Moving Content

Backfield in Motion

pgottesman@gmail.com (Patricia Gottesman) — Sun, 20 Jun 2010 12:32:00 -0700

Capsule: Today's digital TV won't evolve into tomorrow's TV fantasy--mobile, transformational, interoperable, personalized, location-based, searchable, technologically advanced, service-laden, efficient, fertile and environmentally sensitive--until traditional TV (facilities-bound broadcast, cable and satellite) finds a way to score even more points--as in dollars-and-sense--from their lock on the US entertainment leader-board. Is it possible that the Google/Apple nexus--and its mobile digital progeny--will work with regulators to disrupt the process?

The Financial Times on Google-Apple
The Economist on Apps

Functional business models for online TV entertainment don't exist beyond gaming. Despite the multimedia promises of monoliths Google, Apple and Microsoft, the only TV model still making sense these days is multichannel TV through cable and satellite (including broadcast) distribution. Cable profits continue to rise in volume and speed, giving MSO's a penchant to buy themselves something big to forestall death and taxes. Still, the core cable distribution profit drivers--top-line customer and revenue growth--are spending the Summer of 2010 in rerun mode, building mainly on rate increases and the churn-churned spending requirements of reselling every home on the block on the Triple Play.

So there's something riveting about the evolving Google-Apple grudge match and its relationship to our imagined digital TV future. Who'll bring it on in the next wave of digital TV--playing FM to cable's persistent AM of successful news and sports? Will HBO really GO online, like its TV Everywhere brand extension promises? Or will it OD on subscription-on-demand contentment, while a new mobile entertainment form becomes the new TV? (Can you imagine "It's not TV; it's HBO" being turned into a critique?)

The mobile point's tough to fake. It'll require a major leap for the fixed wired cable and satellite distributors to re-imagine themselves as healthy fast food, in addition to that full Sunday dinner served in the fancy eating room. Just as you can't imagine prime rib in a bag as a meal one-the-go, none of us can stay "on the cord" and stay active. What will cable and satellite do to reinvent themselves as the new protein bar?

Can content and distribution break themselves into bite-size profitable chunks for mobile money? Or, should the renaissance of vertical integration rule? Is it time to start rethinking all the successful content and distribution break-ups over the past few years--Time Warner's top-of-mind--as so 2008? Not really. Strong tensions between content and distribution are way-older than 2008. The separation between cable content and cable programming was mandated in the 1980's when the US government required cable operators to sell their programming services to their satellite competition.

But could a similar move, favoring the programmers over the distributors, be in the works today? The new FCC doesn't look like it wants too active a role in re-sorting the media world. Still, it's easy to imagine a 2012 trip across-the-border that requires cable distributors to share the programming they own with digital distributors--like Google and Apple--at reasonable rates and with supportive service guarantees in exchange for the many rights the wired world continues to enjoy and employ.

Of course: there is that nasty competitive quarrel between Google and Apple about alternative platforms and standards. No matter how combative the quarreling duo may be, does anyone doubt that the combatants are at their most powerful working together? They complement each other so well. You say: Open system; I say: Closed system. You say: Free; I say: Paid. You say: Plays Anywhere; I say: Plays-best-on-My-devices. The only thing we both say in unison is: It's fun making money sailing on a cloud.

As a quid pro quo for being granted a new form of broadband distribution transmission rights in a competitive form to cable and satellite (while "borrowing" the "utility portion" of cable and telco broadband networks,) Google/Apple may just agree to subsidize state and local governments with a new mobile franchise payment, equivalent to a small portion of the revenue they derive from mobile content delivery. Of course, once we're down this path, we might as well imagine several G-APPS--or application-driven versions of Google and Apple--because if money starts moving to this side of the ledger, it could be a digital green-fields moment for new distribution hybrids (and for new technology and new jobs.)

Wireless spectrum owners and device manufacturers are unlikely to put up a fight. Many will benefit if they can resolve the spectrum capacity and interoperability issues that need to be smoothed out to form a clear revenue superhighway. They'll need to resolve these issues anyway, just to stay ahead of the existing competition and to keep pace with the equity markets' performance growth requirements.

On the public side of the issue, given the number of real gaps between local, state and federal budgets and the money the US stands to earn on our current course over the next few years, new "Google/Apple hybrids" driving new taxes-and-fees across the jurisdictional spectrum are likely to be welcomed by Democrats and Republicans alike, no matter who's in charge.

Which content companies win in this scenario? Maybe Disney is the likely innovator, with its broad catalogue of TV content and distribution, including broadcast, cable and theme parks, not to mention the international sports monolith ESPN. What about Viacom and Fox? How far will Time Warner's HBO Go go?

In preparation for a world where the media makes even more money from more places than it does today, traditional TV will have to learn how to divide a larger pie with a larger field of players on the move.

That kind of score is going to require distributed mobility, meaning: our mobile future will include more than today's wireless telcos. And, depending on how quickly the content companies decide to place their bets, inertia will define the competitive dynamics: the media in motion will remain in motion and the rest will remain at rest.

Cool Fire

pgottesman@gmail.com (Patricia Gottesman) — Sun, 6 Jun 2010 09:40:00 -0700

Capsule: This week's lethal gunfire on the Mavi Marmara competed with the Gulf Coast oil spill for most infuriating news story. In contrast to the intensity of the reporting--hour after hour of repetitive video footage of the Gaza-bound flotilla blood fight interrupted by dead and dying Louisiana marsh and sea-life--the lasting public reaction to both stories seems subdued, at least in terms of igniting a real policy dialogue. Are we quietly reasoning through the issues in the news on our way to an evolved dialogue about the environment, energy consumption and peace in the Middle East? Or has the TV medium--resplendent in its apparent access to diverse views on hundreds of news programs--become the message? Have we delegated our emotional reactions to the companies delivering the news, while we observe life in air conditioned comfort?

What if We Drop Israel?
On the Media: The Role of Video in Israeli Blockade Crisis

BP's Gulf of Mexico Response
The Huffington Post: Louisiana Oil Spill 2010 Photos
Network
Marshall McLuhan
Noam Chomsky

Following this week's Israeli gunfire that killed nine aid workers en route to Gaza, the news cycle broke only to turn to the developing BP Gulf Coast oil slick, giving equal time to the rage-stoking arguments for and against an American break up with both the oil industry and with Israel. Really?

Are either of these ideas remotely realistic or desirable? How do they get introduced as possibilities? Have we started consuming our news as if it's targeted just to us in pre-digested pieces--a long-held media aspiration that's an equal mix of technological brilliance and grand commercialism? When will we be able to vote out anything we don't like with the click of a cursor or a remote--the ultimate reality a la carte?

With all of our new age digital technology, we may be avoiding educated decisions about the most difficult issues in the news because of the simple emotional way our news is delivered. It may feel good when we see something that reinforces our deepest desires for simplicity, power and satiety. It may even feel good when we're invited to explode--or when the people in the TV explode for us--but are we really making things better?

Much of what we're doing when we watch cable news and cruise broadband headlines is distracting ourselves, drawing our minds away from difficult questions. Why don't we have a respectable plan for oil independence beyond offshore drilling? Is it because a real plan has no silver bullets and will involve some long-term combination of offshore drilling, nuclear energy, repurposed natural gas and an improved relationship with oil exporters? Yuck. Who wants to spend their wind down time after work winding up on that kind of a brain-teaser?

While we're at it: what's our evolved thinking for peace in the Middle East? G_d knows we've been thinking about it for awhile. Is it time to stand staunchly beside our ally Israel while having deep but ineffective sympathies for the Palestinians? (The targeted "B" side of that ideological single is, of course, standing staunchly behind the Palestinians while having deep but ineffective sympathies for Israel.) Why does our relationship with Israel and the Middle East get accepted--even marketed--as an imponderable rather than as a commitment to a long-term set of actions to be taken responsibly and courageously?

Of course in the real world, someplace well outside the range of many TV cameras, the two issues dominating this news week were linked, connected viscerally by armed conflict in the Middle East and Africa over the last century. Blood has been spilled all over the world trying to carry out reasonable and unreasonable policies on oil rights and the breaking down or building up of the fragile balance between Israel, the Palestinians and the intractable warrior stance of many of Israel's neighbors.

Given the number of wars that have been inspired by oil and Middle East aggression, why aren't we moved to more responsible action? Shouldn't we be getting as mad as hell--like Network's Howard Beale in Paddy Chayevsky's 1976 master-work--until we decide we're not going to take it anymore?

Maybe the anger we need is inside the TV. The news borders on dramatic entertainment; certainly, distracting pathos. Think about this Winter's rage-filled imagery of neo-libertarians summoning Hitler as a fascist facsimile for the Obama administration. Think about the late Spring's smoldering media fury over the fact that President Obama doesn't get furious enough for the TV cameras. We've got a cable news mood ring for every season--and lately it's always red. Why do more?

Broadband news reads aren't much better as they compete with TV for passive eyeballs. Newser's bad boy (and Rupert Murdoch biographer) Michael Wolff crashed another ridiculous headline onto the shore of the media consciousness this week, asking why we don't "just break up" with Israel in one of his blogs. That's not a serious thought; it's an emotional distraction that puts distance between us and our ability to think constructively. Of course, it may make us want to read more Wolff wondering what delicious lunacy he'll concoct next.

It makes you wonder if the news was full of similar emotional distractions in the wind-up to the 20th century's two World Wars. The growth of tabloid journalism in the UK has been linked to WWII; and, American tabloid newspapers published many 20th century "yellow pages" stoking public emotion around multiple wars. Has the media always been both the relief valve and the advance signal for the dark emotions inside you and me? Despite our deepest paranoia: likely, not intentionally.

One of the paradoxical features of the news throughout media history is that it's gotten less global and therefore less complete during periods of heavy competition. Today's western media consumer enjoys hundreds of news brands, all vying in a commercially inhospitable digital world for a business model, looking for tons of viewers who will provide tons of revenue to ensure profitable survival for the lucky few, who will duplicate each other until the market runs dry.

Costly foreign bureaus have been consolidated or closed in record numbers as Google and Yahoo!'s Brand X news has grown. The beginning of the end of the newspaper, relatively speaking, may mean our tolerance for in-depth information and analytical nuance has decreased in proportion to the number of video stories and emotional web headlines replacing it.

There is a glimmer of hope in broadband's cool fire: internet savvy news readers may be better informed in their active news hunting than passive TV viewers, mostly because of the instantaneous access internet search can provide to alternative content. Of course, news hunting via Google, Yahoo! and Bing comes with its own counter-balancing glimmer of despair: how devoted is a relatively passive and highly distracted citizenry to the news hunt? How good is a search-optimized media world at turning up the untold story?

A sample web search of this week's in-depth reporting on the Middle East and the Gulf Coast leaves much insight to be desired. Are the tonier news tomes in need of better search-engine optimization? Do you have to be well-informed in the first place in order to search for meaningful information? How can we stay focused on complex issues with so many sirens blaring and newscasters raging and weeping in, let's face it, a pretty entertaining style?

Of course, we know that solving the world's problems will require us to spend time and energy getting underneath the headlines and into history and context. Of course, we know that it will be hard and time-consuming. Of course, we know that a rich understanding of the moral principles behind the news is reserved for the few who stay hungry.

Still...it's easier to feel sated by balancing a few ad-infused hours in front of the TV kind of emoting with a few ad-infused hours on the internet kind of searching. But if we know that we're getting the news we deserve, isn't it time we asked for more?

"All over the place, from the popular culture to the propaganda system, there is constant pressure to make people feel that they are helpless, that the only role they can have is to ratify decisions and to consume."
Noam Chomsky

When Worlds Collide

pgottesman@gmail.com (Patricia Gottesman) — Sat, 22 May 2010 13:41:00 -0700

Capsule: Digital media turned an important personal growth corner this week. The Wall Street Journal revealed that Facebook and MySpace were betraying friends while friending advertisers. Exactly how excited must the Journal have been to put the screws to the digital revolution by spying on the spies? Pretty excited, except when it came to inquire about News Corp's MySpace and its intelligence-sharing policies.... Can democracy be crowd-sourced by private enterprise? Should people ever entrust their personal rights to a digital media business? Was the digital euphoria of this last pre-recession decade a product of utopian wishful-thinking in a social climate of greed and excess? (Oh, grow up!)

The Wall Street Journal
Forget Email
Facebook's Mark Zuckerberg
Yahoo! on MySpace

Last week, digital darlings Facebook and MySpace were caught sharing their "users'" personally identifiable information (e.g., names and hometowns) with advertisers. Like any predictable pre-teen, Facebook claimed it had been misunderstood and "changed" its policy after the deception was revealed--but not before protesting that there would have been no deception had its registered users bothered to read the terms and conditions they signed up for in the first place.

By using the caveat emptor defense, Facebook unfriended its users as well as the digital "opt-in" concept at a critical phase. Advertising is trying to find its market through new business models in a determinedly digital world. To succeed, digital marketers will have to take the "opt-in" concept to new bankable heights. They'll have to be clear until it hurts when it comes to informing online customers of the terms and conditions of their digital business relationships. And, digital customers will have to grow up and recognize that they're just customers to those digital brands that seemed to understand them so well.

In the same week, Google was caught by Germany--how do they have the time? weren't they still chasing Greece?--collecting e-mails through intercepted wireless paths while roving German neighborhoods to improve their Google Maps product. Google quickly revealed the screw-up, claiming that the wireless data interception was unintentional--tough to believe given that Google admits to combing g-mail for attitudinal data that pegs its users to specific commercial segments that appeal to advertisers. Is Google really reading our mail? What about our blogs? (Let's hope so.) Did we inadvertently sign up for that by failing to read that never-ending bore of a terms-and-conditions micro-screen pop-up?

Maybe it's time for everybody to take some personal responsibility for this wacky state of affairs. For years, while the global consumer market was enjoying the fruits of past, present and future labors, the digital economy was setting its ground-rules. Rule #1: the "user" is king. More than profit, more than revenue, online usage is the number one metric of online success. Build crowds and the money will follow.

And follow it has, through advertising contracts that have made the digital advertiser the most important user of all. The brands are in on our lives; they're in on our conversations; and, they're even in on our pictures, if useful brand data can be gleaned from our digital albums. Yet, even with all of this personal access, the ultimate digital advertising money won't be realized until the theory of personalized advertising as a new direct marketing hybrid pays off.

Because it bets on future buying behavior (for now, in a recession,) digital ad revenue is more of a loan on future results than cash for the rest of us. Like hyper-inflated values on digital real estate, usage metrics have promised advertisers a rich future that has only been realized to date by the equity participants savvy enough to get in and get out through the very tight ownership window. Everybody else--including both advertisers and regular people who have made the investment of time and heart it takes to build a Facebook page--has paid without equivalent profit.

Digital payment currency for the consumer includes unsolicited advertising approaches as well as the foreboding of knowing you're being watched by interested fans who might easily turn into an angry mob led by your creditors (or your ex-spouse.) But don't worry: freedom (i.e., peaceful anonymity) can come through an actual "Facebook suicide"--the bathos-filled term used for erasing all traces of your Facebook page.

NPR Now entered the privacy debate last week by analyzing the potential personal cost of social media in a report on online privacy violations. According to NPR's legal sources, Facebook is commonly searched by attorneys looking for incriminating tidbits that can strengthen workers' compensation and divorce cases--all admissable in court. Those pictures of you obviously drunk with a too-familiar co-worker? If they show you standing, they can cost you your disability claim. If they show you canoodling, they can cost you your prenup in a nasty divorce.

Lucky dogs, traditional media have been slow to take what they know about the experiential habits of their customers to the digital bank. Federal regulators prohibited wired distributors from using personal data to exploit their customers years ago. Strangely, in its balancing of traditional and digital media, the federal government's regulatory instincts have been inconsistent in concept and execution. While cable operators are prohibited from revealing personal data (like name and home address) linked to TV viewing habits, few clear rules apply to protecting online users surfing through a media world far more exotic than angry Fox and MSNBC editorialists, Playboy on Demand and the occasional disreputable infomercial.

So, now that we've eaten from the tree of Knowledge of Digital Good and Evil, must we live outside the Garden? Yes.

Of course, digital nirvana never really existed. As painful as it is, this truth can set the media free. At least, it can help establish new blended advertising values built on the best intentions as well as the best results.

Trading Places

pgottesman@gmail.com (Patricia Gottesman) — Sat, 1 May 2010 12:52:00 -0700

Capsule: Could Arizona's new people-control law be a reincarnation of world attitudes following the Great Depression--the one that followed the US Stock market crash of 1929? Sometimes, you've got to move to the edge in order to see what the edge really looks like.

CNM News Network
The New York Daily News
Now Public Crowd Powered Media
Facebook 1 Million Strong Against the Arizona Immigration Law
Bridging the Online Language Barrier (OTM, WNYC)
Wikipedia on World Population
Wikipedia on The Great Recession

This week's media coverage of Arizona's new people-control bill is whipping up a storm of protest. It's also reacquainting our country with our unresolved relationship with our American identity.

Helping things get better and get worse, the media has a few neuroses of its own to de-kink. In 2009, CNN stepped up to the pro-immigration plate by releasing TV host Lou Dobbs, who had opined loudly that our nation was going to hell because of Latin American immigration. On the con side, Fox News is still the number one rated cable news channel, proving the power of American entertainment over culture at a time when we could use a real stab at the news.

We may be saved from our claustrophobic video-dome by our new online tools of crowd-sourcing, social media and social activism. Have social media replaced the face in the mirror with the faces in the crowd? Will American cultural leaders heed the call to move from Visionary Narcissism to Visionary Social Entrepreneurship because, in the end, diversity profits?

There are over 6.8 billion people in the world. The United States has 310 million of them, meaning that if the world were a democracy where every person had a vote, America would have to make friends quick in order to influence policy. "Friending" India or Indonesia or Brazil could do a lot to lift our numbers; and many public and private hands have turned to the task of firming up those connections. Still, a better online connection with our global knowledge base has reintroduced some facts that are fanning US paranoia, aided by our stubborn insistence on blindly confusing the news with entertainment.

The United States represents less than five percent of the world's population. As our relative size sinks in, it's also whipping up a familiar destructive instinct to protect our borders with force as the last bastion of America's eternal influence. Of course broadband power, courtesy of America's largest media distributors, has delivered the tools to break those illusions down to size. And, at cross purposes, media content is giving neo-American-isolationism a greater berth than reality actually affords.

American media influence on the global dialogue remains far larger than one might expect for a country with 5% of the world's population. The American GDP exceeds $14 trillion--three times the world's second-largest economy in Japan and twice the GDP-per-person of China. And even though the national debt has soared to 87% of US GDP, the American economy remains the largest in the world. The American media voice breaks through walls around the world--a nearly $1 trillion global industry--some of which now carry the angry faces of Arizona and the angry faces of the rest of us facing Arizona.

Some of the American media influence comes from the commonality of the English language--the prominent language in the most socially mobile parts of India and, up until recently, the prominent language on the web. But English language web dominance is changing rapidly as different world voices are building web businesses and social media in their own languages. A rapidly growing percentage of today's internet sites are written in a language other than English.

For the English-speaking parts of the world, there are web translators, but these translation engines make English trade places with each site's native tongue, fueling our language isolation and failing to provide a real taste of our dialogue with the rest of the world. Our media economy may be missing more than a few coins in its sofa cushions as a result.

America's largest loss may be a newer deal than our nationalist approach to language. US media content has embraced commercialism so completely that much of the news isn't even the news anymore. Newspapers were always faced with this dilemma--the one that pits making a living against making a profit from hysteria that scorns objectivity. Today, even the liberal news media give too much press significance to hate-mongering and far-right-wing bathos. The coverage given to extreme Tea Party activists throughout 2010 is one example of the so-called liberal media falling off the other side of the horse.

Comforting news persists from the media cynics who've studied our historical ideological dialogue closely. The media point-of-view swings between left-and-right via a very narrow arc. The difference between the American right and the American left is small when looked at closely--in part because the American fabric has interwoven diversity through constant cycles of immigration into its DNA.

People coming up always moderate the views of those running in place. The viewpoints of the young balance out the viewpoints of the old, for better and for worse. New immigrant struggles remind us of how America became the nation that dreams of freedom and justice in the first place. Our idealism balances our fears armed with statistics and hope.

In this light, it would be pretty to think that the Arizona legislature will walk its recent immigration bill back a giant step toward a constructive position that's actually on our ideological arc. That process would be hastened if we acknowledged that--as mighty as our economy and our military make us--we are routinely digesting and transmitting a relatively small arc of ideas, making us less than uniformly great and less than uniformly hateful. Our highest point on the American arc is reserved for hopes and dreams, balanced on our lowest point by fear.

When American ideals soar, they represent some of the greatest egalitarian poetry of the human spirit. We should expect nothing less from this nation of immigrants that built its 20th century wealth fighting some portion of its wars to free the world from tyranny, influenced by the often liberal immigration policies that have given America its trans-cultural face.

You Say You Want a Revolution

pgottesman@gmail.com (Patricia Gottesman) — Sat, 17 Apr 2010 11:39:00 -0700

Capsule: Where did our 70's yen for social revolution go? Today's social change is conflated with social media, courtesy of Facebook, YouTube, twitter and MySpace. Yesterday's generation gaps are today's socio-economic gulfs, defined by whether you listen to alternative music on your iPhone, slim down your telephone service to wireless only and pare your broadband down to wireless 3G--with the richest demographic trending more progressive on media and less progressive on politics. Maybe the media was always a poor barometer of cultural evolution. But today, social change seems pushed into the background in a world of immediate gratification through centralized search, e-books, iTunes, apps and news-filtering aggregators. As predicted, the medium is the message; and, the message is less about art, political and cultural change than about recovering economic dominance.

Revolutionary Media
Revisiting the Day When Internet was Born
NPR on Wikipedia
On the Media

The Hidden Brain

People love the Beatles. Their lyrics seemed right in the '70's and they still seem right today.

You say you want a revolution. Well, you know we all want to change the world. You tell me that it's evolution. Well, you know we all want to change the world. But when you talk about destruction, don't you know that you can count me out. Don't you know it's gonna be all right, all right, all right. You say you got a real solution. Well, you know we'd all love to see the plan. You ask me for a contribution. Well, you know we're doing what we can. But when you want money for people with minds that hate, all I can tell is brother you have to wait. Don't you know it's gonna be all right, all right, all right. You say you'll change the constitution. Well, you know we all want to change your head. You tell me it's the institution. Well, you know you better free your mind instead. But if you go carrying pictures of chairman Mao, you ain't going to make it with anyone anyhow. Don't you know it's gonna be all right, all right, all right. (From: "Revolution," initially released in 1968 as the "B" side of "Hey Jude.")

In some ways, the most revolutionary aspect of the Beatles' Revolution lyrics is the fact that we can look them up online today and quote them anywhere--probably not as powerful as what Lennon had in mind. Today, one of the highest ranking Google choices under "revolutionary media" is a religious site of the same name.

Media milestones in the '70's included what seemed like confrontational coverage of centralized power and geopolitics. In a rich irony, The New York Times' Pentagon Papers and The Washington Post's Watergate coverage poisoned perceptions of the Vietnam War and helped depose the US President who took us out of it.

For those who cared to learn what havoc the cold war and colonialism were wreaking in southeast Asia, the Middle East and South and Central America, there were words and images that had never before been shared.

NPR was born in 1970, beginning its 40+ years of earnest struggle to maintain an attitudinal center. And, for distraction, widespread sales of color TV's and VCR's offered technicolor entertainment, as did the beginning of today's 500+ TV choices with the birth of cable, including MTV and CNN as the 70's turned into the '80's.

Today's media milestones include: the international coverage of September 11th; the Iraq War and its aftermath in an increasingly unstable Middle East; Hurricane Katrina; 2008's US Presidential campaign; President Obama's inauguration; the passage of national Health Care legislation; and, lots of gut-wrenching news that doesn't seem like news at all, reported in high emotional color by cable networks and bloggers with vague attachments to the facts and strong affiliations with their employers' bottom lines.

We may not have news the way we used to yearn to make it, but we have greater content personalization and greatly expanded distribution at a fraction of the cost of old media and, maybe, at a fraction of the social impact. The evidence of these changes--captured by the global internet and iTunes, as well as Google's entry into and exit from China--seems less revolutionary than powerful in placing cultural choices in alignment with economics.

NPR, having survived a near-death experience in 1983, is still striving to earn its 2005 Harris Poll credential of "America's Most Trusted News Source"--despite the misappropriation of titles like this by popular cable news networks. WNYC's On the Media carries stories like this past week's nuclear summit, during which President Obama asked the press to leave, just as the discussions began; this year's Pulitzer award to ProPublica, an internet-only news source, reporting on the deaths of purportedly euthanized patients in the immediate aftermath of Hurricane Katrina; and, the publication of Panorama, a 328-page newspaper designed for nostalgic news interests.

On the Media also blows the lid off gender bias--again?--by completing an inventory of NPR news sources and commentators, concluding that the voices invoked most commonly overwhelmingly belong to men. (Even at NPR?)

On the Media's commenter on this story is a male university professor and blogger who has the guts to say that women still don't stand up for themselves in the marketplace because of a too-substantial fear of what people will think. His theory: there won't be real media equal rights until women learn not to give a *#$@! (You know the word; I'd say it but I'm afraid of what you might think.)

Brooke Gladstone, On the Media's host, opines that women have learned not to express themselves aggressively, because when we do, we're treated as if we've expelled methane in public. Can this story really still be in the news 40 years after Gloria Steinem first published Ms. magazine?

Is the culprit an unevolved media or is it The Hidden Brain? Shankar Vedantam's 2010 book hypothesizes that most public thought is the product of a collaboration between the conscious and the unconscious. On gender bias and racial prejudice, Vedantam theorizes that our earliest cultural associations favor men and caucasians and that this unconscious bias is most likely to defeat conscious thought when we're emotionally weak--fearful, angry, distracted.

Maybe this explains the lack of a real revolution in today's media images. Instead, we have a steady stream of angry white men and a few unattractively angry women--at least they seem unattractive to our collective unconscious, according to Vedantam (who, after all, likes an angry Mommy?)--talking about taxpayer revolts, attempts to rewrite the Constitution and our perceived proximity to communist China.

And this is just the right wing. The left wing seems delusional in mistaking our common sense in electing an African-American President and Democratic party leader for real revolution, when it seems that today's revolution is all in our heads.

Apple Bites

pgottesman@gmail.com (Patricia Gottesman) — Mon, 5 Apr 2010 15:03:00 -0700

Capsule: Has Apple reinvented retail for the rest of us?  Is the iPad launch akin to the birth of broadcast or cable TV? Before TV, movies fit in the theater; sports, in the stadium; and, news on the broadsheet. After TV, they all fit--shorter, portable and with commercials--on a little screen. After reinventing music, has Apple reinvented TV--as well as newspapers and magazines, to fit on the Mac, the PC, the TV, the smart phone, the "pod," the "pad," in the purse, in the pocket--everywhere, as long as you buy your media from Apple?  Will the media ever be the same?

Apple Bytes
Business Insider
The New York Review of Books
Apple iPad
The New York Times
The Financial Times

It's a new way of experiencing media, they say. Could it be long before they say: "It's a new way of watching TV?" Will a new way of shopping be far behind?

"They" are the inaugural iPad buyers, who came alive this past Saturday, April 3rd, when over 300,000 iPads were sold.

Other Apple iPad "birthday" statistics: one million applications were downloaded, as were 250,000 e-books from the iBookstore, prompting JP Morgan to increase its Apple per-share price target from $240 to $305.

Apple is projected to sell one million iPads in Q2 and five million in FY 2010. For a nation of over 300 million consumers, that ain't chicken-feed--especially at $500-$800 a pop, plus monthly 3G subscription fees for partners on the high end. Is the iPad a green shoot (planted by Johnny Appleseed) on its way to becoming a retail media beanstalk?

Americans spend over 30 hours a week watching TV and 13 hours online. The American media appetite is extraordinary. Until now, that appetite couldn't go out on the town. It had to be satisfied at home through a cable, satellite or telco TV connection. After the iPad launch, who will keep us down on the farm now that we've seen Paris?

It's inevitable that WiFi service, as well as subscription 3G and plus-G's services, will make TV more of an online viewing experience: something you can watch at home and carry with you to share. But with our current wired and wireless broadband limitations, we don't yet have a sense of how the portable online viewing experience will alter today's network-and-VOD spin around the digital-set-top-box dial.

We'll have a better sense soon. Before those five million iPad's are sold by year's end, the iPad model will begin to stimulate broadband expansion. Cable and telco broadband distributors will announce improvements to the American online experience, as they've already begun to do through wideband and 100-500Mbps broadband market launches. Broadband's main motivation for a service upgrade: to retain customers and to ensure that cable and telcos' retail path to the customer wallet and credit card remains the preferred way to buy media.

Developing an alternative retail view, Apple has already announced a plan to add more TV and movies to its iTunes online store. It's even talking numbers with content giants CBS, News Corp., Disney and others. As a show of media strength, Apple's iBookstore disrupted the Amazon Kindle retail book-selling model before the iPad was even launched. Given that two major publishing houses--Simon&Schuster and Harper-Collins--are owned by CBS and News Corp., multimedia content deals make sense.

Omnibus content deals also make sense because it's time content found other outlets beyond the existing wired mega-model. Cable networks remain on solid revenue footing as long as the combination of advertising and subscription dollars continue to dual-stream in. But the breakdown of advertising value--enabled in part by Google and its ad search model that has contained ad unit pricing within its online revenue zip codes for most of the last five years--persists.

Cable networks have pushed the subscription stream as far as possible by adopting what some cable distributors call "the arms merchant model"--selling to cable, telcos and satellite until they've wrung the annual growth potential out of the wired subscription model. Seeing this coming, content networks have been hopeful that their world will get larger with new wireless TV subscription distribution through AT&T, Verizon, Sprint and T-Mobile's wireless phones. These hopes have been largely dashed over the last decade; phone companies have been even less likely to "get" TV in its wireless form than in its wired Fios or U-verse just-like-cable-plus versions.

All of which leads today's content mega-giants to the retail Master of the Universe: Apple. Ready to accept TV as the new software with open arms, Apple's iPad is developing its brand definition as a media device for today's media consumer. Computing seems old-school, particularly when most computer users use computers more as portals, simple e-mailers, word processors, calculators and TV screens already. (Can door-stops be far behind?)

Where will this all lead? Cable, satellite and telco TV distribution won't go away, but their attractive growth will likely be curbed as content networks find new supplementary distribution paths, grinding their primary distribution relationships down to arguments over carriage fees while pretending to wonder: "Where did the love go?"

If they're cautious, distributors will resist iTV the same way they resisted alliances with DVD retail (and, before that, videotape rentals and purchases.) But, given the speed of the device advances that digital technology has wrought, waiting out the deterioration of the iTV platform as if it were Blockbuster won't necessarily work.

If confident, distributors will jump on the iTV bandwagon with a clear vision of their broadband backbone as the best foundation for the iTV retail store, even when that store travels via an iPad.

In the meantime, the biggest losers could be Google and the TV commercial.  Isn't it likely that Apple goes after advertising after conquering music, voice, books, movies and TV?   In this scenario, TV ads will follow their fast-shrinking relatives--the online display ad, the online search ad and the displaced newspaper ad--into a more confined space.

With iPad viewers free to catch-and-carry TV-on-the-run, TV ads may have to thrive in a new media form--iSpots?--via a new technology embrace. Google--the online advertising market-maker--may have to search its pockets to play in an online environment that carries TV-and-text on a portable screen.

Wouldn't it be ironic if Apple bit Google in the end?

It's not so far-fetched. These twin online Masters of the Universe are already in a scuffle over mobile operating systems.  A scuffle over the value of advertising may be next, with Apple setting the market for ad prices on its ingenious traveling platform. Because the iPad will get there first, Google's Android model--stuck on a phone while looking for a tablet to call its own--may have to dance to the iTunes' music.

Welcome to the new media reality: it's paradoxically like a musical chairs game where the market plays its tune while technology pulls chairs to eliminate players. Will the last laugh belong to the last distributor standing?

TV, TV Everywhere

pgottesman@gmail.com (Patricia Gottesman) — Sat, 27 Mar 2010 14:33:00 -0700

Capsule: TV Everywhere is the cable-led armada trying to colonize the internet by navigating subscription TV's dual-revenue stream. It's here now because its cable royalty parents--Time Warner and Comcast--are ready to move forward with a-mostly-agreed-upon first-use model for QoS-and-DRM-supported broadband video. While Time Warner's HBO Go is beginning to share its internet look-and-feel, TV Everywhere isn't TV, yet. TV will be Everywhere when either the cable industry or the new cloud media giants turn their vision for internet viewing into a product, like HBO turned movies and sports from broadcast into cable TV over 30 years ago. The biggest challenge: putting content and distribution back together again.

New TeeVee
FierceOnlineVideo Weekly
iTunes Everywhere
iPhone Live Event Streaming
Dishes Everywhere

"TV Everywhere" is the new black. It's racing "fiber-rich," "high definition" and "Triple Play" to the top of the multichannel search list hall-of-fame. It's "what you want when you want it;" it's "always on;" it's "lightning fast;" and, it will be every other term cable marketers have used to sell digital TV and broadband for the last 15 years.

It's not TV. It's TV Everywhere. And it can save or destroy the distribution side of the cable and satellite industries.

The current TV Everywhere plan is to authenticate the billable identity of a cable, satellite or telco TV customer by giving him an internet "identity card" that will transcend borders when that customer watches TV over his broadband connection. Of course, border control costs money and permits taxes, fees and surcharges to follow customer migration--making it likely to receive government support. But the most important aspect of TV Everywhere's authentication process is that it can help content and distribution companies know more about who watched what, when and where as well as how to increase revenue based on that knowledge.

The TV Everywhere business strategy is to use authentication to safeguard digital rights and digital revenue. Of course, authentication alone won't lead to profitable growth without new product and pricing strategies. Ultimately, TV and broadband subscription customers are going to drive these new product strategies by preferring to watch some of their favorite TV shows and movies online, with searchable navigation, which alone will change the nature of TV viewing, making the PC screen arguably superior to that cool fire in the living room.

Unfortunately, the negative of searchable navigation is its powerful pull towards a la carte and away from cable networks and their retentive brands. Searchable navigation favors individual TV shows and movies, just like internet music favors singles. In order to off-set a la carte cannibalization, TV distribution is likely to end up charging more for broadband TV as a service--both to increase profits on its most valuable tier in the home and to slow down the movement of its customers toward the siren song of internet TV.

A broadband "navigation surcharge" may be a useful way to think about driving higher broadband rates, as long as it can be tied to a real cable broadband navigation product. It's better than imposing a "bandwidth utilization" or "bandwidth metering" charge when considered against today's vibrant regulatory landscape. It's more distribution-friendly than a "broadband content fee" since surcharges on internet TV content will have to be shared with the content companies.

No matter how lucrative increased broadband navigation charges might become, they're unlikely to power a new collection of cable content and distribution products on their own. Cable pricing will lose its elasticity when stretched over an increasingly expensive Triple Play including immobile TV and deteriorating voice values. For cable, a new generation of mobility products is a better solution to making TV Everywhere more than a zero sum game.

Mobility can drive profitable growth for the cable, satellite and telco industries provided distribution embraces a new media math--one that looks at spectrum utilization differently and is prepared to invest more capital into plant, equipment, software, devices and business development partnerships. The new mobility math will reward distribution companies for network expansion, maintenance, billing, customer service and new authentication features, like personalized navigation. It's also likely to favor content and device partners with what may seem like a disproportionate revenue share just for showing up.

The addition of mobility to the cable product line can also bring substantial omnibus benefits, including improved pricing elasticity; new combined wired-and-wireless spectrum for niche and VOD content; a new syndication quick-stop on the DRM food-chain; and, new market access to a younger demographic that might be inclined to buy broadband-only or, worse, to buy wireless broadband only from a wireless provider. If cable can carve out a claim to a wireless footprint with a handful of wireless products, it can also promote its healthy economics, including the dual advertising-and-subscription revenue stream that floats all boats in the wired world. And, it can leverage the cable industry's greatest strength: its fixed connectivity and ongoing billing/credit relationship with the home that supports a complete understanding of who its customers are and what they're doing.

The cable industry hasn't yet tapped into these strategic benefits beyond managing receivables with remarkable diligence--no small feat considering the credit storm not yet past. Cable's most strategic use of its omniscience on where we live and what we buy has been to reduce service and maintenance costs by speeding up the diagnostics process for service technicians. By properly taking location-based and polling benefits into account, cable distributors can use authentication to move TV from screen-to-screen in the home. And if catch and capture video can be perfected in the home, mobile TV can't be far behind.

Potential new B-2-C and B-2-B products that TV Everywhere can hasten--for cable, for wireless companies or for the cloud-based internet advertising and retail giants, including Apple, Google, Amazon, Microsoft and, lately, Facebook--include: new TV networks (Google does own YouTube after all) that can place singles or series onto every screen (including the mobile ones) with a single purchase; expanded bandwidth-as-a-service that customers can buy like expanded storage, serving up a new version of the network DVR and combining wired and wireless spectrum to support new niche products like the iPhone supports new "apps;" and, powerful targeted advertising and marketing "avails" that can reach customers with relevant marketing messages on every screen.

Authentication's theme will be a complete 360-degree-customer-lifestyle-view that can make whoever brings it modern and pervasive (think Apple.) New interoperable navigation products may jump across screens along with content; and, new bundled voice products can package free calling along with low-priced videoconferencing and pre-programmed podcasts storable on any cable-served customer's fixed or mobile device, including in-car audio systems.

Looked at in terms of its ability to bridge wired and wireless products and content, TV Everywhere can become a new design for a reinvented media sector. For cable, the limiting factor may be the challenge of imagination. Big distribution may fail to imagine a future bigger than the Triple Play. It may exhaust its potential, wringing every cent out of traditional programming-and-distribution arrangements, ending up parched with a museum of STB hardware around its neck and too little exclusive TV content.

If cable content can't imagine a future where it avoids a la carte value deterioration--a certain outcome if it partners too closely with the new cloud media--it will be similarly beached. We've seen what happened to publishing and advertising by failing to read the maps correctly. Cable networks may not make the same mistakes. They may reinvent themselves by thinking of the TV form in a new seamless format that can appear anywhere and everywhere. Or, we all may end up watching TV as shorts on YouTube, Apple and Facebook, saving our quality time for online reading and research--if there's enough of quality left to read.

Hedgehog Zillionaire

pgottesman@gmail.com (Patricia Gottesman) — Sun, 7 Feb 2010 14:16:00 -0800

Capsule: Who will win the media wars: the hedgehog or the fox? Traditional media--hedgehog-like in their dedication to a central hierarchy of ideas--won't hit a rebound cycle soon unless the advertising-only revenue model expands to include more diverse business strategies. Digital media--embracing the fox's complexity with its multiple hierarchies of content sources and technologies--is risking its digital genes by fooling around too long in the interesting idea parking lot without financial consummation. The digital foxes that have gotten busy making money haven't yet spawned robust sires that can compete with traditional media and their strong syndication and distribution offspring. But if traditional media can't get enough to eat hunting advertising clients gone digital and digital media can't reproduce enough money to spawn a new generation, what will the media look like in 2020 hindsight?

Media Myth and Realities Survey (2008)
IBM Global Media Report (2007)
Isaiah Berlin's "The Hedgehog and the Fox" (The Proper Study of Mankind)
India Brand Equity Foundation
Chasing the Storm

Isaiah Berlin, well-known for finding the roots of modern thought in the iambic pentameter of Shakespeare, wrote a famous essay, "The Hedgehog and the Fox." In it, Berlin meditated on a line from ancient Greek poetry: "The Fox knows many things, but the Hedgehog knows one big thing." Which would you rather be?

Berlin used the Hedgehog and the Fox to analyze Tolstoy's War and Peace in terms of its blurred distinction between historical fiction and non-fiction. Hedgehogs were thinkers and writers--history's media figures--who viewed the world through the lens of a single defining idea, e.g., Plato, Dante, Hegel and Nietsche. Foxes, in turn, drew on a wide variety of experiences, e.g., Aristotle, Shakespeare, Goethe and Joyce. Berlin's essay claimed that Tolstoy was both Hedgehog and Fox--a new media hybrid?--whose writing personality embodied "the queer combination of an English chemist with the soul of an Indian Buddhist."

Students of politics and government have borrowed the Hedgehog and the Fox to describe the political personalities of world leaders. The distinction still works well today when thinking about industries, institutions and personalities--including the personalities of plain-old-folk like you and me.

Amongst media brands, The New York Times is a hedgehog and Google is a fox. Comcast, like most traditional media distributors with a conventionally self-protective view of content, is a hedgehog. The print, radio, film, cable and broadcast distribution industries are all hedgehogs. Does this augur well for the Comcast/NBCU merger or would it be better if there was a fox who could find new digital revenue somewhere in the merger gene pool?

Surprisingly, News Corp. is a hedgehog, even though it owns Fox--one of the biggest media hedgehogs in TV history. News Corp. also owns MySpace, which is a fox in the best and worst senses: its scope-y social media platform has strong usage and immature returns.

C-Span is a hedgehog, as are most TV networks, including ABC, NBC, CBS, PBS, Discovery, AETN, HBO, Showtime, MTV, CNN, Cartoon, SyFy, E!, Disney and ESPN. ESPN has been adventurous in its digital and international expansion--a foxy move--but the Disney superstar still operates profitably because it holds a traditional media and sports rights hierarchy clearly in mind.

Some content and distribution hybrids believe that a vertical hierarchy is the only route to media profitability, making Google, Apple and Amazon hedgehogs in fox-clothing. Yet, if a hedgehog knows but one thing and a fox knows many things, digital media has strong fox DNA. Digital media grows through horizontal expansion--from person-to-person and country-to-country. In this sense, digital media's social-networking bona fides are undeniably sincere.

After Google conquered US advertising by reinventing the US advertising value hierarchy, it moved abroad, replicating itself in Canada, Mexico, South America, western and eastern Europe and, most portentously, in Asia. Many hedgehog cable content networks have similarly expanded horizontally, but their chromosomes are arranged differently, with every alternative market in service to the profitability of its US business.

Google's latest China struggles may seem alarming, but they only strengthen the horizontal giant, promising a stronger product alliance with the US government as the US re-evaluates its China policies. If Google should ever leave China, it will likely be a temporary move traded for a much richer near-term prize of US regulatory harmony.

For Google and rest of the digital foxes, there's also India, the world's second most populous country and its largest democracy. The Republic of India's population is 1.2 billion. Most interestingly, its media hierarchies are performing differently from those in the US.

India is the world's second largest newspaper market. Its 1,900 news publishers have a combined print circulation of 200 million and growing as the Indian middle class continues to expand. Over 35,000 individual news titles are published, including 4,000 dailies.

India also has a voracious appetite for TV, with 100 million TV HH out of 200 million total market HH. With an average Indian HH size of four-to-five people, the Indian TV market reaches 500 million sets of "eyeballs"--to use a traditional advertising term. Over 60 million TV HH are connected to cable or satellite TV. Through Direct-To-Home, over 300 broadcast, cable and satellite channels reach the TV viewer, with roughly 50 new networks added each year. (These statistics and those that follow are from a group of media reports on the Indian market published in 2007-2008, just before the 2008 global market correction from which India appears to have recovered within the closing months of 2009.)

The largest Indian media market isn't print or TV. It isn't internet use or traditional voice. Total Indian internet users surpass 81 million, of which less than ten per cent are connected via broadband service. Wired voice lines surpass 37 million. The largest media market for content in India is composed of roughly 550 million mobile phone users, close to half the population.

How can digital content and distribution foxes penetrate the Indian media marketplace profitably? Sheer horizontal scale is valuable, but the average personal and household income in India is relatively low, making the advertising susceptibility different from what many western media companies might recognize.

Borrowing some of the vertical hierarchy of traditional media may be the key to a new sustainable digital middle class, supporting a global digital economy beyond the Google, Apple, Amazon, eBay and Facebook super-majors.

Partnerships with India's place-based service providers might be the starting point, especially if traditional US media invest in the creation of interactive TV and mobile content that expands in an inverted order from mobile to TV and broadband. With its huge market and strikingly different market considerations, India might be a right-sized place to experiment with new mobile and social media content forms. In a market like this, international media companies might create new TV and data content that is truly portable, forging new distribution models across digital devices and screens in every hand, room, home, bus, car, train, theater, office, school and retail venue.

Drawing on a wide variety of new experiences, it would be a happy accident if the US--that largest of ideological hedgehogs--recovered its economic health, at least in the media, by defying definition and coloring outside the US market lines. One route to profitable fox-hedgehog hybrid status: a thoughtful alliance between old media and new in a country whose striking similarities and inescapable cultural differences may make us better at our own game.

i Yi Yi Yi

pgottesman@gmail.com (Patricia Gottesman) — Sat, 30 Jan 2010 17:25:00 -0800

Capsule: Apple took another bite out of the competition last week with its sleek AT&T 3G-powered iPad for newspapers, magazines, e-mails, movies and TV. While Steve Jobs' iPad demo showcased free clips from The New York Times, National Geographic, Time magazine and Google's YouTube, Apple debuted pricing requirements with the major TV networks: hit TV shows sold in the iTunes store were asked to drop their per-episode a la carte retail prices by half to $1 each. In other media news, Eric Schmidt opened a new front in the Chinese American war of search words with his World Economic Forum remarks criticizing Sino-censorship in terms reminiscent of Secretary of State Clinton's January freedom-of-speech speech. If Google and Apple team up, who in the media will be left standing?

The Financial Times
Gizmodo
WSJ.com
The Street.com

It's 2010. And, while it's not yet Spring again, it's grand to be in a New Year somewhat disassociated from the recession of 2008-09. Sure, the markets are dodgy and the government is fighting with itself. The weather outside may be frightful, but the confidence fanning the cool fire in the media den is so delightful. Comcast and NBCU are in each other's arms. Time Warner and Time Warner Cable are reporting steady results. AT&T, Verizon, DirecTV and the rest of the usual suspects are still standing, including feisty Sprint, Qwest and Cablevision Systems.

Cable networks had a comparative banner 2009 versus traditional TV. Cisco, IBM and HP continue to produce and, at times, excel in support of the media. The strongest of the major newspapers and magazines remain in business, thrashing against the schadenfreude headlines of online aggregators.

And, just when Wall Street might have thought it safe to go back into the media waters without fear of a recession-based engulf-and-devour story looking for them, Apple the dis-intermediator has risen (yet again) as the unconquerable Steve Jobs tells the tale.

This week, the iPad debuted in a press-and-friendlies demo in San Francisco. Mr. Jobs with his typical laconic intensity described the iPad media tablet as a device that could put out the stars if it wanted to. Many audacious critics--fueled as critics generally are by too-high expectations--ripped the iPad and stripped Apple's pre-pumped stock price for the features the new device didn't have, which Apple promised hastily to add. Appropriately, we've been left to imagine the iPad--which won't be sold in its introductory version until March and in its incarnate ultimate fighting form until at least July--as it seems right to us.

What could a light resolute highly-defined portable full-color screen with demonstrably beautiful commercial internet navigation do for us? Powered by an effective wireless data plan from AT&T--the new whispernet provider to Amazon's Kindle following Sprint--the iPad should bring us infinite entertainments, utilities and distractions.

Recognizing this, Apple has chosen its moment to become the digital WalMart. Apple wants to set the prices and the procurement infrastructure for media in the 21st century. Like the pioneer cable operators of the 1970's and 80's, Apple has invented a new utility. Following cable's reinvention of television content and distribution for the home, Apple has reinvented content and distribution for you and me. Cable created a new market structure and a new product design for TV networks and, again, for internet connectivity and, again, for efficient wired voice service. Apple is creating a new market structure and a new product design for the same three things--TV, broadband and voice--annexed to both wired and wireless partner systems.

There is a crucial fly in Apple's ointment when looked at from the grand historic perspective of the magically successful and always under-sung cable industry. Cable dis-intermediated broadcast television by allying with Hollywood and regional sports to create a new syndication generation. Before cable, broadcast TV followed theaters and airlines and international outlets by months and years with commercial-filled movies and TV. After cable, new pay and basic networks slid into the syndication schedule and created a new money path, with commercials and without, that traveled back to content and distribution outlets.

Apple will dis-intermediate broadcast, cable, satellite and telco TV by sliding an entirely new syndication structure into the mix with its own discrete pricing and a new customer relationship. This time, customers will relate to a highly regarded tech brand--rather than to a franchised cable media company tasked with creating its own brand while building its pay-for-service business--represented by an international device purchased from a seemingly competitive CES marketplace with a supporting distribution and service architecture of its own.

Of course, there would be no Apple iPad without AT&T or a wireless distribution connection to a cable broadband service. But evolution dictates that all of these distribution providers will be somewhat eclipsed by the beautiful Apple device that magically manages customers through the myriad content selections of the internet and its commerce partners. (Of course, when the bill arrives, everyone will remember the utility brands of the distribution companies.)

What if Apple takes its opportunities one step farther and partners with Google? The two companies have shared board representation and advisors over the last few years, until a recent move to drive an apparent wedge between the management teams. Maybe the virtual break-up of Apple and Google was just that--corporate warriors fighting over the iPhone and Android mobile devices and their software. Or, maybe each management team is really in a competitive mind-set when it comes to its past partner--which, more than likely, will draw them toward one another if only for a deeper and winning market comprehension.

Google CEO Eric Schmidt called out China's internet regulation in Davos last week. Schmidt's resistance, as well as the resistance of the US government, has been to China's disintermediation of our western commercial internet structure. The West defines web interaction as a series of roads to be crossed only by government-sanctioned market forces. Accordingly, US search portals, websites and internet service providers stand between western internet users and their personal, institutional and commercial interactions. Internet users know that their navigation, their engagement and their interaction is monitored privately and publicly; but in a peculiarly western compromise, we accept the presence of business and government in partnership in a way that we wouldn't accept business or government individually.

In contrast, China's regulation is centralized and obvious in its resistance to contrary views. It opposes all those that differ with the state. Since the US is perpetually in opposition to China on trade and monetary policy, military influence and government controls, US internet policy is a perfect place for international war games. The internet represents virtually every brand of infrastructure; and, as the most prolific universal gateway to the Internet, Google stands in the middle of conversations that will determine the future as a set of apportioned losses and gains.

As President Obama might say, understanding all of the possible international permutations of the internet requires a higher pay grade than most of us enjoy. But we can understand the justifiably high brand esteem and related productivity that companies like Google and Apple--the GM of their service generations--enjoy.

It's also safe to say that most media content brands should be careful before ceding pricing control to any new distributor, even when it's wearing fashionable clothes. Unlike cable, satellite and telco TV, both Apple and Google slice the media into marketable fragments more valuable than the media bundle as a whole and keep the lion's share of a la carte advertising, equipment and download profits for their highly efficient, low-cost digital businesses.

On the plus side, like cable, satellite and telco TV, both Apple and Google provide a brilliant product context for other people's ideas. They make content slices more valuable--down to every search phrase, product, service, channel, VOD, network, movie, TV show, music download, article, essay, report or blog--than they would otherwise be.

But these new content values come about only within the context of each distributor's brand. For now, the extraordinary brand constellations of Google and Apple are still too new to create enhanced value for the media they absorb and replace. Too often, once competitive media gets pulled into these constellations, they lose their independent value: witness print and TV advertising's fall and the resulting parasitic destruction of much of the print, broadcast radio and broadcast TV landscape over the last three years.

It's hard to search for a proper historical reference that defines today's media position facing the pure commercial power of Apple and Google. It's probably somewhere in a transportation analogy between the train, the truck, the bus, the car and our own walking stride being complemented and somewhat overtaken by the airplane.

Of course, there's always the more primitive idea of the motor-coach replacing the horse. But nobody wants to be the horse.

Eenie Meenie Miney More

pgottesman@gmail.com (Patricia Gottesman) — Sat, 23 Jan 2010 13:47:00 -0800

Capsule: What's the better model for digital TV distribution--a la carte or the bundle? Does it matter? The question itself may be an illusion. With Google's YouTube opening a new version of Blockbuster for video "rentals" and Apple's Tablet promising to revolutionize traditional media as a profitable sale in a newly portable digital world, what will TV look like five years out? Will cable packages persist ? For fans of a la carte, the 2011 New York Times' metered model--where you get a finite amount of content for little or nothing extra and pay a la carte for what you choose above the norm--could demonstrate a new efficiency for TV distribution. With all these new TV aggregators entering the ring, will traditional network and pay syndication models get knocked out or knocked up?

The New Yorker

The publishing industry blames the hit-driven efficiency of the mega-book store for the loss of its long tail. It's hard to see today's struggling Borders and Barnes & Noble as powerhouse retailers changing the course of literature; but these brands were running the tables for publishing until recently when portable digital e-readers began to turn the tide. The content commissioned and licensed by the Random Houses of old was seriously changed by big bricks-and-mortar from a broad signature list of classics, educational texts and popular works to a narrow list of popular sale-able titles that people were willing to pay for in volume.

What are people willing to pay for now? It's likely too early to tell given our still unfolding transition to digital publishing with its impulse gratification and everyday low prices. Amazon announced a new deal this week that will share 70% of a book's royalties with the publisher and writer, provided the digital book is brought to market for no more than $10. This is a model that only a consumer can love, provided we all have access to the content we want via portable digital download.

Amazon's new distribution model is aimed at driving book prices down and reading volume up, creating new opportunities for the most popular books on the digital shelf. But will it also make the cost of publishing the more obscure difficult works that we all know we should read from time to time as part of a life well-lived--the digital vegetables--more expensive and harder to get? Is Amazon cutting more meat off the publishing long tail or has it chopped off the tail entirely?

Bricks-and-mortar booksellers and digital retailers are all pushing the bundle--as distinct from classic bookstores like the legendary Strand in NYC that used to house hundreds of choices from the best-seller to the scholarly limited edition. In modern retail, bundles of books make up the retail brand, bringing customers in the door and creating loyal relationships for the storefront (as opposed to the author or publisher) while selling a little extra of the special of the day.

Cable, satellite and telco TV models perform like mega booksellers. They sell their brand in the form of TV bundles at price points from $50 a month to three times that amount, even though viewers still watch TV one show at a time. The cable bundling model helped networks reproduce through bundled carriage fees, charging the most for the best and freshest of a multiplexed network group and practically throwing the narrower cable channel off-shoots in for free. It also helped grow advertising revenue for new channels that got in front of audiences purely because of their required place in a network bundle.

Cable, satellite and telco-tv's $50, $100 and $150 TV bundles encourage TV viewing as an all-you-can-watch buffet. Audiences who find a value in having access to hundreds or thousands of program choices rationalize their cable bills with a per-program math that keeps demonstrating value. Cable distributors reinforce the value of all-you-can-watch when rate increase time arrives each year and the number of available viewing options is promoted (and occasionally increased.)

But TV's tail isn't getting any longer when another dozen networks or several hundred VOD viewing choices are added to the bundle. Most likely, new networks are vaguely similar to the content already purchased; and, where a new original channel is added, it comes at its own relatively high a la carte cost. In this way, TV distribution is able to control the cost of TV content and to finance the development of a few original series that improve brand quality--be the brand in question HBO, Showtime or AMC or Comcast, Time Warner, Verizon or DirecTV. Savvy distributors know that quantity additions--like so many books on the shelves--can't be the real ratings-drivers. By design, quantity in TV land means a few star performers amidst a sea of facsimiles creating a sense of brand abundance.

When Apple and Google's YouTube enter the fray, will they adopt a similar bundled stance? On a practical level, Apple and Google's cable-like TV bundles are guaranteed. Apple and Google will have to replicate the best economics of modern TV distribution in order to place those economics on steroids to drive efficiency. Like Amazon, Apple and Google are efficiency models--larger than their bookseller and cable distributor forebears and capable of beating cable at its own game only if they can do more of the same on a significantly larger scale.

What does all of this mean for the future of content and distribution and their accessibility to the consumer? One view is that efficiency--and only efficiency--wins. The newest distribution models that will prevail and ultimately overtake the guys that "brang 'em" will price in the aggregate--in the sense of the bundled value of a distribution brand--just like today's distributors. But they will look different in that they may enter the market with more a la carte content than the competition only to bring that content back into a bundled model once they've established distribution dominance.

Anyone who has teenagers running up iTunes credit card bills in the low-to-mid three figures each month knows that the Apple pricing model is ripe for a bundle. Once those teenagers are emancipated and have to pay their own freight for music as well as food, fuel and shelter, new realities will claim the day. The true choice quotient inside digital media will be only slightly better than the range of content and distribution choices at present. But everything will look bigger and newer, which may make digital media seem better to a new generation; until that new generation looks around for the long tail it lost.

Bang Bang You're Dead

pgottesman@gmail.com (Patricia Gottesman) — Sun, 10 Jan 2010 09:26:00 -0800

Capsule: Parts of the 2010 media life-cycle promise new sustainability when viewed from the vantage point of the technologies on deck at last week's CES. It's not that the latest consumer hardware is a slam dunk success; it's that the hardware and software components are integrated across industries, promising fertile immediate links to the commercial marketplace. In the same week that CES was attempting its own lingua franca, traditional media wars continued to rage. A broadcast network shot its own TV talk show legend in full public view rather than concede that advertising-reinforced TV time slots are so 2009. At the same time, cablers and cable nets aimed old-fashioned revolvers at one another in the name of program access and controlling content costs. Will a sped-up media maturation process propelled by markets coming slowly back to life result in evolution or a new spate of media homicides?

Financial Times (registration required)
The Wrap
Multichannel News
Gizmodo

What's with the 2010 reruns of generations-old media wars? If the last five years have taught anything to the multi-billion-dollar world of content and distribution, it's that divorce hurts, only slightly less than homicide.

Newspapers and magazines have absorbed the Solomonic wisdom that dividing their brands into two separate businesses--traditional dual-revenue stream print and seemingly modern single-stream internet--is like cutting the baby in half. It doesn't work for either side.

Representing their new lessons to the world, publishing companies are embracing a hybrid content-and-distribution model by collaborating with equipment manufacturers to get the word out in newly efficient forms. Wherever the ten new electronic readers end up when consumers vote, the resulting consolidation should benefit publishers and their reading public.

The new collaborative media business model embraces subscription revenues--with print and e-readers representing the best of mobility as its own brand value--and advertising, serving both print and the place-based online world. The best of the new collaborative brands borrow from all of the content and distribution participants. Making commercial sense of so many brand attributes--accurate information, meaningful advocacy, quality presentation, complete portability and ease of access and use--will be the challenge of the new media decade. Media marketers will succeed when their promotional messages trumpet a winning consumer proposition that includes product design, service design and financial integrity.

Conveying a brand's financial integrity will be tough for most marketers, especially in a market where so many brands suffered significant losses and some were lost entirely during the last three years. But financial integrity is a value that has assumed significance following a major recession that forced a new American frugality as well as a healthy distrust of major corporate brands. Pricing and offers that look too good to be true are more likely to be judged as false by the post-recession consumer. Witness the last two lackluster holiday seasons where sales were lost in a sea of for sale signs.

The fractionalized look of today's media just may suit the consuming public. Seeing big companies who used to make big profits broken into little pieces might feel like payback against the last decade's commercialism and its demonstration of the unbalanced power of American banks versus the people who funded them. The problem is that most brands can't survive cut up into pieces, requiring companies to find new ways to reconstitute themselves into commercial models that work.

One model that might work for multi-channel broadband distributors is to construct a pay content and commerce layer on top of their broadband services. This pay layer could embrace the distributors' content partners akin to the aspirations of TV Everywhere. But the new brand requirements of excellence in product and service design, as well as financial integrity, will require greater versatility than simply duplicating the TV model in the internet space.

Maybe it's time for cablers and cable content brands to look at the near-death experiences of publishing with some healthy humility and a respect for the adaptive abilities of the survivors. If TV online looks and is controlled and priced in exactly the same way as TV through traditional cable service, there'll be nothing new for audiences to buy. Of course, rate increases are a possibility; but jacking up the rates for an appreciably unchanged product seems tried to the point of conviction and no longer commercially true.

If TV Everywhere becomes an exercise in customer retention rather than product expansion and revenue growth, the cable industry will see a further economic softening. As it is, TV's commercial situation is reminiscent of publishing, humbled by divorcing its essential elements into two separate businesses without enough of a commercially sustainable representation on either side of what customers really want.

What customers want is to have their content delivered through an affordable unified place-based system that includes a mobile product and service experience. If the media puts the customer at the top of its new marketing hierarchy, a set of complementary products that fit the bill with better ways to watch TV news, sports and entertainment will result. Of course, these complementary products will force a breakdown of the "not invented here" resistance inside many major media companies.

Better entertainment as well as better business models are already beginning to follow technology across new collaborative corridors. Hastening the transformation is a strong realization that advertising alone can't make the world spin, especially since advertising economics are at war with the economics of internet search, whose supreme efficiency has temporarily forced all ad media prices to the floor.

Google isn't to blame for overtaking advertising with the best available search system. Traditional media failed to keep pace. Multi-channel content and distribution failed to imagine better navigation, keeping the broadcast channel model predominant rather than expanding Tivo-like-models across their TV platforms. It seems clearer in retrospect that for the media like the banks and the insurance companies the last decade was a harvesting decade after all.

So, what follows the harvest? We'll see. Not even the biggest of yesterday's distribution giants have enough of their profits left to support endless content fee increases. At the same time, the traditional media doesn't have enough of its traditional media luster to retain customers while raising subscription prices in a stagnant or even slow-growing economy.

Most importantly, today's consumers with options--exhausted by bickering between political partisans, between new media and old, between content and distribution--don't have the spending mojo to support the familiar. With all of these factors converging, the media brands that survive will have to right a world turned upside down by putting the customer back on top; and, the rest will be consigned to our collective media memory.

Keeping It Real

pgottesman@gmail.com (Patricia Gottesman) — Sat, 2 Jan 2010 18:03:00 -0800

Capsule: What useful media legacies will the 2000-2009 decade claim? With a powerful surge of digital media soaring like a tsunami over traditional media forms, what can the media mash-up that's left teach?  Are we finally grown-up enough to admit our new realism? What hard-earned wisdom have we earned as we rebuild the media in the decade ahead?

Forbes.com

For those still standing as we enter 2010, and even for those laid waste by the last decade's digital surge, it's a good moment to force a useful idea structure over the hodge-podge of media events we've just survived. We must have mastered something in the volatility and media shape-shifts of the last ten years--or, at least, it would be pretty to think so.

Here are a few observations on our post-2009 New Realism courtesy of a digital media mix that strongly influences the way we think, live and work.

TV News and TV News Blogs

Among the many TV News networks brought to us by cable, satellite, telco TV and the internet, a few real news choices persist in presenting the world as a fair representation of life. TV News is both an art and a business for PBS, the BBC, Bloomberg News, EuroNews, regional cable news channels like Cablevision's News 12 and (most of the time) CNN--to name a representative group. TV News, like its print and radio counterparts at NPR, PRI, The New York Times, The Wall Street Journal and The Washington Post, is expensive. It takes money to maintain international news bureaus and to report on the world with patience and knowledgeable intensity.

TV News Blogs, like Fox News, MSNBC, much of CNBC and a lot of broadcast news, don't report the news in the traditional sense that aims at objectivity. Fox, MSNBC, CNBC and kindred cable and broadcast spirits offer thought leadership in the best sense and opinion uninstructed by context in the worst.

International coverage differentiates real news from news blogs in this newly realistic world. If a TV news network staffs international news bureaus--as distinct from jetting correspondents around the globe when a high-profile headline emerges--it's likely a source of real news. As we've seen through wars, social and religious conflicts and the recession of the last decade, events around the world affect our daily lives just like our behavior in our own backyard affects the rest of the planet. Real news thinks globally even when it acts locally.

Of course, there's nothing wrong with news blogs, provided we keep them real enough to understand that we're immersing ourselves in opinion instead of getting as close to the facts--the ultimate reality--as we can.  News is the opposite of entertainment in terms of the cost of capturing real life: in the news, the more real the network, the more expensive the news-gathering process; in entertainment, reality TV is cheap and abundant.

May Carry, Must Pay

Despite the best of public intentions, the media burst out of the constraints of government regulation more during this last digital decade than at any time in media history. Regulations that require multi-channel distributors to carry local broadcasters seem arcane even as they persist. The idea of providing advantages to one commercial TV source over another--in this case, providing advantages to broadcast networks and their affiliated TV stations over other cable or internet based entertainment and information sources--is inconsistent with network neutrality at its core. Regulators can no longer keep ahead of the development force bringing media diversity to American audiences.

The task for the FCC is to stay broad and to attempt a fair perspective as events continue to change the world. At the same time, relationships between media companies have become increasingly private and commercial. Even public broadcasters are sharing resources with a widening network of commercial TV channels, radio stations, news services and bloggers. When the FCC attempts to regulate one medium, it must take into account its interlocking dependencies with the media whole. This was an easier task when analog media and its capital requirements kept the number of participants small and the field broadly visible.

One of the emerging truths in this new real media world is that TV content can no longer assume a guaranteed right to be carried on every distribution network it desires. Must carry has turned into may carry, must pay. The pay part is simple. If we've learned anything in the last decade, it's that media content costs money and someone has to pass the bill along to the consuming public, either directly or through the government. Advertising alone is insufficient; there's just too much advertising available for it to be a dependable link to consumer revenue for each advertiser/investor.

In the name of keeping it real, even the most non-commercial of commercial media are getting wise to the idea that we've got to link to real customers and ask them for more support in order to pay for growth. A few actors in the commercial sphere who dislike getting engaged in real commerce would like to reimagine themselves as fitting into an expanded public TV or radio model, even if their medium is print. The requirements of the marketplace will determine how big the digital public media model will get; but no matter how you look at it, we've all been forced into the messy and interestingly self-regulating business of transacting with our customers for ongoing support. Most likely, public and private media will start to look remarkably similar for the strenuous customer relationship-tending each will require.

Broadband is the Internet

For most American consumers, the internet is a vast value-laden marketplace brought into their homes and businesses by a cable or telephone company through broadband service. The broadband pipes that cable MSO's and telco providers have built and continue to upgrade and maintain are not paid for through taxes or pledge campaigns. The commercial enterprises that sell customers broadband service pay local, state and federal taxes, passing subscription dollars back to the government in exchange for their right to operate.

Although alternative forms of internet access exist--both dial-up and free wireless networks are an intermittently reliable internet source--most of the country benefits from the networks built into private homes, apartments and businesses by companies like Comcast, Time Warner, Verizon and AT&T. These distribution giants will stand behind their substantial broadband investments. They will work with the FCC to ensure that net neutrality means keeping broadband distribution reasonably open to the majority of service and content applications according to rules that don't injure broadband's
commercial existence. They won't give away their capacity and they will work to ensure that regulation is, except in the most extreme circumstances,
benign.

Learning from the last decade's unwitting destruction of substantial media, intellectual and societal value (think the advertising value crash that brought down newspapers and, to a degree, magazines and broadcast TV,) an interlocking private/public partnership will be forged.  In this way, government and business can give each other and the people they serve fair warning of what they may lose if new media ingests old media and serves it back, in the most extreme examples, as lightning-fast digital noise.

TV Content and Advertising Change the Face of the Internet

The advertising formats to which we've become accustomed are due to change. The advertising market crash we're still experiencing is forcing the development of new formats for internet and TV advertising. These new ad forms are most likely to resemble the interactive TV we've all dreamed of, energized by the best of Amazonian commerce and Google-ized search.

Because effective TV advertising is expensive, whether it's brought to audiences via multi-channel TV or multi-channel-TV-delivered-broadband, a new advertising market is being created as an outgrowth of our last digital development decade. The new ad market will include expensive interactive TV advertising riding multiple distribution networks, delivering the promise of aspirational fulfillment powered by the impulse for immediate gratification.

The best and the brightest of our new media decade will devote both creative and commercial muscle to developing the new TV landscape for content and content-rich ads across multiple forms. New HD streaming capabilities--think disruptive peer-to-peer technologies like those of Dyyno.com--will become new home and business shopping services. Product placement and interactive advertising will finally step to the plate to deliver high-end commercial value.

A new ecosystem of interactive TV advertising and rich narrative content built according to the formats that the internet and discrete closed network systems can deliver will create the next sustainable media environment, rich enough to coax the most valuable of the dying media formats of our last decade back to life. Alternatively, we can spend the next ten years trying to figure out what knowledge-based and cultural roles we want content and distribution to play, while we numb out on reality as entertainment and news as opinion in a backwards media world.

Julius and Julian

pgottesman@gmail.com (Patricia Gottesman) — Sun, 27 Dec 2009 11:57:00 -0800

Capsule: Apple's share price hit $204 last week on the possibility of a March 2010 tablet debut supporting an Apple networked internet TV service. The New Year promises to dazzle us with more transformative media news. Beyond the stock market-friendly headlines, will 2010 bring new media business models that actually work? A 360-degree-review of the last decade reveals more laggards than stars. Even the best have destroyed as much commercial media value as they've created--an unfortunate reality we've been taught to accept as part of the creative destruction accompanying technological evolution. Would we be better off acknowledging new media as an extension of what came before? Could the sustainability of the media as a whole be more important than the sum of its parts? Viewed in their proper perspective, could builders like new FCC Chairman Julius Genachowski and legendary Comcast Vice Chairman Julian Brodsky be as important to our future as Steve Jobs and Eric Schmidt?

The Financial Times (FT subscription/registration required)
FCC Bio

In her nearly-perfect Q4 2009 new movie release "Julie and Julia," author and movie-maker Nora Ephron profiles culinary and broadcasting legend Julia Child (Meryl Streep) through the eyes of new media writer Julie Powell (Amy Adams.) In Ephron's movie, based largely on real events, blogger Powell uses Child's magnum opus "Mastering the Art of French Cooking" as the inspiration for a loving tribute to the master chef.

Through brilliant craftsmanship, Ephron lets us watch modern-day Julie Powell (circa 2002) master the art of writing by preparing and writing about the creation of each of the legendary Julia Child's 1950's and 60's culinary masterpieces. Interspersed with a personal story about Powell's growth into maturity, we watch Child's past brought to life on screen, including a recreation of her early broadcast cooking shows depicted as beautifully relevant even in today's multiplexed top-chef TV world. The artistic dance between past and present is beautifully actualized; the borders are softened for us to see the cohesive whole of human experience in the unity of these two characters, as complementary as we may yearn for them to be.

How will the internet dominated media world of our new decade look back on the relevance of what came before? New FCC Chairman Julius Genachowski can exert a strong influence on the memory prism we all use to look back on digital media's critical evolution. Comcast and its founders may also have a substantial say in how we view our modern media reality. In initiating the purchase of NBCU from GE at the close of the decade, Comcast has made an inexorable claim on the beginnings of the 21st century media landscape.

Genachowski's biography is a rich romantic combination of historic symbolism and forward-looking ideals. Genachowski's father and mother are Eastern European Jews who survived the holocaust. One of his cousins is an Orthodox rabbi. His wife, Rachel Goslins, is a documentary filmmaker. He was a "notes editor" at the Harvard Law Review when President Barack Obama was its editor.

Genachowski's career is more wide-ranging and at the same time determinedly focused than seems possible for a 47-year-old father of three. He's an old hand at analyzing the legal implications of FCC rules, having served as Chief Counsel to FCC Chairman Reed Hundt in the 90's. Before his long-running FCC service, Genachowski clerked for U.S. Supreme Court Justices David Souter and William Brennan. He also worked for Senator Charles Schumer when Schumer was a Congressman on the select committee investigating the Iran-Contra Affair.

Genachowksi also earned stripes in the business sector, most notably as Chief of Operations and a member of the Office of the Chairman at Barry Diller's IAC/InterActiveCorp. He has served on the Boards of Expedia.com, Hotels.com, Ticketmaster and Common Sense Media and as an advisory board member to Environmental Entrepreneurs.

In his role as FCC Chairman, Genachowski will be asked to reconcile the burgeoning growth of a handful of today's new media companies with the stability and scale of their traditional media counterparts. As is often the case in industrial evolution, the newest internet-based media products seem to be overtaking traditional media, having created a new scale of consumerism--audience measurement and engagement--that favors digital technology. Once again, in the name of progress, the game has been changed.

Unfortunately, the pace of technological innovation is moving so fast as to shred evolutionary progress in favor of displacement. Our minds can't keep up with the realm of possibility. The sweep of technology encourages almost religious devotion to exploring every digital possibility in the form of new media products, regardless of their value or sustainability. We've thrown the narratives that we use to understand the world aside because the stories can't quite keep up with the rapidly changing historical context.

Comcast may provide a helpful bridge between past and rapidly changing present with its persistent presence as a content and distribution giant. Founded in 1963, Comcast franchised, built and bought its way to the top of the US cable industry. Today, the company provides cable television, broadband internet and telephone service to millions of residential and commercial customers. Comcast is commonly ranked on the top rated lists of US destination workplaces. The company is well-regarded by Wall Street, growing revenues by a 6x multiple between 1999 and 2009 and nearly doubling its share price in the decade.

Comcast's incredible growth story powered the company to 25 million television subscribers, 15 million internet and over 6 million residential telephone subscribers--making Comcast the third largest US telephone company--serving 39 of 50 states. The Roberts family assisted by Julian Brodsky, as Vice Chairman and CFO in the early years, orchestrated Comcast's growth by buying and assimilating a Who's Who list of traditional broadcast, cable and telephony media brands including parts or all of: Group W, Storer Communications, American Cellular Network Corp., Metrophone, Maclean-Hunter, AT&T, Vulcan Venture's Tech TV, MGM/United Artists, Adelphia Cable, Susquehanna Communications, Patriot Media, the Platform and Plaxo.

What new role might Comcast play in the interplay between digital and traditional media? In its assumed ownership of NBCU, Comcast will likely have a chance a year from now to change the culture of a company with more traditional roots than its own. Comcast has the size and influence to move NBCU into the position of a digital content buyer, growing in the same way Comcast grew--through a financially conservative but interpersonally aggressive deal-making strategy in a new media commerce field with relatively inexpensive content choices. Since Comcast has the best distribution position in the media today, it will attract content deals looking for distribution advantages. Depending on the direction of management and the economy, NBCU could find itself in the most enviable content seat of the decade, firmly in the ranks of Disney and Fox.

If it does, US media policy and the industry itself may benefit from the representative presence of a new media company with firmly entrenched roots in traditional business values. Comcast could make a success of its latest gutsy choice, especially if it keeps its customers and prospects as a priority equivalent to its balance sheet. If it does, it may earn the increased gratitude of the equity and debt markets as they reconstitute and advance. And Julius Genachowski and the FCC could have a context marker to learn from, exemplifying a pure evolution play, with reasoned controls applied to the media's characteristic disintermediation and collateral damage.

Up in the Air

pgottesman@gmail.com (Patricia Gottesman) — Mon, 21 Dec 2009 09:50:00 -0800

Capsule: Perhaps the biggest 2009 media accomplishment has been the spectacular value appreciation of a few major companies specializing in cloud computing. The big brands of the last decade--Amazon, Apple, Google and Microsoft--have lifted media markets to the clouds from the somewhat scorched earth of the recession. Have the wired digital distributors been left up in the air on future direction? Maybe it's time to reimagine the wired distribution business as if it were already in the clouds, providing some of the services it's been building toward for over 30 years.

Mobile Symmetry

Jim Patterson, CEO and Co-founder of Mobile Symmetry, reports on the top trends of 2009 in December 15th's RCR Wireless newsletter. Patterson reads the honor roll of 2009 value creation, headed by Amazon.com, whose public shares rose from $51.28 in December, 2008 to $134.15 in December, 2009, bringing shareholders a whopping 162% return on a market capitalization increase of $35.9 billion.  Amazon's stellar performance came during one of the worst performing retail years in commercial history--for everyone it seems but Amazon. The least amongst the big four media performers, Microsoft, added $92.8 billion to its market capitalization, offering investors a 54% 2009 return.

In contrast, network distribution companies--including Sprint, Clearwire, Qwest, Time Warner Cable, Comcast, Verizon and AT&T--delivered a market value appreciation of $7.5 billion for the entire category, with Sprint leading the pack on 2009 percentage return increases at 122%, followed by Clearwire (25%,) Qwest (13%,) Time Warner Cable (9%,) and Comcast (5%.) AT&T and Verizon lost market value with 2009 investment returns dropping by 2% and 1% respectively.

The highest December 2009 share prices in the media distribution category reported by Patterson were those of Time Warner Cable at $42.38, followed by Verizon at $33.73, AT&T at $28.01 and Comcast at $17.64. The lowest cloud computing company share price reported was Microsoft at $29.85--fitting right into the middle of the wired distribution media's largest and best valued companies. However, Microsoft handily beat the wired field with a 2009 market capitalization gain of $92.8 billion on a record 8.9 million shares outstanding, outperforming wired giant AT&T and its loss of $2.9 billion in 2009 market capitalization on 5.9 million shares.

While the rest of the media trade press reports their 2009 top ten lists atwitter on Twitter, friending Facebook's revenue rise and agog over the reading appetites of early adopter Kindle, nook and Sony e-book buyers, Patterson's simple chart on the 2009 value creation achieved by the media's top companies--headlined "The focus on market leadership shifts from network to cloud"--says it all.

Where could the wired distribution world go from here? It may be time to introduce some of the products and services AT&T first advertised in its famous 1993 "You Will" campaign or that Time Warner Cable (then Warner Amex) demonstrated in Orlando, Florida a decade before. What if the media's broadband service providers finally took an appropriate bow for all of the free content other companies have been bringing to the media market for the last decade? If wired broadband didn't exist, virtually none of the most compelling internet content powering billions of dollars in commerce and advertising could exist in its present form.

For all of the broadband internet revenue that media distributors like Comcast, Time Warner, Cablevision, Verizon and AT&T empower, they collect about $30 a month per subscriber in their franchised territories. One way of increasing revenue production would be to extend past franchise limitations with complete broadband portability.

Each of the major cable broadband distributors is building a companion wireless product with limited service inside their franchise areas, regrettably priced at "free." The telco broadband distributors also have free wireless brand extensions without the limits of wired franchises.  Alternatively and perhaps profitably, numerous low-priced and seemingly limitless wireless service extenders with extras are coming to market.  A notable potential market leader has just been introduced by Sprint, threatening to blur the distinct value the wired broadband companies hope to build through free wireless with limits.

Could there be a better plan for the earth-bound broadband companies? For purposes of argument and imagination, let's create one. What if a new portable broadband service was brought to market by an imaginary broadband consortium named "Omega.com." Omega.com might be a consortium of today's wired distribution companies, joining as unlikely bedfellows brands as diverse as Comcast and AT&T, as well as all of the cable and telco participants in between.  Alternatively, Omega.com might be a pairing of Google and Amazon or Apple and Microsoft. But for the purposes of sharing the wealth, let's imagine wired distribution taking its own trip up in the air into the cloud.

The new broadband service, "Velocity.com"--a name we can use in a blog where we don't have to reserve our ideas with special service marks--would offer the greatest available velocity in its wired incarnation, as well as a brandable set of wireless portable service advantages that customers could count on anywhere in the US and a guaranteed gateway to the best news, sports, entertainment, gaming and retail content on the web.

Velocity.com in its introductory form would include web-based versions of most but not all of the TV entertainment available through cable and telco TV today. Its navigation would be web-like, because it would be served as an internet media product, but it would include important navigation extras, showcasing the profound intelligence of television entertainment honed as a cool fire for group viewing in the living room as well as the greased lightning of personal interaction on the web.

Velocity.com would require an internet connection from a local cable or telco broadband company. These local wired internet connections would come in three forms--basic, expanded basic and premium speeds, priced for illustrative purposes at $40, $75 or $125 per month. The local carriers' broadband service speeds would correspond to the level of Velocity premiums available to subscribers.

Basic broadband would operate Basic Velocity, a broadband pay content tier that would include free navigation, a free level of wireless service with the same geographic limits built into today's cable and telco plans, free e-mail and a TV Everywhere "free" match of broadband TV content with everything purchased on cable or telco TV.

More Velocity would match up with expanded basic broadband service from a local carrier. It would include everything inside Basic Velocity, as well as a high-quality wireless router and choices from an assortment of $9.95 per month content and service options: including, unlimited Voice calling for $9.95 per month with enhanced internet-based directory navigation; HBO online for $9.95 per month, with enhanced internet features and content extras; Hulu for $9.95 per month, including unlimited Hulu content choices; Netflix for $9.95 per month, including its streaming video content as well as access to as many as 10 mailed "rental" new release DVD's per month; etc. Volume discounting might apply for a la carte monthly subscription choices amongst cooperating content brands.

Unlike Basic Velocity, where content choices would have to match up TV-Everywhere-like with products and services ordered and billed through wired TV plans, More Velocity would offer customers the opportunity to rebuild an internet-served assortment of TV and rich media content choices independent of other wired or satellite TV, radio or print subscriptions. SiriusXM for home or car would be an added More Velocity $9.95 per month choice, as would the complete library of content from individually-billed internet and, where desired, internet-and-print-or-ereader subscriptions to every newspaper and magazine from The Economist to The Wall Street Journal to The New York Times to The New Yorker, Time magazine, Bazaar, Esquire, USA Today and Dog Fancy.

More Velocity would also include network storage of a defined library capacity of video and rich media content inside a customer's personalized and internet accessible library vault. Network storage including all kinds of content from video to games to past games played to voice-mails and e-mails to historic editions of favorite news brands would be endowed with a meaning far richer than what customers know today from the DVR.

More Velocity would also have an assortment of billing options, including credit and debit cards as well as direct billing from the local carrier with current electronic on-screen billing information and enhanced credit relationships introduced through special credit and bank promotional channels.

Extreme Velocity, the king-of-the-hill of internet speed and content, would match up with premium broadband service from a local carrier. It would include the highest speeds available on its primary wired network as well as a portable high speed wireless hub for up to five internet connected devices in a household or business. Extreme Velocity would include a range of business-level services, all priced individually by Velocity.com and billed by either Velocity.com or, through special arrangement, the local carrier. In this way, Extreme Velocity and the local carrier would acknowledge the merging of business and personal communication and the need for the easy rapid portable mixing of both worlds according to each customer's desires.

Extreme Velocity would be a trip to the mall and to the movies without leaving home. Extreme Velocity "theaters" would bring new releases to customers' TV's or PC's as well as to the lap-tops or other portable devices of subscribers with the best device-and-location-dependent quality of service possible. It would also be a trip to school or to the office or to the offices of others, with advanced video teleconferencing and stored library product to augment internet-based training and accreditation as well as the enhanced security required by most companies for discrete group communication.

All three pay broadband layers of Velocity.com would include enhanced advertising, rich, interactive and addressable, with opt-in personalized premiums chosen by shopping-savvy bargain-hunting customers. Building enhanced advertising and shopping on the internet and appropriating the enhancements into a cable-broadband-and-wireless model will jump most of the advertising and commerce hurdles represented by the still frenzied patchwork of set-top-boxes and local network architecture in the wired-to-home world.

What other dreams may come to a real-life Omega.com introducing a Velocity.com collection of services without borders as early as 2010? More importantly, what profits may come? If the wired distribution and content players in today's media world want to see what life can be like in the clouds, they'll have to learn to fly. To begin again, the media may have to break off pieces of themselves to operate like start-ups or, even better, like mature internet based content/distribution hybrids. While it may not be possible to lose the weight of gravity inside large successful cable and telco operations, it may be necessary to achieve some level of media weightlessness for value growth, especially if the goal is to create a new profit-making product vision of modern scale.

The Price is Right

pgottesman@gmail.com (Patricia Gottesman) — Sun, 13 Dec 2009 08:50:00 -0800

Capsule: Media companies want to find the right price for their newest media products. While deciding how much pricing energy should go into rebranding old media through a slew of market-opening new media products, content and distribution will focus on the profitable navigation of today's digital rights management architecture. Recognizing that new profits must also be built on the continued attractiveness of traditional brands, the media should resist losing track of the diminishing value of their traditional lines. Is it time to reset pricing in old media with new media clearly in mind?

Seth Godin
Feed the Pig
CreditCards.com

Feed the Pig--the pro-savings messaging effort of The Ad Council and the American Institute of Certified Public Accountants (AICPA)--is tough to like, even in these financially troubled times. Feed the Pig is a public service marketing campaign designed to teach grown-ups and kids a healthy respect for savings over spending at a time when credit card defaults and restructuring continue at an unhealthy pace, following the desert storm of mortgage defaults and restructuring that led in the last New Year.

Although the nation's consumers have successfully increased their savings rate for five consecutive quarters over the last two years, it's hard to imagine that Feed the Pig's talking Piggy Bank helped. Oh for the sophistication of that old media brand, Jim Henson's Muppets, and its wise creative. The Muppets' creators knew that Miss Piggy, that most memorable of media pigs, had to be warm, humorous, gluttonous and narcissistic in equal measure in order to appeal to the pig in all of us. In contrast, Feed the Pig's talking Piggy Bank, promoted heavily through Ad Council spots on Bloomberg News and company, is just scary, at a time when watching financial news is scary enough.

As we clear the smaller-than-anticipated debris of retail casualties from 2009's holiday season anticipating the 2010 effects, a slew of new products will be lining up to grab our wallets before we "feed the pig." In the media world, new products will arrive in the wireless, mobile, portable media sphere, as well as in the alternative subscription media businesses selling movies, TV, newspapers and magazine content through rich media over broadband--and, by extension, wireless--distribution. As good as video and rich media hooks into the cable-dominated broadband business can be over time, the most vibrant retail video is unprofitable for distribution companies at the outset because of the bandwidth it demands and the competitive pressure it puts on the value of traditional TV.

How can the most savvy media companies hedge against the tough competitive transitions they'll have to make moving their traditional product lines into preferred profit-making positions in a digital retail world? Seth Godin, one of America's most popular digital marketing brands, suggests a possible starting place in his recent blog on dynamic pricing.

Godin reminds media marketers that they don't have to imagine their digital product lines as exact extensions of their historic predecessors. With some creativity, Godin's idea--that digital products can be dynamically priced according to different physical and brand rules than the print, broadcast and cable products on which they're based--can break important new ground for content and distribution products debuting in 2010.

What if cable companies chose to base the pricing of their current TV packages, delivered to the living room in the same basic way since 1979, on customer tenure? If long-term customers paid less for their cable services than newer customers, could cable stem the expensive tide of competitive TV defection? A price break for long-term customers makes great business sense. Long-timers are stable, carry generally lower credit risks and have already developed an ingrained loyalty to traditional products. They also may need and will likely appreciate a loyalty benefit as they age and see some aspects of their disposable income shrink.

Today's cable and print subscription pricing moves in the opposite direction. Long term customers carry the major costs of the media business and receive regular rate increases on the products they appear to love most. The economic forces of the last two years will likely change the intelligence of this approach. Budgetary constraints on home-owners as well as long-term renters will loosen the loyalty tethers between older customers and the best, most expensive media brands they buy. The new tide will rush in in favor of a more economic consumer plan requested by the media's best customers, urged on by friends and media-savvy family.

What to do? If preferred pricing is offered to all print and cable subscription customers with a tenure of three years or longer, based on loyalty discounts served up as immediate cash back rewards, what benefits can be built into our traditional media foundation? For starters, customers who have the means and the appreciation to afford the solid foundation services on which new digital products are being built will be locked into place by the largest media distributors who have the scale to afford this type of dynamic pricing.

In addition, the pricing of traditional products bought by new customers can float upwards within recession-reason in acknowledgement that the best and most profitable traditional customers have been protected. Since it's most likely that new customers will be more focused on the digital facsimiles of traditional subscription products anyway--i.e., they were the most likely to leave the subscription business in favor of a la carte no matter how the pricing cookie crumbled--a true dynamic pricing schema can be put into place where the newer adopter will pay to play. Digital media savvy internet enthusiasts are the most likely to move off traditional brands because of their inclination towards paying less for content and their new willingness to pay more for windows, location-based services and media fusion from mashed up texting and voice to exciting new video and gaming combinations.

Print subscription businesses might follow a similar path, granting the greatest print pricing and content benefits to their long-term customers--and those prospects that profile like them--while creating a service-and-product-based pricing symphony with carefully crafted variation in the digital world. Separating the revenue strategies between the old and the new will also lead to more productive business strategy. Separating the costs of old and new media will lead to a clear understanding of which businesses produce a profit and which require a ground-breaking reset in order to start making sense.

Today, both old and new media have pricing that doesn't make sense when real costs are taken into account. Often, new wireless and digital products are offered for free even though rate-less pricing encourages a perception of value-less products and services. Traditional media carries high pricing for the customers most likely to enjoy their cable and print subscriptions as a way of subsidizing cheap acquisition promotions that generate expensive "new" customer growth. What many of these promotional discounts, all dynamically priced, do produce is constant rate pressure on the packages most loyal customers buy inside today's unhealthy media business models.

In order to build healthy and growing content and distribution futures, the media might best be served by helping customers choose the right price and the right products to engender loyalty and, where loyalty stops being profitable, to promote profitable short-term satisfaction. There's major money to be made in the immediate gratification business inside digital media. The best and the brightest marketing and business strategists will find ways to turn it loose if they think about their business as multiple distinct businesses with independent pricing, product features and customer demographics.

Remember a time when nobody thought customers would pay for television? If you do, you're probably in the high loyalty demographic that should get a subscription TV price break. While maintaining a healthy, symbiotic relationship with free tv, cable and satellite progressed their pricing models 20 years ago by recognizing that they had invented an entirely new business.

Digital media is a 2010-series of new businesses waiting for the right customer experiences at the right prices to seed the future. If we get the prices right, we'll take an essential giant step toward sustainable digital media products that can drive content and distribution economics for generations to come.

Must Pay TV

pgottesman@gmail.com (Patricia Gottesman) — Mon, 7 Dec 2009 11:20:00 -0800

Capsule: All hail the financial wisdom of Comcast's NBCU acquisition. Its investor-friendly structure is being celebrated by Barron's and UBS this week with enough elan to deliver a nice fat bump in equity value to the Christmas stockings of the American media investor. This has been a poor year for media stocks, less out of turbulence than boredom. Comcast NBCU comes at a good time, enticing investors with the possibility that this combined management team and asset family may get it right. More good news: Sprint is rising from the ashes of the wireless telephony wars on a tide of 3G and 4G business plans and products, including Skiff, a collaboration with Hearst Publishing to build the multimedia storefront of the future for the reading public. Are we finally seeing enough new media business models to support a rising and profitable revenue tide?

The Business Insider
Advertising Age
Barron's on Sprint
Barron's on Comcast NBCU
The FT on Bloomberg

The Mall of America is a commerce wonder 15 minutes outside Minneapolis/St. Paul, including over 500 stores, amusement park rides and enough surrounding hotels and restaurants to make it a vacation destination. Unfortunately, today's retail, travel and vacation sales are all soft enough to make the Mall of America into America's retail museum. Would that this biggest of big boxes had a virtual identity that could expand and contract according to the country's retail spending capacity. In contrast, e-commerce on a cable-powered broadband and TV platform suggests a new retail model that should move sustainably with the times.

Comcast may be in line to become a profitable virtual mall developer with its announced NBCU expansion. While the headlines feast on the cash flow growth prospects of NBCU's cable networks, Comcast's cable systems may have a new media role to play in building its commercial future.

What if profit and product growth turn out to be as sure for Comcast as understanding how to combine old and new media through a familiar money-making formula? Comcast's giant stature as a cable MSO has come from a keen understanding of television's ability to expand and contract based on its interlocking free and paid content layers. Broadcasting networks and stations like those owned by NBCU compose the free TV layer. On top, there are at least two paid cable layers--one for basic, ad-supported cable channels and "free" VOD and one for premium networks and paid VOD.

When the economy and advertising revenue are strong, the broadcast TV layer and the two paid basic and premium cable TV layers are interchangeable, mostly because they're all delivered to most Americans via a paid cable platform. When the economy and advertising rates weaken, the "free" broadcast television layer feels the worst financial effects, but cable's subscription revenue--supporting its original TV products and its re-syndicated TV series and movies through both cable networks and VOD--continues to grow.

Comcast NBCU will soon be in a uniquely favorable position to augment its financial prospects by creating a third pay cable TV layer programmed through its ample content assets and advertising scale; and, based on its broadband distribution networks. The broadband pay TV layer can include access to hundreds of basic and premium TV programs, interactive ads, hit movies and "longtail" entertainments and communal viewing-sharing-buying experiences produced and distributed through the "cloud." Bloomberg Media's extraordinary growth and profitability depends on a collection of products both traditional and unique, now being managed to make Bloomberg's content the most expansive collection of news programming in the world. Comcast and its distribution brethren will need a new broadband pay cable TV layer to facilitate Bloomberg as it expands, as well as other similarly inspired profit-driving media producers.

In a more profitably distributed media world than today's, the "cloud" will come to mean a collection of several flexible closed communications systems that bring the best of the internet into a quality-of-service-controlled and commerce-enabled environment. These flexible closed systems will operate much like today's wired cable systems, with common wireless and mobile authentication, powering customer choice, retail opportunity and commercial product growth.

Today's cable broadband infrastructure will require capacity upgrades and server-based infrastructure augmentation to create a new high capacity interactive pay TV layer. But the technology upgrades necessary to build and operate this important new broadband commerce engine can be iterative, gradual and capital-efficient.

As more TV choices and interchangeable targeted advertising become available on the broadband pay TV layer, the best network operators will be able to move customer orders, authentication, playback and payment systems onto efficient servers with familiar replicable commerce front-ends. They will also be able to leave costly set-top boxes and DVR's in transition for the most basic of services, while broadband pay TV is operated from inside the distribution network powering a range of personally-selected modems, routers, PC's, screens, MAC's, personal storage and wired and wireless playback systems.

Most importantly, these new systems will facilitate new pricing and payment plans of greater value to the consumer and higher aggregated profit potential--including more profitable versions of traditional cable products now limited by their release timing, lack of porting, personalization and billing flexibility and device constraints.

Much of the reporting on why Comcast NBCU makes sense is leaving an important part of the future revenue basis for this transaction--the development of this new pay TV broadband distribution and product layer--out of the story. Maybe, with the economy slowly awakening from its two-year slumber, financial and media reporters lack confidence in technology. Maybe the media lacks confidence in its own product development flexibility. Maybe advertising rates have fallen so far inside today's Grand Canyon of multimedia inventory that a revenue recovery looks unlikely.

Sprint's determined re-entry into the land of the wireless living is a reminder of how long it can take to execute on a forward-thinking plan. Post-Nextel merger, Sprint had a lot of work to do re-rationalizing its financial structure and its consumer product strategy. Sprint's confidence in its ability to operate a superior wireless commerce network was formed during its most challenging years. Sprint was the first nearly flawless "whispernet" operator powering Amazon's Kindle.

Now the Kindle facilitates automatic book purchasing through AT&T; and, Sprint has moved to support Skiff in partnership with Hearst publications and a number of attractive wireless device manufacturers. If they're successful, Sprint and Hearst will take on Amazon with a notable assortment of book, magazine and newspaper content partners looking for a new commerce marketplace with equitable returns.

As it builds the wireless products hooked into its broadband pay TV layer, Comcast might finally and fully rationalize its own wireless network partnerships. Comcast's broadband pay TV layer will likely include commerce capabilities for all of its customers over time, first at home and quickly after via wireless networks and devices from anywhere customers choose.

The nation's biggest MSO has the core network attributes, the technology partnerships, the scale and the paid customer relationships to build a new "must see TV" service that takes the best of NBCU into a new media dimension. Comcast might even bolster the advertising business enough to support the revenue engine powering the broadcast networks and stations at the heart of the NBC brand. Most likely, the merger's magic will be worked on the cable level, strongly supported by a reinvention of Comcast's distribution networks as well as its glittering NBCU content.

Freeconomics

pgottesman@gmail.com (Patricia Gottesman) — Thu, 26 Nov 2009 10:00:00 -0800

Capsule: Of all the strange 2009 developments in our sideways media world, Rupert Murdoch may save the day for the advertising business. First, he'll try to save the day for newspapers, starting with his own. Murdoch's threat to de-list The Wall Street Journal from Google in favor of paid access through Microsoft's Bing should start a gold rush of expensive content to search engines willing to pay something for the privilege. How will the new world order assemble when there are 32 flavors of free and all of them cost something?

Silicon Valley Insider
The Financial Times
FreeSat

The tenet of basic economics that teaches that any price drop or give-away of a product forces prices down across the entire relevant business sector appears to have been forgotten in the mad rush to internet freedom. Free-conomics--not to be confused with Steven Levitt's and Stephen Dubner's two-book marvel with a similar-sounding name--has taken the media world by storm over the last five years and more's the pity.

As if our global economic crisis wasn't enough to destroy media value on a catastrophic scale, we had to help it along by forgetting about economics in the fanciful world of free. The collapse of the media's advertising value followed the introduction of free online newspaper content, promoted by internet search that isn't free in fact even if it appears free to the reader.

Search engines like Google siphon off advertising revenue from every internet listed source and operate in a new marketplace where they own over 70% of the land. What's more: they decide how much all of the land--or online advertising space--costs to a degree that infects advertising rates across the distribution landscape and around the world. Your exposure to search advertising is what you pay to find The New York Times on Google. What you're about to pay for The New York Times as it struggles to rebuild its economics on a solid paid foundation will also include a premium for all of those free online reads of yesteryear.

Bubble economics unite the housing and credit crises we're still surviving with the online content bubble created by Google's extraordinary ingenuity. A bubble occurs when there is surplus capacity in the marketplace, like too many houses, too much low-cost credit and too many free news stories. Like most bubbles, there isn't a single burst, but a series of blow-outs that presage value destruction beyond the bubble's primary participants.

Google's true genius surpasses even the majestic source of its bubble creation: its search algorithm and supporting process. In its quest to catalogue the world's information, Google invented a new airplane. The fact that no search competitors have been able to catch up tells you how much we've all aided Google's rise, kind of like everyone who bought or built a second home by borrowing heavily on the value of the first.

We took cash out of the publishing business in order to put it into online search and we bear some responsibility for the gum on our face that used to be our online bubble. We'll bear more than embarrassment to put things right. We'll bear the subsequent cost of saving an ailing news business that contributes substantially to our quality of life and perspective in an increasingly complex global environment.

But hasn't free news content exposed a broader world audience to the best of America's fourth estate? The broad exposure argument in favor of free only works if there are no costs associated with making the products that are then turned into the marketplace, their value compressed, for free.

Beyond losing money, freeconomics sacrifices context. A paid newspaper or magazine, for all of its flaws, provides a contextual economic model along with the editorial context that adds value to information. Reading the news from a group of free headlines and condensed online digests navigable only through free search and free e-mail solicitation is a context-free friction-free experience. No one realizes the true value or the true cost of what they're taking in with online news. That could be fine if we were all toddlers in the hands of brilliant caring parents (or Glenda, the good witch in The Wizard of Oz) who could supervise our growth into sophisticated adults before turning us loose (or sending us back to Kansas.)

It isn't only newspaper and magazine content that has become free. Everywhere, media distribution is hawking a free or two-fer deal in the hopes of talking consumers into buying something more. Cable distribution keeps running towards free phone service offers, knowing full well that there's a scaling piper waiting to be paid. Right now, the cost of a free phone is showing up on consumers' broadband and wired TV bills. As free internet and mobile video move to prominence, their costs will show up in higher broadband fees and, potentially, international calling charges, reinforcing a rich and poor divide that limits access to the best information to the monied classes and communication to the local neighborhood.

A potential savior with a delightfully unexpected saving grace, Rupert Murdoch is contemplating a structural moat around his news properties, separating them from the free frontier. There's something very smart and grown-up about the choice. It's consistent that News Corp. executives were the first to speak to the media about charging for Hulu content at some near term point. While everyone gasped, News Corp. boldly began providing context for online video services that, like online print, appear free but carry the potentially destructive lagging thrust of all of the costs associated with making movies and TV.

The harshest criticism to date of Murdoch's quest has been dismissive. Google can live without The Wall Street Journal, sniff the free marketeers. Maybe. But if Google's real goal of cataloguing the world's information is to be believed, a Google without News Corp. will be a wildly different creature.

A likely scenario predicts Google will join Microsoft's Bing to determine a sustainable structure for paid online content. The major TV and movie distributors should crash the party and demand a seat at the design table right away. As Google and Microsoft start to design the passage of products that were born free into a healthy paid adulthood in the new media world, Comcast, NBCU, Verizon, Time Warner, AT&T, Disney and the rest should join the grown-up table and set a sustainable example for a better future.

You've Got Mail

pgottesman@gmail.com (Patricia Gottesman) — Sat, 21 Nov 2009 13:04:00 -0800

Capsule: How drastic a transformation will most media companies make to grow again? As AOL announces 2,500 planned lay-offs on a base of 6,900 employees pre-December-9th spin-off, what's the message inside the medium? Will an ailing media and advertising world once warned unveil dramatic new business plans or return to its fundamentals or both? How about broadband distribution giving some thought to graduated mail delivery charges as a start? (http://www.thewrap.com/article/bloodbath-aol-2500-cuts-announced-10409)

AOL is in the news again along with its new Google-harvested leader Tim Armstrong. Within the past few weeks, AOL has chosen a new post-spin-off Board that includes the usual media luminary suspects while announcing its massive lay-off plans to skinny down the company as a new independent investment prospect. While skinny-ing down will help the new AOL throw off cash, it won't guarantee its ability to improve its top-line financials quarter after quarter as Wall Street ultimately requires.

Control Video Corporation and Quantum Computer Services were AOL's earliest screen names, circa 1983-1985. AOL didn't become American Online until 1989, only eleven years before the fateful 2000 merger with Time Warner that spurred many a story, book, modern investment crisis and good old-fashioned ulcer.

Within four years of the AOL Time Warner marriage, AOL had 20,000 employees. More important, it had close to 27 million subscribers in the 2002-2004 timeframe. A whole "You've Got Mail" generation, today's 20-somethings, was formatively raised on the iconic blue triangle, the running man, the killer IM app and the transformation that consumer-friendly brilliantly designed dial-up internet brought to American mass media.

Looking back, everyone knows that the AOL Time Warner merger was a barn-burner of a mistake. What made it a mistake is judged differently according to which tour guide of the American media landscape you use. The structure of the deal and the valuations of the principals were clearly flawed: AOL's future potential was grossly over-stated and Time Warner's potential was judged roughly as rich as it has turned out to be, but only as a media company benefiting from its opportunistic mating with an internet juggernaut.

In spite of its AOL marriage, Time Warner and its spin-off Time Warner Cable have turned out to be tremendous assets on a fundamental level. Time Warner has understood the necessity of content innovation through its cable networks to a level unmet by any other US content company with the possible exception of Disney. It's still struggling to get its magazine properties to a point of either fundamentally solid growth or radical innovation within the internet and mobile space. But Time Warner's magazines have the benefit of time and financial support from their wealthy cable network partners.

Time Warner Cable has continued to grow both organically and through savvy M&A transactions. Since AOL was knee-high-to-a-grasshopper, Time Warner Cable has been a US growth leader through well-conceived and managed mergers and through a fundamental understanding of the core cable distribution business that is arguably superior to the entire cable field, with the possible exception of Comcast.

Why couldn't Time Warner and Time Warner Cable save AOL from its shrinking fate? Since 2002, in seven years, AOL has lost 21.3 million subscribers, bringing its customer base from 26.7 million down to 5.4 million today. Most of these customers upgraded from AOL's dial-up service, most memorably priced at just under $25 per month, to cable broadband service, priced on offer roughly $5 above AOL and over time at least $15 higher, and marketed, sold and serviced by Time Warner Cable and Comcast. The next best alternative during the period of AOL's troubles was telco DSL, priced as low as $15 a month, but without the fast track expansion capability or the speed of its cable competition.

What's the lesson here? It may be that you have to respect fundamentals even while you're worshiping at the altar of change. AOL was a subscription business with an ingenious design and a high respect for quality service as long as it was inside its comfort zone of dial-up internet connectivity. With the emergence of cable distribution exemplified by partner Time Warner Cable and pals, AOL seems to have sustained a broadband meteor hit that left it at least partially frozen in time.

There are hundreds of examples of media and service companies on ice past the point of having been bested by the competition. Broadcasting got iced with cable's expansion, particularly because of the advertising competition offered by cable content. Rather than sit on ice, broadcasters started leveraging their government-support fundamentals early to force their way onto the competitive cable menu.

What makes AOL excruciating is that it wouldn't transform itself into a true broadband service that competed on content while partnering on distribution. AOL's original genius was in understanding its symbiotic reliance on dial-up internet. Once mastered, AOL refused to understand its new symbiotic reliance on cable.

The stumbling block: the broadband conquerors' requirement that AOL surrender a piece of its subscription profit to its cable benefactors. To make this happen, AOL would have had to increase its capacity to include a new revenue source based on either better content or better product attributes in a cable broadband world. You would think that a company with at its height 27,000 US employees--many of whom brought the internet from a science experiment to a mass media marvel by, of all things, inventing a better game of post office--would have been able to take its game to the next level.

How much of AOL's intransigence was its own hubris versus its merger-magnified hubris once inside the legendary warrior walls of Time Warner is open to debate. The most important takeaway is not for AOL; it's already setting its course as a smaller cash distributor that, once transformed, may live to fight another day.

AOL's larger lessons can benefit the whole media content universe as well as monster distributors Google and Yahoo/Microsoft, Time Warner Cable, Comcast, Verizon and AT&T. When your business models fail, you need to fix what's broken in traditional capitalist terms (the fundamentals part); and, you need to introduce new products and business models that will siphon off revenue and cash flow from alternative sources. Cable siphoned off revenue from dial-up internet by undoing AOL as dial-up's brand face. Emboldened in victory, cable went on to undo most of its subsequent telco DSL competition. In doing so, it played more than a few crucial hands in determining the extent of Google's growth.

Despite their transformational power proven over media generations, today's cable distributors are moping around a bit about their inability to claim the revenue they believe they deserve as an offset to increasingly costly bandwidth utilization by their customers. Capping bandwidth won't work and shaping utilization will only work to a point. More vexing, cable has an AOL problem. It needs to develop a new business model that presages the transformation of its video business from a small oligopoly with a very small number of cable, satellite and telco tv players to an open frontier business where customers can get TV from twice the number of distributors in market today.

Maybe part of the answer can be gained by playing post office, just like AOL did when it jumped on top of telephony distribution to claim its fortune. Today's US Postal Service is upside down, threatening to go belly-up by increments, beginning with the elimination of Saturday mail. As traditional mail deteriorates, cable and telco broadband are becoming our new post office. As if the global warming effects of all those retail catalogues aren't enough to herald a transformation, AOL's existential irony may be enough to inspire a new business model for something as basic and high-utilization as e-mail.

What if broadband charged for the transmission of certain types of mail--mail with large attachments, mail delivered over long distances, mail from commercial sources, mail with heavy bandwidth links? It would have to offer something more in the transformation in order to protect its customer relationship fundamentals. But, if broadband internet could make more and ultimately increase its delivery capacity and quality by taking on a very fundamental model--paying for the delivery of a message of varying weight across varying distances--it might accomplish a great future transformation for itself, as well as potentially for the government apparatus it's replacing, in the process.

Get Serious

pgottesman@gmail.com (Patricia Gottesman) — Wed, 11 Nov 2009 18:46:00 -0800

Capsule: The culmination of a major 2008 media merger, SiriusXM had a tough 2009, particularly on growth.  The satellite music, sports and talk radio service must find a way to balance falling new car sales, rising subscription fees and customer growth requirements. Can advertising revenue make a difference with a changed product design that places ads into even the ad-less music channels? Where can a one-way entertainment service for your car take you on today's two-way media streets? (http://www.siriusradio.com/)

It's been a tough 2009 for advertising-based media. Even when advertising has been supported by subscription revenue, growth for many media businesses has been anemic. Because the advertising business has lost its rate-setting floor in favor of an aspirational web-based currency still missing a few zeros, tons of pressure and pride have been placed onto subscription revenue models.

When subscription revenue forms the core of a dual-stream revenue business, customer growth must be strong and predictable, up to the hundreds, the thousands and the millions of potential subscriber-delivered dollars. There's a delicate balance between rates and customer growth that can get unglued when growth machinery sputters; or, when there's too much promotional discounting complete with churn-inducing rate increases when the promos expire. It's hard for businesses without a lot of prior subscription experience to get that balance right.

SiriusXM lost customers this year, moving from 19 million down to 18.5 million since December, 2008. The merged satellite radio company points to the collapsed US auto business which is its main sales channel and dramatically reduced new car sales, just as most advertising-dependent media businesses have. But for SiriusXM, a decline in new US auto sales means more than lost advertising opportunity. It means a serious dent in new customer additions. SiriusXM, carrying at least two points of monthly churn throughout 2009, needs a healthy annual crop of car buyers to maintain customer counts, no less to grow.

The satellite monolith also needs an alternative to entry price discounting, an offer policy that up-ends predictable customer growth performances with serious Year One churn. The discontinuity of first year promotional churn can be absorbed by a business with a majority of seasoned customers, but not by a relatively new business with a long growth road ahead and few feeder paths.

Today, most SiriusXM customers buy the service along with a new car lease or purchase, enjoying a first free year as a bounty courtesy of BMW, Volvo, Chrysler or any of the participating dealers in the Sirius and XM crowd. Once that first free year ends, customers who can't afford the service or who don't see its value in a tough economic climate move on. The attractive satellite radio growth that comes with new car purchases can be bumped by a bad economy into unrecoverable loss territory, forcing a need for even more aggressive growth among the next prospects in the new car buying universe to create the right fundamentals for SiriusXM's growth and health.


Since loyalty from the car buying behavioral segment is the linchpin for SiriusXM, one would expect the company to be setting the standard for product marketing and sales inside the new car buying experience. Given the amount of convincing, informing and educating involved in the typical new car purchase, the sale of SiriusXM is difficult to place.  Satellite radio doesn't have a direct sales presence inside the auto dealership, forcing it to rely on brand and product superiority to justify its price and make and keep its customers.

But SiriusXM's large growth objectives seem to anticipate an acquisition machine akin to that of big distribution generally, including cable, satellite, telco tv, broadband and VoIP. Unfortunately for satellite radio, the model doesn't hold. The growth cycles of these fundamental subscription businesses have been built on product disruption that competes vigorously with entertainment alternatives. As attractive a product as satellite radio has been, its disruptive bona fides have been stronger in the world of promotion--where radio rules and Howard Stern holds court--than in its marketing or product definition.

Perhaps the biggest distinction between SiriusXM and its distribution brethren is a key dedication on the part of the TV and broadband set to sales and marketing machinery and support costs. Since SiriusXM is embedded in so many high-end new car sales, the company is already paying a premium for acquisition, forcing it to control SAC by being more conservative on marketing and sales than most distribution companies. Without a consistent and major commitment to the operational work that feeds customers into a business at a rate surpassing churn, satellite radio suffers from a non-productive growth cycle, as well as from competition from preferred alternative media.

According to SiriusXM's pitch around its earnings reports, its worst economic challenges are ending. Expenses have been pared and the economic efficiencies of the Sirius XM merger will begin to bloom within the next two quarters. But SiriusXM's debt load is so substantial as to risk distracting the company from creating the necessary environment for organic growth. Early in 2009, Liberty Media bailed the satellite radio giant out of its second major debt crisis following the 2008 merger. Whether Liberty ends up maintaining its substantial stake in SiriusXM or permanently diluting current shareholders in some alternative transaction, the company's growth needs are substantial, requiring dedicated investment to be met. How can SiriusXM surmount these structural limitations to create the growth stability they need to last?


Today's reconstituted SiriusXM products include two sturdy satellite radio line-ups, backseat TV for the kids, an online streaming service that can be played on an iPhone or alternative MP3 player and the portability to move from dealer-equipped cars to any car and to the home through a variety of mobile devices. It has hundreds of entertainment choices, including major league sports coverage from XM, major celebrities like Howard Stern from Sirius--at least until his contract expires in the 2010-2011 timeframe--and enough alternative news, talk and music formats to fill out a monthly ARPU of just under $11. Spread across over 18 million customers nationwide, SiriusXM's revenue base is substantial.


But to compete in a new digital media universe, SiriusXM will need even more. A complete sales, marketing and service infrastructure akin to the media distribution companies whose growth it hopes to imitate will be a new requirement for a product and service approaching maturity. The one-year free promotional offers that shoveled customers into the business at its inception might be rethought in favor of an upfront cost and reduced monthly rates for the first 12 to 24 months.

And, Sirius XM's products will need to evolve as a demonstration of its ability to sustain a growing business beyond its original premise. To support the operational infrastructure of a thriving business, SiriusXM will have to introduce new ancillary revenue streams beyond its current subscription and advertising loads. A likely opportunity source: distribution collaboration with satellite, cable and telco broadband services that can take elements of SiriusXM's products and bring them to life inside the home in a way that placing the service on the internet or an iPod alone will not.

Even the most robust new products and improved marketing and sales will have to carry a lot of water to help re-restructure SiriusXM's serious debt load. In today's economy, the company may struggle to rationalize the set-up expenses necessary for a product, marketing and sales transformation. But there are few good alternatives. We could all wait for the US auto business to fix itself, aided by tax dollars. It could be a long wait as each major US car brand has steeled us for reduced production and consumption. It's unlikely that even the healthiest Ford Motors will return to its former numbers anytime soon. Unless SiriusXM finds the structural resources to support a new product development and organic growth process, the once assumed inevitability of satellite radio may fizzle against the backdrop of a radically transformed media future.

Comes With

pgottesman@gmail.com (Patricia Gottesman) — Mon, 9 Nov 2009 15:22:00 -0800

Capsule: In tough times, margin compromises are necessary in the interest of future growth. In retail and advertising, a new multi-product-and-brand-mash is taking shape as compatible businesses search for competitive advantage. "Two-fer" product and pricing combinations from different business units and different companies are being tested in the marketplace--including streaming movies from CinemaNow inside Best Buy's consumer electronics and Newsday.com inside a Cablevision Optimum Online subscription. Which of these new arrangements and their progeny will power the media forward?
(http://paidcontent.org/article/419-most-of-cablevisions-newsday.com-goes-exclusive-for-print-optimum-onlin/; http://www.cinemanow.com/ )

Cablevision's bundling of its Newsday daily newspaper and Newsday.com online content as part of a two-fer product combination with its award-winning Optimum Online broadband service opens the media mind to a lot of possibilities for alternative distribution.

Newspapers can be global, but are generally local first. Cable and telco distribution systems are national in scale, regional in approach and local in their franchised service relationships. The local-to-local blend of a broadband and newspaper online combination may have great appeal, properly marketed and priced.

The core elements to keep in mind in pricing and packaging are those that contribute to the health and growth of each of the bundled products. Unless the rationale behind a "two-fer" is to prop up an ailing product by effectively giving it away with a stronger brand, bundled products succeed based on their individual strengths. Customers are drawn to an ingenious combination--as opposed to a cheap combination, which will always be outperformed by the next "free" offer. The best bundles create a new value logic in their combined customer experience that's better than the individual products on their own. Think of cable, telco and satellite packages--including the cable Triple Play--versus a la carte distribution.

Bringing journalism online into a paid format with broadband distribution makes sense, mostly because newspapers will have to survive some rough subscription sledding if they go it alone. No matter how intelligent the new forms of paid online content from newspapers and magazines will be, their marketing mojo will come from the internet, which means their main marketing engines will be Google et al. It's probably naive to leave paid subscription marketing for publications as august as The New York Times, The FT and The Wall Street Journal, as well as The New Yorker and the rest of the best in the magazine crowd, to online search. Since internet marketing is essentially search optimization, with expensive support from all the usual advertising suspects, it will likely be tougher to sell scale in internet subscriptions than it is to sell print.

The ability of journalism online to flourish without big marketing and sales budgets is questionable. Outside of what can be leveraged through the editorial strength of each brand, the marketing strength of most newspapers has depended on the cross-hatched local and regional advertising relationships it has struck with its most important customers. Retail and classified advertisers want you to know that they're featured inside the daily newspaper and their marketing collaboration increases newspaper sales.

The traditional distribution infrastructure around newspapers is another agent of promotional strength. The newsstand, the news truck, the newspaper delivery guy and the print newspaper itself all brand and sell. Take these distribution elements away--as faulty and uneconomic as they may be--and newspapers online are left in the cold and crowded world of internet search and too much choice. Building up big online marketing and sales budgets when the traditional newspaper infrastructure and its cash needs are still on the stage is asking for profit risk.

Enter the cable guys and their big distribution brethren, skilled in marketing and selling subscriptions as a regular process akin to breathing. Since many newspapers and magazines use video on their sites, an online, print and TV combination of each brand can be marketed as a cable brand enhancement adding value for some to their monthly broadband and TV service. As long as something is being charged and independently billed for each of the products inside, this type of cross-media bundle could be successful, making it easier for customers of both products to enjoy the brands they love. And the value of each component will be clear as long as you can buy your newspaper one of at least two ways: as an online and print brand, or as the enhanced online and print version that comes with cable.

The Cablevision Newsday combination has a few unique walls built around it, the most obvious of which is common ownership. Because Optimum Online and Newsday.com are products of the same company, they're being bundled in the most aggressive way possible--as a single product for customers of either Optimum Online or the print version of Newsday. Newsday.com will command a $5 weekly subscription fee for those who want to go it alone.

From the standpoint of competitive strength, this new online bundle may turn into a strategic stand-out for its brands. From the standpoint of growth beyond its local market walls, Newsday.com will sacrifice the development of new and some mobile audiences as a trade-off for promotion through the cable promotions factory. Given that Newsday is already behind a local market wall since its exclusive Long Island market is actually an island--no less an island dominantly served by Cablevision with its family of Optimum products--there's likely little growth risk. But for newspapers without this structure and with online ambitions that include significant growth through both new advertising revenue and new subscriptions, a more basic version of brand bundling will be preferred.

At the same time, staggering retail giant Best Buy has announced a bundle-to-be between many of its consumer electronics devices that are powered by internet connections and CinemaNow internet movies and TV. Best Buy is appropriating the identity of a media distributor by announcing its "cloud movie" service, to be powered by Sonic Solutions, CinemaNow's owner. The core concepts Best Buy will sell include "openness and flexibility" as all of the internet content purchased to play on one cloud movie device will be available for streaming on every cloud movie device a customer buys from the retail cloud people. Best Buy is already talking cloud distribution talk, referring to "completing the ecosystem" of internet powered digital entertainment.

Pricing on Best Buy's cloud movies has yet to be announced, but it's fair to guess that if this service and retail combination stands a chance in the heavens of success, it will carve out visible profit margins for each of its business partners. The most likely low-risk partnership will see Best Buy sell CinemaNow with a short-term promotional offer that moves to full price quickly. The retailer's substantial contribution will be marketing, selling and educating the consumer on internet streamed product that can be enjoyed as soon as the customer gets home.

As the economy continues to challenge consumers and advertisers, low-risk marketing and distribution partnerships will be an attractive new growth strategy for online TV, movie and print brands. Each new bundle will include a new margin contribution required from the online business to pay for being part of a new media infrastructure.

At the same time, the rates for even wireless phone service are being driven down by internet technology substitution, as evidenced by monthly ARPU drops in brands as strong as Verizon. Why pay for wireless minutes when low-cost and free internet calling can contain your monthly budget? Could it be, once again, that the internet's vast product superiority and cost efficiency is forcing a wholesale haircut on the media?

Our current economic challenges are suggesting a renaissance of the traditional distribution businesses, now expanded to include new online products from in-house and out-of-house in their multifaceted bundles. Of course, big distribution for online products will require elevated online prices to pay their marketing fare. Otherwise, even the most attractive online content may find itself all dressed up with no place to go.

Separation Anxiety

pgottesman@gmail.com (Patricia Gottesman) — Thu, 5 Nov 2009 07:41:00 -0800

Capsule: On the threshold of a likely consolidation of Comcast and NBCU, some members of the press are questioning the wisdom of another content and distribution alliance. At the same time, one media company after another is increasing its Google dependence in hopes of being delivered to a virtual promised land. And, giant Cisco Systems has formed a vertically integrated cloud consortium called the Virtual Computing Environment. Why do we mind the consolidation of traditional media companies without giving online media combinations a second thought? (http://intelligencesquaredus.org/)

Intelligence Squared US produces debates featuring luminaries from government, business, politics, non-profit and the media on issues of national interest. Their October 27th debate presented arguments for and against a motion called "Good Riddance to Mainstream Media." Award-winning new and old media journalists from WNYC/PRI, Politico, Vanity Fair, ABC News Nightline, the Nation, the New York Times and the San Francisco Examiner debated whether traditional media models should stay or go, culminating in an audience vote that bid them stay.

A debate on whether or not mainstream media is dying is like a debate on climate change. It would be wacky to pit scientists and academics against one another on an issue that unites most of the scientific community.  Just imagine a televised debate called "Good Riddance Mother Earth."

Yet, we insist on conjuring up the death of newspapers, broadcast TV, radio, magazines and cable with fierce certainty, aided by precipitous declines in advertising revenue, especially the classified form, that have undermined traditional media revenue models. When classified advertising began its move to superior online products, where were the replacement revenue plans in the newspaper business? The classified shift didn't merit a debate; it merited a new plan, including the kinds of intelligent risks that building alternative revenue streams generally require.   Did newspapers refuse to see the inevitability of their own ill health by failing to recognize an urgent need to change direction? Other than consolidating classified sales through newspaper consortia, not a lot was done to change the course of newspaper advertising revenue.

The same may be happening today with an insistence on over-fishing the online advertising revenue waters. Some media thinkers are advocating increased commercial insertion inside lightly-loaded online TV content. The argument for more advertising assumes a replacement need--in this case, the replacement of traditional TV broadcast and cable advertising with online TV content and advertising. Did somebody die and nobody reported it?  Are broadcast and cable distribution companies going somewhere that will require online TV to assume complete ad revenue replacement responsibility? We better hope not.

Instead of learning from what happened with the early stages of decline in classified newspaper revenue, some in the media seem intent on snuffing themselves out. With classified, new superior advertising products and firms arose online that created an important intersection between local markets and aggregated online commerce communities. Because online became better at telling the classified advertising story, it achieved a natural dominance. The problem was newspapers' failure to respond with an alternative revenue and product plan.

This type of media failure has been widespread and oft-repeated. When Google attained traction for its brilliant search business, the mainstream media either fawned--the "Google is God" school of media evangelism still practicing today--or yawned. Again, print media took a special hit in retail advertising revenue as well as in the appropriation of their content resources. Did anyone complain about the fact that there was an over-correlation towards Google's business model spreading like a contagion through the media advertising world?   Google couldn't say much--not while its stock price and user base were multiplying. What was at the heart of the matter? Traditional media's failure to see that an important part of its foundation was once again being overtaken by the online environment.

Google's mildly cranky book deal and its advocacy of Open ID as the single sign-on linking all US websites are two examples of traditional media challenges in the making; yet, there's a dearth of quality business and media reporting on where Google's giant ambitions might lead and which business segments it might overtake as an outcome. Google continues to do what it's supposed to be doing: expanding, making money, hiring people, supporting its employee base, supporting other businesses and innovating in a way that will create new revenue lines for itself and others. In the meantime, some players in traditional media are doing a lot of the same: expanding, making money, supporting their employee bases and supporting other businesses. What very few in traditional media are doing is innovating and hiring people.

Some combination of masochism and market capitalization math mastery has resulted in a media mind that thinks growth is all about M&A activity that extracts surplus equity value from the markets. Growth is about innovation that creates new or expanded revenue lines for a business as well as jobs. The worry over Comcast and NBCU reconsolidating content and distribution has a serious basis in the historic challenges faced by Time Warner and AOL. But the real issues inside the Time Warner AOL marriage came from a prolonged failure to seek true consolidated value amongst the diverse interests inside. It's unlikely that Comcast will make the same mistake given the chance.

Media consolidation is inevitable, particularly in a tough economy that can only support a small number of leaders at the top. Creative destruction is a part of creative business development, accelerated in the media because of its critical reliance on the latest technology for compounded efficiency and growth. Neither of these inevitable forces presages the death of traditional media.  But traditional media can cause its own ill health by refusing to replace the segments of the business it has lost with new money-making initiatives (beyond rate increases.)  Over-consolidation is most dangerous when just being big seems like enough protection in a technology world that has started coming apart.

Consolidation isn't the problem. Just like divorce, eventual corporate separation through spin-offs are inevitable aided by economic cycles. As long as there are enough fractional new upstart alternatives to a fully consolidated media view, we won't wake up in an Orwellian media nightmare--all extreme progressive arguments to the contrary.

The real insult to traditional media has been too much separation, beginning with superior online products that separated classified and retail advertising from print vehicles of great social value hard pressed to come up with revenue replacement products. Superior online search has supplanted many traditional advertising forms, separating Madison Avenue from its wallet. Urgent burdens sit on the media pressing the consolidation of traditional and new media businesses en route to new profit lines. The first handful of traditional media companies that can produce new products that take the quality of traditional content and duplicate it through place-based traditional and mobile online distribution will change the trend. The great challenge is to perfect addition by addition in an environment that seems to prefer addition by subtraction to the continued detriment of whole segments of the US economy.

Second Life

pgottesman@gmail.com (Patricia Gottesman) — Mon, 2 Nov 2009 14:01:00 -0800

Capsule: Will the media go bravely and opportunistically into an embedded internet access future that brings cyberspace into the real environments in which we work and play?  Future growth for both content and distribution may depend on new products that use authentication for more than extending cable programming from the TV to the PC. Internet Everywhere should follow TV Everywhere into a new phase of technological development that blends wired and wireless communication into a single mobile infrastructure.

BBC
SUNY Stony Brook on Wireless Networks
Nomadix

This week, the BBC World Service and PRI, which includes its US WGBH-Boston partner, celebrated one of the Internet's 40th birthdays with a Leonard Kleinrock interview. Kleinrock originated the Internet predecessor ARPANET, a first-of-its-kind packet-switched computer data-sharing system for which Kleinrock's UCLA-and-SRI based computers formed the first four-node network in 1969. In addition to his substantial UCLA stewardship, Kleinrock went on in the most recent decade to chair Nomadix--a company focused on "providing solutions for the public access market to create multi-use, multi-revenue networks that require zero configuration for end user access"--now part of Japan's NTT DoCoMo.

In the BBC interview, Kleinrock is asked "what comes next?" His enthusiastic response: the internet will change most dramatically in the next 40 years in how it appears to the user. Kleinrock insists that the infrastructure for internet access and navigation will change dramatically, moving content--including data, voice and video--between embedded screens, physical sensors, microphones, speakers, applied nanotechnology and virtual imagery that will "release (personalized versions of) cyberspace into our physical space."

One of the clearest hints that Kleinrock's vision is closer than some may think is the enveloping hush of virtual publishing moving hard physical books, textbooks, newspapers and magazines onto soft mobile Kindles, upcoming tablets and Google-aided search. The originator of Amazon's Kindle "WhisperNet"--through which Kindle readers can buy and have a book, newspaper or magazine of their choice within a minute of ordering it--was Sprint. The wireless contract has now moved to AT&T, where scale will support the seamless spreading of an application destined for the masses.

Kleinrock also sees improvements in store for personal authentication, necessary to provide authenticity and security within the increasingly global and mobile internet environment. As the cable industry's TV Everywhere initiative increasingly is known by the informal shorthand of "authentication," it seems right that the industry develop a view of authentication's broader future applications in the home and workplace.

Cisco's John Chambers, an advanced media thinker as well as a major cable industry equipment supplier of both set-top boxes and modems, is an avid user of videoconferencing in his home and office. Chambers is reputed to believe that top quality videoconferencing will replace some portion of our personal and professional travel in the near future. Seeing embedded personalized communication as a benefit that derives some value from travel cost-and-convenience savings makes sense and may lead to pricing and offer logic inside the cyber-home/office. Cisco is an infrastructure partner to NTT DoCoMo's Nomadix--which Kleinrock led until 2006--along with 3Com, Arrowspan, BelAir Networks, Sky Pilot, Trapeze, Tropos Networks and others.

Where might today's major US media distributors enter this new paradigm? Aggressive partnerships with some of the wireless distributors moving content around the human experience will help. Much of Kleinrock's inspiration for packet-switching as a means of moving content on the ARPANET was theoretical. He developed problem-solving logic for mass connectivity away from his physical computing environment and demanded that the environment shape itself to his vision.

Cable, telecom and satellite distribution might adopt a similar stance, envisioning the post-modern home, office and store all-in-one, shaped by multiple personalized interconnected content and distribution with many well-authenticated cash registers at the ready. This would require cable and telecom to move off their traditional models of controlling every access point and output of their networks--even if only just a little bit.

By assembling a physical and deal infrastructure that includes wireless internet access providers, media distribution might see its smart home plans materialize, blended profitably with smart commercial and in-home entertainment. Media content might escape some of the confines of distribution collars for a new environment that moves its products around town and resells them through traditional and alternative retail distribution hybrids.

A few examples of how the media's embedded personalized second life might take hold? Traditional distributors could break down some of their one-dimensional walls between homes and businesses, acknowledging the massive portability of life and work. Today, distribution and content use anachronistic place-based rules for defining the types of services they provide and their rates. Everything is divided into Residential Service and Commercial Service.

For video, the origin of the strict separation between homes and businesses originated with content companies who didn't want to see group viewings of pay TV content eclipse their ability to sell to alternative commercial distributors--including theatrical distributors at the head of the line--at very high prices. For broadband, the rules are based on some combination of distribution's network management preferences, capital conservation requirements facing pricey line extensions and the drive to profit.

If it's true that the biggest near-term US job gains must come from small and mid-sized businesses, cable and telecom might take a worthwhile tour through the place-based realities of those businesses. Many small businesses operate from homes. Many large businesses rely heavily on the work that their employees do "after hours" at home. If media distributors were able to reserve the distinction between home and business in only those cases where it actually benefited the customer, new profits through integration might logically follow.

Why shouldn't Bloomberg, Thomson Reuters, WSJ Interactive/Market Watch/Barron's, The New York Times and The FT/Pearson be encouraged to bring their business acumen, reporting and information loads into the home through cable and telecom distribution and disruptive marketing? Bloomberg's business data and communications service purchased at home is a pretty pricey extravagance. Given that the Bloomberg market has suffered a few down-sizing dents, can a less expensive more widely targeted wired and wireless business news service create value?

What about the revenue that can be captured driving the in-home media business out-of-home? Comcast, Time Warner, Verizon and AT&T might originate Enterprise/SMB products that integrate "home" content and services--like TV and search--with wireless networks serving offices and stores.

Imagine the transformation of traditional home-based products--premised on two-screen internet-aided TV viewing--into a suite of business products tailored to the real work experience, enriched by multimedia out-of-home screens interconnected via wired and wireless hybrids with office and home PC's. By integrating fixed and wireless distribution platforms with audience measurement triggered by mobile cards or device authentication, big distribution can enable communications and advertising systems that power large and small displays, stores and offices. They can also sponsor the cost-effective replacement of some voice systems with multifunctional cell phones for home and work.

The integration of home, retail and office products might even result in widespread revenue streams based on the Kindle phenomenon. The Kindle and its "Whispernet" have made the immediate physical gratification of our buying impulses contribute to the value of the products bought. Maybe that's why Kindle users are reputed to purchase 40-50% more books after getting turned on. Might businesses as well as stores, theaters, arenas and MDU's benefit from being a backbone for the on-premise sales of selected advertised products shown on integrated screens in common areas and on personalized mobile devices? With a better integrated system for revenue development, we might even embrace the fact that we all shop at work as well as at home and on our "weekends."

If the complex products offered by traditional media content and distribution companies can't be made to fit into the backwards Second Life integration of cyberspace and physical space, new media content and distribution hybrids will likely lead the charge. A personalized Google made for office and home that targets each individual's lifestyle and commercial avatar is likely. Office parks, MDU's and stores can build and drive profit from their own wireless and wired distribution hybrids. So can governments, if there is a will inspired by a need.  But progress will be faster and bigger if today's big media businesses stay opportunistically engaged. To extend their own profitable revenue growth, they might turn their gaze from the last war that birthed their disruptive media businesses to the virtual and real victories to come.

That's Entertainment

pgottesman@gmail.com (Patricia Gottesman) — Fri, 30 Oct 2009 08:18:00 -0700

Capsule: Wired distribution needs a new revenue stream, as well as a consumer-friendly mechanism for resolving network capacity issues. Ditto for wireless, as AT&T and Verizon achieve near saturation on customer growth and a new Deutsche Telekom Sprint alliance threatens to stop handing post-paid customers over without a fight. Both wired and wireless distribution need to anticipate content companies going directly to their customers, as well as the market entry of superior navigators Google and Apple. What's big distribution to do?

Advertising Age
Newser.com

TV Everywhere, the cable distribution effort to make broadcast and cable programming online free with a cable TV and broadband subscription, is planning a 2010 launch. It should be a value-creator for wired cable distribution, as well as for satellite and telco TV companies whose participation has been suggested.

What TV Everywhere will do for distribution is enable PC screens to become additional TV sets for customers who have both TV and broadband subscriptions. It will also encourage both TV and broadband subscription sales. And, it will give the distribution universe some say in how TV content is presented online. Given distribution's network capacity concerns, having a hand in the structure-setting mix for how TV shows up on a TV Everywhere screen will be important.

What TV Everywhere will do for content companies is provide measurable viewership information integrated with online TV viewing. A serious concern has emerged regarding set-top box viewership data on DVR's. Current data extraction methods don't provide for DVR's and their dual tuning capacity, meaning that the most TV-centric households using DVR's are not included in set-top box viewing samples. As TV Everywhere moves content online, the hope is that it will be rated through a universal standard like Nielson or an equivalent alternative.

Moving content ratings competitions from the living room TV to the bedroom PC screen will likely change the world. By de-emphasizing the common cultural TV viewing experience built on the linear progression of network programming, a new two-screen viewing system that collects ratings based mostly on the PC screen will require content to become PC friendly.

The most significant example of what seems like PC friendly content today is the VOD-like episodic sampling navigation offered by every network website, by Google's YouTube and by Hulu and other aggregators. Tying small slices of this content revenue machine into a meaningful financial system with room for growth will be a real challenge. The music business sliced its content down to singles for increased customer satisfaction but has failed to create a revenue-generating infrastructure with expansion capabilities outside of Apple's iTunes, whose ingenious revenue build is directed towards the sale of Apple's devices, including its iPhone.

Distribution has not carved out a clear role for itself and its money-making needs in its Apple partnership. AT&T has a few years of US iPhone exclusivity, which included a mildly glitchy launch period; but that will end as the iPhone smartly pursues its revenue expansion by opening up to more wireless carriers, from Verizon to a potential future combination of T-Mobile and Sprint. The wireless bedrock of revenue development--expensive calling plans tied into long-term contracts, with a la carte texting and data plans on top--doesn't easily accommodate charging for music outside ringtones or TV content. It should.

The likelihood that both Google and Apple are about to do battle over content navigation and, ultimately, content sales is great. Google just introduced a greatly enhanced music search engine that invites sampling. What is sampling for, if not to sell? Complex partnerships with potential advertisers will contribute some revenue growth, but we're growing past the idea that the advertising ocean is big enough to be endlessly fished without consequences. Google and Apple are creating virtual and real marketplaces where products, services and content will be sold without a plan for media distribution beyond themselves.

At the same time, Disney's Bob Iger is exhorting his company to develop enabling architecture for moving content from Disney's Keychest servers to multiple viewing platforms, including smartphones and game consoles like Microsoft's Xbox. No one is talking publicly about what share wired and wireless distribution will have in this digital mix, although it's clear that content companies are finally on the move. TV Everywhere will help, but it won't guarantee dominance over alternative content viewing, selling and sharing unless its participants break down some business and technology walls to favor the consumer.

Cable distribution has already passed through an important wall in its development of advertising and commerce applications. A cable system knows who its customers are. It has the best possible information on subscribers' home addresses, as well as on their broadband and digital TV modems' IP addresses. Cable also knows the score on its customers' ability to pay for services since it bills directly with infrequent credit card accommodation and tight accounts receivable and collections procedures.

As a handful of interesting and potentially revenue bearing interactive TV and advertising applications are being brought to market, cable distribution should grab the remote and the mouse in the house by introducing a simple product that will improve TV viewers' choosing, viewing and buying experiences. The significant legions of TV tune-in spots run across the very old commercial insertion status quo should be moved to a short-form VOD serving infrastructure. This way, TV promos produced by the content networks to enhance ratings and subsquently left for dead inside an old-fashioned one-way distribution system can be brought to life.

Enter a new world where :30 promos are "samples" of longer-form paid and free-advertising-sponsored-content that can be ordered and stored while you watch. Using the passive TV viewing system where viewers are charmed and relaxed to activate the two-way world where content can be used online for watching, learning, shopping and buying seems like the right combination.

If every TV promo spot had a tag that enabled the interactive experience of storing the show promoted on the TV Everywhere system for later online or TV VOD viewing, cable customers could exercise their substantial immediate gratification impulses, now sitting stunted from retail shopping budget cuts. Think of the bonus in-store for PBS: the next time you see an enticing ad for Frontline, you'll be able to click on an icon and store it online and on TV. We'd all like to be high-minded, if properly enabled.

And for viewers who are already firmly in the two-screen camp, clickable on demand online sampling, viewing and sharing will be magic. When you see a promo for something you like, you'll be able to click on the promo with your remote and start watching it with a mouse-click online while you're still watching regular TV. Because regular TV will be better-than-regular, you'll be able to program your week's viewing while watching The World Series or Sunday Football.

As important, you'll be able to click on TV and online advertising to sample, to get more information and to make a purchase. TV Everywhere should make a clear and aggressive claim on both the tagging of TV and online promos for the best of their content, and the tagging of advertising for the best future opportunities for TV-linked commerce. Big distribution has a chance to take a piece of commercial sales for its platform's contribution in bringing the TV programming to the buyer that makes the commercial more attractive. If they can find it in their imaginations, distribution might also strike small slices of credit relationships with financial institutions that can provide an e-and-t-credit platform like PayPal, making purchasing from TV ads easy without credit card numbers and security codes.

Content companies, starting with QVC and HSN, should be all over this execution, as superior to their current interactive presence. Home shopping was huge in its original cable implementation. If home shopping networks shift course to become network background services with short tagged TV and online segments in the foreground, a shopping renaissance could ensue. Shopping networks have few better alternatives than a new viewing and buying system that enables their claim to some of the revenue that is being pulled into online systems led by online distributors like Google and Apple, as well as online commerce aggregators like Amazon and eBay.

But the best part of a new clickable TV promotions and advertising capability will be better TV navigation. Some of the latest examples of navigation progress include mosaic screens offering multiple picture-in-a-picture experiences separated by genre. A news mosaic in an octa-box gives the viewer eight live screens of eight news networks simultaneously. The big simple win on the elegant mosaic is a somewhat enhanced ability to see what's on and help changing channels. There's more out there inside the wired distribution toolbox that can bring new life to the TV experience.

Wireless distribution can take a piece of the new clickable storable sampling, viewing and buying future. By engaging wired distribution partners and enabling their applications on wireless phones, Verizon and AT&T can work with their own Fios and U-verse TV product as well as Comcast and Time Warner to enable remote viewing of saved content online. If Verizon and AT&T don't move in this direction, they risk handing over their future capabilities to the iPhone and the Android. That progression has already begun.

TV and advertising navigation won't be complete without some distribution combination of wired and wireless systems. Moving content between the TV screen and the PC in the home will be great, but carrying it or a facsimile on your mobile devices will be greater still. Print brands who already have libraries of video content that helps tell their stories will have a substantial place and revenue opportunity in a world where short form videos--the art-form formerly known as "commercials"--are the key to every kind of online and mobile content, including newspapers and magazines.

An inter-locking secure system for moving content online, on TV and on mobile devices will be a guaranteed draw for the content community. It will likely be better than the current online viewing choices, where every ad shares some revenue generating potential with Google. Short of doing it themselves, big distribution will see alternative providers develop similar systems and credit facilities that are less expansive and potentially more expensive. That could be bad news for the consumer and the media, tossing TV in all of its potential interactivity to an online world currently defined by flat display advertising, flattening search values and YouTube.

Easy Money

pgottesman@gmail.com (Patricia Gottesman) — Wed, 28 Oct 2009 14:33:00 -0700

Capsule: What new media products, pricing and packaging will initiate the next wave of sustainable growth and profits? In preparation for the next big thing, big distribution should go hunting for quarters in the sofa cushions by carefully reviewing their current pricing execution. At the same time, the media can strengthen its core customer relationships by packaging up alternative content, including new home and business services, looking for relationship-based marketing and advertising opportunities.

The Financial Times

Where's the next vein of easy money in the media goldmine? It's possible, but unlikely, that nothing will ever be easy again. Rather than admitting defeat, content and distribution should commit their minds to developing the next big thing in the unsexy world of pricing and packaging.

To start, it's worth a look at the current structure of TV subscription pricing and promotions. Today's cable, satellite and telco TV pricing accommodates three players in a market where it must and two--cable and satellite--where it can. With this small competitive field, as long as all two-to-three players are pricing comparably, the consumer surpluses--measured as the difference between a discounted package rate and its mature price after a timed promotional discount expires--are comparable. Said differently: consumers feel that all subscription TV services are over-priced, except for those delicious introductory discounts for new subscribers. Predictably, new discount-heavy entrants always look better than the old hat.

A consumer surplus is the difference between the price a customer is willing to pay for goods or services and the price that they actually do pay. A producer surplus in pricing parlance is the increased revenue available by shrinking the discounts and bringing the price paid for a service up to or just over the peak of consumer willingness.

Take as an example the mature or rate card $115 monthly price for a cable, satellite or telco TV package including: a digital version of expanded basic service (100+ channels, with the most highly rated ad-supported networks) and one network, like HBO or Showtime, as well as the standard high-speed data service. The introductory offer price for this service for new customer installations might be $75 per month for the first year of service.

Let's assume that the mature rate card $115 price captures the fullness of what consumers are willing to pay for this package once they've formed a habit. Let's also assume that newly installed or upgrading customers paying the reduced $75 monthly price need a discount to buy, as an inducement to choose one service provider over another or to upgrade their services and deliver more profit to the incumbent.

Newly installed or discounted customers in this pricing scenario are enjoying a consumer surplus of $40 per month or $480 for their first year. The service provider has a strong incentive to increase its producer surplus by bringing the $40 consumer surplus group up to either the full rate card price of $115 ($0 consumer surplus) or up to an intermediate price point between $75 and $115, deflecting churn risk and reflecting what these originally discounted customers as a behavioral segment are truly willing to pay.

The service provider is not using uniform pricing in making these distinctions. Although rate cards will carry the $115 published price and promotional marketing to new and upgrade prospects will carry the $75 discounted price, a growing number of customers past their first year of service will be paying something between these two price points. This reflects the service provider's pricing sophistication, aimed at maximizing profit by tailoring package prices to the price sensitivity of individual segments. Said differently, the service provider knows that uniform pricing will preclude access to certain market segments who are unwilling to pay the mature price because of economic or competitive reasons but are willing to pay a lower price with a larger consumer surplus if they can get one.

If the newly installed discounted group is only willing to pay $100 for the digital TV and broadband package after their first subscription year, the service provider might bring them confidently up to the $100 level through a $25 rate increase after Year One and subsequently lift their price point to the $115+ full-price level. New price points above $115 will be inevitable over time as rate increases are taken on the mature base that keep the mature price moving up. This upward price momentum occurs according to the service provider's need to maximize profit and often reflects a substantial margin surplus over the service provider's revenue-related and operating cost increases each year.

A major pricing challenge in this common scenario is the delta between $115+, as it rises over time, and the heavily promoted $75 offer price, which most service providers are unwilling to raise for fear of missing out on customer growth and upgrades. On the pricing theory that there is a maximum effective price that each customer segment is willing to pay, this cable-satellite-telco-TV pricing approach introduces an increasing number of price points between $75 and $115+ over time assuming that growth and profits have been maximized by hitting the exact maximum price point for each group with discipline.

Price discount offers like the $75 used in this example come into the market with a new product introduction or to overcome a new competitor. The service provider introduces a new product, the benefits and efficiencies of which can only be realized if the new product penetration is maximized. The new product is bundled with a popular traditional product, heavily discounted and heavily marketed. For cable distributors, the arrival of broadband a decade ago and voice, on a scaled basis, five years ago marked the death of uniform pricing. Double-play and triple-play bundles launched a pricing sophistication for cable that drove profitable customer growth and competitive pre-emption for many years.

Today, though, there are more than a few quarters in the sofa cushions of cable pricing--as well as satellite and telco pricing--that can be picked up by applying a simple and regular discipline to surplus measurement over time. If the cable operator in our pricing example above was dealing with a simple, time-frozen delta of $40 between the full $115 digital TV and broadband package and a $75 discounted offer price, a comparison of the actual package ARPU (or monthly average revenue per package unit) and the mature full price will be revealing.

If the package ARPU being realized in this example is $105, the subscription mix between full price customers paying $115 and discount customers paying $75 is 75% at $115 and 25% at $75. By looking at overall churn versus Year One churn over an average period, a service provider can comfortably set subscription price-ratio targets for full-price versus discounted prices that will maximize growth and profit. If the package ARPU is less than $105, the service provider is not maximizing growth and profit because too many customers are likely paying an introductory price. This happens, particularly in decentralized operating environments, because of an unwillingness to risk churn increases through consistent rate increase execution.

Another potential cause for a large mature price versus real ARPU delta is a flawed pricing plan that has lifted the most loyal, longest-tenured customers up to extreme price points (e.g., well over $115 over time,) while continuing to use the low $75 discounted price for everyone new. As the distance between mature price and offer price grows, individual customer segments will break out of their pricing plans, registering dissatisfaction by disconnecting or downgrading service. Often, this type of churn goes un-noticed on a package-by-package basis until the elasticity problems are fairly advanced.

A simple model that compares real ARPU by package to the desired business mix of discounted versus mature pricing will reveal the state of each customer segment in terms of price sensitivity, as well as the efficiency of each operation in setting price targets and reaching them. The best rate increase judgements--which are really pricing judgements in a sophisticated business--will be made knowing what's at risk according to what's performing well and what's under-performing. An optimal result comes from capturing profit increases by making sure planned rate increases actually take place. If the whole pricing system is working as intended, high rate increases on the mature price might not be necessary, decreasing churn and maximizing profit in the healthiest competitive way.

While quarters in the sofa cushions can be thrilling, they're not enough to hold onto the house. For TV and broadband distributors to unleash new powerful growth engines, new products will be required. The current practice of offering only home-grown internally billed products beyond TV programming over which the distributor has virtually complete pricing control should be modernized. Netflix has just reach 11.1 million US customers, a 28% growth rate over 2008 and a 5% growth rate in the third quarter of 2009. It's time to bring Netflix into the cable, satellite and telco TV fold by offering its interesting mix of products and services with a superior local service connection.

Netflix pricing begins with a $4.99 per month package for the rental of two new release DVD's per month delivered to home within 1-2 days of an order. Successive pricing of $8.99 to $16.99 per month brings more monthly DVD's and the flexibility of renting one-two-or-three DVD's at a time. In addition, the $8.99 to $16.99 packages include streaming video with unlimited viewing of classic movies, selected TV and a small number of new releases through Netflix enabled devices. The enabled device list is increasing from Sony Playstation 3's to Microsoft X-Box 360's to Samsung and LG BluRay DVD players to Tivo DVR's to Sony and Vizio internet TV's.

If traditional digital TV distribution collaborates with Netflix to enable customers to decide how they want to watch their movies--through their combined choice of ad-supported or premium networks, VOD or DVD rentals or streaming Netflix video--an economic system could likely be created that maximizes profits by befriending the market's leading competitors. As long as the Netflix service offered by the local distributor is better than Netflix solo--a goal easily achieved through content and local service advantages--the addition of Netflix could jump-start premium IPTV economically. Even if only a cross-section of the rights for Netflix streamed video were legally available for multi-channel service providers, the cable or satellite or telco TV store would be stocked with the best alternatives for TV viewing. And pricing could be managed to reflect a slight increase in service costs for transfering customer calls and arranging web service for the new Netflix content.

Netflix pricing fits well into the traditional distribution price-point schema just as satellite and telco TV pricing was built looking at cable price points. The most important fit that a Netflix or similar alternative might bring would be new value through new products and traditional products in new forms. New value creation well-packaged should increase the elasticity of the current gray box of cable pricing in all of its complexity and increasing vulnerability.

Similar distribution advances that create the best pricing and packaging platform for internet video of every stripe can pay dividends, especially to current broadband pricing. Consumption-based pricing for broadband gives all of the power and control to the service provider who is measuring consumption and billing for it. This model works for utilities but runs afoul of the customer loyalty TV distribution requires in a competitive field with high content variation. Placing the pricing pressure onto added internet video services sitting on top of both standard broadband and the TV Everywhere combination can enable distributors to charge more for internet video while sharing revenue with the internet video content providers, who will be many of the same companies currently producing digital TV.

As long as video alternatives, whether they're streamed, gamed (in a good way,) sold or rented, are available independent of cable, satellite and telco TV providers, there will be a strong competitive incentive to bring them inside traditional distribution's packaging and pricing model. Distributors will need a new perspective to get comfortable embracing the competition, especially since traditional multi-channel competition involves virtually identical core products. A new model can expand the elasticity of the status quo by bringing different content and services--ultimately including home and business monitoring and energy management as well as health care record storage and more--into a tight pricing constellation that will benefit by addition.

In order to prepare for more products with better economics, media content companies might bring to market two versions of their online products--one to be bought outside the multichannel distribution sphere and one to be packaged into it. And distribution should tighten up their pricing and packaging, identifying easy money along the way, in preparation for an internet and service expansion aimed at powering profitable growth for years to come.

First, Impressions

pgottesman@gmail.com (Patricia Gottesman) — Mon, 26 Oct 2009 14:21:00 -0700

Capsule: How much scale will a profitable deployment of interactive advertising require? At the CTAM Summit's "Future of Advertising" Panel, Starcom Mediavest Group CEO Laura Desmond shared a view: "We need to have (the addressable advertising) platform rolled out (to) encompass all of the TV world, not just cable and a few networks." (Broadcasting & Cable.) While this may be true of targeted one-way advertising, two-way interactive advertising may use impressions math as a scaling alchemy for gradually phased deployments that turn TV, broadband and mobile avails into solid gold.

Broadcasting & Cable

In the last two weeks, AT&T and Verizon announced earnings, the centerpiece of which were the counts of their wireless subscriber additions. AT&T added 2 million wireless subscribers during 2009's third quarter, bringing its full count to 81.6 million. Verizon added 1.2 million wireless subscribers for a total of 89 million.

The force behind AT&T's highest wireless additions count in company history was Apple's iPhone; it was the device of choice for over half of all new customers. Of 3.2 million new iPhone activations in the period, 40% were new AT&T customers, translating into 1.28 million new AT&T wireless additions out of 2 million total brought by the iPhone.

Despite the seeming marital harmony between AT&T and Apple, the iPhone is a purveyor of Big Love, intending more marriages in the near future. In an anticipatory moment, AT&T's Mobility & Consumer Markets CEO Ralph de la Vega addressed the issue during his earnings call: "We have a legacy of having a great portfolio...that will continue after the iPhone is no longer exclusive to us."

The portfolio may be great, as is the aggregated scale and history of its owner. But the voice business is morphing into something new, increasingly more wholesale in orientation than retail. In staking so significant a share of its growth and profit-making on Apple's stellar device, AT&T is moving from a transport business that runs the tables to a transport wholesale partnership company, dependant on devices, distribution and content partners that are media-rich, complex and out of the former phone company's control.

At the same time, Verizon has turned for partnership to a star big enough to rival the sun. Google and its Android mobile operating system will be featured in several new Verizon mobile phones, promising to give the iPhone something to think about as it opens its AT&T marriage en route to polygamy. Verizon has introduced competitive advertising that pounds on the message of the reliability and superior coverage of its network, gently mocking the iPhone and its 85,000 "apps" as being less important than Verizon's coverage "maps." Verizon's message is right on its core strategy of binding customers through superior wireless service. It also keeps the focus on Verizon itself, rather than sharing advertising and marketing benefits with its Google operating system partner.

What is the AT&T/Apple versus Verizon/Google competition bringing the market? Some good wireless advertising: Verizon's maps are a visual relief in a sea of wireless minutes, monthly prices and "G"'s that blur the meaning of numbers and numb comprehension.

A bigger result: the beginning of the end of the wireless voice-and-text business as we know it. The numbers inside both AT&T's and Verizon's earnings reveal continued losses in the wired voice businesses--the parts of the business that are entirely controlled by telecom distribution with government participation. The growth business continues to be consumer wireless; but in order to grow that business to the detriment of each other, AT&T and Verizon have changed the nature of their economics by changing the products they sell.

As the new economics of each customer addition reflect new allies demanding their share of the bounty in the wireless wars, a new wireless product definition has begun to colonialize the voice business as if it were an extension of the internet. This is a very different result from the "You Will" strategic intention AT&T expressed in the early 1990's. During its famous ad campaign, AT&T convinced its audience and itself that it would lead the course of innovation in consumer, business and public markets. Having grown horizontally but not appreciably vertically, AT&T and Verizon now use their tremendous scale to court friends of similar comparable size but more obvious future prospects.

In order to strengthen their prospects, AT&T and Verizon should think seriously about the share of advertising revenue they'll keep once the definition of wireless voice morphs into wireless media. In order to protect their future economics, telecom distribution should imagine the healthy growth of the advertising trees in their own backyards and all of their nourishing fruit. Because both companies moved into TV via wired distribution, with AT&T's U-verse and Verizon's Fios, they may have inherited the view of advertising coming from their fierce wired distribution forebears and rivals: cable and satellite.  They should do more.

The money-making distribution leaders of the cable and satellite business view their relationship with content as their primary economic driver, leaving advertising for cable networks, broadcasters and print content/distribution hybrids to figure out. Retail is one off of advertising and it's the rare media distributor, outside of print, that gives the actual buying and selling of goods as well as services a second thought.

Adding complexity, the future of TV advertising is likely to be a brand promotion, direct marketing, direct sales and fulfillment hybrid. Adding opportunity, each distribution business will have a strong influence over how much of each revenue component drives their profits as that future develops.

TV advertising today is still an impressions business. In the dreamy haze of setting advertising rates mating vague client expectations with rough viewership estimates, impressions are the currency. Impressions mean the number of times an ad campaign can be seen according to network ratings multiplied by available viewers multiplied by viewing opportunities determined by available ad inventory. As more inventory opens up with more available channels to be viewed, as well as alternative TV distribution forms (like wireless,) individual network ratings fall pressured by the possibilities.

TV content companies struggle with ratings accuracy but the broad realities of audience measurement persist. The more types of incumbent TV content available to US viewers, the lower the audience numbers will be for each incumbent type. The force that can smash this reality is the emergence of a new medium. Cable TV smashed the ratings realities of the broadcast networks, sharing advertising impressions and taking a serious and growing bite out of broadcast TV ad revenue. Mobile TV and IPTV, whatever they come to mean, will add inventory and impressions to the incumbent TV universe. They'll divide audiences and change the revenue model again.

Even if content incumbents expand their viewership seamlessly from broadcast and cable to wireless and IPTV, they will, at best, hold onto their current revenue in the aggregate by spreading it over larger and smaller bits of advertising inventory. These new TV ad forms, according to their small size and complexity, will require greater and more costly oversight. In other words, keeping revenue up in a complex distribution environment where total TV viewership is not increasing significantly is a profit-shrinking task.

How can the media raise advertising profits? By making the increased availability of advertising inventory into something more than one-way impressions or passive viewing opportunities. The value of an impression--the one shot an ad has to grip a viewer into a purchase--will increase when even a small percentage--say 5%--of TV advertising inventory can make a direct sale. If one-in-20 TV avails holds a spot that can be clicked on with a cell phone or a mouse or a TV remote to activate a real or potential sale, impressions math becomes a beautiful sight to behold. Smashed into an explosion of commercial opportunity, the TV ratings and impressions currency value will rise on an interactive tide of new buying and selling direct to the consumer.

If click-to-purchase is so worthwhile, why are online advertising rates stagnant? Because the nature of the internet today precludes a direct purchase more often than enabling one. We click most often through a search engine to (or on our way to) a commercial website that has buried within it a commerce engine to facilitate our purchase. There are too many steps.

Most important, the first step, the identification of a seller via search, presents the seller and his products in the most antiseptic of terms--as a Google or Yahoo! uniform search listing. The advertising magic for search comes from taking a highly motivated comparison shopper and turning him into a potential buyer by showing him the stores. The advertising magic for interactive TV will be taking a passive viewer (or millions of them) and inspire them to make an impulse purchase or to act on a latent desire that can be linked to the art of advertising and its context inside relevant TV content. If this experience is portable, the advertiser has that many more opportunities to turn desire into action--on the couch, in the car, while shopping, while bored at a holiday party.

Verizon, AT&T, Comcast, Time Warner Cable and all of their media distribution brethren will inevitably take more control of their platforms by developing interactive advertising on a small practicable scale. Even a handful of TV impressions can turn into a small goldmine for the distribution platform that connects buyer and seller most powerfully. There may even be an opportunity to run the new advertising tables by running the models that determine the value of interactive TV fulfillment at home and on the go.

Surely Google has this ambition in its Android operating system and its Verizon partnership. Apple has already begun. It projects it will complete its 10-billionth global iTunes fulfillment at the end of this year. Now, Apple has a phone that sings and access to a multimedia collection of platforms that can knock the stuffing out of the TV advertising economy. Let's hope they'll create a high tide, by inspiring competition, along the way.