Posts for 'SVOD'

These days there’s no shortage of SVOD services to choose from, with each one seeing to grab a slice of viewers’ monthly spending. And with cord-cutting on the rise, undoubtedly there IS some spending freeing up as viewers cancel their pricey pay-TV services.

But two major industry trends should keep SVOD providers from being overly optimistic about replicating anything close to Netflix’s ad-free hockey stick subscriber growth over the past decade: first, the prevalence of password sharing and second, a tolerance for advertising related to “subscription fatigue” that the proliferation of SVOD services is engendering. New data released this week by Hub Entertainment Research and The Trade Desk underscores the extent of both.

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A question that has been following Netflix since the beginning of time is whether the SVOD giant would ever include advertising. Netflix management has consistently responded “no” and emphasized that their viewers expect an ad-free experience. Saying this so many times has created the perception that Netflix’s opposition to advertising is “religious” (i.e. so core to its brand/strategy/user experience that deviation simply isn’t possible) that no logic to the contrary will prevail.

But looking ahead to the new decade and the vastly different industry dynamics that are unfolding, I think there are many reasons why religion is finally going to give way to business imperatives. For anyone already saying, “no, no I just don’t believe Netflix could undergo such a conversion,” keep in mind the intense objection Steve Jobs had to subscription music. Then came Spotify’s incredible growth and in 2015, Apple Music was launched (note, Tim Cook took over as CEO in 2011, just prior to Jobs's death).

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VideoNuze readers and podcast listeners know that as the streaming wars have heated up I’ve become focused on whether subscribers will increasingly churn in and out of various services (“spinning” as I’ve called it). There are arguments on both sides of this issue, and it’s not yet clear to me how it will unfold.

But research late last week from PwC suggested that the potential for spinning is quite high. When PwC asked “Would you make any changes to your current subscriptions in order to subscribe to these new services?” 64% of respondents said they would terminate or downgrade one or more current services while 36% said they would make no changes to current services.

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I’m pleased to present the 493rd edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.

First up this week we return to the topic of “spinning” SVOD services, which I wrote about and Colin and I discussed on last week’s podcast. “Spinning” is the idea that subscribers will dip in and out of SVOD services to manage their monthly expenditures. Colin and I were at TVOT this week and on a panel Colin moderated spinning came up. We discuss our key takeaways.

Another topic that came up was where Disney+ pricing will go in the future, which we discuss (I think the only direction is up).

Last up we talk briefly about Cheddar’s monetization strategy. Colin did a good interview with Melissa Rosenthal, EVP at Cheddar, about the company’s success with native advertising.
 
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I’m pleased to present the 492nd edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.

This week Colin and I discuss my post from earlier this week, “Will Spinning Video Subscriptions Become a Thing?” which highlighted Hulu’s explicit offer to subscribers to switch (or spin) between its Live TV and ad-supported SVOD service. Hulu made the offer to mitigate a $10 per month rate increase it announced on its Live TV service.

Colin and I examine the pros and cons of SVOD services explicitly pitching spinning as a value proposition and whether it will take hold. Related, Colin also raises the interesting point that with the SVOD landscape getting more crowded, it might be beneficial for SVOD providers to offer smaller bite-sized on-ramps to start customer relationships (e.g. weekend passes, pre-paid credits, etc.) as we’ve seen in other industries.

SVOD is entering a significant period of transition, and from our perspectives, all ideas are going to be on the table to attract and retain subscribers.
 
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We all know about the proliferation of subscription streaming services (Disney+, Apple TV+, soon Peacock, HBO Max, all in addition to Netflix, etc.). Each service is investing heavily and wants to become a core part of our video behavior, entrenching itself as an unquestioned line item on our credit card statements.

Achieving that status is nirvana because inertia is a powerful force; once achieved, a subscriber needs to not only have an ah-ah recognition moment, but then follow it up with action to drop the service (figuring out how to do alone could be too much for many - find a cancellation link, an 800 number to call, etc.). For example, ever wonder how many people don’t check their statements closely and still pay for unused AOL dial-up service years since they’ve used it? I’m guessing it would be shocking.

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I’m pleased to present the 491st edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.

Disney+ launched this week, nearly 2 1/2 years after Disney announced a massive pivot to focus on direct-to-consumer distribution. Colin and I have both spent time using Disney+ in the past few days and on today’s podcast we share our perspectives.

There’s a lot to like about Disney+, but of course there’s no such thing as completely clear sailing. Potential issues we explore include whether Disney+ can/will create enough new content to keep pace with Netflix (and even whether it should try), how significant churn will be among the first 10 million activations (all of which are on some type of free trial), whether Disney+ can truly scale to 90 million subscribers while maintaining a family focus, what role bundling will play, and more.

Disney+ marks a major step forward in the evolution of the TV/video industries. It will be lots of fun to see how it unfolds.

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Over the past few years a powerful virtuous cycle of wired broadband Internet access, connected TV and over-the-top premium content has taken hold, disrupting the traditional TV and pay-TV industries. This virtuous cycle is going to accelerate going forward, causing further instability for established providers and significant opportunity newer entrants.

Robust broadband is the foundation of the virtuous cycle. Today Leichtman Research Group reported that U.S. homes subscribing to broadband cracked the 100 million level for the first time. Big cable TV operators, who have been offering broadband for 25 years, are the winners, now accounting for 67% market share, vs. 33% for big telcos. That’s up from a 64%-46% split 2 years ago in Q3 ’17. Big cable TV operators continue to gain subscribers (830K in Q3 ’19, up 14% vs year ago) while telcos continued to lose them (down 225K in Q3 ’19, the biggest quarterly loss in over 3 years).

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Last Friday afternoon CNBC reported that NBCUniversal is “leaning toward” making the free, ad-supported version of Peacock, its upcoming streaming service, free, with everyone getting unrestricted access. This would be a change from restricting it to Comcast’s cable and broadband subscribers only, as originally intended. The ad-free version would still carry a fee.

Which direction Comcast decides to go will say a lot about whether it sees Peacock’s primary role as helping Comcast grow and defend its core cable/broadband business, or having NBCU become a bona fide competitor in the “streaming wars” developing with Netflix, Amazon, Disney, WarnerMedia, Apple, etc. How should Peacock’s value be optimized - by restricting access to serve the Comcast’s cable/broadband business, or to be guided by the market and help NBCU build Peacock into a large OTT business?

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I’m pleased to present the 489th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.

First up on this week’s podcast, Colin and I discuss new data from Hub Entertainment Research, in particular how 63% of viewers said “online” is their main source for their favorite TV show. The research also found very strong awareness for Disney+ and Apple TV+, which is good news for both. Then we transition to WarnerMedia’s updates on HBO Max, which will launch in the spring.

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Just before the WarnerMedia team took the stage to unveil details of HBO Max, Sony announced that would it shut down its 4 year old PlayStation Vue virtual pay-TV service on January 30th. The moves are 2 great examples of the constantly-shifting strategies of big media companies.

PS Vue was an early mover in virtual pay-TV (or “vMVPD”). But if you think of the industry in 4 quadrant terms, with price on one axis and channel lineup on the other, PS Vue was relatively high on both - it offered a mostly complete channel lineup competitive with traditional pay-TV operators, but not at a significantly reduced price (which is the top motivator for prospects).

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A new survey from Hub Entertainment Research found that 63% of respondents identified “online” as the main source of their favorite TV show, vs. 35% who said it is their pay-TV set-top box. The 28 point gap is a big jump from the 2018 survey which found a 56%-44% divide in favor of online.

No surprise, within online, Netflix is by far the number one source of respondents’ favorite shows. Netflix was identified  by 34% of respondents, followed by 10% for Amazon Prime Video, 8% for Hulu and 4% for “other online.”

Hub didn’t provide an age breakout for any of the above data, but a separate study released today by Common Sense Media found that for 8-12 year olds, YouTube is by far the most used video service (53%), with Netflix next (27%) and YouTube Kids (7%), Amazon Prime Video (3%) and Hulu (2%) following. An interesting article in today’s WSJ helps explain the appeal of YouTube to teens.

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Verizon and Disney announced a promotional deal this morning which will give a free year of Disney+ to Verizon’s new and existing 4G LTE and 5G unlimited wireless subscribers and new Fios and 5G Home Internet subscribers. Some back of the envelope calculations show the promotion could quickly yield millions of new Disney Plus subscribers.

At the end of Q2 ’19, Verizon reported a total of around 94 million wireless retail connections. Verizon has been promoting new unlimited plans, and CFO Matt Ellis said on the Q2 ’19 earnings call that “less than 50% of our customer account base are on unlimited plans.” If say 35% are on unlimited, then around 33 million wireless subscribers would be currently eligible for the Disney+ free offer. If even 10% took advantage, that’s around 3 million new Disney+ subscribers.

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I’m pleased to present the 487th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.

Netflix reported its Q3 ’19 results this week, the last quarter before the onslaught of new SVOD competition begins from Disney+, Apple TV+, HBO Max and Peacock, among others.

In this week’s podcast Colin and I discuss the Q3 results, which were strong internationally and decent in the U.S. (better than Q2 ’19, but still well down from Q2 ’18 and below Netflix’s own forecast). But we focus mainly on where things go from here.

We agree that the days of Netflix’s robust U.S. growth are almost certainly over. But we also think Netflix’s content remains highly competitive and international could continue expanding strongly in the short-term, depending on how quickly Disney+ rolls out to other geographies. In short, there is a lot of uncertainty given all the new choices coming to market.

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Netflix investors breathed a sigh of relief after yesterday’s Q3 '19 earnings report. The company missed its subscriber forecast of 7 million subscriber addition, but only narrowly by a few hundred thousand. Netflix added 500K subscribers in the U.S. vs. its 800K forecast. That was a far better performance than Q2 when it lost 130K subscribers in the U.S. Internationally Netflix gained 6.3 million subscribers, basically in line with the 6.2 million it forecast.

The U.S. miss was blamed mainly on an elevated churn rate that Netflix said hasn’t normalized since rate increases went into effect earlier this year. The good news is the higher rates translated into 16.5% increase in average revenue per unit in Q3.

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I’m pleased to present the 486th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.

Colin and I were both excited to see Hulu launch a mobile video downloading feature this week. Hulu had teased the feature over a year ago. As Colin notes though, because it’s only available with the Hulu (No Ads) service and only on iOS devices, just around 15% of Hulu’s overall subscribers will gain access to downloading (at least for now).

We then discuss reports that Disney doesn’t yet have an agreement with Amazon for its forthcoming Disney+ service to be included in Fire TV devices. The deal is held up due to Amazon’s attempt to wrangle more ad inventory in Disney’s other apps. The situation is typical of the complex and sometimes competitive relationships between big media and technology companies today.

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Last week, the WSJ ran two articles that underscore how Disney is navigating new terrain as it prepares to launch Disney+ in November. The articles also showcase how convoluted relationships among major media and technology companies are going to become over fights for shifting leverage.

One article described how Disney has continued to ban advertising from Netflix on its entertainment TV networks (ESPN is still ok) even though it will accept ads from other SVOD providers. The other article described Disney’s negotiations with Amazon over how much ad inventory Amazon should be allocated to sell in Disney’s apps that run on Fire TV. The article noted no deal at all has been reached for Disney+ to be carried on Fire TV, as the SVOD service’s launch date nears.

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NBCUniversal’s SVOD service will be known as “Peacock” and will launch in April with over 15,000 hours of content. As expected, classic shows like “The Office” and “Parks and Recreation” will be exclusively on Peacock, along with “30 Rock,” “Cheers,” “Frasier,” “Will and Grace” and numerous others.

Peacock will be available both ad-supported and ad-free, though NBCUniversal didn’t announce any pricing just yet (Peacock will be included at no charge for Xfinity subscribers). SVOD pricing has been under pressure since Disney announced initial Disney+ pricing at $6.99/month, with Apple TV+ following at $4.99/month. HBOMax is likely to be at the high end around $14.99/month.

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Apple finally revealed details of its Apple TV+ SVOD service and by all accounts it looks poised to get off to a fast start when it launches on November 1st. Positives include 9 original shows from A-list talent, low pricing of $4.99 per month, 1 week trial period, ad-free viewing, binge-watching (albeit limited to 3 episodes per show to start), account sharing for 6 family members and downloading.

But the biggest tailwind Apple TV+ will enjoy is that it will be bundled for a free year for buyers of new or Apple-refurbished iPhones, iPads, iPod touches, Apple TVs and Macs who activate Apple TV+ within 3 months of their purchase. That means millions of viewers will become exposed to Apple TV+ at no cost, especially during the all-important holiday season. There is virtually no upfront friction since the Apple TV app is pre-installed on all these devices, including Macs running the latest macOS.

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I’m pleased to present the 475th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.

Was Netflix’s Q2 ’19 subscriber slowdown a short-term blip or the start of a long-term trend? This is the question Colin and I dig into on this week’s podcast.

This week Netflix reported its first-ever domestic streaming subscriber loss, dropping 130K paid subscribers to end the quarter with 60.1 million paid subscribers. The loss compared with a forecasted gain of 300K and a gain of 870K a year ago in Q2 ’18. And internationally, Netflix gained 2.83 million paid subscribers to end the quarter with 91.5 million subscribers, compared with a forecasted gain of 4.7 million and a gain of 4.6 million a year ago in Q2 ’18. So all in, Netflix’s global subscriber gain dropped roughly in half, from 5.45 million in Q2 ’18 to 2.7 million in Q2 ’19.

Netflix blamed a weak Q2 content slate and to a lesser extent price increases in the U.S. and expects Q3 to return to typical growth. But Colin and I note new SVOD dynamics ahead that could scramble things such as the loss of key content like “Friends” and “The Office,” strong entrants like Disney+ and HBO Max. It’s hard to tell how it all shakes out just yet.

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