Control content, control data, control the world – the AT&T buyout of Time Warner

AT&T’s takeover of Time Warner makes strategic sense for the shareholders of AT&T. The only surprise is that early rumours of Apple buying over Time Warner did not come to pass.

AT&T are primarily a telecommunications company. They already control the data flows and analytics and understand all the little things that make people/customers tick. However, what they’ve not had is the content that their customers require and monetise the flow of content to the people who need it most.

Through the acquisition of Time Warner, it reduces AT&T’s transaction cost of providing the content to customers which is supported by superior data.

It’s akin to an infrastructure company laying pipes to bring water to households actually now providing the water along with the pipes they already have rather than have a separate company providing the water.

Why content matters

You have data on the information and content your customers require. However, you cannot act on the data yourself if you do not control the development of the content and intellectual property (IP). You can either try and create the content on your own or simply buy the largest available content provider available for sale.

This is what AT&T have done and it allows them to suddenly use the data and deliver even larger profitability to their shareholders by giving their customers the data they seek.

HBO (think Game of Thrones, Curb Your Enthusiasm, The Sopranos, etc), CNN, DC Comics (Superman, Batman, and the new UN ambassador, Wonder Woman), Hulu (Netflix’s rivals) are all now going to be under AT&T’s control.

This will allow them to control the entire spectrum of services they provide to customers and create an ecosystem (of both infrastructure and content) that may be difficult or unfeasible to leave for any customer.

Big data just gotten bigger

You know HOW your customers access information. You now know WHAT information your customers seek. Bring the two together and you create superior propositions for customers which rivals are unable to match.

The advertising potential also has now grown exponentially as AT&T monetise the data analytics and provide superior insight to advertisers.

Bringing the fight to the competition

The moment Google and Facebook moved from being search engines or networking platforms to becoming media and content companies with their own telecommunications infrastructure, the fight was on.

Facebook and Google are already providing Internet and call facilities. They also started buying or developing content facilities (Youtube acquisition by Google or Facebook Video/live).

This mean either existing telecommunications companies get into the business of content development or acquisition or they themselves get acquired. I suspect this was a major impetus for AT&T in their decision to buy Time Warner.

What next?

It’s always easy to bite, but it’s important to be able to chew and swallow. It remains to be seen how well the merger itself works. Most mergers are fraught with complications, from realising business benefits to cultural differences.

It will be interesting to examine Apple and Google’s next reactions. Google have developed their own hardware (Pixel) and Apple have long wanted to get into the business of content and IP.

Perhaps a takeover of Netflix by Apple in the offing?

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The Google Toothbrush test

Google’s toothbrush test for new services (introduced by Larry Page):” Will everyone use it at least twice a day?” Services such as Google Search, Google Mail and Android certainly pass the test. #innovation

This should be what firms think about as they create new products (I suppose we will need to think how we can move products which have passed the floss test – where people know the product/service is important but don’t use it enough – and push it on to pass the toothbrush test!!)

Of BlackBerries, Apples and Nokia…

Now that some of the initial brouhaha over the Nokia takeover by Microsoft and the slow and painful end of BlackBerry (the company formerly known as RIM!) has eased off, it may be instructive for us to consider some of the lessons learnt from the demise (?) of what were once the world’s leaders in mobile phones.

Nokia, a 148-year old company, at its peak in 2008 had 40% of the world’s mobile phone market, was worth over US$120 billion and contributed to almost 4% of Finland’s gross domestic product. BlackBery on the other hand, in 2008 at its peak was worth over US$80 billon but were bought out a few weeks back for just under US$ 6 billion.

The easy explanation for what happened to Nokia and BlackBerry was that, like so many other companies, it got run over by the juggernaut that was Apple Inc.

However there was a more fundamental problem. The world of technology and social behaviour and patterns changed and BlackBerry and Nokia both did not keep up. Nokia spent their time, effort and resorces primarily around competing against competitors in their immediate space, such as Sony, Ericcson, Motorola, Alcatel, etc. Both Nokia and BlackBerry focused on the enterprise sector and ensured that they remained dominant through supporting business needs more than they did personal consumer needs.

The changing consumer behaviour and tastes also were not picked up on by both companies. Nokia tried to gently enter the era of touchscreen (and there were plenty of engineers and experts within Nokia who claimed that touch-screen was merely a fad that would not take off – the same people who also claimed that the iPad was going to be another technological failure – like the Apple Newton!). They also failed to spot that even within the business world, people were not merely adopting the technology which their companies wanted them to use and the era of BYOD or Bring Your Own Device soon ushered in and enterprises allowed their employees to use their own devices within the business. Businesses and companies have adapted to their employee needs (especially since Apple and Android both improved their security features for enterprises).

The net result is that we had two mobile phone companies (Nokia and BlackBerry) made redundant and obsolete by two companies who were not even from the same sector or industry (Apple and Google who developed Android). Now Apple and Android based mobile devices control more than half the corporate mobile sector.

My (very brief and immediate) views on what went wrong for both Nokia and BlackBerry are as follows:

– they got complacent. Both Nokia and BlackBerry were initially great innovators who led the industry with fantastic technology innovation and progress (such as the Nokia Communicator or BlackBerry/RIM’s enterprise email servers) but became large and bureaucratic and started delaying product launches and did little to lead their industry or the market with innovative ideas and solutions, the way Apple or Google-led Android did; – they focused too much on their immediate competiton and had little long-range planning and scanning for other possible competitors from other sectors or spaces; – they were not responsive or reactive enough to their customers’ (consumers’) needs. The moment you forget your customers is the moment you have peaked and will be on the way down (and these include both internal and external customers). Both Nokia and BlackBery either did not understand shifting consumer patterns and behaviour or simply chose to (criminally) overlook them; – they both stopped taking risks. In the words of Thomas Zilliacus, previously the chief designer at Nokia, “I look back and I think Nokia was just a very big company that started to maintain its position more than innovate for new opportunities. All of the opportunities were in front of them and Nokia was working on them, but the key word is a sense of urgency. While things were in play there was a real sense of saying “we will get to that eventually. Nokia became more of a maintainer, more of an iterator, whereas innovation only comes in re-invention and Nokia waited too long to make the next big bold move.” The lesson here is simple, no risks = no returns = eventual decline. – Nokia thought even if they missed the high-end smartphone market, they still had the lion’s share of the low-cost market. However, what happened instead was that the likes of Huawei and Spice phones (from India) started capturing the low-cost market which Nokia previously were dominant. BlackBerry also thought enterprises would never give up the security functions which they could provide, but that changed the moment Android and iOS both could start coming close to the level of security which enterprises were comfortable with. – they became too bureaucratic and cumbersome – they lost the agility and speed to market which they initially had. Becoming successful has its potential pitfalls – and one of them is around becoming too large, slow and filled with management layers and red-tape. Empire building begins in some functions which is to the detriment of the entire organisation. Microsoft is going through similar pains at the moment too.

The above meant that both Nokia and BlackBerry started their startling and rapid descent into their current predicaments.

Who would have thought when watching Neo of the Matrix dialling into his hyper-cool Nokia back in 1999, that he may one day dial in and find himself stuck in a blue screen of death!