News Business Hit by More than Internet Disruption

Most observers would agree that the Internet is changing the news business much as television news and then cable news changed it in past years. "Audiences now consume news in new ways," says the 2009 "State of the News Media" report by the Pew Project for Excellence in Journalism.

That isn't unusual. Many other businesses, including retailing, communications, music, video, marketing, advertising and ultimately even education face fundamental revenue challenges from the Internet and IP services.

The point is that the Internet and IP create new functional substitutes for older ways of doing things. "They hunt and gather what they want when they want it, use search to comb among destinations and share what they find through a growing network of social media." the study says. And though revenue decline is most measurable evidence of decline, it might not be the only indicator of note.

The public’s assessment of the accuracy of news stories is now at its lowest level in more than two decades of Pew Research surveys, and Americans’ views of media bias and independence now match previous lows, says the Pew Research Center for the People & the Press

Just 29 percent of Americans say that news organizations generally get the facts straight, while 63 percent say that news stories are often inaccurate. In the initial survey in this series about the news media’s performance in 1985, 55 percent said news stories were accurate while 34 percent said they were inaccurate. That percentage had fallen sharply by the late 1990s and has remained low over the last decade.

Similarly, only about a quarter (26 percent) now say that news organizations are careful that their reporting is not politically biased, compared with 60 percent who say news organizations are politically biased. And the percentages saying that news organizations are independent of powerful people and organizations (20 percent) or are willing to admit their mistakes (21 percent) now also match all-time lows.

"Much of the growth in negative attitudes toward the news media over the last two years is driven by increasingly unfavorable evaluations by Democrats," the poll suggests. On several measures, Democratic criticism of the news media has grown by double-digits since 2007. Today, most Democrats (59 percent) say that the reports of news organizations are often inaccurate; just 43 percent said this two years ago.

Democrats are also now more likely than they were in 2007 to identify favoritism in the media: Two-thirds (67 percent) say the press tends to favor one side rather than to treat all sides fairly, up from 54 percent. And while just a third of Democrats (33 percent) say news organizations are “too critical of America,” that reflects a 10-point increase since 2007.

Readership, and hence revenue are dropping for obvious reasons: people get their news other ways. But perhaps newspaper readership also is down for less tangible reasons.

Potential Impact of "Wireless Only" Packaging

It's too early to say whether Sprint Nextel's new "Any Mobile, Anytime" program will revolutionize mobile market packaging and pricing the way AT&T's "Digital One Rate" did in abolishing the distinction between local and long distance calling in the broader mobile business.

It's too early to say whether a rumored or possible merger between T-Mobile USA and Sprint Nextel will occur, creating a strong third carrier to challenge AT&T and Verizon Wireless.

Likewise, it is too early to know whether a strong "wireless-only" carrier can compete effectively against integrated carriers with wireline and wireless assets.

But there are glimmers. Sprint Nextel's new "call any U.S. mobile, in the United States, for one flat fee essentially merchandises voice services to secure new data plan revenues. The new plan attempts to capitalize on the growing population of mobile numbers, the growing number of users who only use mobiles and who also value Web services and mobile access to those services.

The new plan also provides a direct incentive for mobile users to call other mobile numbers as opposed to landline numbers that might reach the same called party.

For some segment of the buying public, the new plan might also nudge some customers away from prepaid wireless, especially those who like the idea of a fixed monthly payment and also want access to many of the latest handsets, something prepaid plans do not offer.

Under the new plan, the potential incremental cost of a Sprint Nextel postpaid calling plan and an unlimited prepaid plan is about $20 a month.

The problem for most potential buyers is that most users probably do not have a good understanding of what percentage, and what number, of monthly calls actually terminate on wireless numbers. That understanding is helpful as the $70 data plan Sprint Nextel offers comes with 450 landline minutes. If half of any given user's calls are terminated on mobiles, that is equivalent to a standard calling bucket of about 900 minutes.

Taken as a whole, Sprint Nextel's marketing initiatives will tend to push consumers in the "wireless only" direction. A potential merger with T-Mobile would create a huge new company with a vested interest in pushing such initiatives even further.

Will T-Mobile and Sprint Nextel Disrupt U.S. Mobile Market?

It long has been clear that both T-Mobile USA and Sprint Nextel would have to do something substantial to dramatically change their lagging market share in the U.S. mobility market.

Verizon Wireless is the current leader with about 32 percent market share, while AT&T has about 29 percent, according to wireless analyst Chetan Sharma. Sprint Nextel has about 18 percent share, down from about 25 percent a couple of years ago, while T-Mobile USA has about 12 percent share.

A T-Mobile USA merger with Sprint Nextel would create a single company with perhaps 30 percent share, creating a wireless market with three "evenly-matched" contestants. The big difference is that AT&T and Verizon would continue to operate wireline assets, while a new company would operate as a wireless pure play.

So now there are reports that Deutsche Telekom, T-Mobile USA's parent, will launch some sort of effort to merge with Sprint Nextel or otherwise structurally change its market position.

Mobile Users Less Likely to Click on Ads?

Mobile users are approximately half as likely to click on an advertisement as non-mobile users, a new study by Chitika, a Massachusetts-based online advertising network, suggests. The contrarian findings are based on a sample of 92 million impressions.

The Chitika study shows that 1.3 million impressions(1.5 percent) came from mobile browsing.

Non-mobile clickthrough rates held steady at 0.83 percent, while mobile clickthroughs averaged 0.48 percent.

While the recent growth in smart phones has sparked greater interest in mobile advertising, it appears given the numbers that mobile users are not receptive to advertising, a phenomenon that Chitika says is not surprising, given the mobile users’ propensity to be searching for quick answers or directions.

Of the five major smartphone operating systems--Google’s Android, Apple’s iPhone, Microsoft’s Windows CE, Palm OS, and Research In Motion’s BlackBerry--iPhone ranked the worst for clickthrough rate at a 0.30 percent.

But the iPhone also accounted for the bulk of mobile hits, at 66 percent. The highest clickthrough rates were observed for phones using "other" operating systems, including group BlackBerry users and a small handful of other phone operating systems including Symbian, Nokia, and HTC.

The clickthrough rates are certainly lower than expected, given the industry’s general consensus that mobile users are more likely to click ads, Chitika says.

So how does one account for the findings, which are contrary to what most would expect? Perhaps rendering is the issue. Chitika notes that the study compares the same ads delivered both to PCs and mobiles.

That likely means inability to render PC-formatted ads on smaller mobile screens reduces clicks, as the ads are unreadable, unviewable or unwieldy.

Still, Chitika suggests that mobile Internet users are disinterested in advertising, and iPhone users are the least interested.

So far, there have been few other studies on mobile clickthrough rates, compared to PC user rates. Given the obvious importance mobile advertising and marketing holds for funding new applications, the matter needs further study.

The study does confirm a couple of observations, however. Many studies have shown that iPhone user behavior is noticeably, sometimes even dramatically different from that of users of other smart phones. The Chitika study confirms that difference in behavior.

MetroPCS, Leap Wireless in Play?

The on-again, off-again potential merger between MetroPCS Communications and Leap Wireless might be on again, Reuters suggests. But both companies might be in play, with rumored buyers including the likes of America Movil , Deutsche Telekom (owner of T-Mobile USA or AT&T.

As often is the case, intense competitive conditions that are good for consumers are not so good for providers. A brutal and ongoing price war in the prepaid wireless business is depressing profit margins at MetroPCS and Leap Wireless, many note.

And while prepaid specialists long have toiled in the shadow of the larger post-paid market segment, growth now is higher in prepaid, which is attracting new interest. Sprint Nextel already has acquired Virgin Mobile, and most market watchers have expected more consolidation for some time.

For America Movil, which operates theTracfone prepaid business, the advantage of acquiring a facilities-based competitor would allow Tracfone to boost its profit margins, as at least some of its traffic could be carried and terminated on owned facilities.

Such a merger also would provide heft in a market where scale economies are important, and allow America Movil to expand in the postpaid market as well as the broadband access market.

MetroPCS might be interesting for T-Mobile USA, which would acquire a facilities-based prepaid brand, a move that would allow T-Mobile to expand in the prepaid market while protecting post-paid profit margins and retail pricing.

Others say it could make sense for AT&T, again as a way to expand in the prepaid segment with a distinctly different brand.

Sprint Any Mobile, Anytime: Serious Data Mining

With the release of Sprint's new "Any Mobile, Anytime," a new feature of Sprint "Everything Data" plans that allows calling to any U.S. wireless number, on any carrier's network, at any time, without additional charge, as well as the coming AT&T "A-List," which allows unlimited calling to any five to 10 numbers, it is getting even harder to figure out what a "minute of voice use" actually costs.

T-Mobile USA has had "myFaves" for some time, allowing unlimited calling to any five phone numbers, while Verizon has had a "Friends and Family" calling circle feature for years, as well. Both of those plans, like the new AT&T plan, allow the service providers to tout an enhanced feature that makes calling to some phone numbers free.

The Sprint plan moves beyond existing "friends and family" or "calling circle" plans that typically include only mobiles on a single carrier network, or only a limited number of phone numbers on any network. The issue is that the new Sprint plan, like existing plans available from AT&T and Verizon, which make all calls to other AT&T or Verizon mobile customers free calls, also introduces an element of uncertainty into user thinking about how many "out of network" minutes actually are needed on a monthly basis. That's the new element of uncertainty on the consumer end of the service.

Beyond that, large calling circle plans also have introduced a bit of uncertainty on the service provider end, at least as regards the profit margin on voice calling to "off network" numbers. One can assume that the marginal cost of terminating a domestic "on network" mobile call placed from a domestic "on network" number is quite small.

One also can assume that domestic off network calls within a purchased bucket of minutes carry a pre-determinded margin. So the really profitable scenario is when a user exceeds a bucket ("breakage") and has to pay a really-high incremental price per minute, or when users buy buckets of minutes they do not use.

Sprint's new "Any Mobile, Anytime" program is risky to a certain extent because Sprint might not fully understand how its users will behave once they have access to the new feature. Presumably quite a lot of data mining already has gone on, allowing Sprint planners to predict past termination behavior, especially the number of placed calls from Sprint mobiles that terminate off network to landlines and other mobiles.

It was just that sort of rudimentary data mining that lead all the carriers to craft programs that allow unlimited calling nights and weekends, for example, when usage is light enough that additional calling does not tax the networks.

But Sprint's data mining on behavior of its "unlimited" plan customers might have provided enough new insight into changes in user behavior that the company has confidence about the changes in user behavior that occur when users migrate from "large buckets" to "unlimited" calling plans.

Sprint might have uncovered in its data mining that the existing calling patterns of its current customers show a marked upsurge in mobile-to-mobile terminations, both on network and off network.

Sprint might also have discovered that, on balance, the cost of offering unlimited termination on rival networks can be captured within the new fee structure it has created.

In other words, unlimited mobile termination at current plan costs is at least revenue neutral when customers move to $70 a month access plans featuring 450 minutes terminated on domestic wired networks, or $90 a month when users terminate no more than 900 voice minutes on domestic wired networks.

But Sprint might also have concluded that getting more customers on data plans results in the new "Any Mobile, Any Time" plans being revenue incremental, not simply revenue neutral, after accounting for cost of service.

It's getting harder to tell what any given calling pattern actually represents for any user, at least in "cents per minute" terms. And that ultimately might be a very good thing for service providers and users. For users, the actual "cost" of calling will become less important an issue in choosing service plans.

For service providers, the actual profit margin on voice services might remain interesting, even as formal "price per minute" metrics fall.

AT&T Launches Entertainment Portal

AT&T is getting into the online content business with the launch of its new website AT&T Entertainment. TheWeb site allows users to watch thousands of streaming TV shows and movies on their PCs. The online content, provided by numerous content providers including ABC and NBC Universal, CBS Interactive and dozens more, is available to all consumers at www.entertainment.att.net.

By delivering video entertainment to your PC, the new site is part of AT&T’s strategy to make popular content available to consumers across the three screens at the center of their lives — the TV, PC and wireless phone. AT&T plans to add more TV programs and movies from other leading providers in the coming months.

At AT&T Entertainment, fans can view thousands of TV shows after their initial network airing and movies from a variety of networks and studios, including ABC, Bravo, CBS Entertainment, CBS News, CNBC, NBC, Oxygen, Syfy, The CW, USA Network and more. Consumers can easily find content by browsing TV shows and movies alphabetically, by genre, or by network or studio. The site is open to any user; you do not have to be an AT&T customer to enjoy watching shows on the site.

AT&T "U-verse" TV and Internet customers who visit AT&T Entertainment can sign in to access U-verse "Web Remote Access," a popular application that allows customers to schedule and manage DVR recordings directly from their PC. U-verse Web Remote Access has been available through the att.net portal since 2006.