The cable television industry may be in for a makeover, whether it likes it or not. One possible role model could be Apple Inc., notes a February 2010 article from The Wall Street Journal. Here’s why:
Currently, TV networks provide shows and channels to cable operators for a fee. Cable operators then bundle the content together as part of a cable TV package, and recoup their expenses from consumer subscriptions and in some cases advertising.
The problem is, consumers aren’t happy paying for packages that include shows on networks they don’t really watch or even want in the first place. In fact, media research firm Nielsen estimates that in 2008, households only viewed 18 channels on average, out of the 130 that come with their cable TV subscription.
Likewise, the Internet is a growing threat to the cable television industry’s current distribution model. Not only can viewers now watch shows for free or at a low cost online and on web-enabled devices, but the ubiquity of the Internet could also increase the risk for pirated shows, especially as consumers look for cheaper alternatives.
One possible solution, notes The Wall Street Journal, is for cable operators to ditch their role as content middleman and to simply focus on selling access to their pipes, allowing TV networks to then sell content directly to consumers. This, notes the paper, is similar to how Apple Inc.’s new e-book store for the iPad (dubbed “iBooks”) operates — by acting as a storefront (or a dumb pipe) for publishers to sell their books, in exchange for a fee.
To read the full Wall Street Journal article, click here.
Businesses are increasingly using social media to connect with consumers and enhance brand awareness. However, according to a 2009 global study sponsored by technology giant Cisco, few businesses have formal processes and policies in place to govern social media use, and this lack could lead to improper disclosure and misrepresentation.
The Cisco study, the first of a two-part series, is based on in-depth interviews with 105 participants from 97 organizations in 20 countries. It was carried out by IESE Business School in Spain (an operating partner of the Institute for Media and Entertainment), the E. Philip Saunders College of Business at the Rochester Institute of Technology in the U.S., and the Henley Business School in the United Kingdom.
According to the study, social networking tools like Facebook and Twitter are becoming a key part of business initiatives in areas like marketing and communications, human relations and customer service. However, only one in seven of the surveyed companies had a formal process to implement social media tools, and only one in 10 involved their IT departments in their social media strategies. What’s more, respondents admitted that they find it difficult to create and adopt policies that strike the right balance between the personal nature of social networking, and proper corporate oversight.
As companies integrate social media in their operations, the study suggests that the following issues be addressed: When, how and what initiatives are to be launched (and not launched); how the enabling technologies should be managed; and how employee use of these technologies should be managed.
For study highlights and additional information, you can read the full Cisco news release here.
In January 2010, Apple Inc. finally launched its long-awaited touchscreen tablet — the iPad. It can surf the Web, play music and videos, send mail, display photos, read e-books and publications, and run thousands of applications from the App Store. Indeed, Apple CEO Steve Jobs says it will put “the whole Internet in the palm of your hands.”
Already, the iPad has gotten attention from consumers and industry players alike. While some analysts expect it to “ignite” sales of tablet computers, some have also pointed out its deficiencies, such as the device’s failure to run Adobe’s Flash player, its inability to support multitasking capabilities, its lack of a built-in camera, and so on.
To simply focus on the pros and cons of Apple’s latest offering, however, may be to miss the crucial point, says Sandra Sieber, Associate Professor and Head of the Department of Information Systems at top-ranked IESE Business School, an operating partner of the Institute for Media and Entertainment (IME). Sieber also teaches the Advanced Digital Media Strategies executive education program at IME.
And what exactly is the point? A likely price war on Internet data plans, leading to increased Web use and consumption of content, says Sieber. This is because unlike the iPhone, the iPad has no exclusivity contract with AT&T. Consumers are free to choose which telecom operator to work with, opening the field wide for competition. So while the iPad could likely boost bandwidth use much like the iPhone did, telecom operators may not find it as lucrative, as they would likely have to cut profit margins and offer economical data plans to win their share of the market.
The likelihood that iPad owners will consume more content, however, is good news for content distributors and developers. “It will still imply that content distributors will have to find good ways to monetize content, but with this new proposition, Apple directly attacks the access hurdle,” says Sieber. “As (Apple Inc.) said on the iPad presentation event, they have 75 million iPhone users. What they did not say is that they are all paying hefty data plans. How many users may they have if the mobile Internet becomes cheap?”
To read Sieber’s detailed analysis on the subject, published on the IESE Technology Blog, click here.
Imagine a world without music executives – a world where an artist has control over the production, manufacturing, publishing, and management of his or her career. A world where a singer is only a song and an Internet connection away from worldwide acclaim. This world may be closer than you think.
So you think you’re on top of the current digital revolution? Chances are, based on “Demi Moore’s Law,” you’re only seeing half of what your business can do with technology, and only half of what technology is doing to your business, says Spanish academic Josep Valor, in today’s interview with Financial Times.
“Demi Moore’s Law” is an extension of Intel founder Gordon E. Moore's law on the exponential pace of microprocessor development, and plays on the word “demi” (which means “half” in French) and Moore’s name.
Valor, an associate dean and technology professor at Spain’s IESE Business School, an operating partner of the Institute for Media and Entertainment (IME), says record companies, for example, didn’t quickly adjust to the reality of digital music reproduction. They should have focused on their core strength — making money by finding and promoting new talent — instead of spending millions of dollars fighting file-sharing Web sites.
Focusing on one’s core competencies, while at the same time understanding how technology is changing the marketplace and the world around us, is key, says Valor, who adds that companies don’t necessarily need complex algorithms and cutting-edge hardware to succeed.
One example of a company that has adjusted well to the digital era is U.S. sports magazine Sports Illustrated, which went online in 1997 and now ranks among the top 10 sports Web sites worldwide. Valor, who also teaches the Advanced Digital Media Strategies program at IME, wrote a case study documenting the magazine’s transition. This case study, now being taught in IESE Business School's MBA program, has gotten extensive favorable feedback.To read the full Financial Times interview with Valor, click here.
Two out of five UK Internet users would rather give up their TV than their Internet connection, says a recent survey by London-based research firm GfK NOP. Is it possible that eventually, with TV manufacturers’ upcoming and planned integrated web product enhancements, consumers may never have to choose?
Starting with the 2009 holiday season, companies like Sony, Samsung, LG, Panasonic and Vizio began to market their Web-enabled TV sets, which allow users to stream online content directly to their TVs, without having to connect to a computer or set-top box. The price tag? From $850 (for LG’s 42LH50 LCD TV), and up.
Randy Waynick, SVP at Sony's Consumer Group, predicted to USA Today, "When we all open up the newspapers on Jan. 1, and they talk about the hot items from the holiday selling season, Internet-connected TVs are going to be at the top of the list."
Of course, the dream to marry Web and TV has been around since more than a decade ago, when Microsoft purchased MSN TV (formerly WebTV Networks, a system that allows TV sets to connect to the Internet). The idea, however, finally seems to be gaining traction. In fact, iSuppli, a market research firm specializing in the electronics value chain, predicts that by 2013, worldwide retail sales of Internet-enabled TVs (IETVs) will reach 87.6 million units, compared with 14.7 million in 2009.
So can IETVs really go mainstream? It’s possible, but for now, there’s still a lot to improve on. Most IETVs in the market are not yet Bluetooth- or WiFi-equipped. They use a wired, Ethernet connection so consumers can’t easily connect wirelessly. Also, users cannot surf the Web freely with these TVs, and can only access content through a limited selection of “widgets,” or tiny on-screen buttons representing software apps. Samsung IETV sets, for example, have widgets for Blockbuster On Demand, Amazon On Demand, YouTube, Twitter, Flickr, eBay, USA Today, RallyCast and Yahoo!’s Finance, Weather, Video and News Updates — but not for Facebook, or e-mail services.
If they do catch on, however, IETVs could be a “nightmare” for the hardware “middlemen” who sell devices that enable users to connect their TV sets to the Web, such as set-top boxes like Apple TV and Roku’s Netflix player. IETVs could also threaten other online-viewing services, such as Time Warner/Comcast’s “TV Everywhere/On Demand Online,” which enables cable TV subscribers to access cable programming online for free.
At the same time, IETVs could be a “dream” for developers of “widgets” and similar software programs. Likewise, as iSuppli noted in its research report, IETVs could boost sales for manufacturers and semiconductor suppliers that provide memory, micro-processing chips and other products that enable TVs to connect to the Web.
And there will likely be more opportunities in the future, as TV sets become more affordable and other players in the digital media value chain find a way to exploit the trend. As Michael Greeson, President of consultancy firm Diffusion Group, tells BusinessWeek: "The concept has been validated in the mobile space; the iPhone is a proxy for what can happen in widget-enabled TV," he says. "This is a battle. Internet connection to the TV will redefine the entire television business."
Are cable and satellite TV firms in danger of “disintermediation?”
In economics, “disintermediation” refers to “the removal of intermediaries in the supply chain” — which some critics believe could be cable programming’s fate, as more and more users watch their favorite shows directly online, bypassing the cable and satellite TV companies. Indeed, how these companies will cope in today’s Web-centric market “is the single biggest question facing the media industry,” remarked former News Corp. President and COO Peter Chernin, at the USC Annenberg School for Communications’ roundtable discussion last Fall.
The End? Maybe, But Not Yet
For now, however, cable companies appear to be in good shape. According to a September 2009 report by marketing and media research firm Nielsen, time spent watching TV is up four minutes from the prior TV season, and up 20 percent from 10 years ago — partly because of the increased choice in cable and broadcast content.
And as El Segundo-based satellite TV company DirecTV has shown, it’s still possible for non-broadcast firms to maintain subscriber growth. DirecTV reported 136,000 new U.S. subscribers for the 3rd quarter of 2009, bringing its total base to 18.4 million, with the average monthly revenue per subscriber rising 2.1 percent, says Dow Jones NewsWires.
Cable and satellite companies may still have to watch their backs, however. As video content grows online, so does the online audience. Research firm comScore reports that Web-viewing again reached record-breaking levels this past September, with 168 million users in the U.S. watching videos via Web-based services like YouTube and Hulu.
What’s more, the proliferation of products and services that support the “online viewing” model may continue to threaten cable’s role — such as Internet-ready HDTVs and Blu-ray players, Internet “set-top boxes” like Apple TV and Boxee, “video- and Web-ready” game consoles like XBox 360 and Playstation 3, and pay-per-download/subscription-based services like Amazon on Demand, Netflix, or Apple’s planned iTunes TV.
Salvation = Content Control?
So what can cable operators do to protect their programming revenues and remain relevant? One strategy, it seems, is to take “control” of how their content is accessed online. Time Warner and Comcast, for example, have partnered on an initiative to make their cable programming available online for free — but only to their own paying cable subscribers. Called “TV Everywhere” for Time Warner and “On Demand Online” for Comcast, the initiative is expected to launch by the first part of 2010.
And as we have written about in a previous post on the Comcast-NBCU merger, when Comcast completes its deal to a 51 percent stake in media and entertainment firm NBC Universal, this could give Comcast an even bigger say on how and when TV shows are distributed online — which, incidentally, could also raise anti-trust concerns. "Comcast/NBC would control so much important content that it could charge competitors more for its programs," writes Free Press, an independent advocacy group for media reform.
As for the Bottomline?
For now, there are still more questions than answers as cable firms and other players in the media chain find their footing in the changing digital landscape. Since producing and distributing content costs money if users watch shows online for free, how can cable operators recoup costs of licensed and distributed content, and turn a profit? Will advertising dollars be enough, or will companies like Time Warner/Comcast eventually resort to charging consumers even more for their cable subscriptions, to subsidize their “free” online content? Will content providers, like Disney, for example, break away from cable firms and make their content available on services like Apple’s planned iTunes TV? If yes, who will go first? And from a technical standpoint, can the Internet really handle the huge need for increased bandwidth that will occur if there is a potential mass migration of viewers from TV to online?
Steve Jobs famously referred to the Apple TV — Apple’s “set-top box,” which allows viewers to play digital content from their computers on their TV sets — as a “hobby.” Why? “A lot of people have tried and failed to make [the “set-top box”] a business,” says the Apple CEO, at the 2007 AllThingsD conference in California. “It’s a business that’s hundreds of thousands of units per year, but it hasn’t crested to be millions of units per year. But I think if we improve things we can crack that.”
Well, Apple is now apparently trying to “crack that,” using the same strategy it used to sell millions of iPods and iPhones — “software” before “hardware.” In other words, offering an impressive range of content first, and hardware sales will follow.
The tech giant is currently on a mission to convince TV networks to make their shows available on iTunes, Apple’s software-based online digital media store, reports All Things Digital’s Peter Kafka. These TV shows would be part of a $30-a-month subscription service planned for sometime next year. And while Apple is not pushing to make the service exclusive on Apple TV, the service could still potentially boost sales of Apple’s beleaguered set-top box. That is, if Apple’s plan succeeds.
Who’s likely to bite?
Consumers who download or stream shows online, for one. According to research firm comScore, a record-breaking 168 million users in the U.S. watched videos via Web-based services like YouTube and Hulu this past September. And while it’s easy to find free content, the theory is: viewers who want to be assured of watching their favorite shows in good quality might not mind paying a minimal fee — especially if it beats the steep price of a cable subscription, which often includes bundled-in shows that are of little interest to many viewers.
“With it being so easy to get the things they want for free online, why should consumers be obliged to spend $90 a month for 500 channels, 490 of them that are never, ever watched?” writes LA Times’ BrandX blogger, Richard Metzger. “Paying just $30 for the things you do want to watch is a no-brainer. You won't need the DVR either, saving you an additional $12 a month.”
What’s more, Apple already has a built-in market it could target — the more than 100 million users who already have iTunes accounts.
Content providers looking for additional sources of revenue may also be interested in Apple’s proposition. Interested but cautious, that is. “Cable networks, for instance, don't want to threaten existing relationships and subscription fees from cable providers like Comcast,” says Kafka. “And programmers are also worried about the effect a subscription service would have on advertising revenue: Even if the service didn't distribute TV programs until after their initial air date, that could cut into ratings, which now measure viewership over the course of several days.”
Who will get bitten?
As mentioned, cable companies who depend on paid subscriptions may be threatened, if Apple comes out with a cheaper “unbundled” alternative that allows viewers to “buy” only the networks and shows they want, not a package of often “irrelevant” programming. But other players in the digital media chain may also find themselves on the losing end — such as brick-and-mortar retailers who sell DVRs and DVDs, and rent DVDs (like Blockbuster).
"The challenge is: Why do you need to have a physical retailer in the midst of a transaction between the content owner and the ultimate consumer?" Colin McGranahan, analyst at investment research firm Sanford C. Bernstein & Co, tells The Los Angeles Times.
Still more to chew on, however:
Even if Apple succeeds in getting consumers and content providers to bite, the company may still have other potential hurdles to face, such as, how to efficiently deliver video that will take up increasing Internet bandwidth. “Streaming your nightly TV is going to take lots of bandwidth, something broadband providers like cable and DSL companies are trying to limit, not open up,” writes Dan Moren, associate editor at MacWorld.com. To some extent, Apple’s success may rely on the very people they’re trying to disintermediate, the cable companies who control the “pipe” to the customers.
Apple also may need to make sure iTunes TV syncs properly with other systems and devices. A recent iTunes update that allowed users to connect their iTunes library to their Apple TV 3.0 box has led to synchronization glitches for PalmPre users, for example. “Apple has screwed some of its iTunes users,” writes tech reporter Mark Everett Hall in TGDaily.com. That kind of negative feedback can hurt Apple’s credibility and sales.
And of course, Apple would still have to fend off competition from similar subscription-based services, such as Amazon’s Video on Demand, Internet-ready HDTVs and Blu-ray players, Roku’s Netflix player, and game consoles like XBox 360 and Playstation 3, which now allow users to stream Netflix movies and TV shows, says PCWorld.
Pirates are firing at the ship, seizing the vessel, and taking command of its precious booty, leaving nothing for the ship’s captain and owners but the fear of a life’s work brought to a naught. Although not as swashbuckling as Pirates of the Caribbean, it is the dire picture Hollywood is painting of pirates ravaging its creative content. Is Internet piracy really a threat to the industry, or is it simply a sign of changing consumer demand?
Fresh from buffing up its site and eager to redefine its identity, MySpace has a new mission: collaborate and make “friends” with other players — especially the “cool kids” in social media. An interesting strategy, but will it be enough to bring MySpace back into the “in crowd?”
As we noted in a previous post on MySpace, while the company has been losing supporters to Facebook, it still has a lead on videos and music. Unsurprisingly, MySpace recently refocused its efforts on these strengths, in a bid to differentiate itself from Facebook and to woo back users and advertisers.
Recent site improvements include: 1) launching MySpace Music Videos, which aggregated video content from major music labels and independent record companies; 2) purchasing and integrating iLike, a music-sharing app; and 3) offering artists and labels an interactive tool to analyze audience data, through the MySpace Artist Dashboard.
“Facebook is about core communications with your friendship network, whereas MySpace is about congregating around popular content with people who share your interests,” said MySpace CEO Owen Van Natta, in a Telegraph interview.
As proof of this new direction, MySpace is now in talks with Facebook to allow users to share MySpace music and videos on Facebook, via Facebook Connect. Indeed, MySpace is all about collaboration nowadays. “Partnerships are going to be a big part of our strategy moving forward as a lot of value can be derived from them,” Van Natta told the Telegraph.
Aside from the potential Facebook team-up, MySpace is now working with Apple to allow users to purchase songs via iTunes. It’s also one of the companies powering “music results” and enabling “music purchases” on Google’s new music discovery service, “Google Music.” AllThingsDigital’s Kara Swisher reports that MySpace is even exploring a partnership with Microsoft to offer MySpace Music on MSN.
So will this new entertainment-focused and “collaborative” MySpace finally get out of Facebook’s shadow and succeed in carving out its own niche online again? It’s possible. By emphasizing licensed content from professional and independent artists, and by catering to music fans, MySpace is “filling a gap in popular culture left by MTV's move years ago away from music programming and the diminishment of music publications,” notes Forbes. This, in turn, could lead to more ad dollars.
New friends or not, however, MySpace still has to face other tough competitors — such as YouTube, the top-ranking video portal owned by Google. A recent report by marketing research firm comScore notes, for example, that Google sites rank first in all online viewership — drawing in 26 million viewers, who watched 10.4 billion videos, as of September. Of that number, YouTube accounted for 99 percent.
And of course, when it comes to business and profit, how long can “online friendships” really last? The turbulent world of digital media is filled with tales of “partners-turned-competitors” (an example might be Apple and Google on online mapping). MySpace’s new “ties” could end up complicated. If its video-streaming service ends up threatening YouTube, for example, how would Google react? It would be interesting to see how MySpace would fight for audience and advertising support, and how it would balance collaboration with competition, as it continues its revamp.
