Courtesy: Engadget

Steve Jobs might be as adept at captivating a live audience as he is at innovating game-changing media products.  For nearly the first hour of Apple’s “September event” in San Francisco, Jobs made nary a mention of Apple TV.  And then, just as the invite-only crowd suspected that the festivities may be ending, Jobs pulled his latest, famed “one more thing” trick, quipping that the final “hobby” (his notorious description of the company’s philosophy towards TV)  was on the agenda – a $99, rental-centric upgrade of  Apple TV that streams movies and TV shows in HD and is compatible with portable devices. 

ABC and FOX are already on board as partners, and Netflix and YouTube streaming are also available.  Jobs announced that commerical-free TV shows are 99 cents for a 48-hour rental, while first-run movies cost $4.99.  The 99-cent price point in in-step with the iTunes song pricing model that has radically disrupted the music industry. 

Also, because all premium content is rented and streamed (rather than downloaded), there are none of the storgage capacity or management concerns that have weighed down iTunes video files in the past.   

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Two freshly released viewer surveys underscore the fragmentation of the TV marketplace, the surging demand for online video and time shifting, and the changing consumer attitudes toward traditional, live television.

The most recent Morpace Omnibus study reveals that while 52 percent of viewing is live (linear broadcasting, whether prerecorded such as a TV series or movies, or actual live programming like sports and news), more than a third (36 percent) of viewing is now on-demand. In addition to VOD services, 41 percent of consumers use in-home or network DVRs for additional “on-demand,” non-linear viewing.

Meanwhile, the migration online continues, with results from an Altman Vilandria & Co. survey declaring that broadcast TV consumption on the Internet doubled over the past year.

Morpace Omnibus Report: August 2010

The list of competitors jousting to disintermediate cable’s long-held and lucrative grasp over television viewing is lengthy but muddled. This proverbial ”kitchen sink” of attackers includes “connected TVs” (Sony Bravia, utilizing Google TV software), Internet-connected gaming consoles (Playstation 3, XBox 360), streaming video services (Hulu, Netflix), and over-the-top (OTT) set-top boxes (Apple TV, Roku).

However, no single platform or technology has conquered this potentially prolific space. There is no “killer app”… at least not yet.

Increased online and time-shifted viewing is yet to dramatically cut the cord on cable TV providers, with only 3 percent of 18- to 34-year-olds sampled by Altman actually canceling their cable. Couple that with 96 percent of Morpace’s respondents answering that they still watching at least some programming from a traditional device, and TV’s place begins to look more secure.

But dramatic shifts in viewing behavior appear to bubble just beneath the surface. Altman found that while only 3 percent of the 18-34 group have “cut the cord,” another 25 percent have “seriously considered” dropping pay TV altogether.  This is just the latest jolt to the cable industry, which lost 711,000 customers in Q2 2010 alone.

The upshot of all this data: A cavalry of competitors are storming the gates, but local and national broadcasters still have opportunities to differentiate their assets through mobile (the Washington Consumer Showcase of Mobile DTV, which we have documented), 3-D and other innovations.

Even with the OTT space cluttered and disjoint, local broadcasters can begin fostering partnerships that enable them to package their content across devices and locations while unlocking diverse, non-linear revenues. Plus, OTA programming has this ace in the hole — it’s free. The net effect can be additive for local broadcasters, not subtractive or substitutive.

A few weeks ago, mobile video platform MobiTV released findings from its delivery of the 2010 FIFA World Cup suggesting that the larger the screen, the longer the time spent viewing. No surprise there, as total average minutes viewed for 5-inch screens (118) nearly doubled those of 2-inch screens (61).

What is eye-catching are the minutes themselves, which put new data behind rising mobile video consumption trends. All told, MobiTV reported that it served more than 100 million minutes of soccer.

While MobiTV and its counterparts — FloTV, Verizon VCast and Sprint TV, among others — see consumer adoption and usage rates surging, their media offerings are singularly national. All the essential TV food groups are on the menu — sports (ESPN), drama (USA), news (most prominent brands) and lifestyle programming (Oxygen, TLC).

Unaddressed is local programming, which raises the question, “Where is the mobile opportunity for local broadcasters?”

The Open Mobile Video Coalition (OMVC) is currently studying this question through the Washington Consumer Showcase of Mobile DTV, which BIA/Kelsey is supporting in conjunction with Harris Interactive.

Nine Washington, D.C.-area TV stations are participating, with four discrete products sampled for wireless TV use. The one pure-play cellphone is the Samsung Moment, available through Sprint. Two hundred area residents are utilizing the built-in receiver chip in the handset to test live, local broadcasting as well as a fleet of national channels. OMVC reports “high excitement” for over-the-air mobile TV.

Meanwhile, in Raleigh, N.C., News over Wireless, a division of Capitol Broadcasting, which owns and operates WRAL-TV and the immensely popular WRAL.com, is working to localize TV news on 3G mobile devices through carrier partnerships on behalf of stations in more than 50 markets.

Even though Hulu CEO Jason Kilar calls his service “incremental and complementary” to cable, the online video hub’s potential fall IPO is a testimony to the transition of TV across screens and the rapid growth of OTT (over-the-top) services.

OTT delivers IP video to end users over third-party broadband using gaming consoles, set-top boxes, and other devices to connect the Internet and TV. The upshot: The ”cord is cut” on cable.

BIA/Kelsey projects that OTT will surpass cable within three years, reaching 62 million homes by 2013 as consumers demand greater customization and control of their content. Hulu is the most watched OTT service, with 53 percent of all OTT users accessing it. Notably, 42 percent of those viewers already watch at least some Hulu programming on their TVs.

The timing of the reported public offering is especially interesting considering that Hulu — a joint venture of News Corp., NBC Universal, the Walt Disney Co. and Providence Equity Partners — reported only $100 million in income last year and is yet to release tangible revenues from its recent rollout of the $9.99 per month Hulu Plus premium service, which aims to create a second revenue stream alongside its core advertising business. ComScore reports that it did serve up more than 780 million video ads in July, far and away the most of any online video property.

A Hulu IPO, coupled with mounting research backing OTT growth, should motivate local broadcasters to take notice of the migration of Internet TV onto traditional screens. Competition is deepening. TV viewership, while growing, is also fragmenting, with more sources of video and more devices delivering it. OTAs can pursue a multitude of strategies, both a source of opportunity and confusion.

Broadcasters will need to foster partnerships in order to build the necessary infrastructure to provide OTT services. With that in place, a coherent OTA + OTT offering could unlock new revenue streams and afford consumers a richer viewing experience.

There is a growing debate over the controversial accounting standard FAS 157, which has recently been amended and renamed Topic 820. Overall, the proposed amendments shouldn’t cause much concern for companies — with one possible exception that I address below.

A good proposal, in my opinion, states that “blockage” will not be considered when fair valuing an asset. Blockage is the ostensible discount that would occur when someone sells a large percentage of outstanding stock, relative to most small, minority trades on public stock exchanges. This is a good move as it will simplify valuation work. In my 25 years of business valuation work, blockage has rarely come up, and when it has, my research has indicated there hasn’t been much there. Professional articles on this issue largely agree. Ruling out consideration of this will make valuations easier and, in my opinion, no less accurate.

Now, the proposed additional disclosures about fair value of an asset that include changing one or more “unobservable” inputs could prove to be a costly headache.

This change would lead to disclosure of the changes to the value of an intangible asset, when one or more inputs to the valuation model are changed. This could make the valuation and disclosure processes much more complicated. When estimating the value of an intangible asset, there are always many inputs to consider. With the proposed changes, it would be very easy for such disclosure to become very cumbersome and costly, and quickly exceed any benefit to users of financial statements.

The proposed amendments were issued on June 29, 2010, and comments are due to the Financial Accounting Standards Board (FASB) by Sept. 7, 2010.

While there may be benefit in having fair values of assets included in financial statements, it does subject financial reporting to greater subjectivity. If the requirements go too far, they can increase the cost of compliance beyond the benefits to investors.

We believe the Financial Accounting Standards Board (FASB) needs to show some restraint. We also think there should be professionals other than accountants on the board. The oversight of any profession should not be left simply to the people in that profession. If non-accountants from the financial community and other walks of life became members of the FASB, it would be welcomed by the general business community and lead to more cost-effective financial reporting in the United States.

William Redpath is vice president, consulting, for BIA/Kelsey, with an expertise in the appraisal of broadcasting, cable, and telecommunications businesses and intangible assets. Bill earned his B.A. degree in economics and political science from Indiana University and his M.B.A. from The University of Chicago.

With Google TV Ads’ announced partnership to auction inventory across 11 national networks carried by DirecTV, the search giant begins to try to rebut skepticism about its ability to achieve significant reach. Now it must demonstrate the ability to generate healthy revenues, driven largely by SMB platform adoption, to avoid the pitfalls it suffered in similar newspaper and radio consortia.

DirecTV’s 18.7 million households, combined with Google’s existing relationship with Dish Network, more than double TV Ads’ overall reach to 33 million homes. The networks — including brands such as Bloomberg, FOX Business, Fit, Fuel and TV Guide — are generally lower-rated, with many highly targeted to specific demographics.

However, Google Ads will have access to local inventory across all dayparts, a breakthrough that previously impaired its perception as a primary TV advertising vehicle and was absent from the radio partnership.

For SMBs, there is a give-and-take. Google TV ads is effectively an extension of its lucrative, popular AdWords platform that enables businesses to create, target and track their own self-provisioned campaigns. As Mike Boland has written about extensively on this blog, the self-service nature of the platform can make the process more seamless for SMBs with existing AdWords accounts, which can tailor their buy according to channel, daypart, geography and demography.

Additionally, the tracking analytics that Google offers through data it extracts from set-top boxes can afford these advertisers a more transparent and targeted approach to offline spending.

If an increasing number of new clients are drawn to the service by its granularity, then advertiser demand may drive more traditional media companies — the more prominent names that have not opened up their inventory — to reconsider partnering with Google. To this point, most cable and telco providers, as well as prominent cable networks — the ESPNs, TNTs and USAs of the cable universe — have shied away from Google, not wanting to share their own audience data and fearing the possible commoditization of their inventory.

Conversely,  SMBs must adopt the Google TV Ads platform en masse for the search giant to sell at scale and generate substantial revenues. Again, this relies on self-service, which stems from both awareness and user-friendliness of both campaign creation and bidding. Much of that awareness connects Google TV Ads’ aforementioned reach-and-prominence dilemmas.

Scripps’ HGTV Network, which reaches 99 million U.S. households on air, and 5 million unique visitors per month online, announced today that it is partnering with Cox’s Kudzu in a broad agreement with many moving parts.

The deal will provide HGTV’s on-air and online viewers with Kudzu’s local directory and social media information on home repairs and service providers. The relationship with Kudzu will eventually extend to Scripps’ other “shelter” sites, which include DIY Network and FrontDoor.com, the women-oriented real estate site.

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Gannett’s local newspapers and TV stations will begin selling Yahoo inventory, considerably boosting the size of Yahoo’s local sales efforts. The deal, which involves 81 newspaper organizations and seven of its 23 TV stations, is similar to the efforts of Yahoo’s 800-member Newspaper Consortium.

But Gannett, notably, is staying separate from the Consortium. In part, Gannett was concerned that contract was newspaper specific (even though Media General and Freedom Interactive, which both have added TV stations, seem to work within it). The timing for originally joining the Consortium also wasn’t good, as Gannett was still backing CareerBuilder while the consortium was launched with Yahoo Hot Jobs.

Yahoo VP of Channel Sales Lem Lloyd has been working on projects with Gannett for more than a decade, starting when he was an executive at Knight Ridder and they co-owned verticals ranging from CareerBuilder to Cars.com. “When the corporate entity puts a focus on something, they have a great ability to have local properties execute strong sales and execution,” he says.

Lloyd adds that both entities are committing major resources to the new effort. “Gannett is in an especially strong position to help due to its portfolio of smaller media markets, which typically fall from DMAs 75-200,” says Lloyd. “It is a great proving ground for selling more sophisticated advertising to local businesses.”

What isn’t involved is Gannett Local, a separate venture designed to sell search solutions to SMBs. Tribune also recently launched a local search arm. Lloyd notes that the Yahoo deal won’t be at all search oriented.