By:  Athina Kontosakou and Gregory Bufithis

18 May 2012 - The US cable industry is very big and very profitable. The four large publicly traded cable companies – Comcast, Time Warner Cable, Cablevision, and Charter Communications – have an aggregate enterprise value of nearly $200bn. They face limited competition, have high and stable margins and spew out cash. Yet they are accused of being “dumb pipes” – mere distributors with little power over suppliers or customers.

The description fits if you consider only video distribution, which represents about half of the cable operators’ revenues. The reasons can be debated (competition from telecoms and satellite companies? cord-cutting? low household formation?) but video subscriber growth is in unmistakable decline. And pricing power seems to be slipping: growth in revenue per video customer (see chart below) at the big four has slowed recently.  And even as video revenue has flatlined, the cable companies’ programming costs have been growing a few points faster than inflation.  A nasty squeeze.

But these are not video companies, of course.  They are video/data/voice companies.  Their chief advantage is that one set of competitors (telcos) only offers video in select markets, and another (satellite companies) cannot offer data or voice.

And combined revenue (see chart above) from all services is still growing in the mid-single digits at the big four, though the pace of growth did slacken a bit in the first quarter.

The important driver is … data!  It accounts for about a fourth of the companies’ revenues.  As long as data subscribers keep growing at 6 per cent or 7 per cent (as they have been during the past year) and a bit of extra revenue can be wrung out of business services and advertising, the cable model will keep working.  Data subscriptions will eventually hit saturation, too – the big four have 36m data subscribers, up 4m in only 2 years, as compared to 42m video subs. That will leave price increases as the last, and hardest, route to revenue growth. But until that day comes, these pipes are plenty smart enough.

The US cable industry is very big and very profitable. The four large publicly traded cable companies – Comcast, Time Warner Cable, Cablevision, and Charter Communications – have an aggregate enterprise value of nearly $200bn. They face limited competition, have high and stable margins and spew out cash. Yet they are accused of being “dumb pipes” – mere distributors with little power over suppliers or customers.

The description fits if you consider only video distribution, which represents about half of the cable operators’ revenues. The reasons can be debated (competition from telecoms and satellite companies? cord-cutting? low household formation?) but video subscriber growth is in unmistakable decline. And pricing power seems to be slipping: growth in revenue per video customer at the big four has slowed recently. And even as video revenue has flatlined, the cable companies’ programming costs have been growing a few points faster than inflation. A nasty squeeze.

By: Gregory P Bufithis, Esq.
(with thanks to staffers Juan Di Lica, Andrea Valencia, Athina Kontosakou and Darius Champion)

30 April 2012 -  On the heels of Mark Zuckerberg paying $1bn to eliminate the threat to Facebook from Instagram (which we wrote about here), with Yahoo unveiling (yet another) reorganization under its fifth chief executive in five years, and with AOL selling a portfolio of 800 patents to Microsoft for $1.1bn … well, we thought it high-time we posted our Mobile World Congress coverage.

We attended the Mobile World Congress (MWC) in Barcelona last month, by far our favorite event of the year. MWC is every conference delegate’s dream. Despite being enormous … it runs 4 full days and this year some 60,000+ people attended … it is superbly organized and run by the GSM Organization which has a crackerjack staff that can resolve an problem you might have, make scores of suggestions concerning how to cover the event, where to take a eat/drink break, accommodations etc. Scattered throughout the event were video booths where you could do short clips that were instantly Tweeted, recharging stations for cell phone, laptops, tablets, etc., and scores of private “meet & greet” areas. It’s was our third year in a row here and we have a ball. 

Normally just the EAM Capital telecom/media team attends. But this year we decided to wear a second hat and brought staff from our sister company Project Counsel which covers the legal technology space. There were a lot of legal vendors and law firms attending MWC this year. Not  presenting, just attending.  Last year we encountered 3.  This year 12+.  Last year was especially fun because we had an off-the-floor presentation of how an ediscovery/forensics expert breaks out a mobile phone and extracts the data.  

All in all, this event is about revenue-building strategies for mobile-phone operators, financial services in a mobile world and how to capture more of the connected consumer’s time and money, convergence and the battle for dominance across a range of other telecoms-sector-related channels from smartphone operating systems.  We’ll have more on that in a minute. But some of our most intriguing chats were with the folks from Hitachi, IBM and Symantec, vendors with substantial e-discovery assets and some pretty big staffs at the show.

NOTE: And the big gorilla not in the room was Apple who announced their new iPad the week after MWC (funniest sidenote:  upstaging Google chairman Eric Schmidt by sending out the iPad event invitations just as Schmidt’s MWC keynote started).   The  smartphone and tablet poster child has “stayed the course” with its tradition of eschewing the trade-show circuit and not make an appearance in Barcelona.  Well … kind of not there.   Rumor had it that Apple quietly had some people there doing meetings, research, etc.   Meanwhile, there were are plenty of other companies representing Apple’s influence here: The app developers, mobile media companies, accessory companies, etc.

But it leads us to a point made by our Project Counsel companion company in their LegalTech 2012 review (click here) and why so many e-discovery vendors were at MWC:

“Mobile First”.   At LegalTech this year we saw two e-discovery data processing/data review presentations on iPads.  The future.  One of the technology trends that can no longer be ignored is the rise of the Apple platform across all enterprises, a trend I wrote about in January (click here). In one of the conference sessions at this year’s LegalTech, the sentiment from the floor was that the Apple iPad was now the device of choice for attorneys.  And we encountered e-discovery vendors who have developed a niche product line dealing with data collections from Apple products.

No surprise.  It’s a “mobile first” world.  As the folks from Forrester said at their presentation “companies need to realize that mobility is the new front end for engagement systems. Apps are increasingly context aware, fed by the cloud, sensors, history and social data. That requires companies to reconsider how they deploy apps for customers, partners … but especially employees around this enhanced form of engagement”.  Bravo.  Mobile apps from companies can’t just log data, they need to harness all the power of mobile and social to help people get specific jobs done in any particular industry. 

And so it will be for e-discovery applications based on the “industrial strength” presentations we saw at LegalTech.  All you need to see is Microsoft’s purchase of Skype, Google’s acquisition of Motorola Mobility and Deloitte’s acquisiton of Ubermind to realize that technology’s next phase will be those firms that boast the most compelling ecosystems of devices and cloud-based services.  And it also explains why e-discovery vendors attend the Mobile World Congress and learn more about technology, platforms and “industrial strenth” apps.

As the team from Symantec said, categories are blurring.  Cloud, social, mobile.  Trends in the workplace are driving enterprises to cater to the information needs of workers who are not only mobile but smart-device enabled and cloud integrated.  Knowledge management discussions were taking place all over MWC … not least by the e-discovery/information management folks.  We’ll discuss this in more detail below.   Cloud technology continues to grow as a model for delivery, with most vendors now offering that option even if their product was not originally developed for the cloud.

And Apple has had something of a head start in this race thanks to the visionary Mr Jobs, and they are clearly winning hearts and minds in the enterprise, but Amazon, Google and a host of other companies are now hard on its heels.  But the iPad has reached a position where it is becoming harder to find things the iPad can’t be adapted to than to list the uses it’s already being put to. 

This marvelous convergence of diverse technologies and applications and the “what is possible” makes attendance at events like the Mobile World Congress mandatory.  And with the natural of progression of technological disruption, the step-changes in competition such as Facebook’s entry into contextual search and Google’s further expansion into all elements of search, plus those polymaths at IBM with their Watson project and its natural language processing and information retrieval for applications in enterprise knowledge management and e-discovery … well, we’ll need another blog post for that.   We’ll have more comment on the e-discovery aspects of MWC on our Project Counsel site.  Right now, a focus on other elements of the event.  As always at an event like this there is simply too much to see, to do, to cover.  So just a few short observations:

▪ MWC is a “let’s make a deal” event

It’s easy to get distracted at MWC.   There were some 60,000 people, hundreds of booths, some product announcements, and oh, yes — an entire conference of panels and keynotes  But those panels and keynotes are in the background, not the main event.  MWC is a proper trade show – most people are here to do business, network, discuss deals, meet with press, and socialize, much more than they’re here to attend keynotes or panels, or even launch products.   The booths are big (and mostly devoid of Booth Babes) and well-staffed but the real work is in the scores of meeting rooms, and at dinners and parties.  As our chums at Orange said “Mobile World Congress really runs from 6 p.m. to 4 am”.    And well … it’s Barcelona and it’s beautiful outside. 

 
▪ The biggest theme at MWC: how to live in a connected world

The big thing at MWC wasn’t a phone or new network architecture or a gadget.  It was more about the subtle shift in focus on how we live in a hyperconnected world. This year the industry seemed to move beyond starry-eyed soothsaying about a world of 50 billion connected devices to start talking about how these mammoth networks of objects and appliances would actually work and how they would be managed. Ford Motor Company’s executive chairman, Bill Ford, delivered one of the keynote addresses.  It was on the connected car.  Ford has moved well beyond the idea of the embedded connectivity in vehicles being used for mere infotainment. Instead it dreams of a world where cars don’t just talk to the network but to one another, sharing information on their speed, direction and even destination in order to coordinate their movements across the world’s highways. Ford predicts there will soon be 4 billion cars globally, which will bring untold amounts of congestion to our roads. He implied that human beings acting as individual agents could no longer manage that congestion in any meaningful way, but a machine intelligence distributed among billions of individual vehicles could make the optimal decisions on where our cars are placed on the highway.

In an interview, Ericsson Labs’ Mikael Anneroth made the interesting point that if 50 devices in our home are connected, they will generate a lot of chatter, and that deluge of info could get very annoying. If the Internet of things is giving us too much information, is it really giving us no useful information at all?  (Can you make the Internet of Things shut up?)  Ericsson is looking further into the future, designing a social network of things in which devices communicate with one another, acting on the information they receive. As in Ford’s connected car, embedded objects behave with an intelligence of their own, and the user winds up seeing only the end results. For instance, if inclement weather is on the horizon, all of a user’s connected objects could go into storm mode: The windows close, the heat goes up, new route information is sent to your car’s onboard navigation system and your calendar is updated to give you extra time to make your appointments.

Of course, handing that much free agency to devices has its pitfalls. These connections have to be secure, and the artificial intelligence behind them has to be foolproof. What happens if these systems are hacked? Your kitchen appliances may go haywire, or worse, your car could start swerving to avoid phantoms.

▪ Telecoms change business models … well, try to change

Two of the more depressing keynotes at MWC were from executives at two of the most prominent mobile operators discussing the commoditization of revenue streams, investment in networks, and competition.   Franco Bernabe (Chairman and CEO of Telecom Italia) and Li Yue (President of China Mobile) focused on changing fundamentals and the ever-growing pressure on their margins.  Each of the operators is going through their growing up phase in the new era.  Some, like KPN and SMART, are seeing deterioration of their business fundamentals because of users choosing to text or talk via services such as Facebook and WhatsApp.   Many do realize that they need to do something, perhaps offer competing services, but are having a hard to time organizing themselves to actually make it happen.  As one telecom told us “entrepreneurs we ain’t”. 

▪ Tablets, the cloud, Apple, the cloud, tablets …

Did we mention tablets?  The cloud?  Apple?  Those braniacs from Forrester were at MWC with, as expected, with some interesting assessments on the course of technology growth.  And a lot flew in the face of that great scary, bogeyman  ”conventional wisdom” …  which always intrigues us.  Simply put, before cloud computing truly commands the attention of enterprise network architects and the Big Bucks are spent, a few other dramas currently in progress must play themselves out first.  And they involve Apple.  First, some shattering news:  Apple makes a tablet everybody really wants. And CIOs and CTOs may not actually know exactly how it does or should integrate with their networks, but unlike most any technology purchase to date, they’re willing to invest in it now and figure out the solutions down the road.

There was a ton of info … petabytes? … to consume so some salient points due to space limitations.  The rise of cloud computing in 2011 led to a rise in server equipment sales. But the principal buyers were actually just a handful of customers who needed a broad infrastructure platform now. One such player was Rackspace. Another was China.  Yes, as in “government of.”

But those purchases are made – they’re done. Meanwhile, Forrester survey results for Q2 2011 were the first indicator of trouble signs for enterprises smaller than the Chinese government, such as banks. Only about one-fourth said they really have an IaaS strategy, with many indicating they don’t really know what an IaaS strategy is.

What has enterprise executives’ attention locked up? Tablets, particularly the iPad.  Until CxOs (no, not the Chandra X-ray Observatory.  CxOs are top executives who have “chief” in their title — chief executive officers, chief financial officers, chief information officers and so on) stop staring at iPads like cats with yarn dangling in front of their faces, Forrester says the growth of cloud computing infrastructure within the enterprise will actually take a dip.  “In 2011, we estimate that Apple will sell $6 billion worth of Macs and an equal amount of iPads to the corporate market; in 2012, we project $9 billion in Macs and $10 billion in iPads; and by 2013, $12 billion in Macs and $16 billion in iPads,” Forrester’s report reads. “In contrast, global corporate spending on Wintel PCs and tablets will decline by 3% in 2012 and by 1% in 2013.” 

So, for the smaller businesses on the enterprise scale, the adoption of iPads has a long tail to it that brings in more Macs, particularly among members of the IT department themselves who evidently prefer working on Macs. Because of them, Forrester believes, Apple could double its worldwide sale of Macs (a majority of which are sold in the U.S.) in a two-year period, at the same time that spending on PCs levels off, and spending on Windows-based PCs declines. Note the forecast for “Wintel” PCs for 2013, which should be the year of Windows 8.  

▪ A stronger ecosystem, not a Nexus tablet, is what Google needs

The Google Nexus tablet was making the rumor rounds, but even if true, such a device alone won’t solve the primary problem Android tablet owners face.  The blog reporters were saying Google was partnering with Asus to build a 7-inch slate, possibly with a quad-core processor, that will sell for $199. Like all prior Nexus devices, the tablet would use a stock Android interface.  The rumor is certainly believable when you consider the the 7-inch tablet Asus previewed at the Consumer Electronics Show in January.

But issues.  As several developers told us at MWC, any developers that have the Google Edition Galaxy Tab 10.1 essentially have an orphaned device. The tablet came with Android 3.1 and received an update to 3.2 a few months later. Since then, however, no software updates have arrived from either Samsung or Google. And I’ve seen no reports of any planned updates. That doesn’t send an inspiring message to developers at an event that should generate excitement. How are devs supposed to create apps for Android 4.0 when the tablet they were given runs older software?

And there really hasn’t been a huge uptick in the number of Android tablet apps since then. Instead, Google added a function that zooms or upscales Android smartphone applications on a tablet. The entire point of the Google I/O device was to generate momentum for Android apps, but top-tier tablet apps and content available on Apple’s iPad are still missing from the Android ecosystem. Think Flipboard, for example, or HBO Go, which is available on Android smartphones, but not tablets.

Simply put: when it comes to tablets, very few developers are thinking Android first and iOS second. And why should this change when the iPad is still outselling all Android tablets combined? Programmers are following the money, which means targeting their wares on the best-selling tablet. 

▪ Data, IT, mobile gadgets … how to use it, them, things, stuff (eh, just go with Apple)

Notice to the IT Department:  stop viewing your “customers” as the problem and start seeing them as the biggest part of the solution. Educate your users. Make them aware of the ways they can access and use data safely, and how they should protect sensitive information.  Well-meaning but uneducated users are your biggest risk. So teach them, and make them your biggest asset.  Admission by an IT guy: “Fortunately, despite Apple’s completely unearned (and inaccurate) reputation for enterprise indifference, the iPhone and the iPad are (not surprisingly) amenable to central management — although certainly not up to the BlackBerry Enterprise Server, but good enough to set corporate security policies and network configurations”.  Yet another feather in the Apple cap.

And, we learned, Apple provides a free iPhone Configuration Utility that can be used to create standard configuration profiles containing device security policies and restrictions; VPN configurations; Wi-Fi, email, and calendar account settings, etc., etc. 

▪ Categories are blurring … cloud, social and mobile dominate

Trends in the workplace are driving enterprises to cater to the information needs of workers who are not only mobile but smart-device enabled and cloud integrated.  Knowledge management (KM) discussions were taking place all over MWC … not least by the e-discovery/information management folks.  The spike in mobile technology use, thanks to the growing use of smart phones and the iPad, has led to the incorporation of different KM technologies into the same application – for example, content management is becoming an integral part of customer relationship management. The use of social software platforms is expanding too, and social elements are being built into nearly every KM application. Cloud technology continues to grow as a model for delivery, with most vendors now offering that option even if their product was not originally developed for the cloud.

The most frequent comment in our KM discussions:  “The release of the iPad by Apple two years ago has been the catalyst for hunfreds of companies to begin exploring business intelligence solutions and on the fly analytics for mobile delivery.” 

And the chaps from Deloitte Analytics, Forrester and Gartner were (pretty much) saying the same thing: the killer app will be the ability to see all the information relevant to the type of work you are involved with. Through your primary application.  Workers in many different areas need access to content, but they want to do it through their primary application.

▪ IBM: a culture of analytics

What a company.  Hard to determine what these folks AREN’T doing.  We spent almost 2 hours with various members of their team, plus a brilliant presentation by the two primary brains behind Watson who ran through 12 current/proposed Watson applications.  Quite a bit of this I wrote about here after LegalTech (click here).   At MWC we learned more about IBM’s smarter commerce approach through its Cognos Solution and its partner Applied Analytix.  Using the Japanese fashion retailer Start Today as an example, IBM increased annual sales on their Zozotown website by a whopping 54.2%.   Their customer-centric focus uses Netezza and Unica to rapidly analyze massive amounts of data, letting them create personalized messages for each of their 3.8 million customers. Results? The solution helped increase the email open rate by five times, and the conversion rate by nearly 1000 percent.  We’ll have more in a special series “IBM: a culture of analytics” later this spring. 

You could spend the whole 4-days just learning about tech products. So just a few of the gadgets we saw or learned about at the event that caught our attention, some mobile related and some not:

▪ The Kobe e-reader Touch

Many pundits think the Barnes & Noble Nook is the best dedicated ebook reader. But we checked out the new Kobo eReader Touch Edition.  I think you can choose either the Nook Second Edition or the new Kobo eReader Touch Edition and experience the best in dedicated ebook reading.  The Amazon Kindle still has a large majority of the ebook market and I do think they are fine devices. However, I personally find little need for space wasted on a dedicated QWERTY keyboard and am not a huge fan of buying books just from the Amazon marketplace. Both the Nook and Kobo devices let you read EPUB books purchased from various online stores and those checked out from your local public library through Adobe Digital Editions DRM management software. The new zForce touch technology also gives you an ebook reading experience similar to a paper book without compromising the clarity of the display.  A cool device.  

▪ Kingston Technology DataTraveler 6000

USB sticks.  Almost all of us use them.  They are enormously useful, especially to move documents around from one computer to another, or so you can leave your laptop behind for that crucial meeting and stick a presentation on one.  But … easily lost and then security becomes an issue.

Ta da!  The Kingston military grade encryption USB stick from Kingston’s DataTraveler range. The DataTraveler 6000 range promises FIPS 140-2 Level 3 military grade encryption. This sounds impressive and actually it is.  So the USB drive is password-protected. Big deal, right?  Wrong.  There are minimum requirements in terms of how simple your password can be.  And if someone unscrupulous is trying to get at what’s on the drive, they may try what’s known as password brute force attacks.   In that case, the USB drive locks down after ten attempts, destroying the encryption key so nobody can get at the data. The brochure says that the encryption engine is so complex “that hacking into it would take decades”.  

▪ Olloclip lens for iPhone

A fisheye lens for your iPhone.  Well, the Olloclip doesn’t stop with just a fisheye lens. Compatible with both the iPhone 4 and 4S, the Olloclip is a quick-connect lens system that includes fisheye, wide-angle, and macro lenses in a tiny and convenient package (yes, I am lifting this from the sales materials).   Slide it on over your iPhone’s rear camera lens and you’re ready to take some very cool photos and videos. The fisheye lens captures a nearly 180 degree field-of-view. The wide-angle lens doubles the field of view of the iPhone camera.  And the macro lens lets you focus the iPhone within 12-15mm of your subject and applies roughly a 10X multiplier.   

▪ Vox.io : “Phone numbers are dead” 

These folks were not presenting at the show, but attending.  Vox.io lives in your web browser, and unlike Skype you don’t have to download an app. Users receive a URL, which they can link to their existing phone number. So, to call EAM Capital just Google “call EAM Capital” and hit the green button on the first link — our Vox.io profile — and you’ll be put through to us.  You see the beauty of this.  When you travel, you don’t need to send your latest phone number to anyone.  Your contacts can reach you straight through your profile, wherever you are in the world.  And users can create disposable URLs to send to people they need to speak to just once.  A new business model: disposable telephony.  Vox.io was founded in Slovenia but the company has since moved to San Francisco.  The service now has 100,000 registered users. 

▪  The Nest learning thermostat

Engineers from Google and Apple have stepped in to update a small gadget known to create large monthly energy bills: the thermostat.  It is called Nest.  Over time, Nest automatically learns about its homeowners through the homeowner’s actions, and automatically makes temperature changes that suit the user’s needs.  Nest consists of a circular screen and a dial-based interface that is clear and simple to navigate. It tells the homeowner what the current temperature of that zone is, and how long it will take to reach a desired temperature so that the user doesn’t constantly tweak it in order to reach that temperature faster and end up overcompensating.

Nest also has two types of proximity sensors. One sensor activates the screen as you near it, which saves internal battery power when you’re not directly in front of it. The other identifies your occasional presence in the room, which allows it to detect when you’re at home or away. It will automatically adjust its settings when you’re away to save energy. When a few degrees are adjusted for energy savings, a glowing leaf appears.

What truly makes Nest unique is its ability to learn. Over time, Nest automatically learns about its homeowners through the homeowner’s actions. For instance, if a homeowner has a fairly regular work pattern of leaving from 9 a.m. to 5 p.m., Nest will pick up on this pattern and adjust temperature settings accordingly. When heat or air conditioning settings are changed, Nest is paying attention to see what the user prefers. It only takes about one week for Nest to learn regular patterns and begins making these changes automatically for the homeowner. 

Next features: it will take out the trash when it detects “overload” and walk the dog when “pee alert” sounds.  Kidding.

▪  Forumtel and its “Sticky SIM” 

Forumtel is an Israeli company that offers some neat solutions such as their Sticky SIM. This neat little device is a micro-thin SIM that overlays your usual SIM card to provide direct access to Forumtel’s services such as mobile money and discount international roaming. It acts like an international calling card but without the need to dial extra digits – it’s a seamless way to lower the cost of your international calls or data roaming. The Sticky SIM also gives you access to a range of secure financial services such as bill paying and banking – it can turn your phone into your credit card for NFC transactions.

▪  Blackbelt offers security

Security is a big issue with mobile devices. They are easy to lose and often stolen and they tend to be stuffed with our personal data ranging from contact and banking details to our private photographs. Enter Blackbelt, a network agnostic and cross-platform security system on steroids. Blackbelt claim that, because it was designed for mobile rather than being ported from the desktop, it is 30x faster than the competitor offerings. As well as Anti virus, anti spam it also features some neat tricks triggered when you lose your handset. If your device is lost or stolen Blackbelt can not only remotely wipe your data but can also continue to track your device even if the thief removes your SIM. If the SIM is changed it locks the handset and secretly sends SMS messages to let you know where it is. It continues to track the device via GPS and even sends you a URL to open a map showing the stolen or lost handset’s present position.

▪  Dump your Garmin:  get an iGrip!

Mobiles are getting even more mobile nowadays with people mounting them to all manner of vehicles to take advantage of things like GPS and mapping systems. Everyone from mountain bikers to boaters are using iGrips to secure their devices to their vehicles. Produced and manufactured in Germany, the range of mounts and grippers made by this 50 year old firm is vast. They seem to have something to suit every handset (or tablet) and for any type of vehicle. The company uses the ‘Made in Germany’ tag as a USP in a world where everything seems to be made China. They boast that their products are flexible, multi-function and solidly engineered and, from what I saw, they certainly seem to live up to this claim.

15 February 2012 – Last year there were a series of dire warnings that app developers would be driven from the U.S. by the activities of NPEs. 

But lo and behold, TechNet (a telecom/technology CEO network that to which we subscribe) says au contraire.  The surge in mobile software and other apps has led to a surge in jobs, almost half a million just in the U.S. by their estimate.  

Dubbed the “app economy,” the million or so apps created just for iOS and Android devices represent jobs for programmers, designers, marketers, managers, support staff, and other professionals, according to the TechNet report entitled “Where the Jobs Are: The App Economy”  (you can read the executive summary by clicking here).

But how just many jobs?  The analysis conducted for TechNet by Michael Mandel, president of South Mountain Economics and former chief economist for BusinessWeek, found that the app economy has been responsible for adding an estimated 466,000 jobs in the U.S., up from zero in 2007 when the iPhone was first unveiled.

However, it’s important to point out, as the study notes in its executive summary, that these are estimates and “may represent ‘jobs not lost’ rather than net jobs gained.”

That total includes jobs at a business like Zynga, which creates Facebook apps, as well as app-related jobs at companies like Electronic Arts, Amazon, and AT&T. It also naturally covers jobs at top app players such as Apple, Google, and Facebook.

As detailed in the study, the core platforms in the “app economy” include Google’s Android, Apple’s iOS, RIM’s BlackBerry, Microsoft’s Windows Phone, and Facebook’s own apps.

The top metro spot for app economy jobs proved to be New York City and its surrounding counties, according to Mandel’s research. But San Francisco and San Jose combined exceeded the jobs created in and around NYC. California got the nod as the highest state for app economy jobs. But the rest of the country is also benefiting, with almost two-thirds of the jobs counted outside California and New York.

As the study notes, on an economic level, each app represents jobs — programmers, for user interface designers, for marketers, for managers, for support staff. Conventional employment numbers from the Bureau of Labor Statistics are not able to  track such a new phenomenon.

Query:  in the great scheme of things perhaps NPEs do not matter much at all. RPX Corp has just signed an agreement with Alcatel-Lucent that some observers believe could generate US$1 billion in extra licensing revenue for the telecoms company in 2012 alone.  The deal could be a win-win for everyone concerned.

Yes, issues abound.  As Google edges towards the launch of its first physical product,  there are major IP challenges that this move poses. In the same vein,  Facebook’s patent strategy has come under scrutiny as the company approaches its IPO.  In Europe, meanwhile, the European Commission’s competition chief sent an ominous warning to the smartphone sector in its Google/Motorola decision.

Don’t you just love turmoil?

21 December 2011 – Google’s video publishing powerhouse YouTube recently unveiled a major upgrade to its video analytics predecessor YouTube Insight. The new system, YouTube Analytics, features a much-improved dashboard that’s easy to navigate and understand.  Beyond aesthetics, YouTube Analytics also includes a cache of new tools that allows you to have a deeper understanding of who’s watching your videos, what viewer demographic associations are and which topics viewers watch most.  For all the details from YouTube click here.

All of this becomes incredibly important as more and more businesses you integrate video into their online marketing efforts.   As more people use the Internet in search of information, online video becomes increasingly important for reaching and connecting with followers, fans and customers. Video’s rise in power as a marketing tool is due to its attractiveness to web surfers. By adding a smile and a friendly voice, you can build rapport with your customers faster and help them relate to your business on a more personal level.

And video connects customers on a deeper level because it covers and reaches out to different types of learning styles: the visual where people learn by reading or seeing demonstrations of a product or service and the auditory where people connect by listening to audio.

Videos also help sites show up higher on the search engines. Browsers and search engines are becoming savvier and are spending less time reading endless web pages of text. Instead, they are picking up on keywords tagged on videos appearing on sites.

Here’s a look at some of the most useful features that can help you tailor your business videos and offer a more engaging video channel:

Detailed viewer data: Among the new features is the ability to split off viewer data from engagement data and drill into each of these categories to generate insights into viewer “Likes” and “Dislikes” across all videos in your channel.

In addition to providing viewer stats, demographics and abandonment rates, the new program comes with data on how users are accessing content and which channels deliver the most engaged viewers. It also offers a host of engagement metrics that can help video owners understand the social side of their viewer data — specifically, what viewers think about each of the videos in your channel. This can help you decide which videos to promote, which new videos to create and what content to scrap.

Audience retention reports: For each video in your channel, you’re now able to see exactly where viewers start to lose interest in your videos. With this information, you can learn more about the attention span of your audience, as well as what specific types of content they prefer.

How to use the data: Ask yourself the following questions to get a feel for how to use the information found in the new Youtube Analytics program to make decisions about your current and future business video choices:

1. Take a look at your Top 10 Videos, as displayed in the new Youtube Analytics dashboard. Do you notice any trends throughout these videos? Do they cover similar topics or run about the same length? Extrapolating from this information should give you a good idea of what type of video to launch next.

2. Next, look at your top Traffic Sources. Which sites send you the most visitors? Can you use the other tools within the Youtube Analytics dashboard to learn more about the visitors from each source? Even if you have one source that sends the bulk of your traffic, keep an eye out for other sources that send highly engaged visitors and beef up your promotional efforts on these sites.

3. Finally, look at your Audience Retention reports. How long, on average, are viewers sticking around during and after your videos? If they aren’t making it through your content or seem to lose interest quickly, get a handle on what they’re looking for to provide future video content that’s more engaging.

But there was also a revelation:  technological innovation may be very cheap and accessible but that does not mean marketing acumen comes along with it.  One of the big issues discussed at last week’s BEA by book and music publishers (a complaint, really) was that despite the proliferation of Kindle e-readers, iPhones and iPads they still struggle to sell titles beyond those that already dominate traditional best seller lists or pop charts.  The long tail is not selling as expected.  

Surprise!  Publishing does not know how to market e-books yet and they need physical retailers to survive as showrooms for their titles.  Barnes & Noble had a major presence at the event and representatives said that many of its e-book sales take place in its stores, as customers order digital editions of the titles they see on the table of staff recommendations.  Browsing on a browser is just not as satisfying. 

Wow.  So maybe that justifies (explains?) John Malone’s bid for Barnes & Noble this month: the combination of its stores with the Nook e-reader … which has claimed 20-25% U.S. e-books market.    

And that was a big theme at BEA: viewing the digital product line as a complement, not a replacement, for the physical book.  Plus what many publishers called “distinctive” books that “really surprise when seen, touched, picked up.”  On area where this is demonstrated:  children’s books, which are seen as relatively digital-proof.  Said Robert Miller, group publisher for Workman Publishing and a major industry player:  “Parents want to buy their kids physical books.  It’s a [unique] pleasure of sharing a book with one’s child. Parents want to give them as gifts, hand them down.” 

At the FT forum, bookstores were urged to become “consultants”, editors “curators”, and publishers “customisers” which followed other discussion that the industry needs to develop high-end, engaging interactive products that will benefit from the re-imagining of the digital content format.  Because many e-books are similar to early films – staged like a play with a static camera – before gradually, people realized what they could do to exploit the medium.

And the other challenge:  continuing to invest in the print product without passing those costs on to retailers and consumers.  Lonely Planet’s publisher said that its new line is much more expensive to produce but they consider pricing very carefully.   A digital product can cannibalize print sales if the price difference is too great, making price parity a necessary goal (trade paperbacks and e-books are essentially the same price). Parity also matters when releasing updated versions of printed work.  The best example given was a book that probably all of us own.  The new, color version of Workman’s bestseller 1,000 Places to See Before You Die will have the same $19.95 price as the original, black-and-white version. 

And as reported by Publisher’s Weekly, publishers have even seen success with print books based on already-existing Web content.   The show was full of stories about people ordering print copies of book versions on free Web site. ”

The other counter-intuitive story:  Moleskine journals (and we all have one, I’m sure).  In an age of increasingly sophisticated smartphones and tablet computers, a surge in sales of Moleskines.  

Yes, functional distinctions in publishing are blurring, as online and digital sales rise.  Witness Amazon’s appointment of Laurence Kirshbaum, a publishing veteran, to head its new general interest imprint.  It is another sign that the digital battle to shape the 21st century publishing industry has been joined.  

And as a concluding note, let’s not forget the enormous power of Oprah Winfrey in this industry who after 25 years on daytime television brought her syndicated broadcast show to an end last Wednesday in the middle of the BEA.  Nobody stands a chance of capturing the audience she built in an era of fewer distractions.   The amount of books she sold through her recommendations was extraordinary.  Can anyone else recreate it?  Individual influencers lack the impact of a mass media celebrity.  Winfrey helped give Amazon’s Kindle its lead in the US market by recommending the e-reader in October 2008.  That kind of “influencer power” is unmatched.

7 February 2011 — We’ve been in New York these last two weeks attending a legal technology conference, and also catching up with our many media industry friends.  My legal technology companies Project Counsel and The Posse List recently partnered with a commercial media production company in NYC (more about that in a later post) and we have been up to our eyeballs in  distribution models, revenue streams and the like via chats with the “money side”" of the industry.  All great fun — and educational.

Hollywood’s historical business model is successively releasing films exclusively through designated distribution channels with pricing based upon when the content is available and the quality of the viewing experience.   Consumers are rapidly embracing new digital entertainment distribution channels.  The Studio’s need to adapt their business models to deliver content to their customers in their preferred method of delivery or risk the same fate as the recording industry.

Hollywood Studio’s have historically built their business models on monetizing their entertainment content by making it available through successive periods of exclusive access as defined by the timing and distribution platform in which it is available.  This linear, well-contained procession of access to their content supports a lucrative business model driven by the highly profitable sale of content directly to consumers (theatrical and home entertainment) that is supplemented with a steady stream of downstream licensing revenues from Pay TV and broadcast television.  The Studio’s are now faced with declining home entertainment revenues driven partially by the availability of low cost alternatives such as conveniently located kiosk rentals (Redbox) and “all you can eat” subscription services (Netflix) with their unlimited physical and growing “on demand” libraries of content available to subscribers.

The Studio’s are extremely reliant on their home entertainment revenues driven by the “sell through” of DVD’s to consumers.  However, DVD sell through revenues  have continued to decline from their peak in 2006 with their underlying value proposition becoming challenged by a combination of factors.  In practice, industry research supports that most consumers do not watch a purchased DVD multiple times (with children’s animated titles being the exception). Based on this historical behavior, consumers are opting for renting their entertainment rather than purchasing.  The industry confused and potentially alienated their customer base with the introduction of multiple high definition formats effectively freezing consumers purchases for fear of buying your favorite player and/or movie in a format that would no longer be supported.  Finally, the value proposition of owning a DVD and having it available for viewing is diminished to the extent that large, content libraries are now available “on demand”. As the quality and ease of accessing this content via your high definition television or other device improves, this provides a compelling alternative to either owning your content or running out to the local video rental store (Blockbuster can attest to this).

The Studio’s dilemma is that the revenues earned from incremental rental or digital licensing fees does not compensate for the loss of revenues from DVD sell through. The Studio’s are beginning to explore new release windows for their content embracing their traditional pricing rationale where price is dependent on the timing of when the content is available and the quality of the consumer experience.

One of the first steps in exploring this value proposition to consumers was several of the Studio’s enforcing a 28 day delay in the content available on DVD to Redbox and Netflix. In exchange for concessions on pricing, the Studio’s are attempting to justify the lower price alternatives of a Redbox/Netflix through the delayed gratification of having to wait 28 days from when the product is available to purchase on DVD or rent at a higher daily rental rate from Blockbuster.

The next opportunity for the Studios is to explore changing the timing of when content is released theatrically and on DVD and Pay per View (PPV). The time elapsed between theatrical debut and DVD street date has been declining over the last decade having moved from an average of five months and 22 days in 1997 to four months and eleven days in 2009.   Similarly the Studio’s have relaxed and in some instances eliminated the four-week delay from content being available on PPV systems from when it is released on DVD. Studio’s spend the majority of their advertising and promotional dollars on the theatrical release. They would like to leverage this spend by making the feature available to consumers across multiple platforms within proximate time frames of when the product is promoted to their consumers. This has largely driven the reduction in time from theatrical release to DVD release. The opportunity to introduce another entertainment product alternative to consumers that leverages these marketing dollars is an enticing concept to the Studio’s.

This concept recently became more feasible when the Studio’s trade association (MPAA) successfully gained the approval from the FCC allowing them to remotely disable the analog outputs on cable and satellite tuners while you watch video-on-demand copies of some movies.  This technology, labeled selectable output control diminishes the risk of illegally copying a digital signal by only allowing you only to use plugs with copy protection on your set top box for viewing the content.  This technology conceptually enables the “safe” digital distribution of feature length motion pictures via a VOD system while limiting the exposure of diminished downstream revenues enabled through the illegal copying and distribution of the digitally delivered content.

While the opportunity to safely distribute their entertainment product to customers in a premium VOD window is enticing to the Studios, there are still a number of issues and/or obstacles.  Theatrical exhibition is vehemently opposed to the premium VOD product. Theatres have historically enjoyed exclusivity of content during the theatrical window that drives consumer behavior (i.e. if you want to see movie in the next four months you need to see in a theatre).

Theatrical exhibition has embarked on a massive retro fitting of their theatres with digital projection. Digital projection offers a superior technical consumer experience for viewers. Digital projection also facilitates the exhibition of 3D movies. 3D while available in the home, is still very limited, so the 3D experience is one that generally must take place in a theatre. With the increase in 3D movies being released and the superior customer experience of digital display, theatre owners have recently taken steps to successfully differentiate their product from the one available in the home. Currently theatre owners have taken a very hard line position with the Studio’s.

I have only skimmed the surface of the issues.  Historically the Studio’s have found price points which have enticed consumers to pay to view their content multiple times in successive release windows. The relative value of when the content is available and what is the quality of the viewing experience will determine the pricing from a consumer perspective. From a Studio perspective, they must begin to find alternative revenue streams from their content to offset the declines in DVD sell through.

For two recent (excellent) pieces in the Financial Times that discuss many of these issues click here and click here.

29 October 2010 – There was a brilliant webcast this week by the Book Industry Study Group.  The program (“Marketing in a Digital World”)  covered a range of tactics publishers are taking to get their books into readers’ hands.  But topic #1 : social networking. Rob Goodman, director of online marketing at Simon & Schuster, revealed a battery of impressive figures about how social networking influences consumer buying habits:

– consumers are 67% more likely to buy from the brands they follow on Twitter

– 51% more likely to buy from a brand they fan on Facebook

– 79% more likely to recommend brands and products they follow on social media.

Other speakers called Facebook, Twitter, YouTube, LinkedIn, etc. the “new retailers”.   The primary advice:  know your ecosystem, learn to speak the language that consumers are speaking.  That might mean using UrbanDictionary.com to understand phrases and words like IMHO, hashtag, and API, or reading Mashable.com’s Twitter guide book, which explains basics, building a Twitter community, Twitter for business, and more.  Being involved in consumers’ world also lets marketers see what people are saying about their books and brands online. 

But it’s more than just setting up a Facebook page or Twitter account.  An example of creativity at work:  Peter Schiff, whose book “How an Economy Grows and Why It Crashes” was published by Wiley this past May. Schiff created his own Web site and made sure that as people searched online for terms related to his book’s topic, they would land on his site.   Reply.  Enage.

Most publishers have increased their online advertising in the past three years with good results.  But  this is all a further example of  the most successful brands on FB and Twitter having significant traditional marketing budgets (click here).

21 June 2010 — Google could be poised to disrupt the increasingly lucrative search-driven content model, sometimes known as “content farming” (for more click here) with a patent for a system to identify underserved content areas.  Similar systems form a key part of the proprietary algorithms used by firms such as Demand Media and Associated Content to work out which article titles will deliver the most ad revenue. Google could either sell or give away this data, seriously blunting the edge these algorithms deliver.  For a good overview from last week’s Financial Times click here. 

The system works by comparing what users search for and what they find, providing valuable data on what areas of interest are underserved.  As the Financial Times article points out Google attained the patent for identifying “inadequate content” this year.  The patent is a continuation of a patent granted to Google in February of this year and is interesting for a number of reasons such as Google’s Chief Economist (Hal Varian) and the head of Google’s Webspam Team (Matt Cutts) being amongst the listed inventors. 

Google says the patent is not necessarily a precursor to a product launch.  “Prospective product announcements should not necessarily be inferred from our patent applications,” says a Google spokesperson. “We file patent applications on a variety of ideas that our employees come up with. Some of those ideas later mature into real products or services, some don’t.”  

Though Google could deal a severe blow to the likes of Demand Media by releasing or selling data on underserved areas, the firm has many times said it has no interest in entering the content business. Other firms might attempt to use the data. However, identifying underserved content areas is only half the job. Firms still need systems to commission, edit and place content. There are also question marks over how long this kind of search-optimized content will remain profitable, as content discovery is increasingly shifting to social networks and other more sophisticated ways of unearthing content. 

You can read the patent application by clicking here. 

For an excellent, detailed analysis of the patent and its potential/prospects from the blog SEO by the Sea click here.

How Jeff Bewkes is reinventing Time Warner

25 May 2010 — Media executives thrive on high-wattage company – Hollywood celebrities, publishing legends, fellow tycoons. The tycoons, at least, were in abundance last summer at the annual retreat sponsored by boutique investment bank Allen & Co in Sun Valley, Idaho, where the wealthy and powerful of the media and technology worlds gather to talk shop. But by day four, the chief executive of Time Warner, one of the biggest producers of entertainment and news, couldn’t wait to leave.

Jeff Bewkes’ bags were sitting in the boot of a hire car ready to speed to nearby Friedman Memorial Airport, where corporate jets were lined up wingtip to wingtip. Bewkes was flying commercial. He’s not a private-jet kind of guy, and routinely takes to the streets of New York to flag down his own taxis – or did until the company decided it was too much of an insurance liability. Nor does he welcome profile writers. Our stories, he told me in the cool mountain air of Sun Valley, are relics of a dying breed of mogul, whose empire-building was little more than an ego-trip at the expense of shareholder returns.

But Bewkes was happy to talk about his company, if not himself. It has thrived during one of the worst periods for the economy since the Great Depression. Warner Brothers secured the top spot in Hollywood last year with blockbuster franchises such as Harry Potter and the surprise hit The Hangover, which in January became the bestselling R-rated comedy DVD of all time. It benefited from the resilience of its cable and satellite channels TNT, TBS and its most famous offering, HBO. And while there are some trouble spots – CNN’s ratings, for example, and the long-term viability of Time Inc, the magazine division facing a decline in print advertising – the company today barely resembles the Time Warner of a few years ago, a struggling goliath in real danger of insolvency.

Now, Time Warner is set to report the highest earnings growth of its industry peers and to return more capital to shareholders than any large US media company. This is everything investors in the media begged for over the decades but rarely received, as “visionary” executives chased the next big deal, never doubting they could find a better use for their excess cash than simply handing it back to shareholders. “We’re trying to make money. That’s what we’re doing,” said Bewkes. “At Time Warner, we intend and we expect to have superior returns in the media sector for investors.”

Getting there meant tearing the old Time Warner apart. In Sun Valley in summer 1999 – about a hundred feet away from where Bewkes and I sat – the top lieutenants of Time Warner and America Online (AOL) had embraced the deal-hatching ethos that defined the mountain resort, huddling in full view of their rivals to flirt with a clever little plan. Six months later, on January 10, 2000, they announced the largest and arguably the worst merger in US history, plunging the new company into two US federal investigations and forever discrediting the term “synergy” – corporate shorthand for making 1+1=3.

Bewkes took the top job at Time Warner two years ago, succeeding Richard Parsons and replacing a laid-back corporate culture with one of shrewd (some say cold-blooded) tactical focus. To the rank and file, his swift decision-making sometimes came off as arrogant, especially when set against his predecessor’s grandfatherly style, but there is no denying that the company has changed for the better. He quickly dismantled not just the colossus created by the AOL merger – a spin-off of AOL was completed in December – but two decades of buying sprees that erased more than $200bn in shareholders’ equity.

Although Bewkes is not philosophically opposed to buying other companies (Time Warner has bid for the Hollywood studio MGM on his watch), he has resisted three rounds of dealmaking since becoming CEO. He walked away from the chance to buy the Weather Channel in 2008 and the Travel Channel last year, and he sat out the bidding for NBC Universal, at $30bn the biggest media prize in recent memory. Instead, he took a public potshot at Comcast, the company that snapped up NBC. “Somebody has finally noticed,” he remarked at a TV industry conference, to guffaws from his audience, “that these things don’t work out so well. We love to see our competitors taking risks.”

That remark infuriated people close to the deal – in part, of course, because they fear he may be right. Tom Freston, former chief executive of Viacom, a business partner and friend of Bewkes, says: “If you look at [past] growth in media, it’s been largely through focus, not mergers and acquisitions.” And yet if Bewkes is to lead Time Warner – and perhaps others – into the new era that he talked about in Sun Valley, he’ll have to do more than turn his back on traditional dealmaking. He’ll have to show us all whether, and how, a media company can grow organically once again.

. . .

Even as a child in New Jersey, Jeff Bewkes wanted to be in the media. “When I was very young, I told my parents that I wanted to be in the entertainment industry,” he’s said, setting up the joke: “That’s when they sat me down and broke it to me that we were not Jewish.” His entrée into entertainment was decidedly unspectacular. During one summer break at Yale in 1973, Bewkes, through his father’s connections, worked as a production assistant. (According to his Yale schoolmate Lloyd Grove, he got to chauffeur Diana Rigg as part of the job.) He was a researcher at NBC News for a year after graduating, then took an MBA at Stanford Business School and started his career in a commercial lending division of Citibank.

Soon, though, he was looking for another job in media. In a commencement speech at his alma mater last year, he joked: “When I came out of Stanford, I looked at my brilliant classmates, who were going into Wall Street high finance, Silicon Valley, advanced engineering, and I said to myself, ‘Jeff, go into an industry where nobody can add’.” Self-deprecation, of course, but the most important career move he’s made came in 1979, when he left Citibank and joined the seven-year-old cable channel HBO, or Home Box Office, which was owned by magazine publisher Time Inc.

Long before AOL became Time Warner’s redheaded stepchild, HBO was the target for scorn. To the blueblood sophisticates at Time Inc in the 1970s, the upstart HBO was a cesspool of profanity-laden TV: as a premium channel that did not run commercials, it was beyond the purview of US censors. But by 1980, when profits from Time’s video businesses (including cable operations) overtook the magazine division, HBO was an object of envy in the TV business, and of jealousy elsewhere in the company.

Bill Roedy, chairman and chief executive of MTV International, who started at HBO in the same week as Bewkes, remembers the late 1970s and early 1980s as the golden years of cable. US television was dominated by three broadcast channels; all cable had to offer, for a small fee, was better reception and a handful of channels. The cable guys’ goal was to show consumers why they should pay for television, an idea as far-fetched then as paying for content on the internet is today. “It wasn’t just about building a business for HBO, but building a business for cable television,” Roedy says. At the time, HBO was known for airing feature films after theatrical release, and for sport, notably pioneering satellite transmission for 1975’s epic fight between Muhammad Ali and Joe Frazier – the Thrilla in Manila.

Bewkes climbed the ranks quickly, which former colleagues put down to his deep financial and strategic sense (contrary to that quip in his Stanford commencement speech). He also had a certain irreverence combined with an unusual sense of diplomacy. Under the guidance of his boss and mentor Michael Fuchs, HBO prospered, airing its first wave of original programming in the 1980s, scoring early hits such as Tales from the Crypt in 1989 and The Larry Sanders Show in 1992, and going on to create or co-found other successful channels including E! Entertainment and Comedy Central (now owned by Viacom and home to comedian and political pundit Jon Stewart).

In 1995, Gerald Levin, three years into his decade as chief executive of Time Warner, forced out Fuchs as head of HBO and asked Bewkes to take his place. Over the next seven years, Bewkes took the division to the next level. The channel went from being a luxury for upper-middle-class viewers to a haven for shows that much of America was talking about. Big bets on expensive original programming such as The Sopranos, Sex and the City and Band of Brothers resulted in big hits that traded on their lavish production values. Between 1995, when Bewkes took over, and 2002, when he moved on, HBO’s profits trebled to about $1bn a year, and now account for 27 per cent of Time Warner’s operating profit. Even rivals are generous in their praise. Peter Chernin, former right-hand man to Rupert Murdoch, says: “The time when he was head of HBO was about as significant a creative achievement as has been done in this industry for a long time.”

. . .

Bewkes’ business sense shone in his time at HBO. His personality and style also won him attention. “He has an uncanny ability to undress someone intellectually while leaving them naked and thanking him for the experience,” says Curt Viebranz, who joined HBO shortly after Bewkes. “It did not matter if it was someone more senior. I watched him do it firsthand to Levin and Steve Ross [former Time Warner CEOs].”

“He knows when to pick the moments to speak out,” says Frederick Iseman, a private equity executive and college friend from Yale. It is a knack that has helped him escape career suicide many times, even while publicly attacking a superior’s ideas. When, during a meeting in 2002, Bewkes cut off AOL founder Steve Case’s rant on the benefits AOL brought to the combined business, Bewkes was admired for saying aloud what many Time Warner executives were feeling. Synergy, he said, was “bullshit”.

Fortunately – for him, at least – he wasn’t wrong. The $164bn buyout of Time Warner by AOL, the deal of the century that would “change the course of history” according to reports at the time, was unravelling even before regulators got round to approving it a year later. Investors soon learned that AOL’s public valuation of $200bn was propped up by fraudulent accounting and undermined by no real internet strategy. The combined company’s forecasts of 30 per cent-plus growth in advertising revenue for the foreseeable future were absurd, former executives say.

Bewkes had tried to talk Levin out of the idea a month after the deal was announced. In fact, Levin agreed the terms with virtually no input from his senior executives. “You had a lot of people saying you should’ve combined a donkey with a rabbit and gotten a flying unicorn,” Bewkes would say years later. “Everyone bought it.”

After Levin departed, his career finished by his inept dealmaking and shareholders’ fury, the avuncular Dick Parsons was promoted to clean up the mess. Parsons’ strategy, as one senior executive recalls, could be summed up in two words: “Don’t fight”. Bewkes, on the other hand, was ready to cause friction if it would help save the struggling company.

. . .

And yet for all the talk of poisonous corporate culture wars, Bewkes has a more technocratic explanation for the disaster of the AOL-Time Warner deal. He blames its failure on a flawed broadband strategy. The break-up of the US telecoms monopoly AT&T in 1984 gave internet service providers such as AOL the right to use telephone companies’ lines without negotiating a price with each of them individually. But by 1999, it was clear that web users were moving over to high-speed broadband, and no such law governed the broadband world. AOL and its rivals had to reach individual agreements with cable and phone companies. This gave the latter the upper hand, naturally, and left AOL and its peers with a fraction of the profits to which they had become accustomed.

AOL’s executives reasoned that buying Time Warner, with the second-biggest cable company in America, would solve its problem by guaranteeing it access to Time Warner Cable’s customers. But with only 12 per cent of the US cable market, Time Warner Cable was unable to persuade its rivals to pipe a souped-up version of AOL into American homes in return for prices that even Time Warner Cable found unattractive. “It’s a classic example of a company-centric innovation that depended on central authority over AOL and Time Warner Cable,” says Bewkes today. “Not only didn’t it fly, but its premise turned the entire broadband industry against AOL.”

What the architects of the merger forgot was that innovation at mature companies requires strategies that will work for rivals as well. Time Warner should have known this: the history of video technology is littered with business decisions at the company that not only enhanced profits, but also helped the rest of the media world make the transition from one technology to another. Time Warner played a key role in the proliferation of DVDs (and, along with Sony, it’s the only media company to share patents in the technology with the electronics manufacturers). A decision in 2001 to slash the retail price of DVDs initially drew fire from Blockbuster, the largest US rental chain, but ushered in a period of unprecedented profits in Hollywood from home entertainment sales, which are now more than half of movie revenues. Warner Bros was also the first studio to try offering films on demand before their DVD release, as a reaction to the slide in DVD sales.

Seven years later, according to Sir Howard Stringer, chairman and CEO of Sony, Bewkes played an important role in breaking the deadlock between competing successors to DVD technology, Sony’s Blu-ray and Toshiba’s HD-DVD. Despite its close relationship with Toshiba, Time Warner’s endorsement of Sony’s more robust technology proved decisive. “He may look conventional. But he is startlingly original,” says Stringer. “That’s what makes him competitive.” Had Bewkes gone the other way, next-generation 3-D televisions, videos and video games that are set to hit the stores this year would probably have been delayed indefinitely, Stringer says.

Of course, he’s not the only person in the media with vision, and his first internet strategy for TV collapsed – and was then usurped. Bewkes wanted to persuade the industry to offer all its programmes on-demand on cable, to make watching TV something akin to internet surfing. But this failed in 2006 because of technological hurdles, including difficulties inserting relevant adverts into shows that might be watched days after they first aired. Meanwhile, News Corp and NBC Universal announced a joint venture, Hulu, that would offer their top programming online for free, supported by internet advertising. Launched in spring 2008, the site is now second only to YouTube as the most popular video destination on the web.

Hulu’s immense popularity with viewers is not necessarily a problem for free-to-air broadcasters who rely on advertising to make their money. But it poses a big problem for channels that depend on the fees they receive from cable networks that want to carry their programming. Bewkes is scathing about the idea: “They went and put their shows on Hulu with neither fee support nor [enough] advertising support, apparently in order to prove that they can drive themselves out of business.”

. . .

Shortly after Hulu launched, Bewkes convened a meeting of the top executives from the Warner Bros film and television studios; from Time Warner’s pay-TV channel owners, HBO and Turner Broadcasting; and from its cable operator, Time Warner Cable. Very quickly, tensions rose as it became clear that there was little co-ordination of online strategies, and little understanding in some areas of how other parts of the group made money. An executive who attended the meeting recalls unease from Time Warner Cable executives about giving away programming for free on the internet, when the business depended on charging cable systems for distribution.

“There were moments where we realised that some of this we can do and some we should not do,” Turner’s chief executive Phil Kent says, diplomatically. The meeting underscored what Bewkes had already realised: that in all this unwinding of deals, the idea could not simply be to keep what worked and lose what didn’t. Rather, Time Warner needed to do something more visionary: separate the distribution of media from its creation – thereby reversing the conventional wisdom behind two decades of the industry’s thinking. (And conventional wisdom that lives on today: think of News Corp’s purchase of MySpace, or Comcast’s impending takeover of NBC Universal – essentially ways of bringing content and distribution under the same roof.) “He’s taking a risk,” says Peter Kreisky, a media consultant and former business school roommate. “The old model was built around scale and distribution – in print and movies and television and internet. He’s moved away from that. It is a tectonic shift.”

At that meeting, the need to clarify the company’s objectives, ultimately by splitting media creation from distribution, became clear. But so did something else: the need to learn the lessons of AOL’s failure and come up with a way of operating online that would work for the whole TV industry, not just Time Warner. “All these innovations, if they’re going to work, they’re going to have to be adopted by all the other studios and the other networks,” Bewkes explains. “They’ve got to be plausible and they have to work with every distributor, not just Time Warner Cable, but other cable, satellite and telephone companies.”

The breakthrough occurred a few months after the meeting, when Glenn Britt, head of Time Warner Cable, called Bewkes and Kent to tell them that cable companies were working on an online technology that could identify whether an internet viewer was also a cable TV subscriber. The ability to block freeloaders from watching their shows online would allow the cable operators to offer more programmes to their customers over the internet. From there, Bewkes refined the “TV Everywhere” concept he’d mulled back in 2006. Now he proposed that far more television programming be offered online – but only to people who already pay for cable and satellite TV, which now means almost 90 per cent of homes in the US. It would earn money through cable subscriptions but retain viewers by giving them flexibility about when and how to watch.

The plan is not without flaws, its backers concede, and it presents big technical challenges. But Bewkes has made it his personal mission to push this idea as a way to save the media industry from itself. Time Warner Cable and Comcast have solicited the support of big TV broadcasters including NBCU, Viacom’s MTV Networks and CBS (the only one of the four nationwide free-to-air networks not to have put its programming on Hulu). Comcast began a nationwide test of the system at the end of last year.

. . .

One morning last November, Bewkes sprinted into an 11th floor conference room just down the hall from his office overlooking Manhattan’s Central Park for a demonstration of the TV Everywhere prototype. He was joined by six executive vice-presidents, including the company’s general counsel – on alert for anything that might smack of a TV industry cartel. Bewkes began firing off questions even before sitting down. “Who’s seen it? What are we going to see here? Is this what consumers are seeing? Is this what’s going live? What did you have to type to get there?”

Andy Heller, vice-chairman of Turner, who was leading the demonstration, broke in. “We’ll get to that, Jeff. Let me set the stage to see how far we’ve come…”

If they can go almost as far again, Time Warner may be credited with conjuring a future – not just for itself, but for the entire television industry. Bewkes sat down to listen.