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Friday, 12 December 2014

Google's European battles continue

It is actually pathetic how far European regulators are capable of ruining their economies. The recent decision by Google to shut down its news service in response to the Spanish government's idiotic new law shows the extent to which politicians are captured by the local press. The law actually forces publishers to charge Google for linking to their sites, in other words, publishers are not allowed to let Google report their articles for free. No doubt the law was inspired by the German experience (where powerful national papers were also bullying the government). In Germany many papers opted out of charging Google. Spain forces the publishers to charge Google with a minimum fee, essentially creating a powerful newspaper union. Not only does this protectionism hurt the economy, it also weakens the government that is - evidently - already at the mercy of the national press.

Monday, 8 December 2014

Facebook Ad effectiveness

The past year's media covering Facebook's prospects as an advertising medium have been full of contradicting information. We heard that youngsters are turning their backs to the platform and that people are fed up with Facebook's lax privacy policy. On the positive side, members ended up more than tolerating Facebook's strategy of putting, so-called native advertising in the newsfeed and markets appreciated the smooth transition of ad revenues from desktop to mobile. Overall, Facebook has done really well. A recent study by Kenshoo (however believable) is a good summary of the year-end verdict: while the cost of Facebook ads have grown significantly, ROI has almost doubled. Social advertising is indeed becoming mainstream.

Friday, 28 November 2014

Google under attack in Europe

It is pretty pathetic how violently European politicians, unable to point to national champions in the Internet / media sectors, attack Google threatening it even with a potential breakup (see recent FT article). Not only is the method unfair, it is also massively stupid as it is simply impossible to implement. Surely, even the German economics minister has realized that the Internet doesn't really respect borders. Google can always keep its servers outside the Eurozone and serve customers from other regions depriving European governments from even the little corporate tax that the company pays to them. Will this mean that Europeans won't use Google's search engine? Unlikely. Even in China, people use Google and surely Europe will not go as far in isolating its Internet users from the single best search engine of the world. And let's not forget that even China, although massively poorer than Europe, can actually show a couple of Internet champions (Alibaba, Baidu, Tencent, WeChat, etc. etc.). Rather than listening to their lobbying media friends, Euro ministers should work on creating an economic environment where innovation and investment thrives.

Tuesday, 11 November 2014

Agenda setting

My friend Francesco Marconi at the Associated Press pointed out some nice research conducted at the Pew Research Center. The analysis, pictured right, shows strong evidence of Agenda setting at major U.S. news outlets. Agenda setting is a subtle way to implement media bias by essentially under-reporting on topics that less favorable to the arguments of the core audience. It is clearly the case for this event that definitely seems to divide America. It is also interesting how social media relates to the 'branded' news channels. It seems that, Twitter is actually driving the news rather than reacting to it.

Friday, 7 November 2014

New York City Media Seminar: Net Neutrality

Nicholas Economides, from NYU was the speaker of last week's NYC Media Seminar. He talked about Net neutrality and its regulatory implications. The topic is complex and among the handful of theoretical models, each only captures a somewhat simplified version of the problem. What emerges from their analysis is ambiguous. We had a great debate concluding that some regulation is clearly needed but maybe it shouldn't be too heavy handed (not too clear as a recommendation). It was also evident that the issue of Net neutrality is so critical in the USA because there is generally insufficient competition on the consumer broadband market (in contrast to Europe, for example). A special treat of the seminar was that it took place in the AP's so-called "fishball room", where, every day, the AP decided what news around the world should be published by news outlets. Not quite but almost...

Sunday, 2 November 2014

Political polarization in the news media

A recent project by the Pew Research Center describes the media habits of Americans depending on their political preferences. There isn't that much surprise in the report: Americans are very polarized, more so than a decade or longer ago.... There is one chart that I found quite interesting: it tries to describe the relative stance of different news outlets across media types (newspapers, newsweeklies, cable news channels, etc.).
The chart is quite loaded on the left. It is surprising that The Economist and even the WSJ are considered to be liberal, The Economist quite so actually. More interesting was the result to the question: "Do you trust/distrust a particular media outlet?" Of course, people trust the outlet reflecting their political views and distrust the one with the opposing views. Yet, three news outlets were trusted by everyone: BBC, The Economist and The Wall Street Journal. Everyone mostly distrusted Buzzfeed.

Thursday, 30 October 2014

Is this the end of the TV ecosystem?

A lot happened in the last few weeks suggesting that the TV industry's traditional ecosystem may fall apart much faster than previoulsy thought. Interestingly, it is not really the accelearation in consumers' "cord cutting" that may drive the process (this is relatively mild still) but rather some content providers' nervousness about 'missing out'. As they watch Netflix and other streaming services come to live, some powerful content providers challenge the status quo to tap into the growing OTT market despite potential backlash from their traditional distributors (cable providers). Yesterday's FT article nicely summarizes the events of the last few weeks (HBO's and CBS's decisions to go direct and some similar effort from ESPN). Most importantly, the article reports on regulators' changing attitude: what if all Internet channels were also considered video distributors, so-called MVPDs? The economics are tricky and may not mean the end of traditional cable providers, who are still in the best position to deliver the Internet to people's homes: 4 channels at $10/month each and a good broadband link at $30-40/month amounts to $70-80, not far from a monthly cable subscription (with amuch richer bundle). The difference is that people can build their own bundles and with the number of potential combinations competition may massively increase pushing content access prices down. Ironically, the winners may remain the cable companies whose monopoly power on Internet access will not change much.

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.

Thursday, 8 May 2014

Rating agencies

Here is an update on the state of the ratings industry. Phenomenally different and, yet, phenomenally the same as three years ago (this blog had plenty of entries about CRAs during the crisis)! It is different because the CRAs are doing well - really well actually.... It is the same because the industry still consists of a select trio of firms who have all the market share together with the 'well-documented' bad incentives in creating biased ratings on pretty much all the economy. The real difference is that we are not in a crisis but in a boom so no-one cares. Yet the flawed structure and framework of the ratings industry has been left in place and will produce the same controversies in the next downturn as it did in the last.

Monday, 28 April 2014

TV and social media advertising

Strong words used by Alan Wurtzel, head of research at NBCUniversal will no doubt put a dent in social media ad budgets, already under pressure. As reported by a recent FT article, based on the results of analysis conducted on Comcast's airing of the Sochi  Winter Olympics, Mr Wurtzel claims that social media had little impact in augmenting the effect of TV ratings. "The emperor wears no cloths" were the words he used to summarize his verdict. Comcast's own data seem to be at odds with this diagnosis, however: 19% of viewers did some social media activity and overall 150 million 'additional' people were exposed to posts via social media overall. This compared to about 21 million TV viewers per day. While there is no doubt that TV's impact is much higher, social media's impact seems far from being insignificant! And this only after about a year of experimentation with the whole concept of connecting the two entertainment platforms. One should also speculate - to be checked - that the 19% posting on social media were younger people. No doubt, this group's size will grow larger and their social media activity become more intense over time. Just this effect appears to be significant. Bottom line: I wouldn't short social media stocks (further) just yet.... at least not based on this analysis!

Wednesday, 16 April 2014

Net neutrality

A number of academic papers have explored the issue of net neutrality in the last few years, many of the most state-of-the-art work being published as we speak. There are two particular papers that are noteworthy in this space. One is by Economides and Hermalin, which has appeared in RAND recently (2012) and the other is by Njoroge in Review of Network Economics. Both of these papers look at a fairly complex world with competing network providers, multiple regimes and heterogeneous consumers and content providers. The results are complicated and it is hard to provide clear cut recommendations. In a nutshell, a non-neutral regime allows network providers to extract more surplus from users and content providers, which also increases their incentives to invest in a higher quality network. Higher quality networks may also provide investment incentives to some content providers but may actually deter some others from participating altogether. So when the content providers are very heterogeneous, net neutrality might provide more overall welfare. It is also important to see that a key driver of the results is the amount of surplus that network providers can keep from the ecosystem. This may not only depend on the pricing regime but also on how much external competition they face. In other words, competition at the network level coupled with a liberal (i.e. not neutral) regulatory regime might actually provide a flexible and robust industry. What is clear from the academic research is that a regulator faces an extremely complex problem if it has to decide on net neutrality or even a restricted framework allowing some discrimination.

Thursday, 10 April 2014

News on News

One can read a lot nowadays about the News industry and, after a long time, the tone is rather optimistic. There is a lot of investment in news from various sources including philanthropists trying to save historical icons - e.g. The Washington Post, earlier entrants who disrupted the industry - e.g. Buzzfeed, well-established online platforms like Yahoo! or Facebook who want to keep their members on the platform and surprisingly also, from venture capitalists. The type of investment is very diverse too. Online outlets discover the value that journalists used to bring to the table and they tend to hire more people. "Curation" is all the talk nowadays, at least on this corner of the business. There is also a fair bit of investment going the other direction, into tools that analyze data (cutting out - if possible - human intervention). Given the easy access to various data sources, the idea is that there is always a niche audience for small bits of analyses / insights. A recent FT article describes in more detail this trend, rightfully wondering about the business viability of the model. Clearly, the disruption is far from over but at least there seems to be some money available for broad experimentation.

Friday, 14 March 2014

Comcast - TWC: Should they be allowed to merge?

Since the announcement of Comcast's planned acquisition of Time Warner Cable (TWC) most observers argue that the union will lead to increased monopoly power and (so goes the logical argument) even higher cable subscription fees for consumers. The most recent "authority" weighing in the debate is The Economist, which devoted an article to the topic in its prestigious Leaders section. While I agree with much of what is said in the article (and in general) about the market power of cable operators in the U.S., I disagree with the statement that acquiring TWC will increase Comcast's market power over consumers in particular, and thus leading to higher subscription fees. First, the two cable operators do not have overlapping networks so they are de facto monopolies as it is. In the case of TWC, I even believe that prices might come down. Why? Because TWC is a pure operator so when it buys content (generally provided by another monopolist), there is double marginalization that leads to higher prices than what a cartel would provide (yes, there is no mistake: a cartel providing complementary products prices lower than two independent complement providers). Comcast owning a lot of content may prevent this. Another concern is precisely Comcast's vast content assets. Given Comcast's increased clout due to the acquisition, it can now extract more surplus from other content providers or lock them out of its offering altogether, substituting its own content in the bundle. This may happen but neither of these strategies is likely to lead to higher subscription fees for consumers. It would simply mean less profit to other content providers. While in some cases one tends to we feel sorry, in others (think ESPN) less so.

Now, are high subscription fees a problem? The answer is a resounding YES! But they are not caused by mergers between cable operators. Rather, the issue is that there is not enough competition across network types. This may change if Telecom companies, DBS operators and Google develop alternative infrastructure. An enlightened regulator may not like this however, as this may lead to excess infrastructure investment. Another approach would be to regulate part of the offering. This is the case to some extent, but the approach needs an update. A good solution could be to regulate broadband access fees over cable. This could keep video prices in check and force cable companies to provide reasonably priced content bundles to consumers.

Thursday, 20 February 2014


It is hard to resist writing something about Facebook's most spectacular acquisition. It is even harder to say anything new, given how much coverage the event got in only a day. Clearly, this young company is not worth $19 billion on its own. But as a piece of technology, it might be just what Facebook needs to preserve its dominance in the social media landscape. It proved to be the most attractive choice from a hoard of copycats and this is by a global population that happens to cover just the right demographic segments. Also, it would have been really horrible if Yahoo!, Microsoft, Twitter or Google would have snapped up WhatsApp in order to fast forward their social networking efforts. The big question is, how will Facebook leverage this new crown jewel? The easy solutions (like putting ads in the messaging service or rising the subscription fee) are out. Can Facebook successfully connect the two platforms to entice WhatsApp users to spend more time on Facebook? Or is it enough to just analyze the huge traffic on WhatsApp to become more efficient in advertising? It is far from obvious how to execute on this acquisition even if strategically it seems to make sense.

Wednesday, 12 February 2014


This is a great picture capturing media freedom in the world. It is sad that most of Europe and the US are not making it to the top. Still look at Hungary and most East European countries!

Developments in media measurement

The need for better measurement of advertising impact - especially for digital advertising - is unquestionable. The challenge, of course, is that most digital ad campaigns are multi-platform campaigns so even if any particular ad's CMP, CPC (or today CPE) is well-measured, with multiple screens this data needs to get integrated to be able to gauge the overall impact of the campaign. Google's DoubleClick and comScore have teamed up to come up to do just that, proposing a standardized measure similar to GRP for traditional media. This is a great development for the industry.

Thursday, 6 February 2014

CNN and the future of news

Jeff Zucker, appointed a year ago to lead CNN did not quite turn around the company yet. A recent article in The Economist describes how the international news provider is trying to turn itself into more of an entertainment outlet. The rational is simple. CNN has an unbiased stance (see earlier article) and this does not go well with increasingly polarized audiences. It is well-documented that biased viewers want to see biased news rather than impartial reporting as they really look for 'entertainment' instead of information. One option would be to become biased but competition is harsh in either corner of biased news providers with Fox and MSNBC firmly dominating Right and Left respectively. Also, CNN has the highest quality infrastructure for generating news - wouldn't it be a waste not to build on this strength? Mr. Zucker seems to have chosen another way to entertain: showing people non-news content, essentially turning CNN into a 'movie channel'. But this doesn't leverage the unique assets either and it is hard to argue that there is no competition among movie channels. Is there a way to compete with the truth at all?

I always argued that there is. What people need is debates! Contests! A good fight is always entertaining as long as one's side is represented. Why not organize debates to inform and interpret the news? Think of presidential debates - they are always very popular. Other examples abound, prominent among them being the very successful Munk Debates venture. Note also, that this approach is hard to copy for a biased provider who cannot deliver a consistent biased outcome for lack of serious opponents willing to debate on the opposite side. Would a team play in a game that is rigged from the start against it? Providing neutral ground and good information to back-up arguments (e.g. acting as a referee) is a unique capability that only CNN could provide. It would build on its assets and would be hard to replicate by competitors.

Thursday, 16 January 2014

Net-neutrality ruling

Last Tuesday, Verizon won a case against the Federal Communications Commission (FCC) in a US court, where the judge ruled that "the FCC had over-reached its powers in imposing 'net neutrality' rules on internet service providers" (see FT article here). While the battle for (or against) net neutrality is far from over - e.g. the FCC considers an appeal among other possible measures - it is definitely a decisive step towards differential pricing for speed / transmission quality of internet content. Advocates of net neutrality argue that this may favor large internet companies with deep pockets (e.g. Google) and lock out cash-poor start-ups, thereby stifling innovation. But does this argument really hold?

For one, perfect net neutrality cannot really exist. Bandwidth is a limited resource and, being free, congestion is impossible to avoid. Service providers have always had to manage bandwidth to makes sure that one provider is not overusing the system to the detriment of others. So far, they had to do this in an ad hoc manner. It seems to me that creating a market for bandwidth is not necessarily a bad idea: maybe running an auction in real time? For one, this may actually increase overall bandwidth because companies investing in infrastructure can recoup their investments better by charging more efficiently their users (the assumption being that consumers' willingness to pay for content will be reflected in content providers' willingness to pay for bandwidth, i.e. access to these consumers). What might happen is that free content maybe more scarce on the internet. But again, while this is bad for consumers in the short-run, it may actually help innovation (content providers can charge for their material), thereby making consumers better off in the long run. Wouldn't it be great, for instance, if sites providing pirated content would be 'penalized' for using excessive amounts of bandwidth? Funnily, Google, which counts as an "incumbent with deep pockets" is a big supporter of net neutrality. Doesn't this suggest that it benefits disproportionately from it? Given the bandwidth used to upload and stream YouTube videos, it wouldn't be surprising.

More generally, it is not clear that such "heavy" regulation (net neutrality is pretty heavy in my mind) is needed in this case. The FCC could impose a "minimum access" rule for instance in the spirit of "free speech" but let the market figure out how to price scarce resources beyond that.