Notes on cable – Part 5 – The future winners of Internet TV

The future winners of Internet TV will likely be the companies that can:

1. Intelligently buy undervalued content.
2. Achieve scale (or have scale).
3. Create good software

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Notes on cable – Part 4 – Billing for Internet

There are different approaches to billing users for Internet usage.  This post looks at the ways in which ISPs might raise prices and implement price tiering for its customers.

Notes on cable – Part 3 – Monetizing content

This post will look at how the content of a show, its monetization strategy, and avenues of distribution all interact with each other.  In the end, I think that the most important factor in monetizing content is scale.  Being able to monetize a piece of content repeatedly creates incredible value.

Tracking John Malone (Part 5) – Nov 2014 update + Why control matters

John Malone continues to create more tracking stocks and spinoffs.  Click the diagram below for a larger image.

The Canadian media landscape

I think that the biggest driving force in the Canadian media industry is the CRTC (Canadian Radio-television and Telecommunications Commission).  This government regulator’s most notable  actions have been:

1. Forcing cable and telephone companies to open up their networks to independent ISPs (Internet Service Providers).  The competition from independent ISPs continues to drive down prices and to hurt the profitability of the incumbent cable and telephone companies.
2. What I call the “CanCon tax”.  Most Canadian broadcasters and cable channels are forced to subsidize Canadian content and to devote airtime to Canadian content.  This hurts the quality of their product and hurts their profitability.

This environment is very good for over-the-top companies such as Netflix because they benefit from cheap Internet and don’t have to pay the CanCon tax.

Notes on cable – Part 1 – The past

Historically, the cable industry has had two areas that has generated very good returns for shareholders:

1. Distribution companies / cable channels.  They monetize content.
2. Infrastructure companies that own the physical coaxial cables.

What happens when technology is good enough?

There are some areas in technology that have reached maturity and are at the point of being good enough.  Take JPEG image compression for example.  This old technology is used on websites everywhere to compress images.  There is a newer JPEG2000 format which is technically superior.  However, this superior technology has seen very little adoption on websites.  Internet speeds are so fast that the benefits (webpages loading slightly faster) aren’t important enough for webmasters to switch.

For some shareholders, there may be a disappointing future ahead.  Once the demand for more computing power stops, there is no longer room to create value with newer technology.  Often what happens is that mainstream consumer demand goes away first.  This can devastate the business model of companies developing new technology as it can only be sold on a smaller scale to niche markets.