Hello again, and a week in review

Apologies for the extended neglect of this blog. It will start to get updated much more regularly from now on...

The following article was published last Friday on TC+M's web site, which you can access free of charge for the latest media news: http://www.totalcontentandmedia.com

The Cable Cabal

As the dominant pay-TV service in a market of committed couch potatoes, cable has had a good ride in the U.S. so far.

This week, the feelgood factor continued as media figures extolled the virtues of cable at The Cable Show, the annual confab for the National Cable and Telecommunications Association (NCTA), in Las Vegas. Jeff Bewkes, the COO of Time Warner, said he believed that cable could potentially rival the Internet in terms of its flexibility of use and attractiveness to advertising.

The investments the cable operators have made in innovation have paid off so far: Comcast, Time Warner Cable and Cablevision have all posted double-digit revenue growth as a result of their triple-play service offerings.

Now some cable providers are getting even more bullish and suggesting even bolder offerings, such as screening films as they are premiered on big screens.

Outside the Vegas desert, there are clouds, of course.

In addition to heavy investment from IPTV competitors like Verizon and AT&T, U.S. cableco's are bracing themselves for regulation that could threaten their pole position.

In the name of letting parents opt out of violence-peddling channels, the FCC is considering forcing companies to liberalise how they offer channels, from their current package structure to an a la carte selection. This would hit margins hard for cable operators.

They may also be forced to 'unlock' their digital set-top boxes so that people potentially can use them to switch from one provider to another. But as yet neither of these issues is squeezing margins—and the powerful cable lobbies will make sure that it stays this way.

Further afield, the message of strength coming out of the U.S. this week was countered by a more sombre picture in the U.K, where Virgin Media reported an operating loss of £15.3m for the quarter that ended 31 March, compared to a profit of £9.2m for the quarter before.

Virgin Media is blaming satellite competitor BSkyB. The breakdown in negotiations to carry Sky-owned channels on Virgin Media's cable service has played a role particularly in terms of customer acquisitions, said chief executive Steve Burch. These fell by 11.9%, their lowest level for a year, with subscribers to its cable TV and broadband services falling by 46,900 over the quarter. A year earlier subscribers had grown by 28,500.

But another issue for U.K. pay-TV providers is what the addressable market is for new customers really is.

When BT launched IPTV at the end of 2006, it wanted to target people not yet receiving any kind of premium TV service. This is actually a big number—at the time of the BT Vision launch, it was some 14 million homes (compared to 11 million already getting pay-TV services). But so far BT has only reported some 5,000 subscribers, and Virgin Media too has shown some difficulty in reaching what Gavin Patterson, the consumer products MD for BT Vision, calls 'the refuseniks.' BT incidentally kicked off a £1 million ad campaign this week; we'll see where that takes them.

The silver lining for Virgin Media has been in the area of triple play. Currently 42.9% of its subscribers take television, broadband and phone services in combined packages, compared with 34.9% in the year earlier period. This however is still not offsetting other losses as it has in the U.S. market.

One example of how to cope with the loss of select content on your cable network might be found in Germany. Premiere, the largest cable provider in the country, had some good news this week as it swung back to profit in the first quarter (which ended 31 March), posting net income of €4.5m compared to a loss of €18.3m in the same quarter a year ago.

While revenues decreased to €224.3 million versus €273.3 million a year ago, largely on a reduced customer ARPU (€261 from €308), Premiere's biggest achievements were cuts in its operating costs by some 29% over the same period the year before; and a rise in customer acquisition rate over the fourth quarter of 2006: 50,582 versus 36,058. The total number of customers to date is 3.46 million.

Premiere is still adjusting to losing exclusive rights to show the highly popular Bundesliga football league fixtures, which went to its competitor arena, owned by Unity Media.

Premiere has a resale deal to continue providing coverage of the games, but there are still questions in the air about how this will impact the company. Currently the marketing around those channels is being investigated by Germany's Cartel office, and the outcome of that may affect Premiere's full-year forecasts.

Yet Premiere is not hanging its star on the outcome of the Bundesliga decision, or even on its successful cost cutting. Later this year, it's launching a new pay-TV satellite package. Using a new wholesale service from SES, it will play on the long-tail concept and offer a variety smaller channels that have not yet been seen in the German market. The name for the service? Premiere Sky.

Last week's week in review

Hi there. I posted this review on the Total Content and Media web site last Friday. For the record I'm putting it here, too. If you are interested in seeing it on the site, or to read fresh news for this week, click here.

The week ending 12 January was dominated by news coming out of two technology trade shows in the U.S.—the Consumer Electronics Show in Las Vegas and the MacWorld Show in San Francisco.

But first a look as some other interesting things this week: HarperCollins is following in the footsteps of other News Corp subsidiaries and investing in the digital world. If it’s half as prescient as Fox Interactive with its MySpace buy, it’s picking a winner in NewsStand.

EMI is continuing to bleed. This week’s news is even lower than expected profits after a dud Christmas and the departure of two of its top executives. Will someone please put this music giant out of its misery already?

YouTube got barred, and then re-released, on the Brazilian market. I point this story out because of the uproar it caused when it was banned (for running a racy video clip), and to show how hard it is still to control content on these very popular sites, and to show how easy it is to simply shut them down.

And in the still young IPTV world, a few little beeps: BT hired an ex-Sky executive to beef up its sports coverage, and Deutsche Telekom seems to be having some problems getting subscribers to its TV service. Some are pointing out that IPTV is a doomed business, but I’m sure that both of the aforementioned operators hope they can do as well as one of their smaller neighboring incumbents, Belgacom.

Now on with the shows…. In Vegas, the story was all about the digital, connected home, which according to reports is finally becoming a reality.

That top-line story was bolstered by an avalanche of announcements from media companies, device makers and every one in between about deals, new services and new products. (Type in CES in our search window to get the full whack.)

Yahoo seemed to be particularly rampant on the news front, with lots of releases concentrating on mobile phone deals as well as key agreements to provide its hitherto Internet-only content to television, and vice versa. I suppose it has a lot of catching up to do to get close to Google again.

It’s a testament to the power of Apple right now that the MacWorld show had almost as much heft in terms of media coverage—mainly because of Apple launching two products that has all other consumer electronics rivals and practically everyone else in the digital media value chain watching closely: a new phone, currently being called the iPhone—which is not really a phone but a multimedia device; and a product called the Apple TV--which is not really a TV but something that links to your set to let you watch all your digital content there.

The phone seems to have attracted the most attention, most likely because it looks like it could potentially become be a successor to the hugely famous iPod—not only can you play music on it, and use it as a phone, but you can effectively use it like a little portable computer, complete with wifi access and even Apple’s operating system behind it all.

People of course are citing all sorts of reasons why the iPhone will need a lot of tweaking before it flies off the shelves—price and form factor being the two main areas of criticism. But even if Apple does not stay on top with this particular product, it is pushing the boundaries for what other portable device manufacturers should be fervently developing next.

Apple’s new baby has also attracted some secondary attention, in the form of a lawsuit that’s been filed by Cisco, who says it owns the name iPhone. Given the numerous announcement that came out in advance of the MacWorld show about how Cisco is going to try to become a Big Name in the consumer market, specifically for digital/connected home products, I can’t help but wonder if Cisco’s suit was another way of it trying to steal a little bit of the limelight being generated by its Bay Area neighbor.

Particularly since many observers suspect the whole kerfuffle will be settled out of court anyway.