Some great reporting from Ad Age over the past couple weeks reveals how Amazon and Google are ramping up in premium video advertising. Given the size and respective positioning of both companies, their initiatives are worth paying close attention to.
First, on Google, Ad Age reported that YouTube has begun to offer feature length movies like “The Terminator,” “Rocky” and “Legally Blonde” for free and with ad support (note all are also available on The Roku Channel). They’re part of around 100 movies YouTube has collected in a bid to further boost YouTube viewership and give advertisers more access to premium, brand safe content.
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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Add Amazon to the growing list of companies that are gunning for their share of TV ad dollars. According to a report in The Information, Amazon is planning to launch a free, ad-supported video service for its Fire TV users that may be called Free Dive. As described, Free Dive looks to be very similar to Roku’s The Roku Channel, which is available to Roku users and as of a few weeks ago also on the web.
For Amazon, the move makes perfect sense in a number of different ways. First, it’s a great complement to the growing array of paid video options Amazon offers (TV programs/movies in Prime, SVOD services in Amazon Channels, transactional, etc.). Free, ad-supported video gives Amazon its own inventory to promote all of these paid services in various ways.
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).
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.
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.
I’m pleased to present the 423rd edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
Apple and Amazon aren’t two companies that come to mind for helping traditional pay-TV operators, but this week brought news of both doing exactly that. Apple announced at its WWDC the integration of Charter’s Spectrum app in Apple TV that will allow users to gain “zero sign-on” access to the app’s content. Other operators have made their apps available on connected TV devices, but this was a first for Apple TV.
Then Amazon announced its Fire TV Cube, a mashup of Echo and Fire TV that also aspires to control your entertainment center. The device includes IR blasters to provide limited control over existing set-top boxes, a rare instance where Amazon is looking to help a prior technology rather than disrupt it.
Colin and I discuss both moves, as well as the broader context that we see for the “appification of TV.” This is already happening with vMVPDs and we expect over the next couple years all major pay-TV operators will have apps for their services available on all major CTVs. For consumers this will be a huge win as they can avoid renting often outdated and expensive set-tops.
(Note, Colin will be moderating the “Connected TV’s Ad-Supported Future” panel at the VideoNuze Online Video Ad Summit on Tuesday. Register now!)
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Amazon launched its new Fire TV Cube this morning - logically combining an Echo device with a Fire TV. But the Fire TV Cube has higher ambitions: to be an entertainment hub, controlling compatible TVs, sounds bars, A/V receivers and even cable or satellite set-top boxes, to deliver 4K TV. The set-top box integrations mean that Amazon is positioning the Fire TV Cube as a surprising friend to pay-TV, rather than a disruptor, the company’s typical role.
Amazon said that the Fire TV Cube is compatible with set-top boxes from Comcast, Dish and DirecTV, Spectrum, Verizon, Cox, Alice and Frontier, covering more than 90% of households with a cable or satellite subscription. The feat is accomplished through the use of IR blasters in the Fire TV Cube that can switch the input to the set-top box and then turn it on/off and change channels. I haven’t tried the Fire TV Cube yet so I don’t know how well any of this works, but my prior experiences with IR have shown it can be finicky.
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.
I’m pleased to present the 416th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
Netflix reported its Q1 ’18 results earlier this week and once again the performance was very strong, with revenue up 43% and average paid streaming subscribers up 25% to 125 million globally. Colin and I discuss what’s driving the company. With 55.1 million paid U.S. subscribers at the end of Q1, it’s possible that Netflix will hit 60 million by the end of 2018, which is the low end of the range of 60-90 million the company has long said it believed it could achieve.
We then turn to discussing Amazon’s new deal with Best Buy for its “Fire TV Edition” smart TVs, which were announced earlier this week. We agree that the move is yet another aggressive step in Amazon’s goal to dominate both the living room and whole home. Amazon’s CEO Jeff Bezos also announced this week that Prime has hit 100 million subscribers with video continuing to drive acquisition and retention. Colin and I both see Amazon expanding further by launching a skinny bundle pay-TV service sometime in 2018.
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Amazon is making a major push into smart TVs, with rival Best Buy as an unlikely partner. The companies announced that Best Buy will introduce more than ten 4K and HD “Fire TV Edition” TVs from Toshiba this summer and in-house brand Insignia later this year. Best Buy has had a deal with Roku for its Insignia line, which will now end. Amazon has had a Fire TV Edition model with Element that is being discontinued.
The new Fire TV Edition TVs will be sold exclusively in Best Buy physical stores, on BestBuy.com and from Best Buy as a third-party seller on Amazon.
I’m pleased to present the 412th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
New data from Deloitte shows a convergence of streaming video behaviors among 3 age groups, Gen Z (14-20 year-olds), millennials (21-34 year-olds) and Gen X (35-51 year-olds) in terms of viewing frequency, subscription levels and binge-watching. Colin and I discuss the data and what’s likely driving the convergence.
We then dig into the math behind Amazon’s originals and how they contribute to Prime memberships and the company’s profitability. Jeff Bezos has spoken publicly about how video drives commerce. My analysis of Amazon’s “The Man in the High Castle” supports this, proving that Amazon is a totally new breed of competitor in the video and TV industries.
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Last week Reuters reported data from internal Amazon documents that for the first time provided insights into viewership of the company’s original TV programs and their contribution to creating new Prime subscriptions. Below I’ve done some additonal math using separately reported information to calculate how profitable at least one of Amazon's original programs could be.
Last October, Fortune reported research from Consumer Intelligence Research Partners indicating that Amazon Prime subscribers spend an average of $1,300 per year compared to an average of $700 per year that non-Prime subscribers spend. (Note, back in Fall, 2016, Morgan Stanley said that according to its survey, Prime subscribers spend nearly $2,500 per year, vs. $544 for non-subscribers). For the purpose of my calculations, I just used the CIRP estimate of $600 incremental spending per year by subscribers.
Preliminary overnight numbers for the Oscars show an 18.9 rating in prime time, down 16% vs. 2017’s 22.4 rating. The overnight rating is a new record low for the Oscars, and importantly continues the dismal showing for 2018’s marquee TV events: Golden Globes (-5% vs. 2017), Super Bowl (-7% vs. 2017, worst in 9 years), Olympics (-7% vs. 2014, worst ever) and Grammys (-24% vs. 2017, worst in 9 years). Clearly TV’s biggest events are losing their luster.
There are always challenges particular to each event (e.g. Olympics time zone issues, Patriots fatigue, etc.). In the case of the Oscars, an ongoing problem is the disconnect between best picture winners and box office performance. A fascinating WSJ article on Friday detailed how only 4 best picture winners in the past 12 years have been among their year’s 25 highest-grossing movies, with none cracking the top 15. In the current era of superheroes, animation and franchise movies, thoughtful best picture nominees simply don’t draw the biggest audiences, in turn diminishing the Oscars’ relevance (2018 could be a quasi-exception with “Black Panther”).
Video ad tech provider SpotX has announced server-side ad insertion interoperability with Amazon Web Services’ Elemental MediaTailor service. This means that content providers which are joint customers of SpotX and AWS Elemental MediaTailor are able to use SpotX’s ad decisioning capabilities to dynamically serve targeted ads, using server-side ad insertion.
With server-side ad insertion (“SSAI”), which is also known as ad stitching, relevant ads are integrated with the content at the server level, providing a better viewer experience as compared with when ads are inserted by the player on the user's device. The latter model often results in buffering as the player transitions between content and ads and vice versa. Buffering is major challenge for content providers because it is the leading cause of abandonment, which in turn diminishes monetization.
Happy New Year! I’m pleased to present the 401st edition of the VideoNuze podcast, and our first of 2018, with my weekly partner Colin Dixon of nScreenMedia.
As is our tradition, we discuss our top trends for the new year. 2017 was extremely busy for the industry and we expect 2018 to be no different. Among our top trends are wireless providers pushing deeper into video, YouTube TV starting to break out among skinny bundles, cord-cutting accelerating and Amazon pursuing many different opportunities to build its video business. We also discuss 4-5 additional trends to watch.
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