Most media businesses offer a bundled set of products. When you buy the newspaper, or watch free-to-air TV, this is obvious. You pay a fee to buy a newspaper, or the offerings of a channel, some of which you want and some you don’t want, but it all comes together in a package. You can pick and choose some content by switching TV channels or subscribing to more than one newspaper, but your choice is quite limited. Pay TV offers a slightly broader bundle. You subscribe to a package from Foxtel and you get access to more channels, and hence can choose between a wider range of content, but it is still a bundled offering. You pay through a subscription rather than by watching advertisements, which makes the business model slightly different, but you are still offered a bundle. This whole business model is now under challenge; for newspapers, TV channels and for pay TV. The share prices of media companies are in decline, and in the US in sharp decline. The challenge so far has been gradual as technology has allowed consumers progressively more control. Technology has worked to undercut the pre bundled business models: videos allowed people alternatives as to how to be entertained in their homes, time-shifting gave them greater control over when they watched programs, and the web gave them news whenever they wanted. Netflix and similar businesses now have pushed the envelope further. They offer access to a wide range of content cheaply and at the viewers’ preferred time. This is part of a broad movement – web based services are undermining the business models of all the product bundlers, from newspapers onwards. Increasingly we are able to pick and choose the content we want to watch, the time we want to watch it, and to pay just for what we want. Music has gone the furthest down that path. Where does it all end? It seems likely that a range of offerings will survive. Some completely bundled products like newspapers will survive at one end, and some smorgasbord offerings like Netflix and Spotify will be at the other. In between they will probably be a range of partly bundled services of the sort Foxtel offers. Just as restaurants exist which offer a diversity of product mixes so entertainment is likely to finish up in the same place. Businesses will adapt, some will fail. To survive they have to find a mix of price, product offering, and availability which is viable. Pay TV to pay the highest price Sitting in the middle, pay TV however looks particularly vulnerable. It took market share from free-to-air TV because it offered a wider range of advertising-free content, but it’s not clear how big the market is now that it is challenged by offerings which offer still more choice. Free-to-air seems most likely to encroach onto the territory of pay TV. A recent Monash Business Policy Forum paper argues free-to-air providers need to separate their control of the spectrum from their provision of content, selling space on the spectrum to a wider range of content providers – a little like a department store allowing product manufacturers space on their shop floors. With digitisation the spectrum operators have the ability to offer a much wider range of content than they currently do. As free-to air expands, pay TV’s only real option seems to be to cut price and expand options available to customers. Some of this is underway and more is likely. It is a costly strategy. Content providers should be winners. As prices fall and choice widens, there will be a more intense struggle for content which attracts eyeballs. Some will be political and some economic. There will be political pressure to broaden the anti-siphoning rules which require some premium sporting events to be available on free-to-air, allowing them to charge premium advertising rates for major events. And other content which is attractive will command higher prices; good for providers like the AFL or FFA. It also means that programs will have to stand on their own merits, and command a commensurate price. The whole business of cross-subsidies from one program to another will be minimised. Higher prices for content will squeeze the profitability of media companies even further as their programming costs rise while their revenue is under challenge. Such unbundling of media is good for the consumer. Rather than being forced to watch the standard (and parallel) programming of the free-to-air channels, we now are more able to watch what we want when we want it. There will be considerable pressure for media laws to change. The current rules are based around media technologies which are well out of date. We failed to make the necessary changes when we digitised the system but economic forces will now ensure it happens. Rodney Maddock is Vice Chancellor's Fellow at Victoria University and Adjunct Professor of Economics at Monash University. This article was originally published on The Conversation. Read the original article.
Telstra last week announced that it will launch Telstra TV in September. This could be the “all-in-one” video streaming service many Australians have craved, bundling together the three leading video-on-demand (VoD) services: Netflix, Stan and Presto. However, it also puts Telstra in an odd position, straddling multiple services, some of which compete with other products Tesltra is intimately involved in, such as Foxtel. It also underscores how the introduction of VoD services have disrupted and fragmented the television market in Australia. Even ISPs are now starting to play a role in delivering content to the biggest screen in the house. So what will the future of television look like in Australia? All-in-one Telstra TV will run on the Roku 2 device, which is comparable in function to Google Chromecast and Apple TV. The Roku 2 already runs hundreds of international apps, although it is unclear how many will be available when the device launches in Australia. An attractive feature of the new service could be that it will launch with access to Netflix and Presto, with Stan to follow. Telstra has said it is trying to negotiate a bundled price for all three services for less than A$30 a month. The announcement by Telstra raises questions about where the company sees its future and involvement, not only as an ISP but also as a media distributor. The Telstra TV device, based on the Roku 2, and remote. Telstra Telstra is already heavily involved in a number of areas of the Australian media, across broadcast and streaming. The company has an even share of 50% with News Corp Australia in Foxtel, which has Foxtel Play, arguably a competitor to Netflix, Stan and Presto. Foxtel itself is involved in a joint venture in Presto with Seven West Media. Foxtel also recently purchased a 15% share in the Ten Network, and last year completed the joint production of Goggle Box with the network, which was broadcast on pay television with a one day delay to free-to-air (FTA). In addition to Telstra’s various media company associations, it also has services that could be argued to compete with its new Telstra TV service. Telstra’s current T-Box could be seen as offering many similar digital services to Telstra TV. Despite this, there is no discussion that it will be discounted when the new service is launched. One key reason for this could be due to the fact that T-Box provides access and recording of FTA broadcast television, similar to its competitor Fetch TV, a service linked with Optus and iiNet. The Roku 2 does not allow FTA viewing or recording, therefore solely relying on internet and app entertainment. As a Telstra spokesperson said: “We will not be positioning this as a substitution for Foxtel at all. This is very much for non-pay TV customers.” Despite this claim, Damien Tampling from Deloitte said there is “potential the move would cannibalise Foxtel customers”. The Roku service does provide access to HBO Go, which provided immediate access to the most recent season of Game of Thrones, a series high on the piracy list for Australians. If HBO Go was to become available in Australia this would impact Foxtel, which relies heavily on exclusive programs such as Game of Thrones. Shake up This move by Telstra also raises questions for the future of television and VoD in Australia, such as: who will be the big media players in the future? Will the future of these services rest with the current traditional broadcasters, free-to-air and pay-TV? Or will ISPs play a larger role in this space in the future? Telstra has the largest number of individual customers subscribed to Netflix of all Australian ISPs, but the lowest percentage: only 5.2%. This is far less than the leader, iiNet, at 16.8%. Stan and Presto are yet to have a strong uptake since their launch at the beginning of this year. Recent figures show Netflix had three times more users than Presto, Stan, Quickflix and Foxtel Play combined. Telstra’s spokesperson said live sports will be the reasons for customers to stay with Foxtel and free-to-air TV. But even sports broadcasting is changing, with new players such as YouTube, along with sporting organisations becoming their own broadcasters. What’s next on TV? There is no doubt that 2015 will be an interesting year for TV. We will see how VoD might force old players to adapt to the changing media landscape. Seven and Nine are already involved with VoD services, with only Ten yet to make a move in this space, although the recent purchase by Foxtel could change the network’s direction. There will also be interest around any new players that may appear as the race continues to establish some structured approach to a changing media distribution environment. In this we might see ISPs take a greater role as media outlets. Marc C-Scott is Lecturer in Digital Media at Victoria University. This article was originally published on The Conversation. Read the original article.
Mobile messaging apps such as Whatsapp are killing traditional text messages while multi-screening is going mainstream, according to an Australian Communications and Media Authority. The ACMA paper, titled Six emerging trends in media and communications, attempts to identify disruptive media and communications trends that “strain the effectiveness and efficiency of existing regulatory settings”. Here are the six media and communications trends identified in the report: 1. Communications go over the top Consumers are increasingly rejecting carrier-based phone calls and text messages in favour of apps and online services such as Apple iMessage, Facebook Messenger, Google Hangouts, Snapchat and Microsoft’s Skype. According to the report, revenues from fixed line phone services have collapsed by 34% in five years, from $18.296 billion in 2008 to just $12.045 billion in 2013. Over the same time frame, the number of voice over internet protocol (VOIP) users has surged from 2.1 million to 4.6 million. However, this extra data users has been good news to mobile phone carriers, which have seen their revenues surge from $15.967 billion to $20.014 billion. 2. Consumers build their own links It’s not just the number of communications apps that is booming. Australian consumers are using them with a wider variety of devices, which are connected over a growing number of network technologies. Consumers now regularly switch between fixed-line internet connections, Wi-Fi, mobile broadband and – especially in remote areas – satellite connections, depending on the time of day. The number of devices they use is also increasing, with the number of Australians owning a tablet, laptop and smartphone increasing from 28% in 2013 to 53% in 2014. 3. Wearables are set to boom On top of smartphones, tablets and laptops, the report predicts wearables (including Google Glass, smartwatches and fitness trackers) are set to become increasingly common over the coming years. The report suggests the number of wearables worldwide will grow from 22 million in 2013 to 177 million in 2018. It also predicts that an increase in the number of devices running Google’s Android Wear platform, along with the release of the Apple Watch early next year, will lead this trend to accelerate. 4. Online content is going mainstream The internet is not just disrupting the way we communicate. According to the report, consumers are increasingly viewing a greater number of TV services (including pay TV, broadcast TV, streaming TV and catch-up TV) delivered to a growing number of devices, over a growing number of network technologies. In a typical week, 97% of Australians watch a free-to-air or pay TV service. By contrast, one-in-two Australians have watched online TV over the past six months. This includes professionally produced catch-up or streaming TV services, pirated movies and content from video sites such as YouTube. Meanwhile, people aged between 16 and 24 now watch more TV over the internet than they do from broadcast television services. 5. Multistreaming is now mainstream In many cases, new forms are television are complementing, rather than replacing older ones. The report shows 74% of Australians with internet access regularly watched TV and used the internet at the same time, up 25 percentage points from 2009. It is as high as 89% for people aged 25 to 34. Overall, 71% of people still prefer to watch TV shows and movies on television, compared to on mobile phones (5%), tablets (4%) and computers (29%). Meanwhile, user-generated content is mostly watched on computers (71%) or mobile phones (41%), rather than tablets (17%) and televisions (10%). 6. TV is still the one for news Finally, when it comes to getting the news, the more things change, the more they stay the same. The report shows that 92% of free-to-air or subscription television viewers watched a news or current affairs programs on television in 2014. While newspaper circulation has dived 18% between 2009 and 2013, the drop has been a drop of just 10% from TV over the same time. Image credit: Flickr/alvy Follow StartupSmart on Facebook, Twitter, and LinkedIn.
When you were young, your grandfather always warned you not to put all your eggs in one basket. Well, when it comes to launching a business, your grandpa was wrong – and here’s why. Back in the 1970s and 1980s, not putting your eggs in one industry basket was the business wisdom of the day. The end product was the diversified conglomerate. In the US, Gulf and Western, a predecessor to Paramount Pictures, also sold clothing (Kayser-Roth), auto parts (APS), zinc, sugar, financial services, video games (Sega), bedding (Simmons) and tool manufacturing services (Thomas Ryder and Sons). They also owned a stadium (Madison Square Garden) and a couple of sports teams (the New York Rangers and New York Knicks). Aside from oil, BP got itself into petrochemicals (including some it bought off Union Carbide), coal, minerals, seeds, fertiliser, livestock feed and sold pet food under the Purina brand. In Australia, the worst offender was Pacific Dunlop. Among many other things, it sold clothing and footwear (Pacific Brands), rubber gloves (Ansell), tyres, auto parts, pacemakers, cochlear implants, tyres, dairy products (Yoplait, Peters), processed vegetables (Edgell, Birds Eye), baked goods (Four n’ Twenty Pies), tyres, fibre optic cables, healthcare products, bedding and ran auto stores. Then there was Mayne Nickless. They were a trucking and air freight company that also offered pathology labs, IT and payroll services, computer networks (Maynenet), security services (MSS), non-prescription medications (including Cenovis and Nature's Own), ran retail pharmacies (Terry White and Chemmart) and owned 25% of Optus. And when it comes to Christopher Skase’s Qintex and Bond Corporation, the less said the better. Of course, there are good reasons why diversified companies usually end in tears. Just ask former coal, horse racing and rugby league mogul Nathan Tinkler. Looking at these lists, many of these products don’t have the same customers, meaning there’s little benefit in cross selling or upselling products. There was really little way Mayne Nickless could have cross-sold next-day home delivery with a 24-hour pay TV sports channel on Optus Vision. And here’s a Four n’ Twenty pie – do you want a pacemaker with that? Many of these products don’t share any common ingredients. While pet foods sometimes use questionable ingredients, you hope BP’s dog food didn’t share too many ingredients with its motor oil. There’s also little advantage when it comes to branding. After a century of marketing “Dunlop” as a brand of tough rubber, would you really want a nice bowl of Dunlop ice cream? With sprinkles? And underperforming businesses can fly under the radar with cross-subsidies for inefficient business models, where the management of a standalone company would be forced to act. There’s a reason why Christopher Skase’s three-time wooden spoon winning AFL team, the Brisbane Bears, were nicknamed the Koalas from Carrara. Meanwhile, while there are plenty of executives who could effectively manage a medical implants firm market ice cream to 12-year-olds, the pool of people who have experience with both is a lot narrower. It’s better to have a highly focused management team overseeing one business than it is to have a big bureaucracy overseeing a clutch of unrelated, poorly performing businesses. Now don’t get me wrong. It’s great to be ambitious, to expand your business and to grow. But remember what your company’s core competencies are. Focus on doing what your business does well and then expand on it – but don’t go chasing millions in an industry you know little about! So are you thinking of growing your business? If so, think long and hard about what you’re good at before you choose a path for growth. After all, you don’t want to end up like Bond Corporation! Get it done – today!
US Federal Reserve chairman Ben Bernanke has announced a slowdown in its bond buying program in the latter part of this year, saying the stimulus could end in the middle of next year. However, any changes would be subject to moderate economic growth and a steadily improving jobs market. “The committee currently anticipates that it will be appropriate to moderate the monthly pace of purchases later this year, and if the subsequent data remain broadly aligned with our current expectations for the economy, we will continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year,” Bernanke said. News Corp begins trading as two separate companies Rupert Murdoch-controlled media conglomerate News Corp has traded for the first time as two separate entities as part of the company’s separation. The entertainment and television assets of the group, now known as 20th Century Fox, traded at around $30.53, giving it a market capitalisation of $70.3 billion. Meanwhile, New News Corp, which primarily comprises of its publishing interests, along with the company’s 50% stake in pay TV operator Foxtel, saw its non-voting shares trading at around $14.30 for a market capitalisation of $8.1 billion. IBM could cut 1500 local jobs IBM is looking to shift some of its Australian operations offshore to Asia and New Zealand, in a move that could see the loss of between 1200 and 1500 jobs. Sources within the IT giant claim senior management were told about the cuts via a teleconference in March, though there has been no official confirmation of the job losses. The company is estimated to employ between 12,000 and 14,000 staff in Australia. Overnight The Dow Jones Industrial Average is down 1.4% to 15112.2. The Aussie dollar is down to US92.85 cents.
The consumer watchdog has issued a warning about widespread unscrupulous industry practices in the door-to-door sales industry, but the industry says many of the practices raised by the ACCC have been addressed.
Treasurer Wayne Swan says the Federal Government will need to cut and cancel whole spending programs to return the budget to surplus next financial year, as it fights a structural decline in the tax base that will keep revenue at depressed levels for years.
Start-ups are being encouraged to build online communities as part of their CRM strategies, after the owner of social tipping site Footytips was acquired by sports giant ESPN International.
Media app developers stand to benefit from changes to Apple’s App Store policies, which will make it easier for publishers to sell subscriptions on its iPad and iPhone.