Underscoring once again how unpredictable the online video space is, Twitter has emerged as the unlikely winner of the rights to stream NFL Thursday Night Football (TNF) games for the 2016-2017 season. Just yesterday I wrote that with Facebook and Apple bowing out, the bidding likely came down to Amazon, Verizon and Google, with Verizon the most likely winner for a variety of reasons.
On the one hand, Twitter’s interest in streaming the TNF games makes sense, as recently returned CEO Jack Dorsey has publicly stated that a top 2016 priority is live streaming, including leveraging its Periscope product. The 10 TNF games give Twitter a marquee property to highlight live streaming, which complements Twitter activity around all games. And Twitter already had a deal in place with the NFL for highlight clips.
Late Friday afternoon, Bloomberg reported that Facebook had dropped out of the bidding for streaming rights to the NFL’s Thursday night package. That news followed Recode’s report from last month that Apple had also withdrawn. With two of the most likely candidates now gone, the only digital players remaining who are both big enough to afford the deal and for whom it potentially makes enough strategic sense are likely Verizon, Google and Amazon (I’m excluding Yahoo since its own instability almost certainly precludes a bid).
Cord-cutting accelerated in 2015. Once again, It dominated headlines about the pay-TV industry, portending its imminent demise, as SVOD awareness and original content investments skyrocketed. But despite all of that, top Wall Street analyst Craig Moffett of MoffettNathanson (who has participated in many VideoNuze events) issued a bullish note this morning on cable TV operators’ prospects in 2016.
Craig’s analysis highlights the subtleties of the pay-TV industry’s dynamics that are too often glossed over in generic media coverage about cord-cutting’s ascent. The nub of his argument is that while the overall pay-TV industry is indeed pressured in many ways, cable operators’ distinct product and technology advantages vs. its primary competitors (satellite and telcos) have led to cable operators taking market share, helping insulate them from macro issues.
Categories: Cable TV Operators
The past week has brought some pretty remarkable statements from Verizon executives, suggesting that the company - which has long-trumpeted its FiOS TV service - has all but thrown in the towel on traditional pay-TV. The decision has broad implications for the pay-TV and broadband industries.
First, at this week’s Ignition conference, Verizon CEO Lowell McAdam said “People do not want 300-channel bundles and the economics won’t work for that.” Instead he’s betting on Verizon’s skinnier “Custom TV” service, which averages between 40-60 channels, and which McAdam said now drives “40% of FiOS’ subscriber volume.” McAdam also talked up Verizon’s Go90 mobile video service as a potential substitute and the company having hired “a couple thousand people” in Silicon Valley.
"It was the best of times, it was the worst of times…"
If you’re looking for a stark illustration of the diverging fortunes of the online video and pay-TV industries - as well as the generational attention/passion gap between the two - then comparing the buzz out of last week’s 6th annual VidCon with the poor early Q2 video subscriber numbers from big pay-TV operators is about as good as it gets.
For those not familiar with VidCon, it’s the annual convention of YouTube creators, fans and increasingly advertisers that want to weave themselves into this community. This year VidCon drew somewhere between 20K-30K attendees (up from 1,200 just 5 years ago) to the Anaheim Convention Center, with the vast majority being teenagers seeking to get up close to their favorite YouTube celebrities for a coveted selfie.
Verizon reported that Q2 ’15 FiOS video subscriber additions declined to just 26K in Q2 ’15, down from 100K additions in Q2 ’14 and 140K additions in Q2 ’13. In the earnings call, Verizon CFO Fran Shammo pinned the blame for the declines on “triple play offer changes at a time of increased competitive intensity” before saying that its new Custom TV packages are now accounting for a third of all new video subscribers.
Verizon is the first big pay-TV operator to share its results and a key question is whether its weak quarter is an early indicator of an accelerating industry slowdown. Last week, in discussing Netflix’s breakout Q2 ’15 results in the U.S. (in which it added 900K subscribers vs. a range of 530K-630K additions in each of the prior second quarters), I asserted that Netflix’s gain could finally be coming at pay-TV’s expense, particularly among younger cord-nevers.
We’ve all heard the adage: if content is King, then distribution is King Kong. For years, distribution and content have been the King and King Kong of advertising: the synergistic, dynamic duo that owned the consumer relationship. But, with Verizon’s purchase of AOL and other recent industry moves, King and King Kong are joining forces with new and powerful allies.
It used to be that creators of content, such as television networks, owned the consumer relationship. Back in the day, brands looked chiefly to the television advertising upfront presentations for the demographic info they desired to drive brand awareness. Consumer focus groups filled in the rest of puzzle.
Despite all the advances in online video in recent years, which have been wide-ranging across technologies, business models and consumption habits, most publishers' approach to mobile video continues to fail. While many feel that 2015 is the year of digital video, the industry won't have truly arrived until we're able to solve our mobile problem, and several other lingering challenges.
These challenges were discussed last month in JW Player's second annual JW INSIGHTS conference, which brought together video experts, influencers and partners from a cross-section of companies including Google, Popsugar and Verizon to discuss the state of the online video industry and the factors that are still holding it back from even greater growth.
Categories: Mobile Video
I'm pleased to present the 273rd edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.
Since Verizon announced it was acquiring AOL for $4.4 billion earlier this week, there has been a ton of media coverage, with lots of speculation about what the deal means for Verizon going forward. This is at least partly due to the companies doing a relatively poor job of articulating the deal's strategy.
In this week's podcast, Colin and I weigh in as well, focusing mainly on how AOL's video, programmatic and video syndication assets could mesh well with Verizon Digital Media Services, which already provides back-end delivery and monetization to video content providers (see here and here). Combining the two seems like the biggest point of leverage to Colin and me, yet we note that Verizon didn't even mention a VDMS role in any public comments on the deal.
Meanwhile, in a week when the pay-TV industry suffered its first-ever first quarter loss of video subscribers, we also discuss how Verizon seems intent on innovating beyond the traditional multichannel bundle.
Listen in to learn more!
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Verizon's surprise $4.4 billion acquisition of AOL, looks like mostly a bet on video, mobile, and programmatic, with content likely the odd man out.
The deal gives Verizon a bigger play in 3 of the biggest trends in the media business - the explosion of personalized, on-demand video viewership, the massive adoption of mobile lifestyles via smartphones, and the shift to automated, data-driven ad buying through programmatic platforms. AOL has been pursuing all of these over the past few years through internal growth and acquisitions.
U.S. pay-TV operators lost 31K video subscribers in Q1 '15, compared to a gain of 271K in Q1 '14, according to analysts MoffettNathanson. The loss was the first time the industry has ever lost subscribers in a first quarter, and signals an acceleration of cord-cutting (or cord-nevering, since it's hard to pull the two apart), contributing to a .5% industry contraction over the past 4 quarters (461K subscribers).
MoffettNathanson has always tried to put pay-TV results in context with both occupied housing net additions and new household net additions. In Q1, the former declined by 407K, but the latter increased by 1.3 million, suggesting around 900K households were added in the U.S. Despite the gain the industry still lost subscribers.
I'm pleased to present the 271st edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.
We had recorded last week's podcast just prior to the news that Comcast was dropping its merger bid for Time Warner Cable, so first up this week we share thoughts on why the deal collapsed.
In my view, the perception of the deal transformed from being cable-centric to being broadband-centric, largely due to the rise of online video usage. As a result, Comcast, post-merger, having 57% of American broadband connections under the new 25 mbps definition, became a sticking point (never mind that it actually has 56% on its own, reflecting its aggressive broadband infrastructure upgrades).
This is a key irony of the deal's failure - Comcast has invested billions in technology, but its woeful customer service ultimately undermines these investments and defines its reputation. In a hypothetical world where Comcast was a "most admired company," (like Apple, Amazon, etc.), I think it's quite possible regulators would have actually welcomed the Time Warner deal.
We then turn our attention to Verizon's "Custom TV" packaging and ESPN's lawsuit. As I explained in Has Verizon Put ESPN Into a Public Relations Headlock Over Opaque "Sports Tax?" I think Verizon is making a brazen move to reign in sports costs. Colin and I agree it's the most startling thing yet to happen in a tumultuous year for the pay-TV industry.
Listen in to learn more!
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We've seen a lot of surprising moves in the pay-TV industry in 2015, but at the top of the list has to be how Verizon is trying to put ESPN into a public relations headlock with its new "Custom TV" packaging plan.
If you haven't been watching this closely, Verizon announced "Custom TV" last week. Under the plan, Verizon FiOS subscribers can take a base package of 45 channels, including the 4 broadcast TV networks, for $54.99 per month, and get 2 "channel packs" which are smaller groups of genre-based such as lifestyle, Entertainment, News & Info, Sports, etc. Additional channel packs are $10 per month.
As the pace of new OTT services has ramped up, I've been asked by a lot of industry colleagues and press which ones I believe have the most and least potential. It's a great question, and while I don't pretend to have a crystal ball, I certainly have my own opinions (as VideoNuze readers know!). But even as I've been sharing my thoughts, I've increasingly been asking myself - why is it, for example, that I'm more bullish about some (e.g. HBO Now), more skeptical about others (e.g. Sling TV) and more willing to be open-minded about still others (e.g. Apple's and Verizon's TV services)?
That's led me to think more rigorously about the criteria that I'm personally using to evaluate the potential of these new OTT services. It may be obvious, but when each of us makes judgments about a product or service, we're doing so against some implicit set of criteria. The challenge with all these OTT services is that a lot is still unknown about them and about consumers' reactions to them. On top of this the market is very dynamic. Nonetheless, I think it's still possible to create a set of criteria against which these new OTT services can be more explicitly evaluated (and re-evaluated as more information about them is known).
With that in mind, below I have shared 9 proposed criteria that I think are important in assessing these new (and existing) services' potential (there may be other criteria too!). By scoring each OTT service on a 1-5 scale against each criteria (i.e. 1 meaning "weak" or "not distinctive" and 5 meaning "strong" or "highly distinctive," their respective total scores emerge, forming a picture of potential winners and losers. If you're interested in using these criteria to do your own scoring, I have created a handy Google doc. Feel free to access, export to Excel, modify, etc. I'm interested in your results and comparing notes.
Here are my 9 proposed criteria:
Verizon and Sony are both on deck with new OTT services poised to launch shortly, according to new reports over the past couple of days. Both companies have previously stated their intentions to pursue new video services, but haven't been specific about their timelines or anything else.
That is beginning to change, as Verizon announced yesterday that AwesomenessTV will provide 200+ hours of original content for its forthcoming service, via 2 channels, one targeted to teens and the other to young millennials. The channels will include scripted and unscripted series along with DreamWorksTV animated short-form content.
I'm pleased to present the 245th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.
Today we debate the odds of success for so-called "vPops," or virtual pay-tv operators - companies looking to deliver pay-TV services over-the-top. I expand on some of the points I made earlier this week for why I think the odds are against vPops succeeding. Fundamentally this comes down vPops' inability to cost-effectively access programming and package it in an appealing way to gain market interest.
Colin sees it very differently, believing vPops CAN create skinnier bundles of channels and successfully target highly specific cord-nevers, cord-cutters and even some existing pay-TV subscribers. Colin believes these bundles can be created at a $30 retail price point and include a compelling array of channels. He also sees room for vPops to offer full channel line-ups at lower cost than today's pay-TV operators, complete with lots of user experience enhancements.
It's a great debate and we're both eager to see what vPops actually DO come to market with over the next 6-9 months to see how things turn out.
Click here to listen to the podcast (23 minutes, 50 seconds)
Lately there's been a lot of talk about so-called "virtual pay-TV operators," (vPops as my partner Colin Dixon at nScreenMedia likes to call them), which are also called "virtual MVPDs" (multichannel video programming distributors). These are companies that will deliver linear and on-demand broadcast/cable TV network bundles from the cloud, over broadband to connected/mobile devices, offering an alternative to traditional pay-TV services.
Sony, Verizon and Dish Network have all publicly stated their interest in launching vPop services in either 2014 or 2015. Though it's still early and much is yet to be known about their actual offerings, there are already many reasons to be skeptical that they'll achieve any material success.
The recent news about the DISH-Disney deal is a watershed moment for the entertainment industry. By gaining Internet streaming rights to ESPN, DISH is perfectly positioned to launch a consumer-friendly, IP-based entertainment network. As analysts have long reported, sports are the last holdout for pay-TV. For many consumers, it's the only reason they keep their expensive cable package subscription.
This is only the beginning. Other companies are now approaching Disney for Internet streaming rights, starting with DirecTV. And, more importantly, consumer viewing habits have shifted to mobile devices.
But the most exciting company I see today is Verizon. Here's why.
The 17 largest broadband ISPs in the U.S. added over 2.6 million subscribers in 2013, down almost 105K vs. the approximately 2.7 million subscribers they added in 2012. These ISPs now have 84.3 million subscribers, with cable TV operator ISPs having 49.3 million (58%) and telco ISPs having 35 million (42%). The data comes from Leichtman Research Group.
I'm pleased to present the 218th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. Both of us have continued to observe signs of how online video is coming of age, and today we discuss some of them.
We start with news that Comcast will begin selling episodes of "House of Cards" in its Xfinity online store. Putting aside the question of why someone would buy an episode for $1.99 when they could binge-view all 26 episodes in a month for $7.99, both of us thought it's noteworthy that the largest cable operator believes an online-only series is worth selling (and note too, the deal was done with Sony Pictures, and that Verizon also has been selling the series).
Then there was the report that Disney might acquire Maker Studios, a pure-play online video / YouTube content provider. While Colin and I get a chuckle out of the idea that the Disney flag could fly over Epic Rap Battles and PewDiePie, we agree it would be a smart bet to gain reach into the all-important millennial segment.
Then we turn to the $18 million investment by Warner Bros. in Machinima, an online video gamer-centric content creator also targeting millennials. The 2 companies already had a successful collaboration with the "Mortal Kombat: Legacy" web series. No doubt the new investment will spur more gamer-centric originals for distribution by Warner Bros.
We wrap up by discussing just how important millennials are to the video's future. Recent data suggest this group is still pretty glued into the pay-TV ecosystem, but their behaviors are changing fast, in turn leading established media companies to focus on online video more than ever.
Click here to listen to the podcast (17 minutes, 38 seconds)