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Jun. 15 2010 — 2:24 pm | 124 views | 0 recommendations | 1 comment

Is Online Video Killing Best Buy’s TV Star?

Graphic credit: switched.comAn  unassuming contributor to Best Buy’s latest big quarterly earnings miss could be consumer willingness to view video online on PCs and mobile connected devices, breaking the sacred bond with home TVs.

Lower than expected television sales in the latest quarter partly reflect that consumers are no longer tethered to their home TVs for all but big, live sporting and other events.

Although the number of US online video  viewers continues to grow steadily, up a more modest 8% in 2010, more than three-quarters of them routinely watch video on connected devices, according to eMarketer. More than one-third of online adults in the US, or nearly 60 million people, routinely watch full-length television shows online.

While mobile video is rapidly growing from a smaller base, 40% of the US population will rely on some kind of mobile Internet device by 2013, and advertisers will be sure to follow, eMarketer predicts.

Seeing evidence of these trends on a consumer electronics giant’s balance sheet could be the first convincing indicator that mass audiences are settling to view video on virtually any size screen in exchange for convenience  and lower cost  –  especially during a painfully slow economic recovery.

Consumer spending has been episodic and (it) appears that our customers are operating on cues from the broader environment,”  Best Buy CEO Brian Dunn said on a conference call with analysts. today.

Although Best Buy cited a number of one-time negative earnings factors, it reported a low-single digit comparable-store sales decline in televisions during the first quarter as well as weakness in other discretionary sales of video gaming, music and movies.

By comparison, the sale of high definition and 3D TV screens for the home  continue unabated as do  wildly popular Apple and other mobile connected devices. Apple’s new Mac Mimi is suspected by many to be a precursor to a new portable compact Apple TV.  If it ever takes off, a new iteration of Apple’s iTV could represent the first pass at what the Yankee Group calls “TV service without the content,” catering to consumers already watching less video on TV than they do online. “Connected devices with prepaid data plans such as Apple iPad allow consumers to be Anywhere without tying themselves to a monthly payment,” a new Yankee report observes.

eMarketer estimates the highest penetration of online video viewing is among 18- to 24-year-olds, with 25- to 34-year-olds and teens not far behind. By the middle of this decade, those age groups will collectively represent more than  90% penetration, with the ability to dramatically alter consumption patterns. Even now,  29% of consumers under 25 get all or most of their TV online, compared with 8% of the overall video viewing population, according to Retrevo.

More than half of today’s mobile video audience (about 55%) is adults ages 25 to 49, according to Nielsen latest Three Screen report. So, it is not surprising that video-on-the-go has prompted the likes of Starbucks and McDonald to compete with free Wi-Fi service that lures consumers to sit and browse free online music, videos and local information.

Walt Disney CEO Bob Iger, who has steadily and smartly advanced its global franchises into the mobile space, explained at a Financial Time conference Monday, “We didn’t want to be marginalized. We have to be where the fish are.”

That seems like ike sound advice for all media, entertainment businesses and retailers including Best Buy.


Jun. 7 2010 — 10:40 pm | 233 views | 0 recommendations | 3 comments

Apple Aims for Mobile Ad, Google Dominance With iPhone 4

Apple was competing with itself as much as with rival Google Monday when CEO Steve Jobs  unveiled the flashy iPhone 4 with no less than 100 features.  Call it the curse of Apple’s meteoric market cap.

Its new video chat (FaceTime)  sleekness aside, Apple’s latest mobile icon was immediately compared to Google’s Android operating system-based flagship phones on the market less than one year. While iPhone 4, available  this summer, represents Apple’s best efforts, “it won’t stop Google…and it doesn’t address some of Android’s new strengths that are becoming weaknesses for Apple,” exclaimed Silicon Alley Business Insider’s Dan Frommer within minutes of the unveiling at Apple’s annual world developers’ conference in San Francisco.

Despite the support of new apps from Netflix, Activision and Zynga along with bells and whistles ranging from an integrated inbox and a seven-hour battery to a $199 starting price, many earlier reviews were fixed on what iPhone 4 did not include.  There was no attempt to match Android’s “cloud” functionality including the zapping of web pages and maps between the Google phones and computer browsers. While Apple just made the iPhone better, it didn’t make Google’s Android phones worse, Frommer and other experts insist.

Jobs and company could partly blame such creeping disdain on Apple joining the elite ranks of large cap players whose shortfalls are magnified and whose achievements are never enough. Just ask General Electric and Google, each with around a $170 billion market cap , which have long been moving targets for frequent volatility in the stock market and on the technology front. Apple’s nearly $235 billion market cap, even in a down market,  recently surpassed Microsoft, to which Jobs quipped “it doesn’t really mean anything.”

Oh, but it does.

Obsessing over and delivering on high-powered design and functionality just isn’t enough anymore. Apple’s dazzling new iPad has already inspired a generation of like competitors. Still, Apple’s iBooks already has snared 22% of the exploding eBook market dominated by Amazon’s Kindle. Apple’s new iAds platform, going live July 1 with $60 million in marketing commitments, could jump-start mobile advertising – if Google doesn’t  leap frog from its Internet ad pearch. Jobs predicts iAds will grab nearly half of the 2010 mobile advertising market — a claim that was immediately challenged by Admob, Google’s dominant mobile ad network.

US mobile Web advertising is expected to reach $3.8 billion this year, according to JP Morgan analyst Imran Khan, which is well below his forecast of nearly $25 billion, a majority of which is spent on text messaging. Morgan Stanley analyst Mary Meeker predicts mobile Web users will outpace desktop Internet users within five years. The yawning gap between the consumer time and advertiser dollars spent on mobile connected devices represents a $50 billion opportunity,  superceding the actual sales of iPhones and Android-powered devices.

iPhone 4’s new video chat promises to unleash a flood of instant personalized marketing and e-commerce transactions, bound by social networking, as soon as Madison Avenue catches up to what could prove a major catalyst for e-marketing. Today’s 233 million domestic mobile phone users (according to comScore), about one-third of which will embrace smart phones by 2011, represent the same reach as television — making it them these devices the new mass medium.

If non-traditional ad platforms such as apps and local targeting play a major role in shaping mobile advertising, as Khan suggests, a fight to the death between Apple and Google could ensue, shutting out more conventional big media. And there will be plenty of large market scorn to go around.

Jun. 5 2010 — 2:02 pm | 424 views | 0 recommendations | 3 comments

Putting AOL Out Of Its Misery: Selling Out to Microsoft

AOL’s tumultuous past is about to take another  strange twist.

Silicon Alley Investor speculates CEO Tim Armstrong is maneuvering to sell AOL to Microsoft rather than merely secure a new outsourced search deal with Google as publicly advertised.

Armstrong danced around the issue at this week’s All Things Digital D8 conference.

AOL’s eventual roll up into some larger entity has been widely expected since it was jettisoned by Time Warner last year. That’s the same Time Warner former AOL CEO Steve Case merged with a decade ago in a deal that subsequently destroyed more than $200 billion in value.

Despite Armstrong’s slick peddling of niche news verticals and an advertising revival, AOL’s solo flight has a short-lived feel. At a time when rival portals such as Yahoo and MSN also are scrambling to reinvent themselves, AOL’s diminished share of users and ad dollars blunts its ability to compete.

In fact, a potential three-way alliance with AOL, Microsoft and Yahoo has been lurking since Yahoo’s former founding CEO Jerry Yang infamously rejected  Microsoft’s $31 a share buyout offer. Shortly afterward, Yahoo came close to merging with AOL. In the end, Microsoft benefits most from the search both AOL and Yahoo provide in its battle with Google.

The overlapping sales and other operating synergies that would yield healthy cost cuts  and swift integration are an impetus for Microsoft to pay between $2 billion and $3 billion for AOL before the expiration later this year of its search contract with  Google. It is uncertain how much of AOL’s sprawling content operations would  survive such a union.

AOL’s slow financial burn could dilute the price. AOL reported a 58%  decline in its most recent quarterly earnings and continued deterioration of its high margin subscription and search revenues which are hammering its free cash  flow. It continues unloading non core assets such as instant messaging service ICQ and social network Bebo, although Armstrong has warned AOL’s future financial performance will likely be worse than expected. AOL’s revolving door management also could have a destabilizing impact.

But some kind of AOL deal seems inevitable. The entreprenurial Armstrong, formerly president of Google’s North and South American operations, could cash out to reinvent in another roll up target heading into what could be a time of rampant Internet consolidation. But there will never be another AOL — thank goodness.

Jun. 2 2010 — 3:37 pm | 73 views | 0 recommendations | 2 comments

On Digital Media’s (D8) Main Stage: Where Are Women?

What’s wrong with this picture?

Of the 19 featured speakers at All Things Digital’s celebrated D8 conference this week, only one is a woman – NPR President and CEO Vivian Schiller.

If you count  Kara Swisher, who co-hosts the west coast gathering of media elite with Wall Street Journal tech guru Walt Mossberg, then two women share the D8 main stage.

Certainly Apple CEO Steve Jobs, Microsoft CEO Steve Ballmer, Facebook CEO Mark Zuckerberg and the other speakers are marquis choices who have earned the spotlight and get plenty of it. But the stack of artistic mug shots on the D8 website makes you wonder where are all the women?

Last year’s D7 conference included Yahoo CEO Carol Bartz and Huffington Post CEO Arianna Huffington — two accomplished, outspoken trailblazers who are used to holding down the fort alone. In November, Arianna and me were among a handful of women presenting at the Monaco Media Forum. Given the conference’s forward-looking agenda, I expected there to be more.

In an era of boundless entrepreneurial opportunity flooding the marketplace with talent, we should be moving beyond gender tally.  Sadly, we are not. Women becoming a simple majority in the work force and claiming a record two of the CEO jobs at Fortune 500 companies are artificial thresholds offering no guarantees.

If the argument is that relatively few women have risen high enough in corporate ranks to be considered headliners, it begs the question why?

If the argument is that featured conference speakers are a product of random selection, the question is why the sheer numbers game fails to work in their favor?

Don’t get me wrong; I am not a raving feminist.  I have happily worked with and for men, and two of my four children are sons. But as a media specialist who has outlasted (call it dogged persistence) most male and female journalists and analysts in this field, I expect to see and hear from more women taking the lead, moving markets and inspiring because I know they can. I mentor my daughters and other young women to do no less.

Surely the world is no better off for not having more women in positions of power and influence.

So, it behooves conference planners and hosts to think outside their comfort zones of friendly industry contacts and reach beyond the buddy system  to consciously showcase female executives and experts who can lend their unique voices and passions to the tattered front line conversation.

I’m just putting this out there…and I’m sure you will let me know what you think.

May. 26 2010 — 8:08 pm | 738 views | 0 recommendations | 9 comments

Why ABC, NBC and Broadcast TV Networks Are Toast

Old broken TV

Image by schmilblick via Flickr

Don’t be surprised if at least one of the Big 4 broadcast networks is sold or dismantled in the next 24 months.

They are failing business models whose brand value is meaningful mostly to strained local TV station affiliates, many of whom are also fighting to survive.

TV tethered broadcasting has been reduced to one of the least financially viable media options in the digital age. The once dominant Big 4 TV networks remain advertising dependent even as they continue losing  an average annual 6.5 percent of audience. Consumers of all ages increasingly bypass appointment television to view video on mobile Internet devices whenever they want.

On Wednesday, Walt Disney Co. denied reports it is in advanced discussions to sell its ABC TV Network to private equity investors. The insight came from a corporate communications secretary arrested by the FBI and securities regulators for trying to sell insider information to investors.

Analysts estimate the ABC TV Network is valued at upwards of $5 billion. Disney Chairman and CEO Bob Iger, who rose through the ABC TV station and network ranks, has not ruled out a possible sale.  Disney’s more than $7 billion in annual earnings is mostly dependent on its cable networks and the ESPN franchise. All of its broadcasting assets contribute only $600 million, according to analysts.

While the ABC insider scheme is strange, the notion of Big 4 media owners shedding their outdated, dead-weight broadcast TV network businesses is not.

As evidenced in the most recently reported quarter, the broadcast networks and even their historically lucrative owned TV stations are a drag on overall media company earnings and, at best, marginally profitable. The NBC and Fox networks are expected to post losses this year.

I have predicted since late last year that Comcast, the leading domestic cable operator, cannot economically justify its creeping takeover of NBC Universal without eliminating or radically altering the struggling NBC TV network business. Comcast has proposed taking a controlling 51% stake in NBCU for $6 billion with plans to acquire General Electric’s remaining ownership stake over time.

Media conglomerates have been hedging their bets against broadcasting for years by buying and developing general interest and niche cable networks that have become profit centers, generating more than half of all earnings. Ad-supported cable networks collectively thrive on $25 billion in annual affiliate fees, or double national broadcast advertising revenues, according to Barclay’s Capital analyst Anthony DiClemente.

Meanwhile, ABC, NBC, CBS and Fox are clawing their way back from a 20 percent decline in upfront advertising during last year’s recession without hope of  resuming substantive organic growth in a fragmented media market. Efforts to build an online pay wall around network TV programs on Hulu.com and TV.com have failed. Even online, the broadcast TV networks lack the interactive magic to play in digital media’s social and e-commerce sweet spots.

The demise of the Big four TV networks is a delicate matter for media giants who still must answer to advertisers and station affiliates bound by the system for more than half a century. Despite Comcast executives’ stated intentions to preserve the business, they have a clean break and financial imperative to innovatively reshape NBCU’s content parts, making NBC TV’s radical change or sale inevitable.

Potential buyers for the NBC TV network and its 10 owned TV stations (in the top 25 markets) could include major NBC affiliated television groups owners such as Hearst, Gannett, Belo, and E.W. Scripps. The NBC TV Network and its owned TV stations are valued at about $6 billion of the NBC Universal’s overall $35 billion value, according to analysts.

Comcast also could convert parts of NBC TV into one or more cable networks supported by both subscriber and advertiser dollars, leaving a less costly broadcast hub of news, live events and sports to interface with TV stations.

Broadcasting is only 15 percent of NBCU’s profit mix even though it generates 36 percent of the company’s overall revenues, according to Bernstein Research. It underscores broadcaster networks’ costly programming and operating costs compared to Internet  rivals..NBC, ABC, CBS and Fox each spend between $2 billion and $3 billion annually on program production. Less than 90 percent of newly produced prime time series survive to a second season.

It is why ABC, CBS, NBC and Fox  have been rifling their owned and affiliated TV station retransmission fees in a short-term revenue generating tactic. But even that option will be challenged as cable operators come under their own financial pressures from new digital distributors.

That makes a smaller pure-play media players such as CBS, to whom the broadcast network is central, a potential acquisition target. The overall risk is that as broadcast TV network valuations plummet, so will the value of their big media owners..

Needham analyst Laura Martin estimates $160 billion in advertising spending and more than $800 billion in corporate enterprise value are at stake for media players as values shift from traditional media to online, mobile and social media.

As it is, the Big 4 network owners have held on too long to ever fully recoup.

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    About Me

    I was multi-media before it was fashionable: a career business journalist covering entertainment, advertising and every kind of pre-digital media. My trademark was hard-to-get newsmaker interviews and breaking big stories until it became obvious industry leaders (like the rest of us) had more questions than answers. Shifting my byline column to big-picture analysis about developments and trends was a no-brainer in an era of headline streams and truncated thought without context. The only questions that matter now: What does it mean? What are the short and long-term implications? It is a perspective honed parenting four accomplished children, studying Arthurian literature (more relevant than it seems), and caring deeply about the transformation of all things media. Share your thoughts here on the extraordinary ways digital will continue reshaping our lives The Next Five Years or email me at mailto:dianemblog@gmail.com

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