Monday, July 9, 2012
The Media World is Changing Faster than We Think
One of my first strategy projects back in my days at Time-Warner involved projecting out just how much satellite television would gain over cable television.
Time-Warner knew at that point that the smaller-sized satellite dish was going to provide a more price-affordable option for DirecTV and Dish to market to consumers.
The big seller at that time, was that satellite was providing access to a vast array of networks that cable simply could not provide.
The prediction was that the satellite providers were likely to take over about a third of the market… and in some cases, could take over up to 50% share. Those higher markets being less populated more dispersed population groups.
I presented the study at an executive meeting at the old Time-Warner building in NYC.
Since then, a couple of interesting events took place…
(1) Expanded broadcast access with a set of new players entering into the competitive mix… the most pronounced being AT&T with U-verse
(2) The roll out of broadband cable
(3) The melding of conventional television with Internet programming
As a result, many of the unique selling claims that the satellite providers touted quickly became of little differential value.
Not only did cable expand its channel offerings, but a greater variety of high-definition channels and DirecTV’s football package were no longer unique to just satellite access.
Satellite providers also lost out big time on the marketability of their user base to local and regional advertisers. They provided limited local access and never netted enough penetration on a local level to break out their served geography in satellite zones aka cable zones.
There is a story about the satellite and cable providers that ran over the weekend in the Wall Street Journal.
The article notes that the satellite provider stock is trading at 10 times forward earnings estimates versus Comcast trading at 15 times and Time-Warner at 13 times.
The article also goes on to say that the satellite business in the U.S. has reach market majority and what is keeping DirecTV and Dish afloat is expansion in less penetrated, more rural markets like Latin America and the developing nations in Asia.
They often say that when times get tough, enemies become friends.
A little over a year ago, I had lunch with two Comcast sales reps. Now I must qualify quickly that I paid for my lunch and they paid for their lunch.
Listening to these two reps tell me about the new alignment of Comcast with DirecTV and Dish reminded me of listening to high school buddies the Monday after their high school football team beat out the cross-county rival.
These boys at lunch were very excited to tell me that now advertisers buying Comcast would also have coverage on DirecTV and Dish.
The media world in 2012 still lives in the mass marketing days of the past.
These folks continue to get pumped that bigger is always better. I sometimes wonder if they mix Viagra with their martinis they sip while lunching together.
A year ago, when I responded to the Comcast reps and said that was good that they were merging audience delivery, I also highlighted how much more effective they could make the zoned buys.
Quickly the smiles faded from their faces.
Zoned buys? Why would you want to make a zoned buy? Buying Comcast market-wide provides “better delivery” than the network affiliates.
When I asked them if they found value in targeting their media buys against niche market segments, they quickly replied “yes,” but they could much more effectively deliver “Adults 25–54” through a full market buy than by cable zone.
I presented that research study to the Time-Warner executive team back in 1998. That was 14 years ago. What was seen as a threat back then, never really materialized.
I might be going out on the ledge with this prediction, but 14 years from today… July 8th 2026, I will put $100 on betting table that “mass marketing” cable television will be in a similar position as DirecTV and Dish today.
It is true that when times get tough, enemies become friends.
Problem is, new “enemies” rise up from out-of-no-where and soon the old enemies fade away.
Maybe when what we term as “Generation ZOOM”… the next generation following the Millennials who were birthed from 2000 forward… hit the business world starting about 10 years from now, they will finally revolutionize the media world in getting the sales team operating from a new marketing audience paradigm.
I will also bet that 14 years from today, those satellite dishes will be stocked up in the back storage room of the Smithsonian along with the 8-track and cassette tapes, non-flat screen television sets, desk-top computers and CD players.
By the way, I also read an article that it looks like Apple will be re-tooling the docking ports on the next wave of iPhones hitting the market this fall.
Add to that Smithsonian storage room the iPhones produced since intro as well!
Pssst… the media world is changing faster than we think … literally!