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.

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.

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.

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.