Current Events in Media

Question:

What are some current events in your industry? What is the impact of these events on the industry?

Summary:

Dish Network chairman Charlie Ergen has recently proposed that Dish look to offer online pay-TV services to relieve the cost of only providing broadcast television.  The new programming offer would not include sports channels because those are the most expensive to provide (50 percent of what customers pay goes toward delivering sports channels, while sports make up only about 20 percent of what they view).

Dish also reported that more customers have left the company, leaving about 13.9 million subscribers as of the end of September.  DirecTV brags a larger customer base, having experienced its best third quarter growth since 2004.  However, Dish's stock has gone up $0.71, and the company a 12 percent increase in revenue.

Analysis:

I find it interesting that Dish Network is looking into online TV options--especially because our group has been looking at companies that stream TV and movies online.  Dish's foray into this mode of TV providing is particularly fascinating because Dish owns Blockbuster, the company that declared bankruptcy after being beat out by Netflix, a company that has just recently begun to offer online TV/movie options.  Is Dish trying to curb the costs of providing sports channels to its customers...or is it trying to compete with Netflix, Hulu, Amazon Prime, and the other companies beginning to use the internet to deliver untraditional entertainment?  Are they providing services so similar that price will be the only factor in consumers' decisions?

Source:

http://online.wsj.com/article/SB10001424052970204190704577024023586817992.html

Influential Leaders

Netflix isn't Doomed

Question: Who have been some influential leaders (Founders, CEOs) in the industry over the past 20 years?

Summary: This article discusses the choices of Reed Hastings, the CEO and cofounder of Netflix, in the past and recent events. The sock price of Netflix has fallen by 70% since July, at least partly due to his poor decisions about the direction of the company - the price increases and an attempted split of the two services that the company offers. However, investors and analysts have long praised his strategic thinking - even if the recent results have not been the best.

Hastings has a reputation for "trying to mold his company to the future, not the past." However, the recent attempt has cost his company 800,000 subscribers. The article presents the idea that Netflix's biggest problem is that it's streaming service offers a wide selection of bad movies, but not many good ones. For a long time there was the impression that the wide variety of movies that are available by mail from Netflix, would soon become available for streaming. Lately, it has been made clear that this is not the case. The content is simply too expensive for Netflix to be able to provide at the prices that consumers are willing to pay.

The article makes the point that Netflix did well in the niche that it picked, but failed to explain to the consumers what would be the reasonable expectations to have of the services they would get.

Analysis: Good leadership is what makes or breaks a company. The media industry is therefore home to many great leaders, however, the most visible face of media is Reed Hastings, CEO and cofounder of Netflix. While the article above is a bit older than most that we have used on this blog (Oct 26, 2011), it provides a good summary of Hastings' strengths and weaknesses as a leader. His good judgment and the ability to foresee the next opportunity in media is legendary. As a long-time customer of Netflix, I would have been hard-pressed to find fault with his leadership a year ago.

It seems, however, that the opportunities in this niche of the media service providers has hit a plateau, and though he has tried to continue with the trend of strong innovation, there is little to be done in order to really improve the service. The consumers are unlikely to want to pay more than they are currently paying - even the relatively small increase recently has led to serious frustration. The content providers, on the other hand, expect to be paid a lot for their product and can get these prices from other sources. Netflix has found the middle ground between quantity and quality, however consumers expect Reed Hastings to continue improving the service, whether or not that expectation is reasonable.

Google's Feeling Lucky

Question:

What are some current events in your industry? What is the impact of these events on the industry?

Articles in this blog post:

“Google Ponders Pay-TV business”

Article Summary:

As television distributors face competition from internet streaming and other major corporations in the industry, they now have to face a new threat: Google. Amidst the development of dozens of online YouTube channels and Google TV, software for televisions which lets both the internet and television channels be searched easily, Google has begun considering making its own cable services.

While not officially announced or commented on by Google, the evidence is piling up. There have been exploratory discussions with Disney and other content providers about distributing content from their channels, along with the recent hiring of Jeremy Stern, an executive from cable television, which indicate a desire to move into the television market. While more details have yet to be seen, many analysts think that a large company like Google or Apple will eventually make the jump into providing online service.

Analysis:

Google definitely has the potential to become an immediate threat to the media industry. While Netflix, Amazon, and Hulu have all trailblazed the streaming industry, Google has significantly more assets and has grown vertically and horizontally at a tremendous rate. Given the introduction of Google TV and the concept of making channels for viewing YouTube, it seems like Google has already made the first steps into the media distributor industry. As the article states, there’s also an incredibly large market at stake – subscriptions and advertisements for television produce $150 billion in revenue, and with the growing strength of both Google and the Internet a transition into media distribution would be welcomed by consumers.

Google has to be careful of moving too quickly. Netflix has lost respect for changing the prices of their service, along with attempting to grow too quickly – it would be incredibly easy for Google to become overly-ambitious and lose potential. Still, as of present Google’s presence strikes a fear in the current distributors due to the immense size of their possible competitor.

Innovation in Media

Question: In what areas of the industry are there opportunities for innovation?

Summary: According to an article on Comcast's website, "[Apple] Apps have opened up an entirely new world of possibility in nearly every industry, and the app revolution is poised to be a game-changer in the evolution of television." This is one example of how media providers have adapted to the technological climate and invented new ways of selling their services and products to consumers. Comcast has developed an Xfinity App that is compatible with the iPad and iPhone which creates another source of revenue for Comcast and the beginning of something new: cable subscriptions on your mobile device.

Analysis: This innovation is just one example of how companies adapt their products/services to haul in new customers and further satisfy old ones. The complicated and interesting thing about the media industry is that technology is constantly changing and improving which means that providers and distributors specifically must be in tune to what is going on, what customers will want next, and prematurely fill those needs. This just one way that competitors in the media distribution industry can stay ahead of the game: innovation.

Source: http://blog.comcast.com/2010/11/xfinity-tv-news-comcast-demos-ipad-app-at-web-20.html

Burst Media Launches Online Channels

Question: What are some current events in your industry? What is the impact of these events on the industry?

Summary: Burst Media, an online media company, is launching a series of online video channels offering a variety of programming. This is an expansion into online TV, which Senior Vice President Jessica McGranenhan claims "has become a vital, integral part of online media consumption." These video channels will be incorporated onto other online publisher's website, such as fashiononerouge.com's use of the fashion channel on their website. These channels will consist of independent content, since this is what Burst is built around - indie media.

Analysis: Entrepreneurship consists of innovating, finding new markets, and offering new products. Online businesses have been the single biggest source of entrepreneurship over the last 15 years, with the exception of computer technologies. Facebook, twitter, amazon, and host of other websites have redefined our society. Online media has been quickly displacing more traditional media. Netflix has slowly but surely made itself into one of the most prominent movie distributors through its online service. The entire move towards online distribution of video is an important part of the recent media revolution. Hulu only recently began to crack open that opportunity, and increased levels of it, as well as new content, will strengthen the market as a whole.
Additonally, indie media is a very important part of entrepreneurship, and offering indie television over the internet is not only a way of expanding the online media market, but it can bring a whole new market to independent media, the same way social networking gave a whole new level of depth to independent bands.

http://www.marketwatch.com/story/burst-media-launches-video-channels-to-enhance-and-complement-publisher-content-2011-11-02

Entrepreneurs Festival - Tech City, London - 2011

Question: What are some current events in your industry? What is the impact of these events on the industry?

Summary: "Held from November 14-19, Entrepreneurs Festival will bring together more than 300 of the best and brightest entrepreneurs from across Europe to meet, train and pitch to the top mentors, entrepreneurs and investors from the UK, USA and Europe." This event is a part of London's Global Enrpreneurship Week, that is supposed to help young tech and digital companies to accelerate their start-up phase through a week of training sessions with the industry's most successful leaders.

Analysis: Technological innovations are essential for media industry, thus anything that helps tech and digital companies speed up the creation of something "the world has never seen before" would (although not directly, but) inversely help the media industry grow. In this case, one of the main goals of the Festival is to help these new tech and digital companies "learn how to sell to and partner with some of the biggest tech buyers and businesses." As of today, one of the biggest tech buyers is media industry, or the media industry players (e.g. telecommunications). Also, amongst those who will be attending this event will be "international tech and start-up entrepreneurs from the games, digital, web and mobile industries" and those entrepreneurs will be looking for the new products that the new emerging companies have to offer. So if someone from the games or web industry will partner up with a new entrepreneurial genius who came up with something from which the industry will benefit, the media industry will benefit from it too (since games and web are part of media industry, there's no way that it won't benefit from their success).

Sources: http://chinwag.com/events/2011/11/entrepreneurs-festival-tech-city-london-2011

Entrepreneurs bring entrepreMORE

Articles in this Blog Post:

“Pay TV industry loses record number of subscribers”

“A Bleak Picture for TV Makers”

Question: How has the competitive landscape changed as a result of leading entrepreneurs in the industry?

Article Summary: Recently, distributors of cable and satellite have been facing a new problem – more and more people are canceling their television subscriptions. While this decrease in customers was small last year, the numbers now are growing, causing a change in competitive landscape. The Associated Press reported that in the course of three months, April to June, distributors lost almost 200,000 subscribers, a 0.2% loss from the total.

Where are all the subscribers going? Due to the poor economy, evidence shows that many consumers have shifted to leading entrepreneurs that offer Internet distribution services at a cheaper price. Netflix and Hulu have many of the same popular shows that the rest of the distributors have, but with no installation, fewer advertisements, and more portability with the growing use of laptops. In an effort to make more of a profit, the content providers like Newscorp demanding higher fees to the online subscribers and instating a week delay on shows for those who use Hulu but do not pay for the expanded Hulu Plus features.

In addition, the markers of physical television systems have suffered a great hit, and companies are manufacturing TVs with Internet connectivity to combat the losses. Sharp Corp. will introduce a new model with “4K” technology, which is four times more detailed than standard HD, which will presumably bring more change to the industry as providers take advantage of the new technology. Bottom-line: entrepreneurs in the form of online streaming are bringing a hit to the rest of the media industry, which makes other distributors struggle, leads content providers to demand higher fees, and physical television producers to introduce new changes of their own.

My Analysis: There’s no doubt that online streaming has influenced changes in the media industry. While the first article mentions how some big companies are not yet acknowledging the threat of online streaming, a product that costs only about $8 instead of the more expensive cable and satellite is incredibly attractive, especially with the recent recession taking most people’s wages.

The entrepreneurs have changed the stage to bring changes in physical televisions, which have much potential to bring even more innovation. Obviously, with internet-connected televisions, more user interactivity and control is brought to the action of watching TV. The 4K televisions, which are four times more powerful than standard HD ones, will also probably spark more competition in the industry – cable and satellite companies are still competing over which has the most and best HD channels.

But the powers of these new entrepreneurs should not be over-exaggerated. In the United States there are about 83 million subscribers to television producers, so a loss of 200 thousand is hardly crippling. Additionally, with Netflix currently in a period of decline and the runner-up Hulu being significantly smaller, the entrepreneurs are still going to need much more innovation to stand amongst the giants without getting squashed.