February « 2009 « ChrisCarterConsulting Blog

27Feb/090

Online Video – The Demise of the MSO?

Posted by Chris

My wife and I were traveling recently and enjoyed the confines of a friend's home at our destination. Prior to departure I asked if the home was WiFi enabled so we could communicate with the outside world and was informed yes, indeed the house had WiFi, but no Cable TV. Being "newsers" my wife and I were at first a little perplexed but instantly realized we could use the wireless connection and our laptop to keep up with the daily goings on from our home region (NYC) and nationally. We just happened to have departed JFK airport on January 15th, in a snow storm. We made it out, after deicing, without a hitch. Flight 1549 from LaGuardia ended up in the Hudson River a few hours later.

As we drove through the Rocky Mtns to our destination the local NPR affiliate relayed the tragic events that led to Flight 1549 landing in the Hudson. We both fully expected to hear there were no survivors and were amazed to find everyone was rescued and safe. Fast forward to the home where we would spend the next few days. We immediately fired up the computer to look for video of the flight, new stories of the incident or any other information available. While we could not find live streaming from the the West Side of Manhattan we were able to locate interviews from the local and national news outlets and many video segments the next day from all of the major morning TV shows. Who needs cable? We realized we didn't. We took this a step further during our stay and were able to find episodes of some of our favorite shows, many of which we had recorded on our DVR prior to departure. In our downtime we were able to keep abreast of not only the tragic events of Flight 1549 but the routines of our weekly life.

Given this I can see why the Cable MSOs are anxious to stike deals with the major cable programming entities to limit the online distribution of their content to the MSOs online platforms, for which only paying Cable Subscribers would be able to access. A recent Nielsen Online report indicated that more than 136 MILLION people watched online video content in January of this year. That's about 45% of the total population of the USA. 45%! Can you imagine why the Cable MSOs are interested in striking this deal? If they don't and all video content migrates to a free online platforms, as many Broadcast TV shows already have, what's the incentive for consumers to keep their cable TV subscription? The MSO becomes just another network operator with no value-added video service and would compete with other broadband providers on price for a consumer's broadband connection. This begins round 2, or 3, of the consolidation of the the major network operators, akin to what happened in the early 90's.

Perhaps one business model for the MSO could be as a content "warehouse" for content developers and programmers. These creative types are not in the business of content distribution and would look for an aggregator to distribute content. Think Movielink. Movie studios are not in the business of movie distribution. That's why companies like Deluxe and Panavision exist, and why other companies are taking the lead in Digital Cinema initiatives. Its not farfetched that this could happen, hence the discussions that are underway between the MSOs and the major Cable Programming companies. Its really just the next step in the evolution of the distribution of programming content for the MSOs. Given the Cable MSOs paid the cable programmers in excess of $22.5B in subscription fees in 2008, as reported in the WSJ, the MSOs do have some leverage in the discussions. In the meantime I'm happy to be able to access FREE video content from broadcasters regardless of my location.

Kudos to Sully and the rest of the US Airways team for putting that bird safely in the water, and to the first responders for getting everyone out.

Filed under: Business Issues, Digital Media No Comments

17Feb/090

Echo Vs Liberty – and for what?

Posted by Chris

Don't you just love a good chess match between corporate titans? We are witnessing just this as Sirius XM scrambles to strike a deal (announced today) to save it from a) bankruptcy and b) Charlie Ergen of Echostar fame. I love when oversized egos go toe to toe, making tactical moves to gain control over a "prized" asset, one in this case whose future value has yet to be determined.

In one corner is Charlie Ergen, head of the Echostar/Dish empire who was recently rebuffed by media mogul Mel Karmazin in an overture to merge their two entities. In the other corner, invited to the match by the aforementioned Mr. Karmazin, is John Malone, ruler of the Liberty Media array of corporations. I was impressed by Mr. Ergen's initial move after being rebuffed, buying $175M of Sirius XM debt that was due to mature today. In the end he either gets his investment returned or control of Sirius XM should they file for bankruptcy. Not to be outmaneuvered Mr. Karmazin invites Liberty Media to the table and consummates a deal that keeps him in control of a company, for now, about whom he once was quoted as asking "how many people are interested in buying this service?". How one's tune changes when they are given control of the company and subsequently invest $21M of their own money in the business. This maneuvering only solves Mr. Karmazin's problem temporarily as yet another tranche of debt, approximately $350M, is due later this year. And I ask, for what?

Perhaps the attraction for Liberty, and Echostar initially, is the value of the underlying assets. But the satellite radio business as a going concern is suspect. The business model's main vehicle for growth is the installation of the Sirius XM systems in automobiles by the factory, and the subsequent sale of the service by the automobile dealer. This is an industry that is on Government life support at the moment and whose business model has its own issues. Speculation is that either of the Satellite DBS systems could use the satellite and ground assets of Sirius XM to distribute digital content to a variety of environments, like autos, trains, or homes, and to portable devices. I suggest the person responsible for this business model speak with the MediaFLO folks at Qualcomm and ask how that's going. And other industries, including the traditional TV Broadcasters, are chomping at the bit to use their multi million dollar investments in digital broadcast assets to use excess capacity to distribute digital content to, you guessed it, portable devices and mobile environments. This field will be crowded without a sound business model yet to be developed.

All of these machinations may feed large egos, but in the end the only value may be in the orbiting satellites and ground stations, which are probably worth much less than the $3.5B in debt on Sirus XM's balance sheet. Or its just a way for guys with lots of money to poke their adversaries in the eye and claim, for now, checkmate!

Filed under: Business Issues No Comments

16Feb/090

MSFT @ the Mall?

Posted by Chris

Was anyone else as shocked as I to open their newspaper on Friday to read of Microsoft's intention to open retail stores to promote their products? I glanced at the date and read "Friday, February 13, 2009" and thought surely this must be incorrect, or a bad joke.

Perhaps there is logic in this strategy somewhere, but to most pundits it appears to be nothing less than yet another MSFT "Me Too" strategy, copying one that was implemented by Apple 1-2 years earlier. I just don't see the comparison. Sure, MSFT can show their latest Zune products, demonstrate the latest release of Windows for the PC or mobile devices, or the latest updates for the Xbox platform, but do you see anyone lining up outside of the MSFT store waiting for the next Zune to drop, as they do the iPod and iPhone? Really? I was taken by the fact that MSFT tested this concept in a 20,000 square foot warehouse near its Seattle campus. Really, again? And what did you think the answer to this market research would tell you? Not to go forward? Perhaps this is just a way shift marketing dollars to a platform with a measureable ROI (who LOVED the Seinfeld commercials? Hands up!) instead of fighting those Mac Vs PC commercials.

It also begs the question of why when you consider the dominant market share MSFT has in Windows for the PC and corporate markets. This is where their bread is buttered, yet MSFT has this incessant need to prove its as hip and cool as Apple. Tough love MSFT - you're not, and never will be. You haven't caught up to Apple in the digital device space. You haven't caught up to Google in the search space. And you are losing share to Firefox and Safari in the web Browser space. This need to try to prove you are a company that develops must have products with cache is getting old. Stick to your knitting before "cloud" and SaaS applications blindside you and erode your core business while you are focused on being sexy.

One of the big political tricks used by many a pol is to label an opponent in a fashion that defines them before they can define themselves. This puts one in the position of always having to answer questions raised by the opponent's definition of them and removes focus from the candidates true skills and values. Unfortunately for MSFT, Apple has done an amazing job of defining MSFT as an old, stodgy, not hip company to which MSFT spends an inordinate amount of time and money screaming, "no, that's not who we are. We can be cool too". Rather than continuing to fight the label Apple has placed upon them with dollars and "me too" campaigns MSFT would be better off ignoring the spin and focusing on the values that made them the dominant company in the markets where they are leaders. MSFT can still launch new devices and services for the digital media marketplace, but do it on terms that don't appear like you are simply denouncing how Apple has postioned you and your technology. And following their strategies is not the answer.