I’m pleased to present the 416th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
Netflix reported its Q1 ’18 results earlier this week and once again the performance was very strong, with revenue up 43% and average paid streaming subscribers up 25% to 125 million globally. Colin and I discuss what’s driving the company. With 55.1 million paid U.S. subscribers at the end of Q1, it’s possible that Netflix will hit 60 million by the end of 2018, which is the low end of the range of 60-90 million the company has long said it believed it could achieve.
We then turn to discussing Amazon’s new deal with Best Buy for its “Fire TV Edition” smart TVs, which were announced earlier this week. We agree that the move is yet another aggressive step in Amazon’s goal to dominate both the living room and whole home. Amazon’s CEO Jeff Bezos also announced this week that Prime has hit 100 million subscribers with video continuing to drive acquisition and retention. Colin and I both see Amazon expanding further by launching a skinny bundle pay-TV service sometime in 2018.
Listen in to learn more!
Click here to listen to the podcast (24 minutes, 7 seconds)
Amazon is making a major push into smart TVs, with rival Best Buy as an unlikely partner. The companies announced that Best Buy will introduce more than ten 4K and HD “Fire TV Edition” TVs from Toshiba this summer and in-house brand Insignia later this year. Best Buy has had a deal with Roku for its Insignia line, which will now end. Amazon has had a Fire TV Edition model with Element that is being discontinued.
The new Fire TV Edition TVs will be sold exclusively in Best Buy physical stores, on BestBuy.com and from Best Buy as a third-party seller on Amazon.
Roku has added two more TV manufacturers to its Roku TV lineup - Best Buy's in-house Insignia brand along with Chinese brand Haier. The Insignia Roku TVs will be available in the spring, with the Haier models available in the third quarter. Roku TVs from initial partners TCL and Hisense became available in 2014. TCL is also expanding its lineup to 12 different Roku TVs in 2015.
In addition to the new manufacturers, Roku has also announced a Roku TV 4K reference design, with TCL as the initial partner. Roku has also teamed with Netflix to bring 4K content to Roku TVs. Netflix began offering "House of Cards" and "Breaking Bad" in 4K in 2014, despite the fact that very few subscribers actually have 4K TVs.
Flipping through yesterday's Best Buy circular, I noticed an ad (see below), which I believe is indicative of the type of pitches that are going to become increasingly prevalent to prospective cord-cutters and cord-nevers. The ad offers a packaged discount to an over-the-air ClearStream HD antenna from Antennas Direct with a TiVo Premiere and highlights logos from Netflix, Hulu Plus and Pandora. While the ad doesn't explicitly say "Dump your expensive pay-TV service now!," it has several key messages that might as well.
Following are 4 items worth noting for the Nov 2nd week:
1. Media company and service provider earnings underscore improvements in economy - This was earnings week for the bulk of the publicly-traded media companies and video service providers, and the general theme was modest increases in financial performance, due largely to the rebounding economy. The media companies reporting - CBS, News Corp, Time Warner. Discovery, Viacom and the Rainbow division of Cablevision - showed ongoing strength in their cable networks, with broadcast networks improving somewhat from earlier this year. For ad-supported online video sites, plus anyone else that's ad-supported, indications of a healthier ad climate are obviously very important.
Meanwhile the video service providers reporting - Comcast, Cablevision, Time Warner Cable and DirecTV all showed revenue gains, a clear reminder that even in recessionary times, the subscription TV business is quite resilient. Cable operators continued their trend of losing basic subscribers to emerging telco competitors (with evidence that DirecTV might now be as well), though they were able to offset these losses largely through rate increases. Though some people believe "cord-cutting" due to new over-the-top video services is real, this phenomenon hasn't shown up yet in any of the financial results. Nor do I expect it will for some time either, as numerous building blocks still need to fall into place (e.g. better OTT content, mass deployment of convergence devices, ease-of-use, etc.)
2. Blu-ray players could help drive broadband to the TV - Speaking of convergence devices, two articles this week highlighted the role that Blu-ray players are having in bringing broadband video to the living room. The WSJ and Video Business both noted that Blu-ray manufacturers see broadband connectivity as complementary to the disc value proposition, and are moving forward aggressively on integrating this feature. Blu-ray can use all the help it can get. According to statistics I recently pulled from the Digital Entertainment Group, in Q3 '09, DVD players continue to outsell Blu-ray players by an almost 5 to 1 ratio (15 million vs. 3.3 million). Cumulatively there are only 11.2 Blu-ray compatible U.S. homes, vs. 92 million DVD homes.
Still, aggressive price-cutting could change the equation. I recently noticed Best Buy promoting one of its private-label Insignia Blu-ray players, with Netflix Watch Instantly integrated, for just $99. That's a big price drop from even a year ago. Not surprisingly, Netflix's Chief Content Officer Ted Sarandros said "streaming apps are the killer apps for Blu-ray players." Of course, Netflix execs would likely say that streaming apps are also the killer apps for game devices, Internet-connected TVs and every other device it is integrating its Watch Instantly software into. I've been generally pessimistic about Blu-ray's prospects, but price cuts and streaming could finally move the sales needle in a bigger way.
3. Apple lurks, but how long will it stay quiet in video? - The week got off to a bang with a report that Apple is floating a $30/mo subscription idea by TV networks. While I think the price point is far too low for Apple to be able to offer anything close to the comprehensive content lineup current video service providers have, it was another reminder that Apple lurks as a major potential video disruptor. How long will it stay quiet is the key question.
While in my local Apple store yesterday (yes I'm preparing to finally ditch my PC and go Mac), I saw the new 27 inch iMac for the first time. It was a pretty stark reminder that Apple is just a hair's breadth away from making TVs itself. Have you seen this beast yet? It's Hummer-esque as a workstation for all but the creative set, but, stripped of some of its computing power to cost-reduce it, it would be a gorgeous smaller-size TV. Throw in iTunes, a remote, decent content, Apple's vaunted ease-of-use and of course its coolness cachet and the company could fast re-order the subscription TV industry, not to mention the TV OEM industry. The word on the street is that Apple's next big product launch is a "Kindle-killer" tablet/e-reader, so it's unlikely Steve Jobs would steal any of that product's thunder by near-simultaneously introducing a TV. If a TV's coming (and I'm betting it is), it's likely to be 2H '10 at the earliest.
4. Get ready for the "Anywhere" revolution - Yesterday I had the pleasure of listening to Emily Green, president and CEO of tech research firm Yankee Group, deliver a keynote in which she previewed themes and data from her forthcoming book, "Anywhere: How Global Connectivity is Revolutionizing the Way We Do Business." Emily is an old friend, and 15 years ago when she was a Forrester analyst and I was VP of Biz Dev at Continental Cablevision (then the 3rd largest cable operator), she was one of the few people I spoke to who got how important high-speed Internet access was, and how strategic it would become for the cable industry. 40 million U.S. cable broadband homes later (and 70 million overall) amply validates both points.
Emily's new book explores how the world will change when both wired and wireless connectivity are as pervasive as electricity is today. No question the Internet and cell phones have already dramatically changed the world, but Emily makes a very strong case that we ain't seen nothing yet. I couldn't help but think that TV Everywhere is arriving just in time for video service providers whose customers increasingly expect their video anywhere, anytime and on any device. "Anywhere" will be a must-read for anyone trying to make sense of how revolutionary pervasive connectivity is.
Enjoy your weekends!