rethought in favor of an upfront cost and reduced monthly rates for the first 12 to 24 months.
And, Sirius XM's products will need to evolve as a demonstration of its ability to sustain a growing business beyond its original premise. To support the operational infrastructure of a thriving business, SiriusXM will have to introduce new ancillary revenue streams beyond its current subscription and advertising loads. A likely opportunity source: distribution collaboration with satellite, cable and telco broadband services that can take elements of SiriusXM's products and bring them to life inside the home in a way that placing the service on the internet or an iPod alone will not.
Even the most robust new products and improved marketing and sales will have to carry a lot of water to help re-restructure SiriusXM's serious debt load. In today's economy, the company may struggle to rationalize the set-up expenses necessary for a product, marketing and sales transformation. But there are few good alternatives. We could all wait for the US auto business to fix itself, aided by tax dollars. It could be a long wait as each major US car brand has steeled us for reduced production and consumption. It's unlikely that even the healthiest Ford Motors will return to its former numbers anytime soon. Unless SiriusXM finds the structural resources to support a new product development and organic growth process, the once assumed inevitability of satellite radio may fizzle against the backdrop of a radically transformed media future.
Monday, November 9, 2009
Comes With
Capsule: In tough times, margin compromises are necessary in the interest of future growth. In retail and advertising, a new multi-product-and-brand-mash is taking shape as compatible businesses search for competitive advantage. "Two-fer" product and pricing combinations from different business units and different companies are being tested in the marketplace--including streaming movies from CinemaNow inside Best Buy's consumer electronics and Newsday.com inside a Cablevision Optimum Online subscription. Which of these new arrangements and their progeny will power the media forward?
(http://paidcontent.org/article/419-most-of-cablevisions-newsday.com-goes-exclusive-for-print-optimum-onlin/; http://www.cinemanow.com/ )
Cablevision's bundling of its Newsday daily newspaper and Newsday.com online content as part of a two-fer product combination with its award-winning Optimum Online broadband service opens the media mind to a lot of possibilities for alternative distribution.
Newspapers can be global, but are generally local first. Cable and telco distribution systems are national in scale, regional in approach and local in their franchised service relationships. The local-to-local blend of a broadband and newspaper online combination may have great appeal, properly marketed and priced.
The core elements to keep in mind in pricing and packaging are those that contribute to the health and growth of each of the bundled products. Unless the rationale behind a "two-fer" is to prop up an ailing product by effectively giving it away with a stronger brand, bundled products succeed based on their individual strengths. Customers are drawn to an ingenious combination--as opposed to a cheap combination, which will always be outperformed by the next "free" offer. The best bundles create a new value logic in their combined customer experience that's better than the individual products on their own. Think of cable, telco and satellite packages--including the cable Triple Play--versus a la carte distribution.
Bringing journalism online into a paid format with broadband distribution makes sense, mostly because newspapers will have to survive some rough subscription sledding if they go it alone. No matter how intelligent the new forms of paid online content from newspapers and magazines will be, their marketing mojo will come from the internet, which means their main marketing engines will be Google et al. It's probably naive to leave paid subscription marketing for publications as august as The New York Times, The FT and The Wall Street Journal, as well as The New Yorker and the rest of the best in the magazine crowd, to online search. Since internet marketing is essentially search optimization, with expensive support from all the usual advertising suspects, it will likely be tougher to sell scale in internet subscriptions than it is to sell print.
The ability of journalism online to flourish without big marketing and sales budgets is questionable. Outside of what can be leveraged through the editorial strength of each brand, the marketing strength of most newspapers has depended on the cross-hatched local and regional advertising relationships it has struck with its most important customers. Retail and classified advertisers want you to know that they're featured inside the daily newspaper and their marketing collaboration increases newspaper sales.
The traditional distribution infrastructure around newspapers is another agent of promotional strength. The newsstand, the news truck, the newspaper delivery guy and the print newspaper itself all brand and sell. Take these distribution elements away--as faulty and uneconomic as they may be--and newspapers online are left in the cold and crowded world of internet search and too much choice. Building up big online marketing and sales budgets when the traditional newspaper infrastructure and its cash needs are still on the stage is asking for profit risk.
Enter the cable guys and their big distribution brethren, skilled in marketing and selling subscriptions as a regular process akin to breathing. Since many newspapers and magazines use video on their sites, an online, print and TV combination of each brand can be marketed as a cable brand enhancement adding value for some to their monthly broadband and TV service. As long as something is being charged and independently billed for each of the products inside, this type of cross-media bundle could be successful, making it easier for customers of both products to enjoy the brands they love. And the value of each component will be clear as long as you can buy your newspaper one of at least two ways: as an online and print brand, or as the enhanced online and print version that comes with cable.
The Cablevision Newsday combination has a few unique walls built around it, the most obvious of which is common ownership. Because Optimum Online and Newsday.com are products of the same company, they're being bundled in the most aggressive way possible--as a single product for customers of either Optimum Online or the print version of Newsday. Newsday.com will command a $5 weekly subscription fee for those who want to go it alone.
From the standpoint of competitive strength, this new online bundle may turn into a strategic stand-out for its brands. From the standpoint of growth beyond its local market walls, Newsday.com will sacrifice the development of new and some mobile audiences as a trade-off for promotion through the cable promotions factory. Given that Newsday is already behind a local market wall since its exclusive Long Island market is actually an island--no less an island dominantly served by Cablevision with its family of Optimum products--there's likely little growth risk. But for newspapers without this structure and with online ambitions that include significant growth through both new advertising revenue and new subscriptions, a more basic version of brand bundling will be preferred.
At the same time, staggering retail giant Best Buy has announced a bundle-to-be between many of its consumer electronics devices that are powered by internet connections and CinemaNow internet movies and TV. Best Buy is appropriating the identity of a media distributor by announcing its "cloud movie" service, to be powered by Sonic Solutions, CinemaNow's owner. The core concepts Best Buy will sell include "openness and flexibility" as all of the internet content purchased to play on one cloud movie device will be available for streaming on every cloud movie device a customer buys from the retail cloud people. Best Buy is already talking cloud distribution talk, referring to "completing the ecosystem" of internet powered digital entertainment.
Pricing on Best Buy's cloud movies has yet to be announced, but it's fair to guess that if this service and retail combination stands a chance in the heavens of success, it will carve out visible profit margins for each of its business partners. The most likely low-risk partnership will see Best Buy sell CinemaNow with a short-term promotional offer that moves to full price quickly. The retailer's substantial contribution will be marketing, selling and educating the consumer on internet streamed product that can be enjoyed as soon as the customer gets home.
As the economy continues to challenge consumers and advertisers, low-risk marketing and distribution partnerships will be an attractive new growth strategy for online TV, movie and print brands. Each new bundle will include a new margin contribution required from the online business to pay for being part of a new media infrastructure.
At the same time, the rates for even wireless phone service are being driven down by internet technology substitution, as evidenced by monthly ARPU drops in brands as strong as Verizon. Why pay for wireless minutes when low-cost and free internet calling can contain your monthly budget? Could it be, once again, that the internet's vast product superiority and cost efficiency is forcing a wholesale haircut on the media?
Our current economic challenges are suggesting a renaissance of the traditional distribution businesses, now expanded to include new online products from in-house and out-of-house in their multifaceted bundles. Of course, big distribution for online products will require elevated online prices to pay their marketing fare. Otherwise, even the most attractive online content may find itself all dressed up with no place to go.
(http://paidcontent.org/article/419-most-of-cablevisions-newsday.com-goes-exclusive-for-print-optimum-onlin/; http://www.cinemanow.com/ )
Cablevision's bundling of its Newsday daily newspaper and Newsday.com online content as part of a two-fer product combination with its award-winning Optimum Online broadband service opens the media mind to a lot of possibilities for alternative distribution.
Newspapers can be global, but are generally local first. Cable and telco distribution systems are national in scale, regional in approach and local in their franchised service relationships. The local-to-local blend of a broadband and newspaper online combination may have great appeal, properly marketed and priced.
The core elements to keep in mind in pricing and packaging are those that contribute to the health and growth of each of the bundled products. Unless the rationale behind a "two-fer" is to prop up an ailing product by effectively giving it away with a stronger brand, bundled products succeed based on their individual strengths. Customers are drawn to an ingenious combination--as opposed to a cheap combination, which will always be outperformed by the next "free" offer. The best bundles create a new value logic in their combined customer experience that's better than the individual products on their own. Think of cable, telco and satellite packages--including the cable Triple Play--versus a la carte distribution.
Bringing journalism online into a paid format with broadband distribution makes sense, mostly because newspapers will have to survive some rough subscription sledding if they go it alone. No matter how intelligent the new forms of paid online content from newspapers and magazines will be, their marketing mojo will come from the internet, which means their main marketing engines will be Google et al. It's probably naive to leave paid subscription marketing for publications as august as The New York Times, The FT and The Wall Street Journal, as well as The New Yorker and the rest of the best in the magazine crowd, to online search. Since internet marketing is essentially search optimization, with expensive support from all the usual advertising suspects, it will likely be tougher to sell scale in internet subscriptions than it is to sell print.
The ability of journalism online to flourish without big marketing and sales budgets is questionable. Outside of what can be leveraged through the editorial strength of each brand, the marketing strength of most newspapers has depended on the cross-hatched local and regional advertising relationships it has struck with its most important customers. Retail and classified advertisers want you to know that they're featured inside the daily newspaper and their marketing collaboration increases newspaper sales.
The traditional distribution infrastructure around newspapers is another agent of promotional strength. The newsstand, the news truck, the newspaper delivery guy and the print newspaper itself all brand and sell. Take these distribution elements away--as faulty and uneconomic as they may be--and newspapers online are left in the cold and crowded world of internet search and too much choice. Building up big online marketing and sales budgets when the traditional newspaper infrastructure and its cash needs are still on the stage is asking for profit risk.
Enter the cable guys and their big distribution brethren, skilled in marketing and selling subscriptions as a regular process akin to breathing. Since many newspapers and magazines use video on their sites, an online, print and TV combination of each brand can be marketed as a cable brand enhancement adding value for some to their monthly broadband and TV service. As long as something is being charged and independently billed for each of the products inside, this type of cross-media bundle could be successful, making it easier for customers of both products to enjoy the brands they love. And the value of each component will be clear as long as you can buy your newspaper one of at least two ways: as an online and print brand, or as the enhanced online and print version that comes with cable.
The Cablevision Newsday combination has a few unique walls built around it, the most obvious of which is common ownership. Because Optimum Online and Newsday.com are products of the same company, they're being bundled in the most aggressive way possible--as a single product for customers of either Optimum Online or the print version of Newsday. Newsday.com will command a $5 weekly subscription fee for those who want to go it alone.
From the standpoint of competitive strength, this new online bundle may turn into a strategic stand-out for its brands. From the standpoint of growth beyond its local market walls, Newsday.com will sacrifice the development of new and some mobile audiences as a trade-off for promotion through the cable promotions factory. Given that Newsday is already behind a local market wall since its exclusive Long Island market is actually an island--no less an island dominantly served by Cablevision with its family of Optimum products--there's likely little growth risk. But for newspapers without this structure and with online ambitions that include significant growth through both new advertising revenue and new subscriptions, a more basic version of brand bundling will be preferred.
At the same time, staggering retail giant Best Buy has announced a bundle-to-be between many of its consumer electronics devices that are powered by internet connections and CinemaNow internet movies and TV. Best Buy is appropriating the identity of a media distributor by announcing its "cloud movie" service, to be powered by Sonic Solutions, CinemaNow's owner. The core concepts Best Buy will sell include "openness and flexibility" as all of the internet content purchased to play on one cloud movie device will be available for streaming on every cloud movie device a customer buys from the retail cloud people. Best Buy is already talking cloud distribution talk, referring to "completing the ecosystem" of internet powered digital entertainment.
Pricing on Best Buy's cloud movies has yet to be announced, but it's fair to guess that if this service and retail combination stands a chance in the heavens of success, it will carve out visible profit margins for each of its business partners. The most likely low-risk partnership will see Best Buy sell CinemaNow with a short-term promotional offer that moves to full price quickly. The retailer's substantial contribution will be marketing, selling and educating the consumer on internet streamed product that can be enjoyed as soon as the customer gets home.
As the economy continues to challenge consumers and advertisers, low-risk marketing and distribution partnerships will be an attractive new growth strategy for online TV, movie and print brands. Each new bundle will include a new margin contribution required from the online business to pay for being part of a new media infrastructure.
At the same time, the rates for even wireless phone service are being driven down by internet technology substitution, as evidenced by monthly ARPU drops in brands as strong as Verizon. Why pay for wireless minutes when low-cost and free internet calling can contain your monthly budget? Could it be, once again, that the internet's vast product superiority and cost efficiency is forcing a wholesale haircut on the media?
Our current economic challenges are suggesting a renaissance of the traditional distribution businesses, now expanded to include new online products from in-house and out-of-house in their multifaceted bundles. Of course, big distribution for online products will require elevated online prices to pay their marketing fare. Otherwise, even the most attractive online content may find itself all dressed up with no place to go.
Thursday, November 5, 2009
Separation Anxiety
Capsule: On the threshold of a likely consolidation of Comcast and NBCU, some members of the press are questioning the wisdom of another content and distribution alliance. At the same time, one media company after another is increasing its Google dependence in hopes of being delivered to a virtual promised land. And, giant Cisco Systems has formed a vertically integrated cloud consortium called the Virtual Computing Environment. Why do we mind the consolidation of traditional media companies without giving online media combinations a second thought? (http://intelligencesquaredus.org/)
Intelligence Squared US produces debates featuring luminaries from government, business, politics, non-profit and the media on issues of national interest. Their October 27th debate presented arguments for and against a motion called "Good Riddance to Mainstream Media." Award-winning new and old media journalists from WNYC/PRI, Politico, Vanity Fair, ABC News Nightline, the Nation, the New York Times and the San Francisco Examiner debated whether traditional media models should stay or go, culminating in an audience vote that bid them stay.
A debate on whether or not mainstream media is dying is like a debate on climate change. It would be wacky to pit scientists and academics against one another on an issue that unites most of the scientific community. Just imagine a televised debate called "Good Riddance Mother Earth."
Yet, we insist on conjuring up the death of newspapers, broadcast TV, radio, magazines and cable with fierce certainty, aided by precipitous declines in advertising revenue, especially the classified form, that have undermined traditional media revenue models. When classified advertising began its move to superior online products, where were the replacement revenue plans in the newspaper business? The classified shift didn't merit a debate; it merited a new plan, including the kinds of intelligent risks that building alternative revenue streams generally require. Did newspapers refuse to see the inevitability of their own ill health by failing to recognize an urgent need to change direction? Other than consolidating classified sales through newspaper consortia, not a lot was done to change the course of newspaper advertising revenue.
The same may be happening today with an insistence on over-fishing the online advertising revenue waters. Some media thinkers are advocating increased commercial insertion inside lightly-loaded online TV content. The argument for more advertising assumes a replacement need--in this case, the replacement of traditional TV broadcast and cable advertising with online TV content and advertising. Did somebody die and nobody reported it? Are broadcast and cable distribution companies going somewhere that will require online TV to assume complete ad revenue replacement responsibility? We better hope not.
Instead of learning from what happened with the early stages of decline in classified newspaper revenue, some in the media seem intent on snuffing themselves out. With classified, new superior advertising products and firms arose online that created an important intersection between local markets and aggregated online commerce communities. Because online became better at telling the classified advertising story, it achieved a natural dominance. The problem was newspapers' failure to respond with an alternative revenue and product plan.
This type of media failure has been widespread and oft-repeated. When Google attained traction for its brilliant search business, the mainstream media either fawned--the "Google is God" school of media evangelism still practicing today--or yawned. Again, print media took a special hit in retail advertising revenue as well as in the appropriation of their content resources. Did anyone complain about the fact that there was an over-correlation towards Google's business model spreading like a contagion through the media advertising world? Google couldn't say much--not while its stock price and user base were multiplying. What was at the heart of the matter? Traditional media's failure to see that an important part of its foundation was once again being overtaken by the online environment.
Google's mildly cranky book deal and its advocacy of Open ID as the single sign-on linking all US websites are two examples of traditional media challenges in the making; yet, there's a dearth of quality business and media reporting on where Google's giant ambitions might lead and which business segments it might overtake as an outcome. Google continues to do what it's supposed to be doing: expanding, making money, hiring people, supporting its employee base, supporting other businesses and innovating in a way that will create new revenue lines for itself and others. In the meantime, some players in traditional media are doing a lot of the same: expanding, making money, supporting their employee bases and supporting other businesses. What very few in traditional media are doing is innovating and hiring people.
Some combination of masochism and market capitalization math mastery has resulted in a media mind that thinks growth is all about M&A activity that extracts surplus equity value from the markets. Growth is about innovation that creates new or expanded revenue lines for a business as well as jobs. The worry over Comcast and NBCU reconsolidating content and distribution has a serious basis in the historic challenges faced by Time Warner and AOL. But the real issues inside the Time Warner AOL marriage came from a prolonged failure to seek true consolidated value amongst the diverse interests inside. It's unlikely that Comcast will make the same mistake given the chance.
Media consolidation is inevitable, particularly in a tough economy that can only support a small number of leaders at the top. Creative destruction is a part of creative business development, accelerated in the media because of its critical reliance on the latest technology for compounded efficiency and growth. Neither of these inevitable forces presages the death of traditional media. But traditional media can cause its own ill health by refusing to replace the segments of the business it has lost with new money-making initiatives (beyond rate increases.) Over-consolidation is most dangerous when just being big seems like enough protection in a technology world that has started coming apart.
Consolidation isn't the problem. Just like divorce, eventual corporate separation through spin-offs are inevitable aided by economic cycles. As long as there are enough fractional new upstart alternatives to a fully consolidated media view, we won't wake up in an Orwellian media nightmare--all extreme progressive arguments to the contrary.
The real insult to traditional media has been too much separation, beginning with superior online products that separated classified and retail advertising from print vehicles of great social value hard pressed to come up with revenue replacement products. Superior online search has supplanted many traditional advertising forms, separating Madison Avenue from its wallet. Urgent burdens sit on the media pressing the consolidation of traditional and new media businesses en route to new profit lines. The first handful of traditional media companies that can produce new products that take the quality of traditional content and duplicate it through place-based traditional and mobile online distribution will change the trend. The great challenge is to perfect addition by addition in an environment that seems to prefer addition by subtraction to the continued detriment of whole segments of the US economy.
Intelligence Squared US produces debates featuring luminaries from government, business, politics, non-profit and the media on issues of national interest. Their October 27th debate presented arguments for and against a motion called "Good Riddance to Mainstream Media." Award-winning new and old media journalists from WNYC/PRI, Politico, Vanity Fair, ABC News Nightline, the Nation, the New York Times and the San Francisco Examiner debated whether traditional media models should stay or go, culminating in an audience vote that bid them stay.
A debate on whether or not mainstream media is dying is like a debate on climate change. It would be wacky to pit scientists and academics against one another on an issue that unites most of the scientific community. Just imagine a televised debate called "Good Riddance Mother Earth."
Yet, we insist on conjuring up the death of newspapers, broadcast TV, radio, magazines and cable with fierce certainty, aided by precipitous declines in advertising revenue, especially the classified form, that have undermined traditional media revenue models. When classified advertising began its move to superior online products, where were the replacement revenue plans in the newspaper business? The classified shift didn't merit a debate; it merited a new plan, including the kinds of intelligent risks that building alternative revenue streams generally require. Did newspapers refuse to see the inevitability of their own ill health by failing to recognize an urgent need to change direction? Other than consolidating classified sales through newspaper consortia, not a lot was done to change the course of newspaper advertising revenue.
The same may be happening today with an insistence on over-fishing the online advertising revenue waters. Some media thinkers are advocating increased commercial insertion inside lightly-loaded online TV content. The argument for more advertising assumes a replacement need--in this case, the replacement of traditional TV broadcast and cable advertising with online TV content and advertising. Did somebody die and nobody reported it? Are broadcast and cable distribution companies going somewhere that will require online TV to assume complete ad revenue replacement responsibility? We better hope not.
Instead of learning from what happened with the early stages of decline in classified newspaper revenue, some in the media seem intent on snuffing themselves out. With classified, new superior advertising products and firms arose online that created an important intersection between local markets and aggregated online commerce communities. Because online became better at telling the classified advertising story, it achieved a natural dominance. The problem was newspapers' failure to respond with an alternative revenue and product plan.
This type of media failure has been widespread and oft-repeated. When Google attained traction for its brilliant search business, the mainstream media either fawned--the "Google is God" school of media evangelism still practicing today--or yawned. Again, print media took a special hit in retail advertising revenue as well as in the appropriation of their content resources. Did anyone complain about the fact that there was an over-correlation towards Google's business model spreading like a contagion through the media advertising world? Google couldn't say much--not while its stock price and user base were multiplying. What was at the heart of the matter? Traditional media's failure to see that an important part of its foundation was once again being overtaken by the online environment.
Google's mildly cranky book deal and its advocacy of Open ID as the single sign-on linking all US websites are two examples of traditional media challenges in the making; yet, there's a dearth of quality business and media reporting on where Google's giant ambitions might lead and which business segments it might overtake as an outcome. Google continues to do what it's supposed to be doing: expanding, making money, hiring people, supporting its employee base, supporting other businesses and innovating in a way that will create new revenue lines for itself and others. In the meantime, some players in traditional media are doing a lot of the same: expanding, making money, supporting their employee bases and supporting other businesses. What very few in traditional media are doing is innovating and hiring people.
Some combination of masochism and market capitalization math mastery has resulted in a media mind that thinks growth is all about M&A activity that extracts surplus equity value from the markets. Growth is about innovation that creates new or expanded revenue lines for a business as well as jobs. The worry over Comcast and NBCU reconsolidating content and distribution has a serious basis in the historic challenges faced by Time Warner and AOL. But the real issues inside the Time Warner AOL marriage came from a prolonged failure to seek true consolidated value amongst the diverse interests inside. It's unlikely that Comcast will make the same mistake given the chance.
Media consolidation is inevitable, particularly in a tough economy that can only support a small number of leaders at the top. Creative destruction is a part of creative business development, accelerated in the media because of its critical reliance on the latest technology for compounded efficiency and growth. Neither of these inevitable forces presages the death of traditional media. But traditional media can cause its own ill health by refusing to replace the segments of the business it has lost with new money-making initiatives (beyond rate increases.) Over-consolidation is most dangerous when just being big seems like enough protection in a technology world that has started coming apart.
Consolidation isn't the problem. Just like divorce, eventual corporate separation through spin-offs are inevitable aided by economic cycles. As long as there are enough fractional new upstart alternatives to a fully consolidated media view, we won't wake up in an Orwellian media nightmare--all extreme progressive arguments to the contrary.
The real insult to traditional media has been too much separation, beginning with superior online products that separated classified and retail advertising from print vehicles of great social value hard pressed to come up with revenue replacement products. Superior online search has supplanted many traditional advertising forms, separating Madison Avenue from its wallet. Urgent burdens sit on the media pressing the consolidation of traditional and new media businesses en route to new profit lines. The first handful of traditional media companies that can produce new products that take the quality of traditional content and duplicate it through place-based traditional and mobile online distribution will change the trend. The great challenge is to perfect addition by addition in an environment that seems to prefer addition by subtraction to the continued detriment of whole segments of the US economy.
Monday, November 2, 2009
Second Life
Capsule: Will the media go bravely and opportunistically into an embedded internet access future that brings cyberspace into the real environments in which we work and play? Future growth for both content and distribution may depend on new products that use authentication for more than extending cable programming from the TV to the PC. Internet Everywhere should follow TV Everywhere into a new phase of technological development that blends wired and wireless communication into a single mobile infrastructure.
BBC
SUNY Stony Brook on Wireless Networks
Nomadix
This week, the BBC World Service and PRI, which includes its US WGBH-Boston partner, celebrated one of the Internet's 40th birthdays with a Leonard Kleinrock interview. Kleinrock originated the Internet predecessor ARPANET, a first-of-its-kind packet-switched computer data-sharing system for which Kleinrock's UCLA-and-SRI based computers formed the first four-node network in 1969. In addition to his substantial UCLA stewardship, Kleinrock went on in the most recent decade to chair Nomadix--a company focused on "providing solutions for the public access market to create multi-use, multi-revenue networks that require zero configuration for end user access"--now part of Japan's NTT DoCoMo.
In the BBC interview, Kleinrock is asked "what comes next?" His enthusiastic response: the internet will change most dramatically in the next 40 years in how it appears to the user. Kleinrock insists that the infrastructure for internet access and navigation will change dramatically, moving content--including data, voice and video--between embedded screens, physical sensors, microphones, speakers, applied nanotechnology and virtual imagery that will "release (personalized versions of) cyberspace into our physical space."
One of the clearest hints that Kleinrock's vision is closer than some may think is the enveloping hush of virtual publishing moving hard physical books, textbooks, newspapers and magazines onto soft mobile Kindles, upcoming tablets and Google-aided search. The originator of Amazon's Kindle "WhisperNet"--through which Kindle readers can buy and have a book, newspaper or magazine of their choice within a minute of ordering it--was Sprint. The wireless contract has now moved to AT&T, where scale will support the seamless spreading of an application destined for the masses.
Kleinrock also sees improvements in store for personal authentication, necessary to provide authenticity and security within the increasingly global and mobile internet environment. As the cable industry's TV Everywhere initiative increasingly is known by the informal shorthand of "authentication," it seems right that the industry develop a view of authentication's broader future applications in the home and workplace.
Cisco's John Chambers, an advanced media thinker as well as a major cable industry equipment supplier of both set-top boxes and modems, is an avid user of videoconferencing in his home and office. Chambers is reputed to believe that top quality videoconferencing will replace some portion of our personal and professional travel in the near future. Seeing embedded personalized communication as a benefit that derives some value from travel cost-and-convenience savings makes sense and may lead to pricing and offer logic inside the cyber-home/office. Cisco is an infrastructure partner to NTT DoCoMo's Nomadix--which Kleinrock led until 2006--along with 3Com, Arrowspan, BelAir Networks, Sky Pilot, Trapeze, Tropos Networks and others.
Where might today's major US media distributors enter this new paradigm? Aggressive partnerships with some of the wireless distributors moving content around the human experience will help. Much of Kleinrock's inspiration for packet-switching as a means of moving content on the ARPANET was theoretical. He developed problem-solving logic for mass connectivity away from his physical computing environment and demanded that the environment shape itself to his vision.
Cable, telecom and satellite distribution might adopt a similar stance, envisioning the post-modern home, office and store all-in-one, shaped by multiple personalized interconnected content and distribution with many well-authenticated cash registers at the ready. This would require cable and telecom to move off their traditional models of controlling every access point and output of their networks--even if only just a little bit.
By assembling a physical and deal infrastructure that includes wireless internet access providers, media distribution might see its smart home plans materialize, blended profitably with smart commercial and in-home entertainment. Media content might escape some of the confines of distribution collars for a new environment that moves its products around town and resells them through traditional and alternative retail distribution hybrids.
A few examples of how the media's embedded personalized second life might take hold? Traditional distributors could break down some of their one-dimensional walls between homes and businesses, acknowledging the massive portability of life and work. Today, distribution and content use anachronistic place-based rules for defining the types of services they provide and their rates. Everything is divided into Residential Service and Commercial Service.
For video, the origin of the strict separation between homes and businesses originated with content companies who didn't want to see group viewings of pay TV content eclipse their ability to sell to alternative commercial distributors--including theatrical distributors at the head of the line--at very high prices. For broadband, the rules are based on some combination of distribution's network management preferences, capital conservation requirements facing pricey line extensions and the drive to profit.
If it's true that the biggest near-term US job gains must come from small and mid-sized businesses, cable and telecom might take a worthwhile tour through the place-based realities of those businesses. Many small businesses operate from homes. Many large businesses rely heavily on the work that their employees do "after hours" at home. If media distributors were able to reserve the distinction between home and business in only those cases where it actually benefited the customer, new profits through integration might logically follow.
Why shouldn't Bloomberg, Thomson Reuters, WSJ Interactive/Market Watch/Barron's, The New York Times and The FT/Pearson be encouraged to bring their business acumen, reporting and information loads into the home through cable and telecom distribution and disruptive marketing? Bloomberg's business data and communications service purchased at home is a pretty pricey extravagance. Given that the Bloomberg market has suffered a few down-sizing dents, can a less expensive more widely targeted wired and wireless business news service create value?
What about the revenue that can be captured driving the in-home media business out-of-home? Comcast, Time Warner, Verizon and AT&T might originate Enterprise/SMB products that integrate "home" content and services--like TV and search--with wireless networks serving offices and stores.
Imagine the transformation of traditional home-based products--premised on two-screen internet-aided TV viewing--into a suite of business products tailored to the real work experience, enriched by multimedia out-of-home screens interconnected via wired and wireless hybrids with office and home PC's. By integrating fixed and wireless distribution platforms with audience measurement triggered by mobile cards or device authentication, big distribution can enable communications and advertising systems that power large and small displays, stores and offices. They can also sponsor the cost-effective replacement of some voice systems with multifunctional cell phones for home and work.
The integration of home, retail and office products might even result in widespread revenue streams based on the Kindle phenomenon. The Kindle and its "Whispernet" have made the immediate physical gratification of our buying impulses contribute to the value of the products bought. Maybe that's why Kindle users are reputed to purchase 40-50% more books after getting turned on. Might businesses as well as stores, theaters, arenas and MDU's benefit from being a backbone for the on-premise sales of selected advertised products shown on integrated screens in common areas and on personalized mobile devices? With a better integrated system for revenue development, we might even embrace the fact that we all shop at work as well as at home and on our "weekends."
If the complex products offered by traditional media content and distribution companies can't be made to fit into the backwards Second Life integration of cyberspace and physical space, new media content and distribution hybrids will likely lead the charge. A personalized Google made for office and home that targets each individual's lifestyle and commercial avatar is likely. Office parks, MDU's and stores can build and drive profit from their own wireless and wired distribution hybrids. So can governments, if there is a will inspired by a need. But progress will be faster and bigger if today's big media businesses stay opportunistically engaged. To extend their own profitable revenue growth, they might turn their gaze from the last war that birthed their disruptive media businesses to the virtual and real victories to come.
BBC
SUNY Stony Brook on Wireless Networks
Nomadix
This week, the BBC World Service and PRI, which includes its US WGBH-Boston partner, celebrated one of the Internet's 40th birthdays with a Leonard Kleinrock interview. Kleinrock originated the Internet predecessor ARPANET, a first-of-its-kind packet-switched computer data-sharing system for which Kleinrock's UCLA-and-SRI based computers formed the first four-node network in 1969. In addition to his substantial UCLA stewardship, Kleinrock went on in the most recent decade to chair Nomadix--a company focused on "providing solutions for the public access market to create multi-use, multi-revenue networks that require zero configuration for end user access"--now part of Japan's NTT DoCoMo.
In the BBC interview, Kleinrock is asked "what comes next?" His enthusiastic response: the internet will change most dramatically in the next 40 years in how it appears to the user. Kleinrock insists that the infrastructure for internet access and navigation will change dramatically, moving content--including data, voice and video--between embedded screens, physical sensors, microphones, speakers, applied nanotechnology and virtual imagery that will "release (personalized versions of) cyberspace into our physical space."
One of the clearest hints that Kleinrock's vision is closer than some may think is the enveloping hush of virtual publishing moving hard physical books, textbooks, newspapers and magazines onto soft mobile Kindles, upcoming tablets and Google-aided search. The originator of Amazon's Kindle "WhisperNet"--through which Kindle readers can buy and have a book, newspaper or magazine of their choice within a minute of ordering it--was Sprint. The wireless contract has now moved to AT&T, where scale will support the seamless spreading of an application destined for the masses.
Kleinrock also sees improvements in store for personal authentication, necessary to provide authenticity and security within the increasingly global and mobile internet environment. As the cable industry's TV Everywhere initiative increasingly is known by the informal shorthand of "authentication," it seems right that the industry develop a view of authentication's broader future applications in the home and workplace.
Cisco's John Chambers, an advanced media thinker as well as a major cable industry equipment supplier of both set-top boxes and modems, is an avid user of videoconferencing in his home and office. Chambers is reputed to believe that top quality videoconferencing will replace some portion of our personal and professional travel in the near future. Seeing embedded personalized communication as a benefit that derives some value from travel cost-and-convenience savings makes sense and may lead to pricing and offer logic inside the cyber-home/office. Cisco is an infrastructure partner to NTT DoCoMo's Nomadix--which Kleinrock led until 2006--along with 3Com, Arrowspan, BelAir Networks, Sky Pilot, Trapeze, Tropos Networks and others.
Where might today's major US media distributors enter this new paradigm? Aggressive partnerships with some of the wireless distributors moving content around the human experience will help. Much of Kleinrock's inspiration for packet-switching as a means of moving content on the ARPANET was theoretical. He developed problem-solving logic for mass connectivity away from his physical computing environment and demanded that the environment shape itself to his vision.
Cable, telecom and satellite distribution might adopt a similar stance, envisioning the post-modern home, office and store all-in-one, shaped by multiple personalized interconnected content and distribution with many well-authenticated cash registers at the ready. This would require cable and telecom to move off their traditional models of controlling every access point and output of their networks--even if only just a little bit.
By assembling a physical and deal infrastructure that includes wireless internet access providers, media distribution might see its smart home plans materialize, blended profitably with smart commercial and in-home entertainment. Media content might escape some of the confines of distribution collars for a new environment that moves its products around town and resells them through traditional and alternative retail distribution hybrids.
A few examples of how the media's embedded personalized second life might take hold? Traditional distributors could break down some of their one-dimensional walls between homes and businesses, acknowledging the massive portability of life and work. Today, distribution and content use anachronistic place-based rules for defining the types of services they provide and their rates. Everything is divided into Residential Service and Commercial Service.
For video, the origin of the strict separation between homes and businesses originated with content companies who didn't want to see group viewings of pay TV content eclipse their ability to sell to alternative commercial distributors--including theatrical distributors at the head of the line--at very high prices. For broadband, the rules are based on some combination of distribution's network management preferences, capital conservation requirements facing pricey line extensions and the drive to profit.
If it's true that the biggest near-term US job gains must come from small and mid-sized businesses, cable and telecom might take a worthwhile tour through the place-based realities of those businesses. Many small businesses operate from homes. Many large businesses rely heavily on the work that their employees do "after hours" at home. If media distributors were able to reserve the distinction between home and business in only those cases where it actually benefited the customer, new profits through integration might logically follow.
Why shouldn't Bloomberg, Thomson Reuters, WSJ Interactive/Market Watch/Barron's, The New York Times and The FT/Pearson be encouraged to bring their business acumen, reporting and information loads into the home through cable and telecom distribution and disruptive marketing? Bloomberg's business data and communications service purchased at home is a pretty pricey extravagance. Given that the Bloomberg market has suffered a few down-sizing dents, can a less expensive more widely targeted wired and wireless business news service create value?
What about the revenue that can be captured driving the in-home media business out-of-home? Comcast, Time Warner, Verizon and AT&T might originate Enterprise/SMB products that integrate "home" content and services--like TV and search--with wireless networks serving offices and stores.
Imagine the transformation of traditional home-based products--premised on two-screen internet-aided TV viewing--into a suite of business products tailored to the real work experience, enriched by multimedia out-of-home screens interconnected via wired and wireless hybrids with office and home PC's. By integrating fixed and wireless distribution platforms with audience measurement triggered by mobile cards or device authentication, big distribution can enable communications and advertising systems that power large and small displays, stores and offices. They can also sponsor the cost-effective replacement of some voice systems with multifunctional cell phones for home and work.
The integration of home, retail and office products might even result in widespread revenue streams based on the Kindle phenomenon. The Kindle and its "Whispernet" have made the immediate physical gratification of our buying impulses contribute to the value of the products bought. Maybe that's why Kindle users are reputed to purchase 40-50% more books after getting turned on. Might businesses as well as stores, theaters, arenas and MDU's benefit from being a backbone for the on-premise sales of selected advertised products shown on integrated screens in common areas and on personalized mobile devices? With a better integrated system for revenue development, we might even embrace the fact that we all shop at work as well as at home and on our "weekends."
If the complex products offered by traditional media content and distribution companies can't be made to fit into the backwards Second Life integration of cyberspace and physical space, new media content and distribution hybrids will likely lead the charge. A personalized Google made for office and home that targets each individual's lifestyle and commercial avatar is likely. Office parks, MDU's and stores can build and drive profit from their own wireless and wired distribution hybrids. So can governments, if there is a will inspired by a need. But progress will be faster and bigger if today's big media businesses stay opportunistically engaged. To extend their own profitable revenue growth, they might turn their gaze from the last war that birthed their disruptive media businesses to the virtual and real victories to come.
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