Ads Won't Support Online TV Business

Too many media-related companies mistakenly believe their conventional advertising, subscription or even free business models will simply transfer over to a connected marketplace. They won't, says Diane Mermigas, Mediapost columnist.

But that's a mistake common to other industries buffeted by IP technology, such as the telecommunications, wireless and music industries, for example. The entire global telelcommunications business, for example, is finding itself facing a nearly-complete replacement of its underlying voice revenue model.

Media firms face something similar. Advertising has been 37 percent of all content revenues, and nearly half of all video revenue.

But advertising is expected to comprise only one quarter of domestic online video revenue by 2012. "The economics are simply not there for advertising to support online video, given rising variable costs and limited scale," says UBS analyst Matthieu Coppet.

There are some other, less quantifiable potential issues as well. Most believe online distribution will be more important in the future. The only issue is how important, and how long the change takes.

At the same time, cable TV's key value proposition--more choice--now is running into potential exhaustion. "Choice" is easier on the Internet.

Also, since most viewers watch a handful of channels (possibly seven to 16), adding more channels, and raising prices to match, is going to run out of gas. It seems to me the only issue is when.

There's a reason so many of us spend so much time thinking about evolving business models. If IP technology affects your core business, it also means your core business is going to face huge business model change.

http://seekingalpha.com/article/145967-media-must-start-anew-mine-connectivity?source=feed

Dumb Ideas for Saving Newspapers

Be worried, very worried, when attorneys supposedly quite familiar with the First Amendment to the U.S. Constitution (free speech, freedom of the press, he right to assembly, the right to petition the government, no prohibition on free exercise of religion) actually propose legally restricting free speech.

First Judge Richard Posner proposes rewriting copyright law to outlaw linking to and summarizing news stories. No summarizing? It's hard to talk about an idea without at least mentioning what the idea is.

Now we have "First Amendment" attorneys seriously proposing that copyright law be changed so that a newspaper’s story could appear only on its own Web site for the first 24 hours before it can be aggregated or retold. So a story about protesters on the streets of Tehran could not be summarized for full 24 hours.

Muddle-headed thinking will not save an old media form that is being supplanted by other new forms. Were it just muddle-headed, it wouldn't be so bad.

It's evil in banal disguise.

http://seekingalpha.com/article/145926-newspapers-vs-aggregators-understanding-the-economics-of-the-internet?source=feed

Bar Linking? More Silliness!

United States Court of Appeals judge in Chicago Judge Richard Posner has suggested that linking to copyrighted material should be outlawed. The suggestion was offered as a possible way to stem the newspaper financial decline.

Though many will find the suggestion odd, and others will cringe at the potential implications for many other Web applications, the concept illustrates just how disrupted content ecosystems now are becoming.

Ignore some obvious and glaring questions about abridgements of free speech rights. Ignore the essential silliness of banning the equivalent of footnotes.

Ignore the analogy to efforts other content owners once made--seriously--to bar the use of VCRs, or to tax sales of blank tape. Ignore damage to "fair use" concepts.

Focus simply on what the suggestion implies about business ecosystem disruption. As in the past, new media are disrupting older media. And as has been the case in the past, some suggest ways of restricting new media to protect the old.

It won't workIt's just silliness.

http://www.becker-posner-blog.com/archives/2009/06/the_future_of_n.html

Will Recession Behavior Stick? Will it Matter?

A serious, protracted economic crisis can result in changes in consumer behavior that persist after the end of the crisis. "Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen," Best Buy CEO Brad Anderson said in

the thrid quarter of 2008.

And that is what executives in the telecom, wireless and video industries are watching intently these days.

People make what they think will be merely temporary adjustments in their consumption behavior but may discover that they like elements of their new consumption pattern. For some incumbents, this could reset demand curves.

For others, there is an unusual opening: a chance to take share on a permanent basis that did not exist prior to the recession. So far, there are few tangible signs of overt change, with one exception: prepaid wireless.

Incumbent telcos continue to see landline voice erosion, but that trend predated the recession and is not directly attributable to demand changes caused by the recession. Some recent surveys of consumer attitudes suggest a willingness to consider downgrades or termination of virtually any service, but service provider reporting so far does not show that attitudes have been followed by action.

New technologies and end use behaviors complicate the analysis. Much as the Telecommunications Act of 1996 aimed to change the nature of competition in the U.S. voice market, but largely was eclipsed by other simultanteous changes in IP technology and applications, so we might ultimately discover that the longer-term changes in other areas eclipse recession-driven effects.

Behavior might well change, but not because of the recession.

All Content Online, but Ad and Fee Models Don't Work: That's a Problem

It's hard to say which prediction is more far reaching: that all content will be online in 10 years; that portions of the advertising business are shrinking; that for-fee and ad-supported content models have not worked well; or that nobody but Google seems able to make money from digital content.

But Microsoft CEO Steve Ballmer argues all are true. And all are related trends. If all content is online, and if much content is ad-funded, then less ad funding or lower rates means less available professionally-produced content.

If ad support does not support the online equivalent of offline channels, then new revenue models have to be created, or less content will be made available.

One might argue this is "just a traditional media" problem. But it's a problem for users who want online access to virtually all the offline content they now enjoy, for telecom service providers who must supply the additional bandwidth and for all the media-related industries that depend on advertising as a business model.

Of Ballmer's predictions, the least controversial is that a shift away from offline media and towards online formats is underway. The global advertising economy--at least the portion that has been allocated for traditional media--has been permanently "reset" at a lower level, Ballmer warns.

So traditional broadcast and print media will have to plan their business models around a smaller share of the advertising market, as revenues continue to move to digital outlets, Ballmer argues.

"I don't think we are in a recession, I think we have reset," he said. "A recession implies recovery [to pre-recession levels] and for planning purposes I don't think we will. We have reset and won't rebound and re-grow."

Few likely would contest the trend towards online content, or the fact that few companies aside from Google and the Wall Street Journal have managed to create interesting ad-supported or fee-supported online businesses.

Most would be comfortable with the notion that traditional content and social media are blending, in many cases. There might be some dispute over the mix, the amount or the timing, but the direction is clear enough.

The big problem for consumers and producers is the inability to create widespread online content business models based on fees or advertising. That's the biggest challenge.

http://www.guardian.co.uk/media/2009/jun/24/microsoft-steve-ballmer-cannes

What Will Drive Consumer Demand for 50 Mbps Service?

While next-generation broadband speeds will increase dramatically to 50 Mbps, 100 Mbps, or even 1,000 Mbps, just seven percent of European online households will pay more for higher speed, says Forrester Research analyst Ian Fogg.

"Next-gen broadband will not be such an easy sell, as there's little pent-up speed dissatisfaction," at least not yet, says Fogg.

Evidence from the U.S. market tends to confirm that thesis. Not many consumers seem inclined to buy 50 Mbps service where it is available. Aside from the higher cost, there is no new application that compels such purchases, with the possible exception of households where are multiple users who tend to be online at the same time, sharing a connection and using high-bandwidth applications frequently.

Put simply, email drove dial-up access and the Web drove broadband access. It isn't yet clear whether video will prove to be the application that drives demand for higher-speed connections, but most people seem to think it will be.

Fogg is right: the next wave of high-speed access adoption will be driven by a compelling new application, just as dial-up and lower-speed broadband was driven by the graphically-rich Web.

Best Buy Hopes to be Bigger Force in Mobile Phone Business

Best Buy Co. is planning to open 40 standalone mobile-phone stores this fiscal year and hopes the move will help it quintuple its share of the U.S. mobile-phone device sales market to 15 percent.

Mobile phones are a crucial component of the company's new sales campaign to focus on gadgets that feature "connectivity." That view is part of an overall trend of recent years: more of the commercial value of any piece of hardware is the services stream attached to it. Likewise, more of the value attached to any piece of software is the services that are associated with it.

Best Buy's phone sales share has grown 1.6 percentage points in the past two years and now has about three percent share of new phones and connectivity plans sold.

http://online.wsj.com/article_email/SB124586883031248947-lMyQjAxMDI5NDI1NTgyNjU4Wj.html