Television

The Stroke of Midnight – Will Viacom Go Dark?


As I looked up from my desk today, I saw a news story that caught my eye: DirecTV is threatening to take 26 Viacom channels off the air at midnight.  Gee, I thought, I guess it has been three years since they last were at loggerheads with the operators.  But that was December, and this is July.  That was Time Warner Cable, and this is DirecTV.   That was 2008, and this is 2012.  Is this story new or an off-network airing of a 2008 episode?

I went to the “Always On” archives to see.  What I found was my post from New Year’s Day of 2009.  I recall going out the night before preoccupied with whether Viacom would still be on the air when I came home.  It was a dramatic moment!  Fortunately, as with Y2K, the stroke of midnight did not bring the terrors foretold.

(Ok, so what I mean here is that in 1999, people feared that there would be all kinds of havoc when we entered the new century because our computer systems would get confused – long story – and people prepared for all kinds of hardships including food and water shortages and lack of electricity.)

In any case, my plan this evening – July 10th – was to republish the post below, comment on how this will be a tricky negotiation given that Viacom has had significant ratings problems with Nickelodeon and MTV, reference the fact that Viacom’s stock price is vulnerable to adverse news given these ratings problems, discuss whether these standoffs have become more common, more public, or simply more on my radar screen, and call it a night.

Given that I had an image of the Sponge Bob ad from 2008, I decided to grab one from this summer’s dispute.  That is where the differences became apparent.  The Viacom ads – at least the ones I found – are simple and slick and use Comedy Central rather than Nickelodeon brands.  Somewhat interesting.

But what really struck me was DirecTV’s website.  Clearly planned well in advance, the site maps out DirecTV’s side of the story including a heartfelt video message from the company’s CEO Mike White.  The ability for television programmers and operators to communicate more directly, personally and interactively with their audiences and customers makes 2012 quite different from 2008 – even though the key sound bites: “Viacom wants too much money,”  “DirecTV/Time Warner Cable is taking your channels away from you” may sound the same.

Who”s the Enemy?  Who’s the Friend? - January 1, 2009

Cable operators and TV affiliates complain when programmers put content online. Programmers put content online because that is where viewers are going. Music producers ignored this “where I want it, when I want it” trend, seeking to protect their business model, and were leapfrogged into impending demise by iTunes. NBC Universal cites Hulu as a huge success story, but CEO Jeff Zucker fears that the web will turn “analog dollars” into “digital pennies.” Online ads may garner high CPMs and may be growing at rapid rates, but they are still dwarfed by broadcast.

Viacom, owner of MTV Networks, has for years sought to create a “360 degree” media presence that hinges upon the Internet. They now have a huge army of digital employees. Cable operators complain that hits like “The Daily Show” and “The Colbert Report” are available in long form on Hulu. But who is benefiting now?

Viacom is asking for a 25 cent increase in monthly subscriber fees (25 cents more per subscriber per month) from Time Warner Cable across 18 Viacom networks. Yesterday, a crawler at the bottom of the screen for each of these networks warned of an impending blackout at midnight. (I rushed home at 1:20am to see the blank screens, but alas no MTV Armageddon.)

Now I watch Comedy Central more consistently than any other non-premium cable network (I love my Showtime – twisted as it may be), and my loyalty to the two programs above is on par with that for broadcast network programming such as “60 Minutes” – most other programming (“Eli Stone,” “Grey’s Anatomy,” “Ugly Betty”) comes and goes. I am proud and embarrassed to say that I get most of my news from Mr. Stewart and, to some extent, Mr. Colbert. So, what will I do if Viacom goes dark? I don’t envision doing much.

First, I don’t watch any of the other MTVN networks. I used to admire Viacom for its segmentation strategy, i.e., different networks for different age demos, but now what that means — for me as a single New Yorker, at least — is that I watch only one of their networks. And, as mentioned above, the two programs I count on are available on Hulu. In fact, Time Warner Cable is promoting to its subscribers where they can access Viacom programming online should it go dark on TWC. So, to whose advantage is the online platform now? Ironically, Viacom has made itself less indispensable to TWC – at least in the short term.

It reminds me a bit of our strategies in the middle east. We train the enemy of our enemy, even though that force was or could become our direct enemy. A bit of an extreme comparison, perhaps. But the question remains – to whom is the Internet a greater threat and for whom is it a greater advantage? Programmers? Distributors? Both? Neither?

Business minds around the world have not yet come up with a way to turn the enormous value of the Internet into a tangible, substantial monetary value. True, digital broadcasts of the Olympics, of SNL (Tina Fey) and of prime time programming do drive stronger TV viewing of these programs — something that was not necessarily anticipated. But, what is the long term business model? How can the television industry identify and transition to a new business paradigm? And, how will they accomplish this in light of existing carriage contracts and – even more specifically — Most Favored Nation (MFN) clauses that make change even more cumbersome?

Always On: 2011 in review


The WordPress.com stats helper monkeys prepared a 2011 annual report for this blog.

Here’s an excerpt:

A New York City subway train holds 1,200 people. This blog was viewed about 6,800 times in 2011. If it were a NYC subway train, it would take about 6 trips to carry that many people.

Click here to see the complete report.

 

As of April, I am now trending more than 1,100 views per month.  Thank you, everyone for visiting and reading.  You are my FAVORITE kind of person!

 

You’ve Been Placed. And You’ve Been Spotted


Product placement has become to video what social media is to media.  It is intrinsic to its fabric.  It has become second nature.  It has become indiscernible.  And that is why I continue to enjoy observing and calling out the placements I spot.  Here is my third installment.  (Stay tuned for more.)

  • Colbert and Wheat Thins: Colbert coins the term “Sponsortunity” on an episode in which he reads at length from the branding memo for “Wheat Thins” that only someone in brand management could have written.  A real treat and must-see for those in marketing.
  • Diet Coke: Diet Coke seems to have used product placement in its own ad (“Not All Stars Appear On Screen”) during the Oscars.  The commercial shows the evolution of a film from script to production with cameo appearances by Diet Coke cans, e.g., in the hands of the writers and those producing the film and placed on the shelves of the door to the sound stage.

  • Apple: I find it so interesting to see which programs use Apple computers but cover up the otherwise highly visible Apple on the back of each device.  Example: Two and a Half Men.  Clearly, the producers like the aesthetic and how it fits with Ashton’s character, but, I guess they did not strike a deal with Apple, so they cover up the fruit.  Other shows go all the way – do they get paid for that?  In Showtime’s “House of Lies,” the consultants use Lenovo Think Pads.  I would expect no less (and it makes me cringe a little when I think back to my pre-Mac years).

For more examples, check out: Place the Spot, Spot the Placement and Spot the Placement, Place the Spot.

The Australian Open – Two Weeks with Rafa, Roger, Novak, Layton and Jelena


As Eli Manning declares his plans to visit Disneyland, and New Yorkers bask in the afterglow of our ticker tape parade, I am still recovering from two intense weeks that were the Australian Open.  (That’s tennis for those less obsessed than I.)

Thanks to ESPN2 and my Time Warner Cable DVR, I awoke every morning for two weeks to a Christmas morning of sorts, full of 10 some hours of tennis coverage.  Putting aside the incredible athleticism, the fit and attractive main characters and the fashion considerations, just the fact that I had a window into beautiful summer weather made the tournament an uplifting addiction.

But there was more to it than that.  When you spend so much time observing the drama that was those two weeks, it is only natural to have thoughts that beg to be shared.  Shared with someone.  Friends, yes, but also, my blog.  (In great part because I have not had a chance to write in a while, so this offers great inspiration.)

So, some observations.  We know that psychology is important to sports and that tennis, in particular, is as much a head game as a game of skill.  In fact, I had the opportunity to have dinner with Tracy Austin a few years ago at which time she acknowledged that a primary reason she won her first U.S. Open is that she was too young to know what a big deal it was.

So back to the observations.  Andre Agassiz observed that tennis is like life.  And like Russian dolls.  Points make up games.  Games make up sets.  Sets make up matches.  Matches make up tournaments – in the same way that seconds make up minutes, make up hours and so on.  And what I find so interesting is that as hard as you fight for a particular point or game or set, when it is over, you are back to square one.  A set won 6-0 is equivalent to a set won 7-6 in a grueling tiebreaker.  Hence, when a match is tied 1-1, it is completely equal.  Except for this.  The player who won the second set is pumped, even deliriously happy as when Nadal fell to his knees after winning the fourth set of the finals.  And the player who won the first set, who came out of the gate flying, is dejected, frustrated, even angry.  I noticed this especially when the young 21-year-old Canadian player Raonic was playing the “old” 30-year-old Layton Hewitt.  Going into the break between the second and third sets, Raonic looked distraught and Hewitt invigorated.  But, from a scoreboard point of view, they were equal.  That’s what they mean when they talk about “momentum.”

What else?  Well, if it is not already the case, then Novak Djokovic’s girlfriend (Jelena Ristic) needs to be approached by a clothing manufacturer or designer for product placement.  All the players have logos galore, but she, who seems to be on screen more than anyone other than the two players, is left to her own impeccable taste to decide how to dress.  (By the way, she’s gorgeous if you were not aware.)  This is a missed sponsorship opportunity.

And, how about those tennis fashions?  For some reason Adidas felt compelled to subject those they sponsor to a disturbing combination of peach and coral that even men on the courts in Central Park remembered two weeks later.  My nephew, who plays wheelchair tennis competitively, tells me it’s because the manufacturers want to show off bright colors at this first summer event.  But I found it cruel.  It took me a while, by the way, to understand why so many players were wearing the exact same dress or style.  At first I thought they might be from the same Eastern European nation.  Then I realized it was Adidas.  I imagine they feel that by having multiple players, who may not make it very far into the tournament, wear the same outfit, they get similar air time as they would if a highly seeded player wore it for many rounds.  That said, the fact that the women’s tennis has become a game of “your guess is as good as mine” makes it hard to predict who might actually have significant airtime.  Even Sharapova, who made it to the finals, went down in a quite brief 6-3 6-0 match.

But let’s get back to Nadal.  Nadal has become my inspiration.  Yes, he’s cute and cuddly and muscular and fit and a magnificent athlete… wait, where was I?  Ah, right, inspiration.  As one of the commentators observed, Nadal plays every point as if it is match point.  No matter how unlikely it seems that he might win – as with the, sigh, U.S. Open of last year, he will never lose hope.  He will never stop fighting.  If Nadal (oh, and Djokovic too) can play a 6 hour final match, then I can (in theory), run for 45 minutes on the treadmill, or hold that tortuous yoga pose until the instructor lets me (please, for G-d’s sake) move on.  So, somehow, even when Nadal loses.  (And, don’t get me wrong, I’m still in mourning for this year’s final), I feel somehow inspired.

To expand upon that point, I have friends who are not Nadal fans.  I don’t fully get it, but it’s true.  Many are Federer fans.  And I can appreciate that.  He’s a class act.  But it does make me wonder what makes someone a Nadal fan and others a Federer fan.  (Putting Novak aside for the moment.)  They are, after all, different.  Nadal is wearing bright swaths of color.  Lime green and sporty blue – on simple (high tech) t-shirts.  Federer’s shirts all have collars.  (Federer has Rolex as his sponsor.)  But I love Nadal.  He’s PASSIONATE.  And he’s physical in a warm way.  When Federer first lost to him and was crying, Nadal put his arm around Federer’s neck and his head on his shoulder.  (I could die!)  When Nadal passed Novak on the grounds of the Ossie open, he patted his back rather than just shaking his hand.  It’s these little things that appeal to me.

So, back to fashion.  What’s up with the mismatched yet coordinated wristbands.  One blue, one white.  One black, one red.  I don’t know.  I can’t think of the colors, but it’s a thing.  Someone ordained it.  They take the colors from the tennis outfit and break them out into two wristbands.  This meant, of course, that when Novak switched from his white shirt to his black shirt in the second or third set – also an interesting move – his blue wristband didn’t make sense, as it was not reflected in the shirt.

So….  what was supposed to be a quick post feels like it could go on and on – much like the 6 hour final, so I must end it somewhat arbitrarily and abruptly.  I hope you’ve enjoyed my tennis musings – brought to you thanks to the coverage of ESPN2 (and the Tennis Channel) and the DVR functionality of Time Warner Cable.

‘Tis the Season of the Webinar (and Conference)


Autumn is here, and  with it, a plethora of webinars, seminars and conference.  My dance card is filling up.  Here are some recent and upcoming events:

Upcoming:

A Millennial Perspective  on Diversity & Multiculturalism” – American Advertising Federation – November 9th, 2011 – various locations throughout the country

Recent:

The State of Mobile Commerce - Are You Meeting Your Customers’ Mobile Experience Expecations? – webinar – November 2nd, 2011 – NYC

Featured speakers, Sucharita Mulpuru, Vice President, Principal Analyst from independent research firm Forrester Research, Inc., and Compuware APM CTO, Steve Tack discussing:

  • The current state of mobile commerce and key mobile trends
  • Why tablet owners are a key component of mobile success
  • Common mistakes that prohibit companies from capitalizing on the mobile opportunity
  • Best practices to deliver quality mobile web and application experiences to smartphone and tablet users
To view the webcast slides, click here

 

Advertising Week NYC – October 3-7th, 2011

Advertising Week Videos available HERE.

Future of Media Forum – October 5, 2011

MediaPost’s Future of Media Forum brings to life MEDIA magazine’s annual “Future of Media” issue by gathering together prominent executives and intellectuals from all facets of media to discuss, debate and opine about the Media Industry’s future. This intriguing roundtable discussion — moderated each year by a noted industry journalist — will take place October 5th during Advertising Week at New York University’s Kimmel Center, hosted by the NYU School of Continuing and Professional Studies.

How to Effectively Leverage Customer Insight to Deliver a Superior Multichannel Customer Experience, October 13, 2011

By the American Marketing Association (AMA): “Voice of the Customer is not just about surveys anymore.  Customers are interacting with your brand through multiple channels including the website, retail store, contact center and even social media. You have to understand all of these multichannel interactions collectively to develop a complete Voice of the Customer.  Join us on this webcast and learn how you can easily gather and leverage data from all customer touch points to deliver a superior multichannel customer experience.

Learn how you can:

  • Collect real-time customer insight across channels
  • Discover and act upon emerging customer trends
  • Deliver a more personal and targeted customer experience
  • Increase customer loyalty and reduce churn”

The World Technology Summit and Awards, October 25-26th

“On October 25th and 26th, 2011, at the TIME Conference Center in New York City, many of the most innovative people and organizations in the science and technology world will come together for an historic gathering – the 2011 World Technology Summit & Awards (the tenth incarnation) – to celebrate each other’s accomplishments; to explore what is imminent, possible, and important in and around emerging technologies; and to create the kinds of serendipitous relationships that create the future.

The majority of Summit participants are either current WTN members (primarily winners/finalists from previous World Technology Awards cycles, as selected by their peers as those doing the innovative work of “the greatest likely long-term significance”) or 2011 World Technology Award nominees. A combination of keynote talks, panel discussions, and breakout sessions… and potentially-career-altering-networking opportunities over two days concluding with a gala black-tie Awards ceremony on the second night held at the United Nations.”


How IP Geolocation Can Turn Your Local Marketing On – webinar – September 28th, 2011

“It’s a proven fact that located messages perform better overall but there is a discrepancy when it comes to online ads.  Currently, online CPSs are far below their offline counterparts (TV, radio, direct mail), and this correlates to the fact that half of all advertising is bought at the local level but there is no scalable way to reach consumers locally online.  For brands, targeting consumers locally is an essential and effective part of marketing as 80% of consumers’ disposable income is spent on businesses within 10 miles of their homes.

Advertising networks and online properties are boosting efforts to engage in increasingly local campaigns as clients are requesting geographically targeted ads.  IP intelligence provides the ability for super-niche targeting, allowing brands to create/provide the most relevant and engaging adds as it provides unique information about web browsers.  This increases marketers’ ability to reach their customers by targeting both business type, and consumer location, IP intelligence provides geographic, demographic and business information so that brands can effectively reach customers online the way direct mail and billboard ads are used to work offline.  Marketers will be able to zero in on trends, demographic information and cultural aspects to best target consumers.

Key learning points that audience members will take away from this webcast are: What is the need for geolocation targeting?  What are the statistics of geolcation effectiveness on advertising?  ROI?  What are some marketing strategies that I can implement around IP intelligence?

Speakers: Miten Sampat, VP of Product Strategy, Quova.  Steven Cook, CMO, Co-CEO, i.e., healthcare.  Alli Libb, Moderator, AMA.”

OMMA Global – September 26-27th, 2011

And, uh, the aha is…


@adscientist posed the following question to me about Advertising Week’s overflowing goody bag of panels and presentations: “Did you learn a lot last week or did you look at it as a lot of obvious statements? I was looking for more insight than i got.”

His comment made me stop to think whether I could identify 5-10 true  “a has” from the conference. Here they are:


1. The ruling on the purchase funnel is not final.  Most agree publicly that the traditional funnel, e.g., awareness, consideration, intent, purchase, loyalty – or as I was taught in business school, AIDA: Awareness, Interest, Desire, Acquisition, needs to be updated.  The patch to purchase is no longer a straight line.  The funnel of choice seems to be the McKinsey oval, which you can view in my summary of the panel.   (No mention of the Forrester “path to purchase” in the age of social engagement – see below).   The key takeaways being that: (a) the process is iterative and circular (b) must include advocacy (b) many include “loyalty,” but that’s not new, that’s just “adoption.”  However, when we got to the TV panels, the upward and lower funnel nomenclature was still front & center.  A disconnect?

Figure I: Forrester Path to Purchase in the Age of Social Engagement

Figure II: Harvard Business Review – Traditional Funnel and McKinsey Consumer Decision Journey

2. I was incredibly impressed with Comcast’s Xfinity vision of how its subscribers will be able to interact with their cable TV menus and the ways in which it will connect to the digital world in terms of (a) broadcasting “likes” (b) finding out what friends “like.”  And, RADICAL, there will be KEYWORD SEARCH!  (When I asked about search functionality at an Advanced Advertising panel in 2010, I received a combination of perplexed and blank stares…) – See Graphic to the right

3. Everyone is on the Facebook bandwagon.  We’re convinced that consumers want us there, and, while I don’t necessarily disagree – after all, a truly successful brand is a “friend” to an emotionally connected consumer, I’m concerned that we may tip the scale and kill the golden goose.

It’s (a) about the balance of push and pull in terms of broadcasting info (b) the ratio of real people to brands.  If kids leave the service when there are too many adults, what will adults do when there are too many brands?

4. Brands are content creators.  This is not new – see Larry Kramer’s recent book C-Scape, Conquer the Forces Shaping Business Today and recall Coke’s Polar Bear campaign (ahead of its time, or pre cursing the future that is today?), but it was a major theme, which means that it is becoming more mainstream.

5. SEM and ad networks are getting more advanced.  Google has new multi-media listings.  aol, yahoo and microsoft are creating a three-way ad network.  Programmed trading (wait, are we talking about finance), is growing.

All for now except:

If you don’t have an iPad, you’re so not cool.  Get thee to an Apple Store pronto!  (iPads, like Facebook profiles of a few years ago, have reached a point where it’s not that you’re cool if you have one but that you’re NOT cool if you don’t have one.)

Place the Spot; Spot the Placement


I can’t help it! When I’m watching “The Big Bang Theory,” and Leonard’s “Mom” holds her soda can just a little too long and a little too high, and the can remains visible for 5 minutes of the show, then it must be a product placement. It’s a bit of a game, a bit of an art to spot, so I’m reopening my log of potential spottings. I hope you’ll join me.  (See also part I of this compilation:  “Spot the Placement; Place the Spot”)

  • How I Met Your MotherTed has already used Bing (the search engine) twice before the first commercial break.  Once to look up the route from their bar to a steakhouse where Woody Allen is eating and then to look up the website where people rate their professors. (October 11, 2010)
  • Big Bang TheoryFresca, Fanta, Fiji Water- in the lunchroom at work – all other beverages have no labels; Fiji water especially well placed – full on label exposure.However, watching episodes a year after I wrote this bullet, it seems that the product placement was there when the episode was new but not for repeats.  Is that possible (see below)
  • America’s Got Talent, June 22-ish, 2010 – Filmed at Universal Theme Park in Orlando.  As with Ugly Betty below, lots of opportunities for shameless promotion and touring of the park, e.g., the host on the rollercoaster or next to the Jaws shark.
  • Reality shows are fantastic venues for product integration.  The book “Buyology” has some great examples, however, about how brands can overshadow each other in programs like “American Idol.” 
  • Rules of Engagement, June 7th, 2010 – Kiehl’s moisturizer on Audrey’s nightstand. Could be for character definition. In any case, awfully prominent, as in the only thing on the nightstand, just inside the shot and positioned so that you could read the label.

    What do you think? Is Kiehl’s helping to define Audrey’s character, or is CBS helping to promote Kiehl’s?
  • Colbert Report, June 8th, 2010 – Colbert wearing a lab coat with a big Lexus logo on the back during piece about Consumer Reports.
  • Colbert Report, June 7th, 2010 – Microsoft’s Bing search engine agreed to donate $2,500 to a charity of Stephen’s choice every time he said the word, “bing.” The show raised $100,000 for the Gulf of America Fund.

  • Ugly Betty and the Atlantis Paradise Island resort – the December 4th episode was one long, albeit beautiful, advertorial for the Atlantis resort in the Bahamas, interrupted only by, well, ads for the Atlantis resort in the Bahamas. There was even an entire scene designed around the famous water slide. If it weren’t for the MEMORABLE footage of the dastardly but oh so hot Connor Owens wearing minimal wardrobe, it might have been too much. Ugly Betty is a great vehicle for brand integration. And I understand that the Latin American version, which takes place in an advertising agency, milks the product placement cow even more completely.
  • Big Bang Theory, September 21, 2009 – new Diet Pepsi can – 3rd act of “Big Bang Theory.” The can is – for me – one of five characters in the scene. 
  • Big Bang Theory, September 22, 2011.  Interesting to me that they drink Fiji water in the cafeteria but always have it facing the other way.
  • Millionaire Matchmaker: 2011 NYC season – interesting interstitial in which she goes on a shoe shopping binge at Jeffreys.  Seemed natural at first; then it made me wonder.  She likes dropping names.  She went with her stylus/make up artist friend.  I suspect she was promoting her as well.  Reality TV – the advertising gods gift to brand integration.
  • Chips Ahoy cookies in the new Planet of the Apes film.  A key plot element. (September 30, 2011)
  • Boardwalk Empire – Canadian Club. I saw a beautifully done window “billboard” on the glass of Beacon Liquor next to the Beacon Theater – has the appearance of being etched into the glass. (October 1, 2011) Arresting – at least to me – and despite unfortunate placement of window pane.  However, evidentially controversial:Through a marketing partnership with Canadian Club, which HBO calls “a brand authentic to the period,” the pay-TV network has been placing Boardwalk Empire displays and window signs in some real-world liquor stores and wine shops. The campaign also includes bar events, such as re-created speakeasies featuring a special cocktail menu. According to HBO Vice President of Brand Marketing Chris Spadaccini, the in-store displays feature crates of liquor with Canadian Club product and branding for the show. Some liquor store signs for the series have the appearance of being etched into the window glass.”Window displays are essentially street-level billboards, so these types of advertisements are helpful in reaching a broad audience,” Spadaccini said in an email about the ad campaign.But that approach — using liquor stores to target a wide range of consumers — marks what’s wrong with the campaign, according to David Jernigan, associate professor at the Johns Hopkins Bloomberg School of Public Health, and the director of the Center on Alcohol Marketing and Youth. “These are sources that children pass on the way to school. They can’t be turned off,” Jernigan says of the window displays, adding this campaign marks the first time he’s heard of a TV show advertising in liquor-store windows”See full article from DailyFinance:http://srph.it/hvwAiE
  • Yes… but they’re not showing alcohol in the displays, just club soda.  Thoughts? 
  • Glee and the Gap: The Feb. 8 episode of “Glee” had an extensive musical scene set in a Gap store

  • Revenge TV Show promoting itself within bars and restaurants in the Hamptons – where the program is set
  • I don’t believe that premium channels like Showtime sell product placement opportunities.  However, if they did, I would spot a lot – including Dexter’s altercation with a Nescafe coffee machine.  (Is Nescafe still around?)
  • Colbert, Colbert, Colbert.  He is the king of product placement.

For more examples, check out: Spot the Placement, Place the Spot

Fool Me Once… Weather.com, Tennis and the Notorious Irene


5-Day ForecastA few short years ago, I played tennis once a year, in Montauk, with my mother. That has changed. A quick count of the dots on back of my Central Park Tennis permit shows 24+ visits to the courts beginning in June when my physical therapist gave me permission to return to the clay following my trapeze injury in December…

In any case, the point is that I have become, one might say, obsessed with tennis. And, as such, I have become similarly preoccupied with the weather.com iPhone app (despite the fact that prior versions have been known to do all kinds of weird things to the phone, including crashing programs and the overall device). Often the first thing I do – before getting out of bed in the morning – is check the weather: current, hour by hour, day by day, and, as of this weekend, severe alerts and videos. And I have been known to repeat this process many times throughout the day

I have come to learn a number of things. First, as I should have recalled from my education in statistics, % likelihood of rain is a misleading statistic. 80% chance of rain – or even 100% chance of rain, as is predicted for Sunday – does not mean that it will rain all day. In fact, a 5-minute passing shower fulfills the prediction of rain but does little to impede my tennis other than causing me to regrip my racket more often, and to consider leaving my iPhone in my locker.  (In fact, the photo to the right was taken first thing in the morning on a day that included hours of tennis that very afternoon.)

I’ve also learned – much against my nature – to be optimistic. 30% chance of rain, as my friend Gary pointed out, means 70% chance that it won’t rain.

So where does this leave me on the eve of Hurricane Irene’s visit to the Northeast corridor? Unfortunately or fortunately, I feel skeptical. 100% chance of rain on Sunday has, in fact, compelled me to cancel my plans to go to the US Open to watch the players practice, and has motivated me to select an indoor venue for my birthday dinner – despite my publicly stated summer birthday policy. However, 4-11% chance of a hurricane and 72% chance of tropical storm conditions has not “at this point in time” deterred me from going forward with said birthday plans, or inspired me to give up my prime parking spot to return my car to the garage.

I hear warnings and forecasts on New York One and from friends and family on Facebook – including one in Hong Kong, who implores me not to underestimate the storm. But I look at the maps and zones and am not convinced. Nor are my porter and doorman. So, I’ve decided to be a weather optimist – at least for the moment. This is not meant to be a recommendation for others in more precarious situations, and, well is subject to change, but I’m curious to see how this weekend unfolds… so much so that I’ll surely be closely connected to my weather.com app – at least until the cell towers get knocked out and I run out of power….

Capturing Value of Digital Products and Services – Guest Article


The article below is a guest posting by my colleagues at the price segmentation and strategy firm Abbey Road Associates

I have worked on several projects with Abbey Road – and find them to be brilliant.  Enjoy!

Authors: Rob Docters. Partner, Abbey Road Associates, Susan Bednarczyk Partner, Abbey Road Associates, and Lisa Tilstone, Market Researcher.

Pricing in the Digital World

Many incumbent content providers, manufacturers, and service providers view digitization as a threat to revenue and profitability. An illustration is the oft-quoted admonition not to “trade TV dollars for Internet pennies.”1 While the

evolution of content, services, and software to digital formats can indeed destroy a traditional business’s profitability– often it is poor transition pricing that is the true culprit.

What are typical concomitants to digitization? In product terms, there tends to be at least half a dozen changes, including:

  • Splitting of content from services, including splitting purchases by vendor and category
  • Sort products into categories and re-bundle them — Easier to embed different content and functionality — Faster service and greater transaction timeliness — Disintermediation between users, buyers, seller frontlines, and product management.

Often these changes lead to a significantly improved range of consumer and B2B choices. The expectation among product developers is that customers will be gratified with these new choices. However often customer satisfaction actually suffers due to user unfamiliarity with the digital distribution platform or vehicle (e.g. application software). Also, complai

nts may also increase because digital Millenials tend to complain more.

We find that digitization often leads to splits in the customer base, between technology- savvy and tech-resistant market segments. Some of this is partly due to user attitudes, but often management forgets that a move toward digitization is often not a cure-all or even an improvement that will satisfy all customers. For instance, most readers (of any age) still read about 20% to 30% faster on paper than on screens2, and complex digital systems can under-perform physical or analog goods in quality or reliability. For instance reliability is why Boeing continues to allow pilots to override digital “fly by wire” controls of the aircraft—Airbus design does not, which has triggered extensive discussion about safety.3 A final example: most audiophiles recognize that vinyl LP records out- perform CD recordings — and certainly outperform MP3.

Management and project teams should keep three principles in mind as they develop and tweak pricing strategy to make money in a digital world:

  1. Segmentation needs to reflect market evolution in a realistic manner. Digitization is usually not a revolution; rather, it is an evolution. Almost every company over-estimates the rate of change and spends insufficient time and attention on the lagging non-digital segment. Ironically the lagging segments are often the most profitable. In legal publishing industry, for instance, the legal book business contributed more margin dollars than the electronic side of the business until the early 2000s—far longer than publishers expected.
  2. For the digital world, the “unit of charging” must change. So instead of dollars per mile/per book title/per movie/device etc. the units of charging need to shift to dollars per digital event, or per application, or per user, or per use, or whatever fits the digital market. For instance, a new manufacturer of retinal eye-scan devices changed the playing field by pricing its start-up digital analytic product on a per-use basis, while traditional film-based eye scan incumbents continued to focus on selling and pricing entire devices.
  3. The cart can come before the horse. Where there is a multi-element (sophisticated) sale, changing the lead element can make all the difference. A new school textbook entrant, for example, successfully entered the market by giving away teaching guides before the textbook adoption contest, which built awareness of and teacher loyalty to a new brand. This strategy enabled the new entrant to sew up the school adoption contest by the time buyers started formally reviewing and evaluating at the actual books. Free is more often an option in the digital world due to lower incremental costs, and so add-ons can precede the main product.

Management may have concerns about digital pricing because often pricing has eroded with digitization. Will your digital prices go up or down? The answer depends partly on supply and demand, and partly on management’s execution. We often find that management does not consider supply-and-demand factors and market evolution before making investment decisions. When the right factors are considered, the resulting roadmap can provide valuable strategic insights, as in the following example.

In a 1996 study, we considered two dimensions that were likely to affect a cable client’s core business — how the advent of digital content creation would impact content pricing and how network development would impact distribution pricing. Our results accurately foretold our client’s actual margin results for the next decade. As digital technologies made video content production easier and cheaper, the supply of content expanded. Relatively slower growth of fiber networks and conventional content distribution mechanisms (e.g., movie theatres) meant that demand grew slowly. The prescription of higher supply and lower demand of content foretold lower video content value and margins.

This forecast was in fact realized in the fortunes of content producers. Movie studios, networks and music producers, who were minting money in the late 1980s (e.g. Viacom, Paramount, BMG, and EMI) saw declining margins over the next decade. At the same time, content distributors, such as cable companies, saw margins grow throughout the 2000s. Newspapers, who faced increasing competition/substitution for their content, combined with a medium in decline, suffered the most.

Although this was the state of play in the ‘90s/early 00s, the future looks different. Many sectors that have already shifted toward digital production of content will no longer experience the same increases in content. Conversely, the number of distribution channels is what is expanding. Most major content providers have established digital footholds and have reallocated resources toward branded on-line sites, social media such as Twitter and a mobile presence in addition to their traditional distribution channels. (An interesting question is how much “content” will be generated by the new social media —is social media a net plus or minus to content versus distribution? The answer depends on the market sector.)

We suspect that with the rise of Internet video distributors (e.g. YouTube and Netflix), collaborative sites such as Wikipedia(4), and social networking sites, the supply/demand balance will shift again as Internet distribution proliferates. If distribution continues to expand, we would expect the value of most distribution channels to fall over the next few years. Flat supply and increasing demand (distribution) means that the value of content may rise again.

Managing digital segmentation in this evolving digital world can seem like a simultaneous civil war plus world war with competitors. Internally, typically there are two camps: one that sees digital products as the future, and the other camp which continually reminds the other that the lion’s share of earnings still depend on traditional products. Depending on the stage of evolution, one side of this civil war usually succeeds in killing the other, to the detriment of shareholders. The winning approach is to avoid putting the both camps within the same chain of command. Bell Canada, for example, found many of its acquired digital businesses (e.g., GeoCities) systematically hamstrung by management after they were subsumed within the more traditional, higher margin Yellow Pages line of business. In contrast, Microsoft separated out Xbox management from the traditional computer side of the business, and grew both.

In consumer markets, we find that poor segmentation often exacerbates pricing, particularly when products are sold internationally. Price levels differ by country due to differences in income (demand) and the number of competitors (supply). For a mobile telephony application, we found that prices ranged from an index of 100 in the US, to 122 in Germany, to 89 in Italy.(5) In less developed countries, the index fell to the teens, yet some global vendors fail to vary prices to the optimum of local price. (Of course there are limits to variance due to re-import “gray goods”, but the price tools can optimize that trade-off also.) Nor was the problem of price variation limited to global marketing. Within the US, similar mobile telephony price differences were apparent between college campuses and working Millennials– again reinforcing the need to segment via price structure. Such optimization is not conceptually different between digital and other types of goods; digital merely changes the thresholds.

How should a digital transition and segmentation be managed? We believe that the unit of measure for a digital product is the core pricing question – one that management often glosses over. Management must ask: what changes have occurred to what people are buying? A good example of creating new digital value is NBC News took old news archives and monetized them as educational video content. The measure of value changed completely, however: from viewers and ratings to per classroom licensing.

To succeed in the midst of digital evolution, pricing and product management should be joined at the hip. In the pre-digital world, communication, interaction, and understanding among product management, pricing specialists, and consumers was never perfect, but imperfections were rarely fatal. Each player could “kick the tires” (understand the product) and it was clear to all what was being sold. Today, that is not possible, often because the value of the product is set by its role in work flow.

For instance, the evolution in digitization of avionics (instruments for an airplane) has changed with digitization. In the past, the altimeter, navigation, communications, and other components would be evaluated by their individual accuracy and reliability. Today, these individual components have been replaced by avionic systems — integrated cockpit information systems, whose components are more similar in accuracy and reliability than ever before. Differences among systems lie in the sophistication of the package and numerous features (e.g. 3D synthetic vision, situation evaluation, error correction, etc.), which are not as easily compared in best-of-breed dimensions. Accuracy and reliability measures, which drove older instrument prices, eventually gave way to new dimensions linked to observable features (e.g. screen size, graphic capabilities, and backup). Equally, competitive contests were often determined by how well the overall system helped pilots fly their aircraft.

Increasingly, pricing changes in the evolving digital world are not feature-driven; they are context-driven. Our work for a leading financial information provider, for example, revealed that information was worth twice its normal value when it was fed directly into a portfolio trading program, versus when it was distributed to analysts and other human users.

Similarly in the B2B digital environment book prices are less and less decided on the basis of the book (hardcover/soft cover, length, etc.) but rather on how the information in the book relates to alternative media. In our work we have found that the better way to price, say, a $100 business reference handbook is to split the value of its content from the physical media (the printed volume). This suggests that B2B publishers and educational publishers:

  • Sell the content separate from the bound book. Example: if you are selling 100 copies of a technical publication at $100 to a large firm for $10,000 ($100 x 100 = $10,000 total), sell the content for $8,500 and the books for $15 each (100 x $15= $1,500.) This initially produces the same total, but we find it sends an important message resulting in additional sales. The message is: “The content is what is valuable, not our printing press.” Also, when companies seek electronic versions, they do not need to be re-educated on the value.
  • Charge on the merits of media. If you offer a value-added platform, charge for that value add. Often we find that supposedly “value add” platforms actually offer little value add (e.g. complex work platforms lose to simple mobile applications), and companies fool themselves where value lies. Hiding content value in an amorphous bundle with media usually destroys value; separating it out often liberates value—customers will punish vendors who appear to be “force bundling” elements. A 15-40% price penalty exacted by customers from unwanted bundling is common.
  • Don’t insist on the same unit of volume! Digitalization liberates you from selling by the book, the integrated software package, the record album, the cockpit instrument, or the TV spot. Clients are often afraid that this unbundling will reduce revenues, but often we find the opposite(6). The prerequisite to revenue gains are, however, solid understanding of market price drivers and bundle configuration.

Thus, whereas books, news feeds, and periodicals were all previously sold on a stand- alone basis, they should now be viewed increasingly as part of an overall content/media price structure:

Price drivers, of course, must be reflected in any execution plan to adapt the traditional business to the new. A key digital pricing question (related to choice of unit) is “scaling.” In the pre-digital world, scaling often took care of itself—that is, when information buyers needed twenty tax guides, they bought twenty tax guides. In the digital world, many users can make do with a single electronic feed. Thus, the question is: how can the feed be priced so that you capture the value of many users? Again, this should lead pricers to shift their pricing focus from the product (“How much is a tax guide worth?”) to the buyer context (context being: “How many tax professionals are being supported? Are they senior or junior practitioners?”) Poor scaling decisions have destroyed value among many service and information providers, including tax software, computer networking, maintenance and repair, and news gathering.

One source of revenue leakage is Digital Piracy, an interesting challenge. Some entertainment, business information, and educational publishers face an 80% or more loss of volume to illegal copying and distribution in certain markets and geographies. Such losses are often avoidable. Pricing can often play a role in combating illegal copying. How? To begin with: give users what they want. Several business-to-business information providers (e.g. energy, construction, legal) have found that simply allowing all customer employees use of information through enterprise pricing immediately eliminated cheating—and provided the information provider with an immediate uplift in revenue.

Another mechanism to eliminate illegal use and re-publication of digital content is to create a price mechanism that offers some elements of the product for free, but links other elements to a more defensible for-pay environment. The strategy is to make it less worthwhile and harder for users to cheat sellers out of revenues on higher-value elements of the product.(7) In the consumer market, an example is the two-level pricing for Microsoft Xbox Live where the Silver level of play is free, but to get to the more desirable (and harder to pirate) Gold features, payment is the easier option:

Another consideration that is crucial to pricing success — or at least a way to avoid a pricing disaster – is to make sure that product management and pricing proceed in parallel, an approach we consider a best practice. Pricing is often a reaction to product plans, therefore if the product management team is overly optimistic about digital adoption the price will be wrong.

Many companies estimating revenue from the new digital offer frequently over-estimate digital volume, and therefore set the price too low. Occasionally, for companies that link price to cost, the lower price may be appealing due to management’s belief in the myth that digital is lower cost. This is almost always wrong: our studies have repeatedly shown that in many cases digital is more expensive than legacy product when you include all costs.

To compound the digital product pricing error, sometimes management handicaps legacy product pricing. Annoyed with the burden of maintaining both digital and traditional products, management either cuts support for the old product, and/or raises its price materially to “harvest” that product (and perhaps to pay for new digital development). The result? Material under-performance of the digital product, due to premature release and inadequate support– and fatal harm to the traditional product line.

Unless your company has matured as a digital product developer, the better approach is to let the market decide, and to separate the price and product development on your existing product lines. Give both digital and non-digital products their best shot. This approach actually requires less effort than reorganizing all the resources to emphasize the new digital product. Typically, established products run on longstanding momentum. You don’t need to kill the old to optimize the new– the market will do that when (and if) it wants.

In some sense, digitization has changed none of the fundamental rules of pricing— pricing should always reflect market price drivers. However, the penalty for maintaining “business as usual” pricing has grown with digitization. Price structures developed over decades to fit an older generation of products cannot be relied upon to perform in the new digital world. Digital price drivers (i.e., factors in the market that shape the structure and level of digital offer pricing demanded by customers) will penalize companies who do not think through the logic.

“Price benchmarking” and trying to apply rules from other companies whose strategies and value offerings are different from your own is not usually a substitute for understanding digital product workflows. Sadly, many digital pricing benchmarks can be behind the times, or focused on a different kind of market segments with different drivers. Digital requires understanding of your consumer needs and business customer context.

SIDEBAR TO GO NEAR BEGINNING OF THE ARTICLE:

Scope of digitization

Digital native Wikipedia defines digitization as “the representation of an object, image, sound, document or a signal (usually an analog signal) by a discrete set of its points or samples.” This definition further notes that the benefit of digitalization is allowing “information of all kinds in all formats to be carried with the same efficiency and also intermingled.”

True, but we would go much further: digitalization goes beyond information to decision logic and automated actions. Although the more publicized impacts of digitalization have involved information, digitalization has also revolutionized devices, manufacturing, tools, and services.

Direct impacts of digitization include many physical operations. Temperature controls, program trading, alarms and controls, professional services and logistical management have all been transformed. For instance, trucks and tankers are programmatically redirected as a result of electronic energy trading; building temperature controls have moved from stand-alone mercury thermostats to integrated computerized systems. Even already-computerized devices, such as telephone company central office switches, are now commanded via distributed digital networks that react to user needs automatically.

Digitization also has indirect impacts. The digital solution often competes with pre- digital solutions – the new applies pressure on the old. That competitive battle requires competitive pricing. For instance, new digital analysis of geophysical sub-surface structures has allowed a new generation of oil exploration analysis. However, older techniques in use by major exploration companies will not go away instantly as these incumbents offer more complete exploration services (e.g.: drilling of exploratory wells.) Both sides in that contest must adjust to the digital advance.

Bios:

Rob Docters is Managing Partner at Abbey Road Associates, a leading price strategy consultancy. Rob is author of Winning the Profit Game: Smarter Pricing, Smarter Branding (McGraw-Hill, 2004), a leading book on price strategy. Rob teaches pricing classes at Columbia University School of Business. He can be reached at robdocters@abbeyroadassociates.com or on 203/972-0000.

Susan Bednarczyk, also a Partner at Abbey Road Associates, has consulted to media companies, telecommunications providers, and large multinationals on successful pricing strategy, product development, and customer segmentation in new ventures and emerging media.

Lisa Tilstone conducts Market Research on consumer insights and trends. She performs market research in the publishing/periodical industry. Lisa graduated Cum Laude from Ithaca College with a degree in Organizational Communications Learning & Design.

Footnotes:

1. Variously attributed to Rupert Murdock, head of News Corp, and to James McCaffrey, Chief Strategy Officer, Turner Broadcasting. The comment has also been rephrased as “paper dollars to digital pennies.”

2. Dillon, A. (1992) Reading from paper versus screens: a critical review of the empirical literature. Ergonomics, 35(10), 1297-1326

3. The Federal Aviation Administration (FAA) of the United States RTCA/DO- 178B, titled “Software Considerations in Airborne Systems and Equipment Certification.”

4. For instance, 1.8 people learned of Michael Jackson’s death via Wikipedia within hours of his death—well before traditional media broke the story.

5. See Rob Docters et al. Winning the Pricing Game. Smarter Pricing, Smarter Branding. McGraw-Hill 2004. Pages 208-210

6. Rob Docters et al. “Bundles with Sharp Teeth,” Journal of Business Strategy, vol. 27, No. 5, 2006.

Abbey Road Associates, August 2010 Page 12.

7. Ibid. Also see Rob Friedman, Leandro Mule, “Relationship Pricing: The Next Revolution in Retail Financial Services Marketing,” The Journal of Professional Pricing Society, 2nd Quarter 2010, vol. 19, No. 2, page 13.

Abbey Road Associates, August 2010

Going Out or Getting Glued? – the newest must-have social app



 

I’ve just met the Mayor of the digital agency where I’ve been working. She recognized me as I was eating my 4-Minute FreshDirect microwavable meal and said, “I see you’ve been checking in on foursquare.”

Game on?

Actually, she seems quite nice, and I’m not just saying that because she might read this.

Evidently, there is a little bit of history behind the mayorship here. There was someone who held the post for some time, whilst three others competed to oust him. Finally, two of the competitors gave up and stopped checking in completely. Meanwhile, he left the agency, and hence the keys were passed to the woman I met by the microwave.

As we continued to chat while she heated up her Parmesan meatballs, I asked whether she was also a user of Get Glue, which she said, seems to be especially popular among her friends on the West Coast.

From what I can tell, GetGlue is foursquare for people who don’t leave their homes/apartments. You get to check in to entertainment activities like TV shows, like them and rate them. Lordy!

Specifically, as the founders describe it on their site, “GetGlue is an innovative social recommendation network for movies, books, and music. The GetGlue website provides a recommendation stream based on personal tastes, what friends like, and what’s most popular right now. The GetGlue browser addon brings filtered friend reviews, personal recommendations, and contextual content to popular sites around the web, such as Wikipedia, Amazon, IMDB, and hundreds more.”

You can use GetGlue by visiting the GetGlue.com site, by downloading the browser add-on for use on pages around the web, or by downloading the iPhone app. When you visit pages about books, movies, music, etc. you can click thumbs-up or thumbs-down on things you like or dislike. GetGlue will then suggest books, movies, music, etc. based on your personal tastes and what your friends like.

Evidently, the online/mobile application/website experienced 800,000 ratings/check-ins in the six days following the launch of its iPhone app, which, I’m told, is a big deal. One of the founders wrote recently that the lion’s share of the 800,000 number is ratings with check-ins averaging 1-5 per minute.

I started hearing about getglue a few weeks ago and in just the last 24 hours, it’s been ALL OVER Twitter. I guess I’d better give into peer pressure and download it. Plus, it sounds good because I consume a lot of media, e.g., tv… so it should be interesting.

I don’t think it would be so good for Dennis Crowley though. He seems to use foursquare predominantly when he’s out and about – and doing exciting things like watching the Spain-Germany World Cup match. Am I jealous???? Well, ok, just a little.