Friday, February 5, 2016

Cord Cutting, What Cord Cutting?

Have the winds shifted?  Is cable television rebounding?  Are households watching cable TV and television advertising?  A look at the top 3 cable operators might indicate that the cord cutting trend has reversed.  According to each of their fourth quarter reports, cable subscribers, as well as data and phone are all increasing.  Charter announced that they increased subs by 33k in the last quarter and 11k for all of 2015.  Last month, Time Warner Cable announced that it gained 54K in Q4 which will make its soon to be owner Charter Cable very happy.  And Comcast Cable added 89K in Q4 although down for the total year by 36 K in 2015. 

Is this reversal simply a Christmas present to the top cable providers or an indication that 2016 could be a growth year for them?  Not raising rates to households might be an encouraging sign.  But should greed get in the way of a better marketing a customer service approach, these sub gains may be short lived.

Friday, January 29, 2016

What Should Apple Do Next?

The iPhones sales are slowing, so are the iPads and the Macs.  And the Apple Watch business is still quite young and not yet proven as the next big thing.  Apple Music is nice, but no one cares.  And Apple TV is still trying to create content distribution deals to become a more valuable box in the home. 

So what does Apple do next?  Do they really want to build their own car or would they be better off licensing their technology into other car companies?  Do they want to shift from content distributor to content creator and acquire a media company like Viacom?  Do they want to expand further into the cloud and enterprise space and consider buying a company like Microsoft, if such a move could get government approvals?  What will the next iteration of Apple be?

The car business seems to be on their radar although I would prefer they license their technology to others or offer their Siri and Music services in a subscription model like Sirius; perhaps a Sirius acquisition might be a nice alternative to their expansion in the auto industry.  The entertainment business is quite fickle. And owning a content network might make it harder to build a fully aggregated Apple TV business.  Is a Netflix acquisition too rich for their blood?  The cloud and enterprise space could be more lucrative as Apple products are more embraced in commercial and industrial spaces.  Microsoft may not be interested in a merger but maybe IBM might listen to a bigger future together.

What is clear is that Apple has the dollars and the resources to build its next new thing.  It continues to make a nice revenue and profit each quarter, but as growth in its mainstay products slow, it needs to expand into new spaces.  Change is coming and Apple needs to continue to evolve and change too. 

Tuesday, January 26, 2016

Apple - Growth Or Value Stock

Apple released its quarterly earnings and based on how you want to view their business, it was strong or disappointing.  They continue to generate an amazing amount of revenue while raising their gross margin.  They have new businesses that are generating monthly revenues and an ecosystem that has delivered a loyal customer base.  But the disappointment lies in its ability to continue to grow at a a high level quarter over quarter, year over year.    Apple may be a profitable, successful company, but it is seen less as a growth company and more as an old timer, value company.  They are no longer seen as Superman, simply as Clark Kent.

The challenge is that its mainstay product, the iPhone may have reached saturation.  Are there more non Apple users out there ready to buy and are current users ready to upgrade.  The level of each generation's improvement over the last no longer makes it so necessary to buy a new iPhone every year or two.  Like its iPad, we may be able to enjoy using it for 5 or more years before we need to upgrade. 

More importantly, investors are waiting for the next must have product for the home.  It is yet to be the Apple Watch or iPad Pro or Apple TV and it is hard to see it extending out to an Apple Car.  I've suggested Apple build its version of the Amazon Echo and deliver more of the Apple infrastructure into the home.  No word yet on that idea.  What 2016 will bring is next generations of each of their product lines.  Great for Apple loyalists, but less impressive for Wall Street. 

Friday, January 22, 2016

Google Pays Apple For Search

Bloomberg has shared some new information about Google and Apple.  In 2014, Google paid Apple $1 billion to be the search engine for the platform.  Its all part of a revenue sharing agreement between the two tech giants.  According to the story, this financial information was never meant to be disclosed.  It makes you wonder what other agreements Apple has that provide other incremental revenue streams. 

Wednesday, January 20, 2016

Its Time For Cable Operators To Transform Their Business

For cable operators to worry about the number of cable subscribers is old school.  It is time that they re-examine their business model and transform themselves for the 21st Century.  If you ask a cable operator what their business or mission is, the most likely response may be that they are the conduit for entertainment, communication, and data.  Unfortunately subscriber numbers are falling, growth across their businesses are slowing and they are consolidating to find greater efficiencies.

It is time for cable operators to be greater than the sum of their parts.  Just as Google has renamed itself Alphabet to become more than just a search engine, cable operators need to be more than just a conduit to bring wire and wireless to the home.  They need to make their mission Smart Home Makers.

As a Smart Home Maker, the business becomes more than just bringing a wire to the home, it involves being a full service provider from smart door locks to home security and video surveillance, from HVAC partnerships to data cloud security.  From full home wiring to high performance wireless streaming.  Cable and broadband become just another piece of being the Master of the Client's Domain.  Along with training to the homeowner, the cable operator becomes the key player in growing the smart home universe.  And the revenue comes from installation to maintenance and monthly service packages.

Tuesday, January 19, 2016

Viacom Activist Wants To Partner With AMC Networks

A Viacom shareholder questions the health of CEO Sumner Redstone and the future of the company.  According to Multichannel, he proposes a merger with AMC Networks as one way to solve Viacom's problems.  But does Viacom's networks, including MTV, VH1, CMT and Spike, bring any synergy to the AMC Networks family?  While AMC has done some previous acquisitions, including Sundance Channel and BBC America, I do not think that such a merger with Viacom has value to AMC.

Comcast, the largest of the MSOs has just announced its move of CMT and Spike from basic to a higher digital tier.  That does not speak well for future subscription growth.  MTV, once a must have network for key demographics, have lost their luster to other networks like the former ABC Family, now Freeform, as well as You Tube and other online websites.  It would require a significant investment to recapture its glory.  And VH1...well, enough said.

Lastly, is AMC Networks more likely a seller than a buyer?  Its owners, Chuck and Jim Dolan, have already sold Cablevision Systems and smaller networks like Fuse.  Jim Dolan might just want to keep his MSG and sports teams and sell off this next piece of their empire.  And for that reason I doubt that AMC would invest in Viacom.

Monday, January 18, 2016

As Cable Rates Rise, Expect More Cord Cutting

Programming license fees continue to rise and cable operators respond by raising monthly subscription rates to its customers.  According to Multichannel, cable rates are expected to rise about 3% in 2016.  It amounts to a few dollars more each month but consumers are already getting tired of any and all increases.  Comcast rates are rising just as they planned to move channels off basic to more expensive digital tiers.  That means that consumers are paying more for less.  Skinnier packages don't necessarily mean lower costs. 

What will subscriber levels look like this year.  Some cable operators have seen a slowdown in lost customers and try to point to a reversal in the trend toward more cord cutting.  First quarter subscriber levels should dispel those myths.  As OTT networks like Amazon Prime, Hulu, and Netflix continue to push more original programming, and customers become more inclined to use them over cable TV for their video offerings, the value of cable decreases.  Cord cutting will only become more severe.  And for households on a limited budget, cable TV will stop becoming a must have for the home. 

Millennial usage has significantly shifted from the big screen television set to the handheld tablet or smartphone.  Their primary video consumption, driven partly by peer pressure, to watch and binge on OTT programming.  And if this next generation sees less value from cable, then when they leave their parents' home for their own residence, cable TV will not be a necessary utility for their new home. 

The wire to the home will be seen only for broadband consumption, not for cable or for phone.  And if cellular companies can make wireless packages that keep the price point for data reasonable, then consumers may make the cell phone company the primary provider of broadband services.  That is the trend facing the cable operator and that is the challenge that this industry must focus to find its next growth opportunity. 

Friday, January 15, 2016

Comcast Pushes Channels Off Basic

The NY Post has reported that Comcast is taking underperforming networks off their basic tier to reduce costs.  The networks targeted include Pop (the former TV Guide Channel, Spike and CMT (both Viacom owned networks) that are being moved to a more expensive digital tier.  It may not be a drop but it certainly reduces their subscriber base.  The article says that Comcast is creating skinnier bundles and reducing costs but it is unlikely that those costs will be passed directly on to consumers; rather, it may only delay the need to raise the costs of the basic tier. 

Unfortunately, when you look a little deeper, these three networks are hardly the financial reason why a cable subscription is expensive.  They are pennies per month in license fees compared to sports programming and other more popular cable networks.  And they were chosen because Pop is an independent network and Viacom has very little leverage with its other sister networks MTV, VH1 and Comedy Central.  None have the cache or demand that they once had. 

Comcast and other cable operators are already feeling the heat from cord cutting.  And big cable networks like ESPN are suffering directly with lost subscriber fees.  This article may only be detailing Comcast's first steps at taking more bolder steps to create a skinnier basic package to retain its cable customer base.  Cutting cable costs and promoting faster broadband service with a cable subscription are two ways cable operators like Comcast can reverse the cord cutting trend. 

Thursday, January 14, 2016

Amazon Prime Has A Deal For You

Amazon Prime has found more streaming media success when the Golden Globes awarded them for their latest original series, "Mozart In The Jungle". To celebrate their win, Amazon Prime is reducing their annual subscription by 26% for new subscribers.  "Subscribing will cost $73 — down from the regular $99 — from 9 pm PT Friday until 11:59 pm local time Sunday night." according to re/code. Quite a savings and sure to drive subscription numbers!