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Inside the Stream Podcast: FandangoNow and Vudu Merge In Wake of SVOD Crushing TVOD
(Reminder - if you are a listener of The VideoNuze Report podcast, please update your feed per below to the new Inside the Stream feeds which have been available for a couple of months....we don't want to lose you as a listener as we complete this transition!)
Welcome to this week’s edition of Inside the Stream, the podcast where nScreenMedia’s Chief Analyst Colin Dixon and I take listeners inside the world of streaming video.
Earlier this week the FandangoNow and Vudu movie and TV VOD (“TVOD”) rental sites merged. Colin notes that the move didn’t register on many industry executives’ radar (certainly nowhere near the biggest deal of the week, Blackstone’s acquisition of a majority of Hello Sunshine for $900 million). The tiny ripple FandangoNow-Vudu caused isn’t surprising given the sub 5% market share the two sites jointly have.
The far bigger story here, which we explore on this week’s podcast, is the tremendous shift in consumer preferences from buying and/or renting movies/TV shows via TVOD sites, to renting access through SVOD services. Indeed, Colin cites data that the market for buying/renting has collapsed by 50% over the past 6 years. Meantime SVOD has skyrocketed. Simply put, SVOD has crushed TVOD.
Note this shift isn’t just confined to video. The late Steve Jobs long insisted that consumers wanted to own, not rent, their music, going so far as to say in his famous 2003 Rolling Stone interview “I think you could make available the Second Coming in a subscription model, and it might not be successful.” Sorry Steve….in its Q2 earnings report, Spotify alone said it had 365 million monthly active users at the end of Q2, with 165 million of them paying a monthly subscription fee. Apple Music likely has MORE subscribers than that, and the services business is Apple’s most important growth segment. Then there’s YouTube, Amazon and many others.
Sometimes even the greats get things terribly wrong.
Be that as it may, Colin and I explore what all of this means to the future of the purchase/rental model and SVOD. Lurking in the wings as another disruptor is AVOD. As Colin notes, Q2 advertising at Tubi, Pluto and Roku was once again off the charts. As the Hello Sunshine team would surely attest, consumer preferences in video are far from settled.
Listen to the podcast (24 minutes, 23 seconds)
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Topics: Fandango, Podcast, Vudu
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5 Key Takeaways from Hello Sunshine’s $900 Million Deal
Lots of industry executives’ heads snapped to attention around 10:30am Eastern Time on Tuesday when the Wall Street Journal posted exclusively that Reese Witherspoon’s media company Hello Sunshine was being majority acquired for $900 million by a new company being formed by former Disney executives Kevin Mayer and Tom Staggs, which itself is being backed by the private equity behemoth Blackstone Group.
Mine was one of those heads snapping, for a variety of reasons. Foremost, $900 million is a whole lot of money for what on the surface seems like *basically* a production company, not to mention one that was only just started 4 1/2 years ago, which therefore means it doesn’t have a deep, monetizable library (which is what justified the recent Amazon-MGM deal). True, Ms. Witherspoon is one of the savviest players in the industry, and her Hello Sunshine business partner and company CEO Sarah Harden has strong industry experience and is also a Harvard Business School Baker Scholar (as an HBS grad myself, but far from a Baker Scholar, which is the top 5% of your 800-person class, I can personally attest that achieving that ranking puts you in the ultimate elite).
Still….$900 million? Yes, $900 million. I don’t have any insider info, but it wouldn’t surprise me if the company generates $50-$100 million of revenue in 2021, max. So the valuation is likely in the 9-18x revenue range…who knows it could even be more. That’s a rare tech industry valuation these days (for context, Roku's mighty stock has bounced around 12x revenue recently).
The WSJ reported $500 million of the $900 million will go to cash out existing investors and the balance will be retained by Ms. Witherspoon, Ms. Harden and other company executives, to be rolled over into the new company. That’s a huge tell about how big they think the resulting company can ultimately be worth and what the IPO or SPAC will look like. But that’s just part of the story….here are my 5 takeaways:Categories: Deals & Financings
Topics: Hello Sunshine
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Inside the Stream Podcast: Why Peacock’s Olympics Coverage Has Been a Big Missed Opportunity
Welcome to this week’s edition of Inside the Stream, the podcast where nScreenMedia’s Chief Analyst Colin Dixon and I take listeners inside the world of streaming video.
Colin leads off the discussion this week, explaining why he believes that Peacock’s Olympics coverage has been a missed opportunity for the fledgling streamer. In particular, Colin notes that even for paying Peacock subscribers, marquee events are not only not available live, they are not even being made available immediately upon their conclusion (note I’m deferring to Colin on this, because as a former Boy Scout, I preemptively chose to record ALL Olympics events in YouTube TV, so I’m not watching anything on Peacock).
Colin is highlighting a crucial point - that for non-pay-TV households, which have multiplied by millions since the 2016 Rio Games, especially among younger viewers - Peacock has fallen short of its potential to meet viewers’ expectations and fully resonate. We have a spirited debate about why this has happened, and what to expect going forward.
Notwithstanding all of this, Comcast reported robust Peacock sign-ups yesterday in its Q2 ’20 earnings, up 20 million to 54 million (though still no word on how many are actually paying). It was also a strong quarter for both broadband and pay-TV. But we discuss what role pay-TV is going to play for Comcast in the wake of last week’s announcement to add Hulu with Live TV for broadband/Flex users (and my forecast that YouTube TV availability is likely just ahead).
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Categories: Broadcasters, Podcasts, Sports
Topics: Olympics, Peacock, Podcast
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Behold, YouTube
“There’s something happening here,
But what it is ain’t exactly clear…”
-Buffalo Springfield, “For What It’s Worth,” 1967
Late yesterday, Alphabet released its Q2 ’21 earnings. Included was the single snippet of financial information for YouTube that Alphabet began reporting a couple of years ago: “YouTube ads,” which represents YouTube’s global advertising revenue (non-ad revenue such as YouTube TV and YouTube Music subscriptions, etc. are not included). YouTube’s ad revenue for Q2 ’21 was $7.002 billion, which was 84% higher than the $3.81 billion Covid-affected Q2 ’20 ad revenue, and 94% higher than the $3.60 billion pre-Covid Q2 ’19 ad revenue.
Yes, Covid dampened Q2 '20 ad revenue, as management had previously said. But still, you read those numbers right. An 84% year-over-year increase. On a very large prior number.
Consider a little comparative context for YouTube's $7 billion quarter: YouTube’s ad business alone is nearly the size of Netflix’s entire global subscription business, which generated $7.34 billion in revenue in Q2 ’21. But two years ago, Netflix’s Q2 ’19 revenue was $4.92 billion, which means over the past 2 years, Netflix has increased its second quarter revenue by $2.42 billion, or 49%.YouTube has increased its ads revenue alone by nearly $3.4 billion, or 42% more than Netflix. Since Alphabet does not disclose YouTube’s specific expenses, it is impossible to calculate its profitability. But because virtually all of YouTube’s content comes from third party creators while Netflix’s annual content tab is approaching $20 billion, suffice it to say YouTube’s ad business is far more profitable than Netflix’s subscription business. It is also fair to project that in Q3 ’21 YouTube’s ad revenue will exceed Netflix’s subscription revenue.
Categories: Advertising, Aggregators
Topics: YouTube
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Did Comcast Just Put the Final Nail in Xfinity TV’s Coffin?
Last Thursday, when I received an email from Comcast PR with a release attached, announcing that Hulu + Live TV would now be available for Comcast’s broadband and Flex users, I did a double-take.
Of course, it is no secret that Comcast has long emphasized its broadband business over its traditional pay-TV business. Between a benign competitive environment and most recently the Covid catalyst, Comcast had soared to 28.8 million residential broadband subscribers at the end of Q1 ’21, up another 448K, while residential video subscribers fell by 404K to 18.6 million. The 10.2 million difference is the largest yet. It reflects macro-changes around cord-cutting and cord-nevering that have swept through the industry unabated and the rise of streaming and CTV.Categories: Broadband ISPs, Cable TV Operators, Skinny Bundles
Topics: Comcast
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Inside the Stream Podcast: Netflix Q2 2021 Earnings - Is There Such a Thing as Too Much Focus?
Welcome to this week’s edition of Inside the Stream, the podcast where nScreenMedia’s Chief Analyst Colin Dixon and I take listeners inside the world of streaming video.
Netflix reported its Q2 2021 earnings this week, and considering the most critical metric of U.S. and Canada subscriber additions/losses, the company did very well. Sure, it lost 430K subscribers, reversing a big Q2 2020 Covid gain, and also tripled its 130K loss from Q2 2019. But it could have been a whole lot worse if post-Covid churn had spiked which would have sent Wall Street into a tizzy.
After reviewing the numbers, Colin and I zero in on the fact that while Netflix has numerous revenue expansion opportunities, it seems uninterested in any of them. In fact, the theme of this quarter’s earnings conference call was Netflix’s 100% focus on SVOD. It has no plans to make money from its new video gaming service. Live sports is still mainly off the table. The new commerce extension won’t generate anything material. And a lower-priced advertising-supported tier? Well the analyst/moderator didn’t even ask about it.
Colin and I are really scratching our heads. It’s like Netflix’s management took a sacred oath: “We will not make money beyond SVOD.” “We will not make money beyond SVOD.” “We will not make money beyond SVOD.”
For my part I’m growing weary of these “religious” responses. I have been doggedly saying Netflix needs to launch a lower-priced ad-supported tier for ages. The CTV ad business in the U.S. alone in 2021 will be $13B, going to at least $28B in 2025. As the biggest player in brand-safe streaming, Netflix has an automatic claim on a portion of this revenue. Perhaps most important, there is simply no other catalyst as sizable for Netflix’s top and bottom lines. But it won’t entertain the option, asserting in the past that it will diminish the user experience, though it hasn’t provided any meaningful backup to support its position.
There’s a lot to be said for staying focused, but in our view, this is getting a little bit ridiculous.
Please let us know what you think!
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Netflix Q2 2021 Earnings Report: Whew!
If you detected the wind pattern figuratively shift around 4:01pm Eastern Time yesterday, you weren’t imaging it. Rather, the shift was due to the collective exhaling of Netflix stockholders who were justifiably on edge about the company’s Q2 2021 earnings report, and in particular its subscriber additions, especially in the all-important UCAN (United States and Canada) region.
Q2 2021 was the first quarter to be comp’d against a full Covid quarter, Q2 2020. It is old news that Covid created many major distortions in the economy, but perhaps the biggest distortion (aside from the bizarre run on toilet paper) was the massive acceleration in streaming and connected TV. And few companies benefited more from shelter-in-place orders than Netflix, which in Q2 2020 gained over 10 million global subscribers, on top of the 15.8 million it added in Q1 2020.
To say that first half 2020 would be a tough act to follow in UCAN would definitely qualify for the understatement of the year award. Netflix said last year that it was experiencing a “pull forward” in demand. Results in Q1 2021 began bearing that out with global subscriber additions coming in at 3.98 million, obviously way down from the freakish first quarter of 2020, but also just a fraction of the 9.6 million global subs that Netflix pulled in back in Q1 2019.Categories: SVOD
Topics: Netflix
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Research: CTV Ad Frequency Problem is “Highly Exaggerated”
At VideoNuze’s Connected TV Advertising Summit last month, one of the issues most often raised by speakers was frequency. Sometimes speakers articulated the issue through their lens as an industry participant; other times it was from their own personal experience. For example, in our final session of the conference, Cara Lewis, EVP, Head of US Investment for Amplifi USA / Dentsu spoke about her experience streaming during the miserably cold Memorial Day weekend (slightly edited for clarity):
“Frequency is definitely an issue. And I can tell you just for myself and my viewing experience this weekend, it was extremely rainy. And I watched a lot of CTV and I kept on seeing the same commercial over and over again, which is completely frustrating because I'm being told as somebody who's buying these ads that we have a frequency cap. Maybe those advertisers didn’t have one, but if they did what I saw was well over what I know our advertisers put in as a frequency cap.”
My experience mirrors Cara’s, as I mentioned in Q&A after moderating a CTV session at Pubmatic’s ENVISION conference two weeks ago. As VideoNuze readers know, I watch a lot of professional golf, on Golf Channel, NBC and CBS, most often on my Roku devices and using YouTube TV. It is mind-boggling how often the same ads are repeated. Admittedly I’m not sure if what I’m experiencing is a CTV frequency issue. It could have much more to do with the TV network, the rights of tournament sponsors, faulty legacy TV system frequency capping, shortage of available campaigns, etc. Who knows.
Regardless of the root cause, as Cara said, as a viewer it’s frustrating and diminishes the experience (and because I’m never able to fully take my industry analyst hat off, even on weekends, I can’t stop thinking “really, where IS all this great adtech that I write about each week?”)
Having said all of that, a new report from Innovid and the ANA, “Decoding CTV Measurement,” asserts that the frequency problem is actually both “highly exaggerated” and likely only limited to very particular situations. Innovid and ANA studied 35 campaigns from 20 big advertisers, representing $35 million in ad spend across 169 publishers and 25+ connected device types.Categories: Advertising, Analytics