The Tom Dougherty Blog
The ground shook across the TV landscape when a potential AT&T Time Warner deal was announced, forewarning investors and competitors that the behemoths are taking the changed landscape seriously.
The deal, at a cost of $85 billion, is a long shot to be approved by regulators. Even it fails, it demonstrates how jumbled the era of Peak TV has become.
Our viewing habits have changed drastically over the last few years, with many cutting the cord, streaming services taking preference (especially among the coveted Millennials) and even ratings for the NFL dipping. Everyone connected to the industry is trying to figure out how to win – and how to survive.
The idea behind an AT&T Time Warner deal is to own both the content and delivery of programming. The strategy is akin to that of Netflix, producing original programming because content providers have become increasing unlikely to make licensing deals with it. They want to own distribution as well.
With that in mind, there are all kinds of rumors about forthcoming deals. Disney will buy Netflix (unlikely, although the two did finalize an exclusive deal for Netflix to stream Pixar and Marvel movies). Comcast will look to another mobile carrier, like T-Mobile or Sprint. (Or even Dish.) Already, Charter is merging with Time Warner Cable (not to be confused with Time Warner).
Will any of these rumored acquisitions or mergers actually work?
What the AT&T Time Warner deal means.
Most analysts are skeptical, noting that Time Warner would be in danger of losing its fees from cable systems if it gave AT&T customers shows it owns, like Game of Thrones.
But I’m not. The old ways of doing things mean that content providers and distributors would just stand pat. They can’t do that. The downfall of Peak TV is that there’s simply too much of it. (Much of it good, mind you.) There will be a bubble that bursts at some point. The ones left standing will be the ones that control both ends of the creative spectrum.
The AT&T Time Warner deal may not be approved. But it won’t be the last one t0 get considered. These deals aren’t about gaining increased market share. They are about survival.
Woe is the Chipotle brand. Its third-quarter results showed net income plummeting nearly 95% versus last year and same store sales declining more than 20%. The food safety issues that plagued the chain last year continue to haunt it as once loyal customers are fearful of coming back.
Publicly, Chipotle continues to laud its industry leading food safety program and praising store efforts to create an excellent guest experience. Chipotle has also doubled its marketing efforts and is running its first television ads since 2012.
However, I don’t think Chipotle has fully grasped that its failure is not a business one but a brand one.
How the Chipotle brand can fix itself.
Prior to its very public food safety catastrophe, Chipotle was a Wall Street darling. It touted fresh and sustainable menu offerings, made to order for each customer. The Chipotle brand was so tightly tied with the freshness of its food that it was positioned as the anti-fast food establishment.
So what did it expect when people got sick from its food? Any connection that Chipotle made with the customer quickly vaporized. The expectation with food being fresh is that it is safer than at other places. Being non-processed gave consumers a certain security blanket.
Jump ahead a year later and consumers still feel like they were lied to.
The Chipotle brand is in serious need of repair. Shortly after the food safety incidents, it launched the before mentioned industry leading food safety program. If your brand is supposed to be about fresh and non-processed, why didn’t Chipotle have such a program in place already? The simple answer is that Chipotle never placed the bar high enough to fulfill its brand promise. Food safety to them was non-processed.
This is the rub. It is facing an almost insurmountable climb to get consumers to come back based on the laurels of its past. Chipotle appears to be simply telling consumers, “Come back to Chipotle, this time we mean it!” Customers are wisely not buying it.
As painful as it may be, Chipotle needs to revaluate its brand in an effort to reconnect to its lost customer base. They’re not just going to come back to the brand that has already failed them with a safety program. Consumers need an emotional reason to return.
Macy’s declines in market share and revenue because department stores are holding onto a model of the market that no longer meets the needs of shoppers. Competition is everywhere and shoppers have more choices than ever. All too often, these choices seem better than the traditional department store model.(Read a market study of the retail market here)
Many of the brands that stores like Macy’s rely on for magnetism (attracting shoppers into the store) have recognized that the worm has turned and are pulling their brands form the retailers. Like Coach, for example. Even Michael Kors has decided not to play the game anymore and has asked retailers to stop couponing and discounting their products.
Macy’s declines can be predicted by looking at the world of magazines
I think you can see a corollary to Macy’s declines in the periodical market back in the late 60s. All businesses naturally seek economies and the broad-based and horizontal magazines like Look and Life found it increasingly difficult to attract advertising dollars. Advertisers learned that it was more effective to spend their dollars in vertical publications that mined the exact consumer they hoped to influence.
The magazine world learned a lesson in focus and these once heralded magazines folded up and went away. Meanwhile, there was a rise in vertical publication advertising because, if you wanted to sell bird seed, it was smarter to buy a small add in Bird Lover magazine then spend for greater subscription numbers in Life magazine.
Today’s world is about focus.
It was all about focus. It still is.
Today’s shopper is accustomed to laser-like focus. Some retailers even specialize in clothing of a particular color or style. Others specialize in a demographic segment or price point. At the end of the day, shoppers are placing a premium on their time. Wondering through a department store to locate only what you are looking for seems like a fool’s errand.
Times are different and the desire for greater focus will remain for quite some time… until a broad nostalgia for the experience of bygone times surfaces. Macy’s declines and Belks’ failures can’t wait that long. My suggestion is to split off the departments as separate brands and run them independently. It’s how you retain value for your shareholders but asks for great pain from the traditional department stores in the transition.
Those retailers won’t do it. They will stick their heads in the sand and maybe invite a new branding initiative. (Like Belks did. It got a new logo with no new meaning and no new customers from the effort.) That initiative will be confusing and without new and improved brand meaning.
The US brand is under siege. Is anyone else worried about the future of the US?
I don’t mean in terms of which candidate you support in the upcoming election. There are sane people on both sides of that debate. I’m talking about the very fabric of what it means to be a citizen of the US brand. An American.
At our root, we claim to be a nation bound by a Constitution that dictates our civil behavior. Since the election of Washington until Lincoln, every election has been followed by a peaceful transition of power. It is what it means to be an American.
The one time that process failed was in 1860 and it resulted in a bloody war that ended in the complete defeat of those that opposed union. The debate for peaceful transition had been decided once and for all with an anything but peaceful five years of blood soaked division. I believe, despite all of the posturing today, that this election will also be a peaceful transition of power from the incumbent to the newly elected leadership.
The US brand has been under siege in the past
I don’t think I am alone in looking back upon the last decade with a bit of distain. Our national genius for compromise has been replaced by vitriol and obstruction. When FDR was first elected, humorist Will Rogers said, “Well, if he gets to the White House and it catches fire and burns to the ground, we will say at least he got something started.” Just like Will, I have become weary of partisan posturing and I want to get SOMETHING done.
My worry is not over the election itself, although the personal attacks are hard to hear. After all, one of these two candidates will be our next President. In many ways, I would love to hear what each candidate will do to help our country if they lose. My sincere hope is that either candidate will try their best when elected. That is the minimum I think we can expect. The rest is just politics.
What REALLY worries me about the US brand? A fear that, as a nation, we might be ungovernable in the future. A large percentage of those that are voting say they do not trust the information published from our government. They do not trust what they read in the news and they do not trust our elective process. I then wonder how they plan on making America Great Again or becoming Stronger Together?
If you don’t read the news, where are you getting your information? If you don’t believe anything the government says or publishes and don’t believe in the right of the majority to rule— well you don’t believe in our Constitution.
I can’t wait to read comments on this post. In the past, my worst fears have been realized in those comments. Aggressive and hateful bloggers post comments that prove my point. They did not read what I had to say.
Until we address the basic problem, which is IGNORANCE, we have a broken system with broken constituents. Just remember that the root of the word ignorant means to IGNORE.
Advertisers have been scrambling for the last few years to find new channels to reach target audiences. People are cutting the cord, watching TV on streaming services and recording shows on their DVRs so they can fast forward through the commercials.
Therefore, advertisers have looked for other avenues, primarily social media and ads on YouTube and the like. TV still represents the best way to reach a broad audience, but the playing field has become more complex.
So what are advertisers to do? Well, they can go back to the future, which is just what American Express has done. It will now sponsor entire segments of the Today Show that will reduce the number of commercials, increase the amount of show content and give American Express a channel to raise its profile.
Sponsoring The Today Show is old hat, but also the new wave.
This tactic, of course, is nothing new. In fact, it’s as old as television itself. The early 50s saw the Texaco Star Theater, a vaudeville show hosted by Milton Berle. It was common for shows throughout that decade and the 60s to have a title sponsor that simply owned that time on the air.
American Express is spending $28.1 million of its $141.7 million advertising budget on NBC alone, with a good chunk of it going to the Today Show. Is this the wave of the future (the past)?
Absolutely. And it won’t just be broadcast TV. Networks and streaming services are playing in a field advertising dollars spread thin. It’s not a big stretch to imagine advertisers owning a show, either on broadcast, cable or even (gulp) streaming.
Does this approach have the potential to turn off viewers? Yes and no. It would actually be welcomed, if the programming already includes advertising. As a viewer, I’ve always appreciated the European model in which the programs are sponsored and ads are shown at the beginning of the program, thus not interrupting during the show itself.
I don’t expect an immediate push to adopt the American Express Today Show model. But don’t be surprised if, in the desperation to open up new channels, that advertisers and TV networks don’t consider it more often.
I travel a lot for business and one thing never seems to change. I continue to hate the airlines.
Since I have a limited number of airlines to choose from where I live, the three I typically hate the most are United, American and Delta.
The things I hate about them seem fixable and would have a great impact on their brands and consumers’ preference for those brands. They are really easy things like a more comfortable seat, in-flight entertainment options, plane updates and on-time service. I would also like the gate agents to be a bit friendlier and helpful too, but I may be asking too much.
So you can probably understand my confusion as to why American has made such a big deal about redesigning its frontline staff’s uniforms. There are new Delta uniforms too.
The new American and Delta uniforms don’t make flying any better.
There are a lot of things wrong with the airlines. If one were to list them, flight attendant uniforms would probably be about 400th on the list. It’s not like I ever really noticed anything wrong with the old uniforms.
To be fair, the new uniforms may provide a sense of pride to the front-line folks that might make them a bit happier. I’m sure that will last for about a month.
However, the airlines continue to do things that don’t actually improve things for the flying customer. The planes are old and look worn out. In commuter jets, seats are threadbare and have no cushion. Beverage service consists of a quarter can of soft drink poured into a plastic cup filled with ice. Seats don’t have power and, even on those very few flights that have internet or in-flight entertainment, the coverage is spotty at best.
I would have no problem with the new uniforms if they represented something larger, such as upgrading the planes the same way airlines have upgraded their uniforms. Honestly, that would have a significant effect on their brands.
Invest in that, American and Delta. I can certainly live with the older uniforms.
I like my music.
In fact, I am about as much of a music nut as I am about the latest tech fads. Maybe even more — as crazy as that is to believe.
On a typical summer night, you might find me outback on my deck. There, I’ll have a fresh Maduro cigar in one hand and two fingers worth of Laphroaig in the other, all while listening to some of my favorites: Diana Krall, Van Morrison or Dougie McLean. That’s the good life.
This is why the release of Apple Music was perfect for a guy like me. I had every song imaginable right in the palm of my hand (if I happened to be using my iPhone) or computer.
This all proved to be handy as my Apple Music account was connected via bluetooth — not my favorite method of listening to music, mind you — to my Amazon Echo. Sure, this was the ultimate clash of my favorite brands, but it worked well enough. I could ask Alexa, the Amazon Echo personal assistant, to turn down the volume if need be, but less easily had to change the songs from the connected Apple device. I’ll add too that, for the longest time, I wished Amazon had a catalog of music as in depth as Apple’s, not just the decent yet limited Prime selection. That way I could simply ask Alexa to play music with out the middle man (sorry, Apple).
Last week, my wish was finally granted.
Amazon Unlimited Music makes things easier.
With Amazon Music Unlimited, I can immediately snag a song and Amazon can take a piece of market share.
The Echo is one of Amazon’s biggest successes. Just like me, all three million Echo owners and users had found a makeshift way to stream music. Yet, with Amazon Music Unlimited, there is an easier way. For a really cheap price, you can tell Alexa to begin your subscription and follow that command up by asking the speaker to play any song you could ever imagine. No phone or computer necessary.
Needless to say, I have already subscribed, and bought an Echo Dot for our bedroom now too. And soon enough, I’ll buy another for my deck.
Could life get sweeter than that?
You’re not alone if you’ve been searching your TV guide looking for the baseball playoffs and becoming confused. The championship series for both the American League and National League are being played out far down your channel list on FS1.
FS1, short for Fox Sports 1, is Fox’s answer to ESPN and airing the championship series on it is Fox’s attempt to get more eyeballs on a channel that so far has been largely ignored by viewers.
I have news for you frustrated sports fans. You’re going to see more of this and Fox is right to do it.
FS1 taking advantage of ESPN’s weakening brand.
FS1, launched about three years ago, has mostly been known for lower-level college sports and some mixed martial arts. But recent moves, including signing some ex-ESPN staffers such as Skip Bayless, demonstrate that Fox is serious about making FS1 a true contender to ESPN. Right now, ESPN still dominates in the ratings but Fox is betting that viewers catching playoff baseball on its sports channel will funnel their viewing habits to the Fox channel. Promos for FS1 programming litter the baseball broadcasts to combat its single biggest problem: Lack of awareness.
We’re at this point because networks saw an opening with the slow defraying of the ESPN brand. The sports network, which began with humble beginnings in the late 70s, dominated the sports conversation so much over the last 20 years that many sports, especially college football and basketball, adjust their schedules to ESPN’s whim.
What ESPN should be doing.
But ESPN, while still leading in the ratings, has seen viewership drop for its flagship show, SportsCenter, and a weaker loyalty to its brand. It has suffered a talent drain (Bayless to FS1, Dan Patrick to NBC, Bill Simmons to HBO and his own media site, The Ringer) and fewer contracts with sports leagues. (Fox, for example, will air the college football playoffs in January.)
Few of us understand what ESPN stands for anymore. It once stood for being immersed in the world of sports. Without the monopoly on league contracts, however, it can’t hold that spot. Even the sports leagues themselves now have their own networks. (The MLB Network aired some of the earlier baseball playoff rounds.)
FS1 isn’t the only network punching a hole into ESPN’s balloon. NBCSports and CBS Sports Network are also on air. ABC, the owner of ESPN, has responded by cutting costs at ESPN.
Downsizing is almost always the signifier that a brand is losing ground. Instead, ESPN should be searching for what brand meaning would regain its preference.
The damage is done. So when you lament the baseball playoffs being on channel 400 (FS1 here in Greensboro), you’d better wise up and greet in the new era. It’s here to stay.