The global adoption of social platforms has profoundly changed society and business. I won’t talk much about the societal side, one needs only to look at the Arab Spring, Occupy Wall Street and the upcoming elections to see the impact of social. On the business side, the way consumers discover and purchase products, and the way companies understand, reach and interact with their customers have all profoundly changed over the last 5 years.

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Over 45% of consumers now ask their friends for advice before making a purchase. This has massive implications on everything from a PR strategy to celebrity endorsements. Businesses are racing to understand the conversations that are taking place on social networks about their brand and integrate that insight into product, marketing and sales decisions. I’ve written extensively on how media companies are just starting to integrate that direct consumer insight (see here, here, here). Every client I have spoken to in the last 18 months is working on ways to integrate social data into their business and operational processes.

This widespread use of social data, both on the supply and demand sides, has also kicked up an ongoing debate about on-line privacy and the ways social data can be used. Anyone interested in this space should keep up with The Wall Street Journal’s excellent, and somewhat terrifying, “What They Know” series on digital privacy.  The way legal and public opinions solidify around on-line privacy will have major effects on how this data is shared and utilized moving forward.

The latest twist in the debate comes as a New York judge ruled that an Occupy Wall Street protested doesn’t own his own tweets and can’t stop prosecutors from searching his Twitter account

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Intel is in discussions to launch an internet-based pay TV service that would compete directly with traditional cable providers. The Wall Street Journal reported today that Intel intends to sell a set-top box which would access a mix of live and on-demand channels, similar to current cable bundles. On the surface this seems a bizarre strategy for a chip maker known for powering desktops.

Let’s look at what’s going on here

Intel knows that its core PC market is mature, and that growth will come from tablets, ‘connected’ consumer devices, and smart phones. The connected living room (as well as the connected house and car) is fast become a reality and it makes sense for Intel to try to be the one powering all those devices. It also, at least in theory, makes sense to move up the value chain in order to gain control over the user experience and create bargaining power with the Samsungs, Microsofts and Sonys of the world that are fast gaining a foot hold in that connected living room.  Intel has struggled to gain share in this market and last October wound down its efforts to make chips directly for connected televisions.

The pay TV market is ripe for disruption (although not in the near future). If Intel can create consumer demand for “Intel TV”, it can force other hardware and service providers to utilize their technology. This is how Intel became a $100 Billion dollar company to begin with. In the PC wars the “Intel Inside” brand became so strong that as long as a box had Windows and an Intel chip, no one cared about the brand of the computer itself. Intel wrestled margins away from manufactures like IBM and HP, turning the PC into a commodity product housing an Intel chip.

This strategy is all well and good in theory but unfortunately won’t work for several reasons

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My wife and I were lucky enough to welcome a new baby girl into our lives on February 16th. In addition to the overwhelming joy and happiness she brings, she has also brought an end to more than 3 hours of sleep or 5 minutes of free time. DigitalPennies posts will resume as soon as my sanity returns…I’m thinking 4-6 weeks. With SXSW, Facebook IPO, AT&T’s data throttling, Netflix content deals, new cable subscription figures and more there should be plenty to talk about.

 

The growth rate in digital music revenue has declined the last six years as adoption matures (and overall industry revenues continue to shrink). However, the latest IFPI Digital Music Report shows that 2011 saw the first actual increase in the growth rate, from 5% in 2009 to 8% in 2010, since the IFPI began keeping records in 2004. What’s driving that growth? Well, potentially lots of things, but the report highlights the adoption of paid subscription services as one of the key drivers.

I’ve argued for years that the best opportunity for digital music revenue growth is through subscription services.  Despite heavy investment, until recently offerings have not been compelling enough to gain any real traction. Last year, however, paid subscribers grew by 65%. So what has changed to advance adoption of subscription services?

  • The penetration of smartphones and connected devices mean a user is no longer tied to a desktop in order to consume subscription music
  • Transition to cloud-based access, browser-based UIs and multi-device apps, make the experience portable
  • Ability to use competing services like Rhapsody on dominant devices like an iPhone make those services more relevant
  • Integration of social networking and services, such as the Facebook and Spotify tie-up, drives awareness and engagement
  • New and interesting services like Spotify, Rdio, Mog, Deezer, Galaxie and others
  • Consumer adoption of video services like Netflix and Hulu are building a general acceptance of the subscription model

Subscription is a fantastic business model that converts unpredictable one-off purchases into steady revenue.  All-you-can-eat subscription offerings can also grow the overall industry by increasing the annual average revenue per user as well as combat piracy (why steal when you have access to everything legitimately?).

So why hasn’t the dominate US digital music service, iTunes, launched a subscription offering? Some have argued that Apple doesn’t care about making money from music sales and uses iTunes only to drive hardware sales. Well, that argument perfectly fits a subscription model that would tether the user to the service (and device). Others argue that a subscription service would decrease overall revenue as only those that currently spend more than the monthly subscription cost would find it economically attractive. This argument ignores the added value that comes from unlimited access and the dramatic decrease in actual cost-per-song.

To play things out, let’s do a little back of the envelope calculation:

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As the world becomes connected, unprecedented amounts of information is being created, shared and optimized. Analog devices are turning digital, and getting smarter along the way. Your house’s old electric meter is soon to be replaced with a small computer that will tell you in real-time exactly how much energy your home is consuming, as well as coordinate with small computers in your dishwasher and refrigerator to run them in the most cost and energy efficient way possible. Thus, saving you money and the world energy. Parking meters are being outfitted with sensors that can alert you when a space is available, as well as alert a traffic cop when a meter is overdue. This saves drivers from circling endlessly to find an open spot and allows police to dedicate man power to more high-value activities than aimlessly wandering the street looking for expired meters.

The successful companies of tomorrow will take advantage of new information and technology to do what they do today better, smarter. Over a series of posts, I’d like to highlight some media companies that are doing just that

Shout Out for Being Smarter, part 2: Zynga

(See: Shout Out for Being Smarter, part 1: Live Nation)

On Monday, Zynga’s stock touched a new low of $8.00 and is currently trading at $8.33, down almost 16% from its IPO in December. But I don’t want to talk about the company’s stock performance. I want to talk about how this company is able to convince enough people to trade real money for fake goods that they can command a nearly $6 BILLION market cap (whether or not $6B is a fair price is a conversation for another day).  They do it by being extremely smart. And I’ll tell you how…

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(source: G+)

INFOGRAPHIC: Welcome to the Digital Living Room: How is the TV Landscape Changing?

2011 was the worst year for US box office attendance since 1995. Some will write this off as a poor crop of blockbusters that otherwise would have dragged people to the theater. A closer look at the numbers shows that, in fact, less and less people go to the movies each year.

What’s going on here? Are movies getting worse? Well…maybe, but the real culprit is the explosion in competition for leisure time and our attention. We have HD TVs, on-demand, Netflix, HULU, Amazon, iPads, iPods, iTouches, xBoxs, Boxee Boxes…it goes on and on. The appeal of the silver screen just isn’t what it used to be. Filmophiles claim there is no substitute for the big screen, and, while I may agree with them, attendance figures don’t lie. People just don’t see as much value in going to the movies as they used to. And yet, the cost of a move ticket keeps going up – nearly 4% a year over the last 10 years.

So how do you deliver more value in a highly competitive environment?

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Have you bought anything through the Kindle store recently? Chances are you’ve noticed, for most titles, the eBook is not quite the deal it used to be. In fact, the Wall Street Journal recently ran a feature entitled “E-Book Readers Face Sticker Shock“. So what’s going on here? Well, publishers have wrestled back control of digital pricing from Amazon and are attempting to find individual price points that (1) protect the value of content, (2) adequately price in the added convenience and features of a digital copy, and (3) encourage digital sales that will grow overall industry revenue rather than strictly cannibalize current sales.  Where once eBooks cost a nice simple $9.99, now they can actually cost more than the physical copy.  Is this insanity?  How can publishers justify charging the same price for a digital book (with no manufacturing, distribution, stocking or retail costs) as they do for a real book? Let’s take a look.

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The connected television market is crowded.

There are dedicated over-the-top device makers (Roku, Boxee, Apple TV),“Smart” TVs and DVD players (Sony, Samsung, LG, Panasonic, Vizio), connected game consoles (Xbox, Sony Playstation), non-entertainment devices (iPads, HTPCs, PCs), user interfaces (GoogleTV), content aggregators (Hulu, Crackle), a billion content specific apps (Netflix, MLBTV, TedTalks, AmazonVOD, Pandora)…and infinite combinations of these  all trying to create the “next generation” of television.

So who is going to win? Lets put aside the discussion of cord cutting and the future business model of television (which I’ve discussed here and here), and just think about devices and who might be the dominant player. There are three core drivers that a connected television player competes on.

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Credit Suisse analyst Stefan Anninger posted some analysis that supports my post last week The Future of Television is Coming…Slowly. Anninger predicts a loss of 200K cable subscribers in 2012, down from his original prediction of 250K. Overall for the year through September ’11, pay TV penetration has fallen from 84.1% to 83.2%. It’s a slow trickle as consumers realize they are not getting near the value they are paying for in a traditional cable bundle. I don’t believe it is just the economy, the downturn is just a initiation point where consumers realize that cable is a rip off. That said, there are nowhere near the mainstream options available on-line to drive mass cord cutting. As a result, you are going to see major media firms continue to protect their core revenue streams, and consumers slowly but continually finding better options online.

See article here (from Hollwood Reporter)

 

 
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