Tag Archives: Apple

Update on Economics of TV – Article from AdAge

I’m not usually into re-publishing other peoples thoughts, of those of you who know me you will also know about my interest & thoughts on the future of TV, consumer behaviour and a migration to a new web based broadcast and ad model.

Below is an article from AdAge in the USA that I think is a telling sign of the future, regardless of what you currently believe or are paid to believe. Enjoy….

Thinking Outside the Box: Web TVs Skirt Cable Giants

Content Built Into TVs Is Big Business — but Not for Bypassed Operators

by Michael Learmonth
Published: January 18, 2010

NEW YORK (AdAge.com) — Considering cutting your Cablevision subscription? It’s not just the cable industry that would rather you didn’t; it’s also TV networks and studios that make bank off your monthly bill.

But device-makers from Samsung to Boxee to Apple TV have no such concerns — and they’re continuing to roll out products that bypass the cable box and draw content and services directly from the web, setting up what could be one of the entertainment industry’s biggest business battles of the next few years. Think: the current print-media implosion, but with much more money at stake.

“The consumer electronics makers are really the only ones who don’t have anything to lose if consumers switch,” said Forrester Research analyst James McQuivey. “Everyone else is conflicted.”

Netflix in particular is in the midst of a push to be a native application on TVs and gaming consoles. Last week it announced a deal with Nintendo’s Wii gaming console for its on-demand movie-streaming service; Netflix is already on Sony’s PS3 and Microsoft’s Xbox, not to mention TVs and Blu-ray players from Samsung, LG Electronics, Sony, Best Buy’s Insignia and Vizio.

At the annual Consumer Electronics Show in Las Vegas, cable operators got a look at a device that could start to eat into another core business: TVs with built-in Skype access. LG and Panasonic announced partnerships to start shipping the sets later this year.

Selling point
The consumer-electronics industry has a long history of over-promising; years of chatter have yet to yield a line of affordable mass-market 3-D TVs you can buy in stores, for example. “A lot of manufacturers have come out and made announcements, but I don’t think they really are in a position to erode the pay-TV subscriptions that the cable industry has today,” said Park Associates research analyst Jayant Dafari.

Yet content and features built directly into the TV have become the selling point for the next generation of high-definition sets, gaming consoles and boxes. And none of it is coming from your cable operator.

“Still no evidence of cord-cutting, but as prices spiral higher, the stresses on the system are unquestionably growing,” said Craig Moffett, senior analyst at Sanford C. Bernstein.

But customers are cutting back on cable bills: while rates go up every year, the average amount consumers are paying for digital cable dropped from $79 a month in the third quarter of 2008 to $70 in the third quarter of 2009 as they drop additional channels and services, according to research from Centris.

Cable still has the most complete reserves of TV programming, films and video-on-demand, as well as a near-lock on live sports and news. But web-based devices are getting closer to offering the full deal. Avner Ronen, CEO of startup Boxee, estimates 60% of broadcast TV is available online free in some form, and 10% of cable TV.

Waiting for clampdown
The question is: When will cable put a stop to it? So far, the industry has been relatively laissez-faire about the situation, but one tech exec, who asked not to be named, predicted that the minute cable operators start to feel the disruption, they will clamp down and use their market power to keep TV and films from seeping into next-generation devices. They’re already putting the squeeze on networks; any free distribution is an argument for lower cable distribution fees.

In the meantime, they insist that cable-cutting is more urban myth than reality. “We see some interesting stuff out there, but right now people are watching more TV than ever; cable-cutting is largely on the fringe,” said Alex Dudley, spokesman for Time Warner Cable, the nation’s No. 2 operator.

The audiences for these web-connected devices are starting to scale to the point at which marketers become interested. Parks Associates estimates that the consumer electronics industry will sell 80 million net-connected TVs by 2013, and there are already 20 million net-connected Xbox consoles in circulation. Recently, Microsoft said it had 2.2 million Xbox users online at the same time — about the audience of an episode of “Gossip Girl.” Within that experience, Xbox is selling traditional spots, branded entertainment and display advertising to brands like Sprint.

Boxee, which unveiled a set-top box at CES, first released its software on the web in 2007 and now has 850,000 registered users. It pulls video and other content from the web and displays it with an interface optimized for 10-foot viewing on TV.

By the numbers
Number of Xbox consoles connected to the web:
20 million (Microsoft)
Peak number of Xbox users simultaneously online:
2.2 million (Microsoft)
Percentage of U.S. households with gaming console that can stream movies:
39% (InStat)
Average price consumers paid for digital cable Q3 2008:
$79 a month (Centris)
Average price Q3 2009:
$70 a month (Centris)
Number of Boxee users:
850,000 (Boxee)
U.S. digital-cable subscribers:
42.1 million (NCTA)
U.S. basic-cable subscribers:
62.6 million (NCTA)
Number of Netflix subscribers:
approximately 10 million (Netflix)
Number of web-connected TVs sold by 2013:
80 million (Park Associates)

Last year Boxee added Hulu content, but was later blocked by the participating broadcasters. Boxee displays video with ads intact, but since Hulu shows TV with a fraction of the ads, putting the web version on TV is intrinsically destructive to NBC, Fox and ABC’s business model.

Snubbing the box
So what did Boxee do? It added a web browser to its box, so users can simply surf over to Hulu.com and watch as if they were on their computer, an inelegant bridge, to be sure, but another incremental snub of the cable box.

In the coming weeks, Boxee will add the ability to sell subscriptions on a pay-per-view or channel basis, much like iTunes, Netflix or Microsoft’s Zune service.

For the vast majority, devices like connected TVs, Boxee, Xbox, Roku, Netflix, etc., are additive to cable. “Personally, I think there is a style of TV viewing that is a more passive activity rather than the more active decision to use Apple TV or Xbox,” said Mike Vorhaus, president of Magid Advisors.

But more and more, people don’t care how their content is delivered, which is a scary thought for the cable industry and a key reason Comcast is acquiring its own content mill in NBC Universal, as well as pushing Comcast’s own, proprietary web-TV plans. One thing the cable operators have on their side is they are cash-rich and can make acquisitions of media or technology companies that start to disrupt their models.

“For many people, cable works just fine; the quality is great; the DVR functionality is great; the only gripe they have is that they’re paying for it,” said Boxee’s Mr. Ronen. But “there is a growing generation out there where the whole definition of entertainment is changing, and their main source of entertainment is the internet.”

For those interested in my views on an alternate ad model in a world of IP TV : https://justinhind.wordpress.com/2009/03/16/the-economics-of-tv/

Economics of the Future of Mobile

Recently I was asked to write an opinion piece for the magazine Marketing, capturing my thoughts on the future of mobile marketing which has always been touted as a large and emerging opportunity, but has yet failed to gain critical mass and more importantly material advertiser support.  Below is an extract of the article.

Marketing Magazine - The Future of Mobile isn't Mobile

THE FUTURE OF MOBILE ISN’T MOBILE

Mobile Marketing has been the long-held, future of advertising. A promise that everyone has got excited about, but few delivered on. I’ve seen numerous reports from industry experts and market analysts, who’ve produced endless business cases and revenue models that never seem to gain any traction anywhere but in a spreadsheet.

Many mobile-based businesses start and fail even before they’ve worked out who they are, where they fit and more importantly what the consumer need and engagement point is. The promise of mobile has been built on a nascent industry that hasn’t really found its feet so far. It begs the question, why have so many people been so wrong for so long? In my humble opinion we’ve all been considering the problem, or opportunity in the wrong context.

The future of mobile isn’t “mobile”. Building yet another disconnected platform, which operates singularly, is the problem. The real question isn’t about what is mobile, it is more about what connectivity and ubiquitous consumer centric computing experiences hold.

The Black Swan of the mobile industry came from an outlier that radically changed the face of what we understood the market to be, Apple. Like it or not Steve Jobs and the Apple crew decided to rewrite the rulebook, grounded in a consumer truth & desire for simplicity when they launched the iPhone.

iPhone

iPhone

The iPhone was one simple device that allowed consumers to do almost everything they could on a desktop or laptop, with the benefits of a compact device that had GPS functionality that could fit perfectly into your pocket at the cost of a normal mobile contract. The iPhone ran basically the same operating system as a Mac, it synced seamlessly with all your business and personal applications wirelessly and it was just easy. Combine this with creating a relatively open software platform that developers could deploy a range of consumer centric applications on, with an open software market place where developers could reach a global audience and monetize their ideas rapidly. Hey presto the face and future of mobile changed irreversibly.

The biggest change Apple brought to the mobile industry was they established and built sustainable consumer behaviour, where for the first time consumers could use mobile devices in an entertaining and meaningful way.  Almost everyone I know now uses the SAME applications and services on their desktop as they do on their mobile. Tweeting, Facebooking, Googleing, blogging, emailing, taking and sharing photos, reading PDF’s, listening to and downloading music have all become a ubiquitous experience, regardless of the device or location. The iPhone really enabled the “Social Web”, combine this with location-based mobile applications, and the face of the mobile game has changed forever, why? Because Apple rewrote the rulebook.

Apple changed the clunky face of mobile marketing and e-commerce. They did what Microsoft, Symbian, Blackberry, Nokia, Sony Ericsson, HTC et al couldn’t do. All of the previous industry incumbents were all operating based on a set of rules designed by engineers and analysts that had a vested interest in developing a disparate market, not a connected market. Apple innovated that last 10% of the mobile market and that innovation has had a 200% impact on the mobile industry as we know it.

Before you start to think this is a plug for Apple, have a look at the ripple effect across the entire mobile industry. Nokia has launched “me too” devices with their own music store, HTC have launched devices with similar interfaces and capabilities, Blackberry has started to support their developer community with a “me too” application store. The rate of change in mobile is increasing exponentially, all because an outlier rewrote the rules.

Apple's App Store

Apple's App Store

So where is the advertising world in all of this though? The advertising community both creative and media is still way behind. Ad Networks are still trying to sell on a silly impression based model (CPM) through serving non-targeted, dumb ad’s that have little relevance to a consumers experience that are at best annoying. Creative agencies and their digital heads have not yet woken up to the fact that it would be a better use of clients funds to build a simple mobile site, designed for a handheld device that delivers consumer utility rather than fight for a full flash and video site that can’t be viewed on a mobile device or indexed in a search engine. It is time to catch up people, understand the consumer and find the right intersection point.

The future isn’t mobile; it is ubiquity of experience across any device that delivers consumer utility and meaningful brand engagement.

The Economics of Online Music

Short & sweet today. I’ve been talking with a new on-line music portal www.bandit.fm being pioneered by Sony BMG here in Australia. Downstream are looking at potentially partnering with Sony to help build an audience for their new service.

Now anyone that knows me, knows how much of an Apple fan I am. I think anything Apple touches, generally turns to gold. Apple have successfully become the trail blazer in almost every product category (think iMac, iPhone, iPod, Mac Books of all types and descriptions). They’ve also revolutionised the consumer software market with easy to use intuitive applications (think iPhoto, iMovie, iDVD and before anyone cans me the whole iWork suite, awesome productivity suite for $99! Let’s also not forget iPhone apps – just brilliant way to build and scale your mobile platform).To date no brand really comes close to Apple’s innovation and foresight.

But when it comes to music, I think there is a true challenger that could really take it to them. Sony have developed what I believe is the BEST music site / portal on the market today.

New iTunes killer

New iTunes killer

I think it is the best for the following reasons:

  1. Great content – they’ve developed the site intuitively with a mixture of channels, artist specific pages, video, news feeds etc. You can engage in specific genres like R&B, Hip-Hop, Rock, Pop or you can navigate to specific content rich artist pages like N.E.R.D, John Legend, Duffy etc etc.
  2. Great site build – mixture of indexable HTML & interactive flash elements, URL structures, title tages, H1 tags etc
  3. Downloads are easy after simple registration process
  4. Music & videos are DRM free
  5. Great experience – you can listen to a whole song or view a video in high quality full screen mode vs. Apple’s 30 second preview function
  6. Not constrained by an app like iTunes – you can access it from any browse
  7. Easy content network integration (PPC) into YouTube & Myspace. They are “THE PLACE” to view music related content.
Specific Music Genre Channels

Specific Music Genre Channels

Usher on Bandit.fm

Usher on Bandit.fm

The site will work very, very well for Paid Search / PPC campaigns, the site structure allows you to deep link to exact content as well as being able to achieve great quality scores which impacts highly on economical bid prices and as content is more compelling than iTunes, I believe with a much higher conversion process too.

The site also has very high potential to work very very well for Social Media, as the site structure let’s consumers be very specific about their Tweets, blog postings etc and create specific interest in genre based content communities. One area they could approve is allowing their content to be aggregated and syndicated on other sites, think embedding audio files or video files to MySpace or Facebook profile pages with pre & post roll Bandit.fm ads promoting their service – very economical way to drive new subscriptions, downloads or cross sell new artists / releases / albums.

So the product I think is truely world class, if this is release 1.0 I can’t wait for new versions updates. Bandit.FM can successfully take on iTunes and Apple in the market they really pioneered and commercialised (on-line music), and hopefully give consumers a compelling reason (safety – no viruses / Trojans, reliability ets) to BUY music rather that steal it from sites like Limewire.com. They only have to carve out small incremental percentages of the on-line global market to create real value & high return for their pioneering investment in on-line music. Congrats to the whole team at Sony BMG!

If you are into music give it a go.

The Economics of TV

Wow… hasn’t everything changed. I think  that change isn’t only constant, it is increasing at an exponentially rapid rate when it comes to marketing and consumer connections.  TV is one of those mediums that is changing at a breakneck pace, being driven primarily by the web, cheaper broadband, processor speeds and more importantly by human behaviour and the hunger to have it all now. It seems though that the only ones fighting this technological and social trend are the TV networks, somehow trying to hold back change like that boy who put his finger in the dike, trying to hold back the pressure of a tidal tsunami.

Lets define what has changed though…

Humans desire for visual entertainment hasn’t changed, we still want to see great content, be entertained, informed, learn etc. All the usual stuff we know & love in our existing inefficient model of liner TV transmission. Actually, all the stuff we do offline (Read, listen, communicate etc)  is what we NOW want to do on-line, the web has just become a faster more efficient means of content dissemination and connection.  There is a fascinating book on it it if you are really interested – Convergence Culture.  Back to TV….

So what the web has allowed us to do is no longer have to experience video content or TV in old world speak in a linear fashion (wait – start – stop – wait, repeat cycle, repeat cycle etc.) Now we can experience content in a multi-dimensional model where prime time is anytime, and we are no longer at the mercy of the television networks to dictate content and programming schedules to us. With the advent of TV shows on iTunes, Hulu, Video Ninja, etc etc we can watch whatever we want, whenever we want. In my home we see shows like Damages, Entourage, dare I say it Gossip Girl, The Mentalist, Flight of the Concords, Mad Men etc within hours of it airing in the USA. We stream it, download it and watch it all ad free on a schedule that suits our lives, rather than that of the networks. Actually we watch 3 or episodes all back to back, it is a much better experience.

Video Streaming site - Ninjavideo.net

Video Streaming site - Ninjavideo.net

So I ponder the question, what will the future & Economics of TV be? Is there a better way? (yes obviously) Who will hold the balance of power, will it remain with the networks who still today are scratching their heads, wondering if they can fight it the same way the music industry did or will they embrace the change that is being thrust upon them by a technical and consumer lead revolution? Should they look to the pioneers of the web (gambling & porn), watch & listen carefully and adapt and commercialise their models or put their heads in the sand, only to come up for breath & see that everything has moved on without them? So I hear all you naysayers saying the IP TV market is small and nascent, but so too was the wireless broadband market, the 3G handset market and yes our old friend the Music market. Believe me it is sooner than we all think, and much much sooner than the guys paid to believe the old system won’t change.

So whats the new model then….

I think, predict, believe that Goggle will become the biggest TV network in the world in the very near future….here is why:

  1. All TV based content ( that and everything else – Radio, Books etc) will be digitised ( fact is it already is!)
  2. All TVC’s will also become digitised and stored on a TVC Ad Server System (similar to current ad digital display ad servers)
  3. TV’s will be increasingly connected to media centers ( think Windows Media Center, Mac Mini or next Gen Apple TV), or co-exist in harmony with hand held devices like an iPod Touch or iPhone.
  4. Google will be able to behaviorally understand a consumer / household based on a myriad of data sources (web surfing history, Search history, IP TV viewing history etc) & serve TV ads directly into a program that has been legitimately downloaded or is being streamed in realtime. Ad serving will be served on the basis of complex algorithms in a live auction model where market forces set pricing, similar to Paid Search today. Think Google’s recently announced “interest-based” ads on the content network with the mechanic applied to TV.  Media planners & network sales forces will be a thing of the past.
  5. Consumers will decide how much advertising they are willing to bear and will trade the cost of ad free convenience off against receiving free TV, where & when they want it. So if I want no ads, I’ll have to pay a higher cost than someone who is willing to see say 8 or 10 ads an hour who may pay nothing.
  6. TV schedules & post campaign analysis will be more like digital campaign analysis than the current pay, hope and pray approach (what I like to call the Strategy of Hope) to accountable effectiveness reports. Advertisers will be able to  understand who they’ve connected with vs. what shows they’ve bought and most importantly how the consumer has reacted within different latency periods from viewing TVC’s embedded into the content (no time shifting of course). Did they visit the site,buy the product, subscribe, buy something else in the clients product portfolio, did churn drop etc etc. The opportunities are endless. Will all TV in the future be more like DR / internet based campaigns – yes I think so at least.
  7. Content producers / companies may distribute their content or shows directly to their audiences over the web and get a larger cut of ad revenue thereby dis-intermediating the networks.
  8. A new breed of KPI’s will evolve based on value & yield, rather than TARPS and average spot cost.
  9. Creative agencies will need to think of new mechanics to engage their clients audience meaningfully. No longer can they solve marketing challenges 30 seconds at a time, in the same linear fashion as the traditional TV networks serve programs.

I’d really appreciate alternate view on this, either from a Television network’s perspective or from the digital industry’s perspective. All I know is TV is going to change faster than we know it and become more like a Search market than the current state we all know and love ( or hate?).

Interesting update:

http://www.smh.com.au/business/content-rules-needed-for-internet-tv-20091105-i0b0.html