Comcast has announced that it will acquire Time Warner Cable in an all-stock transaction valued at $45.2 billion. Comcast is already the biggest video and broadband provider in the U.S. and will now get even bigger, assuming the deal is approved. Comcast has committed to divest around 3 million of TWC's video subscribers to stay below 30% of the total U.S. pay-TV market, so the combined company would have approximately 30M video subscribers. Broadband subscribers would be a little less than 30M.
For me, the big takeaway from the deal is that in the broadband era, scale matters a lot - and to compete effectively, a company simply has to have it. Nearly ubiquitous broadband and wireless connectivity, plus massive proliferation of devices, have enabled online-only players to have easy access to massive global audiences. This context has helped fuel the rise of companies including Google, Facebook, Amazon, YouTube, Netflix, Twitter and many others. With innovative services and solid execution, it's now possible to create huge businesses quicker than ever.
I'm pleased to present the 212th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.
Earlier this week, Roku CEO and founder Anthony Wood, who I interviewed at NATPE, described his long-term vision for Roku to replace pay-TV operators' set-top boxes. Anthony believes that as online video apps become more prevalent, and pay-TV operators want to seamlessly offer them, the logistics for doing so will be so complex, that alternative approaches like using Roku, will become more attractive. Colin and I debate the pros and cons of this vision.
Then Colin walks us through Comcast's stellar Q4 '13 results, announced earlier this week. Of particular note, Comcast added video subscribers in the quarter, the first time in over 6 years. Colin has crunched the numbers and concludes that Comcast will likely have more broadband subscribers than video subscribers by mid-to-late 2014, a stunning development. We explore what this means.
Listen in to learn more!
Click here to listen to the podcast (21 minutes, 11 seconds)
Comcast reported its Q4 '13 and full-year results this morning, which included the company adding 43K video subscribers vs. a loss of 7K in Q4 '12. It was the first time Comcast added video subscribers since Q1 '07. When the biggest pay-TV operator in the U.S. reports a glimmer of health in its core video business, the question begs, are fears about cord-cutting reduced?
While I've always believed that cord-cutting was over-hyped, the reality is that Comcast's positive move does not in and of itself mean concerns about cord-cutting are lessened. That's because Comcast's gain likely says less about cord-cutting dynamics than it does about pay-TV industry share-shifting. For years, the industry pattern has been that telcos and satellite operators have been taking video subscribers from cable TV operators.
Categories: Cable TV Operators
I'm pleased to present the 209th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.
Colin was at CES this week and I've been avidly following all of the news coming out of Las Vegas, so on this week's podcast we share some of our top observations. On the list are 4K TVs, Smart TVs, Roku TV, Sony's cloud-based pay-TV service, Aereo's new $34 million financing and AT&T's "Sponsored Data" initiative among others.
Listen in to learn more!
Click here to listen to the podcast (22 minutes, 4 seconds - sorry, for running long, lots of content this week.)
At CES this week, Sony announced an ambitious over-the-top pay-TV service that will launch sometime in 2014, making it the latest company to try competing with entrenched pay-TV operators. While Sony brings more assets to the table than did Intel (whose OnCue service never even got to market), the odds of Sony succeeding still seem extremely low to me.
To be fair, Sony's installed base of 25 million PlayStations, its early success with the PS4 and a broader base of connected TVs and Blu-ray players (which Sony says all total to 70 million in the U.S.) give the company a presence in homes that Intel didn't have. Sony also has both studio and TV production operations, plus a sizable back catalog, none of which Intel has. Importantly, Sony also has a well-recognized consumer brand (even if it's not exactly synonymous with innovation as, say, Apple's and Google's are), something Intel also didn't have.
When Comcast said earlier this week that it was increasing to 35 the number of channels available for out-of-home streaming for its subscribers, available on iOS and Android mobile devices (in addition to computers), it was another powerful sign of how TV is moving beyond the traditional confines of the living room and set-top box.
But as I thought about how robust this new out-of-home offering will be, it got me wondering, again, about the risk of subscribers sharing their passwords with non-subscribers. "Do no harm" is a key mantra among all media companies these days who must take care not to have new services or features undermine traditional value propositions. Until now this hasn't been a big issue for Comcast with its out-of-home streaming feature, as it included only on-demand content and a limited number of live channels which were solely viewable on computers. It was interesting package, but not super-compelling.
The WSJ has reported that Netflix is holding early stage discussions with at least two U.S. cable operators, Comcast and Suddenlink, about having its app included in their set-top boxes. I've been seeing a lot of arguments for why Netflix partnerships would be good for cable operators, but it seems to me there would be a lot of risk involved for them if such deals materialized.
Helping Netflix become bigger and stronger would be disadvantageous for cable operators. First and foremost, this would be felt in the area of content rights. By securing past seasons of TV programs, Netflix has driven the binge-viewing phenomenon and become its biggest beneficiary. I expect binge-viewing will only gain in popularity going forward as more people experience it and more devices make it ever easier to do. Adoption of binge-viewing means those distributors with strong video libraries will do better.
I'm pleased to present the 199th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. In this week's edition we discuss the new "See It" tool announced in a partnership between Comcast/NBCU and Twitter.
Beginning in November, certain tweets about TV shows will carry the "See It" button. When users click on it, they will be given choices to watch the program now on their mobile device, tune their Comcast X1 set-top to that channel to watch on TV, set their DVR or receive a reminder (more about how See It works here).
Colin and I both like See It's potential to convert the "chatterfest" that now regularly occurs on Twitter around TV shows and live events (sports, award shows, etc.) into higher viewership. Tightly coupling social discovery and the opportunity to immediately watch is very compelling. If Twitter can show See It can actually driving viewership (note, still a big "if"), it would become a very important promotion tool for the TV industry.
We also discuss how See It works with authentication/TV Everywhere, the critical role that Comcast's new IP-based X1 set-tops play in enabling See It, how the rest of the pay-TV industry might adopt See It, and the potential to spread See It to other social sites. See It's widespread adoption will require a lot of TV ecosystem support, but if its value is quickly proven, we believe that could happen.
(Last - Colin and I will both be participating in BroadbandTV Con in Hollywood Nov. 4-6. Come meet us! VideoNuze readers get $75 off conference registration using the code "VideoNuze." Colin will also be hosting a pre-conference workshop.)
Click here to listen to the podcast (17 minutes, 19 seconds)
Final bidding was scheduled to close last Friday in the Hulu sale process, with the list of potential buyers apparently narrowed to DirecTV, Chernin Group/AT&T and Guggenheim Digital Media. According to various reports (here and here), Hulu's active owners Disney and Fox (Comcast is a passive owner) have been insisting on a number of content licensing related deal points.
Hulu's next-day access to its 3 broadcast owners' hit shows has always been the heart of the company's value proposition. But a lot has changed in the online video landscape since Hulu was initially formed in March, 2007. As a result, in my view, there are at least 3 key reasons Hulu's owners are justified in bargaining hard over content licensing rights: the importance of TV Everywhere, the growth of well-funded over-the-top licensees and the potential of online video advertising. Following, I delve into each.
Remarkably, it's already been 4 years since the CEOs of Time Warner and Comcast unveiled the concept of TV Everywhere in a high-profile press event. Since then numerous successful services have launched (e.g. HBO GO, WatchESPN, etc.), yet the prevailing consensus - which I agree with - is that TV Everywhere hasn't yet been adopted at nearly the level anticipated.
I've written in the past about the 5 key things I believe are holding back TV Everywhere and 1 of them is "authentication" - the process of verifying a user and providing rights to watch programming covered by their subscription. Picayune as it might seem at first blush for pay-TV subscribers to remember and input their user name and password to be authenticated, it has turned out to be a genuine barrier to adoption.
That's why Comcast's announcement yesterday of "Home Pass" which auto-verifies and logs in dual Comcast video and broadband subscriber when accessing Xfinity TV (the company's branded TV Everywhere initiative) is significant. Rather than fumbling for their credentials, users can simply visit the Xfinity portal and begin watching nearly instantly.
Though online video has become a hugely popular source of on-demand video for consumers, it's not the only one available. Pay-TV operators have invested heavily in deploying their own on-demand systems through set-top boxes, which have gained strong acceptance. Comcast, for example, now reports 400 million on-demand sessions per month with about 40K TV show episodes and movies available.
However, when it comes to monetization, there's a significant difference between pay-TV VOD and online video. Whereas online video advertising has developed a robust ecosystem that will drive around $4 billion in revenue this year, pay-TV VOD advertising is nascent, as it has suffered from years of underinvestment.
More recently, though, companies like BlackArrow have developed dynamic ad insertion (DAI) capabilities for VOD, which have been deployed to around 30 million homes. In a fascinating discussion at the June 4th Video Ad Summit, Ashley Swartz from Furious Minds led a deep dive discussion of pay-TV VOD DAI and its relationship to both TV and online video with executives from BlackArrow, Comcast and OMD. For anyone trying to better understand these platforms and their monetization potential, the discussion provides great learning and insights.
The video is below and runs 31 minutes, 22 seconds.
I'm pleased to present the 184th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. This week we discuss the cloud's impact on video delivery. First, I share thoughts on Comcast's X2 platform, unveiled this week, in which the cloud plays a central role.
Colin notes that with Comcast's approach, there is still a fair amount of client-side processing happening, so it's not fully capitalizing on the cloud just yet. Colin draws a distinction between Comcast's approach and that of ActiveVideo Networks (which I recently wrote about), whose CloudTV moves all the processing to the cloud, allowing services to run on older set-top boxes and newer CE devices.
It's still early days in the cloud's deployment with different models at work, but there's no question it's going to become a bigger part of the video delivery landscape.
Listen in to learn more!
Click here to listen to the podcast (19 minutes, 43 seconds)
At the Cable Show yesterday, Comcast's CEO Brian Roberts showed off "X2," the latest generation of its cloud-based X1 entertainment platform. Beyond a slew of UI improvements, X2 offers at least three things that are very important and I believe, indicative of key future trends in video delivery: cloud-based DVR, an inexpensive IP set-top box and a unified cross-platform experience.
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)
I had a classic TV Everywhere moment tonight I thought I'd quickly share. I got back to my hotel room in NYC after dinner, flipped on the TV to watch the Celtics try to break the Heat's winning streak and discovered ESPN and many other channels weren't working.
But instead of calling the front desk, waiting for a technician, keeping my fingers crossed, etc. (guessing my fellow travelers know this experience too well), I fired up WatchESPN, entered my Comcast credentials and was watching online within minutes. For the most part, video quality was very strong. The key was being able to watch via the hotel's WiFi network because the stream would have drained my 2GB Verizon data cap.
Binge-viewing will get another big bounce when Comcast holds its first-ever "Watchathon Week" March 25-31, allowing Xfinity TV subscribers to access over 3,500 episodes from 100 TV series on 30 different premium, ad-supported cable and broadcast networks. All VOD-enabled Xfinity subscribers will be able to access the programs, via Xfinity On Demand, Xfinity.com and the Xfinity TV Player app on iOS and Android devices.
Several weeks ago, after watching Intel Media chief Erik Huggers interviewed at the D: Dive Into Media Conference, I expressed skepticism that the company's marketing plan for its forthcoming pay-TV service would work. Huggers explained that Intel would emphasize a breakthrough, high-quality video experience, rather than a "value approach" where consumers could possibly save money by switching to Intel.
While I agree with Huggers that there's a lot left to be desired in today's pay-TV experience, the reality is that the industry's big players have set the tone for how consumers make their decisions to switch providers: price first, features second. The latest evidence of this was another Verizon mailer that arrived at my house last week (see below), offering a 2-year, $89.99/month bundle of video/broadband/voice and a $250 Visa card. Verizon will also bump the broadband speed to 50/25 mbps as a bonus.
Comcast has announced that Xfinity TV subscribers who use the Xfinity TV Player app on their Android and iOS mobile devices can now download certain TV shows and movies, so they can watch when they're not connected to a broadband network. The download option closely mirrors TiVo's recently announced "Stream" device, which also allows downloading.
As I wrote in my review of TiVo Stream, I think the offline viewing use case is a killer app. Despite the proliferation of 4G services, the reality is there are still plenty of times when connectivity is sub-par or non-existent, particularly in transit situations (e.g. airplanes, cars, trains, etc.). Further, the elimination of unlimited data plans by wireless carriers makes streaming long-form content prohibitively expensive. As a result, the download option is very attractive, especially for travelers.
Last Friday morning Comcast reported strong Q3 '12 results, including its 8th straight quarter of lower year-over-year video subscriber losses. For Q3 '12, it lost 117K subscribers, vs. 165K in Q3 '11. This pattern stretches all the way back to Q4 '10, when Comcast lost 135K subscribers, vs. the 199K it lost in Q4 '09. Obviously no business likes to lose customers, but Comcast's (and all cable operators') reality is that with the incursion of telcos and satellite operators, some market fragmentation was inevitable.
On its earnings call, Comcast executives didn't point to any one reason for the ongoing video subscriber improvement, except to point to solid execution and "competing effectively with our improved products and services." Of course it doesn't hurt that the economy and housing have both picked up recently. Comcast's performance is also likely coming at the expense of telcos and satellite operators, whose Q3 results have not yet been fully released.
Categories: Cable TV Operators
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.