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Thursday, October 23, 2014

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Analysis for 'Netflix'

  • Why the Timing is Now Perfect for a Netflix-Comcast Partner Deal

    If your head is still spinning from last week's HBO/CBS/potential cord-cutting news, then buckle up, because here's another doozy that seems ripe to be right around the corner: a partnership deal between Netflix and Comcast. You heard that right - two companies that have been sniping at each for years now have a perfect moment to strike a partnership deal with significant upside to both.

    First, as far as the deal itself, it would roughly follow the template Netflix has already established with large pay-TV operators in Europe and smaller ones in the U.S. All those deals' details aren't known, but at a minimum they include operators integrating Netflix's app into their IP-based set-top boxes'/devices' UI, certain co-marketing arrangements, and some type of revenue sharing by Netflix (i.e. one-time new subscriber bounties and/or ongoing revenue sharing).

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  • 8 Initial Reactions to HBO's New OTT Service

    HBO has dropped a bombshell, announcing plans to launch a standalone over-the-top service in the U.S. in 2015. The announcement was extremely short on details, except to say it was targeted to the 80 million U.S. homes that do not currently subscribe to HBO. Here are my 8 quick reactions to the news. Many more thoughts to follow as more details are released.

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  • Perspective What's this? The Future of TV: 4 Reasons Why It Will Keep Getting Better

    A new wave of viewers has emerged: they're connected, they know what they want to watch, when they want to watch it, and most importantly, how they want to watch it. They are chomping at the bit for premium content that is both accessible and affordable. At the same time, the advent of OTT and connected TV devices has made way for a whole new viewing experience where "television" simply refers to the largest screen in the house.

    We all know the TV ecosystem of tomorrow will look vastly different than today's current landscape, but what changes can we expect? Here are four predictions for what trends will emerge over the next few months and years:

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  • Data is the Real King, As Netflix Keeps Proving

    "Content is King." No, wait, "Distribution is King." No, wait, "Content and distribution are equals and need to work together." And on the debate has raged for years about what's at the core of the media and entertainment industry's success. Meanwhile, Netflix keeps proving that data is fast becoming the real king, with profound implications for all players in the industry.

    The latest evidence of data's ascendance and Netflix's ability to harness it is the company's new 4 movie deal with Adam Sandler. Opinions about Sandler are all over the board, but in a must-read interview with The Hollywood Reporter, Netflix's content head Ted Sarandos neatly summed up why Netflix made such a big commitment to him:

    "The more global we become, the more access we have to global behavior data so we can see what people are watching all around the world. Very uniquely, he (Sandler) stands out for his global appeal to Netflix subscribers. Even movies that were soft in the U.S. outperformed dramatically on Netflix in the U.S. and around the world."

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  • VideoNuze Podcast #244 - Will Netflix Disrupt Movies' Windowing Practices With "Crouching Tiger" Sequel?

    I'm pleased to present the 244th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.

    Netflix kicked up a lot of dust earlier this week, when it announced the sequel of "Crouching Tiger, Hidden Dragon," produced by The Weinstein Company, will be available simultaneously as part of Netflix monthly subscriptions and in IMAX theaters when it premieres in August, 2015. The so-called "day-and-date" strategy prompted two of the three big U.S. IMAX chains, Regal and Cinemark, to declare they won't show "Crouching Tiger" on their screens.

    The core issue here is whether a meaningful percentage of Netflix subscribers will opt to watch the movie as part of their subscription, thereby cannibalizing potential theater sales. Colin and I agree this risk is high, mainly because a family of four would pay at least $60-$80 just for tickets to see the movie in IMAX, a stark premium over their $8 Netflix subscription.

    Admittedly, IMAX is a very unique experience, but with the quality of today's HDTVs and home theater, for many, watching at home is quite stellar. As such, theater owners seem well justified in boycotting the movie to preserve their long-term value proposition.

    The "Crouching Tiger" move raises a host of other questions Colin and I also dig into: Will it have a positive impact on piracy? Is Netflix signaling a serious push beyond TV into movies (see also its 4-movie Adam Sandler deal this week)? And, is Netflix shifting toward a more exclusive content strategy?

    Click here to listen to the podcast (20 minutes, 28 seconds)


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  • The 10 Biggest Online Video Stories of Summer 2014

    September is here and that means summer 2014 is in the rear-view mirror. For online video and the broader video ecosystem, it was another busy few months, as viewers around the world continue to shift their consumption patterns, with many companies scrambling to keep pace. Below I've distilled my list of the 10 biggest online video stories of the summer - read on and let me know if I've missed something!

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  • TV is Video, But is Video TV?

    It wasn't that long ago when the term "TV" had a clear, universally understood meaning - a type of programming (e.g. entertainment, sports, news, weather, etc.) that was viewed on a screen typically located in a living room/bedroom/den/kitchen/etc.

    Flash forward to today and things are much more complicated. TV programming is, of course, still a form of video, but how about all the different original online video that is now being produced - should some, all or none of it be considered "TV?" What criteria should be used to decide how to classify it and who decides? Does the definition differ by age group? And perhaps most important - does it even matter - is the concept of something being considered "TV" still relevant?

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  • Sony is Still Planning to Launch an OTT Pay-TV Service That Has Little Chance of Success

    In an interview with Recode on Tuesday, Sony Computer Entertainment America President and CEO Shawn Layden said the company is still planning to launch a "revolutionary" OTT pay-TV service by the end of 2014.

    However, as Intel learned with its own misguided OnCue foray, the big cable network owners aren't enabling any revolutions to occur in the pay-TV industry. To the contrary, they're working hard to extend the status quo. This, plus other factors, means the odds of success for Sony's nascent OTT pay-TV service are extremely low.

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  • Half of U.S. Households Now Have At Least One Connected TV, Netflix is the Driver

    Here's a new measure of how deeply online video viewing, and Netflix in particular, have penetrated the living room: 49% of all U.S. households now have at least one TV connected to the Internet, slightly over double the 24% level from 2010. For Netflix, 49% of its subscribers report watching online video on their connected TV weekly vs. 8% weekly use among all non-Netflix subscribers. 78% of Netflix streaming subscribers watch Netflix on a connected TV.

    TVs are connected either through game consoles, Blu-ray players, Smart TVs or devices like Roku, Apple TV, Chromecast, etc. The data is according to the 8th annual Leichtman Research Group's Emerging Video Services study.

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  • How Binge-Viewing Became a Cultural Phenomenon - A Brief History

    Binge-viewing is surely one of the most notable cultural phenomena of the past few years. Barely registering as a concept less than 3 years ago, many recent research reports now cite binge-viewing as having been adopted - if not regularly practiced - by a majority of TV viewers (examples here, here, here, here, here, here).

    The shift toward binge-viewing has immense implications for the TV and video industries, touching everything from the creative process to programming/distribution decisions to monetization approaches. Some companies are fully embracing binge-viewing and riding its wave, while others are taking a more cautious approach.

    Stepping back though, how exactly did binge-viewing become such a cultural phenomenon? I believe there are at least 5 key contributing factors, with the relationships among them creating a perfect storm of growth.

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  • VideoNuze Podcast #228 - Broadband Closes In On Pay-TV; Netflix's European Expansion

    I'm pleased to present the 228th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.

    This week we first discuss how broadband's penetration in the U.S. is closing in on that of pay-TV's. New research from Leichtman Research Group revealed the top providers added nearly 1.2 million broadband subscribers in Q1 '14 (the best quarter in 2 years), as compared with around 260K pay-TV subscribers. The biggest ISPs now have approximately 85.5 million broadband subscribers, whereas the top pay-TV operators have 95.8 million subscribers.

    All of this is relevant because it demonstrates how broadband has become a de facto parallel video distribution platform - the fundamental underlying infrastructure for online video. Many of us take robust broadband almost for granted now, yet in reality it wasn't that long ago that broadband wasn't mainstream and high-quality online video quite scarce.

    We then move on to talk about Netflix's big expansion into 6 new European countries. Colin lays out the case why to be bullish on the expansion, while also noting the new challenges Netflix will face.

    Listen in to learn more!

    Click here to listen to the podcast (18 minutes, 57 seconds)



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  • VideoNuze Podcast #227 - Why Dynamic Ad Insertion in VOD/TVE is a Game-Changer

    I'm pleased to present the 227th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.

    This week we dig into the Turner-Comcast deal from earlier this week, under which Turner is providing past seasons' and full current season's episodes to some of its most popular programs to Comcast for viewing on VOD and TV Everywhere.  As I wrote earlier this week, a key enabler of the deal is Turner's ability to dynamically insert ads in the on-demand streams.

    Colin and I agree that, to the extent the deal becomes a template for others, it could have a wide-ranging impact on the ecosystem. To date, Netflix and other OTT providers have been able to aggregate huge libraries of past seasons' episodes, which have fueled binge-viewing.

    But as advertising in VOD/TVE grows and improves, it could become the financial foundation for operators to gain far greater content rights. That in turn could change the negotiating balance for content and perceptions of pay-TV operators. Colin and I explain what could be ahead.

    Listen in to learn more!

    (Note also Colin is hosting a free webinar next Tuesday on Fox Sports Go TVE app. Sign up here.)

    Click here to listen to the podcast (19 minutes, 49 seconds)


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  • Dynamic Ad Insertion Helps Clinch New Turner-Comcast VOD/TVE Deal

    Turner Broadcasting will provide Comcast with VOD and TV Everywhere access for some of its most popular programs across all of its cable networks, under a deal announced this morning. A significant aspect of the deal is that it gives Comcast rights not only to past seasons' episodes, but also to all current season episodes - what's known as "stacking rights." The deal is a big win for Comcast and also underscores the emergence of dynamic ad insertion in VOD/TVE streams as an important new revenue driver.

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  • Here's a Surprise: OTT and Pay-TV Could Wind Up As Best Friends

    The traditional narrative around online/over-the-top video is that it will incent cord-cutting and cord-nevering. But now, in a twist, instead of a looming battle between OTT and pay-TV, it could well be that we're on the brink of a new era of cooperation between the two, which could have profound implications for everyone in the video ecosystem.

    Stepping back for a moment, pay-TV operators have always been in the business of improving the delivery of available video and packaging it into bundles. Initially operators distributed broadcast channels and then in the 70's and 80's, with the advent of satellite delivery, operators began bundling "cable" channels as well (e.g. ESPN, MTV, CNN, USA, etc.).

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  • VideoNuze Podcast #225 - NewFronts, Cable Show and More

    I'm pleased to present the 225th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. This week the NewFronts got underway in NYC while the Cable Show was happening in LA. We discuss some of the highlights from both.

    Starting with the NewFronts, per new IAB research, we were both impressed with the rising esteem of online video advertising in the eyes of ad buyers. These are the people being courted at the NewFronts, and they now see TV and video as being essentially at parity importance for major product/service campaigns.

    Moreover, 2/3 of respondents see their online video spending increasing in the next 12 months, with 67% citing TV budgets as the top source of funding for online video. All of this is certainly good news for the content providers unveiling new programs at the NewFronts this week.

    Colin then discusses his observations from the Cable Show where executives cited concerns about creators being drawn to the YouTube ecosystem instead of traditional TV. Meanwhile these classic distinctions are getting blurrier, as evidenced by last week's integration of Netflix with 3 cable operators. It's not just Netflix though - clearly Hulu has aspirations to be integrated as well, and surely YouTube and others are right behind.

    Click here to listen to the podcast (21 minutes, 3 seconds)



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  • 5 Key Takeaways from Netflix's New Cable TV Partnerships

    Netflix will be integrated by 3 small U.S. cable TV operators via TiVo, per a joint announcement by the companies. Atlantic Broadband, Grande Communications and RCN will begin integrating Netflix in multiple ways: by assigning Netflix its own channel in their on-screen guides, exposing the Netflix app for quick access to sign-up or login and incorporating Netflix content in recommendations and search results alongside linear, VOD and the subscriber's DVR content.

    For Netflix, the deals follow similar implementations in Europe with Virgin and Com Hem. Netflix has avidly pursued inclusion in the primary pay-TV experience, helping it become even more mainstream by eliminating the step of switching inputs to a connected device.  Another benefit to Netflix is the cable operators will also integrate with Netflix's Open Connect content delivery platform.

    There are many different ways to think about the deals; below are 5 of my key takeaways:

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  • VideoNuze Podcast #224 - HBO-Amazon; Apple TV; Netflix, Comcast, Time Warner Cable Q1 Results

    I'm pleased to present the 224th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. This was an unusually busy week with many industry announcements, so today's format is a roundup discussion of four items that seemed most significant to us.

    First up is HBO's exclusive new licensing deal with Amazon, which is the latest evidence of the surging value of high-quality content libraries. Second is Apple's reveal that it has sold 20 million Apple TVs to date, making it more than just a "hobby." Next, we turn to Netflix, which reported stellar Q1 results earlier this week. Finally, we look at Comcast's Q1 and Time Warner Cable's Q1 results. Both companies reported healthier video subscriber numbers (though Verizon reported a much smaller quarter for FiOS video subscribers). The question still looms how meaningful cord-cutting is in reality.

    (Note, we had major technical issues with Skype this week, so in the last one-third of the podcast I sound like I'm in a fish tank. Apologies in advance.)

    Click here to listen to the podcast (17 minutes, 46 seconds)


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  • Netflix Closes in On 50 Million Subscribers and International Profitability

    Netflix announced strong financial performance for Q1 '14 late yesterday, continuing its momentum from 2013. The company reported a total of 48.35 million global subscribers, including 35.67 million in the U.S. and 12.68 million internationally. That was up a total of 6.25 million subscribers vs. the end of 2013, and just slightly behind the 6.4 million subscribers added in Q4 '13.

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  • VideoNuze Podcast #218 - More Signs That Online Video is Coming of Age

    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)


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  • VideoNuze Podcast #216 - Debating Netflix-Comcast Interconnect; Disney Movies Anywhere

    I'm pleased to present the 216th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. In today's podcast, we first discuss Disney Movies Anywhere, which launched this week. Both of us like it a lot (more of my take here). Colin believes it could also become a huge threat to UltraViolet if one other major studio were to adopt Disney's KeyChest technology.

    Then we turn our attention to the Netflix-Comcast interconnection agreement, which has taken on a life of its own this week. It's rare when Colin and I see the world completely differently, but in this case, we do. Colin believes the deal sets a dangerous precedent because Netflix is being provided "extraordinary access" to Comcast's network and also that, going forward, if a content provider wants to get good performance on Comcast's network, it would have to do a deal with Comcast.

    I don't see it this way. As I wrote earlier this week, the deal strikes me as business as usual, with the joint press release specifically saying "Netflix receives no preferential network treatment." Netflix made a business decision to negotiate directly with Comcast and manage/deliver their content themselves rather than work through a CDN which is what the vast majority of content providers do. This path obviously made sense for Netflix, but remember, it's in a somewhat unique situation because it accounts for 1/3 of all Internet traffic at certain times.

    Because Netflix and Comcast said so little about the deal themselves, and because there is so much suspicion of Comcast (and other broadband ISPs) regarding net neutrality, market power, etc., a lot more has been read into this deal than I believe is warranted.

    Colin and I have a very vigorous debate on these issues and ultimately agree to disagree :-)
     
    Click here to listen to the podcast (30 minutes, 27 seconds)



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