Earlier this week, Hulu announced stellar 2018 results: 48% subscriber growth (8 million additions), bringing year-end subscribers to 25 million. Ad revenue of almost $1.5 billion, up 45% in 2018, with 50% growth in the number of advertisers. And median average viewer age of 32, which is 25 years younger than the average broadcast TV viewer.
All of this continues to come at a huge cost; by some estimates Hulu is losing upwards of $400 million per quarter. With Disney set to assume a 60% stake in Hulu after the Fox deal closes, managing Hulu’s growth and financial performance is going to be very important for Disney. Fortunately for Hulu, Disney is highly incented to see Hulu succeed because the company is poised to play a linchpin role in what is certainly Disney’s biggest 2019 priority, the successful launch of Disney+, its new SVOD service.
I’m pleased to present the 448th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
Continuing our tradition for our final podcast of the year, this week Colin and I discuss the top 10 video stories of 2018 - at least in our humble opinions. Once again it has been a very active 12 months, with lots of innovation and change. Colin and I have had a great time analyzing and discussing the critical industry trends each week and we hope you’ve enjoyed listening to our thoughts in 2018.
Let us know what you think of our choices, whether you agree or disagree!
Listen in to learn more!
Click here to listen to the podcast (37 minutes, 16 seconds)
I’m pleased to present the 438th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
On this week’s podcast, Colin and I take up the question I explored on Wednesday, whether Comcast should divest its 30% stake in Hulu to Disney, as CNBC reported it is interested in doing. Colin and I discuss the many benefits Comcast derives from having a front row seat with 3 senior executives on Hulu’s board. On the other hand, there are many reasons why Comcast would be compelled to sell.
Meanwhile, as part of its acquisition of Sky, Comcast will also be inheriting Now TV, the innovative OTT service Sky runs. Colin shares his personal experience with Now TV and some of the specific things Comcast might learn and consider bringing to its U.S. operations. As always, rights are a central issue to surmount.
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Click here to listen to the podcast (20 minutes, 35 seconds)
In the wake of Comcast’s winning $39 billion bid to acquire Sky over the weekend, CNBC has reported that Comcast may be looking to swap its 30% ownership stake in Hulu (plus other consideration TBD), for Disney/Fox’s 39% ownership in Sky (a deal for Comcast to buy that was reported this morning). CNBC said that Comcast sees “only limited value in owning a non-controlling stake in Hulu” given Disney’s 60% share once the Fox deal closes.
This logic is understandable and in addition, divesting the stake would also relieve Comcast of partly funding Hulu’s losses (reportedly almost $1 billion in 2017). On the other side of the coin, Disney would own 90% of Hulu and give up its non-controlling stake in Sky as Comcast takes control of it.
For all the talk about cord-cutting over the years, the most important trend in pay-TV these days isn’t consumers dropping out entirely, but rather shifting from traditional multichannel services to lower-priced virtual MVPDs or “skinny bundles.”
The trend of skinny bundle gains offsetting multichannel losses continued again in Q2 ’18 where, according to Leichtman Research Group, the top traditional services lost approximately 800K subscribers. But just the 2 publicly-reporting skinny bundles, Sling TV and DirecTV Now, gained 383K (with the latter accounting for 342K).
On Disney’s earnings call earlier this week, CEO Bob Iger was asked about the company’s video app strategy - would it be interested in launching one big “aggregated” app housing all of its content, or will it continue to pursue multiple apps with each targeting particular audience segments?
It’s an interesting question because it goes to the heart of whether consumers prefer a big basket of content at one price (the way the pay-TV industry’s multichannel bundle has been effectively offered) or more discrete content services that consumers individually choose to pay for (as has emerged with streaming video and music services, plus a wide variety of other apps)?
I believe Iger’s explanation of Disney’s app strategy was right on the mark:
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.
Everyone understands that being able to seamlessly run and measure cross-screen video ads is the holy grail. But behind the scenes there are all kinds of challenges, which were explored in the opening session of our recent VideoNuze Online Video Ad Summit, which included Mark London (VP, Ad Operations, Advanced Ad Products, Fox), Greg Lubetkin (Executive Director of Sales Operations, Disney ABC Digital) and Bunker Sessions (VP, Business Development, Extreme Reach) moderating.
The panelists discussed buyers’ expectations for unified analytics, optimizing monetization of all video streams, brand safety, maintaining strong user experiences with ad insertion, the role of AD-ID, how to manage programmatic across platforms and much more.
Late yesterday, Comcast made its $65 billion all-cash offer for key Twenty-First Century Fox assets official. The offer sets up a bidding war with Disney, which had already struck a cash and stock deal with Fox. My guess is that Comcast is going to end up prevailing and the bidding will actually be less heated than many expect. There are many dimensions to this drama, but here are 5 quick reactions I have.
Yesterday’s confirmation by Comcast that it is preparing an all-cash bid for Fox assets that would top Disney’s current bid came as no surprise. All that remains now for this corporate drama to go into overdrive is the decision on June 12th in the AT&T-Time Warner court case. If that deal is approved (which I believe is likely), Comcast is expected to formalize its Fox offer almost immediately. As these machinations continue, one looming question is what will become of Hulu?
Hulu is of course a joint venture among Disney, Fox and Comcast (via its NBCUniversal acquisition), with each company owning 30% and Time Warner owning 10% (that’s rounding as Hulu employees also own a piece). That means the ultimate owner of the Fox assets - Disney or Comcast - will also become a majority owner of Hulu. It seems to me Hulu would be more valuable to Comcast, and indeed Comcast should be angling to try to figure out how to take control of Hulu regardless of how the larger Fox deal sorts out. Why?
I'm pleased to present the 400th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.
In this week’s podcast Colin and I discuss our top 10 online video stories of 2017. It’s been another incredibly busy year with tons of industry innovation and progress. As always, it has been a lot of fun to analyze all of this and report on it. Let us know what you think of our choices, whether you agree or disagree!
Listen in to learn more!
Click here to listen to the podcast (35 minutes, 45 seconds)
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Unless there’s some big news, this will be my last post for 2017.
Happy Holidays to all!
I’m pleased to present the 389th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.
On today’s podcast, David Tice, SVP, Consulting at GfK, a global market research company, joins us to discuss factors Disney should be considering about how to price its OTT service that will launch in 2019.
David has researched for several years the maximum perceived value that subscribers of Netflix, Amazon and Hulu place on these services, finding that there’s a “natural limit” of around $11 per month per service. Value perceptions have increased a bit over the past 3 years but have stayed in a relatively tight range between approximately $8-$11 per month.
The research highlights the tight spot that Disney is in, because given the extensive content CEO Bob Iger has indicated will be included and the need to protect existing pay-TV relationships, the company will be very tempted to price higher than $11 per month, just as HBO Now has done. However, such a decision could significantly limit demand as occurred with HBO Now.
Listen in to learn more!
Click here to listen to the podcast (24 minutes, 8 seconds)
Though it won’t launch until late 2019, anticipation for Disney’s entertainment-focused OTT service further increased last week when CEO Bob Iger said at the Bank of America investor conference that the Marvel and Star Wars films would be a part of the service. Whether they too would move over from Netflix was a key unanswered question when Disney initially announced the OTT plan last month.
Iger also detailed everything that’s intended to be included in the service: the entire output of the Disney studio plus Pixar and Marvel, 4-5 original live-action movies exclusively for OTT, a library of 400-500 films, 4-5 original Disney-branded TV series and 3-4 TV movies per year, 7,000 episodes of Disney branded TV, including recent seasons of Disney Channel programming (though not in-season episodes) and thousands of shorts.
I’m pleased to present the 383rd edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.
On today’s podcast, Colin and I discuss how Disney’s blundered 2012 content deal with Netflix has now come home to roost. Even though Disney’s content was only activated on Netflix last year, this week Disney announced it won’t renew the Netflix deal and will instead launch its own entertainment-focused SVOD service - but not until it’s able to in 2019.
Colin and I agree that 2019 is a lifetime away given how fast the video world is moving. Importantly, the competitive environment for kids programming is already very crowded and will only intensify over the next 2 years as others’ investments accelerate. While Disney’s content is the gold standard, for many reasons we discuss, the company success in SVOD is far from assured.
Disney painting itself into a corner is a textbook example of the consequences of prioritizing short-term gains over long-term strategic flexibility. Though the original Netflix deal was done in 2012, its ramifications will reverberate for years to come.
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Click here to listen to the podcast (25 minutes)
By now we’re all familiar with the 3 big announcements Disney made yesterday: 1) a plan to launch its own entertainment-focused SVOD service, in turn sunsetting in 2019 its Netflix licensing deal for Disney/Pixar content, 2) a plan to launch an ESPN OTT service and 3) spending $1.58 billion to buy another 42% of BAMTech and take control of that business.
Focusing on Disney’s entertainment SVOD service it looks pretty clear now that by signing the original December, 2012 licensing deal with Netflix, Disney blew a big strategic opportunity to get in front of the trend toward direct-to-consumer online distribution.
Although more video is being produced than ever, for advertisers, premium video remains the most sought-after. At last week’s 7th annual VideoNuze Online Video Ad Summit, our opening panel “Exploring Premium Video’s Winning Formula,” dug into why premium video is so valuable and how it can maintain its desirability.
The session included Maureen Bosetti (Chief Partnerships Officer, Initiative), Pooja Midha (SVP, Digital Ad Sales & Operations, Disney ABC Television Group) and Scott Rosenberg (SVP/GM, Advertising, Roku), with James Rooke (GM, Publisher Platform, FreeWheel) moderating.
(Note, I’ll be posting all of the VideoNuze Ad Summit videos over the next couple of weeks)
Watch the video (37 minutes, 44 seconds).
Hulu announced yesterday that it has struck deals with 21st Century Fox and Disney for access to over 35 different TV networks for Hulu’s skinny bundle, slated to launch in early 2017. The agreements are no surprise given Fox and Disney are Hulu’s two primary investors, along with Comcast (which has a back seat role per restrictions related to its NBCU acquisition) and Time Warner, which recently took a 10% stake in Hulu.
But the devil is in the details, because when it comes to Hulu’s ability to include live broadcast feeds in its skinny bundle, the Fox and Disney deals only get it a small part of the way. Fox owns 17 stations around the country and Disney owns just 8. Since there are 210 DMAs in the U.S. that means Hulu needs to strike agreements with lots of different local station owners to enable a standardized nationwide skinny bundle offer including local broadcast feeds.
I'm pleased to present the 335th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.
First up this week, Colin and I dig into Disney’s new $1 billion investment in BAMTech, the technology spin-off of Major League Baseball Advanced Media. We both like the move as it further positions Disney to capitalize on online delivery, while protecting itself from ongoing changes in viewers’ behavior. In this case, Disney’s sheer size gives it the resources to keep its options open.
Next up, Colin and I were both surprised by Hulu’s move earlier this week to jettison its free, ad-supported viewing service to a new partnership with Yahoo. Colin wrote a great piece earlier this week listing the 5 most important reasons why he thinks this was a mistake, which we discuss. Hulu continues evolving away from its roots, as it prepares to launch its skinny bundle next year, which brings its own set of challenges.
Listen now to learn more!
Click here to listen to the podcast (23 minutes, 51 seconds)
Say this for Disney - in just the past couple of years or so it has moved to cover virtually every bet for how online video might impact the company in the future.
With its Maker Studios acquisition, Disney expanded into YouTube-style content creation for kids and millennials. With DisneyLife, it’s moving into SVOD entertainment beyond its pivotal output deal with Netflix. Now with Hulu, it’s addressing cord-cutting and the potential of skinny bundles (as well as with deals with DirecTV Now, Sling TV and PlayStation Vue). And finally, with its new $1 billion BAMTech investment, it’s adding platform capabilities for direct-to-consumer live sports streaming. Plus, with the forthcoming ESPN OTT service, it will test its own direct-to-consumer sports offering.
I'm pleased to present the 334th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.
In this week’s podcast, Colin and continue the debate we began back in early May (see here) about whether Hulu’s “skinny bundle” makes sense. We took up the debate again because earlier this week Time Warner announced that it was acquiring a 10% interest in Hulu and that its ad-supported cable networks would be included in the skinny bundle.
As I wrote on Wednesday, the deal seems to muddy Hulu’s skinny bundle proposition further. With all of the TW networks included, Hulu’s cost of programming also rises, in turn driving up the skinny bundle’s retail price. If the bundle ends up starting at $40, $50 or $60 per month, it won’t be able to create meaningful cost savings vs. pay-TV. Even with TW’s networks, there’s still the “Swiss cheese” risk inherent to all skinny bundles - not offering enough breadth to satisfy a family. If all that isn’t enough, Hulu will be competing with its best customers, a very risky approach.
Colin disagrees and thinks this is a big opportunity for networks to take more control of their destiny. Colin argues that given all the uncertainty of the video market, being able to experiment and get actionable insights from viewer data is valuable. In short, he only sees upside opportunity.
It’s a great debate and we’re both very eager to see how the Hulu skinny bundle will actually look when it’s introduced.
Listen now to learn more!
Click here to listen to the podcast (24 minutes, 2 seconds)