Editor’s Note: Welcome to Reality Check, a feature for RCR Wireless News’ weekly e-mail service, Mobile Content and Culture. We’ve gathered a group of visionaries and veterans in the mobile content industry to give their insights into the marketplace. In the coming weeks look for columns from Laura Marriott of the Mobile Marketing Association and more.
Readers of this column will recall that my “ah-ha” moment of the future structure of the cable industry occurred in the wake of Comcast’s failure to buy Disney when I realized that in order to meet the “any time, any where, any device” mandate that all content distributors will eventually face, Comcast needed instead to buy T-Mobile or Nextel (which would have beaten Sprint Nextel to the punch).
While cable’s foray into wireless so far has been miniscule, its growing direct competition with telecos, and the broad consumer interest in and acceptance of bundled triple-play services continues to portent the “any time, any where, any device” mandate that will surely require them to offer wireless access.
Today, however, I would like to examine the other side of that “ah-ha” moment, which assumed that content distribution companies did not need/want to own/be content producing companies. Should it have succeeded in buying Disney, Comcast would have looked a lot more like its second largest cable brethren Time Warner, which owns most of Time Warner Cable. (It is hard to call them competitors, since once a cable franchise has been awarded, cable companies rarely directly compete for customers.)
Subsequent to its Disney failure, Comcast has tinkered around the edges of acquiring content to distribute (that is if you consider the linking of its name with the multi-billion dollar possible purchase of The Weather Channel tinkering), most notably in the creation of regional sports network channels. That, too, however, has proven problematic.
In Washington, Comcast Sports Network had the broadcast rights to the area’s baseball, basketball, and hockey franchises. until Major League Baseball wanted to put a team in Washington, D.C. In return for a promise from the owners of the Baltimore Orioles not to sue MLB for its decision, MLB granted the Orioles the Washington Nationals’ television rights. As fate would have it, the Orioles’ agreement with Comcast was up at about the same time. Rather than negotiate a new agreement with Comcast, the Orioles launched their own regional sports network, depriving Comcast Sports Net of its bread and butter summer programming. (Naturally, as is usually the case in these corporate tugs of war, the Nats fans were caught in the middle and were deprived of seeing any local television programming during much of the Nat’s inaugural season when Comcast declined to carry the Orioles’ new channel on its local franchises, a situation it took nearly an act of Congress to rectify.)
Time Warner
The prime example of whether or not content distribution companies also need to be in the content creation/ownership business, however, should be Time Warner (TW). A major creator of content (HBO and Turner Broadcast cable networks, Warner Bros. studios, Time magazine publishing products and AOL), Time Warner is also majority owner (84%) of Time Warner Cable (TWC), the second largest cable company in the United States with more than 13 million subscribers.
While TWC contributes over one-third of TW’s revenue, and as much as 40% of its cash flow, TWC has been accused of being an anchor on TW’s stock. TWC trades at around the cable industry average of 6 times cash flow while TW, at around 7.2, trails other pure play media companies like Disney, News Corp. and Viacom, according to a report in Multichannel News. As a result, TW’s new CEO Jeff Bewkes has made clear his interest in spinning off TWC, which he thinks will increase TW’s value for its shareholders.
But is he correct? As Comcast’s experience shows, it is becoming increasingly easier for content owners/providers to bring content directly to market. And whoa be the content distributor who seeks to keep programming competition from its offering (an all new meaning for network neutrality). Additionally, while TW is moving one way, Viacom, the valuation leader in the “pure play” space, announced yesterday it was ending its agreement with Showtime to distribute its content and starting up its own cable channel. As the wireless operators look more and more like cable companies and less and less like telcos (that also look more and more like cable companies), which way do they go?
And here is where the horse racing industry rears its head. (Nice segue, eh?)
The horse race
According to a column by horse racing columnist (and Harvard educated) Andrew Beyer in the February 21, 2008, edition of The Washington Post, until last spring, the TVG Network had the exclusive rights with racetracks across America to take bets by phone or computer and to distribute video of races into homes via DirecTV and cable when the nation’s two biggest racetrack owners, Churchill Downs and Magma Entertainment, decided they wanted a bigger piece of the action. They yanked the rights to their tracks from TVG, eviscerating its offerings, and formed a joint venture to distribute the video of their races and offer online and telephone betting rights. The transition of tracks to taking complete vertical control for their products may be creating chaos in the racing industry, as Beyer maintains, but is it also pointing out the need to have end-to-end control of content if you are going to ensure your value in the chain is protected?
Instead of “ah-ha,” maybe my response to Comcast’s failure to buy Disney should have been “uh-oh” in what it portends for the structure of the wireless industry.
*(Possible) Mortal Lock Kentucky Derby Pick Bonus! With the first Saturday in May just around the corner, and with so many of us so anxious to donate our hard won wages to somebody else’s cause, I thought I should leave with you the wisdom of my handicapping of the upcoming race, for purely recreational purposes, of course. Pending any back off of the claim that his hooves are now fine and he is ready to run, I presume the favorite going to post will be Big Brown, the lightly raced (three times) 3-year old colt that has obliterated his competition each time he has run. But while Brownie, as I call him, may have done a heck of a job to this point, he has many more questions facing him than just whether or not his tender feet will hold up. The last Derby winner who was similarly untested was the filly Regret, in 1915, according to the New York Times, and only two horses-albeit one of them last year’s winner Street Sense-have ever had only two starts in the year in which they ran in the Derby, as it is with Brownie. Instead, I offer Colonel John, much more traditionally trained for the Derby, who also exhibited in capturing the Santa Anita Derby, his last race, the one indispensible ingredient for winning the Kentucky Derby: Speed down the stretch. Any one who witnessed Colonel John accelerate from ninth place at the 3/8ths pole, going from the rail to the middle of the track and back again down the stretch while dusting off (most) of the field in the process, knows all they need to about whether or not this horse will be in the race as it heads for home. Colonel John to win (and also with a box including Brownie and/or Recapturetheglory. one shouldn’t forget to hedge one’s bets! You’ll thank me for it.
