(TV) Media: Pity The Conglomerate - Why Viacom's Future Looks Uncertain

If strategy is the long term direction of an organization, Viacom up to this point hasn't had one as it finds itself on the wrong side of one of the biggest shift in the balance of power between networks and pay TV distributors. 

Viacom, a media conglomerate, have made money for decades leveraging their popular networks such as MTV and Comedy Central to force pay TV operators such as Comcast to take less popular channels into their bundles giving pay TV operators no choice but to cough up large retransmission fees  for all  of Viacom's networks just to get the networks their subscribers actually want to watch. 

However, the last five years have seen a grand reversal of this business model as pay TV customers had gotten sick of paying increasing TV bills for channels they don't watch and have opted to explore cheaper, non-linear, and content rich digital options such as Netflix and Hulu. 

Worst still, a segment of the market called "cord nevers" have opted for digital options such as Netflix and Hulu before even considering a cable or satellite TV package which represents their future market of subscribers. This reverse is having a real effect on Viacom on virtually every front as consumers are moving away from the traditional linear TV model offered by networks which explains why Viacom's prized linear networks are experiencing a significant decline in ratings. 

This decline is a big problem for Viacom as it affects the company's two most lucrative sources of income, TV and advertising. Because of this decline in their prized network's ratings, Viacom now have less leverage over pay TV operators who are also feeling the violent shift in consumer preferance and are under serious pressure to meet the demand from consumers to offer smaller bundles or provide an a la carte model where consumers get to choose what channels they pay for. 

This is bad news for Viacom as smaller bundles give pay TV operators leverage to negotiate lower retransmission fees or even opt not to include Viacom's networks in their bundles altogether.

The biggest sign of the reverse is Viacom's negotiations with satellite TV provider Dish Network. While Viacom and Dish have always had a good business relationship and Dish's CEO Charlie Ergen has expressed that he wants to keep Viacom's networks in Dish's pay TV offering, Ergen has pointed out the fragility of Viacom's networks and his intention to insist any deal the two parties hammer out should reflect the decline in Viacom's network value as Ergen said "programmers come in for a renewal and say they want a double digit increase, and we say you should get a double digit decline"1.

Ergen also pointed to the increasing availability of Viacom's network content on a number of online services for cheaper than it is on Dish as another reason why Dish are taking a more muscular stance against rising transmission rates as Ergen insists that his customers "shouldn't have to pay twice" for the same content2. 

However the most revealing reason why Dish are digging their heels in negotiations with programmers like Viacom is because satellite TV, according to Ergen, is a “mature to declining business,” which means that Dish aren't willing to invest as much they would of in the past on content3.  

Dish are feeling the power shift just as bad as Viacom is as unlike cable TV operators like Comcast, Dish don't have a broadband business to fall back on as their pay TV offering continues to decline. However, unlike Viacom, Dish has Sling TV, an OTT service that offers a slimmed down TV bundle online which might possibly be why Viacom's negotiations with Dish are so contentious as Dish are likely to offer low transmission fees for Viacom's network content for Sling TV which explains why Viacom are so reluctant to enter online "skinny bundles". 

Dish would be well within their rights to offer significantly lower fees for Viacom content as there are no slimmed down bundles available online in Sling TV's position which means Viacom may have no choice but to take what Dish gives them as SVOD services want Viacom's content rather than Viacom's networks . There's even a possibility that Dish won't offer Viacom given their content is distributed by Sling TV's OTT competitors such as Netflix. 

In any case, should Dish offer lower satellite and/or OTT transmission fees, it's bad news for Viacom either way. 

The news that keeps Viacom executives up at night is the decline in their networks rating means for their advertising business as lower ratings mean lower ad revenue which is why Viacom stock takes a hit every quarter their ad rev dips. Last month, Viacom saw a 15% drop in its stock after it reported less than encouraging earnings results with their U.S. ad revenue dropping 4% as Viacom cited decline in viewership of their networks as the cause for the dip 4. It's international advertising operation didn't escape the decline with Viacom's international operation experiencing a 2% drop 5. 

However, what really should keep Viacom executives up at night is how the company has exhibited a serious lack of strategy that has defined the company for a decade. Viacom should have at least invested in or started their own VOD service at least five years back given just how dependent the company is on traditional TV and advertising revenue to hedge their bets but instead the company has spent a whopping 21 billion on share buybacks since 2006 which speaks to just how blind the company has been to trends in their own market.  

Much of the blame has been rightly placed at Viacom CEO Phillippe Dauman's feet who has focused on increasing shareholder value which worked for a while but not of late given Viacom's stock has dropped an eye-watering 44.13% since last March 6. This steep decline in Viacom's price is responsible for the company losing billions as Bloomberg reported last year that the company lost $3.8 billion thanks to dauman's buyback scheme going south 7. While it is part of Dauman's role to provide value to Viacom shareholders, it's also Dauman's job to invest and grow the Viacom which hasn't happened much under his reign and the company is in a poor position to compete in the marketplace because of it.

In sum, Viacom have no one to blame but themselves for their current predicament as their lack of strategy or any semblance of long term thinking has left the company vulnerable just exactly at a time when it shouldn't be. 

Notes

1 D. Lieberman, 2016, Dish Network CEO Hints at Hard Line in Viacom Renewal Talks, Calls Extension a "Positive",   http://deadline.com/2016/02/dish-network-charlie-ergen-1201704999 

2 Ibid

3 Ibid

4W. Friedman, 2016, Viacom's ad rev dip; slower SVOD results, http://www.mediapost.com/publications/article/268625/viacoms-ad-revs-dip-slower-svod-results.html

5 Ibid

6Google Finance, 2016, Viacom, Inc. (NASDAQ: VIAB), https://www.google.co.uk/finance?q=NASDAQ%3AVIAB&ei=UEbkVrnvNpOUUr_bsKAJ

7 C. Palmeri and L.Shaw, 2015, Viacom CEO Dauman loses 3.4 billion betting on his own company, http://www.bloomberg.com/news/articles/2015-08-11/viacom-ceo-dauman-loses-3-4-billion-betting-on-his-own-company 

(the big disrupt) IT Security: Why do so many organizations still suck at data security?

It has become axiomatic to say that no organization is the same as the other but when it comes to data security, the differences between organizations are few and far between to say the least. 

Back in late 2014, we wrote an article appropriately titled "why so many companies suck at data security" in response to the Sony hack debacle and pointed to number of factors as to why data security was so bad and costly data breaches were on the up and, unfortunately, we can still write the same article with a few updates as not much has changed except the widespread acknowledgement in both public and private sector organizations that data security must become a top priority. 

This acknowledgement of the importance of data security has partly been fuelled by the post Snowden fallout resulting in consumers taking the badly attributed "the price of liberty is eternal vigilance" quote to heart and the endless horror stories of governments and corporations suffering humiliating and costly data breaches which has seen a strong rise in demand for secure product and services. 

Increased demand for secured products and services has had a severe knock on effect on organizations who have astronomically increased their security budgets and created new roles such as CISO's and CSO's and given them the responsibility to keep their data secure.   

However, what we've seen is that CISO's and CSO's have become targets when organizations look for someone to blame for breaches which accounts for why the role has an abnormally high turnover. While it can argued that CISO's and CSO's should be held responsible because they have ultimate responsibility regarding security matters, this mindset almost guarantees that companies will be no more safe from breaches as constant change indicates to attackers as well as potential replacements that their security posture is vulnerable to attack and that they won't be given much time to fix problems. 

In this environment, breaches are bound to occur and even proliferate as organizations collect and store more data. This causes headaches for CISO's and CSO's as the sheer volume of data they're asked to secure expands almost in lockstep with the proliferation of technologies such as the internet of things (IoT) . CISO's and CSO's are already feeling the pressure of securing an ever growing IT infrastructure and with many organizations adopting or planning to adopt the IoT, the pressure on CISO's and CSO's to secure notoriously vulnerable IoT networks as well as the vast reams of data they'll collect is going to be ludicrously high. 

In sum, after years of outright underinvestment and costly failure to take data security seriously, organizations across the board have must come to terms with the fact the IT security is irreducibly complex and with the future growth of connected devices, the irreducible complexity poses a challenge that CISO's and CSO's at the time of writing are not in any sense prepared to tackle with an adequate degree of competency which almost guarantees the headline grabbing data breaches that haunt organizations continue. 

(The Big Disrupt) Self-Driving Cars: Why It's Going To Take a While to Get Your First Ride in a Self-Driving Car

With the news of Google's self driving prototype being involved in a crash with a bus in Mountain View, California, the long awaited advent of self-driving cars is going to take even longer to take shape. According to The Guardian, The crash happened two weeks ago but the accident report was released to the press by the California branch of the DMV on Monday. 

The crash was caused by both the prototype and its human passenger's (who could also take over the vehicle) misjudgement about the buses's intention as both thought the public transport bus behind them would yield and give way was they were in front of the bus but the bus didn't yield which lead to a crash as both vehicles pulled into the main road at different speeds. 

While no one was injured in the crash and both prototype and the human passenger came to the same error in judgement, Google's recent prototype crash is a blow for the efficacy of the self driving car  as the central argument made in favour for self driving cars is that they're safer than humans at the wheel. Because proponents of the technology have chosen the safety argument to convince people to buy into self-driving cars, there's heavy burden of proof placed upon the self-driving cars to convince regulators, critics, and consumers that it's safe which almost guarantees that the wait to take a ride in a driverless car is going to be longer than anticipated. 

While it's true that Google's self driving car recent crash is its first real accident, Google's prototype latest accident has buffered arguments that Google prototype may be too safe for roads peppered with human drivers which can make the technology dangerous on the road.  

The timing of the recent crash couldn't have been worse as a poll carried out by the AAA revealed that an incredible 75% of drivers were wary of taking a ride in a driverless car. The poll also revealed that drivers have an abnormally high faith in their driving skills compared to their sensor aided counterparts as 85% of drivers were of the opinion that "they have better driving skills than self-driving cars". The poll demonstrated the heavy burden of proof self driving cars are under and how companies like Google are failing to meet it  as 60% of drivers "believe the technology is just too new and hasn’t been proven to work". 

Other polls seem to support the findings revealed by AAA's poll as a poll carried out by Morning Consult last month revealed  why people are concerned about taking a ride in a driverless car as a staggering 76% were concerned about driverless cars sharing roads with human drivers, 65% were wary of the security of their personal data and an incredible 80% were concerned about the road safety and glitches in driverless cars.  

What these polls show us is that Google and every other car manufacturer invested in have their work cut out convincing the public that driverless cars are safe and looking those polls as well as numerous others, the wait for your first ride in a self driverless car is surely going to longer than expected.  

  

(The Big Disrupt) IT: The Double Edged Sword That IS Being A CISO

In an age where IBM CEO Virginia Rometty well-worn phrase that data is the natural resource of the 21^st century is looking less and less presumptuous, companies across the aboard are investing an awful lot of money securing their data and their IT infrastructure from attacks which should be good news for CISO’s who are solely in charge securing both as the role has risen to prominence in light of large data breaches however, this puts a lot of pressure on CISO’s to get things right when the odds are firmly stacked against them.

Sure you might think CISO armed with growing budgets, years of experience dealing with cyber-attacks and threats, a rash of tools offered by security vendors, and a strong team behind them would put in a great position to stave off the threat of hackers but CISO’s, despite all these advantages are still at a disadvantage as they face an enemy that outnumber them and are often as good or better at breaching security systems as CISO’s are at protecting them. While attackers can get caught and prosecuted, the cost barrier to entry is almost insultingly low given how much companies have to spend to deal with a data breach. To give you an idea, TalkTalk’s data breach in October will likely cost the company 30- 35 million while the attackers would be breaking the bank if their efforts broke into the thousands[1].

A good chunk of that 30 million will likely go to their CISO’s budget as the company stated that they will give their CISO “carte blanche over security investments” which was likely to happen anyway given the company’s managing director Charles Bligh revealed that they were discussing spending more on security before the breach happened [2]. TalkTalk’s renewed commitment to security may reveal the company intention to avoid being breached again but this new focus in various organizations across many fields is leading to a strange occurrence of CISO’s budgets increasing despite companies experiencing breaches.

While security is obviously going to become a top priority for organizations after experiencing a breach, it’s highly unlikely a costly failure in any other role in the C-suite would be rewarded with an increased budget. You don’t have to be rocket scientist to find out what would happen if a CMO burned a 30 million hole in his budget on a marketing campaign that failed horribly or a CEO presided over sustained period of no or low growth as both would be out of a job before long. However, Unlike CEO’s or CMO’s, a CISO’s job is largely about planning for worst as opposed for the best working to stop multiple threats which means they negotiate a higher degree of risk of failure.

The high risk of failure seems to be growing by the month as CISO’s experience their responsibilities expand at a rapid rate with organizations embracing new technologies such as wearables, mobile, and the internet of things which CISO’s have to secure. This should prove good news for CISO’s as more responsibility means greater stature in the organization but they also have contend with a notable increase in cyber-attacks and  a much talked about lack of talent in the cybersecurity field which makes covering their growing remit that much harder.

In sum, like a number in the C-suite, CISO’s find themselves subject to a growing budget, greater responsibility and yet overwhelmed by their role but whatever happens, expect CISO’s to be prepared for it.

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[1] N. Wood, 2015, Talk Talk CISO given carte blanche over security investments, http://www.totaltele.com/view.aspx?ID=492027

[2] Ibid