Generator of Business

So you think you’re on top of the current digital revolution? Chances are, based on “Demi Moore’s Law,” you’re only seeing half of what your business can do with technology, and only half of what technology is doing to your business, says Spanish academic Josep Valor, in today’s interview with Financial Times.

“Demi Moore’s Law” is an extension of Intel founder Gordon E. Moore's law on the exponential pace of microprocessor development, and plays on the word “demi” (which means “half” in French) and Moore’s name.

Valor, an associate dean and technology professor at Spain’s IESE Business School, an operating partner of the Institute for Media and Entertainment (IME), says record companies, for example, didn’t quickly adjust to the reality of digital music reproduction. They should have focused on their core strength — making money by finding and promoting new talent — instead of spending millions of dollars fighting file-sharing Web sites.

Focusing on one’s core competencies, while at the same time understanding how technology is changing the marketplace and the world around us, is key, says Valor, who adds that companies don’t necessarily need complex algorithms and cutting-edge hardware to succeed.

One example of a company that has adjusted well to the digital era is U.S. sports magazine Sports Illustrated, which went online in 1997 and now ranks among the top 10 sports Web sites worldwide. Valor, who also teaches the Advanced Digital Media Strategies program at IME, wrote a case study documenting the magazine’s transition. This case study, now being taught in IESE Business School's MBA program, has gotten extensive favorable feedback.To read the full Financial Times interview with Valor, click here. 

Top-ranked IESE Business School's Institute for Media and Entertainment (IME) is the leader in media and entertainment executive education. Our intensive programs for executives and thought leaders include Advanced Digital Media Strategies, and the world's first global Advanced Management Program in Media and Entertainment (Media AMP). These programs attract executives from top media companies around the world, including Time Warner, Google, Disney, Fox Entertainment Group, NBC Universal, MTV Networks, and many others. IESE-IME helps media professionals gain industry-specific business knowledge and real-world insight to help them think like CEOs and advance their media and entertainment careers. For more information, visit www.ime.edu

Two out of five UK Internet users would rather give up their TV than their Internet connection, says a recent survey by London-based research firm GfK NOP. Is it possible that eventually, with TV manufacturers’ upcoming and planned integrated web product enhancements, consumers may never have to choose?

Starting with the 2009 holiday season, companies like Sony, Samsung, LG, Panasonic and Vizio began to market their Web-enabled TV sets, which allow users to stream online content directly to their TVs, without having to connect to a computer or set-top box. The price tag? From $850 (for LG’s 42LH50 LCD TV), and up.

Randy Waynick, SVP at Sony's Consumer Group, predicted to USA Today, "When we all open up the newspapers on Jan. 1, and they talk about the hot items from the holiday selling season, Internet-connected TVs are going to be at the top of the list."

Of course, the dream to marry Web and TV has been around since more than a decade ago, when Microsoft purchased MSN TV (formerly WebTV Networks, a system that allows TV sets to connect to the Internet). The idea, however, finally seems to be gaining traction. In fact, iSuppli, a market research firm specializing in the electronics value chain, predicts that by 2013, worldwide retail sales of Internet-enabled TVs (IETVs) will reach 87.6 million units, compared with 14.7 million in 2009.

So can IETVs really go mainstream? It’s possible, but for now, there’s still a lot to improve on. Most IETVs in the market are not yet Bluetooth- or WiFi-equipped. They use a wired, Ethernet connection so consumers can’t easily connect wirelessly. Also, users cannot surf the Web freely with these TVs, and can only access content through a limited selection of “widgets,” or tiny on-screen buttons representing software apps. Samsung IETV sets, for example, have widgets for Blockbuster On Demand, Amazon On Demand, YouTube, Twitter, Flickr, eBay, USA Today, RallyCast and Yahoo!’s Finance, Weather, Video and News Updates — but not for Facebook, or e-mail services.

If they do catch on, however, IETVs could be a “nightmare” for the hardware “middlemen” who sell devices that enable users to connect their TV sets to the Web, such as set-top boxes like Apple TV and Roku’s Netflix player. IETVs could also threaten other online-viewing services, such as Time Warner/Comcast’s “TV Everywhere/On Demand Online,” which enables cable TV subscribers to access cable programming online for free.

At the same time, IETVs could be a “dream” for developers of “widgets” and similar software programs. Likewise, as iSuppli noted in its research report, IETVs could boost sales for manufacturers and semiconductor suppliers that provide memory, micro-processing chips and other products that enable TVs to connect to the Web.

And there will likely be more opportunities in the future, as TV sets become more affordable and other players in the digital media value chain find a way to exploit the trend. As Michael Greeson, President of consultancy firm Diffusion Group, tells BusinessWeek: "The concept has been validated in the mobile space; the iPhone is a proxy for what can happen in widget-enabled TV," he says. "This is a battle. Internet connection to the TV will redefine the entire television business."

Top-ranked IESE Business School's Institute for Media and Entertainment (IME) is the leader in media and entertainment executive education. Our intensive programs for executives and thought leaders include Advanced Digital Media Strategies, and the world's first global Advanced Management Program in Media and Entertainment (Media AMP). These programs attract executives from top media companies around the world, including Time Warner, Google, Disney, Fox Entertainment Group, NBC Universal, MTV Networks, and many others. IESE-IME helps media professionals gain industry-specific business knowledge and real-world insight to help them think like CEOs and advance their media and entertainment careers. For more information, visit www.ime.edu

Are cable and satellite TV firms in danger of “disintermediation?”

In economics, “disintermediation” refers to “the removal of intermediaries in the supply chain” — which some critics believe could be cable programming’s fate, as more and more users watch their favorite shows directly online, bypassing the cable and satellite TV companies.  Indeed, how these companies will cope in today’s Web-centric market “is the single biggest question facing the media industry,” remarked former News Corp. President and COO Peter Chernin, at the USC Annenberg School for Communications’ roundtable discussion last Fall.

The End?  Maybe, But Not Yet

For now, however, cable companies appear to be in good shape. According to a September 2009 report by marketing and media research firm Nielsen, time spent watching TV is up four minutes from the prior TV season, and up 20 percent from 10 years ago — partly because of the increased choice in cable and broadcast content.

And as El Segundo-based satellite TV company DirecTV has shown, it’s still possible for non-broadcast firms to maintain subscriber growth.  DirecTV reported 136,000 new U.S. subscribers for the 3rd quarter of 2009, bringing its total base to 18.4 million, with the average monthly revenue per subscriber rising 2.1 percent, says Dow Jones NewsWires.

Cable and satellite companies may still have to watch their backs, however.  As video content grows online, so does the online audience.  Research firm comScore reports that Web-viewing again reached record-breaking levels this past September, with 168 million users in the U.S. watching videos via Web-based services like YouTube and Hulu.

What’s more, the proliferation of products and services that support the “online viewing” model may continue to threaten cable’s role — such as Internet-ready HDTVs and Blu-ray players, Internet “set-top boxes” like Apple TV and Boxee, “video- and Web-ready” game consoles like XBox 360 and Playstation 3, and pay-per-download/subscription-based services like Amazon on Demand, Netflix, or Apple’s planned iTunes TV.

Salvation = Content Control?

So what can cable operators do to protect their programming revenues and remain relevant?  One strategy, it seems, is to take “control” of how their content is accessed online.  Time Warner and Comcast, for example, have partnered on an initiative to make their cable programming available online for free — but only to their own paying cable subscribers.  Called “TV Everywhere” for Time Warner and “On Demand Online” for Comcast, the initiative is expected to launch by the first part of 2010.

And as we have written about in a previous post on the Comcast-NBCU merger, when Comcast completes its deal to a 51 percent stake in media and entertainment firm NBC Universal, this could give Comcast an even bigger say on how and when TV shows are distributed online — which, incidentally, could also raise anti-trust concerns. "Comcast/NBC would control so much important content that it could charge competitors more for its programs," writes Free Press, an independent advocacy group for media reform.

As for the Bottomline?

For now, there are still more questions than answers as cable firms and other players in the media chain find their footing in the changing digital landscape.  Since producing and distributing content costs money if users watch shows online for free, how can cable operators recoup costs of licensed and distributed content, and turn a profit?  Will advertising dollars be enough, or will companies like Time Warner/Comcast eventually resort to charging consumers even more for their cable subscriptions, to subsidize their “free” online content?  Will content providers, like Disney, for example, break away from cable firms and make their content available on services like Apple’s planned iTunes TV?  If yes, who will go first?  And from a technical standpoint, can the Internet really handle the huge need for increased bandwidth that will occur if there is a potential mass migration of viewers from TV to online?

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Top-ranked IESE Business School's Institute for Media and Entertainment (IME) is the leader in media and entertainment executive education. Our intensive programs for executives and thought leaders include Advanced Digital Media Strategies, and the world's first global Advanced Management Program in Media and Entertainment (Media AMP). These programs attract executives from top media companies around the world, including Time Warner, Google, Disney, Fox Entertainment Group, NBC Universal, MTV Networks, and many others. IESE-IME helps media professionals gain industry-specific business knowledge and real-world insight to help them think like CEOs and advance their media and entertainment careers. For more information, visit www.ime.edu