I’m pleased to present the 438th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
On this week’s podcast, Colin and I take up the question I explored on Wednesday, whether Comcast should divest its 30% stake in Hulu to Disney, as CNBC reported it is interested in doing. Colin and I discuss the many benefits Comcast derives from having a front row seat with 3 senior executives on Hulu’s board. On the other hand, there are many reasons why Comcast would be compelled to sell.
Meanwhile, as part of its acquisition of Sky, Comcast will also be inheriting Now TV, the innovative OTT service Sky runs. Colin shares his personal experience with Now TV and some of the specific things Comcast might learn and consider bringing to its U.S. operations. As always, rights are a central issue to surmount.
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In the wake of Comcast’s winning $39 billion bid to acquire Sky over the weekend, CNBC has reported that Comcast may be looking to swap its 30% ownership stake in Hulu (plus other consideration TBD), for Disney/Fox’s 39% ownership in Sky (a deal for Comcast to buy that was reported this morning). CNBC said that Comcast sees “only limited value in owning a non-controlling stake in Hulu” given Disney’s 60% share once the Fox deal closes.
This logic is understandable and in addition, divesting the stake would also relieve Comcast of partly funding Hulu’s losses (reportedly almost $1 billion in 2017). On the other side of the coin, Disney would own 90% of Hulu and give up its non-controlling stake in Sky as Comcast takes control of it.
If you’re looking for more evidence of how SVOD is changing the TV landscape, look no further than last night’s Emmy Awards. The 3 big SVOD providers, Amazon, Hulu and Netflix combined to win a record 35 Emmys, up from 32 in 2017. Netflix itself won 23 Emmys, tying HBO for top honors, with Amazon winning 8 and Hulu winning 4.
Netflix’s big winner was “The Crown” which took home 5 Emmys. All of Amazon’s awards were for “The Marvelous Mrs. Maisel” including outstanding comedy series, lead actress (Rachel Brosnahan), supporting actress (Alex Borstein) and writing and directing for Amy Sherman-Palladino. Maisel tied with Saturday Night Live for second place behind “Game of Thrones” which won 9, including outstanding drama series.
I’m pleased to present the 434th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
First up this week, Amazon is said to be planning a free ad-supported video service, similar to Roku’s The Roku Channel. The new service, dubbed Free Dive, would be targeted to the nearly 50 million Fire TV users. Colin and I both like the move a lot, as we see multiple promotional and new revenue benefits, especially if Amazon can attract TV ad dollars. However, a key challenge is finding enough compelling content to make Free Dive interesting to audiences.
We then transition to talking about Hulu. Colin has developed a forecast for subscriber and revenue growth for Hulu through 2020 which he explains. He sees much of Hulu’s revenue growth coming from its Live skinny bundle service, although its profitability will remain challenged due to high programming costs.
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Major SVOD services’ popularity continues to expand, with new research from Leichtman Research Group finding that 69% of U.S. households now subscribe to either Netflix, Amazon Prime and/or Hulu. That’s up from 64% last year and 47% in 2014.
Also noteworthy is the rise of multi SVOD service households. LRG found that among SVOD households, 63% now access more than 1 SVOD service, which is up from 38% in 2015. That means that 43% of U.S. households now access more than one SVOD service, more than double the 20% rate from 2015.
Topics: Leichtman Research Group
On Disney’s earnings call earlier this week, CEO Bob Iger was asked about the company’s video app strategy - would it be interested in launching one big “aggregated” app housing all of its content, or will it continue to pursue multiple apps with each targeting particular audience segments?
It’s an interesting question because it goes to the heart of whether consumers prefer a big basket of content at one price (the way the pay-TV industry’s multichannel bundle has been effectively offered) or more discrete content services that consumers individually choose to pay for (as has emerged with streaming video and music services, plus a wide variety of other apps)?
I believe Iger’s explanation of Disney’s app strategy was right on the mark:
I’m pleased to present the 430th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
This week Nielsen released its Q1 ’18 Total Audience Report, which led to some media coverage that linear TV still dominates consumer viewing. However, Colin dug into the data and showed that while this is true for older consumers, for younger ones, the exact opposite is occurring: linear TV is becoming less and less relevant. Colin shares his analysis.
On-demand viewing’s importance was underscored yet again this week by Comcast striking a deal to integrate Amazon Prime Video into its X1 experience. The move builds on prior Netflix and YouTube integrations, helping Comcast broaden X1’s value proposition. However, neither of us thinks the move materially addresses aggressive competition from skinny bundles that drove up Comcast’s video subscriber losses in Q2.
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Comcast will integrate Amazon Prime Video into its X1 platform later this year. Amazon becomes the third major streaming service to be included in X1, following Netflix in 2016 (see here) and YouTube in 2017 (see here). Comcast said it’s the first pay-TV operator to integrate Amazon.
As with the other services, Amazon’s content will become available to X1 users as part of the X1 UI. Comcast is continuing to position X1 as a streamlined gateway to both its own content and also to third-party content. It’s a smart move by Comcast to build more value into the X1, helping justify subscribers spending $10 or more per month to rent the X1 set-top box (although Comcast has recently been emphasizing it sees X1 also as an interface, living on smart TVs and devices, as well).
I’m pleased to present the 428th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
This week Colin and I discuss new research highlighting how younger viewers are shifting away from traditional TV and toward OTT sources. Colin recaps research from Hub Entertainment focusing on the US while I share highlights from Ofcom’s new Media Nations report covering viewing behaviors in the UK.
While the numbers are slightly different, the general trends are similar. For example, in the US, just 26% of 18-34 year-olds consider live TV their default service. In the UK, for 18-34 year-olds, 54% of their video consumption is now from OTT sources.
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Comcast has officially dropped out of the bidding for the 21st Century Fox assets, clearing the path for Disney to move forward. Comcast still plans to pursue Sky in the UK. But by dropping its Fox bid, Comcast has also foregone the opportunity to take control of Hulu (by virtue of combining its 30% stake with Fox’s 30% stake). Presumably now Disney will take control of Hulu.
I believe this is a major missed opportunity for Comcast, leaving the company under-optimized in the fast-changing premium video industry. As we all know, today’s key industry themes include the rise of cord-cutting and consumers’ move to lower cost skinny bundles, the shift to on-demand viewing, with the accompanying growth of ad-free SVOD services (e.g. Netflix, Amazon, Hulu), the rapid adoption of connected TV and mobile devices for viewing and the nationalization/globalization of video services, among others.
More evidence of the shifting viewership behavior of younger audiences: UK regulator Ofcom’s first annual Media Nations report found that 16-34 year-olds there now watch an average of 2 hours, 37 minutes per day of OTT content vs. 2 hours, 11 minutes of broadcast content across all devices.
The younger group’s OTT consumption is almost double the overall population’s of 1 hour, 28 minutes. Across all age groups, 71% of viewing time is still with broadcast content. However, broadcast TV viewership on TVs dropped by 9 minutes, or 4.2% in 2017 to an average of 3 hours, 22 minutes per day. Since 2012, broadcast viewership has decreased by 38 minutes per day or 15.7%.
Netflix reported a large miss on its subscriber forecast in Q2, with 670K net additions in the U.S. (44% below its forecast of 1.2 million) and 4.47 million net additions internationally (10% below its forecast of 5 million). From my standpoint, the international miss is almost irrelevant because the segment includes so many different countries with so many different adoption patterns that Netflix is still new to understanding. With all of those moving pieces, missing by just 10% isn’t too shabby.
Conversely, the domestic miss of 44% is a real head-scratcher which I believe raises, yet again, real questions around how well the company understands the dynamics of the domestic SVOD market, how much growth remains and how well its forecasting function is run. For eager investors, who have bid up the stock on lofty expectations, getting a handle on these issues seems critical.
Yesterday Netflix announced a very cool new feature called “Smart Downloads,” which automatically deletes an episode you’ve downloaded and finished watching on your mobile device, triggering the download of the subsequent episode. The process happens as soon as you’ve connected to WiFi and occurs invisibly in the background. Smart Downloads is available for Android devices now and for iOS devices later this year.
Smart Downloads is a clever way of automating a manual process, so that users always have something downloaded and ready to watch (although having to manually download a TV episode clearly falls in the category of “first world problems”). Smart Downloads is a a savvy move by Netflix to increase subscribers’ engagement time, which in turn leads to higher satisfaction and better retention. But perhaps most fascinating about Smart Downloads is that it illustrates how fully and quickly Netflix has evolved from an avowed downloading skeptic to an impressive innovator.
Just weeks after closing its acquisition of Time Warner, AT&T has begun the process of revamping HBO’s traditional success formula, with Netflix envy apparently the main catalyst. According to a new NY Times article detailing a town hall meeting that Warner Media CEO John Stankey had with HBO employees, the new strategy boils down to wanting HBO to produce vastly more content with a goal of driving up engagement time and growth.
That sounds a lot like the formula that Netflix has employed for years, spending billions of dollars per year on scores of original programs in a global land grab for subscribers, while de-emphasizing profit maximization. Of course Wall Street has fallen in love with Netflix’s approach. Conversely, HBO has pursued a more limited “boutique” content strategy, with a few key marquee programs, while maximizing profitability.
Pivotal Research has released an analysis of Nielsen data on growth rates of U.S. SVOD services, finding that Hulu had grown access by TV households by 39% at the end of May 2018 compared with a year ago. By Nielsen’s estimate, Pivotal said Hulu had 21 million SVOD subscribers, about in line with the 20 million plus that Hulu itself announced on May 2nd.
Pivotal attributed the growth to both Hulu’s programming and its vMVPD service which includes SVOD access. At 21 million, Hulu would have grown 4 million subscribers or nearly 24% vs. its year-end 2017 level of 17 million plus.
I’m pleased to present the 422nd edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
This week Hulu’s CEO Randy Freer said in a CNBC interview that the company had “surpassed 800,000 subscribers” for its Hulu with Live TV service. It was the first time Hulu has revealed subscribers for its skinny bundle service which was launched just over a year ago.
Colin and I are both impressed with the number, which represents 4% of its overall 20 million subscribers and probably puts it in fourth place in the category behind YouTube TV, Sling TV and DirecTV Now. Based on rough calculations, the Live TV service is likely generating almost $300 million in run-rate revenue now (whether its profitable is another question). That’s a strong start and more evidence Hulu has found a winning formula.
Back on the SVOD service, we also discuss James Murdoch’s comment that about half of Hulu’s subscribers are taking the ad-supported option, (which Hulu said is actually more than 60%), but that would still be down from “the vast majority” which Hulu has consistently said in the past. Finally, we discuss the pros and cons of either Comcast or Disney taking control of Hulu due to the battle over 21st Century Fox assets. I wrote last week Comcast would benefit more.
(Note, Hulu’s VP of Ad Sales Jim Keller will be on Colin’s panel “Connected TVs' Ad-Supported Future” at the VideoNuze Online Video Ad Summit on June 12th)
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I’m pleased to present the 421st edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
On this week’s podcast we cover 3 different topics. First up is Comcast’s announcement this week this it plans an all-cash offer for the Fox assets Disney has agreed to buy. We don’t have time to fully analyze the move, but both of us see it as a bold doubling-down by Comcast on the traditional multichannel TV model. We speculate about whether Comcast should diversify with a skinny bundle offering, as I described yesterday in taking control of Hulu.
Next up we discuss new research from ACSI focused on the lagging role of movies in SVOD and Netflix specifically (which is being addressed with 86 releases in 2018). Lastly, we turn to data from Advertiser Perceptions showing ad buyers are only willing to pay a small premium to be in lighter ad load environments. I’ve previously speculated about whether the math would work for TV networks by reducing their ad loads.
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I’m pleased to present the 420th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
AT&T is planning to deliver its DirecTV satellite services over broadband at a reduced cost, further demonstrating the company’s commitment to OTT video delivery. With the DirecTV broadband service and its upcoming skinnier bundle “AT&T Watch” for $15/mo, AT&T is pursuing every price point for its different video services. Colin and I discuss why all this helps AT&T with its wireless bundling strategy.
We then transition to new TDG research showing Amazon Channels is driving 55% of all direct-to-consumer streaming subscriptions including 70% and 72% for Starz and Showtime respectively. We’ve both been big fans of Channels since it launched as the Streaming Partners Program in late 2015, and it appears to be paying off really well.
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New research from The Diffusion Group finds that 55% of all direct-to-consumer video subscriptions are being driven by Amazon Channels. As the chart below shows, for Showtime, Channels accounts for 72% of new subscriptions, for Starz 70% and for HBO 53%. Both HBO and Showtime reported record subscriber levels at the end of 2017 and the new TDG data underscores how pivotal Channels has been in the 2 premium networks’ revitalization.
Bloomberg reported yesterday that Apple may enable video subscriptions within its TV app, which is available across iOS devices and Apple TV. It would be a smart, although very late, move by Apple to horn in on the video subscription boom. And Bloomberg correctly characterized it as an apparent copycat effort by Apple to emulate what Amazon has been doing with its Channels program since it originally launched way back in December, 2015 as the Streaming Partners Program.
If you haven’t used Apple’s TV app, it allows single sign-on access to many cable and broadcast TV Everywhere apps, which would otherwise need to be individually authenticated, cross-app browsing, search and recommendations and multi-platform viewing. For people with an Apple TV in particular, it’s a handy app that aggregates a lot of content (including what you’ve purchased from iTunes) and in typical Apple style, presents it in a nice interface.