Disruptive Technology: The Great Industrial Broom

I am about to tell you a story that is 100% true, and you will probably be able to relate to the sentiment.

My roommate and I went to happy hour earlier this week.

After we shared stories about our stressful days, the topic of our cable and Internet providers somehow came into the conversation.

We were both complaining about the spotty service, slow Internet, ridiculous price, and what was easily the absolute worst customer service experience I have ever had to endure.

I’m no conspiracy theorist, but I can say with confidence that this company is out to destroy everyone’s faith in humanity.

In the middle of our conversation, we were approached by a complete stranger who overheard our chat and shared our feelings about this particular cable provider.

This stranger showed no hesitation or censorship in expressing his complete disgust with this company.

Moments later, our group expanded again to include a younger couple and another man who was doing his crossword at the bar. Everyone had stories to tell about their terrible experiences.

In just a few minutes, we had nearly the entire bar involved in a flash mob. I knew I was annoyed with this company, but these people took it to another level.

They were chanting profanities and regaling tales of being ripped off by wrong charges, missing Game of Thrones because the cable went out, or losing Internet connection in the middle of a crucial deadline.

This was years of frustration being released. Had we all been consuming more alcohol, it legitimately could have evolved into a rebellion to take down the entire cable provider system.

You probably don’t need the keenest sense of intuition to realize I’m talking about Comcast (NASDAQ: CMCSA) here.

Just reading this may make your blood boil as you relive your own personal Comcast traumas. So help me God if anyone tells me to “unplug my router and wait three minutes” again.

I just did a Google search for “I hate Comcast.” I got 868,000 results.

A search for “Comcast is terrible” produced 1,210,000 results.

When I looked for “the worst company in America,” pretty much every result mentioned Comcast. (There were over 6 million.)

Comcast actually beats Wal-Mart (NYSE: WMT) at being the worst.

Congratulations, Comcast.

So if we all dislike our cable provider so much, then why are we still paying for the services? You might be in a similar situation: no other option. Either that or you’re in a contract, and since Comcast requires your firstborn child in order to cancel, you’re stuck.

Cutting the Chord: Cloud Up or Die Out

Enter Netflix (NASDAQ: NFLX).

We can thank Netflix for giving us all the means for the “cord-cutting” rebellion, as bold individuals abandon their evil cable companies for streaming TV and movies.


Netflix and other streaming entertainment outlets still require an Internet service provider, like Comcast, in order to connect you with your shows.

As the gatekeeper of the media, Comcast demands payment for such a connection and can control the speeds at which you consume media.

Basically, Comcast is charging a toll in order for House of Cards to travel uninterrupted through the interweb to your screen.

Even if you cancel your cable subscription, you still need their Internet service if there’s no other provider in your area. So even when you’re streaming Netflix, ISPs like Comcast and Verizon are getting a kickback.

The FCC’s recent net neutrality ruling gives companies like Netflix the ability to file complaints about unfair treatment from ISPs, but they have yet to jump on that opportunity.

Comcast might still have the upper hand in the media world, but it’s comforting to know that a good amount of its previous customers are taking real action to stick it to the man.

The effects of “cord-cutting” are clear: In 2014, almost 8 million U.S. households cancelled their TV subscriptions. Comcast is currently experiencing the most minimal, if any, growth in its TV sector.

In the fourth quarter last year, Comcast added just 6,000 TV customers. Compare that to the 46,000 customers it added in the same quarter of the previous year. (And that’s just the number of new customers it’s not sucking into the black hole.)

During the first quarter of 2015, Netflix directly contributed to a more than 40% reduction in traditional TV viewing.

With the growing appeal of other options like Apple TV, Google ChromeCast, and Amazon Fire, traditional cable companies like Comcast should seriously consider revamping their style. My first suggestion would be an attitude adjustment.

They better do it quickly, because there are rumors that Apple is developing its own TV subscription service in order to provide viewers with their usual local channels.

All you cord-cutters who sign back up for cable just to watch Game of Thrones? Fear not.

Even HBO — and other premium networks like it — is offering a subscription to customers without cable accounts. It’s called HBO Now, and it’s amazing. Showtime is working on a similar model.

The nefarious merger with Time Warner Cable (NYSE: TWC) is out the window, so Comcast has to start looking for other prospects. The plan to develop a nationwide iron curtain of media control didn’t work, so what now?

Only time will tell how streaming video options will truly impact the traditional cable provider business model — we’re now seeing millions of households choose to forego their subscriptions, and we’ve already seen what services like Netflix did to Blockbuster…

Banking 4.0 vs. Regional Banks… Can Banks Be Branchless?banks4.0

My Granddad is 82 years old. He’s been going to the same branch of Regional Bank-That-Shall-Not-Be-Named since he became a member.

He refuses the drive-thru, and I doubt he knows what an ATM is.

When I was younger, he would take me along to see Rosie — the only banker he ever communicates with.

After all this time, Rosie is basically a member of our family. I’m honestly surprised she hasn’t come to Thanksgiving dinner.

The point I’m making is that Rosie is a trusted member of my Granddad’s social circle.

Their relationship is more than money exchanging hands. He goes to her for advice, and she provides it based on her comprehensive understanding of his financial portfolio.


There is a personal relationship between them that I won’t ever develop with my ATM, but that seems to be the norm. Statistics show that millennials and the Generation Z population just aren’t as interested in the “branch experience” that previous generations value.

  • 39% of millennials would consider using a branchless, digital bank

  • 56% show interest in having a video chat with bank representatives, available on their own time

  • 72% express a willingness to bank with companies with which they already do business but that do not currently provide banking services (ex. PayPal, Apple, Google)

  • As of 2013, over 60% of Internet users reported using online banking

Traditional banking practices are clearly experiencing some vulnerability right now, and new mobile banking options are no help.

These options, combined with the rise of an Internet-dependent population, make it clear that banks need to restructure the paradigm — their service model has been essentially the same since the 1800s.

JPMorgan Chase & Co. (NYSE: JPM), Citigroup Inc. (NYSE: C), and Bank of America Corp. (NYSE: BAC) are all cutting branch locations in response to the increasing role of mobile services.

The “branchless bank” might not be too far off. Let’s talk about Moven.

Moven is part of the “Bank 4.0” movement. One of the presenters at Finovate 2015, Moven is more than a mobile banking app — it’s like having a personal banker in your phone at all times.

Moven is FDIC insured and allows you to link all of your existing bank accounts with the app services.

The app tracks spending and saving behaviors and then provides notifications when it’s wise to lock away savings. (The money is actually locked away — you have to simulate “breaking the glass” to access it.)

Moven will also alert you when you earn a “splurge” moment, and it even has a Wish List feature.

When you’ve saved enough for one of those “gotta have it” items, Moven lets you know.

The app allows you to securely send money to a friend, even if they don’t have the Moven app as well.

If you walk into one of your favorite stores when you’re low on finances, Moven sends you an alert (a.k.a. Moven shakes its finger at you!). Finally, an answer to all those times I said I needed a spending chaperone.

Statistics show that bank members are still interested in face-to-face experiences for large transactions like business loans or buying a car or home. We still trust the advice and input we receive from bankers, so it’s not as if the entire banking sector is crumbling to the ground.

However, for everyday banking, the Internet is the way of things.

The real concern is for local and regional banks that may not have the capability of providing cohesive mobile or Internet options for their patrons. Before the Internet, local banks enjoyed a sort of monopoly on their geographic community.


They owned the market and tailored their services to the population’s financial needs. Now, with mobility being a huge factor in the banking sector, individuals have other banking options.

Local banks don’t have the home-field advantage anymore. A drop in customers means a drop in investments… and thus a drop in the revenues that banks gain from fees and interest rates.

Establishing an Internet banking system is an investment in itself, especially including regular maintenance costs.

Banks with limited resources may not be able to support the level of quality Internet and mobile interfaces to which we have all become accustomed.

The Big Four (Wells Fargo (NYSE: WFC), Bank of America, Citigroup, JPMorgan Chase) have the resources and infrastructure to keep up with mobile options and services that are important to today’s customers — even despite all their legal costs post-2008.

Millennials express satisfaction with Big Banks, which offer easily navigable mobile services as well as the branch experience when it’s desired.

Even so, the majority of big banks (with the exception of Wells Fargo) are closing branches. JPMorgan Chase & Co CEO Jamie Dimon says he plans to close more than 300 branches by the end of 2016.

In addition to entire branch closures, Bank of America Corp. has closed down drive-thru options and teller windows in the remaining branches. PNC (NYSE: PNC) plans for two-thirds of its branches to be tellerless by 2019.

In terms of our beloved local banks, the FDIC reports over 500 failures last year, most of which were acquired by larger institutions. However, it’s clear from recent trends (as well as future plans) that the banking sector is changing.

The traditional service model of the banking industry no longer aligns with the priorities of today’s generations.  

As banks scramble to respond to customer needs and wants, the Rosies of the world are increasingly being cut from the team.

Tesla vs. Utility Companies

A few weeks ago, my personal superhero, everyday man-crush, and Tesla (NASDAQ: TSLA) CEO Elon Musk announced the release of the Powerwall. If you don’t know what this is, do a little research.

The lithium technology in Tesla’s Powerwall is changing the world of solar energy storage.

The Powerwall is essentially making solar power more accessible, more affordable, and more efficient than previous solar-plus-storage systems (dare I say, disruptive?).

I’ve read a few different articles that stomp their feet about the financial inefficiencies of the Powerwall — the authors claiming it will be many years before fully solar, off-grid power is within reach for the average American.

That might be true. But to those naysayers, I think about something I read from Ray Kurzweil, Google’s Director of Engineering.

Kurzweil says, “People tend to dismiss a disruptive technology when it’s only 1% of a solution, ignoring the fact that it’s doubling every few years and will be at 100% in a very short time.”

The Powerwall came as a surprise for many energy analysts, most of whom predicted cost-efficient solar storage to be in the distant future.

The Powerwall isn’t ready for an immediate defection from grid utilities, but it’s a definite wake-up call for utility companies like Pacific Gas & Electric (NYSE: PCG) and Edison International (NYSE: EIX), which are currently mulling over the idea of initiating “time of use” residential electricity rates for their customers.

As of right now, the cost of providing electricity depends on the time of day and the time of year.

Higher demand means higher prices for residents and utility companies.

On particularly hot days and normally in the evenings, utility companies are forced to buy electricity from an extended network of power plants that otherwise are not needed. We call these “peaker plants.”

Costs of dipping into peaker plants trickle down to individuals and households.

“Time of use” rates are intended to deter customers from using so much electricity (and fossil fuels) during peak hours, but there are issues with hitting customers with huge bills during the summer — especially for households that may not be able to adjust their lifestyles around different times and rates.

The Tesla Powerwall can store excess solar energy that is gathered during the day (peak sunlight hours).

This means households can continue to use the Powerwall’s stored energy into the night, rather than switching their home energy back to the grid source or selling their excess energy back to utility companies.

In Musk’s ideal future, the Powerwall will push households completely off the grid and end our population’s dependence on fossil fuels.

The Powerwall has the potential to change how we access and store our energy, therefore changing the entire structure of the utility industry. It may not be affordable for the average person today, but it will be an option for a broader market very soon, especially with Musk supporting open-source dialogues.

Pandora vs. The Music Industry

So far, we’ve talked about industries that may soon feel some real disruption from emerging technologies and ways of life. I think it’s fitting now to include an industry that has already genuinely been burned by a disruptive innovation.pandora

I would like everyone to sit and think about the last time they purchased a 12-track CD from their favorite artist.

For me, it’s been at least 10 years. I could be wrong, but I’m not even sure cars are manufactured with CD players anymore. Even in 2000 in the middle of the Napster craze and other file-sharing programs, CD sales still reached a strong 730 million.

Unfortunately, in the years since, there has been a dramatic plummet in those numbers. Last year, only a little over 140 million physical albums were sold.

Once the option for digital music was born, people stopped wanting CDs. Case closed.

The music industry wanted us to want them because they gained a huge profit from selling them. So the music industry put their blinders up and ignored the incredibly obvious message that the public wanted digital music.

Rather than support technologies for diverse and affordable digital music, the industry focused all its efforts on shutting down digital distributors. Now, the entire industry is valued at about $7 billion.

That’s half of what it was 15 years ago. It’s dying. So clearly the lesson here is to pay attention to the consumer base. We’ll get back to that later.

Let’s get a little more recent and think about the last time we paid for an entire 12-track album from iTunes or Amazon.

I will admit if there’s some song I’m dying to hear I’ll splurge for the $0.99. I’m the same person who’s been known to pay for extra lives in Candy Crush though, so draw your own conclusions.

I might buy the occasional iTunes track, but for the most part I’m streaming Pandora (NYSE: P) or Spotify throughout my day. (I’m doing it right now.)

Simply put, streaming media is the new status quo. In 2014, not even digital downloads could fill the deficit of purchased albums — only 106 million full digital albums were purchased.

For any industry, it is difficult to convince consumers to pay for something when they can so easily access it for free. Now, just 44% of U.S. Internet users and 64% of Americans who buy digital music think music is worth paying for.

There are a few large arguments circling around this issue. The one I hear the most maintains that artists on Pandora (and other streaming sites) are blessed with the exposure, particularly new artists who otherwise would not have the means to reach such a large fan base.

The more often the songs are streamed, the more fans purchase concert tickets; therefore, the artists still make money.

I’ve also heard the “music is like air” argument from individuals who believe no one should have the authority to police our access to something so essential to human existence.

Two words: intellectual property.

Nothing is Free… Even if it Arrives Over the Airwaves

Artists should be able to make a living from their art, and they do get paid by streaming services. Every time a track plays on a streaming music channel, a fraction of a penny is paid out to the record company.

These royalties are divided between the performer, songwriters, producers, etc.

Here’s the catch: These royalties rarely amount to much. In a recent interview, songwriter Aloe Blacc revealed, “It takes about one million spins on Pandora for a songwriter to earn just $90. In return for co-writing a major hit song, I have earned less than $4,000 domestically from the largest digital music service.”

Right now, artists and other music industry officials are negotiating with streaming music services to increase the percentage of royalties they are paid, but there has yet to be any conclusion.

Unfortunately, the consumers have spoken, and streaming media is what we want. As of 2015, Pandora alone has almost 80 million active listeners averaging half an hour of listening time every day.

There are 60 million active listeners using Spotify. Between just these two streaming services, we can conclude that 140 million people have decided not to pay for their music.

This sort of reminds me of what happened 15 years ago when millions of people decided not to buy CDs anymore.

Maybe it’s the music industry itself that needs to face the music on this one.