Thoughts While Visiting the Samsung Experience

Times Square rendered in Legos @ Samsung Experience, Time Warner Center, New York

I went to the Samsung Experience a few weeks ago.  If you are not familiar with this place, it is sort of like an Apple Store, except without the store part.  You can't buy anything, it is simply a beautiful showroom for the company's products and a place to try them out in a comfortable setting.  I visit it every month or two as a way to keep up on the developments in consumer electronics - notably 3D TV, Internet-connected TVs and Blu-Ray players.

3D TV continues to be very much a mixed bag to my eyes.  In the (Blu-Ray-based) sampler demo I saw recently, the 3D effect was not very impressive and the quality of the effect seems to vary -- sometimes it looks good, sometimes not so good.  It might might work better in a very dark room.  After all, real 3D is all around you in a lit room.  And 3D TV seems to suffer next to 3D reality.

Google TV is very clunky and laggy, when it was usable at all.  Samsung could learn from Apple and spend some time and set up decent demos of the services related to the products on display.  Without a sample account set up, the Facebook, Twitter and MLB apps are useless and no visitor wants to enter their own information to use them.  Also the Google TV remote is way too complicated (and I am somewhat familiar with the platform from experience with Android phones).  Google TV is hopeless now, but so was the first version of Android.  Roku and Apple TV, both of which I have at home, are far more polished right now.

The Galaxy Tab, Samsung's answer to the iPad, would also benefit from an Apple-style demo setup with some sample photos, emails, Facebook account, etc.  The only things that one can really use out of the box are the browser and games like Angry Birds (both of which are very nice).  The tablet did seem a bit laggy, which I hadn't noticed when I used it on earlier visits.

Samsung's Android phones look awesome.  The Epic has a great looking screen.

Samsung's 59 inch  plasma TV picture is excellent with (2D) Blu-Ray feed.  I wonder how Netflix Watch Instantly will look on it?  Of course Netflix is one of the highest profile apps for the set, but the Experience has not set up a way for one to, uh, experience it.

Tablets used while watching TV, readers in bed

Nielsen has done some research on tablet (e.g., iPad), electronic reader (e.g., Kindle) and smartphone usage.  No big surprises here -- people read in bed and a Kindle doesn't generate its own light (so is less likely to distract someone with whom you might share said bed) and there are already a number of TV guides that work on the big screen of a tablet (none of them work on a Kindle or smartphone).

Smartphone tops for "With family/friends", "Waiting for something", "Shopping/running errands" and "Commuting" -- the most mobile and social activities.

Reader tops for "Lying in bed" and "Other activities" (like, er, reading?)

Tablet tops for "Watching TV" (multitasking or using these guides, I would imagine), "Attending a Meeting/Class" (taking notes or pretending to do so) and "In the Bathroom" (well, it is about the size of a magazine).
 
In the U.S., Tablets are TV Buddies while eReaders Make Great Bedfellows (Nielsen Wire)

Bandwidth Caps and Over-the-Top Video

Todd Spanger of Multichannel News noted in a blog post today that a Morgan Stanley analyst estimated that a typical household watching HDTV exclusively delivered over-the-top would use 600 GB of data per month and a heavy viewer might use a bit over 2 times that amount 1.4 TB (that's terabytes).  Comcast's cap is 250GB per month; AT&T's is the same for U-Verse, less for DSL customers.

The part of the posting that got me was this:  "The bottom line is that none of the broadband access networks were engineered to absorb this much per-subscriber usage. You can’t efficiently move 18 lanes of traffic down a four-lane highway."

GB per month is not really the capacity problem; the issue is peak time demand.

However, everything in my limited knowledge of cable plant design points to the fact that the engineers were always thinking about how consumer usage would grow over time and what infrastructure could be scaled up to meet that demand.  The concept of a fixed capacity infrastructure as a long term solution doesn't seem like anything any good engineer would have believed would be adequate given the explosive growth of Internet traffic BEFORE HDTV took off and over-the-top existed in any meaningful way.

It seems inevitable that consumers will have very fast pipes in their homes in the not-too-distant future and, if history holds, the unlimited, fixed price plan will be the way that consumers want to buy it.  If the cable operator doesn't provide it, a telco will, or a wireless company will or broadband over powerline (BPL) or someone or something else will.

Delivering HDTV to Typical Household Entirely Over-the-Top... (Multichannel News)

Customer Satisfaction - Verizon still on top

Verizon FiOS had the best scores, but interesting to me is that "All Others" -- namely smaller companies which are probably not as well known -- scored second.  Maybe the better known your cable company is, the worse you think it is.  AT&T U-verse and Dish Network both fell by 4 points.  According to ACSI researchers, U-verse was hurt by an increase in customer complaints about picture quality, particularly on HD channels.  Perhaps there are some limits to pushing a lot of video down a regular phone line.

American Customer Satisfaction Index - Subscription Television Service

Netflix largest source of Internet traffic

Netflix is nearly 30% of peak downstream Internet traffic, according to a report by Sandvine.  This is up from 21% last fall.

If over-the-top has yet to change the multichannel marketplace, it pretty clearly has already changed ISP traffic patterns.  More interesting to me is that video (Netflix and YouTube, BitTorrent, Flash Video and Hulu) are well over 50% of downstream traffic already.

It seems likely that lots of customers are going to have issues with ISP bandwidth caps in the near future.

Netflix Now the Largest Single Source of Internet Traffic (Techcrunch)

Cablevision launches new "fighting" service

Fight Now is devoted to mixed martial arts, boxing, wrestling, etc.  This category of programming tends to be very unattractive to advertisers, despite having a lot of appeal to young men, a tough-to-reach demographics.

Fight Now TV launches on Cablevision (Variety)

NBC May Have Proxy for Some Affiliate's Retransmission Consent

The rub in these agency deals is what happens if the affiliate goes off the air and who makes that call.  The agent (in this case NBC) might want to hang tough to get a better deal, but the affiliate will be the one losing the lion's share of revenue during the disruption.  How this intersects in a potential deal with Comcast?  That should be interesting.

NBC, Affiliates Iron Out Blanket Retrans Deal (Broadcasting & Cable)

Epix available to authenticated subscribers on connected TVs

Premium service Epix is making an extensive offering of programming available to "authenticated" subscribers (those buying the service from cable, DBS and telco operators).  Two elements of this are a little different from most such authenticated offerings.  First, the content offering is extensive -- over 3000 movies at any time.  Second, and more unusual is that the offering is available on TV-centric platforms like Roku, Google TV and Samsung Internet-connected TVs and Blu-Ray players; more typically, the TV Everywhere concept is about making content available on NON-TV platforms (i.e., phones, tablets, computers), presumably the TV portion was covered off by the MVPD. What this addition does do for Epix is lay some groundwork in the event that it makes a direct-to-consumer offering available in the future.

Epix press release

VOD as a major advertising platform is "waiting to happen"

That's one of the "strategic implications and future directions" in the Advanced Advertising Media Project summary report on "Remaking Video-on-Demand to Deliver Media Value". It's almost hard to remember that VOD launched with great promise -- everyone wants the opportunity to watch things at their convenience. Then the business realities/choices/jockeying came out: Comcast took the position that it would not pay extra for programming for its VOD platform, the advertising had to be locked in at the time the program was delivered and Nielsen wasn't set up to measure the viewing. Given this combination the programmers treated it as a platform for marketing -- clips, a place for sampling of new shows and the like. What might have been a premium platform became a promotional one and a divided one since every distributor had a different strategy for VOD depending on their technology (DBS) or the economics of their footprint (CableOne) or their belief in charging extra for SVOD (Cablevision).  Also, nobody had a good way to navigate the choices (no iPod scroll wheel or recommendation engine innovation). The victors of VOD -- YouTube, Netflix and DVRs -- all had the benefit of not having a seat at the table.


Advanced Advertising Media Project (download page)

HBO GO - 1 million downloads in a week

HBO GO is an application for iOS (iPhone, iPad, iPod touch) and Android which provides access to HBO programs on a VOD basis as added value to those who subscribe to HBO (and whose multichannel provider have a deal with HBO to authorize GO). Unlike distributor TV Everywhere schemes where the multichannel provider still aggregates the content and has the direct relationship with the customer, HBO GO allows HBO a direct relationship with its subscribers and puts the HBO content in its own garden, so to speak. ESPN's WatchESPN app is similar in these respects. It is semi-over-the-top.

How significant is the one million download figure? HBO has about 28 million subscribers. The main distribs that do not have deals for HBO GO are Time Warner Cable and Cablevision, which represent about 16% of multichannel subs, so the HBO GO potential universe is about 23.5 million and 1 million of that is about 4%. iOS and Android devices are not 100% penetrated, however.  If we assume they are 50% penetrated (which feels high) then the one million downloads represents 8% penetration, if we assume they are 27% penetrated (smartphones were 27% penetrated in the US in December 2010, but a good chunk are Blackberries and other OSs and the 27% doesn't include the incremental penetration of iPads and other tablets -- let's assume they offset each other), then the GO app is about 15% penetrated...not a bad start, which suggests that 1400 titles is a pretty compelling content offering.

HBO Gets it Right (paidcontent)

Disney 1Q11

Some interesting things I saw in the Disney 10-Q.  A lot of cricket, looks like the "Media Networks" got a better deal on transfer pricing than it used to have with "Home Entertainment" and programming and restructuring cost less at A&E/Lifetime.

ESPN STAR Sports, a joint venture in which ESPN owns a 50% equity interest, has an agreement for global programming rights to International Cricket Council events from 2007 through 2015. Under the terms of the agreement, ESPN and the other joint-venture partner have jointly guaranteed the programming rights obligation of approximately $0.7 billion over the remaining term of the agreement.

The decrease in home entertainment revenue reflected an 8% decrease due to lower unit sales, partially offset by a 4% increase due to higher net effective pricing driven by increased sales in Blu-ray format. Net effective pricing is the wholesale selling price adjusted for discounts, sales incentives and returns. The decreased unit sales in the current quarter reflected the strong prior-year performance of Toy Story 1 & 2 and the animated version of Alice in Wonderland domestically and Up internationally. Additionally, there was an 8% decrease due to the impact of a change in the transfer pricing arrangement between Studio Entertainment and Media Networks for distribution of Media Networks home entertainment product (see Note 2 to the Condensed Consolidated Financial Statements).

At home entertainment, 6% revenue growth due to higher unit sales and 3% growth due to higher net effective pricing were more than offset by a decrease due to the change in the transfer pricing arrangement between Studio Entertainment and Media Networks for distribution of Media Networks home entertainment product. Higher unit sales in the current period were driven by the strong international performance of Toy Story 3 compared to Up in the prior-year period as well as increased catalog sales.

Equity in the Income of Investees

Income from equity investees was $279 million for the current six month period compared to $242 million in the prior-year six month period. Higher income from equity investees was driven by higher affiliate and advertising revenue and lower programming and restructuring costs at A&E/Lifetime, partially offset by higher programming costs for the Cricket World Cup at our ESPN Star Sports joint venture.

Disney 10-Q

Comcast SportsNet Regionals to rebrand as NBC Sports

NBC Sports head Dick Ebersol apparently dropped this tidbit when he was a guest on NHL Commissioner Gary Bettman's talk show on Sirius XM on April 21, although it wasn't much reported then. From the MSO's perspective, it is somewhat sweet to know that your competitors (e.g., DirecTV, Dish, Verizon), still have to, in effect, promote you on their channel lineup.  Whether calling the network Comcast comes at any cost to the network is unclear.  With Comcast rebranding its TV service to Xfinity, a name change was probably necessary and certainly there is nothing magical about the name Xfinity Sports Philadelphia.

At this point, I wonder if there really is an NBC Sports brand.  Certainly the name NBC (and the other Big 4 broadcasters) stand for high quality production.  Given how the sports rights have moved from one network to another, it seems unclear if they mean anything more than that.  National network level production values for local sports, however, is better than nothing (e.g., Root, Versus).  There is a potential for enhancement to both the local and national NBC reputation, unlike the decade-old ShopNBC rebranding of Valuevision which doesn't enhance the Peacock or fit with home shopping.

NBC Steps Up Branding (MediaPost)

Boston Mayor wants to reregulate Comcast basic rates

Basic (a/k/a lifeline) cable is now $15.80, up from $9.05 in 2008.  There is no mention in the article of retransmission consent fees paid to broadcast stations.

Menino wants to regulate cable rate (Boston Globe)

Comcast and TiVo kill original DVR deal

If there is was any doubt about the cable industry being a path to riches for TiVo, TiVo's experience with Comcast should put that to rest. The company's struck a deal in 2005 to make TiVo an option for Comcast's DVR customers. After years of both sides working on software integration and Comcast making it available to consumers in some areas as an option, surprise, it hasn't really been that successful for TiVo. In that time, the cable companies' generic DVRs have improved, CableCards have not worked (and/or have not been supported by MSOs) and switched digital video has made using non-cable boxes more difficult.

TiVo 8-K

Scripps Networks 1Q11

This part (below) was interesting to me.  The "noncontrolling owner" is Tribune, which, as we know, has had some problems of its own.  At $52.8 million for 6%, my math is that Food & Cooking are being valued at $880 million, a pretty modest price for a fully distributed, well-branded network (plus Cooking).  I guess Tribune found the money after they did the math.

from the 10-Q...
Food Network Partnership noncontrolling interest - During 2010, we completed the rebranding of the Fine Living Network (“FLN”) to the Cooking Channel and subsequently contributed the membership interest of the Cooking Channel to the Food Network Partnership (the “Partnership”) in August of 2010. In accordance with the terms of the Partnership agreement, the noncontrolling interest owner was required to make a pro-rata capital contribution to maintain its proportionate interest in the Partnership. At the close of our 2010 fiscal year, the noncontrolling owner had not made the required $52.8 million contribution, and its ownership interest in the Partnership was diluted from 31 percent to 25 percent. Accordingly, for the four months following the Cooking Channel contribution, profits were allocated to the noncontrolling owner at its reduced ownership percentage, reducing net income attributed to noncontrolling interest by $8.0 million in 2010.


In February 2011, the noncontrolling owner made the $52.8 million pro-rata contribution to the Partnership and its ownership interest was returned to the pre-dilution percentage as if this pro-rata contribution had been made as of the date of the Cooking Channel contribution. The retroactive impact of restoring the noncontrolling owner’s interest in the Partnership increased net income attributable to noncontrolling interest $8.0 million in the first quarter of 2011. Net income attributable to SNI was decreased $4.7 million.

Scripps Networks 10-Q

Starz sues Dish over free previews

Ah, the perils of a flat rate deal.  Shame on the lawyers if they didn't see the possibility of this happening.

Disney and Starz sue Dish (LA Times)

my earlier post on this matter

Christina Norman out as CEO of OWN

For those scoring at home Christina Norman started as CEO of the Oprah Winfrey Network on February 17, 2009 and appears to have been fired today. The channel launched (on the carriage of Discovery Health) on January 1, 2011.  That's a pretty short leash if the reason for her dismissal is poor ratings, as has been reported. The dirty little secret of cable programming is that the ratings of all new networks generally stink, unless they primarily launch with reruns (e.g., Cartoon Network, TV Land). Norman had worked at MTV Networks for nearly two decades prior to OWN, including time as the head of each of VH1 and MTV. Oprah's network dismissed its first CEO, Robin Schwartz prior to hiring Norman.

Christina Norman Out... (paidcontent)

Crown Media 1Q11

Hallmark Channel's ratings rank decline from 22nd total day/21st prime time to 30th total day and 29th in prime time (versus 1Q10), yet advertising revenues were up 8.5%.  That's a better advertising market for you. (Note the revenues include ad sales on the much less distributed Hallmark Movie Channel, too).

One of the issues for a public company with a single network is the materiality of an agreement with any major multichannel distributor.  Note the following disclosures about its relationship with Cox:

"A distribution agreement with Cox ended on December 31, 2010.  Our Channels continue to be distributed by Cox under the terms of the expired agreement through four extensions to that agreement that expired on April 30, 2011, while renewal negotiations continue.  The Cox distribution agreement covers approximately 5% of our subscribers for the Hallmark Channel and 2% of our subscribers for the Hallmark Movie Channel."

Crown did not mention that negotiations were continuing with AT&T, which dropped Hallmark Channel and Hallmark Movie Channel last September.


Crown Media 10-Q

Suddenlink 1Q11

Unlike most cable operators, Suddenlink (the d/b/a for Cequel) actually gained subscribers from 4Q10 -- 1,300.  It is not much, but it is notable.  Curiously, Suddenlink did not report its homes passed or basic penetration, core operating statistics for any MSO.

Cequel 1Q11 Quarterly Report

DirecTV 1Q11

Net sub additions 184K versus Dish's 58K.  DirecTV now has 57.9% of the DBS marketplace, the highest penetration since I started tracking this regularly in 1Q03.  DBS subscriber growth versus prior year was only 1.8% -- a new low.  The prior low was last quarter -- 2.1%.

DirecTV 10-Q

End of Set-Top Boxes?

If the security, DVR and decoding functions of the set-top leave the box itself and end up in software, then the capital needs of multichannel providers will go down (set-tops are a huge part of capital spending). Less capital required lowers the barriers to entry. Fewer barriers to entry means more providers -- whether over-the-top or facilities-based. All of which suggests that video margins will continue to go down for distributors.

Bye Bye Set-tops? (Home Media Magazine)

News Corp 1Q11 financials

The advertising recovery has been very good for cable programmers, no surprise there.  The interesting thing in News Corp's results was the extent to which the company is now dominated by cable.  In the last 9 months, operating income from the cable networks $2.129 billion is greater than all of the other divisions combined ($1.864 billion).  You know, 20th Century Fox, Fox Broadcasting, The Wall Street Journal...small stuff like that.

News Corp 1Q11 earnings press release

Disney mad about its customer Starz's year-long free preview on Dish, sues...

Dish?

Bloomberg article: Disney Unit Sues Dish...

Comcast 1Q11

The cable systems lost 39K basic subs since the prior quarter and 714K in the last year.  Broadcast television quarterly operating cash flow was $20 million versus over $800 million for the cable networks. Operating cash flow margin on the cable systems up to 41.3% versus 40.5% in 1Q10. Comcast has stopped reporting its number of digital boxes.  When it first launched digital cable, it used to only report digital boxes, and did not report digital subscribers.


Comcast trending schedules, earnings release

TV set decline

A weak economy and the conversion of the broadcast TV technology are probably much bigger factors in the decline of TV set ownership than replacement of cheap TV screens by more expensive computer screens.  However, like a cell phone substitution, if you already have a computer, it can replace a TV set.  This substitution is most attractive for young people with limited finances, good eyesight and small homes.

NY Times: Ownership of TV Sets Falls in U.S.

Charter 1Q11 results

Charter had another quarterly decline of basic subs -- down 23,800 (combined residential and commercial).  Basic cable subs to home passed is 36.0% while Internet to homes passed is 29.1%.  Cablevision had a similarly small spread in those figures in reported 4Q10, but both Cablevision figures were more than 20 points higher.

Charter 1Q11 financial results press release

Dish 1Q11 results - good?

Net addition of 58K subscribers looks very good after 3 quarters of net losses. However, net additions were 237K in 1Q10. Gross additions were 681K versus 833K in the prior year. Reported average monthly churn was up from 1.40% in 1Q10 to 1.47% in 1Q11.

That TiVo settlement sure was good news.

Dish 10-Q