VideoNuze Posts

Disney reported a $47 million operating profit in its direct-to-consumer (DTC) segment in its fiscal third quarter 2024. The profit comes one quarter earlier than Disney had forecast. The $47 million profit reverses a $517 million loss in the year ago quarter.

While the optics of the profit are indeed positive, in this week’s podcast Colin and I do a deep dive into the profit’s true quality and sustainability. Doing so reveals a fragile picture. First, there are issues about how much of Disney+’s recent subscriber gains are in fact due to the Charter deal, which by some accounts hasn’t been terribly successful in driving active subscribers. Meanwhile, Hulu’s been moving sideways for a while, and there’s no longer transparency about ESPN+’s subscriber count.

Another issue is Disney+’s falling average monthly revenue per paid subscriber which declined further in Q3. It’s noteworthy because Disney’s CFO ascribed it partially to Disney+’s lower-priced ad tier. Yet Hulu actually reported higher average monthly revenue per paid subscriber due to higher ad revenue. So there are some contradictory signals.

Meanwhile, Disney’s aggressive bundling, at deep discounts, may bode well as a longer-term churn-buster, but will almost certainly pressure near-term DTC profitability. Then there’s Disney+’s price increase, which will kick in soon, concurrent with a broad rollout on limiting password sharing. This double whammy is likely to lead to some subscriber losses.

From analyzing the the Q3 financial statement, it’s clear Disney+ and Hulu were still unprofitable in the quarter. It was actually ESPN+ that turned the DTC segment green. But as I detail, further analysis reveals an unusual jump in ESPN+’s quarterly profit level and profit margin vs. a year ago, suggesting Disney may have done a one-time reallocation of expenses from ESPN+ to ESPN that cannot be replicated in future quarters. Speaking of one-time events, Disney may still owe Comcast another $5 billion for the Hulu buyout (it’s not clear if that would hit the DTC line or another).

Finally, and at the risk of piling on, just over the horizon in fiscal ’25 loom big payments for Disney to the NBA for its new rights deal and an earnings drag as the new Venu Sports JV (potentially) ramps up. Note, an early Venu write-off is equally likely.

Add it all up and it’s clear to us that the quality and sustainability of Disney’s first quarterly DTC profit are quite fragile.

Listen to the podcast to learn more (35 minutes, 26 seconds)

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Early returns show Olympics viewership is up strongly so far. But while many devoted fans watch the full-length events, many other more casual fans consume just the highlight clips - often after they search for them subsequent to hearing about a particularly exciting moment (e.g. the clutch pommel horse performance, the long match-ending runback in rugby sevens, etc.). Watching highlights can also help drive casual fans to watch full length. 

All this means that for a long duration event like the Olympics, solid strategy/execution highlight clips distribution is imperative. In today’s podcast Colin and I discuss how we’ve been impressed so far with NBC’s Olympics highlight clips distribution across Peacock and YouTube. We’re able to compare and contrast experiences because Colin’s only been watching on the former and I’ve only been watching on the latter.

We discuss NBC’s balancing act of seeking to build value in Peacock, its owned and operated property, while also recognizing and respecting the reality that YouTube is the number one video search destination for hundreds of millions of users, so it simply can’t be ignored. Finally we discuss the business model benefits of distributing on Peacock and YouTube. 

Overall NBC’s Paris Olympics clips execution is far superior to the last games, and provides lessons for others. Still, we see still further room to optimize, which we review toward the end. 

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Comcast reported Q2 ’24 results this week, including an update on Peacock, which cut its loss to $348 million in the quarter from $639 million a year ago. Peacock’s subscriber count increased from 24 million in Q2 ’23 to 33 million at the end of Q2 ’24, but that was actually down a million from the end of Q1 ’24. 

In this week’s podcast we discuss whether and when Peacock will turn the corner and become a scaled, profitable streaming service. Peacock is betting big on expensive sports to deliver, with the Olympics kicking off tonight, and a new multi-billion dollar NBA deal to be announced soon, validating our call for Peacock to "Go Big or Go Home" back in November, 2021.

Peacock was a very late entry to the streaming game, and according to MoffettNathanson, has lost at least $8 billion over the past 14 quarters. Colin and I explain why we aren’t convinced sports can carry the weight of Peacock’s turnaround, and agree that only time will tell. 

We then switch gears to discuss Netflix’s Q2 earnings and the company’s lagging ad-tier performance, which surprises both of us a bit. Veteran podcast listeners will recall that back in October, 2022 Colin and I expressed our optimism about the pending impact of paid sharing and the ad-tier. The former has been a monster success for Netflix, based at least partly on the expert execution of its rollout. The ad tier remains a work in progress but we remain confident Netflix will figure it out. 

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Antenna’s research has become a go-to source for streaming industry executives trying to understand the fast-evolving landscape. In this exclusive interview, Antenna’s Co-Founder and CEO Jonathan Carson discusses details behind the firm’s recently-released “State of the Subscriptions” report. Jonathan is an ad industry veteran with particular expertise in research and monetization, as well as a longtime friend.

Three weeks ago Colin and I did a podcast on the publicly available report, and Antenna itself did a short webinar about it two weeks ago. But this interview explores data that hasn’t been publicly released, so listeners gain access to brand new insights and data that Antenna hasn’t previously shared.

The interview provides a fascinating window into four drivers in streaming today: the shift to adoption of ad-supported SVOD tiers, the role of bundling, the anemic penetration of annual SVOD subscriptions and consumers’ acceptance to date of SVOD price increases. We finish up with Jonathan sharing his views of the industry going forward.

The interview with Jonathan is a must-listen for all industry participants. Together with our interview with leading Wall Street analyst Michael Nathanson two weeks ago, they are a blockbuster doubleheader of insights, helping all of us truly understand what’s happening in the streaming industry today.

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We’re excited to have top Wall Street media analyst Michael Nathanson join us this week. Michael and his partner Craig Moffett of MoffettNathanson are the “one-two punch” of the TV, streaming and broadband industries. Their analyses and insights are widely considered best in class. Michael is an old friend, and we’re so pleased to have him join us in this exclusive, must-listen interview.

Among the many topics we cover: the recent decline in CTV CPMs due to Amazon’s market entry and why the new inventory will be digested, the competitive dynamics in the broader CTV/AVOD market, YouTube’s massive scale and Michael’s prediction that YouTube TV will be the pay-TV market leader in two years with 10 million subscribers, FAST’s potential, legacy media’s abysmal $30B cumulative loss on DTC services in the past 5 years, why streaming’s future will be driven by advertising and why the “unit value” of advertising is poised to soar due to AI and finally, the biggest potential surprise in the next year.

Anyone who wants to understand what’s really happening in the TV/streaming industries will find this exclusive interview invaluable.

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Antenna has released its new “State of Subscriptions” report, which is full of data and insights addressing some of the most pressing topics in the streaming industry.

On this week’s podcast, we dig into some of the report’s key takeaways about how annual subscriptions aren’t gaining much traction with viewers, why streaming bundles are already succeeding, the surprising degree to which subscribers are accepting price increases, the ascendancy of ad-supported tiers and more.

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This week we interview Roku’s Head of Ad Marketing Jordan Rost and MAGNA’s EVP, Intelligence Solutions Kara Manatt, about their companies’ new research - "From Power On to Power Off" - about viewers’ content discovery journeys and the role of CTV Home Screen advertising. A key takeaway of the research is that almost half (44%) of streaming sessions begin with the viewer browsing, rather than knowing what they want to watch.

That opens up a huge content discovery opportunity on the home page, which dovetails with advertisers (especially streaming services) desire to gain awareness and action. We discuss this dynamic and other findings from the research about viewers’ mindsets and receptivity to ads along with how home page ads are already being executed.

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New research from Inscape analyzing the viewing behavior of 23 million opted-in VIZIO smart TV owners reveals streaming’s ascendance. In Q1 ’24, fully 58% of these viewers only streamed content, up 3 percentage points since Q4 ’23. 38% watched both streaming and pay-TV (cable, satellite and OTA), and just 3% only watched pay-TV. The streaming-only group has increased from 45% in Q4 ’21. We discuss these and other key findings.

Then we turn our attention to Max’s immediate rate increase, announced this week. Of note, only the two ad-free tiers are getting $1 per month increases, while the “Max With Ads” tier will remain $10 per month. As we discuss, this is the latest evidence of how traditionally ad-free streaming services (e.g. Netflix, Disney+, Amazon Prime Video) are incenting subscribers to take ad-supported plans - and why CTV advertising is poised to become more valuable than ever.

Last up we review new research from the American Customer Satisfaction Index showing record-high satisfaction levels for streaming services. Neither of us are surprised, given the strength of streaming’s value proposition. This year Amazon Prime Video topped the satisfaction list, but all streamers perfumed well and were tightly clustered.

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