By SHALINI RAMACHANDRAN
http://blogs.wsj.com/cmo/2015/04/09/with-new-investment-john-malone-aims-to-personalize-tv/
Herb Lair (HL): John Malone was dubbed "Darth Vader", a nickname allegedly given to him by Al Gore when Malone was the head of TCI, where he demanded equity positions in cable programming services in return for carriage, and attempted to defeat the must-carry rules which protected broadcasters.
Paraphrasing Yogi Berra: Is it Deja vu all over again for cable TV operators to miss new digital opportunities, including Internet of Things, or can John Malone personalize cable TV by removing the darkside image of both?
Below are my thoughts on the Wall Street Journal blog, point by point. Some of my comments were recorded in CED Magazine in 1999, and others were in blogs over the past 4 years. Again this is a subject I have researched and written on over the past 35 years.
WSJ: “Cable pioneer John Malone and Canadian business tycoon John Risley are investing $8 million in a startup that they hope will bring cable operators’ outmoded customer operations into the digital age.”
HL: Circa 1999 CED Magazine https://sites.google.com/site/cuoirent/mergers-and-acquisitions as convergence becomes a reality, the service providers who survive will be those who develop customer loyalty. Customer loyalty is a direct result of being able to measure customer preferences and then deliver customer satisfaction. The reality is that the Internet Web-site database managers are doing a much better job, managing customer expectations and building databases…………..
A cable MSO cannot allow its legacy SMS solution to restrict business growth. It must invest heavily in database management and marketing and be willing to make Internet technology their new best friend. They should remove immediately any thoughts that they are in a monopolistic industry. Competition from the Internet for the subscriber’s disposable income has no geographic limitation. Multimedia content on the net will improve rapidly over the next two to three years. Primitive forms of movies are being tested through sites such as ifilm.net. Broadcast.com, recently purchased by Yahoo for $5.7 Billion, broadcasts music and video events on the Internet. The swirl of activity illustrates “how quickly the Internet is changing from a text-and-graphics medium to a multimedia experience”—Eben Shapiro, staff reporter for the Wall Street Journal.
Even though marketing databases are not cheap, the value of a household has multiplied as the number of in-home offices and homes with multiple phone lines have exploded. Consider the recent prices paid for systems by AT&T, Paul Allen, and Comcast. Add in the number of subscribers with cellular phones, pagers and Internet access, and it’s easy to see the value attached to each home in recent system sales. Because households are becoming the equivalent of small enterprises, long-term success will require effective data warehousing and data mining.
HL: Circa 2015 ” investing $8 million in a startup that they hope will bring cable operators’ outmoded customer operations into the digital age.”?? Most might consider that investment too little, too late. However, Malone is not known for making bad investments. He is known for investing in companies and ideas; and substantially improving their value from TCI to Liberty Global (UIH, UPC, etc.) to Charter.
WSJ: “The startup, called UXP Systems, promises that its software can enhance cable operators’ back-office billing and care systems to help them personalize experiences and gain more detailed insight about individual members of a household.”
HL: Circa 1999 CED Magazine Can you imagine having the ability to enter a personal preference profile into an application so that the TV not only directs you to your preferred program, but also gives you pertinent advertising information on products and services of interest much like Amazon.com? Allowing consumers to provide input about upcoming programming schedules via e-mail or through an on-screen guide is an incredibly powerful tool that the Internet offers.
HL: Circa 2015 with the dominance of major back office billing and care providers – Amdocs, CSG, and Netcracker, etc. there must be API’s to ensure consistency. Personalizing experiences and gaining more insight will require sharing subscriber profiles, location/passing files, and set-top-box data captured on tiers, streaming, premiums, movies, and events.
WSJ: “John Malone Sander de Wilde for The Wall Street Journal
The investors believe UXP’s platform could allow cable companies to finally gather the kind of atomized data on their customers that Google Inc. and Facebook Inc. -0.16% have on their users, which could offer new advertising opportunities.”
HL: Circa 1999 CED Magazine The revenue gold mine could come from the ability to substantially reduce the costs of direct marketing via mail and telemarketing by providing, for a price, the one-to-one retailing data gathered by knowing the buying habits and preferences of customers. This is another byproduct of transitioning to the digital era.
HL: Circa 2012 Cable has long history of failing to develop 1-1 target marketing. Canoe Ventures (MSO venture) was touted as the Holy Grail of targeted advertising and was less than a success.
"By the way, don't think that the Internet is a killer application in direct response advertising and electronic commerce." David Verklin, CEO of Canoe Ventures. (Famous last words when attempting to develop another data gathering warehouse)
A $150 million investment in CV, and the efforts of a staff of 150 people, the cable industry’s effort to grab a bigger piece of the $70 billion spent on TV advertising, was largely unsuccessful.
Note: Canoe Ventures failure indicates it might be better to work with social media than to develop another data gathering scheme.
WSJ: “It could also enable operators to offer personalized services to different members of a household, the way Netflix Inc.NFLX +3.43% allows for making multiple user profiles attached to a single account.
The investors believe UXP’s platform holds the potential to make signing up for cable service as simple as signing up for Netflix or Amazon.
“Focusing on a seamless user experience, where any individual can get access to a personalized set of services through their broadband operator, is an emerging sweet spot for the industry,” Mr. Malone, 74, said in a statement.
“When you talk about changing the user experience, the cable IT guy tears his hair out because it means completely having to rejig all these legacy billing systems,” which can cost hundreds of millions of dollars, Mr. Risley, 66, said in an interview.”
HL: Circa 1999 CED Magazine Proper SMS strategy and direction are essential. One of the most innovative television products to flop was introduced in the late 1950s. The combination of TV, AM-FM radio and phonograph was an ill-conceived experiment in integration. It might have made for a nice piece of furniture, but unfortunately, the color TV was being rapidly improved and replaced every two years and the phonograph was evolving to 8-track tape (and later, to cassettes and CDs) and the radio, well it could last forever.
Then, modularity became the king. Similarly in the SMS arena, there have been several attempts to develop all-inclusive products that have never seen the light of day (e.g. Tele-Communications Inc.’s Summitrak, CSGS’ Phoenix project, etc.). Problems, as well as the expense, to integrate and coordinate computer code, technologies, and software releases to cover diverse businesses such as cable TV, telephony and data became prohibitive. Now convergent SMS providers must be willing to work with system integrators or function as integrators or enterprise resource planners (ERP) to provide total solutions built from modules. Bill Gates states in his new book – Business @ the Speed of Thought – “that as more standards evolve … the more likely the ‘best of breed’ tack will be used to buy independently the best product modules available instead of buying from just one vendor “.
HL:circa 2012 The subscriber fondness of mobile devices and voice/Siri type control, tracking interests and preferences along with moving the clunky and costly set top box controls to the Cloud along with a Google type search model of generating part of its revenue through ads. The way broadcast TV paid for and controlled content in the early days. The tracking of subscriber preferences like Amazon does. Apple TV to me is something that will have to work with legacy flat screen TVs as well as new Apple TVs but will be the process (social media and Cloud) and selling mobile devices (the real Apple TV) and the new business model (hybrid with subscription and targeted ads). Not just a flat screen. But should save customer money as Apple has done with music and aps
WSJ: UXP declined to disclose its valuation or the percentage size of its new investors’ stakes.
Mr. Malone, who was a key figure in the early days of the U.S. cable industry, has returned to the fore lately through a large investment in Charter Communications Inc.
Mr. Risley, who co-founded Caribbean cable operator Columbus International Inc., led the operator to invest in UXP in 2011. Mr. Malone bought a stake in Columbus in 2013, and when the company sold itself to Cable & Wireless last year, Messrs. Risley and Malone bought out Columbus’ interest in UXP, resulting in the $8 million investment.
UXP has only signed up four cable companies and none in the U.S., but says it is in talks with about a dozen players. Some operators are already moving to set up individualized user profiles on their newer set top boxes and apps. Comcast Corp.’s X1 set top box for instance, allows for the primary bill-payer to set up secondary user profiles.
HL: circa 2012 US is much tougher back office billing and customer care based on my experiences in all 50 states and over 50 countries. Many times cable marketers in US “outsmart” themselves with complex plans and discount strategies that confuse subscribers.
The obvious alternative, with the least cost to implement is an independent Cloud CRM solution designed to cross index cable subscriber households with their corresponding social network interests. The current regulatory and privacy issues experienced by cable TV operators gathering unauthorized data from set-top boxes could be minimized, by validating subscriber and even eliminated by essentially having an opt-in plan (provided conveniently by the social media). Access along with profile and interests of households would be controlled by the subscriber’s social media platform of choice. Facebook and Twitter have high consumer acceptance and could be used for household profiles, product interests, social interests, and viewing entertainment interests. There would be incentives to the subscribers to opt-in including notification and reminder of viewing favorites, Groupon type ads, and specific ads matching interests with infomercial type group discounts and urgency to buy.
WSJ: Beyond allowing personalization of services, UXP’s software could offer operators a path to try new business models in an era when more customers are “cutting the cord,” or dropping their pay TV subscriptions. For example, today some operators may want to offer “over the top” streaming services to customers that aren’t in their service areas. But that’s difficult, because cable operators’ back office systems for managing customers’ accounts have long been based on which houses are connected to their physical network of cables.
UXP Chief Executive Gemini Waghmare says the company’s software solves that problem. It allows operators to “onboard” a customer through an app and instantly give them access to services like a Wi-Fi hotspot or streaming TV—rather than waiting for an installer to hook them up at their house.
Mr. Waghmare says operators are considering using this approach to offer “freemium” subscription models in which potential subscribers can try some ad-supported channels for a period of time for free on a trial basis.
Mr. Risley, who introduced Mr. Malone to UXP, said Mr. Malone “would love to see the operators come up with some new business plans.” Mr. Malone sees an opportunity to use UXP’s know-how in personalization across his investments in cable and satellite radio, Mr. Risley said. Mr. Malone was not available for an interview.
HL: circa 2013 Cable model, unlike original broadcast model of matching content cost increases with advertising, has gotten so skewed to content being paid by subscribers, not advertisers, it needs a shock. ESPN is $7 for suite soon going to $10. Cable subs are subsidizing that content with 30% sports addicts and the remaining 70% casual or non-sports sub paying nearly a $1 billion a month. Having a company like Google 100% ad supported should bring a much needed new model perspective. Also the ap supported (aka PPV) model of Apple could bring some new models as well as it did to music. Same with Amazon and Vudu via Walmart who made their businesses grow rapidly through being low cost and customer friendly. Cable TV revenue model is admittedly broken and TW CEO admits its ecosystem is anti-consumer which only further illustrates how out of touch they are with failure to upgrade model through use of targeted ads, etc. and use of social media to provide better services and save costs, not increase them. A big change in ecosystem will be mobile devices replacing TV remotes and STB logic moved to the Cloud. On the smaller communities I see a new groundswell against cable that I think they are severely underestimating. A community bank CEO said he saw something similar in banking when the big banks failed to take care of community needs. I can see getting the minimum cable/Internet or even broadcast/Internet with antenna and shopping the rest - I did it over 14 years ago when local cable didn't have HD or sports or movie packages that I was interested it - it wasn't difficult - no hassle- then and with Smart TV and IPTV even less today -- back then I used cable and Direct TV and satellite got most of my revenue. Satellite now has 30% of market. Lots of people are taking premium channels off, including myself, for Netflix. I have also replaced my cable telephone service - cable can still count me as a subscriber but revenue is rapidly decreasing!
WSJ: Mr. Risley says UXP’s technology can pave the way for operators to regain control of the customer from tech giants, who have built businesses on collecting and monetizing users’ data on the Web. While cable operators have long had access to a valuable trove of customer data through their set top boxes, their efforts to target ads that are relevant to each household have struggled to gain scale, due in part to technological hurdles.
Even set top box data only gives insight at the household level and doesn’t distinguish, for example, which family member was watching a particular episode of “Modern Family.”
“We can actually tell you…who is watching what, and then that information becomes very valuable to advertisers,” Mr. Risley said. If the cable operators don’t monetize that type of data, the “over the top” Web TV players will, he said.
HL: circa 2014 There is a $100 billion Web-advertising market. Google search, facebook, along with many other social media companies provide numerous free services with costs paid by advertisers. Twitter’s using a broad data and screen-share approach to edge its way into a $70 billion TV advertising market.
“Facebook has the people – 1.15 billion users to Twitter’s 240 million. But Twitter has a head start. Even though tweeting about television is far from average behavior, with the majority of messages coming from a small number of vocal users, it has become the platform for talking about must-see television. Twitter was mentioned in half of Super Bowl commercials in 2013.
The company has aggressively invested in tracking. .” Excerpt from the Atlantic
Inside the campaign to take over your living room, screen by screen
Twitter has aggressively invested in tracking. In the past year Twitter shelled out $90 million for the social analytics company Bluefin Labs and an undisclosed amount for another analytics startup called Trendrr. Its acquisition of the mobile ad serving platform MoPub for $350 million in September will also benefit its targeting efforts.
The least cost to implement is an independent Cloud CRM solution designed to cross index cable subscriber households with their corresponding Twitter / facebook social network interests.
With nearly $100 billion in pay-tv subscription revenue and $70 billion in advertising revenue at stake, expect an epic battle for the eyeballs and pocketbooks of the consumer. Burning question remains, “Is Darth Vader gone forever or will he be resurrected for the epic battle? “
Note: My analysis is totally based on WSJ blog, and is not meant to be a review of UXP Systems. Reasons it caught my attention were John Malone’s investment in personalized TV and his choice for a solution. Subject that I have researched and written on extensively based on my 35 years’ experience in cable TV.
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Herb Lair
herblair
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Hey Herb,
I always read your twitter and facebook comments and insights on social media with great interest. You are an original thinker! I am most interested right now in the new players in the video/media spaces as the traditional cable/satellite Pay TV remains resistant to adaptation in this quickly changing environment.
Behavioral marketing and targeted ads - Using social media to offset pay TV content costs through behavioral marketing and targeted ads
Jeopardy Teen - Grandson Cooper Lair contestant on Jeopardy Teen
Linkedin Group on Amazon,Apple,facebook,Google,Twitter,or Walmarts' impact on the future of TV. - Discussion of the impact of social media strategies for targeted ad sales and behavioral marketing on the $70 billion TV advertising market. Benefits and cost Impact on Pay TV subscribers and Pay TV providers.