Colin Pape, Co-Founder/President of ShopCity.com, an early stage Internet company, has a vision, “imagine finding prices for any product or service offered within your community all on a single website.” That’s what he’s doing with his company. ShopCity’s business model is working with local businesses and putting, pricing, availability, hours of operation and methods of payment in the ShopCity.com marketplace to facilitate local purchases. ShopCity.com provides small businesses with a package of advertising services, sponsorship opportunities, a suite of online business-building tools and a local marketplace they can buy and sell through that is heavily promoted in the community.

Small businesses are often eager to consider advertising online but they are attracted to a more complete local market solution that includes on-air, events, and other local points of presence in the marketing mix such as outdoor signage. “Small businesses want to be on the Internet but they’re reluctant to pay for an intangible Internet presence that’s just online – however, when you combine online with in-community advertising – whether it’s signage, radio or TV ads – something they can experience offline, the equation changes,” Pape says. ShopCity wants to drive additional success by partnering with local radio stations to leverage their brand credibility, ability to reach key demos and local sales forces. In return, ShopCity offers a compelling digital solution for radio stations to add in to their mix. ShopCity typically does revenue split deals.

ShopCity got the idea of working with local radio stations from a Midland, Ontario radio station. The Dock FM was looking for a unique angle to bring to its multiplatform advertising efforts and an ability to get a “call to action” for its advertisers. Since the station kept bumping into ShopCity’s sales reps, The Dock FM’s Sales Manager reached out to see about a partnership. ShopCity saw the possibilities and agreed to work with The Dock on ShopCity’s ShopMidland.com site, offering free profile pages to radio advertisers as a value-add, and with the station promoting a co-branded sub-section where businesses could get a special discount while the Dock earned revenue share on paid packages.

ShopCity is looking to develop the model further and is seeking broadcast partners that are already running ‘shop local’ oriented campaigns. Says Pape, “I see huge potential for radio stations and community-branded web platforms to come together to create cross-platform value for each other’s medium. Radio plays an important part in our strategy moving forward.”

Seven Philadelphia CBS-TV and radio stations have combined their news resources to create a new Digital Out of Home (DOOH) News Network utilizing 39  CBS Always On “Digital Newsstands.” The Newsstands include HDTVs and a 24 hour news ticker.

The Digital Newsstands have been created in partnership with Center City Direct, a local marketing and technology company. It is a division of Alternative Media Holdings, which also provides DOOH services to retailers, office buildings and other street-level installations.

Stations included in the partnership include KYW-TV (CBS), WPSG-TV (CW), KYW-AM, WOGL-FM, WYSP-FM, WIP-AM and WPHT-AM. In addition to local news and weather, the newsstands will also feature tourist information. Ultimately, more than 120 newsstands are envisioned.

Thanks to TV NewsCheck for the scoop

LIN TV Corporation (TVL/NYSE) is a public company with 27 television stations in 17 markets, reaching about 11.5 million households each week. This makes LIN one of the largest television group owners in the country. LIN’s stations typically rank first or second in the Nielsen ratings, both overall and in their news time slots. In addition to its owned and operated television properties, LIN has a growing digital business, more than 50 television station and niche web sites, as well as mobile offerings, including two very popular iPhone and BlackBerry applications recently released. We spoke with LIN’s President/CEO Vince Sadusky to get his thoughts about the firm’s adaptive digital strategy and what he believes are growth platforms for LIN going forward.

BIA/Kelsey: Vince, you just purchased Red McCombs Media, an online media and services company. How does this fit in with your television stations, web sites and mobile initiatives?

Vince Sadusky: It’s kind of funny; we weren’t actively looking to buy. We just saw a good opportunity in RM Media to bring in some excellent sales and marketing expertise to help us get where we want to go. We’ve had a partnership with them and found it to be incredibly helpful. Plus, they have an outstanding customer service culture that we really liked. This fits very nicely with our strategic plan. And you know, the company had a fair amount of revenue on a standalone basis with positive cash flow!
Generally, we hold ourselves out there as folks willing to do partnerships and deals. I make regular trips to the West Coast to keep the discussions going. We’re open and interested in talking. I have to say that sometimes we’re dealing with young folks and new companies that don’t know what “on air” means but they do understand audience reach so that’s a part of the television business that’s impressive to them.

BIA/Kelsey: Tell us more about your strategic plan?

Vince Sadusky:Well, we had a new management team come on board a couple of years ago. We really wanted to reshape LIN TV into a digital media company. Our goals were to grow and diversify our revenue base; become a significant player in the digital media market; develop a national footprint and get into the performance-based marketing game. We focused initially on our web properties and grew that revenue contribution from 1-2% to 12% of overall revenues by the second quarter of this year. We sold the value of the web sites independently of our television properties to maximize value and revenues. We found that advertisers were willing to pay premiums for our station branded web sites but didn’t want to put all their digital money into just one web site. So that was fine and it provided good growth, and will continue to, but would also limit our future revenue growth potential.

The second issue was coverage for national online advertisers. While we’re in 17 markets with our stations, that’s only 9% of the country. This actually limits our attractiveness to national advertisers. No matter how good one of our television stations web sites are, at the end of the day, it’s only one market. Unlike our TV stations, our web sites can go national with their geography. However, the only significant access we had to the national ad market was through ad networks. Our experience is that ad networks make for an unstructured platform that we can’t really control. For example, we’re news leaders in our market and that reputation is important to us. With Google’s contextual advertising, there was a story about a woman’s murder and her husband was the prime suspect. The story identified him as a dentist and Google served up a dentist ad in the right column. We’ve also had FOX ads appear on our CBS station’s site. In the television business we’ve got procedures to prevent this kind of thing.

To get more control over context and presentation of content and get access to significant growth we targeted national spending. Clearly, we felt we needed to go outside the ad networks to get there in a way that we could be comfortable with the environments we were creating and the value we were receiving.
That’s when we started working with RM Media and had a terrific outcome. We very much enjoyed their creative minds, execution and experience. Their backend solution was great for verifying ad campaigns and really opened up the “black box” to clients. They could follow campaign performance on a daily basis and loved it. RMM offered money back performance guarantees based on click-through rates or some other relevant metrics. RM Media can target by demo, geography, context, behavior or psychographics. And they continually monitor CPM, CPC and CPA metrics so campaigns are effectively tracked and fine-tuned to achieve campaign and ROI goals.

BIA/Kelsey: Your acquisition of RM Media clearly supports your goal to develop a national footprint and have more control over your digital inventory. How about in your local markets, any benefits there from this acquisition?

Vince Sadusky: Definitely! Say for example you’re selling a local car dealership or a fast food franchise for their specific geographies down to zip codes. We could always provide banners and video pre-rolls but now with RM Media we can provide an ad network catering to their demos and provide a full, interactive ad campaign with ROI accountability built-in.

There are local advertisers we couldn’t touch with our television stations. For example, in Providence, Rhode Island there may be a local sporting goods store guy who sells to the junior high and high school teams. He can’t afford TV but he can afford a geo-targeted digital campaign. We give him video pre-roll and he looks like a pro and loves it. We can do a whole interactive ad campaign for him based on IP addresses in his part of the market. This kind of robust and accountable ad campaign is a terrific thing for local advertisers. They can play with the big boys now. This takes a lot of time on our part to provide the education to these small businesses but it’s a significant growth area for us.

BIA/Kelsey: Well, let’s talk about that education effort and generally your approach to sales, sales training and sales management. There are a lot of approaches being championed? What’s your secret sauce?

Vince Sadusky: We have a two-pronged approach to sales. Our history is in the television business and that requires a certain skill set for a successful sales person. It’s different with digital media. We trained our existing folks as best we could to transition into digital media as well as television. It worked in some cases but not in others. We have great sales people on the television side and we didn’t want to lose them. So we set them up to succeed where they’re strong instead of trying to force fit them into digital media sales. It doesn’t make sense to try to have everyone selling everything.

The thing is that with performance sales it’s a whole different language than it is selling ratings. It requires accountability value propositions, metrics and guarantees that just aren’t first nature to our traditional sales teams. We’ve hired interactive sellers who are really pros. We will have the traditional AEs partner with the interactive AEs where it makes sense. The on-air sales team often makes introductions for our digital sales team and that works well. The television salespeople feel comfortable talking about numbers and video pre-rolls with their existing books of business. To develop new business on the digital side, it’s all about the interactive AEs doing what they do best.

BIA/Kelsey: You’ve talked about the value but also the limits of web sites branded around your television stations. How do you grow outside that branding, do you have vertical web site strategy?

Vince Sadusky: We haven’t been interested in purchasing sites. I’ll tell you why. We’ve seen lots of traditional media investment go into verticals. Here pricing and valuation is based on traffic, not profitability. At LIN, we’re keeping our eye on the bottom line and we’re not sure what these vertical web sites are worth in terms of profitability. We know we can get some great content to our web sites where business models such as revenue sharing and syndication are in play and we’re comfortable there. We have developed vertical sites where we think it makes sense. We’ve got micro sites around some of our shows. In Green Bay, Wisconsin one of our local shows, “Living With Amy” at 10am generated so much traffic, we split her off into a separate site. We haven’t tried to do this on a larger basis with national content though.

BIA/Kelsey: Speaking of content, how does user generated content and social media fit into your plans?

Vince Sadusky: What we do really well is deliver professionally-produced news and entertainment. Our focus is to extend how people can consume this content across platforms. We don’t want to do just a couple of newscasts. We want to offer that content across platforms – on-air, mobile and web. We do need to be smarter on the interactive side. We look at social media and see the buzz but wonder how effective it really is for advertising. We’re not necessarily interested in being the first in or even early followers, we look for sustainable, profitable business models. We’re still new to the digital game, we are still figuring out what works.

We have released iPhone and Blackberry mobile applications that have been enormously popular. Our Mobile, Alabama television station released an iPhone app that was one of the top 10 iPhone apps! We view mobile as about the state of advancement of the web five years ago. It’s early days from an advertising business perspective. People do love their cell phones and they’re in the game for the latest and greatest upgrades and smart phones. We also know that people value their local news and weather. We want to be there for them.

BIA/Kelsey: There’s a lot of energy around television suddenly discussing it’s a wireless medium that can offer mobile video on cell phones. Is this an important growth area to LIN?

Vince Sadusky: We view mobile video like we do Web 2.0. We got started behind the 8-ball on the web side. But now, we’re in the video game. That is what we do. So we’re much better off in the mobile video game from day one. We have good, relevant content. People can get their national information, shopping and so on from a variety of sources. But for substance and relevance, they’ll want their local news. That goes to our strength in story telling with television using moving pictures, sound and our narrative power. We are cautious about the ad load with mobile. We don’t want to turn people off. We need to figure out the right balance.

BIA/Kelsey: Any final words, Vince?

Vince Sadusky: Well, like I say, we know what our strengths are and we also know where we have to learn. We set some new goals for ourselves in building out a digital media business while leveraging our strengths in local television. It’s working but we still have a lot to figure out.

BIA Commentary:
First off, we want to thank Vince for taking the time to talk with us. We saw the item on the RM acquisition and thought it an interesting move particularly since investment capital is rather short these days.
The acquisition of RM makes LIN a more effective interactive player as they now have a full service digital agency behind them. Further, the ability to come to the realization that just being able to offer one local website (your own) to advertisers might not be enough to coordinate a successful digital ad effort is a big moment for a historic TV company. TV operators have never ever worried about not being able to offer enough reach. The acquisition of RM and the ad network it has under contract gives LIN’s digital sales teams the ability to look more like problem solvers to local businesses who are struggling to understand how to successfully implement digital media into their existing ad spending. LIN now offers solutions not exclusively tied to their own properties. We believe this is a good space to occupy and helps position LIN as a solution provider that is agnostic to any one specific solution. As broadcast companies take on more platforms, we believe this “ad agency” mentality is a philosophy that is destined to work for local media sellers.

After many years the transition to digital television is being realized. HD Radio service is now available at many radio stations with receivers also available. Conversion to these digital transmission technologies provides incredible opportunities for broadcasters to expand their services, brand and presence in their local markets. Yet, to take full advantage of these opportunities, there is still much to be accomplished. Local radio and television broadcasters must broaden their thinking to allow their operations to enter into new areas and new ways of generating revenues. By taking advantage of their reputation, brand name, and presence in their local markets, broadcasters can increase revenues and values for their stations.

Many television broadcasters are doing just that. They are expanding their avenues of pathways to their local audiences through different transmission channels. According to BIAfn’s Media Access Pro™ database, there are now more than 350 different local television stations providing multicast signals. These multicast signals are providing programming from not only the smaller networks such as CW and My Network, but also expanding the programming from newer networks such as LATV, RTN, Ion’s QUBE Children’s network, and expansion of local news programming.

At the same time, the radio industry is also expanding the programming it is offering through HD Radio technology. There are more than 800 different multicast signals provided by local radio broadcasters offering a tremendous number of new programming services. These multicast signals are expanding the services provided by local broadcasters, bringing diverse programming into local markets. For example, of the 46 markets with new Classical multicast signals, 14 previously had no other Classical stations in the market.

In addition to providing new programming through more efficient usage of their allotted spectrum, local broadcasters are reaching audiences through other means. Radio stations are delivering via Internet streaming their main signal and/or their HD Radio multicast programming to people without HD Radio receivers and are also offering downloads of already aired programming (i.e., podcasts). Television stations are also providing downloads of news stories on their websites. Concurrently, national networks are utilizing the Internet through delivery of their programming through downloads of episodes. Allowing audiences to choose when they view and listen to programming is just one step in the broadcasters rethinking of their roles.

Another potentially lucrative opportunity soon to be available to local television broadcasters is Mobile Handheld DTV (M/H DTV) services. Through use of their digital spectrum, local television broadcasters will shortly be able to reach local consumers through other devices such as their mobile phones, portable computers, or some other handheld video devices. According to a recent study sponsored by the NAB, BIAfn estimated that the potential advertising revenues associated with these services for local stations may be as high as $2 billion by 2012. At first, this programming may likely be simulcasting their main programming (or one of their multicast channels), but over time, this delivery mechanism may lead to specialized programming suited for these types of devices. Once again, another way broadcasters are rethinking the way that they provide services to their local audiences.

Another “rethinking” of broadcasters adapting to new possibilities are television broadcasters utilizing some of their spectrum for emergency alerting purposes. Many public television broadcasters are part of the new Digital Emergency Alerting System (DEAS) under a program administered by SpectraRep – a division of BIAfn. Other public broadcasters, also with the help of SpectraRep, are working with their local police and first responder agencies, such as the Clark County (Las Vegas) School District Police Department, to utilize the digital spectrum for distributing information directly to the incident scene in emergency situations.

Radio and television stations implementing these multicasting and emergency alert applications highlight the tremendous revenue opportunities now available to local broadcasters. By capitalizing on their reputation, brand name, and presence in their local markets, broadcasters are expanding the services. It is no longer the case that broadcasters just send one signal to their transmitter tower and sell access to viewers and listeners. Now they are challenged to fully utilize their technical facilities, as well as their marketing capabilities, to expand into areas previously unimaginable. Creative out-of-the-box thinking and dynamic local managing will be a must to maximize the profitability and values of these stations.

Remarks to the MMTC Conference Panel

Mark Fratrik, Ph.D., was invited to present at the Minority Media and Telecommunications Council (MMTC) conference in July 21, 2008. In his presentation, Dr. Fratrik offered an overview of the current status of the media and telecom industries and what new entrants need to do to secure financing for acquiring new properties. The following is a transcript of his message.

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I first wish to thank David Honig and the rest of the Minority Media and Telecommunications Council (MMTC) for inviting me again to participate in this conference. I am always heartened to come and meet with many of you who have the true entrepreneurial spirit and desire to enter into these industries.

My role on this panel is to provide some general information on the status of these industries and what new entrants need to do in order to secure the necessary financing – both equity and bank financing – to acquire properties. Specifically, I am first going to talk about general economic and financial market conditions as it affects new entrepreneurs and owners in ratio, television, and the telecom industries. Others on the panels before and after this one will go into more detail. Second, I am going to talk briefly about general radio and television industry conditions also as they also affect new owners’ abilities to raise the needed capital. Finally, I will talk briefly about what these conditions mean – what prospective new owners need to show in light of these conditions to successfully secure financing.

Turning to the first topic – general economic and financial market conditions – whether you call it a recession or just meager economic growth, it provides a tremendous challenge for new entrants into any industry. The immediate potential to increase revenues is severely limited given these economic conditions. I might add, however, that these poor conditions may also offer opportunities to acquire distressed properties whose owners may be forced to sell for prices lower than at other times.

Along with the tough economy, the financial markets are also in “turmoil.” Given the shakeout started by the mortgage crisis of last year, the overall financial market is struggling to find a new equilibrium. During that time, the pricing of loans and the requirements written into the loans are quite burdensome. According to a survey by the Federal Reserve, the funding costs and borrowing standards are at the highest since 1991 and 2001. Part of this turmoil is also seen with the slowdown in activity. According to S&P analysis, the 2nd quarter of 2008 saw the loan volume down 76% from the 2nd quarter of 2007 (the last quarter before the mortgage crisis set in).
As S&P stated in their July 2008 LoanStats newsletter, “arrangers say they are hitting the pause button on new deals until the current turbulence subsides, while investors husband dollars to focus on jut the most compelling situations.” Whenever there are tough times in the financial marketplace, it is important to remember, however, that these equity funds and banks are in the business of loaning money. While it may be tough for a while – both in terms of conditions and rates – that will pass.

In addition to the tough economic and financial conditions, new owners are also confronted with challenging industry conditions in radio and television. The entire radio industry has seen negative overall revenue growth for years running with an expectation of negative growth for next year, though not as bad. This overall national negative growth does mask the better, positive performances of the radio industry in medium and small markets, but those positive growth rates are not overwhelming. Yet, radio is still an important player in the local media markets, providing access to local audiences for local advertisers. There are underperforming stations in these markets that could be turned around providing good cash flows. Additionally, radio stations are increasingly generating revenues from other sources, in particular Internet related revenues, opportunities that were discussed in another panel today.

In the television market, local stations are generally going to do well this year with the impact of political revenues, especially in Presidential battleground states and states with competitive Senate contests. Following this year, 2009 will show a downturn with an upturn expected in the succeeding year. There are some ominous warning signs affecting local television, specifically the tough times facing the automobile market. If those companies and their local dealers cut back on their advertising, this will have a depressing effect on the growth on television advertising revenues.

Yet, much like radio, local television stations are still very important players in the local advertising marketplace offering access to local audiences. Television stations have opportunities to move into other areas to generate additional revenues such as their Internet sites. Some television stations receive as much as 20% of their revenues from their Internet site and related activities. In addition, local television stations have a potential new revenue source associated with mobile/handheld DTV services (M/H DTV). This new technology is progressing through a standard setting process and might be rolled out by late 2009.

What do these challenging economic/financial/industry conditions mean for new owners and companies trying to secure financing? First, and foremost, these new owners need a STRONG story, with grounded research, as to why they will rise above the industry revenue trends. No longer can you just show that you will ride the crest of the industry, it has to be more compelling.

Second, in that STRONG story, you need a digital, other revenue component to insure that your revenue growth and bottom line growth is sufficient to attract the needed equity and bank investors. Without that potential upside, these financing sources will not take the risk.

Third, and finally, you need to be incredibly DILIGENT in assessing and researching opportunities. Through comprehensive examinations of these opportunities, you will either come up with some hidden problems that will make you walk away (and be glad you did), or other information that might lead you to be able to acquire the property at a lower price, making it more likely to secure the necessary financing.

In closing, let me emphasize that while it is challenging to secure the necessary financing in these tough economic and financial market times, there are still opportunities in the market, properties that can be purchased for reasonable prices, to make the effort.

Chief Strategy Officer, BIA Financial Network

It is an unsettling time to be a journalist. You are either on the edge of extinction or in charge of the universe . . . Access to the Internet gives the generations living today the choice to be the best-informed, or the worst-informed, human beings in history – but we will never be able to claim that we were the least-informed. Celebrity, slime and crude polemics pour from the electronic faucets as easily as high-minded exegeses.Jim Hoagland, WashingtonPost.com, March 2, 2008

There is a certainly duality to the fabric holding together what we tend to call the “digital media.” One fundamental reality is that pretty much all media are digital now, at least for most of their lifecycle. This includes even magazines and newspapers which earn increasing portions of their revenues and readership from digital versions of their products.

The duality I’m speaking of gets closer to what Mr. Hoagland speaks to above. I just came from We Media 2008, an exciting digital media conference held in the multicultural crucible of Miami where the theme was, “Digital worlds: We Media at the tipping point.” Using digital media as the foundation, this conference, in its fourth year, blends generations, cultures, and value systems (e.g., social capital and financial capital) to explore and document the future of digital media. Here at this conference, we had digital immigrants, those who were born in the analog and print era and digital natives, those who have never known a world without personal computers or even by now, the Internet itself.

Digital immigrants sited at We Media included executives from companies like USA Today, UPI, Wall Street Journal, Consumer Reports, AARP, Miami Herald, Qualcomm, or the Wall Street Journal. Digital natives hailed from both relatively established and start-up companies like Newsgator.com, NewsCup, Real Girls Media, Innovators Network, Imagine Miami or Proteus. Digital immigrants are charged with running companies that must change from within or face extinction. Digital natives are either launching start-ups trying to wrest the keys to the family car from the immigrants, or indeed working inside companies run by immigrants trying to overcome enormous chasms of age, attitude, social norms, culture, behavior, expectations and resources. Think Times Warner versus AOL. Or perhaps better yet, think Google versus the traditional advertising industry as they tried to figure each other out.

Digital immigrants tend to be those in charge of things these days. However, unless they can adapt, the choice is not happy either for them personally or for their companies. On the other hand, digital natives while clearly waiting to receive the keys to the kingdom have not yet achieved ownership of the universe. We Media 2008 put together a very interesting cast of immigrant and native characters from the digital milieu both on the panels and among the attendees making for very interesting “conversations.” (Note: in the Web 2.0 world, speakers and digital media are invitations to become involved in a conversation or interaction, not sterile, one-way, drive-by deliveries of information packages.)

The world the digital natives are about to inherit (wrest) from digital immigrants includes the two worlds Mr. Hoagland sees coexisting. We see both embarrassing riches of information on the one hand and the banal, trivial excesses of the uncritical mind on the other. Without the old guard (FCC, journalistic training and ethics, family values, social mores) holding sway over the popular and vulgar, what chance do digital media run by natives have to make their loftiest contributions to society?

And herein rests the very essence of the duality I noticed at We Media 2008. The digital natives are so bright, creative and fresh-minded about what assumptions to make regarding the role and responsibility of digital media in society. Citizen participatory journalism, social networking, blogging, widgets, gadgets, interactive video, instant messaging and multi-way chat evoke not a shudder or second thought from these natives. This all comes as naturally to them as clicking on the 6pm TV news or the plop of the newspaper at the doorstep might for digital immigrants (neither of which digital natives express much use for).

At BIA Financial Network, we have the great opportunity to work with and learn from companies facing unsettling visions and encouraging opportunities inherent to a digital media world where of extinction versus survival. Ultimately, we see that path to prosperity as led by the optimistic if undisciplined vision of the digital natives who are happy to live by their digital swords if only they could figure out how to get going with their businesses…and that’s where we come in to the picture.

The digital home is a key battleground where companies from several distinct industry segments are betting their converged network futures. The market to provide integrated service packages of voice, video, data and wireless has forged a number of new alliances, mergers, acquisitions and joint exploration in recent years. The interplay among semiconductor and digital signal processing devices, consumer electronics components, networking (including core, local and home) along with advances in ever more capable software applications and new business models for content owners and distributors has evolved into a new Media Ecosystem. This Media Ecosystem shares properties of the telecommunications, Internet and media industries but also features emergent properties whose dimension and implications we are just beginning to see and understand.

Traditional Internet and telecom companies have repositioned themselves in short order over the past couple of years in recognition that companies must change if they want to survive in the new media order. Cisco has joined the ranks of the many other companies looking to redefine themselves in order to pursue new growth strategies premised on an understanding and capitalization of the rapidly evolving Media Ecosystem. Consider how Cisco, the Internet routing infrastructure company, is targeting the digital home by pursuing a new strategy of acquiring companies serving the consumer space. Its search for revenue growth and new markets inevitably led it to look at next generation networking into the homes. Two key business opportunities for Cisco’s desire to leverage its Internet routing core competence were getting Internet data into the home and then throughout the home. Cisco’s strategy has been to pursue both of these opportunities and this will influence competitive evolution across several industries.

The major information highways into the digital home remain satellite, cable, telephone and broadcast. While the transition to digital transmission in both the broadcast television and broadcast radio industries shows promise, to-date, neither of these industry segments has proven to be much of a factor in redefining the Media Ecosystem. Rather, it has been the cable, telco and satellite industries that have been the drivers.

So, how does Cisco fit into the mix? Cisco’s acquisition history has been to target smaller technology companies with an edge they were looking for to drive growth opportunities. Their focus on the digital home began with its 2003 purchase of Linksys Group which featured consumer grade wireless routers to support WiFi networking in the home. Earlier this year, Cisco moved on to purchase KiSS Technology, a company which provided solutions for networked DVD players. Finally, in this month’s purchase of Scientific Atlanta, Cisco has realized its strategy of developing a compelling networking offer both into and throughout the home.

As for getting into the home – the Scientific Atlanta acquisition brings a 50% market share of the existing cable set top market and positions Cisco well for the continued digital transition in that industry. Scientific Atlanta also provides headend gear for cable operators, a market space Cisco knows well from the Internet and telco customers it already serves. And, Scientific Atlanta demonstrated its own ability to understand and serve the converged network market with its sale earlier this year of IPTV set top boxes to SBC for its Project Lightspeed venture.

The Linksys and KiSS acquisitions fit when taking into account that Cisco also has a strategy for developing a beach head in the digital home for storing and moving information inside the premises. Scientific Atlanta’s MediaCenter DVR product has sold 3.7 million units and features DVR recording along with DVD player/burner capabilities. The average DVR-equipped household has only one DVR but about two and a half television sets. By enabling networked DVRs and other devices (e.g., KiSS and Linksys) in the digital home, Cisco can create a substantial value proposition for its cable and telco customers in one package.

BIAfn’s Take:
The moves taken by Cisco to experiment with new combinations to produce innovative business offers make sense in the “survival of the fittest” contests that are playing out in the Media Ecosystem.

The same old solutions will not work as IP converged networks changed the rules of survival. Competitive innovation and change will continue to provoke a complex interplay among companies seeking survival and growth.

We will see executives continue to try to reposition their companies and jockey for positioning. However, those who are able to develop a deeper understanding of the Media Ecosystem will be able to see underlying directions and forces in a context that is both relevant to them and provides strategies for action. It will be these executives and companies that will provide the clarity of marketplace success.