I'm pleased to present the 177th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. Earlier this week, Netflix reported solid results for Q1 '13, adding a total of about 3 million new subscribers, 2 million in the U.S. and a million internationally. Netflix projects it can ultimately obtain 60-90 million U.S. subscribers, which would be 2-3 times as many as HBO, the biggest "premium TV" network.
As I wrote earlier this week, if that were to occur - and it's still a big if - it would mean Netflix would have to get a lot of middle and lower income American homes to layer on another $8/mo or more to their already substantial pay-TV bills, OR there would have to be material cord-cutting that essentially frees up household budget for SVOD subscriptions. Colin suggests a third way, which would be "cord-shaving" - subscribers cutting back on existing pay-TV services like sports networks or premium channels to make room for Netflix in their budgets.
That of course leads to the question of what HBO might do as it observes Netflix's continued growth. It's hard to see HBO standing still, yet, for reasons HBO has discussed in the past, unbundling itself from pay-TV would be a huge step for the company. Last but not least, Amazon - which become Netflix's biggest U.S. SVOD competitor - is rumored to have a set-top box introduction planned, which could also shift the competitive balance in the U.S. Bottom line, there are a lot of twists and turns yet to occur in SVOD in the U.S.
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Click here to listen to the podcast (19 minutes, 6 seconds)
Netflix reported solid Q1 results yesterday, gaining 2 million streaming subscribers in the U.S. and another 1 million internationally. Netflix now has 27.9 paying subscribers in the U.S. and 6.33 paying subscribers internationally. With growth re-started since the 2011 Qwikster debacle, a persistent question is how big can Netflix become in the U.S.?
Traditionally many have thought the answer is in the 30 million subscriber range, which is where the biggest premium channel, HBO, has pretty much leveled out. This line of thinking assumes that Netflix is essentially another premium channel and consumers will treat it as such.
But Netflix's CEO Reed Hastings always answers the size question by asserting that Netflix can grow to become 2-3 times HBO's size, implying 60-90 million subscribers ultimately. He points to differentiators like Netflix having more content, being less expensive and available on more devices, having greater personalization, etc.
At starting prices of $8/month or so, affordable subscription video on demand (SVOD) services like Netflix, Hulu Plus, Amazon, Blockbuster and others would seem to appeal to middle and lower income Americans. But a new report from Nielsen finds the exact opposite is true: wealthier homes, with household income over $100K/year, adopt SVOD services at 185% of their index, while lower income homes, with household income under $50K/year, subscribe at just 47% of their index.
Adding to the picture, "Professional" homes subscribing to an SVOD service are at 150% of their index, while "Blue Collar" homes are just 63% of their index.
The data seems to support a contention that Netflix has repeatedly made, which is that SVOD services are typically adopted in addition to - not in substitution for - pay-TV services. To the extent that pay-TV rates have continue to increase, it makes sense that only upper income homes can afford to then layer on an SVOD service on top of pay-TV.
I'm pleased to present the 174th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. There's no question video is moving to streaming and electronic delivery, but DVDs still have plenty of life left. That's what Redbox is banking on to get a foothold with its new Redbox Instant service, as CEO Shawn Strickland explains in this interview. Both Colin and I think it's a smart, albeit risky, strategy given the inevitable downward trend in DVD usage.
I see part of DVD's durability as due to Hollywood's windowing practices. Because of the multi-billion pay-TV window, licensing to networks like HBO, Starz and EPIX, major studios delay the availability of movies in SVOD services. The intervening home video access continues to give DVDs life. Unless and until Hollywood abandons the pay-TV window, DVDs will continue to have life. And since Netflix has essentially abandoned DVDs, there's a big opportunity for Redbox.
However, Redbox Instant has another problem, which is that its streaming content selection today is terrible, as Colin explains. That means prospective subscribers have to determine whether its worth the $3/mo or so they're effectively paying for it on top of the DVD value which is worth around $4-$5/mo. Colin and I are both skeptical. Even if Redbox Instant doesn't fly, we both see DVDs being with us for a long time to come.
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Reminder: Colin and I will be at NABShow next Mon. and Tues. in our booth SU12907. If you're there and have a moment, please stop by to say hi.
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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.
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Click here to listen to the podcast (18 minutes, 57 seconds)
I attended the D: Dive Into Media conference earlier this week for the first time. It is mainly a series of one-on-one interviews with senior executives from a variety of media and technology companies, plus networking. Overall it was a great conference, and it's hard to beat a couple of days in beautiful Dana Point, CA, especially when coming off a blizzard in Boston.
My main interest was the video-related sessions, and from those I had 6 takeaways which I share below (along with selected session video clips), in no particular order:
I'm pleased to present the 165th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. This week I first share some reflections from spending 2 days at the NATPE conference earlier this week, focusing on content creators' attitudes toward online video.
That's a segue into discussing "binge-viewing," which will get a lot more visibility starting today, as Netflix releases all 13 episodes of its high-profile original series "House of Cards" (I watched the first 5 minutes of Chapter 1 this morning, and I'm hooked already). We discuss how binge-viewing is changing viewers' expectations and influencing content creators. For more about the pros and cons of Netflix's binge-viewing strategy, see my prior analysis here.
Next we talk about eyeIO, and its THX certification announced yesterday. Colin provides a layman's explanation, that augments his post yesterday, of why this is so important along with the context of H.264 and the new H.265 standard just approved by the ITU. We also review the benefits to content providers and viewers.
Click here to listen to the podcast (19 minutes, 36 seconds)
I'm pleased to present the 164th edition of the VideoNuze podcast with my weekly partner Colin Dixon, now heading his own firm nScreenMedia. This week we dig into Netflix's Q4 results, which were reported this week. As I wrote yesterday, Q4 was certainly the best quarter Netflix has had in a couple of years, and it's encouraging to see the company getting back on track. It is still quite early in understanding how the overall streaming market will shape up and what Netflix's adoption will be.
In the discussion, we explore key questions around the company's growth prospects, competitive landscape and international expansion. On the last topic in particular, Colin adds his observations of how Netflix is doing in certain international markets where he been doing research and traveling.
Click here to listen to the podcast (26 minutes, 44 seconds)
Netflix reported its Q4 '12 results late yesterday, adding 2.05 million domestic streaming subscribers, 1.81 million international streaming subscribers and losing 380K domestic DVD subscribers. All of these numbers were slightly better than the high end of the guidance range that Netflix provided with its Q3 report back on Oct. 23rd. Netflix also reported an $8 million quarterly profit globally, compared to its forecasted range of a loss of $13 million to a profit of $2 million.
Predictably - and just as happened a year ago when Netflix reported a relatively strong Q4 '11 - this morning's headlines are touting the company's turnaround (a sampling of what I've seen: "A Resurgent Netflix Beats Projections, Even Its Own," "Netflix's Q4 restores company's investment luster," "Netflix Posts Surprise Profit," "Netflix smashes street expectations," etc.). Investors are even giddier, sending Netflix's shares up more than 44% this morning.
To be fair, after the horrendous period beginning in mid-2011, with the ill-fated Qwikster and aggressive rate increase decisions, the Q4 results are quite heartening. Domestic streaming subscriber additions were at their best level since the heady days of Q1 '11. DVD subscription losses slowed to their lowest level since the losses began following Qwikster. And international turned in its best quarter of subscriber acquisitions to date. Management also said that churn is improving and international payment issues are being resolved.
Nonetheless, and at the risk of sounding like the "skunk at the picnic," I think there are still some key open questions for the company, which I would generally put into 3 buckets:
Audience fragmentation isn't a new concept, but the proliferation of high-quality online-only originals suggests the trend is only going to intensify. These days, a week doesn't go by without another key player announcing a new or renewed online-only series, in turn creating ever-more choices for viewers and advertisers. Combine the surge in originals with the broad adoption of video-enabled connected devices, and the pieces are falling into place for even more changes in viewing behaviors.
Categories: Indie Video
Welcome to 2013! If you were mostly checked out over the past 1-2 weeks (or were only paying attention to the fiscal cliff roller coaster), you didn't miss a whole lot in the video world. However, there were 5 items that caught my attention which I briefly describe below:
Having binge viewed 8 episodes of the final season of "The Wire" on HBOGO over the long weekend, I am very intrigued by Netflix's strategy to release all 13 episodes of its first high-profile original series, "House of Cards" on Feb. 1st. Based on the trailer (see below), the show looks very compelling. The question is whether Netflix's strategy strikes the correct balance between delighting its subscribers vs. best serving its own business interests.
Binge viewing, or watching numerous episodes of a TV series in a concentrated time period, has become a huge phenomenon, pioneered by Netflix's subscribers themselves. The opportunity to watch as much as you want of a series, on multiple devices, and at any time you prefer (and without any commercials!), is the ultimate in consumer control. As Netflix migrated to streaming, it erased the last obstacle to binge viewing, the need to mail back one DVD in order to get the next one with successive episodes.
I'm pleased to present the 154th edition of the VideoNuze-TDG podcast with my weekly partner Colin Dixon, senior analyst at The Diffusion Group. This week finds Colin in Copenhagen, in the middle of the Nordic region which is seeing a lot of OTT activity from Netflix, HBO Nordic and others. Colin provides an update on what he's learned.
In addition, we discuss YouTube's declining market share, which in September stood at 33.2%, down from 53.1% as recently as July. I delved deeply into all of the year-over-year data this past Monday. Colin adds another dimension to the analysis, saying that this reflects a shift away from viewing short clips, toward longer-form viewing.
Click here to listen to the podcast (20 minutes, 8 seconds)
It may be a fool's errand to question the thinking of an investor who's worth $14 billion, but after listening to Bloomberg's interview with Carl Icahn yesterday (embedded below) concerning his newly disclosed 10% stake in Netflix, it's hard not to conclude his understanding of the company is a mile wide and an inch deep. Unless he has some big vision for the company up his sleeve that he's not disclosing, Icahn seems more interested in a short-term bet on driving Netflix into a larger company's arms, than in positively influencing Netflix's murky strategic direction.
I'm pleased to present the 153rd edition of the VideoNuze-TDG podcast with my weekly partner Colin Dixon, senior analyst at The Diffusion Group. This week Colin and I review Netflix's Q3 '12 results and its bumpy path forward.
As I wrote earlier this week, by the end of 2012, Netflix will have lost 8 million, or half the DVD subscribers it had back in July '11. That loss of subscribers and cash flow come at an inopportune time, given Netflix's aggressive international expansion. Colin is slightly more optimistic about Netflix, citing its better-than-expected international subscriber results. We also share thoughts on where Netflix goes from here.
Unrelated to Netflix, Colin also just released a complimentary white paper called "Examining the Trend: From IPTV to Broadband IPTV, which is available for download here.
Click here to listen to the podcast (24 minutes, 46 seconds)
Netflix reported its Q3 '12 results yesterday, including dismal streaming growth of just 1.2 million subscribers in the critical U.S. market. But the big takeaway for me continues to be the breathtaking contraction of its highly profitable DVD-by-mail segment. By my calculations, beginning in Q3 '11 (when the Qwikster debacle was launched) through Netflix's forecast for Q4 '12, the company will have lost approximately 8 million DVD subscribers, or about half the estimated 15.9 million it had back on July 1, 2011.
Can you think of any other company that has pursued a voluntary strategy shift away from a reasonably healthy core business, which then resulted in half of its customers dropping in the subsequent 18 months? I cannot. In fact, I wonder if there's ever been one. That's how remarkably bad the Qwikster decision is turning out to be.
Research firm GfK released data from its third annual Over-the-Top TV report late last week, finding, among other things, that consumption by Netflix subscribers age 13-54 is roughly 2,000 minutes per month, about the same as it found in its '11 study. That amount is in the same general ballpark as the 2,388 minutes/sub/mo that BTIG analyst Rich Greenfield calculated for June, 2012, and in line with the 2,000 minutes/sub/mo that I calculated during Q4 '11.
The survey of 1,051 persons age 13-54 and conducted in June, 2012, found the average Netflix subscriber watches 5.1 TV shows and 3.4 movies per week. The survey revealed that 39% of this age group are Netflix subscribers (up from 35% in '11), with 47% having ever been a Netflix subscriber.
Back in February, 2011, when Amazon unveiled Prime Instant Video, I noted that the service's Achilles heel was its minimal content selection. And since the video service was embedded in the larger Prime free shipping offer - rather than getting its own standalone brand - I sensed hesitancy that Amazon would spend big bucks to license lots of premium-quality video. That indeed seemed to be the case as Amazon didn't announce a single content licensing deal to support Prime Instant Video until July, 2011.
However, since then, things have changed markedly; Amazon has been on a content licensing blitz over the last 15 months, announcing at least 14 different deals, culminating in today's with EPIX (see below for links to all). Despite the slow start, Amazon's huge content investment shows the company is quite serious about achieving content parity, or better, with its closest rival, Netflix, while leaving others like Google, Apple, Wal-Mart/VUDU, Verizon/Redbox and others playing catch-up in user-friendly subscription OTT services. Including the EPIX content, Amazon says it now has 25,000 titles/episodes, up 5-fold from its February, 2011 launch.
If you were trying to tune out last week, whether lying on a beach or on a family getaway, you didn't miss all that much exciting online video-related news. However there were some items worth noting and below I've highlighted five that caught my eye.
In the past 2 weeks, Netflix delivered tepid Q2 results and a cautious forecast, while Comcast reported strong broadband numbers and an improving video subscriber picture. That's a big reversal from a year ago, when Netflix was flying high and talk of cord-cutting hung over the entire pay-TV industry. So what might we learn from these 2 companies' experiences over the past year? Though I'm sure there are plenty of lessons, here are 4 that come to mind: