Convergence and the birth of a new AT&T

The proposed AT&T – Bellsouth merger signals the unfreezing of the US telecommunications industry and is likely to send seismic waves through the industry. If the merger goes through, the erstwhile baby bells will be reduced to three major players: AT&T, Verizon and Qwest. Further, there is some talk of Verizon making a move on Qwest and reducing the sector to a duopoly. The AT&T merger makes sense when you consider existing industry conditions.
Cable industries with their triple-play (TV, internet broadband, phone) offerings have stolen share from the traditional baby bells and consolidation might help AT&T cope with this convergence threat better. The new entity plans to apply the same brand across all its offerings and this should help reduce ad spend. The increased consumer base should also help when it comes to investment and roll-out  of new technologies such as IPTV. Scale should also help AT&T in dealing with its suppliers. The regulatory environment these days also seems to be favorable to such a move even though questions of how this merger would affect the net-neutrality issue persist. This merger might bring benefits to residential customers in the form of lower prices and increased choices but business consumers might suffer from a reduction in choices of service providers. It will be interesting to see how the cable companies and Verizon respond to this merger.

MTV turns 25: Can it stay relevant?

BusinessWeek has a long but engrossing article on the measures that Judy McGrath, the new CEO of MTV, is taking to keep the channel cool and relevant. MTV’s target audience increasingly satiates its voracious appetite for media on the web and via cellphones in addition to TV sets. This proliferation of new distribution channels threatens MTV’s established business model of content delivery through cable; especially as it receives 60% of its revenues from advertisers.

McGrath is highly focused on understanding her customers and is referred to as ‘a 16 year old boy in an adults body’. She’s embracing new media and leading initiatives such as the on-demand streaming of videos to college campuses. MTV has also begun offering its content through iTunes, formed a partnership with Microsoft, and is launching a high-definition channel. MTV networks recent split-off from Viacom may also help it be more nimble and reactive to the market. There are many other businesses in the media and the technology sector that are facing challenges similar to the ones being faced by MTV and the lessons learned here could be applied widely. A lesson that’s readily apparent is of harnessing new technologies and cannibalizing your own business before someone else does. MKT 601, anyone?