The TV world is in the middle of a digital wave.  Content has started moving from the fixed schedule to the more ‘on demand’ online format, see HBO Go or Hulu.  While many are resistant to this change (eg, Disney receives over $5 per cable subscriber per month for ESPN, an incredible source of value), they must realize that in the long run things will shift.

So the question then becomes, ‘what will the future look like?’.  Not an easy question, but examining the junction of what customers want versus what is economically viable for companies can give an idea:

What the customers want:  In today’s world, customers want instant gratification.  An episode is released, they want to be able to watch it on their timeframe, at the click of a button.  Pirating is a real issue, and sadly it won’t go away with legislation, and so if companies don’t deliver content in a quick and easy way, they can continue to expect a workaround (call it getting ‘Game of Throned’).  Also, consumers will ideally pay as little as possible, with the aim that when they do pay, it is for things they like, not lumped in with a bunch of crap they aren’t interested in (see music in the CD days, when you had to buy an entire terrible Smashmouth album just to get the one good song; also see Cable TV bundles today).  This ties into a major customer preference: customization.  So what impact will this have?  Unbundling.  Paying $100 for a cable package seems archaic to anybody that knows they can get it cheaper.  And the secret is slowly working its way out:  Netflix plus Hulu plus the basic channels you get from just plugging your TV into the wall (FOX, NBC, CBS, etc.) costs <$10 a month and yet provides an incredible array of content.

So, what can be inferred about the future of this space based on what customers want?  Content must be readily available, customization must be possible, and payment must not feel 90% wasted.

What is economically viable for companies:  Given these constraints, what might be a viable business model?  Companies need to ensure that revenues cover costs.  In the Entertainment industry, companies need a way to generate enough money from hits to cover failures, and they also need a system for pushing new content.  Two potential options come to mind:

The Menu:  This is quite simple, as series are produced they are listed online in places like iTunes for purchase; as with music there is a way to ‘test it out’ before buying more (eg, watch the first two episodes for free).  You can buy on an episode by episode basis, or you can buy full seasons at some kind of discount, it’ll be just like buying music today (single songs versus the album).  As content is largely a marketing industry, this would have to be supported by advanced marketing and recommendation engines to get people experimenting with new shows

Online Subscription: This is a little more fun.  Think of it as cable completely de-bundled.  Now, there is a starting point distribution service, a single site from which you pick and choose which ‘channels’ you want to subscribe to.  Why would you pick a channel?  It has content that you really care about.  For example, as a sports aficionado, I would want ESPN, or something similar, so I would pay whatever the monthly rate is for that.  To make it worthwhile to customers, every channel would need to have either a constant rate of fresh programming or a deep reservoir of content to pick from.  This would make it perfect for reality (including news & sports) where there is always updating and therefore it is worth it to pay a little bit each month.  However, this can also apply to many niches: horror, serialized dramas, comedy (like comedy central), and really anything people are willing to pay for.  Shows could still be released on a weekly basis, but once released they are available for viewing any time.

With the current state of the world (with both iTunes and Netflix), it can be assumed that these two formats will exist side by side.  But which will dominate?  With a menu style service, consumers will expect purchases to be ad-free, and this will forever force it to the secondary market.  Advertisements are a key source of value, and their use allows direct-to-consumer costs to be kept lower.  Also, advertisements are the best system for pushing new content, an absolute necessity in this industry.  A subscription format will be capable of this, and therefore it will come to dominate the future of content distribution.  The menu will likely take the place of buying the DVDs, for the people who are true fans and want the special features and ad-free format.

So then, who is poised to win in this space?  On the menu side, it is already obvious, iTunes is in a perfect position.  On the subscription side, it will be Netflix.  Netflix is an online-focused company with the goal of providing content in an instantaneously gratifying way.  They do not have any major ties binding them to the old cable format, and they are rapidly entering the space of original content (see the recent purchase of ‘House of Cards’ for reportedly more than $100M).  While it is currently a one price gives all subscription, they are fully capable of starting to add secondary ‘levels’ (for example $3 more per month gets you a special ‘horror’ bundle).  They could actively license content, or set up internal productions for different things.  If they’re smart, they will create an effective ESPN competitor.  Eventually, Netflix will be the home source of all viewing content.  They will be the portal through which everybody purchases their ‘channels’.  Some of it will start to look a bit like traditional cable (eg, a standard $100 bundle that provides all the common channels), but it will also create opportunity for more niche concepts, with a wide range in price.

All of this ends with the result:  Netflix will rule the future of TV.


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Growing web audience and protecting newspaper circulation

Charging for access to a news website may be counterproductive for someone trying to muster a large online audience. Readers asked to punch in credit card numbers to see a news story, even for a relatively small price, are just as likely to surf elsewhere.

But so-called paywalls are a fad among newspaper sites, and not just for publishers trying to recover shrinking advertising revenue. Media companies are balancing the need to mobilize web audience, and the online advertising they bring, with the preservation of print readership.

Consider the curious, more-for-less deals offered by the New York Times and Boston Globe to lure web readers to their print editions.

Last spring the New York Times started charging for access to its website, www.nytimes.com. The Times asked readers to pay $3.75 to $8.75 per week for digital subscriptions, depending on level of access. (The most expensive, “All Digital Access” choice included use of the website as well as access to a smartphone application and the tablet app.)

Anyone who takes the Times in print – including Sunday-only subscribers who pay $3.75 per week – also get full-boat digital access. That means the Times creates an incentive – savings of at least $5 per week – to subscribe to the Sunday paper.

The strategy seems to work, at least from a print perspective.

The Times reported 771,000 print subscribers on the average weekday from May to September of this year, according to Audit Bureau of Circulations data reported by a Nov. 1 Associated Press story. Including online subscriptions, the Times’ counted 1.2 million weekday subscribers. (The ABC, which verifies the circulation numbers newspapers give to advertisers, doesn’t count readers of a free website as subscribers.)

The ABC report showed the Times’ overall circulation growing 25 percent from the previous six months, the AP reported. Unsurprisingly, the newspaper reported slight growth in Sunday sales, according to AP, as “many people bought or kept a print subscription because it comes with free digital access.”

The Boston Globe, owned by New York Times Co., makes a similar pitch to its readers.

The Globe owns Boston.com, the granddaddy of news websites in New England with 3.5 million monthly unique visitors. But Boston.com is no longer the online home of the Boston Globe. As of September, that distinction belongs to BostonGlobe.com.

Boston.com continues to deliver news, sports, entertainment and opinion for free. The new BostonGlobe.com offers news, sports, entertainment and opinion – from the pages of the printed Globe – for a price.

That price now is $3.99 per week (not counting promotions.) But access to BostonGlobe.com also comes with a subscription to the Sunday newspaper. That costs $3.50 per week.

So, even as the Boston Globe mobilizes an audience for its paid site, and maintains an audience for its free site, it really wants people to read Sunday’s edition the old-fashioned way, with sections of newspaper spread over the kitchen table.

Jon Chesto, business editor of The Patriot Ledger in Quincy, Mass., credits this pricing scheme as the reason the Globe’s Sunday circulation inched up during the past six months. The Globe sold more than 360,000 copies of its Sunday paper on average from April through September of this year, according to the Audit Bureau of Circulations.

Chesto writes: “With the heavy preponderance of ads in the Sunday edition … the Globe’s management has every reason to shore up Sunday sales. It looks like they finally found a way.”

Sunday’s edition is important not just because of the large number of ads in newsprint. The fat stack of coupons, specials and circulars inserted into the paper each Sunday is a major source of revenue.

Subscriber numbers are also important. Those dictate how much a newspaper can charge advertisers – for ink-on-paper ads or the inserted variety.

Whether this tactic succeeds – for the Globe or Times – will be in the eye of the beholder. Will success be measured by web audience? Or is it stable Sunday print circulation with digital subscribers paying for access to news?

Complicating matters for the Globe is the challenge of running two news websites – one free, the other paid – side by side.

Globe Editor Martin Baron said dual sites makes perfect sense because they give readers choice. And he doesn’t apologize for asking readers to pay.

“We have a paywall around our journalism already. It’s called what people pay for the newspaper,” Baron said during a panel discussion sponsored by the Nieman Journalism Lab at Harvard in September.

For the Globe, anyway, success will not be either a large online audience or stable circulation. It will be both.


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Over the past few years, we have seen an emergence of peer to peer “rental” sites that allow people to rent out their belongings to others looking for short term use of that asset.  Users can log on to relayrides.com to share their car, airbnb.com to share their house, or zilok.com to rent just about anything else.  Additionally, we have seen an exponential increase in the success of multi-sided e-commerce websites that connect sellers and buyers from around the world to facilitate global commerce.  Alibaba.com, Tradekey.com, and globalsources.com are a few of the sites that are attracting hundreds of thousands of users and million dollar valuations.

The single biggest threat to these business models, as I see it, is a loss of trust between the two parties.  The fundamental issue here is the balance of power – the perception that one side has a lot to lose while the other side has little risk in the transaction.  To explain:  In the peer to peer sharing sites, the lender risks renting to an irresponsible renter who trashes his or her valuable property; for the e-commerce site, the buyer risks paying for an item only to be delivered an inferior product, or, even worse, delivered nothing at all.

To further illustrate this point, two examples have appeared in the media recently.  Their potential to undermine the business models serves as a warning to this fledging industry.

Airbnb came under attack this summer when a renter nicknamed EJ lent her apartment to a vacationer, and returned to find it vandalized and ransacked.  EJ described the experience in a blog post that went viral, garnering the attention of Techcrunch, USAToday, and CNN.  She writes, “[the renter] and friends had more than enough time to search through literally everything inside, to rifle through every document, every photo, every drawer, every storage container and every piece of clothing I own, essentially turning my world inside out, and leaving a disgusting mess behind.”

Airbnb isn’t the only site where a breach of trust occurred between its two parties:  in February of this year, Chinese police arrested 36 people accused of fraudulent practices on Alibaba.com.  These “business people” are accused of scamming buyers out of an estimated $6 million by taking payments for items that they never actually delivered.  The event was made even more scandalous by the fact that these sellers were granted “Gold” supplier status by Alibaba employees who were allegedly aware of the scam.

Despite the verification systems that were in place in each of these cases, people still got burned.  Such examples bring the reputation of the world-wide, multi-sided platform business model into question.

So, what needs to be done to ingrain the integrity of the business model?  Below, I offer some advice on how to build trust between the parties:

1.    Take responsibility:  It’s not enough anymore to simply build a site that facilitates transaction.  Users expect more.  Perhaps expectations have been set by industry trailblazers like eBay, which acts in a no nonsense manner when dealing with questionable or suspect transactions.  Both buyers and sellers risk removal from the site if practices are called into question.  Multi-sided platforms need to protect both sides from the risks inherent in the transaction, through tools like insurance policies, escrow accounts, and post-transactional feedback tools.

2.    Find out what’s broke and fix it, immediately:When Alibaba discovered that its own sales staff had been involved with some or all of the 2,300 cases of fraud over the last two years, leaders were held accountable.  The company’s CEO and COO removed themselves from the organization after the fraud was uncovered to take responsibility for the “systemic breakdown.”  This, combined with their public admission of guilt, has gone a long way in keeping down bad press and building user confidence.

3.    Be proactive:  Rather than waiting for an unfortunate event to occur before acting, anticipate the risks and protect your users.  Relayrides, for example, holds a $1 million supplemental insurance policy for its car renters and installs an immobilizer on the vehicle to prevent cars from being started without a reservation.  It is necessary to implement stringent requirements for both sides of the platform – be it mandatory compliance to a legally binding Code of Conduct/Ethics or compulsory screening of rental properties and manufacturing sites.

In summary, there is value created for both sides using these platforms.  If a platform wants to remain a viable business, however, they must invest in security measures to protect their customers and be prepared to take responsibility when something does occur.  Building trust, taking responsibility and underwriting a product or service are just good and basic business practices.


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Cloud storage services, offered by companies such as Amazon or Dropbox, provide users a safe and reliable solution to store and remotely access content online. Previously a tool to backup and transfer data and a substitute for local storage, cloud storage gained renewed attention and a new spin this month with the launch of Apple’s new iOS5 and the iCloud. The feature generated quite some buzz and is indeed very cleverly engineered. But the key question is: will it significantly impact the way people shop and use digital content or is it just another cool Apple product? I believe it is the latter.

iCloud automatically stores your music, photos, documents, apps and calendar and pushes them into all your devices. Movies are not supported yet, but that’s due to disputes between Hollywood studios and HBO, not Apple’s fault. iCloud is already linked to your iTunes account and is native to Apple’s mobile productivity apps, so there is no need for uploads or synchronization. You take a photo or buy a song at iTunes on your iPhone and it automatically appears on your iPad’s library. As Apple puts it, iCloud is “automatic, effortless, and seamless — it just works”.

And that’s exactly the problem. It just works on Apple’s devices, for songs purchased from iTunes and documents created on Apple’s productivity apps. Incursions outside the Apple’s ecosystem are possible, but either inconvenient or costly. To access iCloud content from PC computers, users have to install an iCloud application and use an interface much like Dropbox, with specific folders assigned for upload and download functions, resulting in an experience that is far from effortless or seamless. To upload music imported from CDs or purchased somewhere other than iTunes, users have to join iTunes Match for $24.99 per year. So, as with most Apple products and services, iCloud essentially locks consumers into Apple’s closed environment.

Taking a closer look at competitors’ cloud offerings, it seems that platform-centric solutions are becoming the industry norm.

Google Music Beta, for instance, provides a clean and elegant interface that allows users to upload up to 20,000 songs and play them online on any device. It also offers cool features such as “Instant Mix,” which automatically creates playlists by analyzing the musical characteristics of a chosen song. The music experience is seamless across any Android device. However, Google Music has no iPhone app, so if you want to run it on your Apple device, you must do so through the browser, a clunky process, as is uploading individual albums.

Even Amazon, one of the pioneers in the cloud, offers somewhat limited cloud solutions to mainstream consumers. Amazon’s Cloud Drive gives users free remote storage of digital books, music and other content purchased on its site. Users can also store up to 5 gigabytes of content they didn’t buy on Amazon, free of charge. As expected, the platform integrates smoothly with Amazon’s Kindle Fire, but not with other devices.

Microsoft’s cloud products, such as Windows Azure and Office 365, are currently only focused on business segment, so not directly comparable with the retail services discussed above. Rumor has it, though, that the upcoming Windows 8 will enable users to automatically synch media, files and apps among different windows devices.

A universal cloud solution could indeed be disruptive. By reducing the cost of moving content between platforms to zero, it would virtually commoditize media distribution, i.e. customers would be indifferent to what content provider to use. Not to mention the impact on physical media and bricks and mortar media retailers.  

However, given the massive vested interested of companies like Apple, Amazon, Google and Microsoft in protecting and expanding their proprietary ecosystems, it is hard to ever imagine a truly universal cloud service. And as long as the cloud remains fragmented, consumers will still need to shop around multiple platforms and retail cloud services will be just one more tool companies like Apple use to keep customers locked into their platform.

The iCloud might be an awesome feature, but it will not substantially transform the way people consume media.


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Consumer demand for media is at an all-time high. Americans not only are spending more time consuming video than ever before but also have more channels and content from which to choose. For example, the average time sp

ent surfing the internet and watching TV totaled ~196 hours per user per month in the first quarter of 2009, a record at the time.1

Within this growing media landscape, preferences for media are shifting from analog and passive media to digital and interactive media. Digital platforms — internet, video games, mobile — are expected to be the fastest growing as a percentage of consumer time, while users now spend more time engaging in interactive media activities. Case in point, producers of user-generated media content and users of social networking sites are expected to have increased by ~40% from 2009 to 2013.2

However, a number of indicators suggest that television networks have not yet attracted these consumers interested in interactive digital media. Television network viewership is skewed towards an older audience, who still favor traditional media content. The average viewer of the big four major US broadcasting networks is 49 years old, as compared to Facebook’s median viewer age of 26.3 Moreover, many television networks are unable to draw viewers across media platforms, with their online traffic trailing more interactive websites.

Meanwhile, the market for internet connected televisions is expected to grow. According to Marketwire, one-tenth of U.S. broadband households intend to purchase a Smart TV in the second half of 2011, up from 6% in the first half of the year.4 Meanwhile, technology companies such as Google and Apple have turned their sights towards expanding their presence in the living room.

A television that provides real time internet connectivity will allow networks to better create content with the interactive features that have made digital media popular. How might television networks leverage internet capabilities to incorporate interactivity:

Non-scripted content: Most simply, with an internet connected television, non-scripted shows can include an interactive component that will allow the at-home viewer to influence the show’s outcome in real-time as the show is on-air. Imagine a game show, for example, in which the viewer at home can participate as they are watching live.

Scripted content: Scripted shows can incorporate online interactivity both by allowing the audience to shape the course of the show through internet participation (e.g. online balloting, wikis) as well as by extending scripted shows from one to three screens (e.g., mock twitter handles or websites that reveal plot points online).

While basic examples of these features exist today, a television that allows for immediate real-time internet connectivity on the same screen as traditional TV programming offers an opportunity for networks to expand the scope of these applications.

Successfully applying interactive elements using this newfound internet connectivity to television programming has real world business implications.Because of its digital and live elements, interactive programming will attract a younger demographic and be relatively more Tivo-proof, making ad space more valuable.Similarly, a significant online presence will make interactive shows more likely to leverage the internet’s grassroots marketing power.

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1 Nielsen A2/M2 Three Screen Report

2 Veronis Suhler Stevenson research, various editions, eMarketer, January/February 2009; Nielsen A2/M2 Three screen report

3 Compete Analytics, Pew Internet and American Life Project, Magna Global

4 http://www.marketwire.com/press-release/smart-tv-market-expected-to-take-off-1569795.htm


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