Opinion and analysis of the day’s music news.
Changes In Consumer Behavior
— Comcast’s latest earnings provide a few telling examples of the changes in how consumers are consuming entertainment. The company lost 265,000 video customers in the third quarter, a drop of 3.5%. Forty-two percent of lost video subscribers were basic cable customers. High speed Internet subscriber, however, rose 6.5%. Those subscribers who stuck around spent more on cable and Internet services. Average monthly revenue per subscriber rose 10% to $129.70. Total revenue in the quarter rose 7% to $9.5 billion. Year-to-date revenue is up nearly 6%.
The company’s acquisition of Paciolan (a deal that helped win regulatory approval of the Live Nation-Ticketmaster merger) helped Comcast’s “corporate and other revenue” increase 50% to $92 million in the third quarter.
Comcast executives aren’t too worried about the drop in video customers. During the Q&A portion of Wednesday’s earnings call, president Neil Smit said unoccupied housing and unemployment were factors behind the drop. In addition, he said, Comcast has seen that disconnecting customers are opting for over-the-air broadcasts over migration to competitors.
Netflix was a big topic during the earnings call. Comcast continued to portray Netflix as a complimentary rather than replacement service – Netflix executives routinely offer the same characterization. Comcast is seeing more video-on-demand usage and believes it is well positioned for a market with an increasingly strong Netflix, said CEO Brian Roberts. “[W]e think we are seeing an expansion on usage as you can use more devices. So, our on-demand usage continues to be quite large and growing and we are adding content agreed and are a great user interface…We also have better and newer boxes coming out and we have new guides to replace old guides. So there is an awful lot happening but I think with a new series of devices that allow people to consume more.” (Earnings release)
NPD: Four Factors Behind 2010 Holiday Sales Forecast
— NPD Group forecasts weak holiday sales for electronics retailers. The consumer research firm expects a 1-3% drop in sales this holiday season.
There are four factors behind NPD’s gray outlook. The first is prices, which are flat and in some cases have risen since last year. Consumers are trained to expect big price drops each year, flat prices or small price declines are not expected to motivate purchasing. Second, NPD sees no “killer hardware innovation” to motivate consumers to replace and upgrade. Third, says NPD, “nothing grows forever.” Flat-screen TV and notebook purchases were up big in 2009. The shortage of growth opportunity in those two areas makes overall growth in electronics growth “nearly impossible to achieve.”
Lastly, NPD has found that consumers who previously planned on merely cutting back on electronics purchases are now not planning to buy anything at all. “Technology had always been the special purchase, the splurge if you will,” explains NPD. “Today, with most technology approaching good enough status, even though technology is a more integral part of the consumers’ life it is paradoxically easier to postpone that new computer or camera purchase in favor of something else.”(NPD Blog, BizReport)
Verizon and AT&T Begin Selling iPad
— Apple’s iPad may be the exception to a weak holiday season for electronics. Verizon and AT&T began selling the device on Wednesday at their brick-and-mortar retail stores. Both companies are selling the different iPad models at their regular prices. Verizon is charging for data plans ranging from $20 a month for 20GB to $50 a month for 5GB. AT&T offers $15 for 250MB and $25 for 2GB. (Apple Insider)
Spotify Rumor of the Day
— The Spotify rumor of the day comes from CNET. The long awaited music service “has never been closer to finalizing deals” for a U.S. launch, reports Greg Sandoval citing multiple sources with knowledge of the discussions. This makes sense. Unless the negotiations are moving backwards, they are going to move forward. Thus, each day a deal gets closer to being done.
Sandoval also mentions large advances being dangled in front of labels to get them on board. MediaMemo quotes a source that says “tens of millions” are being offered to get the deal done. Even so, MediaMemo paints the very believable picture that Spotify’s insistence upon a free, ad-supported version is a continued sticking point in negotiations. (CNET, MediaMemo)
