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Saturday, 4 October 2014

Comcast and TWC again...

The media mega-merger of the fall is far from being a forgone conclusion. And it will coincide with FCC rulings on net-neutrality, a topic closely related to the debate on whether Comcast should be allowed (or not) to acquire TWC. The core issues are nicely summarized in a recent article by The Economist, that paints a particularly worrying picture of Comcast's lobbying techniques. Yet is this really such a big deal?

Nobody doubts that Comcast will have even more power than before. But, it is not clear how much more. It has too much power already today. But where is this power coming from? Its size? Hard to believe. 40% share is not that large even if it dominates 10 of the largest metropolitan markets. Some content providers have much higher shares (think of ESPN). Moreover, cable providers have always been local monopolies for it doesn't make sense to duplicate infrastructure. Is Comcast's power coming from the fact that it is backward integrated? Again, not clear. While it owns all kind of content assets, there are powerful channels outside Comcast with huge negotiation power. And let's not forget that vertical integration should lead to lower consumer prices as double marginalization is solved. Then, what is the problem? I think that the problem is the lack of competing technology to cable. Telecom firms have terrible infrastructures in the U.S. and this, even in large cities. AT&T, and its (few and large) competitors have failed to invest in broadband as did satellite (although the technical difficulties are bigger here). The real solution to curbing Comcast is to make sure that there are proper incentives to invest in alternative broadband technologies.

Thursday, 2 October 2014

How to use location data for marketing

With the explosive growth of mobile devices and usage, advertising dollars are quickly moving to mobile. However, the return on this ad spend is questionable partly because marketers have a hard time figuring out how to effectively use consumers' location information. "Geofencing", the idea that a consumer can be attracted to a store or service when s/he passes in its proximity is an obvious solution but this may not work for a variety of products (large ticket, high involvement products for example). We explore an alternative use of location data here, that makes use of people's movement patterns and their similarities to infer inherent consumer characteristics. It is exciting to see that so much can be inferred from simple movement paths. There is a lot more to come in the area of geo-location for marketers.

Wednesday, 1 October 2014

NYC Media seminar: Radio mergers

First, an introduction: on the first Wednesday of every month I and Lisa George from Hunter College organize an academic seminar in downtown NYC. The seminar is hosted by the Associated Press. The topic is media broadly defined. We tested the concept last year and it worked so we plan to continue. The line-up of speakers for this year can be seen here.

Today was the first talk by Przemyslaw Jeziorski, from Berkeley, Haas. The topic was the impact of the 1996 deregulation of radio station ownership caps on M&A activity. Fantastic paper, great data and careful methodology! The conclusions are also very interesting. Deregulation seems to have resulted in significant increases of social surplus (mostly reflected in higher radio revenues due to increased market power and presumably lower costs as a result of scale). Moreover, there is convincing evidence that simple rules (e.g. an owenership cap) work better as firm's can 'game' the regulator's more complex intentions.

Friday, 5 September 2014

Chinese media landscape

The Chinese media landscape is quite fascinating. Far from being copycats of western media companies (that once they definitely were) today's Chinese media companies have introduced a lot of innovations tailored to the local market. Alibaba (to be listed on the NYSE next week) is a hybrid of Amazon and eBay but also owns part of a social network (Weibo), similar to Twitter that is meant to facilitate communication between buyers and sellers. It owns a bunch of other related businesses: media content, retail and navigation - see a list of recent acquisitions here. Interestingly, its revenue model is also different from its western counterparts (mostly based on advertising rather than transactions fees). Similarly, Tencent, China's largest social media site was originally shaped after Facebook but is a very different social network today. It's WeChat mobile messaging system is a full blown social network, very different from Facebook's recently acquired WhatsApp. WeChat dominates China (is also successful in other countries) and has successfully integrated mobile payment, e-commerce and hosts a lot of content that members are paying for (e.g. games). China has a bunch of successful online video streaming companies (the largest is Youku Tudou parly owned by Alibaba) that produce their own content rivaling the established state-run TV and movie industries. The decade-long evolution of the industry has been strongly influenced by the government's industrial policy. On the one hand, the government has always exerted strong censorship making companies' lives harder. Yet, it has also been careful to protect Chinese media companies from their western rivals. A recent rule limiting introduced to limit western content on Chinese sites to 30% of airtime is a good illustration. While it creates disruption for distributors, it greatly helps local content developers that often reside under the same corporate roof.

Friday, 11 July 2014

Global Advertising Market in 2014

Last year I compiled two charts on global ad spending and they ended up getting a lot of attention. The data is broadly available but somehow it is hard to find good charts that summarize well this information. The planet hasn't changed that much from 2013 - the US still dominates the roughly 550 billion dollar global market by size (far ahead of Europe) while growth is in the developing world.

More interesting is the division in terms of the type of advertising. Digital has surged ahead faster than expected and the real division between digital ad types manifests itself in terms of whether the ads are served on a mobile device or on desktops. Last year, people were much more concerned about the contrast between search and social media spending. In this sense, this year will probably mark the big transition to mobile advertising. It is also important to note how well TV is hanging on to its share of advertising budget. Print, as expected, continues to decline (although not as fast as some thought).

Thursday, 26 June 2014

Aereo ruling

Well, the courts have spoken and - in my mind - were reasonable: Aereo is obliged to pay retransmission fees to the boradcasters. A summary of the case can be read in today's FT article. Some more clarifications can be read here.

Why reasonable? Because Aereo's capacity to charge such a low price to consumers is really only based on a specific interpretation of the current law concerning retransmission fees. It would have been unreasonable to allow Aereo freeride on the broadcasters content when cable networks have to pay billions for it.

Whether the existing law makes sense is another matter... If the broadcasters' model is based on free content for advertising why have the retransmission fees in the first place? With time, all content will move to the internet, which will be available anywhere (it is almost the case already). It is not clear then that we need broadcasters at all (in the sense of using radio waves to deliver content). In fact, many of them are part of large media conglomerates wondering about the future of the TV ecosystem. Broadcasters in their original form are likely to be the past...

Wednesday, 14 May 2014

AT&T and DirectTV merger

I am puzzled by the recent news about the possible merger of AT&T and DirectTV. My conversations with colleagues didn't quite erase my doubts that this, roughly $50 billion deal doesn't make sense. There are no obvious technological synergies. While AT&T will gain some 20 million satellite subscribers, it will not be able to integrate this customer base with its own (roughly 5 million) video customers. So no real gain in terms of scale either. On the operations side, again, not clear whether costs can be taken out of the combined system. Five times more customers will make it easier to negotiate content deals but does this marginal impact justify the huge financial transaction and associated management challenges? It is not clear. VOD is a big and growing business. It is also clear that consolidation is needed as the landscape is quite fragmented. But this particular combination doesn't strike me as the right one.