And, as if by magic, the NY Times comes out with a piece today on how troubled the carriers are. It blames the troubles on saturation. I say the way out is changing the model from closed to open, and getting more scale, with revenues that are not directly tied to use of the networks.
Here's my previous bit: Cell Phone Networks Take Another Hit
Cell Phone Networks Take Another Hit
In this age of open, digital and shared media, those who opt for control -- especially if that control gives them what’s deemed an unfair share -- will be attacked from many sides. Witness the music industry’s overpriced CDs of albums they’d already sold in vinyl. (And compare it to the success of iTunes, which has been attacked for being controlled, but has also relented and removed DRM and also is now playing with pricing.)
Today, many companies are developing -- and consumers are loving -- options to go “off-deck” and circumvent cellphone carriers, either by installing applications on their phones or by accessing the mobile Web. The cellphone carrier networks, the Sprints, AT&Ts and Verizons of the world, are demanding what one wag here at the AlwaysOn conference called a “rapacious” share of anything that runs through their system. Not only do subscribers, locked into costly contracts, have to pay for every new piece of service, and difficult-to-understand fees, but the carriers also demand that anyone who wants to provide a service to their subscribers -- anything from weather to movie listings to paid video -- give the cellphone carriers a share that can be as much as 70 percent. Plus the fees are often dictated by the carriers. These moneys were easily demanded in a day when the only way to reach cellphone subscribers was through the network, and the interface on the phones that the carriers controlled. The carriers also controlled the information about the use of the networks; some would say that they are protecting their users’ privacy. Fair enough.
But with the mobile Web, and applications for smartphones like the iPhone and Google’s Android system, it’s becoming easier and easier for content companies and their consumers to circumvent the network. Medialets chairman and CEO Eric Litman told me today about how his company is embedding code in Apple’s iPhone apps that allow his firm to measure all kinds of data on the phones’ usage, a lot of typical Web measurements, for example, like pageviews, unique visits, time on site and so on. The trick, he said, was that the Apple folks had not demanded anything from the code, and had struck a deal with AT&T that required the carrier to let apps through unblocked. The book “Planet Google” by New York Times columnist Randall Stross points out how Verizon kind of sort of bent to Google, which was bidding on new cellphone spectrum, demanding that cellphones be allowed to work on any network instead of being locked. (It’s not clear Verizon fully kept its promise to do so, Sross says, but that’s another story). At a panel I appeared on with partners Scribe Media last fall at Streaming Media West, the argument was over whether subscription video on cellphones could survive when people could go get what they wanted for free.
In another panel, on what business can learn from Obama’s use of social media, Larry Weber of Racepoint Group, Digital Influence Group, said media companies were structured so much like mafiosi that their hold was “hard to break.” But, he said, the era of unpaid media was coming. Don’t know if I agree with the characterization. But it is hard to see how business models based on control -- rather than enticement and service -- will win.
Today, many companies are developing -- and consumers are loving -- options to go “off-deck” and circumvent cellphone carriers, either by installing applications on their phones or by accessing the mobile Web. The cellphone carrier networks, the Sprints, AT&Ts and Verizons of the world, are demanding what one wag here at the AlwaysOn conference called a “rapacious” share of anything that runs through their system. Not only do subscribers, locked into costly contracts, have to pay for every new piece of service, and difficult-to-understand fees, but the carriers also demand that anyone who wants to provide a service to their subscribers -- anything from weather to movie listings to paid video -- give the cellphone carriers a share that can be as much as 70 percent. Plus the fees are often dictated by the carriers. These moneys were easily demanded in a day when the only way to reach cellphone subscribers was through the network, and the interface on the phones that the carriers controlled. The carriers also controlled the information about the use of the networks; some would say that they are protecting their users’ privacy. Fair enough.
But with the mobile Web, and applications for smartphones like the iPhone and Google’s Android system, it’s becoming easier and easier for content companies and their consumers to circumvent the network. Medialets chairman and CEO Eric Litman told me today about how his company is embedding code in Apple’s iPhone apps that allow his firm to measure all kinds of data on the phones’ usage, a lot of typical Web measurements, for example, like pageviews, unique visits, time on site and so on. The trick, he said, was that the Apple folks had not demanded anything from the code, and had struck a deal with AT&T that required the carrier to let apps through unblocked. The book “Planet Google” by New York Times columnist Randall Stross points out how Verizon kind of sort of bent to Google, which was bidding on new cellphone spectrum, demanding that cellphones be allowed to work on any network instead of being locked. (It’s not clear Verizon fully kept its promise to do so, Sross says, but that’s another story). At a panel I appeared on with partners Scribe Media last fall at Streaming Media West, the argument was over whether subscription video on cellphones could survive when people could go get what they wanted for free.
In another panel, on what business can learn from Obama’s use of social media, Larry Weber of Racepoint Group, Digital Influence Group, said media companies were structured so much like mafiosi that their hold was “hard to break.” But, he said, the era of unpaid media was coming. Don’t know if I agree with the characterization. But it is hard to see how business models based on control -- rather than enticement and service -- will win.
What the Economy Means for Media Investment
Investors here at the AlwaysOn media conference have been confirming in private discussions and on stage what angel investor David Rose said recently: that their money is having to stretch farther, that others are reluctant to come into the rounds as early.
One venture capital investor also told me he’s seeing “A Series pricing” for B and C rounds, meaning that people investing even later in a company’s life cycle are able to, for their money, get a larger share of the equity. For example, instead of getting 15 percent of the company, they’re able to get a fifth of it, he said.
But in a sign of optimism, another, based in Silicon Valley, said that funds of money that were raised 1-2 years ago are still uninvested, so they will need soon to find something to invest in in the next few months.
Later, on a panel about later-stage venture capital investment, Alan Spoon, Managing General Partner of Polaris Venture Partners, said he was seeing more funds looking to others for liquidity, trying to shore up balance sheets and less interested in such calculations as ROI (return on investment -- which in the financial world is a more specific ratio than often gets thrown around in advertising) and IRR, another ratio that figures out the internal rate of return -- how much a company is supposed to be able to earn from the money it has.
The pressures on the markets are making hedge funds and mutual funds get out of the venture game, the panelists also said, and money is being lent and companies being valued at much lower valuations than before the bust.
One venture capital investor also told me he’s seeing “A Series pricing” for B and C rounds, meaning that people investing even later in a company’s life cycle are able to, for their money, get a larger share of the equity. For example, instead of getting 15 percent of the company, they’re able to get a fifth of it, he said.
But in a sign of optimism, another, based in Silicon Valley, said that funds of money that were raised 1-2 years ago are still uninvested, so they will need soon to find something to invest in in the next few months.
Later, on a panel about later-stage venture capital investment, Alan Spoon, Managing General Partner of Polaris Venture Partners, said he was seeing more funds looking to others for liquidity, trying to shore up balance sheets and less interested in such calculations as ROI (return on investment -- which in the financial world is a more specific ratio than often gets thrown around in advertising) and IRR, another ratio that figures out the internal rate of return -- how much a company is supposed to be able to earn from the money it has.
The pressures on the markets are making hedge funds and mutual funds get out of the venture game, the panelists also said, and money is being lent and companies being valued at much lower valuations than before the bust.
Spend Less, Gain Market Share
"When you’re comparing yourself to companies that are spending ‘like drunks,’ you should take comfort, because market share will come to you merely by outlasting them."-- Richard de Silva, General Partner, Highland Capital Partners, at the AlwaysOn OnMedia conference in New York
David Rose: Investments Need To Generate Cash
David Rose, NY Angels founder and head of investment incubator RoseTech Ventures, says his potential portfolio companies today must make money in a way they didn’t have to a year ago.
In early 2008, Rose would help start a business presuming venture capitalists and others would soon come kick in more. Today, “we can’t assume there will be anyone after us with a follow-on round,” he said at a NY:MIEG breakfast event at the Samsung Experience in the Time Warner Center at Columbus Circle. “We are really only looking at businesses that can get to profitability” on their own, and show growth, then, perhaps, get more investment in 2-3 years. The panel, titled, “The Economic Downturn’s Impact on Media & Entertainment,” explored how business has changed for media and technology businesses in recent months, and what prospects may be.
Rose was on the panel with Andrew Cleland, Executive Director of Alliances and Technology Strategy of Time Warner, and Robert Rechti, who is a senior VP and Industry Advisor for GE Commercial Finance’s Media, Communications and Entertainment business. Dale Peskin, co-founder of iFOCOS, host of February’s We Media conference in Miami, moderated. Cleland and Rechti both said they hold to the same principles as before the economy tanked, doing due diligence, though they may now look for more cash flow and flexible business plans, and be more selective in their deals.
(Note: My company, Teeming Media, has done business with both NY:MIEG and We Media.)
In early 2008, Rose would help start a business presuming venture capitalists and others would soon come kick in more. Today, “we can’t assume there will be anyone after us with a follow-on round,” he said at a NY:MIEG breakfast event at the Samsung Experience in the Time Warner Center at Columbus Circle. “We are really only looking at businesses that can get to profitability” on their own, and show growth, then, perhaps, get more investment in 2-3 years. The panel, titled, “The Economic Downturn’s Impact on Media & Entertainment,” explored how business has changed for media and technology businesses in recent months, and what prospects may be.
Rose was on the panel with Andrew Cleland, Executive Director of Alliances and Technology Strategy of Time Warner, and Robert Rechti, who is a senior VP and Industry Advisor for GE Commercial Finance’s Media, Communications and Entertainment business. Dale Peskin, co-founder of iFOCOS, host of February’s We Media conference in Miami, moderated. Cleland and Rechti both said they hold to the same principles as before the economy tanked, doing due diligence, though they may now look for more cash flow and flexible business plans, and be more selective in their deals.
(Note: My company, Teeming Media, has done business with both NY:MIEG and We Media.)
NY Times Digital Version More Valuable
While the NY Times may not earn enough from its digital iterations to support its operations (even minus the printing costs), I do believe the digital version is more valuable. Reader comments on one of today’s front page articles, about the boom in self-publishing, give useful details from those readers that were not included in the article. Hearing Nick Kristoff’s interviews or watching videos he’s produced from overseas, I get texture and nuance not available from his columns, wonderfully written though they be. Of course, just because there is value there does not mean it will be rewarded at a level that can support it. The creativity of the journalists and production people must be matched by creative thinking and acting from the business and finance sides.
Thoughts on Newspapers Becoming Not-for-Profits
A NY Times Op Ed today suggests newspapers should move to a foundation-supported model and become 501(c)3 not-for-profits. Through that model, with its tax advantages, the newspaper business can survive, the authors write.
My thoughts on the idea are here. To sum up a longish essay: For-profit can work in the news biz, just maybe not the way newspapers practice it.
My thoughts on the idea are here. To sum up a longish essay: For-profit can work in the news biz, just maybe not the way newspapers practice it.
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