It may be a fool's errand to question the thinking of an investor who's worth $14 billion, but after listening to Bloomberg's interview with Carl Icahn yesterday (embedded below) concerning his newly disclosed 10% stake in Netflix, it's hard not to conclude his understanding of the company is a mile wide and an inch deep. Unless he has some big vision for the company up his sleeve that he's not disclosing, Icahn seems more interested in a short-term bet on driving Netflix into a larger company's arms, than in positively influencing Netflix's murky strategic direction.
Yesterday comScore released its September 2012 Video Metrix data which showed YouTube accounted for approximately 13.1 billion videos viewed out of the monthly total of 39.4 billion. At 33.2%, that's the lowest market share YouTube has had since Aug. '10 when I started tracking this data. As recently as July '12, YouTube had a 53.1% share (with 19.6 billion videos viewed), though as I pointed out previously, in August, its share dropped unexpectedly to 36.5%.
In addition, the 13.1 billion YouTube videos viewed in September is the lowest in the 13 months since comScore changed its reporting methodology and is nearly 30% lower than the 18.6 billion videos viewed a year ago in Sept. '11 and almost 650 million lower than its Aug '11 total of 13.8 billion videos. (YouTube's record high was 21.9 billion in Dec. '11). See chart below for more.
I'm pleased to present the 153rd edition of the VideoNuze-TDG podcast with my weekly partner Colin Dixon, senior analyst at The Diffusion Group. This week Colin and I review Netflix's Q3 '12 results and its bumpy path forward.
As I wrote earlier this week, by the end of 2012, Netflix will have lost 8 million, or half the DVD subscribers it had back in July '11. That loss of subscribers and cash flow come at an inopportune time, given Netflix's aggressive international expansion. Colin is slightly more optimistic about Netflix, citing its better-than-expected international subscriber results. We also share thoughts on where Netflix goes from here.
Unrelated to Netflix, Colin also just released a complimentary white paper called "Examining the Trend: From IPTV to Broadband IPTV, which is available for download here.
Click here to listen to the podcast (24 minutes, 46 seconds)
Colin Dixon, senior partner at The Diffusion Group and I are back for the 151st edition of the VideoNuze-TDG podcast. This week Colin and I first discuss YouTube's curation plans which I wrote about yesterday. I've received a number of emails about my post, with most readers intrigued by the idea, and wanting to learn more. Colin likes YouTube's curation direction too, seeing it as a reminder of the value of programming.
Colin then walks us through some of the interesting reactions he got on a panel he moderated at the TV Next conference, "The Rise of the Next-Gen Operator." He asked the question - imagine its 2022, what does a pay-TV operator look like? Listen in to learn more.
Last but not least, Colin is moderating a session for Ooyala at next week's Digital Hollywood. Ooyala is offering complimentary admission to the conference in exchange for completing the form located here.
Click here to listen to the podcast (21 minutes, 15 seconds)
YouTube has gained a huge amount of publicity for its original channels initiative, which was expanded internationally earlier this week. Now, according to an article by Magnify.net's CEO Steve Rosenbaum in Forbes yesterday, another critical and emerging YouTube strategy is "curation."
YouTube is the 800 pound gorilla for video uploads - with 72 hours added every minute - and the idea behind curation is to get users to cull through that massive video library to either add to their own channels and/or to build new ones, using others' videos.
AOL has announced this morning new iOS and Android apps that provide access to over 420K curated videos from its AOL On Network. AOL is including videos from its owned properties such as Engadget, TechCrunch, HuffPo Live and partners like Martha Stewart, Travel Channel and E!.
I've been playing around with the app a bit on my iPad this morning and it's a strong user experience. Upon launch, a set of highlight videos moves across the screen, with others displayed below. At left there's an icon which allows the user to pick videos from among 14 channels like Business, Food or Parenting. At right there's an icon that allows the user to go directly to certain content properties and/or search within them. The videos can then be sorted A-Z, by date, or by number of views. I only have one nit which is that there's no persistent "home" icon to get back to the starting point (you have to navigate to "Top Picks").
YouTube's new app for the iPhone and iPod touch is now live and available for download. The news comes a month after Apple said it wouldn't include its own YouTube app in the next version of iOS, thereby paving the way for YouTube to build and deploy its own.
In a blog post, YouTube described some of the key benefits of the new app: tens of thousands more videos, a channel guide with swipe navigation, enhanced search tools and the ability to share videos via Facebook, Google+, Twitter, email and text. I'm not an iPhone user (though plan to be shortly), so I haven't been able to test the new app. However, the description suggests a lot of commonality with the Android app I'm accustomed to, though the UI does seem a bit different.
Research firm GfK released data from its third annual Over-the-Top TV report late last week, finding, among other things, that consumption by Netflix subscribers age 13-54 is roughly 2,000 minutes per month, about the same as it found in its '11 study. That amount is in the same general ballpark as the 2,388 minutes/sub/mo that BTIG analyst Rich Greenfield calculated for June, 2012, and in line with the 2,000 minutes/sub/mo that I calculated during Q4 '11.
The survey of 1,051 persons age 13-54 and conducted in June, 2012, found the average Netflix subscriber watches 5.1 TV shows and 3.4 movies per week. The survey revealed that 39% of this age group are Netflix subscribers (up from 35% in '11), with 47% having ever been a Netflix subscriber.
After a week off for R&R, I'm pleased to be joined once again by Colin Dixon, senior partner at The Diffusion Group, for the 146th edition of the VideoNuze-TDG Report podcast. Colin is at the IBC conference in Amsterdam this week, so his audio isn't quite as good as usual. There, he attended a fascinating presentation by a Unilever executive on how the company is adapting its advertising to the realities of a multi-screen world. Colin shares his reactions, particularly to how Unilever is creating its own online content in order to engage its audience in ways not possible with traditional TV advertising.
Shifting gears, we then discuss Amazon's aggressive content licensing blitz that I wrote about earlier this week. Having spent hundreds of millions of dollars licensing premium content over the past 15 months in support of its Prime Instant Videos, I think it's pretty clear that Amazon has emerged as the strongest new competitor to Netflix. Colin agrees, but reminds us that although content parity is critical to competitiveness, user experience matter as well. On this front, we agree Amazon still has a lot of work to do to match Netflix. Listen in to learn more!
Click here to listen to the podcast (23 minutes, 41 seconds)
Variety is reporting on an internal Hulu memo indicating that the imminent buyout of Hulu's private equity partner may spark a series of changes, including the possible departure of CEO Jason Kilar and modifications to its content licensing arrangements with its broadcast network TV owners. Kilar has done an excellent job with Hulu, creating a top-notch user experience that is monetized through both ads, and more recently through subscriptions at Hulu Plus. Kilar has more than defied the skeptics who dismissively labeled Hulu "Clown Co." prior to its launch.
Nonetheless, there can be no disputing the fact that Hulu's essential asset from the outset has been exclusive next-day access to programs from Fox and NBC (now Comcast) and more recently, Disney/ABC. Broadcast TV is still by far the most popular programming around, and even though Hulu has added dozens of content partners, including a high-profile deal with Viacom, the reality is that for many Hulu users, it's a destination to catch up on their favorite broadcast programs.
No doubt you've already heard that Apple will not be including its native YouTube app in the next version of iOS that will officially launch this fall. Apple said its license for YouTube, which it held since 2007, when the iPhone launched, has expired. From my vantage point, this seems like a rare win for all stakeholders: YouTube, Apple, iOS users, YouTube's content partners, advertisers and even other video content providers.
In the past 2 weeks, Netflix delivered tepid Q2 results and a cautious forecast, while Comcast reported strong broadband numbers and an improving video subscriber picture. That's a big reversal from a year ago, when Netflix was flying high and talk of cord-cutting hung over the entire pay-TV industry. So what might we learn from these 2 companies' experiences over the past year? Though I'm sure there are plenty of lessons, here are 4 that come to mind:
I'm pleased to be joined once again by Colin Dixon, senior partner at The Diffusion Group, for the 141st edition of the VideoNuze-TDG Report podcast.
In this week's podcast Colin and I discuss Netflix's underwhelming Q2 '12 results. As I wrote on Wednesday, the company continues to be haunted by its decision a year ago to essentially abandon its DVD-by-mail business. Although in the very long-term, streaming will dominate, Netflix jumped the gun in de-emphasizing what was a lucrative business with substantial entry barriers. DVD subscribers, which are down by 34% in the last 3 quarters were a huge contributor of profits to the company which it could sorely use now as it pursues an expensive - and uncertain - international expansion.
On international, Colin notes that Netflix's performance wasn't that bad, but he still has concerns, particularly in the highly competitive U.K. market. While Netflix seems to have eclipsed LoveFilm there, Colin's sees the new NOW TV service launched by Sky as overwhelming Netflix in marketing and service quality, in turn suppressing subscriber growth there.
Nonetheless, Colin is still reasonably bullish on Netflix in the long-term, figuring that its size and well-known brand will help it get back on track. Absent shorter-term catalysts, I'm not so sure Netflix can return to its glory days. It will be fascinating to watch unfold.
Listen in to learn more.
Click here to listen to the podcast (27 minutes, 33 seconds)
Netflix reported its Q2 '12 results yesterday, and once again DVD subscriber losses in the U.S. were a driving factor in the company's overall performance. While Netflix added over 500K streaming subscribers, the company lost another 850K DVD subscribers. This has become a persistent theme in Netflix's U.S. subscriber dynamics: modest growth in streaming undermined by significant DVD losses.
In fact, as the chart below shows, over the last 3 quarters Netflix's DVD subscribers (standalone and hybrid with streaming) have dropped by 4.7 million, from 13.9 million to 9.2 million. That 34% drop is even more significant if you broaden the period to include estimated churn during Q3 '11 and forecast churn for Q3 '12. Q3 '11 was the quarter in which Qwikster was announced/withdrawn and the DVD/hybrid price increases were instituted. Churn spiked by about 2 million subscribers vs. Q2 '11; it is probably fair to assume that almost all of that was among DVD subs. For Q3 '12, Netflix's mid-point forecast for DVD subs is 8.5 million, a 700K drop from Q2.
In case you missed it while vacationing for July 4th, last week Netflix CEO Reed Hastings posted on his Facebook page that Netflix's streaming exceeded 1 billion hours for June, a new record for the company. BTIG's Rich Greenfield calculated that equates to approximately 2,388 viewing minutes per Netflix U.S. subscriber for the month (that's up from 2,000 minutes/mo which I calculated for Q4 '11). To put the June minutes in context, it's nearly double the average 1,315 minutes that the 180.5 million U.S. Internet subscribers each streamed in May, according to comScore's data.
Admittedly, it's a little bit of apples vs. oranges (comScore vs. Netflix internal data, May vs. June, free vs. paid, etc.), but assuming the numbers are at least in the ballpark, they demonstrate how thoroughly Netflix dominates in time spent per viewer vs. all other sites. For example, Netflix's 2,388 minutes/sub in June is more than 5x YouTube's 462.7 minutes/viewer in May and almost 10x Hulu's 253.7 minutes/viewer in May. Beyond YouTube and Hulu, the disparities become even more glaring; Netflix has 30x or greater viewing time of sites like Yahoo, VEVO, AOL and others.
After a golden period of scorching growth from 2010 to mid-2011, Netflix has been on a rocky road since, to say the least. While subscriber growth re-started modestly in Q1, the company reported its first loss in years. True, you can't "drive while looking in the rear-view mirror," but it is intriguing to think about where Netflix might be today had it done 5 (or maybe more) things differently. Here are my top 5 "what-ifs" to consider:
I'm pleased to be joined once again by Colin Dixon, senior partner at The Diffusion Group, for the 131st edition of the VideoNuze Report podcast, for May 4, 2012. This week Colin and I discuss how fundamental battle lines have been drawn between the traditional TV ecosystem vs. the numerous digital outlets that are launching online-only original programs. To be more specific, the former group seems intent on erecting ever-higher paywalls to access its programs, which is in turn opening up a gigantic opportunity for free, ad-supported programs to be provided by the latter group. How this battle unfolds will have far-reaching and profound implications for everyone involved.
For the traditional TV ecosystem, there appear to be two core drivers at work; first, the desire by broadcast TV networks to morph themselves into cable TV networks, and second, the role that TV Everywhere is taking on as a foundation of paywall economics.
Netflix reported its Q1 '12 results yesterday, adding almost 3 million subscribers, of which 1.7 million were domestic and 1.2 million were international, while showing its first loss in a while. Focusing just on the domestic side, the 1.7 million additions are certainly a positive reversal from the past 2 quarters, but are just about half of the 3.3 million domestic subscribers added a year ago in Q1 '11 (see chart below). While Netflix is forecasting to add 7 million subscribers in 2012, the company's domestic expansion rate is clearly slowing from its torrid pace of a year ago.
Yesterday YouTube got a lot of coverage of its new licensing deal for hundreds of movies from Paramount because separately, the studio's parent company, Viacom, has been involved in a bitter copyright litigation with YouTube for years. While it's noteworthy that the parties are able to do business despite suing each other, the bigger questions here are whether YouTube's initiative to rent Hollywood movies makes sense and can succeed?
Today I'm pleased to share a video interview I did with Vuguru's Chief Creative Officer Kristin Jones at the recent NATPE Market conference in Miami, FL. Among other topics, Kristin describes Vuguru's business model, some of the successful originals that it has created, how she sees online distributors differentiating themselves and where the market for digital content is heading from here.
The interview runs about 7 minutes. (Note, I'm off camera and my audio isn't great, so the questions are overlaid in text.)