After reading a piece in the Wall Street Journal yesterday concerning Google's $100MM bet on celebrity channels on YouTube. It reminded me of my old mentor, Gerry Weiss' insights into competition and colliding arenas.
Gerry and his colleagues developed the concept as strategic planners at GE under Jack McKittrick. Essentially, a technology that is at the core of one entity in one 'arena,' or business area, uses said technology to expand into a new business. The entity's technological and/or other business model attributes strike at a vulnerability of existing occupants of the new business, causing a radical upheaval.
That's what seems to be about to occur at Google/YouTube.
I've been writing about the disintermediation of cable television for a few years. Now I realize that Google's recent staking of various media celebrities to $100MM worth of channels for their own creative usage will only speed that disintermediation. The Journal article cites several actors having broken into work on cable television programs via viral YouTube videos.
I've contended for several years that a writer/producer like Larry David would be foolish to bother putting his next series on cable. He could easily go right to streaming video from a website.
Then Glenn Beck departed Fox News for his own website-based media empire.
The Journal piece ended on a cautionary tone, noting that Google isn't likely to be earning revenues from any of this YouTube effort anytime soon. But offered a silver lining that in just three years, its Android cell phone alternative has grown to take half of the smart phone market.
My own sense of Google and YouTube is that, in the simplest case, they get eyeballs on which to earn advertising revenues. Then, over time, as viewers are trained to watch streaming web videos as their natural way of viewing heretofore broadcast- and cable-only frequently-aired (i.e., weekly programs) content, the step to paying for new content from a bankable talent like David or some other writer will be simple.
At that point, it wouldn't be a stretch for Google to be straying into signing and backing new talent, would it?
Even if not, just by migrating more and more viewers to their streaming video, they'll drain the last drops of life from broadcast network television, while accelerating the problems at cable providers.
That's one of the hallmarks of arena competition. Whether it's smart or not, the new entrant can afford to subsidize its intrusion into the new business with profits from its existing businesses. In Google's case, they aren't unconnected. But its targets don't really have multiple revenue sources on which to rely in the coming video content sourcing battle.
Showing posts with label Cable. Show all posts
Showing posts with label Cable. Show all posts
Tuesday, November 22, 2011
Thursday, July 14, 2011
Glenn Beck's & Oprah Winfrey's New Media Strategies- Which Will Work?
Back on July 1st, the day after Fox News lost Glenn Beck's program, I wrote this post on my political blog discussing Beck's next act.
This week, I read that Ophrah Winfrey's nascent cable network is having teething problems, prompting the networks namesake co-owner to step up as its new CEO.
As I wrote in that linked post, I think Beck has gone Winfrey one better. He's simply moved to the web with his entire non-radio empire.
Perhaps the most notable phenomenon is that both media moguls have departed their former homes- one broadcast network, the other a major cable network- to own their own operations. Or, in Winfrey's case, co-own with Discovery Network.
According to yesterday's Wall Street Journal, Winfrey's new network, OWN, is "struggling" amidst the departure of several senior execs and the firing of the CEO. So she's taking over and moving members of her production company's staff into those senior business management slots.
I'm not clear on why Winfrey partnered with Discovery, rather than going it alone. Perhaps it had to do with the cost and ability to access a slot on cable distributor systems like Comcast and Cablevision. Or perhaps it was to piggy back on Discovery's existing production and management assets.
Either way, Winfrey is still mired in the world of quasi-regulated communications, cable system distributors and advertising. Not to mention the need to pay carriage fees to distribute her network.
Just because Winfrey found a sweet spot with her own long-running talk show and amassed a fortune from the spinoffs and such doesn't mean she really belongs among the Allen & Co. conference attendees. It seems to remain to be seen if her one-hit talent will translate into the acumen to run an entire network and demonstrate what amounts to master-programming skills.
In contrast, Glenn Beck leapt from cable giant Fox News to his own website-based streaming video channel. Like the actors who broke away to found 7Artists studio, simply took advantage of modern technology such as the internet, smart phones and tablets, offering access to his video site for about $5/month or $100/year, with free upgrade to a 'plus' membership through the fall.
I have no idea what the approximate revenue numbers may be for Beck, because I am not familiar with what his actual average daily viewership on Fox was. I know he consistently won his 5-6PM time slot against news programs. It's reasonable to expect that he's looking at several million dollars/month of direct membership fees he can pocket, while drastically simplifying and cutting his total operations costs.
Meanwhile, Beck took the opportunity of his departure from Fox to air a long infomercial on GBTV, showcasing his senior executive team, new on-air personalities and various associated business initiatives.
I gathered from a chance remark on one of Beck's programs that he spends "about a million dollars a year on security." That would suggest he's making tens of millions of dollars per year from his radio program, paid website access, books, and associated businesses.
If so, I think he'll have no problem funding his new website-based media empire on his own. The credentials of his new staff were impressive, e.g., the woman who 'put The Huffington Post on the map,' a senior executive from CNN, and other accomplished managers. And he's clearly had them on staff and working for many months.
It seems to me that, regardless of how you feel about his views and content, Beck took the more sensible route to his own media empire, than Winfrey. With a direct streaming website to any medium of the subscriber's choice, there's no potential for boycotts from advertisers or cable systems. No FCC concerns. I'm not even sure that Beck is counting on advertising for much of his revenues.
As I mentioned in my linked post, the various initiatives which Beck unveiled in his infomercial suggest an anti-Soros type of hydra-headed businesses which include John Doe-like clubs, charitable onshore production efforts, like Paul Newman's enterprise, and more political-action-oriented projects directly addressing liberal-leaning US college campuses.
In short, Beck is putting his fortune where his mouth is, hiring top talent to get him there, and choosing a venue which is at the leading edge of technology, with the fewest regulatory constraints possible.
Beck's move finally proves my point concerning the relative disutility and ability to be easily disintermediated of cable media distribution. And, of course, broadcast networks. Rather like what I wrote about in yesterday's post.
Beck made sure his new venture is easily found, cheap to join, and ubiquitous. By emphasizing smart phones and tablets, plus political action projects, he's opened up his venture to younger audiences, as well as older ones.
Whether Winfrey or Beck proves to be more financially successful might be less important for the old media world, in the long run, than that both former conventional media stars bolted their former homes to control their future media destinies with so much apparent ease. How they fare may vary, of course, as Winfrey's management headaches attest. But their example may begin to sink in with more conventional entertainment creators who, until now, have sold their television series to broadcast and cable networks.
How long will it be before Glee, MadMen and Psyche simply go to websites and enjoy 100% of subscriber fees, selling by the episode, season or more, via credit cards and PayPal?
This week, I read that Ophrah Winfrey's nascent cable network is having teething problems, prompting the networks namesake co-owner to step up as its new CEO.
As I wrote in that linked post, I think Beck has gone Winfrey one better. He's simply moved to the web with his entire non-radio empire.
Perhaps the most notable phenomenon is that both media moguls have departed their former homes- one broadcast network, the other a major cable network- to own their own operations. Or, in Winfrey's case, co-own with Discovery Network.
According to yesterday's Wall Street Journal, Winfrey's new network, OWN, is "struggling" amidst the departure of several senior execs and the firing of the CEO. So she's taking over and moving members of her production company's staff into those senior business management slots.
I'm not clear on why Winfrey partnered with Discovery, rather than going it alone. Perhaps it had to do with the cost and ability to access a slot on cable distributor systems like Comcast and Cablevision. Or perhaps it was to piggy back on Discovery's existing production and management assets.
Either way, Winfrey is still mired in the world of quasi-regulated communications, cable system distributors and advertising. Not to mention the need to pay carriage fees to distribute her network.
Just because Winfrey found a sweet spot with her own long-running talk show and amassed a fortune from the spinoffs and such doesn't mean she really belongs among the Allen & Co. conference attendees. It seems to remain to be seen if her one-hit talent will translate into the acumen to run an entire network and demonstrate what amounts to master-programming skills.
In contrast, Glenn Beck leapt from cable giant Fox News to his own website-based streaming video channel. Like the actors who broke away to found 7Artists studio, simply took advantage of modern technology such as the internet, smart phones and tablets, offering access to his video site for about $5/month or $100/year, with free upgrade to a 'plus' membership through the fall.
I have no idea what the approximate revenue numbers may be for Beck, because I am not familiar with what his actual average daily viewership on Fox was. I know he consistently won his 5-6PM time slot against news programs. It's reasonable to expect that he's looking at several million dollars/month of direct membership fees he can pocket, while drastically simplifying and cutting his total operations costs.
Meanwhile, Beck took the opportunity of his departure from Fox to air a long infomercial on GBTV, showcasing his senior executive team, new on-air personalities and various associated business initiatives.
I gathered from a chance remark on one of Beck's programs that he spends "about a million dollars a year on security." That would suggest he's making tens of millions of dollars per year from his radio program, paid website access, books, and associated businesses.
If so, I think he'll have no problem funding his new website-based media empire on his own. The credentials of his new staff were impressive, e.g., the woman who 'put The Huffington Post on the map,' a senior executive from CNN, and other accomplished managers. And he's clearly had them on staff and working for many months.
It seems to me that, regardless of how you feel about his views and content, Beck took the more sensible route to his own media empire, than Winfrey. With a direct streaming website to any medium of the subscriber's choice, there's no potential for boycotts from advertisers or cable systems. No FCC concerns. I'm not even sure that Beck is counting on advertising for much of his revenues.
As I mentioned in my linked post, the various initiatives which Beck unveiled in his infomercial suggest an anti-Soros type of hydra-headed businesses which include John Doe-like clubs, charitable onshore production efforts, like Paul Newman's enterprise, and more political-action-oriented projects directly addressing liberal-leaning US college campuses.
In short, Beck is putting his fortune where his mouth is, hiring top talent to get him there, and choosing a venue which is at the leading edge of technology, with the fewest regulatory constraints possible.
Beck's move finally proves my point concerning the relative disutility and ability to be easily disintermediated of cable media distribution. And, of course, broadcast networks. Rather like what I wrote about in yesterday's post.
Beck made sure his new venture is easily found, cheap to join, and ubiquitous. By emphasizing smart phones and tablets, plus political action projects, he's opened up his venture to younger audiences, as well as older ones.
Whether Winfrey or Beck proves to be more financially successful might be less important for the old media world, in the long run, than that both former conventional media stars bolted their former homes to control their future media destinies with so much apparent ease. How they fare may vary, of course, as Winfrey's management headaches attest. But their example may begin to sink in with more conventional entertainment creators who, until now, have sold their television series to broadcast and cable networks.
How long will it be before Glee, MadMen and Psyche simply go to websites and enjoy 100% of subscriber fees, selling by the episode, season or more, via credit cards and PayPal?
Wednesday, July 13, 2011
Going Wireless for Everything
For some time I've been observing the potential for the disintermediation of cable offerings by less expensive alternatives. My focus had been primarily on cable-provided television, which has become much more significantly affected among younger adults.
However, in the past few weeks, I've had personal experience and talks with friends involving cutting various wired communications or entertainment services to go wireless.
For example, a few weeks ago I finally terminated my landline telephone and associated ATT long-distance service. I'd had that phone number since 1999, but, increasingly, it was turned off and disused. My cell phone provides effectively free long distance, while the landline's total monthly costs, including long distance, mostly due to legacy regulatory fees and taxes, was in the neighborhood of $40-50.
I don't actually know of a single adult, including those, like me, over 50, who has moved within the past two years and installed a landline telephone. Not one. One squash partner is now considering following my lead on dropping his landline, since he's become angry with Verizon's forcing him into Fios at much higher prices than he used to pay for phone and internet.
Next, a cycling partner asked me about alternatives to cable television, as she feels she gets virtually no use from it at all, for about $60/month. As one of the few subscribers to AppleTV, considered a failure even by Steve Jobs, she often watches "tv" with her daughter on an Apple laptop propped up on their dinner table. Her daughter finds various sources for content- Hulu, YouTube, to name just the most obvious two.
We discussed how she could buy a high-end Tivo with web access, connect it wirelessly to her internet service, and obtain her movies and older television series content via Netflix through the Tivo. Plus directly access all the websites from a television, rather than the Apple laptop.
Then I ran into a squash friend with whom I discussed dropping landlines. She wasn't so fixated on cable television, but asked what I thought could be options for dropping her high-speed cable internet service. She confided that both of her sons, who are on the same wireless plan with her, use their Android cell phones for internet access, in effect making them cellular modems for their laptops. I agreed that she could just do that and save those monthly charges. She has an Optimum Online triple play package for about $150/month, so dropping the phone and internet may save her more than $100 of that.
I related the conversation I'd had with my other friend about dropping cable television, and this friend thought about that, as well. Overall, she could recover the full $150/month from Optimum and simplify her life, as she prepares to return to Canada in the next few years. Further, she noted that she didn't need a Tivo to get Netflix, since her kids had left a PS3 at home, which now serves as a platform for Netflix, as does the Wii.
One woman I know who moved into an apartment last year after a divorce skipped the landline and internet access, simply searching for other wireless signals in her complex rather than paying the $60/month for said connectivity.
It's expected nowadays that 20-somethings use cell phones and whatever internet connection they find at work or in their neighborhood to save on cable, internet access and conventional telephone expenses. But I think it would surprise many strategists at Comcast, Verizon, Cablevision et.al. to discover how many older, well-educated, higher-income adults are cutting as many cords, cables and wires as possible in their homes to save money and consolidate communications and entertainment budgets. I suspect it's happening among older Americans of that segment far faster than was forecast perhaps even just a year ago.
However, in the past few weeks, I've had personal experience and talks with friends involving cutting various wired communications or entertainment services to go wireless.
For example, a few weeks ago I finally terminated my landline telephone and associated ATT long-distance service. I'd had that phone number since 1999, but, increasingly, it was turned off and disused. My cell phone provides effectively free long distance, while the landline's total monthly costs, including long distance, mostly due to legacy regulatory fees and taxes, was in the neighborhood of $40-50.
I don't actually know of a single adult, including those, like me, over 50, who has moved within the past two years and installed a landline telephone. Not one. One squash partner is now considering following my lead on dropping his landline, since he's become angry with Verizon's forcing him into Fios at much higher prices than he used to pay for phone and internet.
Next, a cycling partner asked me about alternatives to cable television, as she feels she gets virtually no use from it at all, for about $60/month. As one of the few subscribers to AppleTV, considered a failure even by Steve Jobs, she often watches "tv" with her daughter on an Apple laptop propped up on their dinner table. Her daughter finds various sources for content- Hulu, YouTube, to name just the most obvious two.
We discussed how she could buy a high-end Tivo with web access, connect it wirelessly to her internet service, and obtain her movies and older television series content via Netflix through the Tivo. Plus directly access all the websites from a television, rather than the Apple laptop.
Then I ran into a squash friend with whom I discussed dropping landlines. She wasn't so fixated on cable television, but asked what I thought could be options for dropping her high-speed cable internet service. She confided that both of her sons, who are on the same wireless plan with her, use their Android cell phones for internet access, in effect making them cellular modems for their laptops. I agreed that she could just do that and save those monthly charges. She has an Optimum Online triple play package for about $150/month, so dropping the phone and internet may save her more than $100 of that.
I related the conversation I'd had with my other friend about dropping cable television, and this friend thought about that, as well. Overall, she could recover the full $150/month from Optimum and simplify her life, as she prepares to return to Canada in the next few years. Further, she noted that she didn't need a Tivo to get Netflix, since her kids had left a PS3 at home, which now serves as a platform for Netflix, as does the Wii.
One woman I know who moved into an apartment last year after a divorce skipped the landline and internet access, simply searching for other wireless signals in her complex rather than paying the $60/month for said connectivity.
It's expected nowadays that 20-somethings use cell phones and whatever internet connection they find at work or in their neighborhood to save on cable, internet access and conventional telephone expenses. But I think it would surprise many strategists at Comcast, Verizon, Cablevision et.al. to discover how many older, well-educated, higher-income adults are cutting as many cords, cables and wires as possible in their homes to save money and consolidate communications and entertainment budgets. I suspect it's happening among older Americans of that segment far faster than was forecast perhaps even just a year ago.
Friday, August 27, 2010
Tivo Finally Breaks Through To The Web With New Remote Unit
It's been more than a year in coming, as I predicted in this post from February of last year. But Tivo has finally provided a means of accessing the broader internet.
In that earlier post, I wrote,
"Thus, it would seem only a matter of time before TiVo provides a feature on its own website that would let me either type in my preferred websites, or simply import my web browser bookmarks, so that I can access this menu on my television screen via TiVo's content menu.
So there you have it. Just about two and a half years after my post regarding the necessary hardware and software for television viewing of internet web content, it's basically here. One software tweak by TiVo, and it's done. I'll have TiVo for access to online weekly programming, including news programs, either free or paid, and Netflix for my movie content. "
This week, I read in the Wall Street Journal that Tivo has released a remote, priced at $90, which features a slide-out keyboard and navigational buttons. In effect, what has been needed to make Tivo a gateway for television screen-based internet surfing.
At this price, as a remote, it's far simpler than another set-top box. And it comes from an established vendor.
I'm one step closer to cutting my monthly Comcast bill in half by dropping the cable television portion!
In that earlier post, I wrote,
"Thus, it would seem only a matter of time before TiVo provides a feature on its own website that would let me either type in my preferred websites, or simply import my web browser bookmarks, so that I can access this menu on my television screen via TiVo's content menu.
So there you have it. Just about two and a half years after my post regarding the necessary hardware and software for television viewing of internet web content, it's basically here. One software tweak by TiVo, and it's done. I'll have TiVo for access to online weekly programming, including news programs, either free or paid, and Netflix for my movie content. "
This week, I read in the Wall Street Journal that Tivo has released a remote, priced at $90, which features a slide-out keyboard and navigational buttons. In effect, what has been needed to make Tivo a gateway for television screen-based internet surfing.
At this price, as a remote, it's far simpler than another set-top box. And it comes from an established vendor.
I'm one step closer to cutting my monthly Comcast bill in half by dropping the cable television portion!
Tuesday, October 06, 2009
Further Thoughts On GE's Disposal Of Its Media Businesses
Over the weekend I wrote this brief post on GE's overdue admission that it needs to begin unraveling the underperforming, diversified conglomerate.
Perhaps my most succinct piece on the pointlessness of GE's current incarnation was this May, 2007 post. In it, I noted,
"Simply put, corporate diversification for cash flow smoothing has been a discredited management approach for creating consistently superior total returns for some time. My own proprietary research, which drives my equity portfolio selection of consistently superior large-cap companies, confirms this. Back some thirty or forty years ago, when trading equities was expensive and information and innovation were in shorter supply, it may have made sense for investors to hold shares of conglomerates. And, in the day, they existed- Gulf&Western, ITT, and Litton, to name just a few. But they are gone now. ITT still exists, but in nothing like the shape it had under Harold Geneen.
Today's large firms are usually focused on a particular product/market. Diversified conglomerates are pretty much a thing of the past. Mediocre analysts and fund managers might confuse large focused global firms, such as Intel, Cisco, or ExxonMobil, with yesteryear's broadly diversified giants. You should not. I don't think investors do, either. That's why GE's stock is in suspended animation. Everyone can diversify more cheaply today than they can by paying an enormous tax on operating earnings of GE's business units in order to keep them under one administrative regime.
What's ironic is how everyone seems to have forgotten GE's heritage of being subjected to wrenching change with each new CEO of the prior forty years, except for Immelt. He's the only one not to have actually made a big change in the firm, and it has stalled."
I've had a couple of conversations with business colleagues about GE's newly-disclosed decision that it's time to unload the media businesses. While I am not, of course, privy to the board's or senior managements' private discussions, it seems to me that one or more of the following may be reasons why Immelt has suddenly come clean that GE needs a "greater fool" to buy NBC/Universal, and that fool is Brian Roberts.
First, according to the Wall Street Journal articles about the GE media unit, NBC's network operations are finally, inexorably sliding in profitability terms. While the company doesn't break out results in any more detail than the major business units, somewhere down in the depths of the NBC/Universal unit is, we are told, a declining network income statement. With each passing month/year, these properties become bigger drags on GE profit growth and total return.
Next is the Universal studio property. This morning's Journal announced that the studio co-heads are being shot and tossed out. Apparently, this unit, too, has been suffering from poor performance. Taking the network and movie studio together, I find myself recalling an Immelt remark about how much fun it was sitting in meetings to decide on production slates for both units.
Guess Jeff's touch isn't so good. And other executives will pay the price.
Then we come to NBC's cable properties. The ones with which we are well-acquainted, CNBC and MSNBC, are fairly small in the larger cable world. CNBC may be a the premier business cable channel, but it's woefully small next to general cable news networks like Fox or CNN.
However, the company also owns Oxygen, SyFy and USA Network, in addition to which it recently bought The Weather Channel. However, this collection of entertainment channels isn't going to carry the underperforming assets of the remainder of the entire NBC/Universal business group.
So, just in terms of the arithmetic of assets, revenues and profits, GE's media group is finally beyond a tipping point in its effect on GE's overall performance.
Beyond financial performance, there's the issue of the media unit's growing prominence as a lapdog for the current administration. There's been much written about NBC's and related properties' leftward political tilt. It could be that Immelt and his minions are beginning to realize that it's becoming riskier, given the actions of the current administration, to be seen as apologizing and cheerleading for it.
There is also growing awareness that GE stands to benefit financially from a government-run health care system and the crackdown on CO2 emissions and greenhouse gases. This bargain with the devil in Washington may be just a touch too cozy when the company also owns a collection of media properties which trumpet those government programs.
Simply put, it borders on GE churning out propaganda for the government, in return for favored treatment in various new programs. That makes the company a target for lots of criticism.
My next point is one that, ideally, would be a subject on my companion political blog. But I feel it's necessary to mention it here, and will do so as non-partisanly as possible.
If Immelt and his board feel that current legislative difficulties are likely to increase the chances that this will be a one-term administration, then the risks of betting everything on Washington's initiatives, and broadcasting them, too, literally, becomes higher.
If GE didn't own a media business, it would avoid and evade quite a bit of criticism for conflicts of interest. And, later, could duck a lot of flak for having been tailoring news and opinion to please Washington. Being seen as the media stooge for a failed administration might add unwanted pressure to the already long-underperforming conglomerate.
Then there's the embarrassment of GE's having to have taken government funding handouts to stabilize its over-leveraged, ailing finance unit. It was a pretty bitter pill to swallow for Immelt to have to rely on federal help to avoid a serious funding crisis of his own.
How can a company with the federal life support needle in its arm appear to run an objective, credible media group? It can't.
This, too, might now be seen as a real point of vulnerability moving forward. Thus, another reason to dump the media businesses ASAP.
Finally, there's the old adage, "strike while the iron is hot."
Just when the financials and, perhaps, political winds are beginning to blow ill for GE's media business, someone came along with an interest in relieving the company of this headache.
If GE can successfully get Brian Roberts to buy out Viviendi's interest in the media group, and then take it off GE's balance sheet, leaving the Connecticut-based conglomerate with a minority interest, it will have managed to unload a problem child before the value in it really craters.
One trend that is afflicting both GE's networks, and cable properties, as well as Roberts' cable business, is the move by many consumers to direct viewing of entertainment and other video content on the internet, rather than through intermediaries such as cable channels.
Roberts thinks he can scoop up enough content to be a key player in even internet-based content, just in case his distribution pipes really do begin to empty.
Whether this makes sense would be the subject of another post focused on Comcast. For right now, it's enough to note that Robert believes in this strategy.
There's nobody else on the horizon capable of taking NBC/Universal off GE's hands like this. TimeWarner is so messed up it couldn't possibly consider it. And, anyway, even Bewkes might be wary of having so many old network properties dumped on his balance sheet. TimeWarner seems to be moving out of content, at least on the print side. It's far from clear it would suddenly try to move into video content, but not in a gigantic way.
No, Brian Roberts is probably the last, best hope for GE, short of an outright spin-off of the media group. Which, by itself, is not a bad idea. And one I've advocated for over two years.
Having now broached the notion that it should jettison its media businesses, it may be hard for GE to avoid the spin-off route, if the Comcast talks fall through.
Of course, deep in the background of all this negotiating is the unspoken but implicit judgement that Jack Welch probably messed up in buying NBC to begin with. If it was such a great, strategic move, why is it being uncoupled now?
In fact, you could argue that the media group, as a standalone unit, might have been more nimble, savvy, and successful at doing what was necessary to enhance performance long ago. But, as part of the larger GE conglomerate, it was hamstrung by a corporate parent's oversight, bureaucracy, and funding.
But, now, there are a legion of reasons for GE to do something to shed the businesses. And no time like the present. Because, frankly, the present is still way too late for this move.
Perhaps my most succinct piece on the pointlessness of GE's current incarnation was this May, 2007 post. In it, I noted,
"Simply put, corporate diversification for cash flow smoothing has been a discredited management approach for creating consistently superior total returns for some time. My own proprietary research, which drives my equity portfolio selection of consistently superior large-cap companies, confirms this. Back some thirty or forty years ago, when trading equities was expensive and information and innovation were in shorter supply, it may have made sense for investors to hold shares of conglomerates. And, in the day, they existed- Gulf&Western, ITT, and Litton, to name just a few. But they are gone now. ITT still exists, but in nothing like the shape it had under Harold Geneen.
Today's large firms are usually focused on a particular product/market. Diversified conglomerates are pretty much a thing of the past. Mediocre analysts and fund managers might confuse large focused global firms, such as Intel, Cisco, or ExxonMobil, with yesteryear's broadly diversified giants. You should not. I don't think investors do, either. That's why GE's stock is in suspended animation. Everyone can diversify more cheaply today than they can by paying an enormous tax on operating earnings of GE's business units in order to keep them under one administrative regime.
What's ironic is how everyone seems to have forgotten GE's heritage of being subjected to wrenching change with each new CEO of the prior forty years, except for Immelt. He's the only one not to have actually made a big change in the firm, and it has stalled."
I've had a couple of conversations with business colleagues about GE's newly-disclosed decision that it's time to unload the media businesses. While I am not, of course, privy to the board's or senior managements' private discussions, it seems to me that one or more of the following may be reasons why Immelt has suddenly come clean that GE needs a "greater fool" to buy NBC/Universal, and that fool is Brian Roberts.
First, according to the Wall Street Journal articles about the GE media unit, NBC's network operations are finally, inexorably sliding in profitability terms. While the company doesn't break out results in any more detail than the major business units, somewhere down in the depths of the NBC/Universal unit is, we are told, a declining network income statement. With each passing month/year, these properties become bigger drags on GE profit growth and total return.
Next is the Universal studio property. This morning's Journal announced that the studio co-heads are being shot and tossed out. Apparently, this unit, too, has been suffering from poor performance. Taking the network and movie studio together, I find myself recalling an Immelt remark about how much fun it was sitting in meetings to decide on production slates for both units.
Guess Jeff's touch isn't so good. And other executives will pay the price.
Then we come to NBC's cable properties. The ones with which we are well-acquainted, CNBC and MSNBC, are fairly small in the larger cable world. CNBC may be a the premier business cable channel, but it's woefully small next to general cable news networks like Fox or CNN.
However, the company also owns Oxygen, SyFy and USA Network, in addition to which it recently bought The Weather Channel. However, this collection of entertainment channels isn't going to carry the underperforming assets of the remainder of the entire NBC/Universal business group.
So, just in terms of the arithmetic of assets, revenues and profits, GE's media group is finally beyond a tipping point in its effect on GE's overall performance.
Beyond financial performance, there's the issue of the media unit's growing prominence as a lapdog for the current administration. There's been much written about NBC's and related properties' leftward political tilt. It could be that Immelt and his minions are beginning to realize that it's becoming riskier, given the actions of the current administration, to be seen as apologizing and cheerleading for it.
There is also growing awareness that GE stands to benefit financially from a government-run health care system and the crackdown on CO2 emissions and greenhouse gases. This bargain with the devil in Washington may be just a touch too cozy when the company also owns a collection of media properties which trumpet those government programs.
Simply put, it borders on GE churning out propaganda for the government, in return for favored treatment in various new programs. That makes the company a target for lots of criticism.
My next point is one that, ideally, would be a subject on my companion political blog. But I feel it's necessary to mention it here, and will do so as non-partisanly as possible.
If Immelt and his board feel that current legislative difficulties are likely to increase the chances that this will be a one-term administration, then the risks of betting everything on Washington's initiatives, and broadcasting them, too, literally, becomes higher.
If GE didn't own a media business, it would avoid and evade quite a bit of criticism for conflicts of interest. And, later, could duck a lot of flak for having been tailoring news and opinion to please Washington. Being seen as the media stooge for a failed administration might add unwanted pressure to the already long-underperforming conglomerate.
Then there's the embarrassment of GE's having to have taken government funding handouts to stabilize its over-leveraged, ailing finance unit. It was a pretty bitter pill to swallow for Immelt to have to rely on federal help to avoid a serious funding crisis of his own.
How can a company with the federal life support needle in its arm appear to run an objective, credible media group? It can't.
This, too, might now be seen as a real point of vulnerability moving forward. Thus, another reason to dump the media businesses ASAP.
Finally, there's the old adage, "strike while the iron is hot."
Just when the financials and, perhaps, political winds are beginning to blow ill for GE's media business, someone came along with an interest in relieving the company of this headache.
If GE can successfully get Brian Roberts to buy out Viviendi's interest in the media group, and then take it off GE's balance sheet, leaving the Connecticut-based conglomerate with a minority interest, it will have managed to unload a problem child before the value in it really craters.
One trend that is afflicting both GE's networks, and cable properties, as well as Roberts' cable business, is the move by many consumers to direct viewing of entertainment and other video content on the internet, rather than through intermediaries such as cable channels.
Roberts thinks he can scoop up enough content to be a key player in even internet-based content, just in case his distribution pipes really do begin to empty.
Whether this makes sense would be the subject of another post focused on Comcast. For right now, it's enough to note that Robert believes in this strategy.
There's nobody else on the horizon capable of taking NBC/Universal off GE's hands like this. TimeWarner is so messed up it couldn't possibly consider it. And, anyway, even Bewkes might be wary of having so many old network properties dumped on his balance sheet. TimeWarner seems to be moving out of content, at least on the print side. It's far from clear it would suddenly try to move into video content, but not in a gigantic way.
No, Brian Roberts is probably the last, best hope for GE, short of an outright spin-off of the media group. Which, by itself, is not a bad idea. And one I've advocated for over two years.
Having now broached the notion that it should jettison its media businesses, it may be hard for GE to avoid the spin-off route, if the Comcast talks fall through.
Of course, deep in the background of all this negotiating is the unspoken but implicit judgement that Jack Welch probably messed up in buying NBC to begin with. If it was such a great, strategic move, why is it being uncoupled now?
In fact, you could argue that the media group, as a standalone unit, might have been more nimble, savvy, and successful at doing what was necessary to enhance performance long ago. But, as part of the larger GE conglomerate, it was hamstrung by a corporate parent's oversight, bureaucracy, and funding.
But, now, there are a legion of reasons for GE to do something to shed the businesses. And no time like the present. Because, frankly, the present is still way too late for this move.
Saturday, October 03, 2009
GE Negotiates To Sell Media Unit to Comcast
Color me stunned at the recent news that GE is actually considering divesting itself of its ill-fitting, value-destroying media unit.
However, I've been more stunned by the apparent inability by many pundits and analysts to comprehend why this is such a no-brainer for GE.
For example, on Friday morning, CNBC's David Faber sputtered as he groped for an explanation as to why GE CEO Jeff Immelt is now consenting to that which he has refused for so long- the spin-off of the firm's media properties.
I've written countless posts, found under the "GE" label, about why this conglomerate no longer has a reason to exist. How all 5 or 6 major businesses should be standalones. How shareholders are being ripped off by Immelt and the board, forced to pay a corporate overhead tax for people and functions which add no value to GE's owners, but line the pockets of Immelt and his staff.
Apparently, GE's senior management finally came to view the NBC network's accelerating decline with alarm. Add to that the dismal MSNBC and uneven Universal Studios performances, the minority ownership by Vivendi, and the whole thing probably became a headache best jettisoned while it still has some value.
Like so much else that GE owns, e.g., the credit card and other finance units Immelt tried, belatedly, to unload during last year's credit crisis, the best time to have sold it was years ago.
Now, it's probably going to have to settle for a spin-off of some sort.
Separately, there is the question of just what Comcast thinks it is doing. Brian Roberts is going all in on content as so much entertainment moves to web-based sources. And, again, as I have written in prior posts, owning both media distribution pipes and content has never been a winning hand.
But that's another post.
For now, I'm happy to see that time and fortune have finally eroded GE's objections to the inevitable, and the conglomerate is beginning to be split asunder.
I wonder which GE unit will be teed up for separation next?
However, I've been more stunned by the apparent inability by many pundits and analysts to comprehend why this is such a no-brainer for GE.
For example, on Friday morning, CNBC's David Faber sputtered as he groped for an explanation as to why GE CEO Jeff Immelt is now consenting to that which he has refused for so long- the spin-off of the firm's media properties.
I've written countless posts, found under the "GE" label, about why this conglomerate no longer has a reason to exist. How all 5 or 6 major businesses should be standalones. How shareholders are being ripped off by Immelt and the board, forced to pay a corporate overhead tax for people and functions which add no value to GE's owners, but line the pockets of Immelt and his staff.
Apparently, GE's senior management finally came to view the NBC network's accelerating decline with alarm. Add to that the dismal MSNBC and uneven Universal Studios performances, the minority ownership by Vivendi, and the whole thing probably became a headache best jettisoned while it still has some value.
Like so much else that GE owns, e.g., the credit card and other finance units Immelt tried, belatedly, to unload during last year's credit crisis, the best time to have sold it was years ago.
Now, it's probably going to have to settle for a spin-off of some sort.
Separately, there is the question of just what Comcast thinks it is doing. Brian Roberts is going all in on content as so much entertainment moves to web-based sources. And, again, as I have written in prior posts, owning both media distribution pipes and content has never been a winning hand.
But that's another post.
For now, I'm happy to see that time and fortune have finally eroded GE's objections to the inevitable, and the conglomerate is beginning to be split asunder.
I wonder which GE unit will be teed up for separation next?
Monday, June 29, 2009
Cable TV Attempts To Fend Off Internet Video
I've written several posts, most recently, here, regarding the efforts of cable television providers to cope with an initially small, but growing segment of viewers who are turning to the internet for all of their video programming.
Last week, the Wall Street Journal carried two separate articles on the response of cable systems to this phenomenon. Basically, they cable system providers are offering their customers access to exclusive video content, and internet access to existing cable video content, in exchange for not disconnecting their cable feeds, and merely keeping their high-speed internet access.
I don't think this will work. It seems to me that people tend to want known content for the lowest price, consistent with their viewing habits or access capabilities. Quite a bit of existing cable content is now available on Hulu, or on an inexpensive, per-episode basis on iTunes.
Like many technologies, there's a growing rift between younger consumer segments and older ones. For example, I prefer to watch most television programming on a large screen, but my children have learned to be fairly ambivalent between a television screen or their laptops.
Promising as-yet-unspecified video content in exchange for very pricey access to content you can access either via Netflix, Amazon, iTunes or Hulu doesn't seem like such a great deal anymore. Further, consumers are learning to accept and use a variety of means by which to access video content.
Finally, as I noted in this post, in February, TiVo is now fully capable of adding a menu of internet URLs to its menu, thus allowing a subscriber to access any internet site for video content. It's not clear to me why TiVo is waiting to do this. Perhaps it's a matter of quid pro quo with content providers continuing to make it easy to use TiVo instead of their proprietary DVRs.
In any case, there are a multitude of paths to video content that don't lead through a paid cable television subscription.
Adding a few exclusive video programs is, in my opinion, unlikely to be a long-term solution for the cable providers. Eventually, they're going to face what music and movie producers have already undergone- technological advances which render their proprietary hold over video content moot and of much less value than it could command in the past.
Last week, the Wall Street Journal carried two separate articles on the response of cable systems to this phenomenon. Basically, they cable system providers are offering their customers access to exclusive video content, and internet access to existing cable video content, in exchange for not disconnecting their cable feeds, and merely keeping their high-speed internet access.
I don't think this will work. It seems to me that people tend to want known content for the lowest price, consistent with their viewing habits or access capabilities. Quite a bit of existing cable content is now available on Hulu, or on an inexpensive, per-episode basis on iTunes.
Like many technologies, there's a growing rift between younger consumer segments and older ones. For example, I prefer to watch most television programming on a large screen, but my children have learned to be fairly ambivalent between a television screen or their laptops.
Promising as-yet-unspecified video content in exchange for very pricey access to content you can access either via Netflix, Amazon, iTunes or Hulu doesn't seem like such a great deal anymore. Further, consumers are learning to accept and use a variety of means by which to access video content.
Finally, as I noted in this post, in February, TiVo is now fully capable of adding a menu of internet URLs to its menu, thus allowing a subscriber to access any internet site for video content. It's not clear to me why TiVo is waiting to do this. Perhaps it's a matter of quid pro quo with content providers continuing to make it easy to use TiVo instead of their proprietary DVRs.
In any case, there are a multitude of paths to video content that don't lead through a paid cable television subscription.
Adding a few exclusive video programs is, in my opinion, unlikely to be a long-term solution for the cable providers. Eventually, they're going to face what music and movie producers have already undergone- technological advances which render their proprietary hold over video content moot and of much less value than it could command in the past.
Tuesday, February 24, 2009
More On Internet Video Viewing
Only yesterday, I wrote this post concerning cable television companies moving to control internet distribution of their content-providers material. In that day's Wall Street Journal, a smallish column on the back page of the Marketplace section
"Online video is cutting into television, albeit slowly.
People are watching more video than ever on every type of screen -- television, the Internet and mobile devices -- according to a report on the nation's viewing habits to be released Monday by Nielsen Co.
Nielsen found that during the fourth quarter of 2008 the number of users and the time spent watching each of the three screen media rose from the previous quarter. "If people like video, they like it wherever they can get it," said Susan Whiting, vice chair of Nielsen.
The biggest jumps came in the number of viewers watching video on mobile devices and "time shifted" television, that is, programming viewed with a digital-video recorder. Each rose about 9% in the fourth quarter from the third quarter. Roughly 11 million people used mobile viewing and 74 million people watched DVR programming. Internet video users increased 2.3% to 123 million people.
In both time spent and number of viewers, Internet video grew at a rate twice that of television. Michael Vorhaus, president of consulting firm Frank N. Magid Associates, points to the growth as a threat to traditional television viewing. "It's not going to go away and it's not going to get better," he said.
For the first time in the Nielsen study, people ages 18-24 spent nearly the same amount of time -- roughly five hours -- watching Internet video each month as they did watching DVR programs. Other age brackets watched half as much or less Internet video than they did DVR video."
It reinforces why cable executives are so worried. Clearly, the tide is shifting more rapidly to DVR and internet. But since so much video is now being viewed straight from the internet, it's quite possible that the cable companies have already lost the entire younger, under-30 generation.
"Online video is cutting into television, albeit slowly.
People are watching more video than ever on every type of screen -- television, the Internet and mobile devices -- according to a report on the nation's viewing habits to be released Monday by Nielsen Co.
Nielsen found that during the fourth quarter of 2008 the number of users and the time spent watching each of the three screen media rose from the previous quarter. "If people like video, they like it wherever they can get it," said Susan Whiting, vice chair of Nielsen.
The biggest jumps came in the number of viewers watching video on mobile devices and "time shifted" television, that is, programming viewed with a digital-video recorder. Each rose about 9% in the fourth quarter from the third quarter. Roughly 11 million people used mobile viewing and 74 million people watched DVR programming. Internet video users increased 2.3% to 123 million people.
In both time spent and number of viewers, Internet video grew at a rate twice that of television. Michael Vorhaus, president of consulting firm Frank N. Magid Associates, points to the growth as a threat to traditional television viewing. "It's not going to go away and it's not going to get better," he said.
For the first time in the Nielsen study, people ages 18-24 spent nearly the same amount of time -- roughly five hours -- watching Internet video each month as they did watching DVR programs. Other age brackets watched half as much or less Internet video than they did DVR video."
It reinforces why cable executives are so worried. Clearly, the tide is shifting more rapidly to DVR and internet. But since so much video is now being viewed straight from the internet, it's quite possible that the cable companies have already lost the entire younger, under-30 generation.
Monday, February 23, 2009
Cable Television Bids To Control Internet Distribution
I wrote my last post about the coming trouble for cable television here, only a few weeks ago.
Thanks to my acquisition of a TiVo unit, which connects wirelessly with my computer network, I wrote,
"My TiVo accesses NetFlix through a wireless adapter which gives it access to my home computer network. While I can't program NetFlix choices on the TiVo controller, TiVo can access my NetFlix account on its own to retrieve my selections.
Thus, it would seem only a matter of time before TiVo provides a feature on its own website that would let me either type in my preferred websites, or simply import my web browser bookmarks, so that I can access this menu on my television screen via TiVo's content menu.
Once I can do this, TiVo would let me watch various programming websites, such as HuLu, as well as NBC's own content, delayed, on its website.
As I discussed this with my business partner Sunday morning, I remarked that, once TiVo does this, I am just one step away from cancelling my cable television service.
The only missing content would be my two primary news channels, CNBC and Fox. Once I could stream these, I'd be ready to cut the cable connection, slicing my monthly content delivery bill in half."
I've been writing about this eventuality for several years, and it would seem that it is finally within sight for an average American internet user and cable television subscriber.
Imagine my surprise, then, when I read an article in last week's Wall Street Journal revealing that US cable systems are in talks with content providers about restricting the latter's distribution of said content, for free, on the internet, on pain of losing some of the revenues they receive from the carriers.
Cable systems like Comcast, Cablevision, et.al., are not stupid. They see the future, and it looks like what happened to the music industry.
So they plan to provide extra internet-accessible content to those who retain their cable television subscriptions, thus, hopefully, saving the vulnerable half of their revenue streams.
I have been reflecting on this approach for the past few days, and I don't think it is a universal solution for the cable system companies.
Back in August of 2006, I wrote this post, in which I mused,
"I don't know what the arrangements are for the provision of, say, ABC's Lost or Desperate Housewives. But it would seem reasonable that production contracts for serial programming is going to change. Before, it was just about syndication rights and royalties. Now, a good production company with a hot property can air it initially via a network, then go solo after the brand has been built. Or, perhaps they'll just go directly to a YouTube or other online video content concentrator site.
Then again, perhaps a really good production shop will simply secure its own financing via the capital markets. Maybe they'll sign a long-term distribution agreement with YouTube to provide basic cashflow while they develop properties for the online market. The possibilities seem truly too many to contemplate just yet."
I still think that scenario can occur. It boils down to branding, doesn't it?
Someone like Larry David, Jerry Seinfeld, or Dick Wolf can probably secure financing, run a few pilot videos on YouTube or another popular site, and then invite viewers to screen a new series directly from their website, going to a paying basis after one viewing from that address.
My point is, while new, unknown content providers may still have to approach networks, cable or broadcast, and be handled by the cable television systems, established artists would not seem to have this problem.
Whether they be actors, writers, directors or producers, veteran talent would seem to be able to marshal other necessary talent, funding, and equipment, in order to create and market their new content directly to viewers' televisions over the internet.
They might go directly to TiVo, as a distributor, among other outlets, for preferred, easy access.
The move by cable companies, of which the Journal article wrote, is surely a clever step, if not a bit late in the game. It will keep a number of viewers connected to video content via their cable television subscriptions.
But I do not think it's a long term, nor necessarily foolproof solution. It seems to me that the Schumpeterian winds of change have already begun blowing at gale force through this sector. As the Journal piece noted,
"Some critics say it might be too late to put the online-video genie back in the subscription bottle. A growing number of people are growing accustomed to watching TV shows online, without paying. About 136 million people watched online video content in January, up 16% from the same period in 2008, according to Nielsen Online."
That would not seem to bode well for cable systems, no matter what they try to do to block this trend. But, they can always ask the music industry executives about this sort of trend. Their experience may hold more parallels than cable industry executives dare to imagine.
Thanks to my acquisition of a TiVo unit, which connects wirelessly with my computer network, I wrote,
"My TiVo accesses NetFlix through a wireless adapter which gives it access to my home computer network. While I can't program NetFlix choices on the TiVo controller, TiVo can access my NetFlix account on its own to retrieve my selections.
Thus, it would seem only a matter of time before TiVo provides a feature on its own website that would let me either type in my preferred websites, or simply import my web browser bookmarks, so that I can access this menu on my television screen via TiVo's content menu.
Once I can do this, TiVo would let me watch various programming websites, such as HuLu, as well as NBC's own content, delayed, on its website.
As I discussed this with my business partner Sunday morning, I remarked that, once TiVo does this, I am just one step away from cancelling my cable television service.
The only missing content would be my two primary news channels, CNBC and Fox. Once I could stream these, I'd be ready to cut the cable connection, slicing my monthly content delivery bill in half."
I've been writing about this eventuality for several years, and it would seem that it is finally within sight for an average American internet user and cable television subscriber.
Imagine my surprise, then, when I read an article in last week's Wall Street Journal revealing that US cable systems are in talks with content providers about restricting the latter's distribution of said content, for free, on the internet, on pain of losing some of the revenues they receive from the carriers.
Cable systems like Comcast, Cablevision, et.al., are not stupid. They see the future, and it looks like what happened to the music industry.
So they plan to provide extra internet-accessible content to those who retain their cable television subscriptions, thus, hopefully, saving the vulnerable half of their revenue streams.
I have been reflecting on this approach for the past few days, and I don't think it is a universal solution for the cable system companies.
Back in August of 2006, I wrote this post, in which I mused,
"I don't know what the arrangements are for the provision of, say, ABC's Lost or Desperate Housewives. But it would seem reasonable that production contracts for serial programming is going to change. Before, it was just about syndication rights and royalties. Now, a good production company with a hot property can air it initially via a network, then go solo after the brand has been built. Or, perhaps they'll just go directly to a YouTube or other online video content concentrator site.
Then again, perhaps a really good production shop will simply secure its own financing via the capital markets. Maybe they'll sign a long-term distribution agreement with YouTube to provide basic cashflow while they develop properties for the online market. The possibilities seem truly too many to contemplate just yet."
I still think that scenario can occur. It boils down to branding, doesn't it?
Someone like Larry David, Jerry Seinfeld, or Dick Wolf can probably secure financing, run a few pilot videos on YouTube or another popular site, and then invite viewers to screen a new series directly from their website, going to a paying basis after one viewing from that address.
My point is, while new, unknown content providers may still have to approach networks, cable or broadcast, and be handled by the cable television systems, established artists would not seem to have this problem.
Whether they be actors, writers, directors or producers, veteran talent would seem to be able to marshal other necessary talent, funding, and equipment, in order to create and market their new content directly to viewers' televisions over the internet.
They might go directly to TiVo, as a distributor, among other outlets, for preferred, easy access.
The move by cable companies, of which the Journal article wrote, is surely a clever step, if not a bit late in the game. It will keep a number of viewers connected to video content via their cable television subscriptions.
But I do not think it's a long term, nor necessarily foolproof solution. It seems to me that the Schumpeterian winds of change have already begun blowing at gale force through this sector. As the Journal piece noted,
"Some critics say it might be too late to put the online-video genie back in the subscription bottle. A growing number of people are growing accustomed to watching TV shows online, without paying. About 136 million people watched online video content in January, up 16% from the same period in 2008, according to Nielsen Online."
That would not seem to bode well for cable systems, no matter what they try to do to block this trend. But, they can always ask the music industry executives about this sort of trend. Their experience may hold more parallels than cable industry executives dare to imagine.
Tuesday, February 03, 2009
Tivo's Next Step: The Internet?
As my Comcast system upgraded to digital, they cleverly rendered my old VCR's multi-channel tuner useless, since anything I recorded had to come through my television's feed from the digital cable tuner.
Thus, I lost the ability to watch one program while recording another. Stripped of every American's God-given right to do this, I recently purchased a TiVo unit for simultaneous digital video recording, and all the other benefits of the service.
In particular, I wanted to also stream instant NetFlix content to my television, rather than simply my desktop computer.
As I have using the TiVo unit for a month or so, I began to consider how it can and probably will morph into a general purpose web content player.
For example, within a week of setting up the TiVo unit, it underwent a few automated software upgrades, integrating the NetFlix feed more seamlessly into the menu.
My TiVo accesses NetFlix through a wireless adapter which gives it access to my home computer network. While I can't program NetFlix choices on the TiVo controller, TiVo can access my NetFlix account on its own to retrieve my selections.
Thus, it would seem only a matter of time before TiVo provides a feature on its own website that would let me either type in my preferred websites, or simply import my web browser bookmarks, so that I can access this menu on my television screen via TiVo's content menu.
Once I can do this, TiVo would let me watch various programming websites, such as HuLu, as well as NBC's own content, delayed, on its website.
As I discussed this with my business partner Sunday morning, I remarked that, once TiVo does this, I am just one step away from cancelling my cable television service.
The only missing content would be my two primary news channels, CNBC and Fox. Once I could stream these, I'd be ready to cut the cable connection, slicing my monthly content delivery bill in half.
I went exploring yesterday, and found that CNBC offers a premium content subscription of roughly $10/month which provides a video stream of their channel. So that fits the model about which I hypothesized over two years ago in a post about the eventual disintermediation of cable by individual channels offering separate internet-based viewing for a monthly fee.
Fox has some video streams, but I haven't yet found one that matches what is broadcast on their channel live. It's probably there somewhere. If not, they surely can do what CNBC is doing, at their whim.
So there you have it. Just about two and a half years after my post regarding the necessary hardware and software for television viewing of internet web content, it's basically here. One software tweak by TiVo, and it's done. I'll have TiVo for access to online weekly programming, including news programs, either free or paid, and Netflix for my movie content.
Thus, I lost the ability to watch one program while recording another. Stripped of every American's God-given right to do this, I recently purchased a TiVo unit for simultaneous digital video recording, and all the other benefits of the service.
In particular, I wanted to also stream instant NetFlix content to my television, rather than simply my desktop computer.
As I have using the TiVo unit for a month or so, I began to consider how it can and probably will morph into a general purpose web content player.
For example, within a week of setting up the TiVo unit, it underwent a few automated software upgrades, integrating the NetFlix feed more seamlessly into the menu.
My TiVo accesses NetFlix through a wireless adapter which gives it access to my home computer network. While I can't program NetFlix choices on the TiVo controller, TiVo can access my NetFlix account on its own to retrieve my selections.
Thus, it would seem only a matter of time before TiVo provides a feature on its own website that would let me either type in my preferred websites, or simply import my web browser bookmarks, so that I can access this menu on my television screen via TiVo's content menu.
Once I can do this, TiVo would let me watch various programming websites, such as HuLu, as well as NBC's own content, delayed, on its website.
As I discussed this with my business partner Sunday morning, I remarked that, once TiVo does this, I am just one step away from cancelling my cable television service.
The only missing content would be my two primary news channels, CNBC and Fox. Once I could stream these, I'd be ready to cut the cable connection, slicing my monthly content delivery bill in half.
I went exploring yesterday, and found that CNBC offers a premium content subscription of roughly $10/month which provides a video stream of their channel. So that fits the model about which I hypothesized over two years ago in a post about the eventual disintermediation of cable by individual channels offering separate internet-based viewing for a monthly fee.
Fox has some video streams, but I haven't yet found one that matches what is broadcast on their channel live. It's probably there somewhere. If not, they surely can do what CNBC is doing, at their whim.
So there you have it. Just about two and a half years after my post regarding the necessary hardware and software for television viewing of internet web content, it's basically here. One software tweak by TiVo, and it's done. I'll have TiVo for access to online weekly programming, including news programs, either free or paid, and Netflix for my movie content.
Friday, January 09, 2009
Cable Television's Problems Hit Home At Time Warner
Last October, in this post, and earlier, in 2006, in this post, I have voiced my belief that, in the not too distant future, half of cable companies' revenues will be shorn, as their television packages begin to be disconnected.
In 2006, I wrote,
"I now wonder whether half of cable's revenues will go away as more consumers find and buy/view content directly on urls via their hi speed data facilities. With destination sites like Youtube, who will need a pre-packaged suite of programming content like Comcast currently has for TV, or is attempting for the internet? And then, we'll probably see cable and telephone company DSL-based content offerings compete each other's prices downward to retain some measure of revenue from these antiquated, pre-packaged content services.
Instead, we'llprobably buy a wireless box which takes the hi speed online signal, directs it with a handheld wireless controller, and displays url-based video on your in-home TV display."
And, in October, I added, in that post,
"It won't be surprising to me at all if we unplug from Comcast's television services within two years. I'll save about $600/year, which means the most expensive of the new wireless internet-to-television boxes will have a 6 month payback. Schumpeterian dynamics are quickly moving internet-based video content, that is not business news, into a competitively-advantaged position relative to packaged video content services offered by cable operators."
Well, two things have occurred to speed my prediction along.
First, Time Warner took a $35B charge yesterday for impairment of value in its cable properties. The company's new CEO, Jeff Bewkes, explained that, due to the company's equity price having been mercilessly hammered, it was forced to recognize the reduction of the economic value of its cable system assets.
The Wall Street Journal article reporting this pointedly noted that disintermediation via services like Hulu and iTunes were causing viewers to find alternative, cheaper, or even free sources of programming which used to be accessible only via paid cable television packages.
On a personal note, I can vouch for this. My daughters and I took a giant leap forward in this direction with the holiday season purchase of a TiVo HD DVR. With a wireless adapter, we now can stream Netflix on demand program content directly to our television.
Further, it's already affected my cable television subscription. Rather than consider upgrading to a more expensive package to receive Disney channels, I now have next-day access, for free, via Netflix. Netflix also offers a huge number of recent television programming, plus several thousand movie titles for on-demand streaming.
Because TiVo upgrades its boxes with software downloads, how long will it be before the service begins to offer direct streaming from various other internet-bases sites, including Hulu or individual cable channel-related sites?
Today, it's Disney that I'm not buying from Comcast. Tomorrow, who knows which channels will have also become redundant?
The second linked post, from last October, detailed how some younger video content consumers are dropping their cable television subscriptions, substituting them with set-top boxes streaming Netflix and/or other content to their televisions.
Time Warner's write down was an unexpected piece of additional evidence that this vision of the future disintermediation of cable content by internet-based content sites is approaching much faster than anyone believed even a year or two ago.
Chances are, it will accelerate from here.
In 2006, I wrote,
"I now wonder whether half of cable's revenues will go away as more consumers find and buy/view content directly on urls via their hi speed data facilities. With destination sites like Youtube, who will need a pre-packaged suite of programming content like Comcast currently has for TV, or is attempting for the internet? And then, we'll probably see cable and telephone company DSL-based content offerings compete each other's prices downward to retain some measure of revenue from these antiquated, pre-packaged content services.
Instead, we'llprobably buy a wireless box which takes the hi speed online signal, directs it with a handheld wireless controller, and displays url-based video on your in-home TV display."
And, in October, I added, in that post,
"It won't be surprising to me at all if we unplug from Comcast's television services within two years. I'll save about $600/year, which means the most expensive of the new wireless internet-to-television boxes will have a 6 month payback. Schumpeterian dynamics are quickly moving internet-based video content, that is not business news, into a competitively-advantaged position relative to packaged video content services offered by cable operators."
Well, two things have occurred to speed my prediction along.
First, Time Warner took a $35B charge yesterday for impairment of value in its cable properties. The company's new CEO, Jeff Bewkes, explained that, due to the company's equity price having been mercilessly hammered, it was forced to recognize the reduction of the economic value of its cable system assets.
The Wall Street Journal article reporting this pointedly noted that disintermediation via services like Hulu and iTunes were causing viewers to find alternative, cheaper, or even free sources of programming which used to be accessible only via paid cable television packages.
On a personal note, I can vouch for this. My daughters and I took a giant leap forward in this direction with the holiday season purchase of a TiVo HD DVR. With a wireless adapter, we now can stream Netflix on demand program content directly to our television.
Further, it's already affected my cable television subscription. Rather than consider upgrading to a more expensive package to receive Disney channels, I now have next-day access, for free, via Netflix. Netflix also offers a huge number of recent television programming, plus several thousand movie titles for on-demand streaming.
Because TiVo upgrades its boxes with software downloads, how long will it be before the service begins to offer direct streaming from various other internet-bases sites, including Hulu or individual cable channel-related sites?
Today, it's Disney that I'm not buying from Comcast. Tomorrow, who knows which channels will have also become redundant?
The second linked post, from last October, detailed how some younger video content consumers are dropping their cable television subscriptions, substituting them with set-top boxes streaming Netflix and/or other content to their televisions.
Time Warner's write down was an unexpected piece of additional evidence that this vision of the future disintermediation of cable content by internet-based content sites is approaching much faster than anyone believed even a year or two ago.
Chances are, it will accelerate from here.
Monday, October 06, 2008
Highspeed Cable Cannabilizes Cable Television Sooner Than Expected
Back in August of 2006, I wrote this post regarding the potential for residential video viewers to begin disconnecting their cable television subscriptions. Instead, I suggested, they would make use of the soon-to-come boxes allowing wireless internet access from highspeed cable directly to their televisions.
That day seems to have arrived sooner than anyone expected for quite a few American viewers. Specifically, several friends, including a consultant, S, all warned me that I was overly optimistic in my belief that we were only a few years from the point at which fairly average people would begin to unplug their cable television service.
Friday's Wall Street Journal featured an article entitled, "Turn On, Tune Out, Click Here," in the Technology section. The piece begins with this passage,
"Kenny Johnson, a senior credit analyst for Fox Home Entertainment in Garden Grove, Calif., recently took a hard look at his finances -- and canceled his c-television subscription.
With a newborn child at home and growing household expenses, he says the decision saved him and his wife more than $40 a month -- or roughly the increase he is paying at the gas pump every month for his commute to work. The couple held onto their DSL Internet connection, which costs about $38 a month.
Now the Johnsons access most of their television shows online, through Web sites like Hulu.com, in addition to the free broadcasts they pick up over the airwaves. They also bought a set-top box that allows them to stream shows via Netflix.com to their television set, including episodes of NBC's "The Office" and Showtime's "Weeds."
"To me, it looks just like my cable," Mr. Johnson says.
In the past two years, nearly every major network show and many of the biggest cable programs have become available on the Internet. The virtual library of content includes everything from "Desperate Housewives" and "CSI" to "The Colbert Report" and "Mad Men.""
This last sentence is, of course, the key change in the past few years. I cannot say I foresaw this over two years ago, but I did envision something similar, but actually more costly. Rather than charging for this programming, networks are actually giving them away for free, with a smattering of advertising.
How lucky can viewers get? We might have had to pay by the view at individual network, program or producer websites. Instead, the same television executives who paid for their programming with ad revenues have graciously replicated that model online.
The piece further notes,
"Many shows can be viewed for free and are accompanied by a dollop of ads that's small when compared with the number of commercial breaks on television. As a result, some cost-conscious consumers are ditching their cable subscriptions altogether.
"I'm saving a lot of money," says Tony Leach, a product manager at an online stock brokerage firm in the Bay Area. Mr. Leach canceled his $60-a-month cable subscription two years ago and has watched all of his favorite television shows on the Internet ever since.
The online television bonanza reflects a scramble by networks and cable stations to avoid the fate of the music business, which is still reeling from the effects of piracy and early missed opportunities to capitalize on the Internet.
Complete episodes of about 90% of prime-time network television shows and roughly 20% of cable shows are now available online, according to Forrester Research analyst James McQuivey. There are still notable holdouts, such as Fox's "American Idol" and current seasons of HBO series like "Entourage."
The number of people watching all of their programs online is still small; some estimates put the number at just 1% of the total television audience. In part, that's because watching online isn't as easy as channel surfing on the couch, TV remote in hand. Viewers must either watch shows on their personal computers, or use a device like Apple TV, which allows them to download shows from the Internet onto their television sets.
Within the next several years, however, media and technology executives say that a host of new technologies will make television access to online video a mainstream phenomenon. Vudu Inc. already sells a $299 set-top box with a remote control that allows users to download television shows for $1.99 per episode. Microsoft and Sony both sell television shows that users of their Xbox 360 and PlayStation 3 videogame consoles can download over the Internet for viewing on television sets.
Netflix subscribers can buy a $99 set-top box from Roku Inc. that streams videos on their television sets. The service is included at no extra charge in the monthly Netflix fee for renting DVDs."
This, of course, is key. I have written a few posts about the set-top box issue in the past. Now, with more options than just AppleTV, it's a fair bet that in only a year or two, the current trend away from cable television subscriptions will increase markedly. For example, again, from the Journal article,
"Still, research firm Nielsen Online estimates that in June, 3.2 million Internet users watched more than 106 million video streams on Hulu.com, a site that wasn't available to the public until March. Walt Disney Co.'s ABC.com delivered nearly 27 million streams to 2.9 million viewers that same month, according to Nielsen. The data include everything from behind-the-scenes clips and segments of shows to complete episodes.
Other research indicates that online video-watching is cannibalizing television audiences. According to a spring survey by Integrated Media Measurement Inc., a research firm that tracks media consumption, more than 20% of viewers in the firm's 3,200-person panel watched some prime-time network television online, up from roughly 6% in the fall. Half of those online viewers said they were no longer watching those shows on television.
"What this study is showing is that the long-vaunted convergence of the TV and the computer is happening faster than anybody thought it was happening," says Tom Zito, Integrated Media's company's CEO."
Eventually, one would conjecture that this will affect the economics of the current cable distribution system. And, on that topic, the article reports,
"Tensions are beginning to heat up between cable operators and cable channels over free Web video. Glenn Britt, CEO of Time Warner Cable Inc., has been one of the most outspoken people on the topic, telling cable program executives to not expect to continue sharing subscription revenue if they keep giving their top shows away for free online. When asked how programmers have been responding to such comments, Mr. Britt says, "Not well."
Executives at several cable channels were reluctant to discuss the topic, at the risk of further straining discussions about Internet television with their cable-operator partners. "We can't just cut the cable companies out," says one of those executives."
Meaning, as I understand it, that cable system operators intend to keep more money if their content suppliers continue to give that content away freely on their own websites.
"Last year, the average home received 118.6 cable channels but only tuned into about 16 of them, or 13% of the total available to them, according to the Nielsen Co."
This, too, is one of the reasons I predicted this effect a few years ago. I can personally attest to watching only about 5-8 channels, while my daughter uses perhaps an additional 3. She, too, has no compunction about watching video content on one of the two wireless laptops to which she has access on a regular basis.
Thus, the closing passage of the Journal piece is prophetic,
"Jeff Pulver, founder of PrimetimeRewind.tv Inc., which makes it easier to locate Web television shows, says he believes the Facebook and Google generation won't look askance at getting television shows from the Internet.
Still, adds Mr. Pulver, who also co-founded the Internet phone company Vonage, "Some people will [continue] to subscribe to cable, the way their grandparents did.""
That's pretty much how I feel, too.
Only this weekend, my daughter and I discussed buying a Tivo unit to secure better content access, as well as, of course, the digital recording capabilities which will restore my 'watch one record another' channel feature which I lost when Comcast insisted that I use their digital set top box. In fact, my daughter even counseled against going with the cable operator's digital video recorder, based on her knowledge of the units' flaws and failure statistics.
It won't be surprising to me at all if we unplug from Comcast's television services within two years. I'll save about $600/year, which means the most expensive of the new wireless internet-to-television boxes will have a 6 month payback. Schumpeterian dynamics are quickly moving internet-based video content, that is not business news, into a competitively-advantaged position relative to packaged video content services offered by cable operators.
I rather doubt I'm alone on this issue, as the Journal article notes.
That day seems to have arrived sooner than anyone expected for quite a few American viewers. Specifically, several friends, including a consultant, S, all warned me that I was overly optimistic in my belief that we were only a few years from the point at which fairly average people would begin to unplug their cable television service.
Friday's Wall Street Journal featured an article entitled, "Turn On, Tune Out, Click Here," in the Technology section. The piece begins with this passage,
"Kenny Johnson, a senior credit analyst for Fox Home Entertainment in Garden Grove, Calif., recently took a hard look at his finances -- and canceled his c-television subscription.
With a newborn child at home and growing household expenses, he says the decision saved him and his wife more than $40 a month -- or roughly the increase he is paying at the gas pump every month for his commute to work. The couple held onto their DSL Internet connection, which costs about $38 a month.
Now the Johnsons access most of their television shows online, through Web sites like Hulu.com, in addition to the free broadcasts they pick up over the airwaves. They also bought a set-top box that allows them to stream shows via Netflix.com to their television set, including episodes of NBC's "The Office" and Showtime's "Weeds."
"To me, it looks just like my cable," Mr. Johnson says.
In the past two years, nearly every major network show and many of the biggest cable programs have become available on the Internet. The virtual library of content includes everything from "Desperate Housewives" and "CSI" to "The Colbert Report" and "Mad Men.""
This last sentence is, of course, the key change in the past few years. I cannot say I foresaw this over two years ago, but I did envision something similar, but actually more costly. Rather than charging for this programming, networks are actually giving them away for free, with a smattering of advertising.
How lucky can viewers get? We might have had to pay by the view at individual network, program or producer websites. Instead, the same television executives who paid for their programming with ad revenues have graciously replicated that model online.
The piece further notes,
"Many shows can be viewed for free and are accompanied by a dollop of ads that's small when compared with the number of commercial breaks on television. As a result, some cost-conscious consumers are ditching their cable subscriptions altogether.
"I'm saving a lot of money," says Tony Leach, a product manager at an online stock brokerage firm in the Bay Area. Mr. Leach canceled his $60-a-month cable subscription two years ago and has watched all of his favorite television shows on the Internet ever since.
The online television bonanza reflects a scramble by networks and cable stations to avoid the fate of the music business, which is still reeling from the effects of piracy and early missed opportunities to capitalize on the Internet.
Complete episodes of about 90% of prime-time network television shows and roughly 20% of cable shows are now available online, according to Forrester Research analyst James McQuivey. There are still notable holdouts, such as Fox's "American Idol" and current seasons of HBO series like "Entourage."
The number of people watching all of their programs online is still small; some estimates put the number at just 1% of the total television audience. In part, that's because watching online isn't as easy as channel surfing on the couch, TV remote in hand. Viewers must either watch shows on their personal computers, or use a device like Apple TV, which allows them to download shows from the Internet onto their television sets.
Within the next several years, however, media and technology executives say that a host of new technologies will make television access to online video a mainstream phenomenon. Vudu Inc. already sells a $299 set-top box with a remote control that allows users to download television shows for $1.99 per episode. Microsoft and Sony both sell television shows that users of their Xbox 360 and PlayStation 3 videogame consoles can download over the Internet for viewing on television sets.
Netflix subscribers can buy a $99 set-top box from Roku Inc. that streams videos on their television sets. The service is included at no extra charge in the monthly Netflix fee for renting DVDs."
This, of course, is key. I have written a few posts about the set-top box issue in the past. Now, with more options than just AppleTV, it's a fair bet that in only a year or two, the current trend away from cable television subscriptions will increase markedly. For example, again, from the Journal article,
"Still, research firm Nielsen Online estimates that in June, 3.2 million Internet users watched more than 106 million video streams on Hulu.com, a site that wasn't available to the public until March. Walt Disney Co.'s ABC.com delivered nearly 27 million streams to 2.9 million viewers that same month, according to Nielsen. The data include everything from behind-the-scenes clips and segments of shows to complete episodes.
Other research indicates that online video-watching is cannibalizing television audiences. According to a spring survey by Integrated Media Measurement Inc., a research firm that tracks media consumption, more than 20% of viewers in the firm's 3,200-person panel watched some prime-time network television online, up from roughly 6% in the fall. Half of those online viewers said they were no longer watching those shows on television.
"What this study is showing is that the long-vaunted convergence of the TV and the computer is happening faster than anybody thought it was happening," says Tom Zito, Integrated Media's company's CEO."
Eventually, one would conjecture that this will affect the economics of the current cable distribution system. And, on that topic, the article reports,
"Tensions are beginning to heat up between cable operators and cable channels over free Web video. Glenn Britt, CEO of Time Warner Cable Inc., has been one of the most outspoken people on the topic, telling cable program executives to not expect to continue sharing subscription revenue if they keep giving their top shows away for free online. When asked how programmers have been responding to such comments, Mr. Britt says, "Not well."
Executives at several cable channels were reluctant to discuss the topic, at the risk of further straining discussions about Internet television with their cable-operator partners. "We can't just cut the cable companies out," says one of those executives."
Meaning, as I understand it, that cable system operators intend to keep more money if their content suppliers continue to give that content away freely on their own websites.
"Last year, the average home received 118.6 cable channels but only tuned into about 16 of them, or 13% of the total available to them, according to the Nielsen Co."
This, too, is one of the reasons I predicted this effect a few years ago. I can personally attest to watching only about 5-8 channels, while my daughter uses perhaps an additional 3. She, too, has no compunction about watching video content on one of the two wireless laptops to which she has access on a regular basis.
Thus, the closing passage of the Journal piece is prophetic,
"Jeff Pulver, founder of PrimetimeRewind.tv Inc., which makes it easier to locate Web television shows, says he believes the Facebook and Google generation won't look askance at getting television shows from the Internet.
Still, adds Mr. Pulver, who also co-founded the Internet phone company Vonage, "Some people will [continue] to subscribe to cable, the way their grandparents did.""
That's pretty much how I feel, too.
Only this weekend, my daughter and I discussed buying a Tivo unit to secure better content access, as well as, of course, the digital recording capabilities which will restore my 'watch one record another' channel feature which I lost when Comcast insisted that I use their digital set top box. In fact, my daughter even counseled against going with the cable operator's digital video recorder, based on her knowledge of the units' flaws and failure statistics.
It won't be surprising to me at all if we unplug from Comcast's television services within two years. I'll save about $600/year, which means the most expensive of the new wireless internet-to-television boxes will have a 6 month payback. Schumpeterian dynamics are quickly moving internet-based video content, that is not business news, into a competitively-advantaged position relative to packaged video content services offered by cable operators.
I rather doubt I'm alone on this issue, as the Journal article notes.
Wednesday, April 18, 2007
Time Warner's Big Cable Decision
Yesterday's Wall Street Journal featured an article in its Marketplace section which reported that Time Warner is seriously considering unloading its cable holdings. CNBC, as it often does, due to its alliance with the newspaper, featured a discussion of the article. At least one fairly on-air-headed anchorperson wagged her tongue about the 'fat cash flows' from Time Warner's cable businesses.
That, of course, misses the point. Public companies are not run for cash flows, because, in a capital market which is liquid, cash can be borrowed. Shareholders rarely seem to buy stocks for dividends, as they did thirty years ago, when transaction costs were exhorbitant. Instead, stocks are viewed with an eye to total returns.
There was one key passage in the Journal article that says it all about Time Warner's situation,
"For years, Time Warner has believed in wedding its movies and television programs to powerful distribution networks- primarily its cable operation- as a way to ensure that their content wouldn't be blocked by rivals. But with the Internet increasingly serving as a home for TV and film offerings, content companies may feel they no longer need to control old-style distribution networks such as cable or satellite TV."
In prior posts, here, and here, plus a handful of others you can find by searching my blog for the term 'Time Warner,' I have argued that old media, as represented by Time Warner and the networks, have ignored the coming, now at hand, disintermediation of broadcast and cable channels by direct URL access.
My post yesterday concerning H-P's entry into the hardware product/market space for this missing link portends just how broad this disintermediation is likely to become- quickly.
Taking all of this into account, I can only marvel that Time Warner has dawdled as long as it has to come to the realization that its cable assets are about to become as 'valuable' as the old Bell System's local copper loops and land lines. Being a common carrier is simply not likely to earn consistently superior returns in the future of direct video content access from URLs on the internet to a TV.
Beyond that, Time Warner's strategy of attempting to own both the distribution and the content was never fated to work well. It never has, and never will. I've written about this as recently as February of this year, here. Essentially, superior content will always find a market. Superior carriage will always command a premium and have supply. Owning a mediocre combination of both assures that, in time, both will fail to provide consistently superior returns.
I've included a Yahoo-sourced chart of Time Warner's past five-year stock price performance, compared with the S&P500. It's pathetic. The firm's stock price has ended up essentially flat, having plunged early on, plateaued, then rose, and now sunk again. It has woefully underperformed the index over the period. It's hard to believe the firm's senior management and/or board has been attentive to its long term prospects.
The Journal article alleges that the two-pronged strategy involving holding cable assets is CEO Parson's preference. That figures, since Parson's has pretty much bumbled the management of the combined Time Warner-AOL since he took over from Gerald Levin. Parsons is a lawyer with no evident grasp of business strategy.
Thus, it's no surprise that Time Warner might be as much as five years too late in exiting cable systems and using the resulting funds to buy into online properties at lower prices than today's.
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