Time Warner vs LIN – Helping Promote the DTV Transition

Time Warner Cable’s churn rate is about spike in at least 13 cities. Yesterday, Time Warner lost the right to carry LIN broadcast stations because it refused to pay a retransmission fee of what amounts to less than a penny a day per subscriber. In the Austin market this means Time Warner customers no longer have access to NBC and the CW. The cable provider went so far as to develop a Web site full of corporate spin accusing LIN for trying to charge its customers for a free service, while ignoring the fact that all cable providers charge subscribers for stations they could access over the air for free.

Time Warner Cable spokesman Alex Dudley said broadcasters like LIN TV will have to look elsewhere. “They are not gong to prop up their failing business model on our customers’ backs,” Mr. Dudley said. – Wall Street Journal

This notion of a “failing business model” is amusing because it is directly applicable to Time Warner. A decade ago most customers had only one option for cable. The satellite market was nascent and phone companies were still simply phone companies. The problem is Time Warner refuses to acknowledge that it is not the only game in town anymore and in fact has become a commodity. In Austin Dish Networks, Grande Communications and AT&T have all negotiated deals with LIN. Price and selection dictate customers cable provider selection. Currently, Time Warner fails at both.

Since most of the markets impacted are small, it is likely Time Warner thought it could strong arm LIN into a more favorable arrangement. Unfortunately, one of those small markets involves the FOX station in Green Bay. In PR 101 I believe there is an entire paragraph dedicated to not messing with the ability of Packer fans to watch their team. Anybody want to guess what the feature story on most NFL pregame shows will be this weekend?

February 19, 2009 is an important day in the U.S. It is DTV day. As most should know, all analog broadcast transmission will switch to digital. Most cable company retransmission contracts with local broadcast stations expire on Dec. 31, which could point to a boom in digital antennas and converter boxes. For those that are a bit more Tech savy, this could be the final nudge to abandon cable entirely. As I discussed in June, it is now possible to watch nearly all television legally online. According to the Wall Street Journal’s Nick Wingfield, some analyst suggest up to 90 percent of prime time network shows and up to 20 percent of cable programing is now availabe and these numbers will only grow with time. A vision of the digital living room: HD TV with antenae to receive local channels that is connected to a computer with high speed internet access. Thanks to online movie streaming capabilities from companies like Amazon and Netflix, the computer does not even need a DVD drive. Since Time Warner Cable is also experimenting with metered internet service, I do not really see any consumer benefit in subscribing to a single offering. Perhaps Time Warner should rethink spinning off AOL…

Killing the Internet One Innovative User at a time

Video killed the radio star, however Comcast is trying to prevent online video from doing the same to the overpriced and unnecessary cable industry. Comcast announced that on Oct. 1 it will begin capping broadband connections at 250 GB a month. Currently this is a huge amount of data with a limit that the average internet user (2 GB) would never even begin to approach. So why would Comcast make such a cap? It is all about the impending online video future.

The cap Comcast has put in place will directly impact online digital media growth and innovation seen through services such as Hulu, Netflix, On Networks and Move Networks. Their motivation is to protect its video on demand services and prevent ISPs from becoming commodities as 250 GB does not go very far if you are watching HD programming online like movies and live sports.

Our one hope lies in the hands of Congress providing the FCC the power to prevent metered access to the internet. The FCC just recently slapped Comcast on the wrist for degrading P2P traffic on its network which has brought about the consequence of the net neutrality double edged sword.  Metered internet access could irrevocably change the development of digital media and the online user experience.

Format Floundering eXtended

The HD video format war was thought to be over. Back in February Toshiba accepted HD DVDs demise and announced it would step aside, allowing Sony’s Blue-ray to be the industry standard. This was thought a momentous victory for Sony, who’s Betamax had been defeated by JVCs VHS in the videotape format war in the 1970s.

The industry predicted that once a format was settled on, sales of HD video players would explode. Unfortunately this did not happen because the increase in price did not match the overall picture enhancement. To the average consumer, the increase in picture quality between a HDMI DVD player and Blue-ray is marginal, but the Blue-ray machines are still double the cost. 

Then the roof caved in this week as Toshiba shot back with its new XD-E500 that utilizes its new eXtended Detail Enhancement (XDE) technology, which upconverts standard DVD to 1080p. Many would suggest this will have no impact on the market because Blue-ray players do the exact same thing as well as allow customers to view true HD videos. I disagree. Instead I think this is the final nail in the coffin for Blue-ray for three reasons:

1. Price. The Toshiba machine is half the price of a Blue-ray player, making it the lowest cost option for maximizing standard DVD quality.
2. Confusion. Did you know Blue-ray players also upconvert standard DVDs? It is likely the masses will not and try to extend the life of their DVD libraries until forced to abandon them. The longer the standard DVD player is in a majority of households, the greater the certainty that Blue-ray will be skipped over for reason number three.
3. Online movie distribution. Netflix, Blockbuster and Amazon all offer movie download and streaming options today. Then of course there is the iTunes behemoth. There is no need for a DVD player when you can obtain movies online and sync them to your TV. The need and desire to own movies in a physical form has past.

As stated by Molly Wood on Buzz Out Loud, Blue-ray is evolutionary, not revolutionary. It is not the next groundbreaking technology, but merely an expensive upgrade. Whether it is video, articles or radio, all media is headed online. Digital distribution is the revolutionary technology and it is right around the corner.

Net-Newsers and Print Media’s Place in the Digital Consolidation

Cox Enterprises announced last week that it plans to sell the Austin American-Statesman as well as 28 other daily and weekly newspapers. This comes the same week both the Tribune Co. and E.W. Scripps Co. took significant write down charges and is reminiscent of Knight Ridder’s sale to the McClatchy Company two years ago. The media industry is continuing to consolidate due to digital distribution and the venerable city newspaper is dying.

The erosion of newspaper circulation and consequently advertising revenue has been expected for several years, however the industry as a whole has done little to reinvent itself and build a new profitable business model. The obstacle preventing success is clearly the new online medium. Back in April, Nicholas Carr wrote about the impact of unbudling the print newspaper product on the Internet. The problem is online readers can view articles a la carte and completely avoid the sections that subsidize high investment articles like investigative reports. Each article now becomes an individual product and unfortunately the most profitable articles are short, product oriented and match advertiser interests. This sounds eerily similar to the now famous article in the The Atlantic that looked at how online consumption is not only impacting content, but also how we process information.

A great example of how newspapers are being outflanked by new media that often panders to the lowest common denominator was when the L.A. Times, the U.S.’s fourth largest paper, stated that it had 127 million page views in July. Unfortunately the blog network Gawker Media received 254 page view during the same period. While it is true that Gawker Media serves a national audience, the L.A. Times would likely argue the same. Surely it should have higher page views than an online tabloid.

Despite the current landscape, local newspapers can survive. I believe in 5 to 10 years most markets will have a single local media and for all their faults, most online newspaper sites are technologically further along than their local broadcast counterparts. Now is the time to invest in online video and intensive local coverage. Local newspapers can outsource national news with recognized blogs that cover specific niches. The Washington Post has already begun experimenting with this in their technology section.

This week the Pew Research Center released findings on current news consumption trends in the U.S. Unsurprisingly, it found that in the last two years there was a  6 percent drop in the number of people that said they read a newspaper the day before. I also learned there is now a category that defines how I receive the news – Net-Newsers.

Lastly, here is a great segment from Costas Now that takes a look at the collision of traditional media and new media and its impact on quality journalism. For reference, Deadspin is a Gawker Media blog.