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.
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