I'm pleased to present the 179th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. Yesterday, YouTube confirmed that it will offer content partners the ability to charge for subscriptions. In what its calling a pilot program, 53 subscription channels are being launched, some from established brands like UFC, PGA, National Geographic and Jim Henson, and many more from less well-known content partners.
In this week's podcast Colin and I discuss whether this is a big deal or not. Colin's more bullish than I am, seeing it as a very important piece in the YouTube puzzle, adding to existing advertising, rental and purchase monetization options.
I agree it's smart move by YouTube, but I don't think it's a game-changer. While I see this as the right thing to offer content partners - especially those with huge audiences on YouTube - this is akin to "freemium" type option that will require partners to very clearly differentiate the incremental content available in their subscription tiers in order to convert a small percentage of their free viewers to monthly subscribers.
A complicating factor is that for many users, YouTube subscriptions will be on top of - not a substitute for - already expensive pay-TV monthly bills. Then there's also a Netflix, Hulu Plus, Amazon or other SVOD subscriptions which already make a claim on finite entertainment dollars too. Lastly, YouTube is perceived as a "free" site by many, so it will take significant promotion by channels to persuade users to pay.
Bottom line: YouTube is doing right by its content partners in offering this capability, but it's up to the content partners themselves to make it successful. My guess is for most partners, advertising will continue to dominate their YouTube-related revenue for a long time to come.
Listen in to learn more!
Click here to listen to the podcast (18 minutes, 15 seconds)
I'm pleased to present the 177th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. Earlier this week, Netflix reported solid results for Q1 '13, adding a total of about 3 million new subscribers, 2 million in the U.S. and a million internationally. Netflix projects it can ultimately obtain 60-90 million U.S. subscribers, which would be 2-3 times as many as HBO, the biggest "premium TV" network.
As I wrote earlier this week, if that were to occur - and it's still a big if - it would mean Netflix would have to get a lot of middle and lower income American homes to layer on another $8/mo or more to their already substantial pay-TV bills, OR there would have to be material cord-cutting that essentially frees up household budget for SVOD subscriptions. Colin suggests a third way, which would be "cord-shaving" - subscribers cutting back on existing pay-TV services like sports networks or premium channels to make room for Netflix in their budgets.
That of course leads to the question of what HBO might do as it observes Netflix's continued growth. It's hard to see HBO standing still, yet, for reasons HBO has discussed in the past, unbundling itself from pay-TV would be a huge step for the company. Last but not least, Amazon - which become Netflix's biggest U.S. SVOD competitor - is rumored to have a set-top box introduction planned, which could also shift the competitive balance in the U.S. Bottom line, there are a lot of twists and turns yet to occur in SVOD in the U.S.
Listen in to learn more!
Click here to listen to the podcast (19 minutes, 6 seconds)
Netflix reported solid Q1 results yesterday, gaining 2 million streaming subscribers in the U.S. and another 1 million internationally. Netflix now has 27.9 paying subscribers in the U.S. and 6.33 paying subscribers internationally. With growth re-started since the 2011 Qwikster debacle, a persistent question is how big can Netflix become in the U.S.?
Traditionally many have thought the answer is in the 30 million subscriber range, which is where the biggest premium channel, HBO, has pretty much leveled out. This line of thinking assumes that Netflix is essentially another premium channel and consumers will treat it as such.
But Netflix's CEO Reed Hastings always answers the size question by asserting that Netflix can grow to become 2-3 times HBO's size, implying 60-90 million subscribers ultimately. He points to differentiators like Netflix having more content, being less expensive and available on more devices, having greater personalization, etc.
At starting prices of $8/month or so, affordable subscription video on demand (SVOD) services like Netflix, Hulu Plus, Amazon, Blockbuster and others would seem to appeal to middle and lower income Americans. But a new report from Nielsen finds the exact opposite is true: wealthier homes, with household income over $100K/year, adopt SVOD services at 185% of their index, while lower income homes, with household income under $50K/year, subscribe at just 47% of their index.
Adding to the picture, "Professional" homes subscribing to an SVOD service are at 150% of their index, while "Blue Collar" homes are just 63% of their index.
The data seems to support a contention that Netflix has repeatedly made, which is that SVOD services are typically adopted in addition to - not in substitution for - pay-TV services. To the extent that pay-TV rates have continue to increase, it makes sense that only upper income homes can afford to then layer on an SVOD service on top of pay-TV.
I'm pleased to present the 174th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. There's no question video is moving to streaming and electronic delivery, but DVDs still have plenty of life left. That's what Redbox is banking on to get a foothold with its new Redbox Instant service, as CEO Shawn Strickland explains in this interview. Both Colin and I think it's a smart, albeit risky, strategy given the inevitable downward trend in DVD usage.
I see part of DVD's durability as due to Hollywood's windowing practices. Because of the multi-billion pay-TV window, licensing to networks like HBO, Starz and EPIX, major studios delay the availability of movies in SVOD services. The intervening home video access continues to give DVDs life. Unless and until Hollywood abandons the pay-TV window, DVDs will continue to have life. And since Netflix has essentially abandoned DVDs, there's a big opportunity for Redbox.
However, Redbox Instant has another problem, which is that its streaming content selection today is terrible, as Colin explains. That means prospective subscribers have to determine whether its worth the $3/mo or so they're effectively paying for it on top of the DVD value which is worth around $4-$5/mo. Colin and I are both skeptical. Even if Redbox Instant doesn't fly, we both see DVDs being with us for a long time to come.
Listen in to learn more!
Reminder: Colin and I will be at NABShow next Mon. and Tues. in our booth SU12907. If you're there and have a moment, please stop by to say hi.
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I'm pleased to present the 173rd edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. This week we focus on the rising cost of content to pay-TV operators and the rising quality of content found online.
In a post yesterday, Colin validates pay-TV operators' complaints about programming costs, noting, for example, that at Comcast they rose from 34% of video revenue in '08 to 40% in '11 (at Time Warner Cable they were 41% and at DirecTV they were 45%). As we discuss, these escalating costs are eating into operators' profit margins as subscriber rate increases haven't kept pace. As VideoNuze readers know, sports is a major culprit in all of this, though entertainment networks have raised their own rates as well.
Against this backdrop, the quality of content available online is improving markedly. For example in just the past couple of weeks, we've seen Netflix announce another new series, with the producers of The Matrix films and Babylon5, Amazon Studios announce new shows "Betas," "Zombieland" and "Sarah Solves It" and Crackle a second season of "Chosen." Further, anime network Crunchyroll disclosed it's now up to 200K paying subscribers, TheBlaze (Glenn Beck's online video network) is raising $40M. Even the BBC, one of the most traditional TV networks, announced it will be premiering shows on its iPlayer.
In short, the quality of programming online is getting better all the time, while the cost of content to pay-TV operators is escalating, in turn putting pressure on subscriber rates. All of this means viewership patterns are bound to change and with the broader video industry.
Reminder: sign up for "Sizing Up Apple TV" a free video webinar, next Tuesday, April 2nd featuring Brightcove's Jeremy Allaire and me.
Listen in to learn more!
Click here to listen to the podcast (18 minutes, 57 seconds)
Flipping through yesterday's Best Buy circular, I noticed an ad (see below), which I believe is indicative of the type of pitches that are going to become increasingly prevalent to prospective cord-cutters and cord-nevers. The ad offers a packaged discount to an over-the-air ClearStream HD antenna from Antennas Direct with a TiVo Premiere and highlights logos from Netflix, Hulu Plus and Pandora. While the ad doesn't explicitly say "Dump your expensive pay-TV service now!," it has several key messages that might as well.
I'm pleased to present the 172nd edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. This week we first discuss Google Fiber, which Google announced this past Tuesday would roll out to a second city, Olathe, KS. Nonetheless, as we discuss, it still feels like Google Fiber is a hobby for Google, though its executives recently asserted otherwise. Neither Colin nor I quite understand what Google Fiber's actual market impact or game plan is, and we are skeptical that there's a business case to support its broader rollout.
We then turn our attention to another Google-related item, which is that YouTube announced this week it is now attracting 1 billion visitors/month, even as (according to my analysis), its U.S. online-only traffic has dropped by 32% year-over-year. But, because comScore doesn't measure mobile access, this isn't an accurate portrayal of YouTube's reach, which is clearly expanding. Colin has further data that adds color to the situation.
Separate, Colin has released his excellent new white paper, "Second-Screen Apps for TV" (free download here)
And a reminder to sign up for "Sizing Up Apple TV" a free video webinar on April 2nd featuring Brightcove's Jeremy Allaire and me.
Listen in to learn more!
(update - the correct pronunciation of Olathe, KS is "O lay the" (thanks Frank Hughes!).
Click here to listen to the podcast (18 minutes, 57 seconds)
Here's an eye-popping data point from last week's comScore online video rankings report for Feb. '13: YouTube's total of 11.3 billion monthly views were down 32% vs. Feb. '12 when it had 16.7 billion views (see chart below). But lest you think viewers are fleeing YouTube, the perennial 800-pound gorilla of the online video market, what really appears to be happening is that a sizable chunk of viewers are shifting their viewing to mobile devices, which as I understand it, is not counted in comScore's data.
I attended the D: Dive Into Media conference earlier this week for the first time. It is mainly a series of one-on-one interviews with senior executives from a variety of media and technology companies, plus networking. Overall it was a great conference, and it's hard to beat a couple of days in beautiful Dana Point, CA, especially when coming off a blizzard in Boston.
My main interest was the video-related sessions, and from those I had 6 takeaways which I share below (along with selected session video clips), in no particular order:
I'm pleased to present the 165th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. This week I first share some reflections from spending 2 days at the NATPE conference earlier this week, focusing on content creators' attitudes toward online video.
That's a segue into discussing "binge-viewing," which will get a lot more visibility starting today, as Netflix releases all 13 episodes of its high-profile original series "House of Cards" (I watched the first 5 minutes of Chapter 1 this morning, and I'm hooked already). We discuss how binge-viewing is changing viewers' expectations and influencing content creators. For more about the pros and cons of Netflix's binge-viewing strategy, see my prior analysis here.
Next we talk about eyeIO, and its THX certification announced yesterday. Colin provides a layman's explanation, that augments his post yesterday, of why this is so important along with the context of H.264 and the new H.265 standard just approved by the ITU. We also review the benefits to content providers and viewers.
Click here to listen to the podcast (19 minutes, 36 seconds)
I'm pleased to present the 164th edition of the VideoNuze podcast with my weekly partner Colin Dixon, now heading his own firm nScreenMedia. This week we dig into Netflix's Q4 results, which were reported this week. As I wrote yesterday, Q4 was certainly the best quarter Netflix has had in a couple of years, and it's encouraging to see the company getting back on track. It is still quite early in understanding how the overall streaming market will shape up and what Netflix's adoption will be.
In the discussion, we explore key questions around the company's growth prospects, competitive landscape and international expansion. On the last topic in particular, Colin adds his observations of how Netflix is doing in certain international markets where he been doing research and traveling.
Click here to listen to the podcast (26 minutes, 44 seconds)
Netflix reported its Q4 '12 results late yesterday, adding 2.05 million domestic streaming subscribers, 1.81 million international streaming subscribers and losing 380K domestic DVD subscribers. All of these numbers were slightly better than the high end of the guidance range that Netflix provided with its Q3 report back on Oct. 23rd. Netflix also reported an $8 million quarterly profit globally, compared to its forecasted range of a loss of $13 million to a profit of $2 million.
Predictably - and just as happened a year ago when Netflix reported a relatively strong Q4 '11 - this morning's headlines are touting the company's turnaround (a sampling of what I've seen: "A Resurgent Netflix Beats Projections, Even Its Own," "Netflix's Q4 restores company's investment luster," "Netflix Posts Surprise Profit," "Netflix smashes street expectations," etc.). Investors are even giddier, sending Netflix's shares up more than 44% this morning.
To be fair, after the horrendous period beginning in mid-2011, with the ill-fated Qwikster and aggressive rate increase decisions, the Q4 results are quite heartening. Domestic streaming subscriber additions were at their best level since the heady days of Q1 '11. DVD subscription losses slowed to their lowest level since the losses began following Qwikster. And international turned in its best quarter of subscriber acquisitions to date. Management also said that churn is improving and international payment issues are being resolved.
Nonetheless, and at the risk of sounding like the "skunk at the picnic," I think there are still some key open questions for the company, which I would generally put into 3 buckets:
Welcome to 2013! If you were mostly checked out over the past 1-2 weeks (or were only paying attention to the fiscal cliff roller coaster), you didn't miss a whole lot in the video world. However, there were 5 items that caught my attention which I briefly describe below:
Scan comScore's monthly rankings of top video properties and one of the interesting things you'll notice is that aside from maybe one or two TV networks' sites, those with the heaviest traffic (e.g. YouTube, Yahoo, AOL, VEVO, Facebook, etc.) specialize in short-form content.
What this means is that unlike traditional TV - which features 30 and 60 minute programs (if not longer) - in online video many viewers' experiences consist of cobbling together numerous shorter clips, requiring them to repeatedly make a choice of what to watch next. The reality is that in online video there is little actual "programming" or "scheduling" that happens - where human beings actually create and curate a flow of programs designed to keep the viewer in place for longer (and more monetizable) periods of time.
Recognizing this deficiency - and the proliferation of Internet-connected TVs - a new service launching today called Portico, from startup Net2TV, aims to package, or cluster by genre as "mosaics," certain online videos, to create a more TV-like experience for viewers. Portico's service, which is available initially on Philips SmartTVs in the U.S. presents mosaics featuring either a specific content provider, or multiple providers. In the former example, CBS Interactive's CHOW.com has its own mosaic, whereas the "Portico Tech" mosaic includes content from Discovery's Revision 3 and Bonnier's Popular Science.
Having binge viewed 8 episodes of the final season of "The Wire" on HBOGO over the long weekend, I am very intrigued by Netflix's strategy to release all 13 episodes of its first high-profile original series, "House of Cards" on Feb. 1st. Based on the trailer (see below), the show looks very compelling. The question is whether Netflix's strategy strikes the correct balance between delighting its subscribers vs. best serving its own business interests.
Binge viewing, or watching numerous episodes of a TV series in a concentrated time period, has become a huge phenomenon, pioneered by Netflix's subscribers themselves. The opportunity to watch as much as you want of a series, on multiple devices, and at any time you prefer (and without any commercials!), is the ultimate in consumer control. As Netflix migrated to streaming, it erased the last obstacle to binge viewing, the need to mail back one DVD in order to get the next one with successive episodes.
comScore released its October Video Metrix rankings late last week and the good news for YouTube was that with a little over 13 billion videos delivered, its market share nudged up to 35% from September's 33.3%. As I wrote a few weeks ago, that was a record low share for the perennial online video leader, and was actually down from 53.1% just 2 months prior.
However, as the chart below shows, it's the third straight month of share below 40% and may well represent the "new normal" for YouTube's place in the industry. One interesting explanation for the drop in share is the comScore's numbers don't account for mobile (smartphone and tablet) viewing. If proportionately more of YouTube's viewing has shifted to mobile, then the declines in its online share would reflect that.
I'm pleased to present the 156th edition of the VideoNuze-TDG podcast with my weekly partner Colin Dixon, senior analyst at The Diffusion Group. Google is all over the online video industry and today is an "all Google" podcast, as we focus on updates related to Google TV, Google Fiber and YouTube.
First up is Google TV, and Colin discusses new features including voice-based search, the PrimeTime TV/movies app and updated YouTube app, as well as a new AirPlay-like app that allows users to watch video through their Google TV that was discovered on their Android devices. Colin views all of these as the continued evolution of Google TV, which long-term he believes will become an interesting device.
Next up, the first installations of Google Fiber occurred this week in Kansas City. The much-hyped project promises to deliver 1 gig speeds for $70/month, though a profile of an early customer indicated actual speeds around 600-700 mbps. Still, that's a huge jump from typical broadband ISP service and Colin shares scenarios of what may happen when speeds and bandwidth caps are no longer constraints.
We finish up with YouTube, which this week revealed that it will re-invest in 30-40% of the original channels it helped launch, meaning 60-70% won't get additional funds. Like TV networks, YouTube is learning what works and what doesn't, and re-upping accordingly. It's also worth noting that the YouTube app launched on Nintendo Wii this week, further spreading YouTube's reach into the living room.
Click here to listen to the podcast (16 minutes, 39 seconds)
In my post last Tuesday, I cited comScore data showing that YouTube's share of online video views had dropped to 33.2% in Sept. '12, its lowest level in the 3+ years since I've been keeping track. On our weekly podcast last Friday, Colin Dixon from The Diffusion Group noted that while YouTube's view count was down, its time spent per viewer (sometimes referred to as "engagement") had increased during the past year.
Colin's point was consistent with YouTube's own goals; in response to my post, a YouTube spokesperson had directed me to a company blog post from August, in which Eric Meyerson, head of creator marketing communications, described changes the company had made to "encourage people to spend more time watching, interacting and sharing with the community."
I'm pleased to present the 154th edition of the VideoNuze-TDG podcast with my weekly partner Colin Dixon, senior analyst at The Diffusion Group. This week finds Colin in Copenhagen, in the middle of the Nordic region which is seeing a lot of OTT activity from Netflix, HBO Nordic and others. Colin provides an update on what he's learned.
In addition, we discuss YouTube's declining market share, which in September stood at 33.2%, down from 53.1% as recently as July. I delved deeply into all of the year-over-year data this past Monday. Colin adds another dimension to the analysis, saying that this reflects a shift away from viewing short clips, toward longer-form viewing.
Click here to listen to the podcast (20 minutes, 8 seconds)