I’ve been paying a lot of attention to the signals NBC is giving to the market around their IPTV and social networking plans. Most of the other players have fallen into place – Fox with MySpace, CBS is in bed with YouTube, Viacom looks to be partnering with Tagworld, etc. Everyone except NBC is at least experimenting with online TV in other ways, too.
NBC seems to be choking, frozen like a deer in headlights. They were close to acquiring Tribe but backed out. A VP wrote a blog post about their strategy, admitting they were late to the game, and then deleted it. I imagine execs at NBC meeting regularly and screaming a lot for someone to just figure this out and do something.
So I was surprised yesterday to see NBC working closely with Netflix on their new streaming television and movie product. At least they are experimenting. But their mindset was displayed perfectly in a quote in the NYT article on Netflix, where a (different) NBC VP was quoted:
Frances Manfredi, senior vice president for cable distribution at NBC Universal, said her company wanted to provide video content “where consumers want it, when they want it, how they want it.” But, she added, “we really recognize that the traditional distribution businesses of cable and syndication are our primary businesses, certainly with respect to revenue generation.”
And that, frankly, is what it comes down to. “Feel free to experiment with this Internet stuff, Manfredi, but don’t do anything to hurt our bread and butter revenue streams.”
It’s what paralyzes entrenched companies with familiar revenue streams from changing, afraid to lose their “primary business”. Meanwhile, nimble startups come by, eat their lunch, and sell for $1.65 billion. If NBC was thinking straight, they’d be doing a lot more than experimenting with online TV. They’d be doing something as broad and ambitious as what Netflix is doing in the face of the ultimate demise of their DVD mailing business – spending most of their operating profit placing a very big and very smart bet on tomorrow’s world.
I don’t want to pick on just NBC, either. Another example – This is what’s holding Yahoo and Microsoft back from offering an email product that is as good as Gmail. They both have lots of customers that pay for extra storage and things like POP access. Offering a product as good as Gmail means walking away from that revenue. And it would take a bold executive to recommend to his or her superiors to kill a nice existing revenue stream and replace it with a free product just to gain market share.
For startups, this is a terrific and ongoing opportunity. It’s why Jingle can eat away at the entrenched 411 market, for example. And there are countless other opportunities as well. Just find an entrenched business. Then eat their lunch as they watch, paralyzed.
Spot on Mike. I think this is a frustration that many of us can relate to in the marketplace, whatever the scale it is that we work on. This comforts me though, it’s a process of evolution and nothing more. Those that survive will exploit opportunities and adapt and those that don’t won’t have a seat at the table. It’s what keeps the game interesting for most of us.
It also gives me hope that much of this social media phenom will ultimately prove to have served more than just forcing corporates to engage their customers in a better way. Dark I know, but ultimately these moves into new markets are more about control and defense than we often mention.
I know this is a hubristic statement but what nbc needs is s simple startup they can nuture and grow the way they want. Simply put – like ours. We have been growing since our 9/1/06 launch. If they are looking for the 18-24 year old demographic tell em to take a look at ours. Our unique visits have doubled recently and we are ready to do a major campaign to the market. Not to toot my own horn or pimp out too badly but we are looking for a major player and I know we would be a perfect fit.
http://www.theCampusCenter.com
Munch, and Volley back to the Industry that started it all.
We all benefit from fresh niche content.
Mike,
This is the reason that start-ups can prevail. I frequently refer to the book, “The Innovator’s Dilemma” on our blog. The last time was in reference to the ongoing Netflix vs. Blockbuster debate, which I find fascinating from a word-of-mouth perspective:
http://www.baza...ster-round-two/
If your readers want to learn more, I suggest they read that book. It will give them the confidence to bob and weave in the midst of slow-moving giants.
Best,
Brett
NBC might have a hangover from bubble 1.0. When all the other networks were trying to figure out their “internet strategy”, NBC jumped into the net with both feet, with NBCi. It was hugely expensive (remember Xoom) and failed hugely. Perhaps they are waiting on bubble 2.0 to see how things shake out.
Honestly I think there’s a bigger thread to them from Tivo than from YouTube.
I think this is what Clay Christensen calls the Innovators Dilemma
A hundred “years” ago, Michael Bloomberg famously said there’s no advantage to being first into a Net space. Still true? I think so, IF…you’ve got a better digital mousetrap. Or, a solution that addresses an unserved user desire.
Netflix is doing something right with its upcoming product by making the online video viewing experience simple: click and play. Its choice of “streaming” technology (versus downloading pipe-busting movie files) coupled with the brilliant “free viewing hours” are something NBC execs ought to ponder on.
Over at Google Video, with its Flash player, the “instant play” is already a reality (even for 2-hour movies), so it’s not a technical hurdle for NBC to make its vast media library available online for anyone with a broadband connection, plus by now Netizens are used to watching a 320 X 240 box two feet from their eyes anyway.
The only issue NBC execs get to exercise their lung power about during their internal meetings will be to determine a price structure: 99 cents one stream, or 99 cents a day, or 99 cents for an 8-hour-play-window. Gee wiz, guys, make your parents proud that they paid for your Ivy-League education.
so…
i gotta move fast.. to make sure i get there before someone else, (whereever there is), and i need to be cool…
mike. the fact is, google did spend 1.65 billion for youtube. the fact is, it’s waaay to early to tell if they’ll ever be able to recoup that value back.
business is littered with people who spent on businesses/strategy/technology/etc because it was ‘the smart’ thing to do, only to have it blow up in their prespective faces.
frankly, i seriously believe in the idea of content delivery. i’m not convinced in the idea of ’streaming’ as the solution for everything.
in case you haven’t noticed, the cost to ’stream’ something to you is way more costly than the cost to blow it over the airwaves… who’s paying for that additional bandwidth/customer delivery pipe?
having said all of this, i believe there is a present/future for content delivery, but as the ceo of netflix has stated, ‘this market is negligible’ for now.
the key players, have plenty of time to sort through/figure this out.
no need to rush in as was done 5-6 years ago!!! bu it seems like people like you have forgotten this.
peace
Michael…I agree with you 100%. The problem is that the stubborness is that of “old fashioned” owners who know nothing else. They sometimes drown and in the process take with them a lot of innocent bystanders….
In a sense though sometimes you have to understand as it is the deviation from the core that is sometimes the deadliest…
sam: google already recouped the value of the YouTube deal on day 1… the deal was for stock, and as a result of the announcement, GOOG’s market cap went up by ~5x the amount of stock they paid for YT.
while the market may later downgrade (or further upgrade) the company’s market cap based on YT performance & monetization, there’s no question the deal was a win from a market & market cap perspective.
the more interesting part of the story wasn’t that Google paid up $1.65B for YT, but that they effectively put the Google Video effort second priority behind gaining market share. i believe *that* is the “bold stroke” mike is referring to, and the decision that is much harder for entrenched players with existing revenue streams (and less optimistic shareholders / less volatile stock).
TAGWORLD?!! WTF is that..more web 2.0 crap?
Add Yahoo to the list of impotent dinosaurs listed…doing stupid deals to acquire crap like MyBlogLog, Mebo and whatever “hot” Web 2.0 deadzones makes no sense…
hi dave…
i did a quick/dirty analysis/review of google’s stock movement for the last few months before and after the youtube purchase. i don’t agree with your implied assessment that the youTube purchase is the reason for the stock price.
when google purchased youTube, goog was ~410, thereafter the price moved up to 423 where it moved around/oscillated around (423-419) until oct 20, where it moved again. to understand the movements (if you can really ‘understand’ price movements) i would argue that a portion of the movement might be attributed to the youtube purchase, but i would more strongly argue that the upward movement was/is reflective of the strong growth in marketshare, as well as earnings from the advertising engine of google.
this timeframe also correlates to announcements of earnings/information regarding the end of the quarter.
so. i’m not as of yet willing to say that the purchase of youTube has been the great deal that others might.
just my 0.02 worth…
peace…
Traffic-wise, nbc.com is doing much better than other networks
abc.com, cbs.com, fox.com (purely the corp sites, without their other online properties elsewhere — MySpace would certainly prevail otherwise. ).
Abc.com has very low traffic — am surprised – they had a number of TV hits recently. Or, am I missing something? (Compete.com does not let to see traffic for abc.go.com)
http://snapshot...bc.com+cbs.com+
I’m not that surprised…as Mike Eisenberg points out above, Clayton Christensen created an entire cottage industry examining this sort of thing (c.f., “The Innovator’s Dilemma”)…seems to me that the only large companies in an industry that are able harness what Christensen calls “disruptive” technology (i.e., technology which doesn’t immediately support the business models of the entrenched customer base) are the ones that are run centrally by the CEO (e.g.–Apple, NewsCorp perhaps). And this inability is particularly pronounced (and more evident to the world at large) when the industry is at a critical inflection point (as is broadcast media right now).
N.B.–this does not necessarily hold for smaller companies and start-up’s whose role in many cases is to deliver new technologies to the market (and who don’t have an entrenched customer base asking for something else).
While NBC may very well be a deer in headlights, I can think of a lot worse things to do in this market than to sit tight. A Yahoo acquisition of Facebook, for instance, at north of even $800 million would be a major mistake in my opinion, even though some might hail it as a great move now.
It remains to be seen whether many of these Web 2.0 have real staying power as businesses. They have certainly captured the imagination of the popular culture and I do think that social media is here to stay, but what it’s going to look like a year from now and whether many of the companies that are currently on the acquisition radar can actually develop into real companies with significant revenue that makes them worth acquiring (or investing in) at current valuations remains to be seen. Furthermore, these startups are built on technology that is basically a commodity now. All the major media companies have the resources to build their own social media platforms and if they can’t get the users on them (which is why they acquire), then they should be analyzing why they can’t attract users themselves because that will reveal what they’re doing wrong in today’s market. It may also reveal why acquisitions will eventually fail if they can’t understand the recipe for success for what they acquire. I should note here that News Corp. has done a fantastic job with MySpace, but there’s no guarantee that MySpace will be as popular in 2-5 years as it is now.
With all the overfunding and copycat Web 2.0 startups with no differentiation and business model, there’s certainly going to be a fallout at some point. A number of startups will succeed and those that don’t could very well serve as cheap acquisitions for the likes of the NBCs of the world once these companies are part of the firesale. And for the successful startups, eventually eyeballs will need to be converted to dollars and I think more of the “successful” Web 2.0 startups will turn into decent medium-sized businesses than the next Googles.
One of the major problems I’ve always had with major American corporations is their short-sightedness. This is no doubt due in part to the short-sightedness of Wall Street. If you study the decline of the American automobile maker, when the Japanese first started competing in the marketplace, almost all of the American auto companies pursued short-term strategies to protect their market in the immediate term that were were disasterous in the long-term. Companies like NBC (and even Yahoo) face real challenges in a changing media world and M&A is a short-term band-aid for bigger problems. It does no good for them to take a short-term approach that enables them to take an “out of sight, out of mind” position that kills their business down the road. Just ask GM and Ford.
Case study: The newspaper industry.
Early on, afraid to invest online with a long term outlook and adopt progressive strategies that might cannabalize huge print revenue streams (but would position them to have a valuable online audience as the model changes). So by not cannabalizing themselves, they left the market open to predators who happily and easily took their market share. Now the advertising dollars are shifting to the Web in a huge way and newspapers are too late to the game.
Man, who uses jingle, Text message to Google with Business Zipcode, or hop on google maps, hasn’t everyone realized nobody wants to “hear data” yet? 411? My grandma doesn’t even use that anymore, I am sure there are still plenty of people who do I guess but what a waste of money.