I’m pleased to present the 402nd edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
This week we start by discussing Hulu’s growth to over 17 million subscribers, which it reported earlier this week. Both of us are impressed by the numbers, which makes Hulu a firm #3 in the SVOD market. The key number that we’d like to know is how many new subscribers are taking the ad-supported version, which has dominated in the past.
Hulu’s and SVOD’s growth have come at the expense of viewers owning and renting video, as Colin explains in his review of recent Q4 ’17 DEG data. DVDs fell a whopping 22% vs. Q4 ’16 and rentals were down as well. The only category that grew was SVOD. Related, the dominance of SVOD makes me wonder how Apple is going to monetize its high-profile original TV shows. If Apple sticks with a transactional model it will be facing serious headwinds.
Finally, Colin shares a few thoughts on CES product news from Samsung, LG and Intel.
Listen in to learn more!
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As online video adoption and longer-form viewing have grown, consumers have become increasingly interested in moving the experience to their TVs. This trend has certainly helped to drive interest in connected TV devices (e.g. Apple TV, Roku, Chromecast, etc.). But even as these devices have proliferated, TV manufacturers have promoted Smart TVs, which connect to the Internet and generally offer a handful of pre-integrated apps, most prominently Netflix, Hulu Plus, YouTube, Pandora and others.
Since connected TV devices are relatively cheap (Chromecast set a new low in 2013 at $35) and are easy to install, no longer must consumers be required to buy a whole new TV simply because they want to stream Netflix, for example. No doubt, this dynamic - combined with the saturation of HDTVs and the adoption of mobile devices for viewing video - all contribute to global TV sales being down in 2013 for the second year in a row, the first time this has ever happened.
Startup Cognitive Networks has announced that its Automatic Content Recognition (ACR) technology has been integrated by LG, making it the first big Smart TV manufacturer to deliver "enhanced TV" experiences.
As Michael Collette, CEO of Cognitive explained to me in a recent briefing, the company makes Smart TVs aware of what content is being displayed on screen instead of being "blind" as they currently are. Cognitive's ACR works by packaging pixel map information from the screen and sending it to the cloud where it is compared to an index of known fingerprints. The resulting data is fed in real time via Cognitive's "ENGAGE" API back to the Smart TV so that app providers can provide interactive experiences to viewers.
TVs connected to the Internet - whether through set-top boxes, game consoles, Blu-ray players and/or as Smart TVs - are one of the hottest trends in the video landscape. Connected TVs allow viewers to have all of the traditional lean-back, long-form experiences they're accustomed to, but with online video/over-the-top's benefits of convenience and selection. Connected TVs crack open pay-TV operators' grip on TV delivery and give advertisers new opportunities to engage audiences.
Nonetheless, it is still early in connected TVs' evolution, and at the recent Video Ad Summit, we dedicated a session to debunking 5 key myths that have grown up around connected TVs and video advertising. Moderator Tom Morgan, CEO and co-founder of Net2TV, led a discussion of these myths with executives from LG, Media Storm and YuMe, which was based on thought-leadership from YuMe (full presentation available here).
The video is below and runs 30 minutes, 21 seconds.
CES '09 is now behind us. As has become typical, this year's show saw numerous broadband video product and technology announcements. As I wrote often last week, the key theme was broadband-enabled TVs. Assuming TV manufacturers deliver on their promises, Christmas '09 should mark the start of real growth in the installed base of connected TVs.
Here are the noteworthy announcements that I caught, in no particular order (I'm sure I've missed some; if so please add a comment and include the appropriate link):
At CES, Yahoo is making its presence felt in the budding broadband-to-the TV space with its "Yahoo Widget Engine." It has announced deals with TV manufacturers Samsung, LG, Sony and Vizio (see next post). It's an impressive list, and these Yahoo-enabled TVs are expected in the market later in '09.
Some of you may recall that the Yahoo Widget Engine debuted last summer as part of a broader alliance with Intel called the "Widget Channel". The two companies have come together to create an applications framework running on new Intel media processing chips. An SDK allows 3rd party developers to use web-standard technologies to develop applications for TVs and other CE devices. That's a mouthful, but the news coming out of CES appears to show that Yahoo/Intel are making progress building out the ecosystem of both TV manufacturers and 3rd parties applications.
In addition to Yahoo content like news, weather, finance and Flickr, there's 3rd party content from USA Today, YouTube, eBay and Showtime. And there are premium movie and TV programs from Netflix, Amazon VOD and Blockbuster. The list of others involved goes on.
All of this is very positive for the budding broadband-to-the-TV space and clearly demonstrates how much emphasis the non-incumbent video service provider (cable/satellite/telco) world is placing on "over the top" services. As expected, these incumbents have a big disruptive bull's-eye on their foreheads. For the numerous 3rd parties that have never had access to the consumers' TV, broadband's openness provides their first-ever entry pass.
As exciting as all this is, the jumble of TV, content, technology and aggregation brands coming to market is prime to create mass confusion for consumers being targeted with these services. Here's the scenario: a prospective TV buyer walks into a Best Buy just looking for a new HDTV, but pretty quickly starts hearing about all these different services and brands. Within minutes the consumer's head is going to be swimming. Which service and content is free and which costs extra? How does it all connect? What if I already have Netflix, Flickr or YouTube passwords - do they automatically work? Do I need to change something that's already in my house, like my home network? And who do I call if something's not working right? One sure winner with these new broadband TVs coming out is the Geek Squad!
Still, this is exciting stuff. A whole new world of broadband on the TV content and applications is finally poised to see the light of day and with it will come all kinds of new opportunities.
What do you think? Post a comment now.
Happy New Year and welcome to 2009.
The new year is picking up right where the old year left off - with Netflix adding yet another way for its subscribers to use its Watch Instantly streaming service on their TVs. Today's announcement that its WI software will be embedded in a select number of new LG "Broadband HDTVs" is more evidence of how content providers and consumer electronics companies are aiming to go "over the top" of cable/satellite/telco, driving high quality broadband video all the way to the TV.
The new LG Broadband HDTVs joins XBox 360, TiVo, Samsung and LG Blu-ray players and Roku as options for Netflix subscribers looking to watch WI on their TVs. The differentiator here is that this is the first "boxless" approach, so it offers a potentially simpler (though not less expensive) solution for consumers. No doubt it is the first of many deals Netflix will announce with TV manufacturers in '09.
Still, my bet is that the group of box-based solutions will matter more to WI usage for a long time to come. That's because, even though LG is the #3 HDTV manufacturer, TV set replacement cycles are getting longer with the down economy, the new Broadband HDTVs will likely have a several hundred dollar price premium, and importantly, a solid portion of the existing Netflix subscriber target audience for these broadband sets may have long since been using one of the box-based alternatives and not see a lot of incremental benefit in buying one of the LG Broadband HDTVs.
Nevertheless, I think an interesting target market for these sets are non-Netflix subscribers, who are open to a "cord-cutting" proposition. Netflix is laying the groundwork for becoming a genuine alternative to today's multichannel subscription video services. As I've said before, to make itself more viable as an alternative, the most important thing Netflix can do is beef-up WI's broadcast network programming library.
When top-tier broadcast network programming is combined with its movie catalog, Netflix could become very appealing for consumers who don't care much about cable network programs or sports. For $17/month for Netflix vs. $60/month or more for a typical digital TV package from cable/satellite/telco, the math on paying the premium for the Netflix-enabled LG TV becomes much more interesting. Importantly, the retailer has a much stronger hook to sell the LG Broadband HDTVs, especially if, as an added incentive, Netflix perhaps threw in a 3-4 month trial subscription.
The bottom line here is that Netflix continues to do the right thing by building out the portfolio of devices that play its WI streaming programming. The bigger the addressable audience is, the more that content providers of all stripes will take notice and want to do deals (Netflix's expansion of its promotional deal with Showtime is a useful data point on this subject). No other non-cable/satellite/telco subscription video service is close to Netflix in terms of number of subscribers, compatible streaming devices, library or brand name. In '09, Netflix is poised to build on these advantages as it morphs itself into an over-the-top broadband powerhouse.
What do you think? Post a comment now.
As promised, each day this week I'm sharing one prediction for 2009, with each one getting progressively bolder as the week progresses (and yes, I'll concede - as a number of you privately pointed out to me - yesterday's forecast that the Syndicated Video Economy would grow in '09 was a pretty wimpy start). So moving out a little further on the limb, today's prediction #2 is that video delivered directly to mobile/wireless devices will take off in '09, finally.
For those of you who have been following mobile/wireless video delivery, this has been a market that's perpetually been "just around the corner." In fact, a little over a year ago when I was planning VideoNuze, several people suggested that I shouldn't just focus on broadband delivery (as I define it to mean high-speed wired delivery of video to a home or business), but also mobile/wireless video. But after doing some due diligence I concluded that the market wasn't there yet, and that the vast majority of new video activity would be focused on wired broadband. Indeed, I think that's how '07 and much of '08 have shaped up.
However, having tracked recent activity in the mobile video space, I think '09 is going to be a big year of growth and recognition for this new medium (in fact, an old friend gently chastised me over lunch last week for even drawing a distinction between wired and wireless delivery, saying, "come on, it's ALL broadband!" I think he makes a very fair point.)
What has traditionally held back mobile delivery are a lack of video-capable devices, voice and text-focused wireless networks and a closed "on-deck" paradigm, which is the wireless carrier's version of the cable and satellite industry's proverbial walled-garden.
These limitations have now been mostly addressed, or are in the process of being addressed. On the device side, the most notable video-capable device is of course the iPhone, which by my calculations has already sold over 13 million units and is on its way to almost 20 million by the end of the year. Everyone I know who has an iPhone - especially kids - are infatuated with the video feature (if you've never seen it, especially now using AT&T's 3G network, get thee to an Apple store immediately!). In '09, the iPhone is poised for even greater popularity as Wal-Mart begins stocking it, possibly for just $99. Recession or not, the iPhone is going to remain white hot.
Not to be lost in the iPhone's phenomenal wake are many other new video-capable phones. There's of course the new G1 from T-Mobile, powered by Android, Google's new mobile OS. I got my first look at one last week, and though not as sleek as the iPhone, I was able to watch excellent YouTube video. There are plenty of others to choose from as well, including the Samsung Propel, the LG Incite, the new BlackBerry Storm and the latest mother-of-all-phones, the Nokia N64, which comes with 16GB of internal memory (enough for 40 hours of video). Whereas many of us today carry phones incapable or barely capable of viewing video, in '09 the replacement process will be in full swing.
Of course, all the cool devices in the world don't matter unless you have a robust underlying network and the freedom to view what you want. On this front, the wireless carriers' push to build out their next generation 3G networks finally allows sufficient bandwidth to view high-quality video (though not HD yet). Next up is 4G, first from Clearwire, the SprintNextel-Intel-Google-cable industry consortium that's deploying its WiMax network with speeds of up to 6 Mbps downstream being promised. There's also MediaFLO, Qualcomm's mobile broadcasting platform that has steadily built out an ecosystem of technology, carrier and content partners.
Last but not least are the consumer-focused services and applications. Until recently, this market has mainly consisted of packaged subscription services like Verizon's VCast and MobiTV, which itself recently announced more than 5 million subscribers. The combination of new devices and networks promises to bring an increase in on-demand, web-based, ad-supported video consumption (plus paid downloads to be sure, courtesy of the iPhone mainly). Another interesting twist is the advent of live broadcasting from mobile devices, powered by providers like Qik, Kyte and Mogulus. These all supercharge the Twitter micro-blogging phenomenon.
All of this underscores why the distinction between wired and wireless broadband really becomes meaningless over time. The mobile experience is going to seem more and more like the one you have sitting at your computer, with the added benefit of portability. To throw a blue-sky variable into the mix, one wonders if at some point you'll simply plug your phone into your TV and watch streamed or downloaded video that way, rather than through a set-top box or a wired broadband connection. There's a convergence concept for you!
Years in the making, mobile/wireless video is finally upon us, and '09 is going to be a big year. That's good news for all of us as consumers, and it surely means I'll be working a lot harder to stay on top of things.
What do you think? Post a comment now.
Tomorrow, 2009 Prediction #3
Welcome to December and to the home stretch of 2008. Following are 3 key themes from VideoNuze in November:
Cable programming's online distribution narrows - Last month I concluded that cable programmers (e.g. Discovery, MTV, Lifetime) are going to become much more sparing when it comes to distributing their full programs online. As noted in "The Cable Industry Closes Ranks," after hearing from industry executives at the CTAM Summit and on the Broadband Video Leadership Breakfast, it has become apparent that the industry is going to defend its traditional multichannel video subscription model from broadband and new "over-the-top" incursions.
Both programmers and operators have a lot vested in this successful model, and are surely wise to see it last as long as possible. Subscription and affiliate fees are particularly precious in this economy, as the WSJ wrote on Saturday. Still, many VideoNuze readers pointed out the music industry's folly in trying to maintain its business model, only to see it turned upside down. Many predicted the cable industry is doomed to follow suit. Truth-be-told though, as I wrote in "Comcast: A Company Transformed," major cable operators are already far more diversified than they used to be. Broadband, phone and digital TV (+ add-ons like DVR, HD and VOD) have created huge new revenue streams. Surging broadband video consumption only helps them, even as "cord-cutting" looms down the road.
Netflix moves to first ranks of cord-cutting catalysts - Three posts in November highlighted the significant role that Netflix is poised to play in moving premium programming to broadband distribution. Most recently, in "New Xbox Experience with Netflix Watch Instantly: A 'Wow' Moment," I shared early reactions from a VideoNuze reader (echoed by many others) to receiving a subset of Netflix's catalog through Xbox's recently upgraded interface. Netflix CEO Reed Hastings highlighted the increasing importance of game devices in bridging broadband to the TV in his keynote at NewTeeVee Live this month (recapped here).
Still, Netflix lacks the rights to deliver many movies online, a problem unlikely to be rectified any time soon given Hollywood's stringent windowing approach. As such, in "Netflix Should be Aggressively Pursuing Broadcast Networks for Watch Instantly Service," I offered my $.02 of advice to the company that it should build on its recent deal with CBS to blow out its online library of network programs. In this ad-challenged environment, I believe networks would welcome the opportunity. Hit TV programs would help drive device sales, which is crucial for building WI's adoption. While the Roku box is a modest $99, other alternatives are still pricey, though becoming cheaper (the Samsung BD-P2500 Blu-ray player is down $100, now available at $300, I spotted the LG BD300 over the weekend for $245). A robust Netflix online package would be poised to draw subscribers away from today's cable model.
Lousy economy still looms large - Wherever you go, there it is: the lousy economy. Though the market staged a nice little rebound over the last 5 days, things are still fragile. Across the industry broadband companies are doing layoffs. This is only the most obvious of the side effects of the economic downturn. Another, more subtle one could be downward price pressure. As I wrote in "Deflation's Risks to the Broadband Video Ecosystem," economists are now growing concerned that the credit crunch could lead to collapsing prices and profits across the economy. I noted that such an occurrence would be particularly damaging for the broadband industry, where business models are still nascent, so ROIs and spending are softer.
Here's to hoping for some good economic news in December...
What do you think? Post a comment now.
Yesterday I had my own positive broadband video experience, remotely watching portions of the NewTeeVee Live conference held in SF from the comfort of my office. Om Malik and crew put together a packed agenda and I had wanted to go, but a personal conflict kept me in Boston.
I caught most of Netflix CEO Reed Hastings' keynote (until the UStream feed froze up, arghh...) and thought he offered some interesting tidbits about how he sees the broadband video market unfolding. VideoNuze readers know I've been avidly following Netflix's recent moves with Watch Instantly and I've come to think of the company as one of three key aggregators best-positioned to disrupt the cable model (the other two being YouTube and Apple).
Three noteworthy points that Hastings made:
Standards needed to interface broadband to the TV - Hastings catalogued the efforts Netflix is making to integrate with various devices like Roku, LG, TiVo, Xbox, etc, but concluded by saying that these one-off, ad hoc integrations are not scalable and are really slowing the market's evolution. Most of us would agree with this assessment. Still, he was quite pessimistic about a standards setting process's ability to move quickly enough - saying this could be a 10-30 year endeavor. Instead, if I understood him correctly, he thinks the TV approach should just be browser- based, and also that today's remotes should be scrapped in favor of pointer-driven (i.e. mouse-like) navigation.
Game consoles in leading position to bridge broadband to the TV - Hastings made a pretty strong case for the Wii - and to a lesser extent the PlayStation and Xbox - as the leading bridge devices. The Wii in particular could be a real broadband winner if it could support HD and Flash. As I've been thinking about broadband to the TV, I've concluded - barring anything from left field - that game devices, IP-enabled TVs and IP-enabled Blu-ray players are where the action will be concentrated for the next 3-4 years (this doesn't take account of forklift substitutes like a Sezmi or others sure to come).
NewTeeVee has a good wrap-up of Hastings' talk as well, here. The video replay isn't up yet, but when I see it, I'll post an update.
What do you think? Post a comment now!
Over the past several months Netflix has made a series of announcements related to its "Watch Instantly" feature. On the device side, there are new partnerships with TiVo (for Series 3, HD and HD XL models), Microsoft Silverlight (for Mac viewing), Samsung (for Blu-ray players), LG (for Blu-ray players), Xbox 360 and of course Roku. All allow Netflix Watch Instantly content to be delivered directly to users' TVs. Meanwhile on the content side, there have been deals with Starz, CBS and Disney Channel, with more no doubt yet to come.
Our household has been an enthusiastic subscriber to Netflix for years and I welcome the commitment that Netflix appears to be making to Watch Instantly. However, as I pointed out in May, in "Online Movie Delivery Advances, Big Hurdles Still Loom," Watch Instantly is hobbled by its limited catalog, now totaling around 12,000 titles, just 10% of Netflix's total catalog, even after including the recently added Starz titles.
The fundamental problem Netflix is bumping up against in building out Watch Instantly's film catalog is Hollywood's well-established windowing process. Studios have wisely and methodically maximized their films' lifetime financial value by doling out the rights to air them to a series of distribution outlets. These rights unfold in a carefully calibrated timeline and have become wrapped up in a thick layer of contractual agreements extending to all parties in the value chain. It is a system that has served all constituencies well, generating billions of dollars of value. It is also unlikely to change in any material way any time soon.
As such, Netflix, the "world's largest online movie rental service," as it calls itself, is increasingly discordant. On the one hand, growing the Watch Instantly service is crucial to Netflix's long term success in the digital/broadband era but on the other, it doesn't have the ability to offer a competitive catalog that meets consumers' online delivery expectations. So what to do?
My recommendation is for Netflix to incorporate the delivery of TV programming, via Watch Instantly, into its core value proposition. Specifically, Netflix should be making an all-out effort (if it is not already doing so) to secure next-day rights to deliver all prime-time broadcast network programs to its subscribers.
This strategy provides Netflix with many clear benefits and positions it well for long-term success. First, in these tight economic times, it dramatically expands the value of the Watch Instantly feature, turning it into both a bona fide subscriber retention tool to battle churn as well as a high-profile subscriber acquisition lever (not to mention an exciting pull-through offer big box retailers could use in their Sunday circulars to generate traffic).
Second, it is a clever competitive strike against four primary alternative ways whereby consumers can watch network programs on demand: cable-based VOD, a la carte paid downloads at iTunes/Amazon/others, free online aggregators like Hulu/Fancast/others and DVRs (though note the TiVo deal addresses this last option).
A comprehensive Netflix prime-time catalog compares well with each alternative. Against cable VOD it offers familiar, superior navigation plus a viable revenue stream for broadcasters while cable tries to get Canoe ready; against paid downloads, the obvious advantage of being a value-add service; against online aggregators, commercial free delivery; and against DVRs, the lack of consumer hardware purchases and persistent recording space limitations.
All of this should make Netflix a very appealing partner for the broadcast networks. They are getting hammered by ad-skipping, audience fragmentation, quality programming migrating to cable and an inferior single revenue source business model. The prospect of Netflix offering payments for their programs should be well-received. There may be concerns about programs' long term syndication value and also the potential enablement of a new gatekeeper. In better times these might be deal-killers; in this climate they shouldn't be.
Finally, there's the big potential long-term Netflix prize: if it can stitch together a large-scale network of compatible devices for Watch Instantly distribution, it could create a viable "over-the-top" alternative to today's multichannel subscription services (cable/telco/satellite). As I described in my recent "Cord Cutters" post, to really succeed, Netflix would have to eventually incorporate cable network programming. But if its reach is wide and its economics sound, that's within the realm of possibility as well.
But those are long-term issues. For now, while the recent CBS deal is a great start, Netflix should be working double-time to build out a full library of broadcast programs. It would dramatically improve Watch Instantly's appeal and value, while positioning Netflix well for the broadband era.
What do you think? Post a comment now.
Yesterday's announcement by Netflix and LG Electronics that they are partnering to develop a new set-top box generated a lot of coverage. For me the deal shows at least 2 things. First, there is an endless reservoir of optimism concerning consumers' willingness to adopt standalone devices for broadband-delivered video. And second, that Netflix, which has been all over the board in the last couple years in trying to define a broadband delivery strategy, has seemingly made yet another misstep in this critical area.
Regarding the optimism about standalone devices, as many of you know, I recently wrote about this in a post entitled "Broadband Video on TVs is a Mirage" in which I concluded that these broadband appliances are unlikely to gain widespread market appeal. Though little information was revealed about the Netflix-LG box, for now, I don't see any reason to believe that this new box will be an exception to the logic I laid out in that post. At best I view standalone broadband appliances (e.g. AppleTV, Vudu, Moviebeam, Akimbo, etc.) as appealing to only a small sliver of consumers.
My logic applies to Netflix-LG as follows: how many people are realistically going to shell out $400 (assumed price) for a new box, plus spend the time involved to install it, when the principal benefit is to be able to watch a small subset (6K out of Netflix's current 90K catalog) of content Netflix already makes easily available on the robust DVD format? I'd say maybe 10% of Netflix's current base of 7 million, max. That would be 700K boxes TOTAL - hardly the kind of numbers that make a CE executive's eyes pop.
A greater issue is that this new box seems to represent just the latest in a pattern of dubious moves by Netflix, coupled with poor communications, regarding how it intends to gracefully migrate from its current DVDs-through-the-mail approach to succeed in the broadband era.
For the last two years Netflix has publicly appeared to jump from one broadband approach to the next. For example, yesterday's box announcement was accompanied by news that Anthony Wood, whom Netflix brought on board just 8 months ago as its V.P. of Internet TV, would be departing from the company, reversing Netflix's previous plan of developing its own box (which itself was an ill-considered idea).
The LG box approach continues Netflix's pattern of cloudy planning and communications. On a day that should have been all about articulating why this new co-developed LG box is, at last, the correct approach, Reed Hastings, Netflix's CEO seemed to veer completely off message in his remarks to the NY Times, stating that "We want to be integrated on every Internet-connected device, game system, high-definition DVD player and dedicated Internet set-top box. Eventually, as TVs have wireless connectivity built into them, we'll integrate right into the television."
Huh? If this "Netflix-everywhere" approach is instead the real strategy, then why put out the LG press release at all, much less specifically say in the first sentence that Netflix is "joining forces to develop a set-top box." If the company is really interested in an "everywhere" approach, then it should have announced a group of partnerships to validate Mr. Hastings's aspiration and stayed away from the notion that it would co-develop any particular model. A Netflix investor is left wondering, yet again, what is Netflix's real game plan, how it will allocate its finite resources and how it will leverage its brand equity to succeed in the broadband world?
My sense is that Netflix seems to have a bias that it needs to be intimately involved in hardware development, rather than partnering widely and relying on the market to sort things out. Netflix should follow TiVo's recent (and correct, I believe) approach in trying to "piggyback" on top of devices as they're deployed and gain market traction. Starz is yet another example of a content provider staying agnostic, correctly forming partnerships with various device manufacturers for its Vongo service, while steering clear of embracing any particular approach. While Mr. Hastings hints that Netflix wants to do exactly this in his remarks, the LG announcement undermines this strategy, if it can even be called that.
Netflix has assiduously built one of the best brands in subscription entertainment. Its task now is to leverage that brand in the broadband era. Regrettably, yesterday's LG announcement provides little evidence that the company has finally formed a winning plan. With competitors all around it, Netflix needs to get this right sooner rather than later.
Agree or disagree with my assessment? Post a comment and let everyone know!