It’s basically a toy company for grown-ups.
Revenue was light. In general, weaker than everyone expected on the top line and guidance was similarly weaker than what everyone was expecting on the top line.
Want to know how a stock like AAPL goes from $705 to $485 in three months for no real reason? Here’s the truth about how the market works.
The Weekly: NBC’s Olympics Coverage Best Ever. No, Really.
This is the third in The Weekly, a series to be posted every Wednesday or so. Each will be a long-form, original piece that dives deeply into one topic. Each piece may be related to business, technology, gaming, design, entrepreneurship, economics, politics or any manner of other topics. The idea is to shed some light on something that at least a few people will find interesting. I hope that you’re one of them.
The world came together in London for a few glorious weeks of sporting achievement this summer. Literally billions of people the world over watched and cheered on both their home nation’s best and global stars like Usain Bolt who transcend mere nationality with their excellence. All of this glory and…Americans were left outraged.
The National Broadcasting Corporation paid $2.2 billion to secure the exclusive broadcast rights for the 2010 Winter Olympics and 2012 Summer Olympics in the United States. Last year, NBC signed a blockbuster extension worth $4.38 billion, securing the rights to each Olympiad through 2020. So, while we may not yet know where the 2018 or 2020 Olympics will even be held, we know that a small peacock will be sitting in one of the screen’s corners for the duration.
Delayed coverage has been a hallmark of Olympic television since their beginning. Even the Atlanta and Salt Lake games, taking place within the US and therefore not subject to time zone inconveniences, often were delayed to maximize viewership – and therefore advertising revenue – during primetime. Whereas Beijing was 12 hours ahead of the US east coast, placing the games literally half a world away in 2008, London is a mere five hours ahead. Games that started as late as 10PM in London could be comfortably viewed at 5PM on the east coast, or over a late lunch in Los Angeles, with a wide swath of spectacle pleasantly taking place from when Americans woke up in the morning until they were ready to settle down for the night.
Some grousing could be heard during the 2008 and even 2004 games regarding delayed viewing, but neither Olympiad came close to creating the same firestorm of discontent seen with coverage of the 2012 games. Of course, NBC did nothing to help themselves, often spoiling results with a promo advertising an interview with a gold medal winner the next morning before the event had even been televised.
NBC also made tremendously bone-headed decisions in its editing of the opening and closing ceremonies of the games. In its coverage of the opening ceremonies, NBC inexplicably cut out a tribute to the victims of the 7/7 Underground bombings that took place just a few weeks after London was first awarded these games. Far from an incident known only to the British public, the 7/7 bombings captured global sympathy and were the last successful attack by Al Qaeda on Western soil. NBC chose to show an interview of Michael Phelps by Ryan Seacrest instead.
In the closing ceremonies, NBC cut out performances by The Who, George Michael and other British artists with global appeal in favor of cutting to the pilot episode of a new comedy certain to be cancelled by Thanksgiving. That it did so at 10:58PM ET allowed NBC to count the show as primetime viewing, declare it a success, misrepresent the show’s popularity to viewers and gouge advertisers when it airs in its regularly scheduled time-slot.
Though these were poor, slimy decisions, they’re the type that would have slipped by largely unnoticed outside of the sports and entertainment press in previous years. What led viewers to display such anger this year if NBC was simply up to its old tricks? Importantly, market penetration of high-definition, digital cable/satellite and high-speed internet was not as widespread as today. This says nothing of mobile penetration: in 2008, the luckiest among us were toying around with an iPhone 3G, and the word “tablet” still mostly applied to the stones Moses carried down from the mountaintop. Our rate of technological advancement in the mobile sphere has been nothing short of amazing in the past four years. Because we now enjoy greatly expanded capabilities, we demand greatly expanded access.
These are what “tablets” looked like in 2008.
Also explaining why NBC didn’t raise much ire in 2004 and 2008: the same, tech-savvy, mostly-affluent viewers likely to raise hell about coverage in 2012 benefited from tremendously increased cable coverage in both years as compared to previous Olympiads. NBC flexed its cable coverage muscle in 2004, expanding from CNBC and MSNBC to also feature events on USA, Bravo and Telemundo, in addition to airing portions of the games in high definition for the first time.
In 2008, Universal HD and Oxygen joined the list of NBC outlets providing coverage, and the network offered two exclusive HD channels dedicated to basketball and soccer on most digital TV platforms. Many local affiliates dedicated a second digital over-the-air channel to 24 hour coverage, and NBColympics.com offered limited live streaming video online for me first time.
Indeed, the growth in total Olympics coverage airtime for recent games is astounding. The 1964 Olympics in Tokyo garnered a mere 45 minutes per day of coverage, totaling 12 hours for the entire Olympiad. The 1980 Games in Moscow, boycotted by the United States, was worthy of a mere six hours of highlights domestically for the entire event. The 1996 games in Atlanta set a new record for widely available coverage at 171 hours. This number began to grow exponentially in 2000 as cable coverage became an increasingly viable mainstream proposition, ballooning to more than 440 hours of coverage. In 2004, coverage nearly tripled again to 1,210 hours of coverage, which in turn was blown away by 3,600 hours of Beijing coverage, despite the disadvantageous time gap. In 2012, NBC truly outdid itself with an unbelievable 5,535 total hours of coverage.
Coverage of the Olympic Games in 2012 was more complete than for any previous Olympics in history.
NBC’s online coverage is what allowed the network to claim such tremendous gains in coverage for the past two summer games. Indeed, in 2012, NBC achieved a Holy Grail of sorts in its coverage: for the first time ever, every single event was available to view live on NBColympics.com, as well as on new mobile apps created for iPhone, iPad and select Android devices. It’s easy to see how, with such advances, NBC would adopt the derisive attitude they initially showed toward complaints about coverage availability: the 2012 Games were the most accessible of all time to American viewers.
What’s a shame is that, horrible editing choices aside, NBC really did do a tremendous job making coverage available, but a combination of fundamental misconceptions and conflicting incentives led to a few poor choices that sullied all this hard work.
First, ignoring some understandable tech issues over the first few days that would sometimes result in jumpy video streams, every event was available to stream live online. To do so required a cable subscription with both MSNBC and CNBC in the channel lineup. Some may scream about this, but I don’t take issue with requiring a TV subscription to watch: a subscription indicates you’ve already paid NBC for coverage by two of their longest standing cable properties and also helps to somewhat limit the strain that such an ambitious offering would place on even the most robust network architecture.
If viewers missed the live stream, though, it was impossible to replay events that occurred previously until after they had aired during primetime. This limitation was purely arbitrary, a transparent attempt to goose ratings.
Commercials would often break into streaming coverage at random intervals while action was taking place, rather than at triggered intervals where interruptions were less noticeable.
Events often lacked even a rudimentary commentator, although when compared to the overly-talkative network coverage, perhaps this was a feature.
The site required the use of Adobe’s increasingly irrelevant Flash Player to work, hogging computer resources unnecessarily given coverage was streaming through YouTube, and therefore capable of being rendered without Flash.
The iPad application required viewers to either always have an annoying banner ad on screen or zoom in to full screen mode such that they might miss important elements happening near the edges.
The most damning weakness in NBC’s online coverage, though, was how hard it was for viewers to simply watch an event on their television. Millions of viewers sat on the couch with a laptop or iPad in their lap while a TV many times larger sat powered off in front of them. I eventually devised a method using two custom plugins, a MacBook Pro, a virtualized copy of Windows, an Apple TV, a paperclip, some duct tape and a turn of the century gramophone that allowed me to stream coverage from my laptop to my television. Yet none of this should have been necessary: a brilliant feature called AirPlay, built into iPads and iPhones and iPod Touches around the world, allows users to send their screen view to their television with one tap. This feature was disabled in NBC’s apps.
NBC could have further expanded the reach of its coverage by releasing viewing applications for game consoles like Xbox 360 or PlayStation 3. Due to the network’s historical ties to Microsoft, and Microsoft’s constant pursuit of ways to set its console apart from the competition, I suspect Microsoft would have gleefully designed such an application itself at no cost to NBC for Xbox Live Gold members, complete with advertising and a licensing payment to NBC as added incentive.
The problem is, all of these coverage options remain either loss leaders, break even propositions or small money-makers for a for-profit company that committed billions of dollars to simply purchase the right to cover the games, much less actually commit the technical wherewithal and human resources necessary to do so. NBC’s bottom line is still dictated by its advertising revenue, which is dictated by the results of a few thousand viewers with Nielson boxes attached to their televisions.
Although NBC was successful in finding premiere sponsors for its online coverage, such as Citi and Gillette, surely the amount each company paid for their promotional spots was a fraction of what a substantial ad buy in primetime would have cost. Each viewer taking advantage of an alternative viewing option like NBC’s apps or website is one less viewer for the network’s traditionally measured viewing population. The sad irony of the current system is that it’s likely that the more ways NBC makes its coverage available to viewers, the less advertising money they’ll actually bring in.
Though NBC’s coverage suffered from a few critical, avoidable flaws, the network was successful in one regard: it was easier to watch its official coverage than it was to pirate it. The same can’t be said for HBO’s Hard Knocks or BBC’s Top Gear, two notable examples of time sensitive shows that are hard to watch legally in the US. HBO’s case is particularly inexcusable. The paid-subscriber network has no advertisers, and is therefore not beholden to Nielson ratings the way a network like NBC can be. HBO offers the exceptional HBO GO service, in website and mobile app form, along with console-based viewing options.
Every HBO show is available literally the minute it finishes airing on TV- and often beforehand- through HBO GO. Every show, that is, except Hard Knocks, which HBO claims is unavailable due to their licensing terms with the NFL. HBO says that Hard Knocks is available to view using digital cable’s On Demand feature, but this is unavailable to Comcast customers for reasons unknown. As such, viewers that miss the original airing of Hard Knocks can either miss the episode entirely, despite being paying customers, or choose to freely stream an episode through an illicit YouTube upload or download a high definition copy to keep in about 20 minutes from a torrent service. Both options actively dis-incentivize viewers to maintain an HBO subscription once they figure out having one didn’t help them in the first place.
HBO series Hard Knocks isn’t available on HBO Go due to licensing issues, even though nearly every other HBO series can be watched online or on mobile devices. Policies like these only serve to foster piracy.
Top Gear is a less clear-cut case. The show, which airs on the BBC, is wildly popular worldwide, yet the BBC itself is restrained from offering ambitious viewing options outside the UK by the broadcaster’s government charter, which declares the BBC must act in the interests of British citizens who pay an annual tax for the service. Even so, BBC operates BBC America, a digital cable channel available widely in the US, but waits weeks before airing new Top Gear episodes domestically. Due to the show’s popularity, high-definition downloads are often available from thousands of sources within minutes of the show’s completion on BBC airwaves. Although a stream is made legally available by the BBC to British residents, it is unavailable for those living off the Isle.
In each case, these content providers have taken positive steps in making their programming more accessible, but have implemented arbitrary hindrances meant to shore up their traditional business models while bending to the demands of their viewers. These obstacles only serve to infuriate viewers, though, as it is plain to see that the challenges aren’t technical in nature: the networks are capable of serving up content the way viewers wish; they’re simply choosing not to do so.
I believe that networks largely know that the old way of business is heading for the dustbin, but because they haven’t devised an equally profitable business model for anytime, total access, they feel forced to build these barriers as a stopgap. They must work quickly, however, if they don’t want to lose their grip the way record companies have in the music industry.
Four years from now, live, pirated, streaming coverage will be just as accessible and at least as high quality as the streams NBC presented this year. These streams will come through distributed IP services, so defeating them won’t be as easy as obtaining a copyright takedown for a single website. They will be essentially invincible to legal processes and readily available to interested viewers.
The clock is ticking: networks must either find a different metric for their viewership, and a better way to get paid, or lose their grip entirely.
Can Apple Top Microsoft as Most Valuable Tech Firm?
It would take impressive execution for any company to unseat Microsoft at the top of the technology heap. But Apple [AAPL 201.46 7.12 (+3.66%) ], flush with cash and fat margins, has catalysts in the iPhone, the Mac PC and a highly anticipated but unconfirmed tablet device expected to launch next year, analysts and investors say.
The answer is yes. But not until late next year, once the Tablet has established itself as a success and Windows 7’s corporate adoption continues to lag behind.