THE CABLE PIPELINE

Apple (Nasdaq: APPL), led the way with the $.99 download price for your favorite iTunes rather than purchasing a CD with one song you really liked, and eleven others that could be thrown away, in want for a better excuse to use them. It then went on the create iPhone, and with a mind-set to share knowledge, created an Apps Store to build function and connectivity in what customers wanted from their mobile experience.

Cable/Telco and DBS companies have long used the model, more is better, and delivering customers a bundled package of mass channels at, an economy of scale price, is a good model. Depending on what consumers want to watch, one particular channel could cost you the price of many channels. That model worked fine in the past since prices were relatively cheap and channel quantity was high. Today, prices and channel availability are high all supporting high infrastructure and programming costs.

Now Google (Nasdaq: GOOG), is set to introduce a new Android based TV UI software at its upcoming Developer Conference in San Francisco which promises to lead the way in how consumers connect to their favorite TV programs. In addition, Google will be partnering with Sony, Intel, and Logitech to introduce Google TV, a web based platform to offer all the applications consumers want in a TV/Internet marriage.

What does this mean for the Video Industry? It confirms that competition is beginning to emerge from some of the giants in Internet proliferation who understand that a market does exist for Internet based TV. That market differentiates itself from the traditional bundling and mass distribution of linear programming which the Cable TV Industry has developed and distributed so well.  

Google TV will be joining the ranks of Apple TV, Netflix, Roku, and others who have struggled to carve out an alternative niche in Internet TV viewing. And it will all come down to a Set-Top-Box delivery system along with serious applications giving consumers a wide variety of experiences over this venue.  Currently, BluRay, Xbox, Roku, Apple TV and others have STB’s which will need to be upgraded and refined to compete with the formidable Cable Industry which has been developing their unique boxes for years.

This marks the spot where real competition will begin within the marketplace. As Google, Apple and others enter the Set-Top-Box market, only needing a high-speed broadband connection to operate; the game may change in favor of more choice and less mass bundles to offer consumers what they really want from both Internet and video.

Goggle has previously announced its intention to build a one-gigabit enable broadband pipeline in various test markets to indicate a belief that fiber-to-the-home is feasible and economically viable. But there continues to be unanswered questions regarding this initiative, mainly whether the revenue Vs cost models will hold up under their own weight.  Verizon (NYSE: VZ), has also tested these waters with FIOS, and is now halting all new market construction in favor of concentrating build-outs of existing commitments. Sufficed to say, the economics are still yet to be determined over the long haul with such a high build-out cost on the front end of FTTH.

The bright side of the equation is that Set-Top-Box’s and associated applications have potential in creating more of a competitive landscape in traditional video markets, but does not necessarily correlate in the build out of more infrastructure other than in underserved markets, which fall under the Broadband Stimulus Plan. Traditional Telco’s have the best chance of competing with infrastructure based competition with their existing Telco based parallel lines with Cable. However, all companies competing for the video customer realize that applications based competitiveness is a must in this changing arena.

Related articles by Zemanta

• Report: Google Will Soon Unveil Android-for-Television (wired.com)
• Google reportedly preparing to intro TV software next month (arstechnica.com)
• Google and Partners Seek Foothold in the Living Room (nytimes.com)

 Read More →

The FCC is addressing the failure of CableCARD‘s in its National Broadband Plan that takes further steps to encourage development of the Home Gateway, a device in which consumers can easily and seamlessly access video programming from all distributors.

In a proposed Network Gateway-NOI and CableCARD NPRM, the commission is seeking input on how to best rework the CableCARD rules to make Set-Top-Boxes more universal in nature and easier for consumers to connect and network throughout the home to any video provider offerings.  The question remains; is the FCC suited to take on another attempt to create competition within the Set-Top-Box market? Or should it leave this to market forces?

A Universal Provider Gateway Concept could be flawed

Most, if not all video providers want control of the user experience in their Set-Top-boxes, or proposed Gateways, and are not willing give up that control universally. That means each provider wants to create its own Gateway and harkens back to the premise of why CableCards did not work. Companies are not willing to share the proprietary customer relationship with other competitors. This is why only a few set-top boxes are in the market. Cable companies created their own devices to offer video content to customers, while investing billions to do so; but as market forces continually change the demand for a more competitive STB/Gateway continues to emerge. See (FCC to “improve” CableCARD rules this month)

A Sub-Market of Over-The-Top competitors

With the advent of Hulu, and YouTube along with NetFlix, Apple TV, Roku, Blu-Ray, and X-Box the concept of a possible competitive residential gateway, or STB if you prefer, has taken hold. Video programmers have accepted these non-traditional video providers as a new pipeline to distribute their wares. See (Park Associates Blog). But should these companies be looking to themselves to have unique home gateways built for home distribution which will connect consumers with mainstream video, Internet, and phone services? I think so, and this also means contracting with an Internet Service Provider-Video Provider-Telephony-Wireless Provider for a residential service interface to their STB. This may be easier said, than done.

Drive Private Sector competition

Near term competition does not lie in building hard-line infrastructure, although Google is testing those waters; it lies in the sub market of Over-The-Top competitors willing to create their own unique consumer experience, and compete with traditional providers with a superior customer interface that delivers video-wireless-Internet-telephony to the hardware within homes. It will not work to have a mandated universal gateway that all competitors must share. This means that competitors must contract with video programmers, wireless and telephony providers, or build their own networks to compete. Cable-Telecom providers have a huge advantage on that market segment. That is to say they have invested billions in infrastructure, hardware, wireless, and telephony products to offer consumers through their networks and STB’s. This is where potential competitors must look to have a chance at capturing an all-in-one home gateway market share. See (Hot Boxes: The Explosive Potential for Residential Gateway Devices)

Solution

View the Residential Gateway as a unique way for all providers to connect with their customers. It should be specific to the company with all the applications consumers’ demand, one that is easily interchangeable to all home hardware. This requires competitors to take on risk and invest in new ideas and concepts that will capture that market segment. As new markets unfold, the best and the brightest will be there to take advantage of any changing landscape in residential gateways to the consumer.

This again, goes back to whether the FCC should involve itself in manipulating the market to create more competition. It should encourage competition; it should incent competition within the marketplace by tearing down barriers to compete. But it should never mandate private companies to compromise their markets by opening up their STB’s, or consumer gateway.  

Related articles by Zemanta

• FCC’s Proposed Gateway Mandate Misses Opportunity for Alignment with Pay-TV Operators’ Incentives on Open-standard STBs – IMS Research (eon.businesswire.com)
• TiVo, Sony and others to FCC: ‘gateways’ should replace CableCARD (hd.engadget.com)
• Apple introduce its own HDTV? I think not (feldmanfile.blogspot.com)

 Read More →

Courtesy Market Force Information, Inc

According to research performed by Market Force Information, Inc. movie watchers still prefer going out to enjoy the Theatre movie experience for various reasons, including:

• Experience of watching movie on the Big Screen
• Not wanting to wait to see new releases
• Enjoying a movie with friends
• Movie Theatres were a good venue to take a date

It seems like experiencing a new movie release has not changed in the many years since its inception; consumers view this as a justifiable and entertaining expense, at least some say every month. 70% of 3,000 responders indicated they would go to a theatre in the first three months of 2010 and one-third indicated a willingness to see three or more by the end of March.

Next in line for most viewers is the Kiosks where movie watchers rent movies from a retail outlet like RedBox with more than 40% saying they use this type service, while 26% of these consumers indicating a willingness to increase use of this venue.

Netflix and Blockbuster Online is being used by 27% of surveyed consumers with 21% saying they will increase their consumption.

Rounding out the movie content viewing experience is the Cable TV Industry with 15% saying they watched

Courtesy Market Force Information, Inc

movies through their monthly subscriptions with 18% indicating that their viewing would increase on this venue.

What does this research indicate about consumer habits and spending for video content-(movies)? The marketing adage of being first to market with new content evidently means something to the buyer. However, companies should delve deeper into consumer demographics, starting with age, income, and location. Which of the 3,000 surveyed are most likely to use each venue? Then target those consumers who are most likely to use your venue with the content they want to see most often.

But keep in mind there is a pecking order here. New Movie Releases are first sold to Theatres, then the Video-DVD markets, and thereafter released to Cable Companies. So, there is a compelling reason for certain consumers to visit Theatres, then Rentals, and finally Cable.

Advertising also plays a large role in consumer spending on video content. Respondents indicated by 70% that television was their primary source of learning about new movie releases, followed by movie-trailers, and last learning from friends and written reviews.

Although the Cable Industry is not first in the pecking order for new content, their venue is growing and will continue to increase with the right consumer data, pricing, and target marketing. At least cable channels are making revenues from the heavy ad placement of the studios.

<!– ckey=”59BE5E2E” –>

Related articles by Zemanta

• Market Force Acquires Ted Costas Group, Expands Theatre Practice (eon.businesswire.com)
• Rival Studios Join to Push Video on Demand (mediadecoder.blogs.nytimes.com)
• Consumers Lose as Redbox Delays New Releases 28 Days for Warner Bros. (mashable.com)

 Read More →

I believe everyone can agree that Broadband Competition and Pricing are high on their lists of (all things broadband). Yes, consumers and businesses alike want a high quality broadband experience with dynamically fast upload and download speeds, and with seamless and unbridled applications to fill their Christmas wish lists.

It seems as though we are going in that direction, at least on the applications front, with innovators like Apple, Cisco, Motorola, and others, where competition is a daily fact of life; where CEO’s champion innovation, and speed to market, while continuing to find cost savings ways to offer a competitive product.

How are the incumbent land-line Broadband ISP’s fairing in the realm of innovation, speed to market, and cost innovation in producing a high quality product at a competitive price? I will give them a (C) on any standardized testing metric. And the reason remains that without sufficient competition, see (New FCC Report Boosts Case for More ISP Competition), a company’s desire or motivation to innovate; to produce a high quality product; provide the best customer service, at the lowest possible price, is just not there.

This kind of mindset can permeate throughout an organization where the (status quo) is accepted and championed; where being first to market with a great product is not needed, with no significant competition to worry about, see (ISPs Raise Broadband Costs — And Advocates’ Ire), and where a mature and declining linear programming market is continuing to produce significant returns, albeit in the short term. But wait, these companies built their networks with private funding and made them hard to emulate, while producing their innovations (during their day), and are now enjoying the spoils.

However, incumbents must act as though they have competition, simply because they will at some point – maybe sooner than later, and this must be drilled into every employee throughout the organization; not just in the isolated places where some level of competition exists. They must model themselves after the Apple’s, Cisco’s, and Motorola’s, and other innovators of the world.

This is a defining moment for the industry, as legislatures through the mantra of the FCC look for ways to create a Broadband competitive market, either through legislation or competitive factors, see (What Would Broadband Competition Look Like?). Now is the time to let go of the status quo and create new markets defined by innovation and price competitiveness. It is happening with the likes of Apple, Netflix, Boxee, Hulu, YouTube and others that value customer service and retention. So, roll up those sleeves and get to work; time is running out.

Related articles by Zemanta

• FCC Commissioner rips ISPs on broadband prices, competition (arstechnica.com)
• Clyburn Blasts Price Hikes (techdailydose.nationaljournal.com)
• FCC launches broadband test site for consumers (computerworld.com)

 Read More →

The FCC has just issued a Public Notice: Comment Sought On Video Device Innovation NBP Public Notice # 27, to spur innovation within the set-top-box market currently being served by individual Cable & Telecom companies as monthly rentals to consumers. First, these providers have invested in their own versions of set tops which interface their products with consumers for a wide variety of enhanced services.

The problem the FCC sees in this configuration is that it somehow stifles competition within the marketplace therefore making it difficult for consumers to delve into the now wide range of new services like Internet TV from different providers. This makes for a hodge-podge of connection/interface devices consumers must rent or purchase to experience what they want. Examples would be X-Box, Blu-Ray, Apple TV, Netflix, and others which connect consumers to Internet content through their TV’s.

The FCC moved to solve this problem through CableCards that mandated providers to modify their equipment to be CableCard Ready. It is probably in understatement to say that this mandate has failed without bringing inter-connectively any closer to the consumer than what we have today, individual provider set-top-boxes. So, where does the solution to this quandary lie?

To say that Cable-Telecom companies are not aware, stifling competitors, or not working on solutions that will take advantage of IPTV seems ludicrous within a competitive market realm. The last thing this market needs is more regulation or mandates to companies on how they should run their businesses, or how they should spend capital to give products that market forces will demand on its own.

Personally, I would like to see Home-Gateways as a solution to this problem. Each provider could custom design their own device to interface with the Gateway, therefore routing different services to each entertainment or communications platform within the home. It would be much simpler and efficient in handling the needs of consumer demand. And this should not be mandated, but left to the innovators to come up with a device which would take any companies encryption product as a plug-in; problem solved.

Being realistic, this solution is much easier said, than done. My point is that innovation, competitiveness, adoption, and lower prices do not come from mandates, they come from market forces where demand and supply rule. With unencumbered innovation the market will solve the set-top-box dilemma the FCC is delving into from a regulatory stance. In essence, let market forces rule, not the FCC.

Related articles by Zemanta

• FCC Admits That CableCARD is a Failure (siliconangle.net)
• Cable Industry: at a Cross-Roads (thecablepipeline.com)
• The FCC Calls for a Standard Set-Top Box: Open Box, Open Market, Open Mind? (xconomy.com)
• Comcast Vs FCC: Implications in throttling BitTorrent (thecablepipeline.com)

 Read More →

Reportedly a deal may be close with Comcast/NBCU. Ok, I’ve have been inundated with all the reasons why such a merger should not happen, from Wall Street’s pandering of a short-term profit loss, to the remembrance of the botched deal to acquire Disney in 2004. Well this is different, and the landscape has changed significantly since 2004.

Both Comcast’s (CMCSA,CMCSK) Brian Roberts and Steve Burke are out front selling the deal as a long-term strategy that will put the cable giant in a strong position to compete with  the Telco’s, DBS, Netflix, Boxee, and Apple TV, if that hobby ever comes alive.(see Apple Pitching Subscription TV to Content Owners)  Here is the crux of what the merger represents and what NBCU (GE) has to offer, including (Film) with Universal Pictures, Focus Features, and Universal Studios Home Entertainment; (Digital Media) including Hulu, iVillage, NBC.com, CNBC.com; and the (Television Group), with stations that will obviously have to be sold off where markets overlap.

It smacks of a good fit if you consider what Comcast brings to the table, including a footprint of over 24 million customers, Comcast Interactive Media with Comcast.net, Fancast, Fandango, DailyCandy, thePlatform, and Plaxo; its own stable of cable channels with Comcast Cable Networks including E! Entertainment Television, Golf Channel, Versus, The Style Network, G4, TV One, PBS KIDS Sprout, ExerciseTV, FEARnet, and Comcast Sports Group.

From both a long-term competitive and shareholder equity standpoint, the venture sets well with my analysis. After all, it will not break the Comcast bank and sends a stern message to those who might be thinking this company is not ready to take on all comers in the Digital TV and IPTV markets. 

The one question that remains in the back of my mind is whether Docsis 3 and PON (see SCTE Cable-Tec Expo ’09), technologies will be enough to carry the HFC platform, with a well put together content and footprint combination, and as a long-term strategy position? The Cable Industry continues to be convinced of this technology, and they have been around long enough to make well thought out decisions. But FTTH continues to be accepted worldwide as the (end-all) scenario in pushing broadband content and applications through the pipelines. Comcast should make sure that their vision meshes seamlessly with its pipeline capabilities.

 Read More →

If you were a the Denver Meet this past week there seemed to be much enthusiasm about the prospects of a better economic situation; the direction of the Cable Industry initiatives like TV Everywhere; and the general hype of Cable’s future competitive offerings . While attendance seemed, a mixed bag, compared to previous forums, it continued to attract a respectable crowd from a continued cost conscious industry standpoint.

Comcast’s Steve Burke’s comments were of significance in realizing the Internet is changing the digital landscape from a linear programming format to a more flexible alternative in determining both how, when, and where the consumer will view and download content. One answer to that realization is TV Everywhere, which has come to life with a 10,000-customer presence through its Fancast property.

There continues to be some controversy surrounding TV Everywhere since viewing its online content requires subscription to both the Comcast video and broadband offerings. Does this equate to a customer (hostage scenario), or does it mean Comcast is thinking smart by gathering content with programmers, and its current bid for NBCU? (see Keeping Up With Comcast)

It does give some benefit to current Comcast customers, which is probably the point, since without TV Everywhere those subscribers would be migrating elsewhere like Hulu and Netflix to watch their favorite content online. However, the fact remains there continues to be obstacles ahead for Comcast’s initiative with authentication and distribution from programmers to make this a feasible and footprint wide service by the end of 2009. (See TV Execs: Don’t Be Distracted by ‘TV Everywhere’)

With a current model of revenue generating Digital Video, with heavy advertising capabilities, the Cable Industry cannot afford to move quickly to a new business model. In an effort to figure out the Internet Advertising puzzle, Comcast has collaborated with Canoe Ventures, LLC to position itself for a future with direct consumer advertising online rather than the more wasteful broad sweep of ads on video distribution today.

In addition, one should not forget Tru2Way, the initiative that seemed to have been put on the back burner by the Cable Industry, although Comcast’s David Cohen indicated their plant would be ready for the application by years end (see Comcast Wired for Tru2way by Year’s End). This signals a desire to go in its own direction, as evidenced by the missing of an important deadline with Tru2Way TV manufacturers this past summer. This initiative promised an interactive experience through a meshed TV/Internet experience. While some TV vendors have continued to move forward with the application, Comcast must see a better alternative.

Although perceptions of the Denver Meet were positive and uplifting it remains to be seen whether this is just rhetoric or something more substantial in Cable’s move to align itself with current and future customer online preferences. (Stay Tuned!)

 Read More →

It is intriguing to read the speculation concerning Comcast’s proposed bid to acquire a majority stake in NBC Universal. And, it is not hard for me to see the opportunities which may abound with such a deal.

 First, let me say that as a distribution platform, Comcast has 24 million customers across the geographical US. Some speculate that Comcast should just increase its size and scope with an acquisition of more cable companies. That may be what analysts want to see; a deal that would increase the pipeline; one that would see stocks immediately rise on the speculation. But this could be the right move for a long-term competitive stance, with an increasing fast and easy access of consumers to content on the internet. I would say emphatically, not so fast.

 Since Comcast is already the largest MSO in the US, and with the FCC smarting over a lost court case involving the 30% Cap in MSO size; it would be impulsive to push the issue in both public and regulatory opinion with a large expansion of its footprint. Size, as we have seen with many mergers, does not necessarily correlate to increased profits.

  Here lay some of the NBC Universal content offerings:

• “Its portfolio includes USA Network, CNBC, Syfy, MSNBC, Bravo, Oxygen, mun2, CNBC World, Chiller, Sleuth, Universal HD, and HD simulcasts. A key revenue generator, the division oversees distribution of the Olympics on cable; retransmission consent for NBC and Telemundo owned stations; and NBC Universal’s content delivery on broadband, linear, and set-top box platforms with services that include video-on-demand, pay-per-view, and set-top box interactive features.”

• “NBC Universal Digital Distribution drives the company’s North American distribution of content across the Internet, wireless, and other emerging platforms, and leads content strategy and development for offerings that include video-on-demand, electronic sell-through, interactive television, and wireless products and services.”

• “Universal has achieved both popular success and critical acclaim with its recent Academy Award winners Atonement, The Bourne Ultimatum, King Kong, Brokeback Mountain, Ray, A Beautiful Mind, The Pianist, and Lost in Translation. Classic, Academy Award-winning films from Universal include All Quiet on the Western Front (1930), To Kill a Mockingbird (1962), The Deer Hunter (1978), and Schindler’s List (1993).”

 This represents a sample of the content which NBC Universal has to offer for a consumer pipeline like Comcast. It goes without saying that CEO Brian Roberts is looking to make a strategic move in nailing down content for its distribution arm in cable. This embodies the short and long-term business acumen of Roberts, a strategic thinker and visionary in charge of the largest MSO, which continues to take hits from internet startups like Hulu, and Netflix. In conclusion, there is not any mystery about the motives of Comcast in this deal for a long-term shareholder equity scenario.

 Read More →

How could a startup company like Netflix get into the Pay-TV business and revolutionize the customer home viewing experience? Blockbuster learned the hard way by not heeding the concept began by the innovative entrepreneur Reed Hastings, and consequently is closing a thousand stores. Started in 1997 as a video rental by- mail business, Netflix eventually expanded the mail rental concept and included the internet, when nobody else believed that consumers would want to rent movies over a young and unproven medium by using their credit cards.

 After both believing in and refining the business model, Netflix has become an industry power to be dealt with by, not only the Blockbusters, but the Pay-TV industry as well. Although Broadband Internet and Cable VoIP Phone report higher subscriber growth than Netflix (see chart below); it is not far behind and continues to grow.

Subscribers By Pay-TV Type – (in millions)

Subscriber growth End 2^nd Qtr from previous year

Source Silicon Alley Insider

So what does this all mean in terms of winning the consumer loyalty, confidence and referrals that most companies strive to achieve? The bottom line seems to be the ease, convenience and flexibility that customers experience when dealing with Netflix. If ordering by mail with a monthly subscription fee, most customers receive their next video within one day after returning their last DVD. Videos are ranked by Netflix so customers can judge how well a movie plays within their vast customer base, while subscribers put their preferences in queue and order accordingly. However, with the ability to download and watch movies on your PC, Netflix has expanded their flexibility with its customers, a point that should not be taken lightly.

 As the chart indicates Netflix is adding more customers than Telco TV, Digital Cable and Satellite TV, which should have rival company executives concerned. Competitors need to take these concepts (to heart); consumer flexibility, convenience and simplicity in their relationship with the Pay-TV customer experience. The business model does not need to be complex, overpriced, or hold the subscribers hostage to purchase additional offerings. In essence, the customer experience should be delivered as promised, conveniently, on-time, and be flexible enough to add innovation and new experiences into the model.

 Read More →