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.