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August 15 2012

20:28

The newsonomics of breakthrough digital TV, from Aereo to Dyle and MundoFox to Google Fiber

In 1998, when Rupert Murdoch’s News Corp. bought the Los Angeles Dodgers, the storied franchise was worth $380 million. News Corp. sold the team in 2003 for $430 million. After winning the ability to negotiate a new multi-billion sports TV contract this fall, they sold earlier this year for $2 billion, blowing the lid off sports property values.

In 1994, the San Diego Padres were worth $80 million. After recently signing a 20-year deal with Fox Sports for $1.2 billion, they sold (pending league approval) for $800 million.

Meanwhile, in 2000, the Los Angeles Times was worth at least $1.5 billion when it was sold as part of Times Mirror to Tribune Company. Today, as it is newly readied for market out of the Tribune bankruptcy, it would go for something less than $250 million. The San Diego Union-Tribune, once valued near a billion dollars, sold for about $35 million in 2009 and about $110 million in 2011.

It’s a reversal of fortune: Newspaper franchises that once outvalued baseball teams by 3-1 or 5-1 or 10-1 now see the inverse of that ratio. Why?

Two letters: TV.

Those numbers tell us a lot about the continuing power of television, in worth, in value creation, and in the news business itself. If we look just at recent events in the ongoing transformation of broadcast and cable to digital, we now see multiple breakthroughs on their path to digital. They give us indications of what the news business, video and text, will look like in the coming years. While we can argue endlessly about the relative virtues and vices of print and TV news, we must acknowledge the relative ascendance of TV and think about what that means for the news business overall.

TV’s revenues are holding up far better than newspaper companies’, and TV is better positioned to survive the great digital disruption.

TV has continued to have great audience. Nearly three in four Americans tune in to local TV news at least weekly, surpassing newspaper penetration, even as Pew Research points out they mainly do it for three topics: breaking news, weather, and traffic. Further, it retains great ad strength — 42 percent of national ad spending, matching the actual number of minutes Americans spend with the medium and making it the only medium still ahead of digital spending as digital has surpassed print (newspapers + magazines this year, both in the U.S. and globally). Yes, TV remains a gorilla. While Netflix won headlines when it announced it had streamed one billion hours of TV and movies in a single month, that huge number compared to about 43 billion hours of U.S. TV consumption, according to Nielsen’s 4Q 2011 Cross-Platform report.

In a nutshell, that’s the difference between TV and video, circa 2012. Video is the next wave — incorporating TV perhaps, but still the very young kid on the block.

Today, TV is no longer a box. Sure, even with all the Rokus, Boxees, and Apple TVs, it seems like TV isn’t yet an out-of-the-box experience. But with Hulu, Netflix, and Comcast’s Xfinity, it’s emerging quickly, escaping our fixed idea of what it once was — the boob tube in the living room. If it’s not just a box anymore, it’s a platform. From that platform, we see both the disruptors and the incumbents doubling down their bets. As in most things digital, few of these launches will be huge winners — but some will drive big breakthroughs. Some of the iconic legacy companies we’ve long known will be absorbed in the woodwork as new brands supplant them. Consider the spate of recent innovation, as we quickly assess the newsonomics going forward:

  • NBC, bashed up and down Twitter, nonetheless proved out a new business model with its multi-platform approach to Olympics coverage. Whatever you think of the tape delays or the suspended reality of Bob Costas’ gaze, NBC made the economics work, surprising itself and others. Its live streaming has ratified the development of cable- and satellite-authenticated, all-access digital delivery. That reinforces cable/satellite value. Further, it whetted prime-time viewing appetites, boosting ratings and earning NBC more ad revenue than it had projected. That’s icing on the cake for NBC, which, under Comcast ownership, has rocketed forward in digital strategy. The network has made a number of moves to transform itself into a global, video-forward, digital news company, joining the Digital Dozen global news pack. Recently, it bought out Microsoft’s share of msnbc.com, a leading Internet news portal. It immediately rechristened it NBCNews.com. In short order, it appointed Patricia Fili-Krushel as the new head of NBCUniversal News Group, an entity made up of NBC News, CNBC, MSNBC, and the Weather Channel. A former president of ABC, with 10 years of experience at Time Warner, she heads a growing news operation. Earlier this year, NBC combined its sports properties into a unified NBC Sports Group, merging NBC’s broadcast sports unit and Comcast’s regional sports networks. NBC is growing out of its digital adolescence. (See “One year after she was hired, Vivian Schiller’s ‘wild ride’ at NBC is just beginning.”)
  • Aereo, the TV startup funded by media magnate Barry Diller, is expanding its footprint from its current New York City base, and starting to offer multiple promotional deals. Diller’s in-your-face challenge to over-the-air broadcasters (CBS, NBC, Fox, ABC, CW, PBS) takes their signals and delivers that programming via the Internet. It charges consumers $12 a month, or as little as a dollar a day. They can then watch those TV stations on up to five devices; in addition, they can deliver these signals to a TV via Apple TV or Roku. Aereo also offers DVR capability, with 40 hours of storage. It’s classic disruption, with Aereo upping the pressure on the cable bundle and messing with the “retrans” fees that broadcasters get from cable companies to run their programming. Is it really legal, as a court recently found? It may be as legal as Google presenting snippets from every publisher and directory provider.
  • Local broadcasters — representing a broad swath of ownership groups organized in a newer company called Pearl — are bringing local TV to our mobile devices themselves. Just a week ago, Metro PCS started selling a Samsung Galaxy S phone with a TV receiver chip in 12 markets. That’s just the first push of Mobile Content Ventures, a collection of Pearl, NBC, Fox, and others. Expect mobile TV, marketed as Dyle, to be available for other phones and tablets, either with built-in chips or after-market accessories — although price points are an issue, with $100-plus premiums likely over the next year. So what does this innovation mean? Simply, that broadcasters are going direct to mobile consumers — no Internet needed, no data charges applying, and maybe providing more consistent video connectivity — with live programming; whatever is on TV at that moment is also on your phone or tablet. Broadcasters just use part of their digital signal to, uh, broadcast to us on our phones. It’s that antenna, and its cost, that’s the issue. Business questions abound. Given the timing of the launch, Dyle seems like an aspiring Aereo killer, and certainly broadcasters would like to see it do that, if further court action doesn’t. More deeply, though, broadcasters want to maintain their direct-to-consumer brand identity as they do a balancing act and try to keep those retrans fees from cable and satellite companies. They don’t want to be left out of the digital party.
  • Social TV pulls up a chair. First it was startup Second Screen, matching tablet ads to real-time TV viewing. Now ConnecTV, partnered with Pearl, is trying to corner the activity as it takes off. Its promise: “synchronization of local news, weather, sports, and entertainment programming along with social polls.” Ah, synchronicity, a Holy Grail of our digital aspirations. Last week, Cory Bergman (a man of at least three full-time digital lives, with MSNBC, Next Door Media, and Lost Remote) sold his Last Remote social-TV site to Mediabistro.
  • Then there’s the disruptor of everything on planet Earth, Google. The company recently announced it is putting another $200 million into YouTube Channels, building on its initial $150 million investment. The move emphasizes how quickly YouTube is growing beyond its homegrown, user-generated roots. Now partnering with dozens of prime video producers, creating more than 100 new channels, it is trying to establish itself in viewers’ lives as a go-to video aggregation source. Major video producers are still wary of Google getting between them and their customers, both ad and viewer, but many others are signed on. Meanwhile, in Kansas City, Google Fiber TV (TV that’s healthier for you?) launches. It’s a rocket shot at the cable, telco, and satellite incumbents. It’s also a demonstration project: providing more, cheaper. The more: interactive search for TV that combs your DVR and third-party services such as Netflix. (Yes, The Singularity ["The newsonomics of Google ad singularity"] marches on.) Google Fiber TV combines DVR and third-party (Netflix-plus) search. Its DVR holds 500 hours of storage of shows in 1080p and the ability to record eight TV shows simultaneously. Bandwidthpalooza. Google’s goal: Toss a hand grenade among the TV-as-usual business models, and pick up some of the pieces, adding new significant revenue lines.
  • CNN moves to break out of its identity funk, figuring out what that powerful global brand means in this fast-changing digital news world. CNN President Jim Walton recently stepped down, clearly acknowledging that his 10-year run had reached an end. “CNN needs new thinking,” he said in a farewell note. On TV, CNN has been beaten up badly both both Fox News and MSNBC. In 2Q, CNN showed its worst numbers in 20 years, down 35 percent year-over-year. On the web, it’a a top-three news player. But overall, it’s become the Rodney Dangerfield of news entities, getting little respect. Its cable fees — the strength of its revenues — could be challenged by low ratings. Going forward and competing against other global news brands — many of which are transitioning their own businesses to gain far greater digital reader revenue — it is, at this moment, caught betwixt and between. How it brings together a single — and global — digital/TV identity is at the core of its continuing journalistic importance and financial performance.

That’s a short list. We could easily add HuffPo’s streaming initiative and The Wall Street Journal’s wider video embrace. Or Les Moonves’ digital moves at CBS. And Fox’s new MundoFox, Spanish-language TV network, taking on Telemundo and Impremedia. The new network, at birth, offers a strong digital component, working at launch with advertisers along those lines. Let’s note some quick takeaways here, all of which we’ll be talking about in 2013:

  • Note how much you see the names News Corp. and Fox here. While segregating its text assets (and liabilities), News Corp. is investing greatly in the video future.
  • Cable bundling’s longevity is uncertain. There’s a lot of residual power here, but we know how quickly that can fade in legacy media. Yes, the unbundling of cable and satellite has been overestimated by some, as Peter Kafka pointed out recently. Yet, these multiple digital strategies may still push a tipping point. Clearly, legacy TV media, despite their public protestations, sees that potential and is acting in multiple ways to prepare for it.
  • Though broadcasters are making major digital pushes, they start from a lowly digital position. Many broadcasters can count no more than 5 percent of their total revenues coming from digital. That compares to 15-20 percent or more for newspaper companies. While there are other sources of revenue have been more stable than those of newspapers, they need to grow digital revenues quickly to make up for inevitable erosion of older money streams.
  • TV ≠ newspapers. Much of broadcasters’ revenues are made on non-news programming, as much as one-half to two-thirds for most local broadcasters. While learning from TV experience here is useful, given lots of differences, the learnings must be smartly applied. As news consumers and advertisers move increasingly digital, though, that thick line that separate local TV from local newspapers thins by the day.

The all-access, news-anywhere, entertainment-everywhere era has created a new massive business competition. Which brands will be top of mind? Who will consumers pay? How valuable is news itself in this contest?

Comcast, Time Warner, Verizon, AT&T — pipes companies — are in one corner. CNN, NBC, CBS, ABC, Fox, HBO, Showtime, and other known-to-consumer brands in another. Aggregators like Netflix and Hulu over there. Media marketers like Amazon and Apple holding court. Google. The local broadcasters fighting for their place in this digital ring. This new battle of brands, in and around “TV,” is now joined.

March 19 2012

12:00

News-to-go is here to stay

For anyone who can remember being floored by the mid-1980s Chrysler sedan that warned “your door is ajar” in delightful monotone, it’s still kind of thrilling that Cadillacs come with wifi these days. But for a growing number of Americans, it’s hard to imagine going anywhere without an iPhone in one pocket and an iPad within arm’s reach.

Here it is, as if there was any doubt: The age of mobile.

One in four American adults now has a smartphone, and one in five owns a tablet. And 27 percent of Americans are getting news on mobile devices — increasingly across different platforms. That’s according to the Pew Research Center’s Project for Excellence in Journalism, and its annual report on the State of the News Media in 2012, released today.

One takeaway from Pew’s January 2012 survey of more than 3,000 adults is that our increasingly mobile reality brings new opportunities and, yes, more uncertainty for journalism.

Pew finds mobile devices are driving up news consumption, immersing audiences in content and strengthening traditional long-form journalism. But the industry is still following the lead of tech giants when it comes to the ways in which news is becoming more pervasive, which begs arguably the biggest of the big questions that Pew’s buffet of data raises: Who stands to benefit economically from the mobile shift?

“If they want to be everything, news is part of that, and people are spending more time with news.”

“When you look at the revenue side, we see even more that the tech companies are strengthening their hold on the revenue side, on who’s gaining the profits from this era of news,” the project’s deputy director, Amy S. Mitchell, told me. “While there may be some positive side in terms of what consumers are doing, the big technology companies are taking an even bigger piece of the revenue pie.”

Illustrating that point: Last year, five technology giants — not including Apple and Amazon — generated 68 percent of all digital ad revenue. By 2015, Facebook is expected to account for one of every five digital display ads sold. In contrast, print ad revenues were down $2.1 billion, or 9.2 percent, last year. Losses in print outweighed $207 million in online advertising gains by a ratio of 10 to 1.

This dynamic gave Pew researchers an idea that has been floated before: Could a tech giant like Google or Facebook swoop in and “save” a household-name newspaper by buying it? Mitchell says there are signs that “speak to the possibility of that happening,” namely the idea that technology leaders might identify news production as a path to omnipresence in consumers’ lives. But why would a profitable company want to acquire an operation — even one with a legacy brand — that’s in the red?

“The technology giants — the big technology companies — have all taken steps in the last year to kind of be an ‘everything,’” Mitchell says. “To not just be the king of search but to also have social networking, to have a video component, to also have your email as well as your social networking, as well as your news feed. While news may not be the revenue generator that these companies are looking to own, it is a part of how people are spending their day. If they want to be everything, news is part of that, and people are spending more time with news.”

Some of the other interesting tidbits in the report:

• Some rural Native American and Alaska Native populations are adapting straight from print to mobile, skipping right over desktops and laptops. It’s a pattern similar to what’s happening in parts of the developing world.

• Some 133 million Americans — 54 percent of the online U.S. population — are active on Facebook, and they’re spending about seven hours per month on the site. That’s 14 times as long as the average person spent on the most popular news sites. Just nine percent of adults in the United State say they regularly follow Facebook or Twitter links to news stories — despite the social media efforts of news organizations.

• Social media platforms “grew substantially” in 2011, but people are still more likely to use search engines or go directly to a news site than follow links from social media.

• Consumers perceive Twitter as having more news that’s harder to find elsewhere than Facebook. But most of those surveyed say they believe the news they get on Facebook and Twitter is news that they would have seen elsewhere without those sites.

• Print newspapers “stood out for their continued decline, which nearly matched the previous year’s 5 percent drop.” The latest Pew numbers show that total newspaper revenue — that means subscription as well as ad revenue — has dropped 43 percent since 2000. Over the last five years, an average of 15 newspapers (about 1 percent of the industry) has disappeared each year.

• As many as 100 newspapers are expected to put up paywalls (in some form) in the coming months. They would join the roughly 150 dailies that have already shifted to “some kind of digital subscription model,” which means slightly more than one-tenth of surviving U.S. dailies have a paywall or subscription service of some kind.

• More consumers are worried about their online privacy, which creates “conflicting pressure” for news organizations that need revenue to survive while also maintaining their audience’s trust. A separate Pew study found two-thirds of Internet users were uneasy with search engines tracking their activity, but they’re also relying more heavily on the services that such companies provide.

January 23 2012

06:57

Pew Research: Tablet and e-book reader ownership nearly double over the holiday gift-giving period

Pew Research :: The share of adults in the U.S. who own tablet computers nearly doubled from 10% to 19% between mid-December and early January and the same surge in growth also applied to e-book readers, which also jumped from 10% to 19% over the same time period. The number of Americans owning at least one of these digital reading devices jumped from 18% in December to 29% in January. These findings are striking because they come after a period from mid-2011 into the autumn in which there was not much change in the ownership of tablets and e-book readers

Continue to read Lee Rainie, www.pewinternet.org

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