Free vs Pirates

There's no question that online content piracy is a problem.  There's some question about how big a problem (in terms of impact on content sales), and growing problems with regard to how to best combat it (copyright enforcement becoming increasingly problematic).

The growing problem with enforcement is that making and distributing digital copies is easy and dirt cheap - and the solutions being offered in policy debates increasingly degrade both digital systems, network security, and individual privacy.  Perhaps its time for a different approach.

A new paper (and forthcoming book chapter) for the National Bureau of Economic Research suggests that a more effective anti-piracy strategy might be to reduce the economic incentives for pirates.  Using new online data sources, and tracking the impacts of natural experiments when large amounts of content were either removed from online markets or made available to them, the study found that having content online significantly reduces online piracy.  Making content widely (and inexpensively) available online can reduce piracy by 10-20%; removing content, or making it significantly more expensive, can increase piracy by a similar margin.  Making distribution of pirated content more difficult and expensive (in this case by shutting down Megaupload.com) increased online content sales by 5-10%.

These results are of a piece with a number of studies that link pricing and marketing strategies with the prevalence of online piracy.  A study for the WIPO found that while online piracy of broadcast signals was rampant, it occurred overwhelmingly under two circumstances: when the content was not legally distributed in the area, or when pricing was set at Western levels (making it unaffordable in poorer areas).  Similarly, a wide range of marketing studies have found that having free or minimal price options minimizes incentives to search out illegal versions.  Those studies also found that content creators can maintain sales and profit levels through the increased volume of legal access, and by engaging in content versioning. 

   Versioning refers to the ability to market different versions of the core content,  For example, music can be made available free online in a low-resolution option, with standard (CD-quality) resolution for a modest price, and in a higher-fidelity version (perhaps with some affiliated goodies) for a higher price.  Versioning has a long tradition in book publishing (hardcover vs. paperback), records (45s vs LPs vs CDs vs DVD-As, etc.), and online radio & video (lower quality streaming for free, but high quality streams requiring subscriptions).

What this suggests is that content creators have an alternative to trying to force digital distribution systems to follow the analog copyright metaphor - particularly when those efforts criminalize their potential audience and markets.  Instead of trying to regulate digital markets to fit traditional business models, they can explore the potential that digital offers for new and increasingly lucrative business models.

Source -  Want to Fight Off Content Pirates? Just Stream Your Show for Free, BloombergBusinessweek
Understanding Media Markets in the Digital Age: Economics and Methodology, NBER Working Paper No. 19634
Monetizing digital media: Creating value consumers will buy, EY.com

Viva la Revolution Mobile

From CIO Insight - 10 Awesome Facts About the Mobile Revolution slideshow.

Several highlight the scale and scope of mobile, mobile data, and mobile broadband

• There are more than 6.7 global mobile subscriptions, 30% for smartphones
• Global subscriptions for mobile broadband will pass 2 billion this year, projected to hit 8 billion by end of 2019
• Subscriptions for mobile PCs, tablets, and mobile routers are projected to grow from 300 million currently, to 750 million by 2019
• In 2009, there was more voice traffic on the mobile network than data traffic.  Today, data traffic is more than 9 times higher than voice traffic.
• Data traffic per smartphone currently averages 600 MB per month, expected to hit 2200 MB per month by 2019
• Data traffic per tablet currently averages 1000 MB/mo; will hit 4500 MB/mo  by 2019.  Mobile PC data traffic currently averages 3300 MB/mo, projected to reach 13,000 MB/mo in 2019
• By 2019, 95% of North American will have LTE (mobile broadband) coverage.  Globally, about 2/3 of the world's population will have LTE access.

A significant contributor to the mobile revolution is the growth of online video options and services, social media, and various entertainment/gaming options

• By 2019, half of mobile data traffic will derive from video.
• Smartphone owners spend, on average, 13 hours monthly on social networking, 8 hours on entertainment, and 6 hours gaming.

The impact may be greatest in Asia, where the growth of mobile broadband provides quick and relatively cheap access to the Net and its content and services to some of the world's most populous countries.

• China alone has 1.2 mobile subscriptions, and India 742 million.  The rest of the Asia-Pacific region includes a further 1.3 billion subscriptions.  In contrast, Africa accounts for 803 million subscriptions, and Latin America 697 million.

The numbers and forecasts come from the most recent Ericsson Mobility Report.

Source -   10 Awesome Facts About the Mobile Revolution,  CIO Insight
Ericsson Mobility Report - November 2013

Infographic: Internet Usage facts

From Staff.com, 7 Shocking Stats Trends in the Internet.

For me, they're not so shocking (and have been reported here before), but still it's a nice graphic.

And the last one about Hollywood is my favourite.

More research on streaming, "TV Everywhere"

Three new industry research studies have come out further supporting the growth of alternative TV viewing and the concept of "TV Everywhere."

• Data from FreeWheel has shown that authenticated "TV Everywhere" viewing has grown 217% over the last year.  (Authenticated viewing is viewing on displays through channel apps that authenticate viewer's subscription status)
• The study also shows that long-form viewing is up 56%, led by scripted drama and sports.
• The growth is being driven by mobile, with the share of online video ad viewing on mobile devices tripling over the last year.   Tablets were the fastest growing segment, with 365% increase.
• A study released by Digitalsmiths suggests that 17% of U.S. and Canadian pay TV subscribers either trimmed or canceled pay TV services - just in the third quarter of 2013.  Another 34% said they thought about changing their pay TV service, while only 54% said they planned to keep their service.
• A key factor in the sample's uncertainty - 39.3% said they were paying more for their pay TV service this year than last, and more than a fifth (21%) indicated that they were paying more than $150 a month for pay TV, Internet, and phone services (combined).
• Nielsen reported that the number of viewers using alternative viewing options mostly continued to increase over the third quarter of 2013.  Those using time-shifting for at least some of their TV watching grew 11% - to 59% of the total US TVHH.  There was a 40% increase in the number watching TV through mobile devices (some 18.7% of USTVHH).  On the other hand, those who had watched TV through their computers in the past month fell slightly.

Sources -  TV Everywhere Clicks, Authenticated Video Views Soar 217%, MediaDailyNews
More TV Cord-Cutting In 2013,  MediaDailyNews
Time-Shifted TV Watching Rises, Net Use Drops,  MediaDailyNews

"Unbundling" warnings

A study by Needham & Company media analyst Laura Martin cautions that a full unbundling of cable networks could result in a loss of up to 60% of TV advertising revenues, 124 cable channels would end broadcasting, and up to 1.4 million industry jobs could be lost.  The numbers sound extreme at first, but aren't out of the range of possibility - particularly with the rapid expansion of alternative video content delivery options.

As discussed in the earlier "Bundling vs. A la Carte" series of posts, (see here, here, and here), bundling cable networks works to expand potential audience reach, encourages sampling of channels and content, and permits occasional viewing.  A consequence of full unbundling for most cable nets would be a significant decline in audience, which will result in a big drop in advertising revenues that may or may not be countered by increased subscription/licensing payoffs.  For some, it may result in a death spiral of trying to hike subscription fees to recoup lost advertising, which will further shrink audiences, advertising revenues, as well as subscription revenues.

Currently, advertising counts for about 60% of TV/cable network revenues, and unbundling will undoubtably push the shift to greater reliance on licensing and subscriptions as a mechanism for funding content creation.  How sustainable that is for the 500+ TV programming networks remains uncertain.  Some high-demand high-value content will thrive, but many low-demand, limited and variable value content may not.  And certainly, I'd expect competition to shrink as many viewers are unlikely to want to pay separately for multiple channels in a genre.

As Martin notes,

“All content companies benefit from TV bundling, as well as from new digital platforms that are driving record free cash flows from content creation globally."

I hope that she's equally correct when she concludes that "(b)ecause consumers lose so much value through unbundling, we expect no policy change in the U.S.”  However, I'm a bit more skeptical that U.S. policy is driven more by economics and consumer interests than it is by outside special interests and politics - particularly those that provide campaign talking points..

Source -  Cable Unbundling Puts Majority of TV Ad Revs,  Media Daily News

Milestone: China dominates Internet use

According to the latest official numbers from the China Internet Information Center, more than 590 million people in China use the Net (more than twice the number of US Internet users).  While the number of users is huge (more than the populations of almost every other country), penetration is still modest, with about 44.1% of Chinese adults having Internet access.  Interestingly, almost 80% access the Internet from their mobile phones - a factor that's also fostering rapid gains in penetration.

 

Source -  China has more internet users than any other country,  Pew Research Centers FactTank

Streaming goes Prime-Time in U.S.

Two recent industry research reports point to the growing acceptance of, and preference for, the use of online streaming sources by TV audiences.

“Viewing habits are quickly evolving and connected TV is going mainstream,” according to Eric Berger, EVP of digital networks, Sony Pictures Television and general manager, Crackle.

The research is based on a survey of 1200 younger adults (18-49) conducted by Frank N. Magid Associates.  Their key finding is that online streaming is now viewers' second choice of viewing source (still trailing live TV).  The study found that access to online video streaming was near universal (96%), and more than half (54%) had access through "connected" TVs - either smart TVs, through attached gaming consoles, separate OTT devices, or connected video players.

The trend seems to be reflected in current trends in the cable/multichannel industry. Cable companies in the U.S. are seeing a surge in broadband-only customers (foregoing the primary TV service) - to the point where many are publicly rebranding as broadband services, which can also deliver TV (see earlier post here).  Research from the Leichtman Research Group is showing a decline in pay-TV subscribers, combined with increasing broadband subscriptions.  Their recent report shows major cable operators with 48.7 million broadband subs, and telcos growing more rapidly with 35.9 million (45% of which have access through fiber).  Average broadband speeds are also on the rise, with average bandwidth for broadband connected homes in the U.S. just over 20 Mbps.

As Cablevision CEO Jimmy Dolan told the Wall Street Journal in August: “Ultimately over the long term I think that the whole video product is eventually going to go to the Internet.  I’m not willing to cede that position now, and I’ve got a lot of customers that buy my video product…[but] the handwriting is on the wall, particularly when you look at young customers.” - See more at: http://videomind.ooyala.com/blog/telcos-cable-operators-see-broadband-subscriber-numbers-skyrocket-0?mkt_tok=3RkMMJWWfF9wsRousqzNZKXonjHpfsXx7OglWK6g38431UFwdcjKPmjr1YEITcN0aPyQAgobGp5I5FEMTrfYWbFrt6cPXg%3D%3D#sthash.gsljDRjn.dpuf

As Cablevision CEO Jimmy Dolan told the Wall Street Journal in August: “Ultimately over the long term I think that the whole video product is eventually going to go to the Internet.  I’m not willing to cede that position now, and I’ve got a lot of customers that buy my video product…[but] the handwriting is on the wall, particularly when you look at young customers.” - See more at: http://videomind.ooyala.com/blog/telcos-cable-operators-see-broadband-subscriber-numbers-skyrocket-0?mkt_tok=3RkMMJWWfF9wsRousqzNZKXonjHpfsXx7OglWK6g38431UFwdcjKPmjr1YEITcN0aPyQAgobGp5I5FEMTrfYWbFrt6cPXg%3D%3D#sthash.gsljDRjn.dpuf

As Cablevision CEO Jimmy Dolan told the Wall Street Journal in August: “Ultimately over the long term I think that the whole video product is eventually going to go to the Internet.  I’m not willing to cede that position now, and I’ve got a lot of customers that buy my video product…[but] the handwriting is on the wall, particularly when you look at young customers.” - See more at: http://videomind.ooyala.com/blog/telcos-cable-operators-see-broadband-subscriber-numbers-skyrocket-0?mkt_tok=3RkMMJWWfF9wsRousqzNZKXonjHpfsXx7OglWK6g38431UFwdcjKPmjr1YEITcN0aPyQAgobGp5I5FEMTrfYWbFrt6cPXg%3D%3D#sthash.gsljDRjn.dpuf

As Cablevision CEO Jimmy Dolan told the Wall Street Journal in August: “Ultimately over the long term I think that the whole video product is eventually going to go to the Internet.  I’m not willing to cede that position now, and I’ve got a lot of customers that buy my video product…[but] the handwriting is on the wall, particularly when you look at young customers.” - See more at: http://videomind.ooyala.com/blog/telcos-cable-operators-see-broadband-subscriber-numbers-skyrocket-0?mkt_tok=3RkMMJWWfF9wsRousqzNZKXonjHpfsXx7OglWK6g38431UFwdcjKPmjr1YEITcN0aPyQAgobGp5I5FEMTrfYWbFrt6cPXg%3D%3D#sthash.gsljDRjn.dpuf

As Cablevision CEO Jimmy Dolan told the Wall Street Journal in August: “Ultimately over the long term I think that the whole video product is eventually going to go to the Internet.  I’m not willing to cede that position now, and I’ve got a lot of customers that buy my video product…[but] the handwriting is on the wall, particularly when you look at young customers.” - See more at: http://videomind.ooyala.com/blog/telcos-cable-operators-see-broadband-subscriber-numbers-skyrocket-0?mkt_tok=3RkMMJWWfF9wsRousqzNZKXonjHpfsXx7OglWK6g38431UFwdcjKPmjr1YEITcN0aPyQAgobGp5I5FEMTrfYWbFrt6cPXg%3D%3D#sthash.gsljDRjn.dpuf

Source -  Streaming goes prime time with connected TV prime destination, RapidTVNews
The U.S. now has over 83 million broadband subscribers, GigaOm
Cable Companies See Jump in Broadband-Only Customers,  DSL Reports

Media Businesses on the Plus Side

Courtesy of SNL Data Dispatch comes a report of the top earners of media companies for the third quarter of 2013.  Some highlights:

• Disney continued its reign of top earner, reporting revenues of $11.57 billion for the quarter, up 7% from the previous year, with a net income of $1.54 billion (up 11%)
• 21st Century Fox moved into second on the revenues list as revenues rose nearly 18%, even though its net income dropped by 44%.  (The 2012 numbers had included Newscorp, which has since split off into a separate company
• Completing the top 5 in revenues and income were TimeWarner, Viacom, and CBS (in that order)
• Newscorp  retained a top 10 spot in revenues, despite nearly a 3% revenue decline
• Discovery Communications saw revenues gain over 27%

Source -  Disney still No. 1 among media earners but 21st Century Fox making gains,   SNL Data Dispatch report.

Another Newspaper Fire Sale?

A news report has Johnston Press trying to divest itself of its Irish newspapers.  The 14 papers, acquired in 2005 for £115m, is being offered to Malcolm Denmark, a British advertising executive, for as little as £7m.  Since Denmark's firm, Mediaforce, places advertising and inserts in newspaperss, the deal may also require approval from Ireland's competition regulators. 

In recent years, Johnston has sold off one paper and closed another as part of a continuing effort to reduce the firm's hefty debt load of £300m.  While Johnston Press has confirmed that it is holding discussions about possible sales, it was unclear whether the firm's Northern Ireland newspapers were part of the deal.

Source -  Johnston Press in talks to sell off Irish newspapers,  Greenslade Blog, The Guardian

Cable News News: Big drops

Considering that last November was a Presidential election year, its hardly surprising that this years cable news network ratings are down.  The actual numbers though, are somewhat shocking - both in isolation and as trends.  They can even serve as a guide to reporting bias.

• Left-leaning coverage will gloat over Fox News Channel's drop of 21% in total viewing.
• Right-leaning coverage will trumpet CNN and MSNBC losing half their primetime audience.
• Interesting, in looking over news reports, there's a lot of a third tack - discussing the CNN - MSNBC battle (for a very distant second) and ignoring or burying the Fox News numbers.

This year's numbers for November had FNC (Fox News) attracting more than 2 million viewers in primetime over the November ratings period (down 18%), with MSNBC pulling in 752,000 (down 50%) and CNN with 488,000 (down 54%).  In terms of total viewing, Fox was down 21% from last year's numbers, MSNBC fell by 45%, and CNN by 48%.

For CNN, that's 15 straight months of declining audience numbers.  And while Fox was also down, it ended the month coming in second (to ESPN) in primetime viewing, and still pulled in more viewers than all the other cable news networks combined.  November 2013 marked the 143rd straight month with Fox News as the top cable news network.


Sources: Nov. 2013 Ratings: CNN Hits Year Low,  TVNewser
November 2013 Cable News Ratings: MSNBC Tops CNN; Numbers Down From Last Year,  Huffington Post
Cable News Ratings: Fox News Channel Leads November As Nets Drop Sans Election Coverage, Multichannel News

(edited 10/2/2013 to add keywords)