Netflix CEO Reed Hastings explains that the company’s decision to separate its DVD and video streaming services is because the DVD business will become Qwikster. Hastings writes that his company “realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently.”
Customers who get get DVDs in the mail will soon receive separate bills from the Netflix-owned subsidiary.
On the company’s weblog, Hastings goes on to admit he did a poor job communicating recent changes to his customers:
When Netflix is evolving rapidly, however, I need to be extra-communicative. This is the key thing I got wrong.
In hindsight, I slid into arrogance based upon past success. We have done very well for a long time by steadily improving our service, without doing much CEO communication. Inside Netflix I say, “Actions speak louder than words,” and we should just keep improving our service.
But now I see that given the huge changes we have been recently making, I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both. It wouldn’t have changed the price increase, but it would have been the right thing to do.
“Netflix Separates DVD and Streaming Services”
Media 01 May 2007 01:52 pm
News Corp. (NWS) owns the New York Post, one of the few American newspapers improving its circulation. Dow Jones (DJ) owns another one, The Wall Street Journal. News came out that News Corp. wants to buy Dow Jones for $5 billion.
I bet you wish you owned Dow Jones stock this morning. It shot up to $57 dollar/share on the news.
News Corp.’s bid might ignite a bidding war for Dow Jones.
The deal makes a lot of sense for News Corp. The Post and WSJ can combine printing and back office operations to bring the tabloid into the black. There’s also the upcoming Fox Business Channel which could use the WSJ’s cachet.
Media 19 Feb 2007 07:30 pm
Sure, the markets were closed for Presidents Day but that didn’t stop XM (XMSR) and Sirius (SIRI) from announcing they are combining to become the king of satellite radio (which still doesn’t rise to the level of Sirius’ Howard Stern being the “King of All Media”).
Sports fans won’t have to make that agonizing decision of whether they want a service with for the NFL and NASCAR on Sirius or Major League Baseball and college sports on XM. Women won’t have to fret over choosing between Martha Stewart on Sirius or Oprah on XM.
Blogging Stocks’ Jonathan Berr sees this as Sirius winning the satellite wars. Sirius is paying a premium to XM shareholders and Mel Karmazin will be running the unified company.
Ultimately the two companies have to hope the money spent competing against each other can go to finding a place in the new media world where iPods and broadband cell phones appear to be the choice for mobile listeners. That will be the new company’s argument to regulators who will scrutinize this deal more now that Democrats control Congress. It will be a challenge when FCC chairman Kevin Martin it wouldn’t be kosher for there to be only one satellite radio company. (What if one went under? Neither of them are making any money.) Also, expect Congressional hearings since Republican Sen. Arlen Specter when the GOP controlled the Senate felt it was crucial to waste time bringing in cable company and NFL execs to testify about the NFL Network.
The companies will have to make sure potential subscribers understand the merger won’t affect them if they buy new satellite radios. The smart thing would be to simply broadcast the same signals across both companies’ satellite networks with one system eventually taking over (if the technology permits). I can see quite a few people deciding to wait for the merger to succeed (or fail) because they think one set of radios won’t work.
[Graphic via hypebot.]
Wal-Mart (WMT) is jumping into the digital movie download market almost like they’re a innovator. Sure, having customers pay someone for movie downloads isn’t new, but the world’s largest retailer is bringing something new to the table: more flexible pricing and price competition:
The nation’s largest retailer is using its buying power to beat the prices charged by other download services in many cases, offering films from $12.88 to $19.88 and individual TV episodes for $1.96 — 4 cents less than Apple Inc.’s iTunes store.
Apple charges less for some films sold on iTunes — $12.99 when pre-ordered and during the first week of sale, or $14.99 afterward. But it only carries films from two studios, The Walt Disney Co. and Viacom Inc.’s Paramount Studios.
Most studios have resisted signing deals with iTunes in part because of Apple’s desire to sell movies at one price. Studios prefer variable pricing such as Wal-Mart is offering.
Apple’s pricing has also caused scuffles between studios and major retailers, including Wal-Mart and Target Corp. The retailers don’t want studios to sell digital copies of films cheaper than the wholesale price of physical DVDs.
Wal-Mart’s online store will sell older titles starting at $7.50, compared with the $9.99 charged by iTunes.
From the looks of things something has gone seriously wrong. It may be a beta but it has to at least be viewable.
With Wal-Mart in place movie studios are set to make more deals with the likes of Amazon (AMZN) and others.
Geeks and even mild techies hooked on our YouTube age won’t be pleased with Wal-Mart’s offering. Customers won’t be able to burn their movies to DVD or play them on their iPods. That’s not so much Wal-Mart’s fault as that of the fearful movie studios.
Media 22 Jan 2007 07:39 am
Michael Eisner, former Disney CEO, has forged a deal between video-sharing website Veoh and United Talent Agency. No, it’s not a Hollywood company realizing their future is internet distribution–monetizing it is a whole different matter–but a open call through amateur video uploads:
Dimitry Shapiro, chief executive of Veoh, said the deal with UTA would become “the new gateway for talent discovery in Hollywood”, adding the channel would bring the “newest and brightest creative minds to the new, more flexible medium of internet TV”.
Brent Weinstein, the head of digital media at UTA, said the partnership would “create a structured, standardised and legally sound mechanism for aggregating and reviewing unsolicited submissions in a peer-to-peer video environment that can support the high resolution, television-quality content that many aspiring artists produce”.
In an unusual move, UTA has bucked the industry trend of discouraging unsolicited material from aspirant actors, writers and directors and instead has actively encouraged people to submit material to the site. The group recently formed a broadband division and has already received thousands of submissions.
This isn’t Google figuring out a business model for YouTube. It’s an agency wading through user-generated content instead of unsolicited videotapes. Biz of Showbiz notes this isn’t even new. UTA’s competitor “Creative Artists Agency has had a deal in place since last year with another online video service Revver.”
Billions pouring into private equity’s coffers gives the beast an insatiable appetite. For any non-Web 2.0 business financial salvation is hoping someone like Texas Pacific or Blackstone buys them. A rumor in the publishing world is the U.K.’s Pearson is on the selling block:
Shares in Pearson jumped more than 4 percent on Wednesday to their highest price since mid-2002 in hefty volume amid speculation over a private-equity buyout for the world’s largest educational publisher.
Details of a report in the weekly The Business magazine, due to be published on Thursday but noted by traders during the afternoon, singled out private-equity firm Kohlberg Kravis Roberts & Co. as a possible bidder.
A source familiar with the matter told Reuters, however, that KKR currently had no plans to bid for Pearson. The private-equity firm declined to comment.
KKR has “no plans” but all that means is their preliminary work isn’t finished.
The Business reports taking Pearson public would mean the sale of The Financial Times which could fetch just under $1 billion. News Corp., The New York Times, and Dow Jones could bite. The story notes analysts say Pearson’s academic publishing is its core which could mean it’s trade house Penguin could also be sold.
Last year The Economist (partly owned by Pearson) explained why private equity firms love media companies more than public markets:
Private-equity firms like media companies better than public markets do. Public markets love a growth story. Private equity appreciates cash flow. Radio and television stations and even newspapers throw off loads of cash, which private-equity firms can borrow against, using this leverage to repay their equity fast. That is true even of businesses whose cash flow is in long-term decline, such as newspapers, as long as the rate of decline is relatively predictable. The biggest risk in many of the current batch of deals is that the private-equity firms discover the cash-flow models to be less predictable than they thought, says Colin Blaydon of Tuck Business School’s Centre for the Study of Private Equity and Entrepreneurship.
Media 19 Jan 2007 04:50 am
Time Inc. cut almost 300 jobs to cut costs and restructure the business for a new age where more and more people are sucking in content via the web. While some of the cuts make sense (People has an Austin, TX bureau?) they might be cutting off their nose to spite their face. Reportedly gone are Time magazine shutting down bureaus in Los Angeles, Chicago, Atlanta. What are they going to do rely on webloggers and CNN for coverage? All the action in the U.S. isn’t happening in New York and Washington. But don’t worry, there will still be plenty for the stringers.
If you’re in the mood Time, Inc. is selling Field & Stream, Parenting, and Popular Science. Get ‘m while they’re hot. No word if any private equity firms are interested. I’m half-way serious. They’re buying everything else.
Mind you, once reported by a cadre of correspondents and written by a staff writer in New York, it was edited (read: rewritten) by a senior editor and edited (yes, rewritten), by an assistant managing editor, and then edited (and, with surprising freqency, rewritten) by the managing editor. And then the research came along to try to correct all the errors this process inserted in the story.
We should be shocked they’ve survived as long as they have.
The McClatchy Company which earlier this year bought Knight Ridder for $4.5 billion sold the Minneapolis Star Tribune to, you guessed it, a private equity firm for $530 million. Avista Capital Partners is the firm of the moment. In a press release McClatchy said Avista tried snagging the two Philadelphia newspapers earlier this year. McClatchy will use the cash to pay off debt from the Knight Ridder deal.
paidContent.org notes the “sale price is much less than the $1.2 billion McClatchy paid to buy the Star Tribune from Cowles Media Co. in 1998.” At $530 million the paper is a better growth prospect than at $1.2 billion. We’ll all wait and see how they’ll get growth out of rapidly-changing business.
The family that used to own the LA Times is reported (by the Times no less) to be interested in buying the company that bought their newspaper. Really it’s not as confusing as that sentence sounded:
The Chandlers, who currently own a 20% stake in the company, have been in discussions with billionaire Ron Burkle’s investment firm, Yucaipa Cos., about making a joint offer for some or all of Tribune’s assets, the Los Angeles Times reported on its Web site, citing two unnamed people said to be familiar with their plans. The L.A. Times is owned by Tribune, along with 10 other newspapers including the Chicago Tribune, 26 television stations, and the Chicago Cubs baseball team.
Tribune executives led by Chief Executive Dennis J. FitzSimons are expected to enter a bid of their own in alliance with a consortium of three private investment firms, one of the group’s advisors reportedly said.
The management consortium is said to include Providence Equity Partners of Rhode Island, Apollo Management of New York and Chicago investment firm Madison Dearborn Partners, according to the L.A. Times.
In July, the Chandlers demanded that Tribune take dramatic steps to lift its stock price, which had lost more than half its value since early 2004. The family said that Tribune should sell its broadcasting division, pursue tax-free spin-offs of its newspaper assets or try to sell the company as a whole.
Also interested in buying Tribune are Tribune executives. But “executives are unlikely to lead any buyout effort but could very well have a future management role in the company.” At least they’d keep their jobs.
Media 13 Dec 2006 08:00 am
The end of the year brings two types of stories: year in reviews; and looks into the future. MarketWatch’s media maven Jon Friedman does the latter by getting us ready for the upcoming battles between Fortune and Conde Nast’s Portfolio on the news stands and CNBC and Fox Business Channel on the boob tube. Competition is always good, but do we really need another financial magazine? Maybe if you are loaded like a partner in one of those private equity firms that’s buying everything in sight.
With magazines like The New Yorker, Vogue, Vanity Fair, and Architectural Digest in Conde Nast’s portfolio (pun intended) you know it caters to someone other than Bob the purchasing manager at the office furniture factory in Cleveland. That guy’s the type who only buys Fortune occasionally but knows his boss has a subscription. A Vanity Fair-style mag that’s full of great, deep profiles and stories would be appreciated even though in our short-attention span infoworld the issues will pile up for months only to be finally read on vacation. At least you’ll know Portfolio will have great pictures.
What will be very interesting is how Fox will tackle business television. Friedman thinks Fox will “focus on individual investors.” If Fox News Channel is any indication Fox Business will install strong personalities. Roger Ailes would love nothing more than to find a Bill O’Reilly for the network. Also from Fox News’ history expect to see plenty of lovely anchorwomen. Maria Bartiromo better be prepared for some competition in the look department. Two things I hope not to see on Fox Business: 1.) a Lou Dobbs “economic nationalist” (i.e. a protectionist from 18th Century Europe); and 2.) Steve Forbes hosting his own show. His brief moments on Forbes on Fox Saturday mornings are painful to watch.