A famous Oatmeal cartoon showed the cartoonist making a good faith effort to buy Game of Thrones. He finds that the show is not available on iTunes, Netflix, Amazon, or Hulu. He tries to buy HBO Go, but it's only available as an add-on to a cable package. Finally, the cartoonist gives up trying to pay for the show and pirates it through Bit Torrent. This cartoon is probably the best ever expression of the "piracy is a customer service issue" thesis.
In a way, this doesn't make any sense for HBO, which makes its money off subscriptions and would ostensibly welcome an opportunity to sell subscriptions to another market segment. HBO claims that (a) people aren't interested in a la carte HBO Go and (b) the transaction costs are too high to do their own billing, etc. The technical term for these explanations is "bullshit." Cord cutters are a relatively small market segment but a fast growing one and I think it unlikely that cable subscriptions will fully rebound when the recession ends since the issue isn't just price but convenience. Moreover, I see no reason why HBO can't handle billing and other logistical issues when the Metropolitan Opera and the NFL, not to mention Netflix, don't seem to have any trouble running their own separately billed streaming video services. Of course there are transaction costs associated with billing, but it can't possibly be anywhere close to the cost of a basic cable package.
And here we get to the real issue. It's not that HBO would like to cut out the middleman and sell to us directly, rather requiring you to buy basic cable is the whole point. Cable is a total cash cow and a more flexible business model means lower revenues. The reason is that the incumbent business model of cable combines the features of bundling (basic cable) and a two-part tariff (premium cable channels) for a perfect storm of price discrimination. For much the same reason as Disneyland could only lose money if it sold a la carte tickets to Splash Mountain for $20 without requiring $80 park admission (which includes access to Main Street, Jungle Cruise, etc), cable companies would lose money if you could buy HBO Go for $20 without first buying basic cable (which includes access to ESPN, Mtv, etc). Basically, economic theory (and some reasonable assumptions about the structure of demand) suggests that an a la carte video market could not make as much money as a bundled video market.
So, that's why the cable companies don't want you to buy a la carte HBO Go, but why is that HBO's problem? Let's contrast it with the NFL. The NFL offers standalone access because the credible threat of a streaming business model gives them more leverage to negotiate with the MSOs. In contrast, HBO doesn't want leverage because most of its sister companies are part of the basic cable ecosystem. (They used to have an actual MSO as a sister company but they spun off Time Warner Cable in 2009). Time Warner makes a lot of money from HBO subscriptions, but it makes even more money from carriage fees on CNN, Cartoon Network, and most of the cable networks starting with the letter "T." Unlike HBO (which would do well under an a la carte model) most of these other channels rely more on channel-surfing audiences than cult followings and so couldn't sell subscriptions on their own and would have to settle for something like a Hulu Plus or Netflix business model, probably with less money per subscriber and far fewer subscribers than they currently get through basic cable. Basically, cord-cutting would help HBO but devastate the rest of the company. For what is a media conglomerate profited if it gain a few hundred thousand a la carte HBO Go subscriptions, and lose its carriage fees and ad revenue? What can a media conglomerate give in exchange for its Turner and WBTVG divisions?
Time Warner more or less acknowledges in their investor report that disruptive innovation could screw them: "Furthermore, advances in technology or changes in competitors' product and service offerings may require the Company to make additional research and development expenditures or offer products or services in a digital format without charge or at a lower price than offered in other formats." This is on the first page of the "risk factors" section of the report, whereas piracy doesn't come up until the third. This order is consistent with my own reading of the industry and with the history of the recorded music industry, the proximate problem of which is not piracy but digital singles.
So basically, we can call this the "HBO has to take one for the team" model. We can get a similar result with a slightly weaker model which doesn't require long-term corporate cross-subsidization but treats HBO as autonomous from the rest of Time Warner. In the short-term, HBO itself is highly dependent on cable companies. The target market for a la carte HBO Go would be households with broadband but no cable, or about 5% of all US households. This is dwarfed by the 20% of households that have cable but no broadband. Moreover, although 70% of households have both cable and broadband, most of them aren't familiar with streaming video through set-top devices. So as a rough ballpark, let's say that half of US households have cable but either lack broadband and or wouldn't know how to use it with a set-top device (even if they already own a Blu-Ray player or game console with built-in streaming support). This means that the number of households HBO could appeal to with a la carte HBO Go are one tenth as numerous as the households they rely on cable companies to reach. And HBO does rely on the cable companies to reach these households through marketing promotions and the like. If HBO figures that angering the cable companies could cost them even a small fraction of these households then they're better off alienating Matthew Inman and myself rather than angering Comcast. The same logic explains why Netflix is interested in creating a cable channel and recent rumors that Hulu will switch to the HBO Go business model.
Of course for the cable companies to punish HBO would require them to forgo their half of HBO subscription revenue. This sounds like cutting off your nose to spite your face but that's not unheard of, especially if doing so deters your face from pissing you off again by flirting with a disruptive business model. We see a similar dynamic with how theatrical exhibitors react whenever movie studios suggest closing the video release window from its current 17 weeks. (Ironically in this scenario it's the cable companies who are the innovators trying to disrupt the stodgy incumbents). For instance last year, Universal floated the idea of experimenting with tightening up the pay-per-view window for Tower Heist. The theaters were livid and threatened to boycott the test film. This despite the fact that the experiment was on ridiculously unappealing terms to the consumer: $60 to watch a mediocre film three weeks after theatrical premiere and that's only if you live in Atlanta or Portland. Ultimately Universal backed down, deciding it was better to keep their old trading partners happy than try to develop new ones.
(By the way, I'm sure you'll agree it's a total coincidence that Universal was bought by a cable company shortly before the Tower Heist incident. Similarly, a total coincidence that this same cable company has a history of playing hardball with internet companies that offer infrastructure for streaming video services that compete with cable TV).
All that is to say I can understand why HBO Go isn't available yet to cord cutters. Still, let's say that tomorrow HBO starts offering standalone HBO Go subscriptions (as I sincerely hope it does), how would I explain that? I could see this happening if HBO decides that the transition will happen eventually and it is better to do it while they can still do so favorably. We saw a similar dynamic ten years ago with the recorded music industry, which acceded to a low price point digital singles market as it saw its market share eroded by piracy, but only moderately so. In 2003, when the record labels agreed to participate in iTunes, unit sales were down about 15% from the pre-Napster peak, which wasn't fun but also wasn't catastrophic. Most people were still buying CDs when the record labels agreed to a legal digital singles market that would eventually destroy the CD market. They did so in order to transition consumers to a new model before most of us had fully committed to piracy. It's a lot easier to get someone to buy singles for $1 if they're used to buying CDs for $15 than if they're used to pirating singles for nothing. Similarly, as the number of cord-cutters increases this will be an increasingly attractive market for HBO, and not just because it can get these people as customers but because it can keep them from developing the habit of pirating content that isn't promptly made available through legitimate streaming markets. We may not be at that point yet, but I wouldn't be surprised if we reach it before HBO runs out of Fire and Ice novels to adapt.
In her new book No One Understands You and What To Do About It, Heidi Grant Halvorson tells readers a story about her friend, Tim. When Tim started a new job as a manager, one of his top priorities was communicating to his team that he valued each member’s input. So at team meetings, as each member spoke up about whatever project they were working on, Tim made sure he put on his “active-listening face” to signal that he cared about what each person was saying.
But after meeting with him a few times, Tim’s team got a very different message from the one he intended to send. “After a few weeks of meetings,” Halvorson explains, “one team member finally summoned up the courage to ask him the question that had been on everyone’s mind.” That question was: “Tim, are you angry with us right now?” When Tim explained that he wasn’t at all angry—that he was just putting on his “active-listening face”—his colleague gently explained that his active-listening face looked a lot like his angry face.
Where did it come from, and what are its intentions? The simplicity of these questions can be deceiving, and few Western leaders seem to know the answers. In December, The New York Times published confidential comments by Major General Michael K. Nagata, the Special Operations commander for the United States in the Middle East, admitting that he had hardly begun figuring out the Islamic State’s appeal. “We have not defeated the idea,” he said. “We do not even understand the idea.” In the past year, President Obama has referred to the Islamic State, variously, as “not Islamic” and as al-Qaeda’s “jayvee team,” statements that reflected confusion about the group, and may have contributed to significant strategic errors.
Leon Trotsky is not often invoked as a management guru, but a line frequently attributed to him would surely resonate with many business leaders today. “You may not be interested in war,” the Bolshevik revolutionary is said to have warned, “but war is interested in you.” War, or at least geopolitics, is figuring more and more prominently in the thinking and fortunes of large businesses.
Of course, multinational companies such as Shell and GE have long cultivated an expertise in geopolitics. But the intensity of concern over global instability is much higher now than in any recent period. In 2013, the private-equity colossus KKR named the retired general and CIA director David Petraeus as the chairman of its global institute, which informs the firm’s investment decisions. Earlier this year, Sir John Sawers, the former head of MI6, Britain’s CIA, became the chairman of Macro Advisory Partners, a firm that advises businesses and governments on geopolitics. Both appointments are high-profile examples of a much wider trend: an increasing number of corporations are hiring political scientists, starting their board meetings with geopolitical briefings, and seeking the advice of former diplomats, spymasters, and military leaders.“The last three years have definitely been a wake-up call for business on geopolitics,” Dominic Barton, the managing director of McKinsey, told me. “I’ve not seen anything like it. Since the Second World War, I don’t think you’ve seen such volatility.” Most businesses haven’t pulled back meaningfully from globalized operation, Barton said. “But they are thinking, Gosh, what’s next?”
The editors of Smithsonian magazine have announced the winners of their 12th annual photo contest, selected from more than 26,500 entries. The winning photographs from from the competition's six categories are published below: The Natural World, Travel, People, Americana, Altered Images and Mobile. Also, a few finalists have been included as well. Captions were written by the photographers. Be sure to visit the contest page at Smithsonian.com to see all the winners and finalists.
When healthcare is at its best, hospitals are four-star hotels, and nurses, personal butlers at the ready—at least, that’s how many hospitals seem to interpret a government mandate.
When Department of Health and Human Services administrators decided to base 30 percent of hospitals’ Medicare reimbursement on patient satisfaction survey scores, they likely figured that transparency and accountability would improve healthcare. The Centers for Medicare and Medicaid Services (CMS) officials wrote, rather reasonably, “Delivery of high-quality, patient-centered care requires us to carefully consider the patient’s experience in the hospital inpatient setting.” They probably had no idea that their methods could end up indirectly harming patients.
This month, many of the nation's best and brightest high school seniors will receive thick envelopes in the mail announcing their admission to the college of their dreams. According to a 2011 survey, about 60 percent of them will go to their first-choice schools. For many of them, going away to college will be like crossing the Rubicon. They will leave their families -- their homes -- and probably not return for many years, if at all.
That was journalist Rod Dreher's path. Dreher grew up in the small southern community of Starhill, Louisiana, 35 miles northwest of Baton Rouge. His family goes back five generations there. His father was a part-time farmer and sanitarian; his mother drove a school bus. His younger sister Ruthie loved hunting and fishing, even as a little girl.
One of the most shocking parts of watching Kurt Cobain: Montage of Heck is finding out that the god of grunge was once a really cute kid. Director Brett Morgen peppers his documentary with Super 8 clips in which the future Nirvana singer can be seen as an infant, toddler, and grade-schooler, blowing out birthday candles, carrying around a stuffed panda, and sending kisses to the camera. Towheaded and cheery-eyed, wearing tiny suit jackets and cardigans, lil Cobain could have been in a Normal Rockwell painting. That he was the iconic all-America boy helps explain his later rebellion, making him an avatar for how traditional domestic life begat counterculture, and …
... oh, wait. I’m mythologizing, aren’t I? Assuming causes and effects that can’t ever be known, turning a human being into an abstraction:Montage of Heck, in some theaters now and airing on HBO on May 4, was created specifically to ward against this sort of thing. In 2007, Courtney Love gave Morgen access to a trove of previously unexamined recordings, notes, and artwork relating to her late husband, with one bit of instruction that would take the director eight years to carry out. “It was time to examine this person and humanize him and decanonize these values that he allegedly stood for—the lack of ambition and these ridiculous myths that had been built up around him,” Love told The New York Times.
The Dr. Oz Show provides critics with ample material: séances, energy healing, miracle diet products. Once a media darling, Oz has been subjected to a steady stream of public humiliations, from his shaming in front of a Senate subcommittee to an April 15 letter that a group of doctors wrote to Columbia University, urging his dismissal from the faculty, accusing him of promoting “quack treatments and cures in the interest of personal financial gain”—to which Dr. Oz responded with an ad hominem attack on the letter-writers and a defense of free speech. But despite numerous subsequent think pieces about the man behind the curtain, a crucial question stands out: Why call for Dr. Oz’s dismissal, when many medical schools and hospitals endorse the most outlandish of his claims?
“I think it’s just gonna be us.” The voice came from one of the grizzled sports reporters gathered in a nearly empty Manhattan hotel ballroom on a cold Friday evening in February. There was the reporter from NBA.com, the house organ of the National Basketball Association; there was the travel/sports/entertainment writer for the Queens Chronicle; and there was a guy who had a lot to say about the New Jersey Devils.
We were there, the four of us, for a mid-season press conference organized by the National Basketball Players Association to coincide with the league’s All-Star festivities. Professional sports unions, dedicated as they are to the cause of helping millionaire athletes make more money, have never been popular, but the nearly empty ballroom felt especially grim relative to the weekend’s other attractions. The All-Star Celebrity Game—pitting the 5-foot-4-inch comedian Kevin Hart against, among others, Mo’ne Davis, the 13-year-old girl who starred in last year’s Little League World Series—would tip off at Madison Square Garden later that night. That, at least, had news potential.
Somehow after enough yoga, sitting perfectly erect and also appearing at ease become no longer mutually exclusive. That’s how instructors Elizabeth Glover and Lara Atella sat in the foyer of their studio on H Street in Washington, D.C. this week, where they explained to me the draw of very hot yoga, as a group of soaking wet, barely clad people poured out of their 105-degree Fahrenheit noon Bikram class. Posture is contagious, like yawning or hepatitis, but with your spine. I tried to nonchalantly pull my shoulders back and stick out my chest as we talked.
If these two yoga instructors seemed especially erect and at ease, it may be because the yoga they practice is an especially intense and especially hot form of yoga. Actually, the neon sign on the brick facade still says “Bikram Yoga Capitol Hill,” but the studio is now called Hot Yoga Capitol Hill. Glover, the founder and director, declines to comment on whether the name change is a position statement—but it’s at least coincidental that, in the wake of multiple recent rape allegations against the guru who created the Bikram yoga method, Bikram Choudhury, some studios are distancing themselves from his name.