Monday, November 16, 2009
I moderated the main stage panel "On Target," and interviewed and met with many global media and advertising executives seeking new ways to connect with interactive consumers.
As the global economy gradually emerges from recession in 2010, the willingness and need to engage in new business practices, strategies and models will take the digital media revolution to a new level.
I will continue to explore all aspects of the digital economy in my online columns, blogs and upcoming book.
What will you contribute to the conversation?
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Wednesday, May 6, 2009
In a world loaded with simplistic, superficial, jump-to-conclusions digital judgment calls, Amazon’s Kindle is an over sized target. As a game-changing device, Kindle is as formidable as Apple’s iPhone.
The electronic reader has been bound in skepticism and oh-hum dismissals since it was launched in a haze just 18 months ago. Its popularity has steady grown to nearly one million users downloading bestsellers for about $10 and classics for $1.99, to newspaper and other subscriptions for up to $14.99. It has been embraced by Project Gutenberg (an archive of electronic titles), Stephen King novellas, book swaps, book and newspaper publishers, and bloggers.
In its latest big-screen iteration, Kindle is viewed as a cheaper, more convenient wired and non-wired salvation for all things written—bigger than smart phone screens and less laborious than most laptop PCs. And it makes a whole lot more sense than the Expresso Book Machine unveiled at the recent London Book Fair by former Random House publisher Jason Epstein. The contraption is an instant book printing machine, described as "an ATM for books" by Andrew Keen.
With Kindle editions having grown to 35% of all book sales (some 275,000 of e-books) and expected to sell 1 million units just this year, there is no limit to its adoption.
The academic world's embrace of Kindle as a necessary tool is a huge endorsement of its usefulness and potential. Princeton, Pace, Case Western, Reed, Arizona State and University of Virginia are among the universities allowing students to use Kindles instead of conventional textbooks this fall.
Once an earth-shaking gadget becomes a critical mass tool, it’s all about applications. Such has been the case for Apple’s iPhone, whose most popular application, the Stanza reading interface and its Lexcyle corporate parent, were recently acquired by—who else?—Amazon.
Amazon Creator Chairman Jeff Bezos not only has single-handedly changed the world of publishing and reading with the Kindle device and Amazon sales and distribution, but the e-retailing, e-commerce process as well. In fact, the full impact and full scope of innovation has yet to be embraced.
E-books will be continuously updated by the author, integrated with reader discussion, and framed by social community. Book promotion becomes a viral process, extending to online video author interviews and real-time exchanges. While it strengthens some ties, it challenges others such as protecting the integrity of a written work and battling piracy.
When he unveiled a larger screen Kindle DX just south of $500 Wednesday, Bezos said the latest generation device would better accommodate serious readers of newspapers, business documents and tedious scholastic works. It eventually could make campus book stores, highlighter markers, textbook publishing houses, bathroom reading materials and Microsoft software obsolete. (Yes, you can even dog-ear the Kindle pages.)
More importantly is the next wave of mobile interactivity Kindle can propagate: new forms of e-marketing, e-commerce, socialization and monetization. Like iPhone, Kindle will nurture an ecosystem of functionality and value. The sky’s the limit on where it goes from here as a $1.2 billion business that is just short of 5% of Amazon’s 2009 revenues, according to Citibank analyst Marc Mahaney.
Kindle’s success could come at Amazon’s expense, Mahaney points out as half of its revenues are generated by the books, videos and music being digitized. “If Amazon can’t successfully jump the chasm from Internet-ordered /mailman-delivered media products, to Internet-ordered/digitally-delivered media products, its financial fundamentals and stock price will be significantly challenged,” Mahaney observes.No worries. It is more than likely, in the classic Bezos style, Kindle and Amazon will continue to innovate themselves one better.
Monday, January 19, 2009
This mess we’re in is not a cycle; it’s a “game-changer,” according to Jeff Immelt, chairman and CEO of General Electric, parent of NBC Universal.
The global economy and the domestic economy are being reset by a crush of extraordinary forces including runaway debt, tight credit and the digital revolution. Nothing will ever be the same again.
Financial services, automotives , real estate and even retail are being transformed by economic and technological forces that will make them completely different industries . The government is commerce's new partner, “so get used to it,” said Immelt, speaking candidly on MSNBC’s Morning Joe.
“We can’t just hunker down. We have to come out of this as a brand new company, “ Immelt said, referring to his ongoing revamping of GE into a more streamlined and green global conglomerate.
Unfortunately, many media companies are acting as if the auto and financial services industry ad spending will resume at historic levels when the recession abates. Given the radically altered nature of investment banks and the demise of Detroit’s Big 3 automakers, there clearly will be fewer, more tightly focused companies providing different products and services. Overall business marketing efforts will continue to go digital in ways that offer more value and efficiency.
As I have repeatedly pointed out in my On Media column, such change will manifest as permanent declines and shifts in advertiser spending. Ad-dependent media companies need to reformat during this painful lull to embrace emerging revenue streams and growth businesses rather than stubbornly cling to failed old models. It’s time to rethink our thinking.
Thursday, January 8, 2009
The big void in 2009 connectivity is centralization that allows consumers to discover and coordinate every kind of content and communication in one place. That means filtering TV programs and films, music and text, maps and data through universal templates that provide the same common functions, socialization and commerce everywhere.That means seamlessly moving all things digital from mobile to home TV to PC and back again.
Despite the announcements this week from players as diverse as Microsoft, Netflix, TiVo and Yahoo to bring more interactive access and choice to the living room TV, home connectivity remains a disjointed, even dysfunctional goal for the average digital consumer. Ultimately, it requires ubiquitous software interface for disparate platforms and devices used in and out of the home.
For now, companies generally remain in their vertical fiefdoms: from cable and TiVo set-top boxes, to game consoles and digital TVs, to computer-savvy phones and PDAs. They sort of interplay with each other.
Netflix jumped ahead of Internet streaming rivals like Apple and Amazon by integrating its software into some LG and Sony plasma and LCD high definition TVs. TiVo is providing search. Apple iTunes is offering DRM-free content to iPod, iPhone and home, but still no social networking. Yahoo’s widget engine built into TVs like LG, Sony and Samsung is helping to usher into the home an Internet ecosystem of services from MySpace, eBay, and Flickr to Amazon VOD and Blockbuster. Boxee has the software that unites social networking with streaming Internet film, TV and radio content on home TV or PC hubs. The endless list of Consumer Electronic Show interactive video announcements, while impressive, represent diffused solutions for consumers who don’t want to work so hard at bringing it all together.
The logical next move is for smart TVs (mandated to be digital this year) to access and download all streaming video, as much from Hulu.com and YouTube as from branded aggregators. There must be more consistency among diverse home devices—from DVRs, cable set-top boxes and on-demand services, game condoles and Blu-ray disc players. Amazon has the cloud access, infrastructure and social community elements to facilitate universal video exchange. Still, there are too many content libraries with limited offerings, high fees and garden walls to make consumer selection and sharing less complicated and costly, especially in a recession. By and large, consumers remain suspended in the industry’s shift from disc to digital, and from home anchored TVs and PCs to all things mobile.
Consider some of the numbers: nearly 80 percent of Americans have cell phones, which is more seven times the number of cable subscribers. Millennials (ages 14-to-24-year-olds) prefer the PC to the TV, according to Deloitte. The majority of 140 million US consumers paying for mobile broadband by 2013 will want texting, video streaming, and easy interface, according to the Pew Internet Project. Even now, three-quarters of Internet users watch video on their PCs, according to IBM, and half of all mobile users want phones with better Internet capabilities including streaming video and GPS, according to the Kelsey Group. More than three-quarters of of domestic mobile users rely on their phones for social networking, 26.3% for video and photos, and 21.5% for texting, according to comScore.
So, before media-related companies start planning for next year’s CES, they should stop and listen to the marketplace. The company that figures out the ultimate universal dashboard software that eases pain and price of being a digital consumer wins the whole shooting match.
Wednesday, January 7, 2009
The first Internet radio for cars unveiled by Blaupunkt at the Consumer Electronics Show in Las Vegas this week suggests that Sirius XM satellite radio could have more trouble ahead in the form of new competition.
According to an account by VentureBeat's Dean Takahashi, the in-dash car stereo can play 20,000 conventional AM/FM as well as Internet radio stations streamed in real time via a Bluetooth connection from the radio to your 3G cell phone. Rather than endlessly browsing by genre, station or keyword, the radio can be programmed with preset stations selected on a Web portal. Potential early drawbacks include spotty domestic 3G coverage and the need for speedy drivers to bulk up on extra bandwidth to assure unbroken radio reception. While economics remain fuzzy, it appears Blaupunkt and partner miRoamer will sell the Internet car radio option for just under $400 domestically the second half of 2009, perhaps with some subscription options.
What it means:
It is an example of how alternative technology is an ever-present check on self-ascribed industry leaders. It may take a few tries to get mainstream in-car Internet radio right, but fears about the recently merged Sirius XM satellite radio monopolizing the market could soon be thwarted. Sirius XM continues to sift through the financial rubble of its protracted merger at a time when automotive sales are expected to remain at record lows in an economically depressed year. About $1 billion in refinancing remains uncertain and merger synergies must be demonstrated as debt-strapped Sirius XM works to post improved performance. What the company—like so many other dominant sector players—may not have been betting on is rigorous competition. The new Internet radio once again demonstrates the point: There always is the prospect of a better, cheaper alternative courtesy of an entrepreneurial tech community that never sleeps…even during a recession.
The $25 billion one-time charge at its cable, publishing and AOL segments announced by Time Warner and nearly $400 million in fourth quarter charges resulting in essentially flat 2008 earnings underscore media and entertainment industry vulnerability in this recession year. In addition to advertiser and consumer spending pullback, media companies also are wrestling with their own structural issues and financial commitments as well as the weakness of third party vendors.
Time Warner’s previous forecast for 5% growth in 2008 adjusted operating income has been reduced to a mere 1%. The culprits include a $280 million legal judgment against Turner Broadcasting related to the sale of its sports team, the loss of rent from bankrupt tenants (Lehman Brothers) of its Time & Life Building in Manhattan, and potential credit losses due to troubled customers such as bankrupt Circuit City.
Time Warner also concedes a “more challenging economic environment” and strained advertising at AOL and its publishing assets. JP Morgan analyst Imran Khan partly attributes Time Warner’s revised guidance to an 18% year-over-year decline in AOL advertising revenues of about $64 million as marketers shift from display to search. An estimated $15 billion of the $25 billion write-down will come from Time Warner Cable, the second largest domestic cable operator which expects to record a loss for 2008. As a result of the impairment charge, Time Warner expects an overall operating loss in 2008 compared to $8.9 billion in operating income in 2007.
What it means:
Media companies will continue to be hurt by reduced consumer and advertiser spending while wrestling with less obvious financial demons including economically ravaged third parties, shortcomings in their own operations and meeting their own financial commitments. While the shift to emerging digital business models and revenue streams prevail, it won’t offer much immediate relief. Time Warner will have the advantage of $9 billion in proceeds from its Time Warner Cable spin-off, putting it in the company of cash-rich peers like News Corp.
Still, a bevy of unknowns and unsettled business are festering just below the radar at many media concerns. AOL is an example of a business model change complicated by a severe economic downturn, the value of whose business has been written-down on other occasions. Bernstein Research analyst Craig Moffett suggests Time Warner Cable’s decision “could prompt Comcast to examine its franchise rights more closely.” Hypothetically, a similar 40% reduction in fair value, comparable with Time Warner Cable’s announcement, would yield a $13.7 billion pre-tax write-down for Comcast this year, Moffett says. Writing down the value of AOL and other Time Warner businesses is an exercise other media companies are sure to endure as valuations continue to fall and readjust. Time Warner and other major media companies’ problems in 2009 will not be limited to a 10%-plus decline in US advertiser spending, flat online ad spending and a mere 5% growth in pay-TV, according to Goldman Sachs. The real question is how much of a financial hit could be represented in 2009 by all the other unknowns?