Posts for 'Aggregators'

7 Quick Reactions to Hulu Plus

Hulu unveiled its much-rumored subscription service this afternoon, dubbed "Hulu Plus." I haven't used the new service, but based on the explanation and the teaser video, here are 7 quick reactions:

1. Is there consumer demand for Hulu Plus? - This looms as the fundamental question that will be answered as Hulu Plus rolls out. From CEO Jason Kilar's blog post, it appears that, at least initially, Hulu Plus is a bet on consumers having an appetite for a library of broadcast network programs since that's all that's been highlighted so far. Hulu identifies about 2,000 library episodes in addition to current seasons. Unless Hulu Plus really beefs up its catalog, it won't be long before the library holds few surprises for returning visitors.

2. Hulu Plus lacks many of Netflix's advantages - It's tempting to think of Hulu Plus competing directly with Netflix, and to an extent of course they're after the same general target consumer. But Netflix has several very significant advantages: a brand that's identified with subscriptions and 14 million+ currently paying subscribers, a deep DVD library of 100,000+ titles (which has every single episode Hulu Plus will be offering), a streaming library of 17,000+ titles (offered at no extra cost to subscribers) and integrations with all the same devices Hulu Plus is touting (except the iPhone, which is coming soon). Further, Netflix has far deeper resources; it is a public company with a $6 billion market cap that spends $250 million/year on marketing and has publicly-stated commitment to obtain more streaming rights from Hollywood. With Netflix on one side and cable on another, it's unclear how Hulu Plus will expand its menu. I don't see Hulu Plus diminishing Netflix's rapid growth.

3. Ads in Hulu Plus would be a big-time buzz-kill - I did a double-take when I first read this line in Jason's post: "Hulu Plus is a new revolutionary, ad-supported subscription product that is incremental and complementary to the existing Hulu service." Whoa - are there going to be ads in Hulu Plus? That will be a flat-out non-starter for many prospective subscribers. Yes, I know about ad-supported cable networks, but that's for first-run programming, not for library or catch-up fare. Hulu Plus must be an ad-free zone. Meanwhile, it's important that Hulu still prove the 100% ad-supported business model for its existing experience. With much in flux regarding ad loads there's new messaging Hulu will likely be rolling there too.

4. Why wasn't Android or Google TV mentioned? - Is it a little weird that there was no mention of Android or Google TV in today's unveiling? I think so. Android is fast-gaining on the iPhone (surpassed by some metrics) and Google TV is poised to make a big splash in the fall. Why no mention? Is there an anti-Google bias at work?

5. Hulu Plus adds more support for HTML5 - Hulu Plus is another boost for HTML5 and another small dent for Flash. By making Hulu Plus available on non-Flash supported Apple devices, the it seems the Hulu team has been willing to make the investment to diversify beyond Flash, which it has used since launch.

6. Comcast must already be considering how it exits the Hulu joint venture - When the Comcast-NBCU deal clears, Comcast will inherit NBCU's ownership stake in Hulu. With Hulu Plus it's hard to see why Comcast will want to retain that stake. There's no discernible benefit to Comcast owning a minority position in a new over-the-top subscription service that whets the appetite of potential cord-cutters. It's one thing for selective NBC programs to be freely available for catch-up on Hulu.com, but a deeper library in a paid subscription service? No way, especially not as Comcast is trying to build value in its own TV Everywhere service.

7. Hulu gets credit for a well-executed launch - Stepping back, the Hulu team deserves credit for keeping its subscription under tight wraps and executing a solid launch. There have been no shortage of rumors, but to my knowledge there haven't been any specifically identifiable leaks in the Hulu ship. That's a big accomplishment, especially when you consider how many people must have had knowledge of the plans. The launch includes a well-articulated CEO message, a nicely-done sizzle reel (that is in Flash, which makes it not viewable on the iPad or iPhone!), several device integrations and a roadmap of add-ons, and a slow-rollout plan that will generate excitement among early adopters.

There are still many unknowns about Hulu Plus, but for now this is plenty to chew on.

What do you think? Post a comment now (no sign-in required).

Categories: Aggregators, Broadcasters

Topics: ABC, Android, CBS, FOX, Google, Hulu, NBC

YouTube Surges to Almost 15 Billion Views in May

comScore has released its May online video rankings and at the top of the list, as usual, is YouTube. In May it racked up a record 14.6 billion video views, up 11.5% from April. YouTube's market share actually dipped slightly in May, to 43..1%, still its 3rd-highest monthly share since comScore began releasing this data in Jan '07. Total video views were also at a record high of 33.9 billion views in May.

The chart below shows how remarkable YouTube's growth has been since Jan '09. YouTube has more than doubled its monthly views from 6.3 billion. Meanwhile, YouTube's market share has hovered right around 40% each month, with its lowest level at 37.7% in Oct '09 and its highest of 43.5% in April '10. YouTube is generating more than 10 times the monthly views it was when Google acquired it.

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Categories: Aggregators, Music

Topics: comScore, Hulu, VEVO, YouTube

Look Who's Advertising on YouTube's Homepage Now: VISA/Toy Story 3 and Xbox's Kinect

Want a sense of just how far YouTube has evolved from its scruffy user-generated roots to a premier site for big brand launches? Then head over to YouTube.com now and you'll see huge rotating rich media campaigns running for VISA, with a tie-in for the new Disney/Pixar film Toy Story 3 (opening tomorrow) and for Xbox's new Kinect motion-sensing feature (the "Wii-killer" unveiled earlier this week at E3).

From a brand launch perspective, these are about as big as they get, with huge money and franchises at stake for all of the companies involved, not to mention the positive or negative career impact for the marketers driving the media strategies at these companies. The fact that both are advertising prominently on YouTube says volumes about the site's importance in the online advertising world and its evolution from its UGC start.

It wasn't that long ago when YouTube was derided an un-monetizable jumble of amateurish clips. It's also worth noting that, as best I can tell, neither the Kinect nor VISA/Toy Story 3 campaigns are running on Yahoo, AOL or MSN right now, the traditional online homes for big brand launches. Now imagine when YouTube is available on TVs via Google TV and you get a sense of just how important YouTube is going to be, and how strategic it has become for Google which is trying to expand beyond search ads.





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Categories: Advertising, Aggregators

Topics: Toy Story, VISA, XBox, YouTube

Total Video Viewership Down Slightly in April; YouTube Share Jumps

comScore has released its new online video rankings for April '10 which show total videos viewed of 30.3 billion, down almost 3% from the prior month's 31.2 billion. As a result, YouTube, which was roughly flat in April at 13.1 billion videos, saw its market share increase to 43.5%, its highest level since July '08. It was also YouTube's second highest share since I started tracking the comScore numbers in Jan '07 (when YouTube had a relatively paltry 16.2% market).

The 3% decrease in total videos from March '10 to April '10, compares with a 5% decrease from March '08 to April '08 and a 16% increase from March '09 to April '10. While it's hard to discern any trends around these 3 year numbers, one thing worth noting is that over the last 6 months, with the exception of blips up in Dec '09 and Jan '10, total video views have stayed relatively stable right around 30 billion. I'm not sure exactly what to conclude from that, but I'll certainly be watching the coming months to see if viewership is flat-lining or just taking a breather.

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Categories: Aggregators

Topics: comScore, Hulu, VEVO, YouTube

With Leanback, YouTube Could be the First Big Beneficiary of Google TV

Categories: Aggregators, Devices

Topics: Google, Google TV, Hulu, YouTube

Roku Ready to Push Snazzy New Netflix UI

Categories: Aggregators, Devices

Kylo TV Browser Can Now be Tweaked to Watch Hulu

Hillcrest Labs, maker of the Kylo browser, which lets users browse the Internet on their TVs, is announcing the Kylo 0.7 beta release this morning. The new release includes updates allowing advanced users to change the browser's user agent string in order to view Hulu. Just two months ago, when Kylo was introduced, Hulu very quickly blocked access, just as it had when boxee tried delivering Hulu to TVs. The new workaround represents another step in the cat-and-mouse game that Kylo is playing with Hulu.

In the press release, Dan Simkins, Hillcrest's CEO and founder said, "It remains our position that Kylo is simply a Web browser based on open-source Mozilla code, like Firefox. We fully respect the rights of content owners and aggregators, and as such, we do no deep link, re-index, divert users past ads, or overlay different user interfaces on video players. However, we believe consumers should be able to use the Kylo browser to visit any site on the Web on the display screen of their choice. Our hope is that a respectful dialog with Hulu will encourage them to consider changing their policies."

To my knowledge Hulu hasn't ever publicly addressed this situation and I'm guessing it's won't this time either. It is extremely likely that Hulu will once again block Kylo, as it seeks to enforce its computer-only viewing model. As I wrote last week in "5 Reasons Google TV Looks Like a Winner," this insistence is really backing Hulu into a corner marginalizing the site for users who just want to watch whenever, wherever they'd like.

Aside from the Hulu tweak, Hillcrest is also announcing new features including a Windows Media Center plug-in, auto-hide control bar, improved zoom, keyboard hiding, multi-screen support for Mac, printing and updated links. Hillcrest is also putting its Loop pointer on half-price sale of $49 through June 11th. The Loop lets you easily navigate Kylo.

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Categories: Aggregators, Technology

Topics: Hillcrest Labs, Hulu, Kylo

Video Interview with Netflix CEO Reed Hastings

Categories: Aggregators, People

Topics: Netflix, Reed Hastings

Roku To Add Netflix Browse, Search and Queue Features

Roku just announced that by June it will soon be introducing a handful of features that improve the Netflix streaming experience when using Roku, including the ability to do the following all within its channel UI: search the Netflix Watch Instantly library, browse and play content and add content to your Watch Instantly queue (here's a short company-produced demo video).



Currently users are first required to do all of these things online in their Netflix account, and then go to the Roku when ready to play their selections. This 2-step process has always felt a bit clunky to me and the new features obviously simplify the experience a lot. Roku spokesman Brian Jaquet told me he believes Roku is the first to offer the search function of the many CE devices Netflix is integrated with. I know Xbox introduced the browsing function last fall and I believe that at least PS3 and Wii (and possibly others) offer this as well.

Netflix has been hitting it out of the park recently with subscriber additions, with streaming an increasingly important drawing card. Things that Roku and others do that improve the TV-based experience are valuable, especially for more mainstream users.

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Categories: Aggregators, Devices

Topics: Netflix, Roku

Comcast and Netflix in the Context of Cord-Cutting

There's likely no hotter debate in the online video world right now than how big "cord-cutting" - the concept of consumers dropping their pay TV service in favor of online-only options - might be in the future.  To the extent that cord-cutting or "cord-shaving" trends develop (and despite some recent research findings, these are still highly uncertain), no company is in a better position to both drive and benefit from them than Netflix.

Netflix cannot be considered a pure substitute for today's pay TV services for many reasons, primarily because there's no live or sports programming, and also because it offers just a fraction of what's available on TV. However, Netflix can be considered a key building block for consumers motivated to cobble together multiple sources to meet their video needs (for example, viewers can augment Netflix with Hulu/YouTube, over the air antenna, iTunes/Amazon downloads, out-of-home viewing, etc.). This is the more likely scenario for would-be cord-cutters than a one-for-one replacement of current pay TV services.

If cord-cutting or cord-shaving did take off, then Comcast, with the largest number of video subscribers of any pay TV provider, would likely be hurt the most (though as the largest broadband ISP, it could actually benefit on that side of its business as users upgrade for more bandwidth).

In this context, and with both companies reporting their Q1 '10 earnings in the past week, it's interesting to look at their performance to consider what to expect going forward.

The natural place to start the comparison is purely the number of video subscribers each company has. Netflix has been on a tear, more than doubling the number of its paying subscribers from just under 7 million in Q1 '07 to just under 14 million in Q1 '10. The biggest chunk of that growth has come in the last 2 quarters alone, when Netflix has added 2.9 million subscribers. Conversely, in that same 3 year time period, Comcast has lost approximately 1.5 million video subscribers to end Q1 '10 at 23.5 million. At the current rates, Netflix could have approximately as many subscribers as Comcast by end of next year.

However, the companies' subscribers are very different. On the one hand, Netflix is seeing its strongest growth in its least expensive $8.99/mo tier, which is a compelling value since it also allows unlimited streaming. Netflix is using this tier to entice many new subscribers and also to defend itself against $1 DVD rental competition from Redbox. As a result its average revenue per subscriber is declining. On the other hand, Comcast has been steadily increasing the penetration of additional services its subscribers take, primarily through "triple play" bundling of video with voice and broadband Internet access. This is reflected in the growth of its average revenue per video subscriber from $107.20 in Q1 '08 to almost $123 in Q1 '10. This, plus other lines of business like advertising, business services and its own programming networks contributes to Comcast generating $9.2 billion in revenue in Q1 '10 compared with Netflix's $494 million.

The flip side of Comcast's drive to increase its ARPU is that it potentially opens up higher cord-cutting interest. Some subscribers who open their billing statements to see a monthly tab in the $200 or more range when premium channels, DVRs, additional set-top boxes, VOD purchases and the like are all added up are inevitably going to get "sticker shock" and start asking the question how much value do they get from their cable subscription? While the cable industry has always made a strong argument that the sheer volume of programming available each month makes it a great subscription value, my sense is that with the massive number of alternative viewing options consumers are now accessing, it's not pure volume that matters, but rather actual cable use, in particular relative to other options.

For example, consider a home with a couple of teenagers who rarely watch live TV any more and instead spend a lot of their free time on Facebook, YouTube, Hulu, etc. Say Dad is only a light sports fan and doesn't consider ESPN or Fox Sports essential, and has long since moved the bulk of his news consumption to online sources. He loves Jon Stewart, but is content to catch his jokes online the next day when he has a few minutes of downtime at work. He also loves some of the broadcast network shows, but can watch them sporadically on Hulu. Mom is into the shows on HBO, plus some favorites on ad-supported cable channels like USA, Bravo and Food Network. Still, she's been having less time lately to actually watch these recently and has also started to gravitate to back seasons that are now available on Netflix. Since the family's Nintendo/Blu-ray player/Roku allows streaming to the TV, it's as simple as cable to use. Net it all out and the family's cable usage has declined markedly in the last couple of years.

Does this example sound familiar to you? I believe this is the kind of situation where cord-cutting or cord-shaving starts to gain some interest. Families faced with the real opportunity to save a few bucks each month, though with clearly reduced program options and convenience, will have decisions to make in the coming years. How they make them and how Comcast, Netflix and others react will have huge implications on their performance.

What do you think? Post a comment now (no sign-in required).

Categories: Aggregators, Cable TV Operators

Topics: Comcast, Netflix

Hulu Missed Its Window for Subscription Success

Unless Hulu has something very unpredictable up its sleeve in the $9.95/mo subscription service it's rumored to begin testing in May, the bad news for the site is that it has already missed its window of opportunity for subscription success. In a one sense it's not Hulu's fault; as a startup 3 years ago, it had to choose what strategy to focus on and execute. Hulu chose the free, ad-supported route, with widespread distribution that has made it the 2nd most-used video site.

The problem is that the world has changed significantly since Hulu was started 3 years ago, and launching a successful online subscription service now is far harder to do now than it would have been then. Here are some of the top reasons why:

Subscription competition - 3 years the online video subscription field was wide open, but now there's Netflix to contend with. As the company's blowout Q1 '10 results amply demonstrate, Netflix is firing on all cylinders.  By providing unlimited streaming as a value add even for its $8.99/mo subs, Netflix has muddied the waters for any would-be online-only subscription competitor, which has to articulate a value prop to prospects of why they should pay the same or more for online-only access, for what will likely be a smaller catalog initially. Netflix also has the device partnerships, 28-day studio deals for more content, well-baked UI/recommendations and deep financial resources. 3 years ago it had none of this; back then it was still imposing confusing online usage caps and pursuing its own set-top box with LG Electronics.

TV Everywhere - 3 years ago cable operators were contemplating their navels when it came to online video delivery, now with TV Everywhere they have a game plan (though admittedly not a lot of actual success just yet). For most cable networks, preserving their relationships in the cable ecosystem is paramount. Taking a leap by licensing content for a Hulu subscription service isn't going to be very appealing. Absent cable content, Hulu will be pitching a monthly subscription to archived commercial free broadcast network programs; that's a pretty narrow value prop.

Comcast-NBCU deal - 3 years ago Comcast was still licking its wounds from its ill-considered bid for Disney; now it has a deal to acquire NBCU, one of Hulu's original partners and a top-tier cable network owner. While Comcast will say all the right things during the deal's review process, I've wondered how long Comcast would even retain its Hulu stake once the deal is completed. Hulu's free "ad-lite" model is antithetical to Comcast's belief in subscriptions and bottom line accountability. A Hulu subscription service is unlikely to help either. Why would Comcast want another competing subscription offer in the market, much less one that would tempt would-be "cord-cutters?"

Lack of ownership will - 3 years ago, NBCU and News Corp were full of platitudes about their new online video baby. But in addition to NBCU's changed status, News Corp has become the most vocal content provider for the paid online content model. MySpace's travails are rumored to have soured Rupert Murdoch's appetite for chasing fickle online users. Meanwhile, Disney, the last partner to the Hulu venture, is plenty interested in subscriptions, but it wants to offer them directly. Then there's Hulu's key financial partner, Providence Equity Partners. I've never quite understood their investment decision given Hulu's limited exit opportunities, but one thing's for sure - they're unlikely to be motivated to help fund the considerable development and marketing expenses Hulu must undertake to make subscriptions succeed.

Retransmission consent - 3 years ago, the idea of broadcasters getting paid for their content still seemed like a stretch. But broadcasters are winning their chosen high-stakes battles, and given their success, are far more inclined to pursue a wholesale model (i.e. getting distributors to pay them monthly) than back a retail, subscription model. Plus, a Hulu subscription model departs from the message of free broadcast service that the broadcast lobby is using with the FCC and Congress to justify why it should retain its excess spectrum, rather than yielding it to mobile data providers under the National Broadband Plan's reclamation program.

User expectations - As if these weren't enough to contend with, the single biggest impediment Hulu faces is likely itself. Having invested its brand heavily in the free ad-supported positioning (and computer-based viewing only) Hulu lacks what experts would call "brand permission" to now pursue subscriptions. Companies are frequently chastened to find out what their customers really think when stretching for new products or business models. Moving customers from free to paid is one of the hardest things any company can do (just ask YouTube which is attempting to do the same); trying to pull it off from a cold start is nearly impossible in my mind. Hindsight is 20-20, but what Hulu probably should have done 3 years ago is offered a "freemium" model that would have immediately conditioned its users to thinking Hulu stands for both free and paid.   

I've learned to never say never in this business, but to succeed, Hulu has to surmount the above challenges and more. If it can do so, it will be a significant win for the company. If it can't it will be yet another reminder of how treacherous things are even for well-funded startups trying to navigate a quickly-shifting competitive landscape.

What do you think? Post a comment now (no sign-in required).

Categories: Aggregators

Topics: Comcast, Disney, FCC, FOX, Hulu, NBC

VideoNuze Report Podcast #58 - April 23, 2010

Categories: Aggregators, Podcasts

Topics: Ad:Tech, Netflix, Podcast

Netflix Blows Away Q1 '10; Adds Almost 1.7 Million Subscribers

Netflix reported its Q1 '10 results yesterday and they're the best in the company's history, blowing away its own guidance for the quarter. Net subscriber additions totaled 1.699 million, above the high end of the company's own guidance range of 1.232 million to 1.532 million net subs. It's by far the biggest quarter the company has ever reported, and is 85% higher than Q1 '09 net sub adds of 920K. Netflix upped its full year guidance range for ending subs to 16.5 to 17.3 million, from the previous range of 15.5 to 16.3 million.

In addition, the company reported subscriber acquisition cost of $21.54 which is the lowest in the company's history. This continues the downward trend in SAC over the last 4 years. Churn came in at 3.8% which is also a record low, just below Q4' 09's 3.9%.

To get a sense of how big Q1 '10 was, look at the below chart showing net sub adds for the five first quarters back to 2006. Note that net sub adds in Q1 '10 were more than twice as much as just 2 years ago in Q1 '08. The SAC line shows the steady drop over the last 3 years. As I said yesterday, the record low churn in Q1 '10 is strong evidence that all this growth isn't coming at the expense of subscriber quality.



On the earnings call, CEO Reed Hastings and CFO Barry McCarthy gave a very upbeat report on the business and reiterated several themes from prior earnings calls. Increasing the streaming library is clearly the company's number one objective, and the recent 28-day DVD deals with Warner Bros, Universal, Fox and HBO, all serve this purpose. Hastings mentioned a number of times that savings on DVD purchases resulting from these deals is being plowed back into gaining more streaming content.

The company noted that subscribers using its Watch Instantly streaming feature for at least 15 minutes per month in Q1 '10 rose to 55% from 48% in Q4 '09. In fact, Hastings and McCarthy often referenced the positive interplay between improving the streaming value proposition and increasing subs, reducing churn and reducing SAC. This is the fundamental dynamic the company is now in. Three plus years since introducing Watch Instantly, the hybrid offer of DVD rental and streaming has reinvented Netflix's value proposition and propelled its unprecedented growth.

A few other interesting tidbits in no order, from the earnings call and commentary:

• New subscribers are disproportionately choosing the $8.99 "1 DVD out" plan.

• A significant number of streaming users have connected their computers to their TVs.

• TV program content available for streaming has grown significantly in last 2 years and now accounts for a significant percentage of weekly viewing hours.

• iPad app has had minor effect on business, but being in Apple ecosystem has generated great PR.

• Wii launch in Q2 is expected to have big impact on streaming usage.

• 28-day DVD deals is prompting some consumer shifting to purchase and VOD, but that was expected and isn't harming Netflix's subscription value.

• Netflix has no interest in setting up a digital storefront for single-use rental or downloads. It believes Amazon, iTunes and others do that model well and it would cause partner conflicts. Subscription is Netflix's only focus.

• Netflix hasn't seen any upside from alleged "cord-cutting" of cable/satellite/telco services and doesn't see itself as a relevant substitute for these services.

• Plan is to continue as a distribution partner for pay channels like HBO, Showtime, Starz and Epix - not to compete with them, or introduce original programming like they do.

• 24% of households in Bay area now Netflix subscribers, and in spite of streaming's growth, DVD shipments in the area still increased in Q1 '10.

• Hastings swapped a large percentage of his cash compensation for stock awards in a vote of confidence in the business.

• Not concerned about reports of Hulu or Redbox subscription offers; Netflix's competitiveness is based on scale, UI, recommendations, content breadth.

• More news on international expansion later this year, but expected to start small.

As I said previously, Netflix is by far the most formidable "over the top" player, and with its continued strong growth is creating many interesting strategic options for itself down the road. The thing that continues to really surprise me about the Netflix story is that no meaningful competitor has emerged. How companies like Apple, Amazon, Walmart, Comcast, DirecTV and Microsoft plus big venture capital/private equity investors have sat on the sidelines and not aggressively introduced subscription DVD/streaming services of their own is both a mystery and a gigantic boon for Netflix. Given Netflix's size and formidable capabilities, it may already be "game over" for any of these potential competitors.

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Categories: Aggregators

Topics: Netflix

What to Look for in Netflix's Q1 '10 Results Later Today

Later today Netflix will report its Q1 '10 results which will be closely scrutinized to see if the company's strong momentum has continued following its blowout Q4 '09.  Netflix is easily the most important "over the top" (OTT) contender and recently it announced further moves that will strengthen its position (e.g. launch of Wii streaming, Warner Bros., Universal and Fox 28-day DVD window deals, iPad app, more CE partners and additional indie content).

In January the company forecasted Q1 ending subscribers would be in a range of 13.5 to 13.8 million, which would represent net sub growth of 1.232 million to 1.532 subs over its Q4 '09 ending 12.268 million subs. The forecasts are a sign of how bullish Netflix management itself is; even the low end would represent the strongest quarterly net sub growth ever. Netflix's best Q1 was in '09 when it added 920K net subs meaning even the low end of the Q1 '10 forecast is 34% higher than the Q1 '09 actual. And a strong Q1 would also bode very well for full 2010 results; historically Q1 represents between 32-41% of Netflix's full year net sub adds.

As I explained in my Feb post, "It's Official: Netflix has Entered a Virtuous Cycle" there are several other key numbers to zero in on today. First is subscriber acquisition cost (SAC), which is what the company spends to add each new sub. SAC in Q4 '09 was $25.23, the second lowest ever (only Q2 '09 SAC of $23.88 was better). SAC has been falling dramatically (it was $47.46 in Q1 '07). I think this is a direct reflection of the company's unlimited streaming feature becoming better understood and valued as online video viewing has soared and convergence devices have proliferated. A continued decline of SAC in Q1 '10 would be very good news.

Churn is another number to focus on. In Q4 '09 it was 3.9%, matching the company's all time low. Churn is tightly related to sub growth. If new subs are low quality (e.g. responding to promotional offers, not understanding up-front what to expect, high delinquencies, etc.), churn will increase. If Netflix can sustain sub 4% churn in the face of unusually high sub growth that means sub quality is strong.

The percentage of subs using its streaming feature for at least 15 minutes/month is yet another number to focus on. In Q4 '09 it was 48%, up from 41% in Q3 '09 and 26% in Q4 '08. I'm sure we'll see an increase in this percentage in Q1 '10, the only question is to what. Last but not least, it will be interesting to see where gross margin comes in. Gross margin ticked up to 38% in Q4 '09, a level not seen since 2006, but it's not clear whether this will be sustained. Benefits of the 28-day DVD deals, which in part reduce the company's cost of acquiring DVDs from these studios will likely not be visible yet in Q1.

Netflix has a huge amount of momentum in its fundamentals, which the stock market seems to have woken up to recently. The company's stock price closed at $87.07 yesterday, up 58% from its 12/31/09 price of $55.09 and up 71% from $50.97, the level that it was at just prior to when it reported its blowout Q4 results. Investors will no doubt be looking at Q1 results to help justify the stock's big recent move. In particular, if sub growth beats the high end of the forecasted range, it could well trigger another strong move higher for the stock (and no that's not a recommendation to buy). Netflix has a wide open playing field, later today we'll find out how well it continues to capitalize on it.

What do you think? Post a comment now (no sign-in required).

Categories: Aggregators

Topics: Netflix

Widevine Announces Product Update, List of Supported Devices and New Customers

Widevine is announcing the 4.4.4 version of its video optimization and DRM platform today, with new features, a list of supported devices and new customers. Widevine's CEO Brian Baker brought me up to speed yesterday.

Widevine is supporting HTTP streaming and also adaptive bit rate streaming for live events and shows, not just on-demand. Devices supported include Apple products, Blu-ray players (Haier, LG, Philips, Samsung, Toshiba), connected TVs, Nintendo Wii, Windows PCs and 50 models of set-top boxes. As TV Everywhere services begin to roll out, secure delivery is a key to success, and Brian explained that Widevine is positioning itself to be in the middle of the action.

On the customer front, Netflix and Best Buy are being announced as new customers. Netflix has been aggressively rolling out new content and supported devices for its Watch Instantly streaming feature. Brian wouldn't confirm, but it seems fair to assume that Widevine is the DRM solution Netflix is using for streaming to the Nintendo Wii, which, given its massive installed base could quickly become a significant percentage of Netflix's streaming use (it just went live last week). In a related move, last week Irdeto announced that Netflix had licensed its Cloakware software as part of its DRM efforts.  

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Categories: Aggregators, Devices, DRM

Topics: Best Buy, Netflix, Widevine

Netflix Signs Up Irdeto to Secure Streaming Delivery

Irdeto, the digital media security provider, is announcing this morning that Netflix has licensed the company's Cloakware Embedded Security software as part of its solution to secure content streamed to multiple consumer devices. Cloakware is a set of tools to defend against unauthorized tampering and attacks. Irdeto has a broad customer base internationally and has lately been raising its profile in the U.S.

For Netflix, the push for enhanced security comes as the company begins expanding to additional CE devices beyond the desktop for its hugely popular Watch Instantly streaming feature. The iPad is the first new device Netflix has targeted, and its app is considered one of the most widely downloaded in the iPad's first weeks on the market. No doubt this success will spawn further Netflix Watch Instantly implementations, particularly as competing tablets come on the market in 2010 and smartphones proliferate, especially those powered by Android.

Categories: Aggregators, DRM

Topics: Irdeto, Netflix

Fox and Netflix Agree to 28-Day Window

Netflix and Fox are announcing this morning an expanded content licensing agreement which creates a 28-day DVD window and gives Netflix streaming access to certain prior season Fox TV shows. The 28-day window, which delays Netflix access to new DVDs until 28 days after their release date is similar to a deal that Netflix struck with Warner Bros. earlier this year.

I continue to be a fan of the 28-day window, as it allows studios a little more time to eke further revenue out of the rapidly-declining DVD sales business, while expanding Netflix's catalog for streaming and reducing its cost on physical DVD purchases. Netflix's Watch Instantly streaming feature has been a game-changer for the company, essentially reinventing the company's value proposition from a DVD subscription business defined by the number of discs out at any time, to one where subscribers get unlimited digital use. The key to its success is building the library of titles for streaming and that's what these 28-day deals are all about.

Update: Universal also announced a 28-day deal with Netflix this morning. Release is here.

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Categories: Aggregators, FIlms, Studios

Topics: FOX, Netflix

Blockbuster Hangs In with New Fox, Sony and Warner Deals

Netflix wasn't the only distributor modifying how it does business with Hollywood studios this week; Blockbuster also unveiled new deals with Fox, Sony and Warner, giving it "day-and-date" availability of these studios' films for store and mail rental (note, not for its on demand streaming service). Blockbuster also got "enhanced payment terms" from the studios in exchange for giving them a first lien on Blockbuster's Canadian assets (which would imply that if Blockbuster files for bankruptcy, the studios could end up owning/operating a slew of Canadian stores). Seems like steep terms for Blockbuster to hang in there.

As I wrote a few weeks ago in "The Battle Over Movie Rentals is Intensifying," there are multiple distributors jockeying to be the consumer's preferred movie source. That means consumers need to figure out, on a title by title basis what works best for them.

For example, I'm a Netflix subscriber and let's say I want to watch the recently released "Sherlock Holmes" DVD. Netflix doesn't get it until April 27th per its 28-day window with Warner Bros. But when I check online, a local Blockbuster store I've never been to shows that it's in stock (though I'm a little skeptical). Do I want to drive down there to find out? Meanwhile, Comcast is offering it on-demand. But do I want to pay $4.99 for it when I'm already paying a monthly Netflix subscription? Alternatively, there's iTunes and Amazon VOD. But then I need to either watch on my computer or on the TV that's hooked to the Roku or temporarily connect my laptop to the TV. See what I mean about the choices facing consumers?

(Note - online movie distribution is among the topics we'll cover at the next VideoSchmooze on April 26th. Early bird discounted tickets available for just one more week!)

What do you think? Post a comment now (no sign-in required).

Categories: Aggregators, FIlms, Studios

Topics: Blockbuster, FOX, Netflix, Sony, Warner Bros.

Is Hulu Now Blocking Access for Kylo Users? Yes, It Is.

No sooner did I post "With New Kylo Browser Convergence is Another Step Closer" this morning, than I've come to understand that Hulu programs are now not accessible through the Kylo browser. Hulu worked completely fine for me yesterday, but now when I go to watch a program on Hulu, I'm getting the text message, "Unfortunately this video is not available on your platform. We apologize for any inconvenience." Huh, what's going on here? Is Hulu blocking Kylo users' access to its programs? I've asked Hulu for a comment.



If Hulu is indeed doing this, it's a PR fiasco in the making for the site. Blocking access to its content would mean that Hulu is putting itself on the wrong side of convergence and risking turning off its users (not to mention censoring as if this were China). The episode recalls February, 2009, when Hulu demanded that boxee turn off access to Hulu at the request of its content partners. That tempest highlighted the artificially made quagmire that Hulu's owners find themselves in - eager to have Hulu boost their programs' viewership, so long as it remains on the computer and not on the TV.

With Kylo, Hulu will once again be called upon to justify how it's making decisions. For example, if I'm using Kylo on my computer, how is watching Hulu content any different than if I were using IE, Firefox, Safari, etc? And if I choose to connect my computer to a TV screen, how is that any different than if I connected it to a large monitor? In short, this is a hairball for Hulu.

Update: Hillcrest Labs, the company behind the new Kylo browser, has confirmed that Hulu is indeed preventing its content from being shown. The statement from Hillcrest's CEO Dan Simpkins:

"We have confirmed with Hulu that they are preventing the Kylo browser from playing Hulu videos. Prior to our formal launch, Hulu videos would play within the Kylo browser. Like Internet Explorer, Firefox or Safari, the Kylo browser is simply a Web browser that enables consumers to visit any site on the Web. We have tremendous respect for Hulu, and we hope that a continued dialog might influence their thinking."

Meanwhile Hulu seems to be in a bunker. I haven't heard back from them, nor has anyone else it appears. I have confirmed from ABC (one of Hulu's owners) that it found out about Hulu's action when everyone else did, which means that ABC is not the instigator here. Much more on this story as it unfolds.

Update 2: Now Tuesday morning and still no word back from Hulu. Nobody else seems to have heard from them either. It looks like their PR strategy is avoidance. That's a bad move because going mum just means that story continues to live (just ask Tiger).

Hulu's decision to block Kylo users is all about preventing Hulu viewership from migrating to TVs, which would undermine broadcast network economics. That's because Hulu, with its light ad load, still hasn't been able to prove its business model. The problem for Hulu - and the networks - is bigger than Kylo though as the push toward convergence between online video delivery and TV is going to be relentless (lots more on this tomorrow). Hulu is facing an escalating "Whac-a-mole" problem which will only lead to huge user frustration and increasingly tortured justifications. 

What do you think? Post a comment now (no sign-in required).

Categories: Aggregators, Technology

Topics: Hulu, Kylo

Wrapping Up the YouTube-Viacom Court Documents Coverage

Categories: Aggregators, Cable Networks

Topics: Google, Viacom, YouTube