For once, LG may beat Samsung

Samsung has been touting the latest strategy for Tizen — this time as an integrated OS for its smart TVs. It’s earned dozens of news stories this month, all tied to its promotional efforts for this week’s CES show in Las Vegas.

Samsung has always been better at announcing and publicizing Tizen strategies than it has been at executing on them. It did not skimp on the grandiloquent predictions when its original incarnation (then called Bada) was announced in November 2009:

Samsung Launches Open Mobile Platform: Samsung bada – The Next Wave Of The Mobile Industry
November 10, 2009
Samsung Electronics Co. Ltd., a leading mobile phone provider, today announced the launch of its own open mobile platform, Samsung bada [bada] in December. This new addition to Samsung's mobile ecosystem enables developers to create applications for millions of new Samsung mobile phones, and consumers to enjoy a fun and diverse mobile experience.

In order to build a rich smartphone experience accessible to a wider range of consumers across the world, Samsung brings bada, a new platform with a variety of mobile applications and content.
…
Based on Samsung's experience in developing previous proprietary platforms on Samsung mobile phones, Samsung can create the new platform and provide opportunities for developers. Samsung bada is also simple for developers to use, meaning it's one of the most developer-friendly environments available, particularly in the area of applications using Web services. Lastly, bada's ground-breaking User Interface (UI) can be transferred into a sophisticated and attractive UI design for developers.

Samsung will be able to expand the range of choices for mobile phone users to enjoy the smartphone experiences. By adopting Samsung bada, users will be able to easily enjoy various applications on their mobile.

Encouraged by Samsung, one analyst predicted that Tizen would make up “half of its portfolio by 2012.”

Instead, (according GSM Arena) only 11 bada models ever shipped — out of more than 3200 models during the past 5 years — before bada was discontinued in favor of Tizen — a merger of bada and the Intel- and Nokia-flavored mobile Linuxes (among others).

Samsung announced its first Tizen phone — the Samsung Z  — June of 2014. A defeatured version of the Galaxy S5, it debuted not in Korea — or North America or Europe — but in Russia, suggesting the company did not think it could compete head to head with the latest Android and iOS phones. In fact, it was even ready for a third world BRIC country: the release was cancelled due to a lack of applications.

At CES this week, Samsung announced that Tizen would jump species — from its viral reservoir in rare smartphones and smartwatches — and become the only OS it uses for its smart TVs. I had three reactions.

First, so what? Yes, as the leading TV vendor Samsung can push out lots of copies of Tizen. But does anyone care what OS is in their VCR, DVR, Blu-ray, TV or home stereo? (I care about the OS in my car stereo — due to cellphone compatibility — but that’s a story for another time.)

Second, Samsung is saying: “let’s ship a platform in a product category where no one cares about app availability.” In other words, it may never win developer support for Tizen — and thus a large assortment of apps — but on TVs, who cares?

Finally, while Tizen frees Samsung from dependence on the evil Google, is shipping Tizen an asset for Samsung — or a liability?

Under the hood, Tizen has a very robust Linux, reflecting bada’s 2011 merger with MeeGo, which in turn built upon years of work by Nokia (with Maemo) and Intel (with its Maemo fork called Moblin). (It also included the failed Linux Mobile standard, LiMo).

However, a robust OS under the hood means nothing if it has a clunky UI. Exhibit A is the Symbian OS with Nokia’s aged S60 UI; Exhibits B-Z are every incarnation of desktop Linux known to mankind.

Which brings me to the dark horse: LG. I hadn’t noticed, but two years ago LG bought webOS, the failed Palm smartphone OS that HP owned for three years before dumping it. This week LG announced it’s using webOS for its own TVs.

Almost six years ago, webOS was a really good smartphone OS. But despite Palm’s efforts to double-down on its modern OS, it wasn’t enough to save the company. Now, webOS has a $100+ billion/year company behind it — and unlike with OS — a large volume of shipping products where it can run.

With a product strategy that usually consists of copying Samsung — much like Panasonic copied all its Japanese rivals — LG is rarely thought of as an innovative company. But here, instead of copying Samsung by developing its own lousy embedded OS, it bought a good one.

Again, will it matter? Will the TV OS matter more than screen size, brightness or — most importantly for a commodity product — price? As a former software guy, I want software to matter in providing differentiation. But I’m not going to bet even one dollar of our youngest’s college fund on it.

Content owners heading for the guillotine?

The ongoing efforts of Hollywood TV and movie syndicators to extort more money out of distributors and their end customers reminds me a little of the French royalty in the late 18th century. For Marie Antoinette and her husband Louis XVI, things were going on swimmingly — until they weren’t.

If that analogy seems too obscure or overblown, think about the record industry cartel 15 years ago. The six major labels were able to charge whatever they wanted—and then their revenues fell by more than half. People didn’t stop listening to music — but a whole generation stopped pay for recorded music while spending shifted to live concerts (where the publishers can’t extract their vig).


So now Viacom is mad because it can’t get DirecTV to pay $144 million more annually ($7.30 per subscriber) to carry its 26 channels. To put pressure on DirecTV, Viacom set up a Facebook page with snappy clip art featuring its Nickolodeon, Comedy Central, MTV and other characters.

DirecTV set up its own webpage to attack Viacom and, in particular, its bundling strategy requring all or nothing from subscribers. When DirecTV page “Other Ways to Watch” linked to online versions of Viacom content, Viacom took down its Internet content for everyone. (At the risk of mixing metaphors, this reminds me of a hostage-taker who puts a knife to his own throat).

We all know how this is going to end: at some point, the cable and satellite TV distributors will be unable to charge a premium over Internet channels. This means that revenues from distributors will eventually be going down, not up. Content producers will need a new business model: the only way out I can see is that there will be embedded ads and product placement for the content no matter where it is consumed.

On the DirecTV website, CEO Mike White delivers an impassioned speech supporting his side. Or, as the text says

By holding firm in negotiations and disputes, we’ve held our price increases to half of the industry average. Some networks or TV stations are asking for as much as a 300% increase in their monthly rate. Imagine the impact to your bill if we just simply accepted those demands for one network, let alone the hundreds we offer you. There’s a reason DIRECTV has been able to offer our customers the lowest annual rate increase of 4% among all providers over the past two years. We’re always by your side.

As a consumer, I think White isn’t aggressive enough (but if his rivals are accepting cost increases and passing them along, his options are limited).

For the past 10 years, our San Jose home has been served by Comcast basic cable at less than $20/month. When we move to our new home, we’ll take the Cox $25/month teaser rate until it expires, and then at that point drop the cable — possibly adding Dish or DirecTV. During the six month period, we also plan to evaluate whether we can get by with over-the-air supplemented by a monthly subscription to Amazon, Hulu, Netflix or Vudu. We may not even need to pay for the latter, as our teen prefers to watch YouTube video clips over 22-minute TV episodes.

So good luck Mr. White. You’re on the right side of history, even if shareholders may not give you the time to see this through. And a word to Jon Stewart, Stephen Colbert and their Viacom masters: be careful what you wish for, because the French people had a lot more freedom after the old order fell.

Old media partners with its conquerers

I was surprised not to find any discussion of the brand/image implications of NBC partnering with Facebook to host this morning’s presidential debate in New Hampshire.

NBC, after all, is a once-reputable international news organization, home of Meet the Press, and former home of Tom Brokaw, Huntley and Brinkley. (It’s now owned by a cable TV conpany). Facebook is an 8-year-old website where people share pictures and post ads for Farmville.

With a little investigation, it turns out the NBC-Facebook pairing is not the only partnership of old and new media. According to a website on “social TV” called LostRemote.com, Fox is partnering with Google, ABC is partnering with Yahoo and the Washington Post is leveraging Twitter. (Apparently CBS, CNN and the New York Times feel they don’t need a social media partner). NBC also has the 15-year-old partnership with Microsoft called “MSNBC.”

NBC doesn’t mention the Facebook partnership on its main Facebook page, but apparently that’s part of the strict separation between news and entertainment (with Facebook.com/NBC reserved for the latter).

The debate is prominently mentioned on the Facebook page for Meet the Press, but not that many people go there. The Meet the Press page is liked by 80,000 members while the main NBC page warrants 215,000. However, this compares to 2.5 million for the Green Bay Packers, 27 million for Starbucks and 37 million for Katy Perry. Even my hapless San Diego Chargers have a million fans.

By partnering with the new social media, the old media are facilitating the shift to the new social media. Does NBC hope that it will legitimate itself with a lost generation by partnering with Facebook? Is there any evidence this has ever worked before?

Of the five major US news networks — ABC, CBS, CNN, Fox and NBC — only CBS is a standalone company (valued at $18 billion). CNN can be bought with its parent Time Warner (TWX) for $37 billion, versus $67 billion for NBC/Comcast and $72 billion for ABC/Disney (DIS).

However, the shift has already taken place. Despite its problems, analysts speculate that Facebook will be worth $100+ billion in its long-rumored 2012 IPO.

The Facebook market cap may reflect an optimistic growth multiple that eventually disappears (ala Netflix, Cisco, Microsoft, etc.) Or the company may continue to chase Google ($210b) in market cap. Either way, it’s hard to see a case where old media will threaten it in public influence (or market capital) any time in the foreseeable future.

Hollywood's inability to have its cake and eat it too

Now that it’s been successful (at least by Web 2.0 standards), the studio owners of Hulu have put it on the block. Various companies have expressed interest, led by Apple.

The problem is that after years of running an oligopoly in which they dictated terms, the Hollywood studios are hoping they will be able to have their cake and eat it too. As their record label siblings and cousins have already learned, it’s not possible in this brave new digital world.

As USA Today points out, the studios want to extract more onerous terms from Hulu to make more money off of online distribution. Examples include putting new TV episodes under a paywall, or delaying their free availability.

However, by doing so they may kill the market value for the Hulu joint venture they have been trying to spin off. Who wants to buy a distribution service whose business model only works because the studios have been pulling their punches — when they have made clear that they plan to start punching hard real soon now?

As the LA Times noted earlier this year, Hulu has been much more successful than anticipated — great for Hulu, but bad for the network parent:

In a short time, Hulu has exploded into one of the top Internet video destinations, defying skeptics who predicted that a service backed by such an unwieldy joint venture would never work. It now attracts some 27 million users every month, according to ComScore Video Metrix.
…
As a result, Hulu's media owners — the corporate parents of ABC, Fox and NBC — are tussling with the site's entrepreneurial managers over opposing visions for the venture. The companies originally crafted the service as a way to control online distribution of their content. But by offering popular shows such as "Glee" and "Modern Family" online at no charge, the media companies fear they may be encouraging consumers to drop cable and satellite TV services, one of their chief sources of revenue.

In other words, the network-studios created to Hulu to profit from the brave new world, but had no intention of speeding the transition.

The LAT points out (as others do occasionally) that the rapid growth of Hulu’s revenues is still a drop in the bucket compared to the revenues of the traditional TV network business model — more than 50:1. (The Hulu platform could equally be used for 2 hour movies rather than 22 minute TV shows, but that hasn’t been a priority of the network-owners.)

The problem with this thinking is that the original vision of Hulu was spot on: the new world is coming, whether the studios do anything or not. So if they don’t want to be a leader in the transition and proactively shape where it’s going, they can be a follower and be whipsawed as they react to the implosion of their long-cherished business models. (NB: Record labels in the 1990s).

Perhaps the behavior of the network executives is selfishly rational — like that of a Eastern European or third world despot. The dictators know they’re going to (at best) flee into exile or (at worst) join Cesusescu in hell — so the longer they hold onto the power, the longer they postpone the day of reckoning. Similarly, a TV exec in his 60s or even early 50s might hope to collect bonuses for a few more years while kicking the can far enough so it blows up on someone else’s watch.

Still, the slow-motion collapse of the broadcast-cable monopoly over pricing and distribution is utterly predictable and inevitable. So if the studios are rejecting a viable Hulu as their future distribution strategy, what’s Plan B (or Plan C or D)?

iPad for sports addicts?

The CEO of Walt Disney seems to be aligned to his largest shareholder’s latest toy, the “magical and revolutionary product at an unbelievable price.”

The most interesting comment in the AP interview of Bob Iger is the potential of the iPad for couch potatoes — not the geeks but the jocks:

"We find that the iPad has a lot of potential. We think it's a really compelling device. We think it could be a game changer in terms of enabling us to create essentially new forms of content."
…
"ESPN ScoreCenter, which is a great app on the iPhone, and provides relatively rudimentary information, scores, basically, suddenly we have an opportunity with a platform where you can really make the scores come to life."

This to me is a major opportunity for the iPad — a portable device with hypertext-linked videos.

Of course, that assumes the content provider is willing to deliver the content without Flash. ABC (and ESPN) are willing to do so — and perhaps Hulu will too.

Odd unbundling decision

This morning brought is the penultimate issue of the weekly TV listings insert in the San Jose Mercury News, as well as for its sister papers in the Bay Area News Group. On August 16, the TV listings will only go to those who pay $26/year. While I certainly get the Merc’s need for new business models, this seems like a non-starter.

Once upon a time, TV listings were one of the main reasons people bought the Sunday paper; I know that’s what caused me to take the SD papers rather than the LA Times, even when I preferred the latter’s news and features. Apparently such sections have been a money loser for years, and several papers (including both Boston papers) have already dumped theirs, in part due to the cost of providing comprehensive information on all the various cable and DVS stations.

Perhaps the Merc is giving away so many papers — to keep the ad rate base up — that they need to charge for something. Certainly charging for the TV section must means that it plan to keep the section ad-free, since the section and its ads will be seen by only a small fraction of the 650,000 Bay Area News Group daily newspaper readers — I’d wager less than 10%.

A decade ago, I might have ponied up for the section or gone out and spent $40/year to subscribe to the dead tree TV Guide. Today, many people use the TV Guide Channel, that combination of listings and shows that makes TMZ seem like Masterpiece Theatre.

The TV Guide Channel doesn’t help our family, because Comcast no longer provides it free on basic cable. Still, we’ll get by just fine without the Mercury’s TV section: TVGuide.com provides more accurate information, for free. If TVGuide.com gets greedy and wants to charge, TV listings are a commodity and so I have plenty of other alternatives: TitanTV, TV.com, AOL or a number of other sites.

So why charge if it’s doomed to fail? Perhaps it’s one last attempt by the TV section staff to prove they’re valuable rather than get laid off immediately. Who knows? Perhaps there are enough non-Internet savvy seniors to keep the section around for another year or two.

A problem even Jack Bauer can’t solve

Jack Bauer is having a really, really bad day. This has happened six other times (since 24 first aired in 2001). This particular day, Jack lost one of his best friends (Bill Buchanan) to terrorists and found out the other (Tony Almeida) was alive, but a double agent.

Still, Jack is a survivor, now on his 7th president: one truly great, one truly evil, and the rest (as with the last 20 years) of varying degrees of mediocrity. Having run out of the likely threats — Islamic fanatics, the Chinese, the Russians — the enemies get more improbable ever season.

Jack fights at all costs to protect a society that he can never fully join, much like Batman or Dirty Harry. As the author of several 24 books summarizes it:

Jack is the sheep dog, the terrorists the wolves. Although the sheep fear the wolves and are guarded by the dog, the dog — with its fangs, claws and willingness to kill — has more in common with the wolves than with the sheep he protects. Despite the dog’s role as protector, he possesses the same predatory instincts and violent tendencies as the wolf, so he can never be a part of the flock. Jack is estranged from his daughter, constantly robbed of a normal life, admired by the audience but alienated by much of the fictional world he inhabits.

As with every season, Jack saves the day. Presumably being infected with an incurable virus will be solved in tonight’s final two episodes — while at the same time, some dear friend will die, or some deadly villain will skate free.

While Jack is a creation of Hollywood, one problem he has not been asked to solve is the impending destruction of its failing television business models. It probably doesn’t fit his skill set, since it can’t be done by pointing a gun or blowing something up.

The core problem is that the 20th century concept of mass media is approaching its end — in this case, the idea of one-to-many prerecorded entertainment. Jack Bauer and 24 are the last gasp of a dying breed, the network television hit show that is watched by a wide enough audience to become part of the popular culture.

The demographics are all wrong for Hollywood. The middle aged and geriatric set will continue to watch TV, but even the CEO of one of the major motion picture studios admits that coming generations are lost. In an (online) interview posted earlier this month , Howard Stringer of Sony said

Children today don't watch that much TV. Take my 16-year-old son, for example. Apart from watching some sports, he almost never watches TV with the rest of the family; instead he spends most of his at-home leisure time communicating via the social networking site, Facebook.

It's clear that customer preferences are changing, and I think this fact indicates what the next steps in TV evolution are likely to be. We'll never recapture our customer's hearts by merely offering better color or higher resolution.

Allowing for this new generation, 24 is available online at the Fox website, or on a limited basis at Hulu. Because I’ve been teaching Monday nights, I’ve watched most of this season in a tiny window on my desktop computer: a lousy experience, but a convenient (and free) way to catch up on the plot twists.

The problem is, TV will never monetize as well online as it did in the 60s, 70s and 80s. As with Internet “real estate” vs. physical real estate, there are no natural limits for online video the way that 3 or 5 or 7 local broadcast TV stations created a scarcity (and thus premium pricing) for TV advertising. The market will be more fragmented — with both domestic and overseas content providers — and the per-viewer prices lower than during the 20th century era of the great broadcast networks.

Some will argue that Google, Amazon and others demonstrate that the Internet can create great wealth, and thus the same will happen for online video. Certainly companies that previously had nothing (cf. YouTube and its three founders) can enjoy explosive growth in demand and market cap (if not revenues). But for every winner there are losers. Advertisements placed with Google are ones not placed with newspapers, books purchased through Amazon are not purchased at the corner bookstore.

Internet media (first print, now video) is the classic commodization of a fat, dumb and happy industry that Clay Christensen (in his 1997 book) termed a “disruptive innovation.” The new technology is cheap and at first appears to be a toy, but it finds a new untapped market and eventually gets “good enough” so that most existing users switch over. New entrants are happy, because they enjoy explosive growth. Consumers get what they want at a lot lower price.

But for Hollywood, an assumption of higher volume, lower margin will never work: its volume has long since peaked. In its heyday, All in the Family drew 20 million households on a Sunday night in a country of about 65 million households. Except for the occasional man walking on the moon or the Super Bowl, there isn’t anything that networks can do to grow this penetration rate — so a show like CSI has less viewers in a country with 50% more people.

If Christensen’s maxims hold true, then the old media will be unable adapt to the Internet threat, because it will be too fixated on protecting existing margins to embrace the online world. So far Fox (like Hulu) hasn’t made this mistake: my free episodes of 24 have an occasional pre-roll ad, but certainly less ads than if I spent 60 consecutive minutes in front of the idiot box on a Monday night. Giving it away virtually free today builds market share, but (as newspapers have found) makes it hard to monetize later.

Even if Hollywood does emerge the winner in the online media, it will be a Pyrrhic victory: both the volumes and unit revenues will be lower than in the late 20th century. Being a TV star won’t be as lucrative as it once was, and unlike rock stars, there’s no alternative revenue model to make up for it.

More urgently for the Hollywood media companies, being a TV producer or studio executive won’t be as lucrative as it once was. I’m guessing this will spark a frantic round of related diversification (videogame companies?) that prove as successful as the AOL Time Warner merger.