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5 Items of Interest for the Week of Nov. 15th
After a short break, VideoNuze's Friday feature of curating 5-6 interesting online/mobile video industry news items that we weren't able to cover this week, returns today. Read them now or take them with you this weekend!
Time Warner Cable Experiments With Lower Tier Video Package
It's a rare day when a cable operator announces a lower-priced offering, but that's what Time Warner Cable did yesterday, unveiling a test of what it's calling "TV Essentials." The new tier, priced between $30-$40, will most notably exclude ESPN, the most expensive channel in the cable universe, meaning right away TV Essentials isn't targeted to sports fans. I've argued for a while now that pay-TV operators have ceded the low-priced/value-oriented end of the video market to Netflix (and others), which given the ongoing recession is a mistake. It will be interesting to see how the new bargain service fares; 2 things that will limit its appeal though are that no channels will be offered in HD, and that it appears those with broadband Internet and telephone services won't benefit from typical package discounts.
Nielsen study: We're still a nation of couch pumpkins
More evidence this week that despite all the deserved enthusiasm over online and mobile delivery, good old-fashioned TV viewing still rules in terms of hours of consumption. Nielsen said that the average person watched 143 hours of TV per month in Q2, essentially flat vs. a year ago. For homes with DVRs, hours of time watched on them nudged up a bit to about 24 1/2 hours. On a related note, this week comScore released its online video viewing data for October, which showed average viewing of 15.1 hours per person. While online video has made huge progress in the last few years, it still has a ton of room to grow to catch up with TV.
More Videos Ads, More User Acceptance
Speaking of the comparison between online video and TV, this week brought some interesting new data on monetization patterns for premium online video. Online video ad manager FreeWheel released data that showed mid-roll ads are the fastest-growing category of ads (up 693% since Q1), and now represent 8% of its ad volume. Completion rates have increased for pre, mid and post-roll ads this year, but notably mid-rolls have the highest completion rate, at 90%. FreeWheel's conclusion is that monetization of premium online video is starting to look a lot like TV, with ad pods inserted throughout. Going a step further, if viewer acceptance of mid-rolls stays high, then this represents a valuable opportunity for TV networks in particular to combat DVR-based ad-skipping.
Startup Claims To Have Set-Top Hulu Can't Block
It was inevitable that Hulu's decision to block access to its programs would set off a game of whack-a-mole, with various devices springing up to do end-arounds. Sure enough, the $99 Orb TV debuted this week, prominently positioning itself as the device that can bring Hulu (among other content) to your TV. One catch is that Orb streams video from your computer and only does so in standard definition. It addresses the "keyboard in the living room" challenge by also including a smartphone app to control the device. It's not a perfect solution, but it does provide a glimpse into the PR-unfriendly dynamic that Hulu, and the broadcast networks, have created for themselves by blocking access to their content by Google TV and others. No doubt there will be plenty more Orb-like devices to come to market in the months ahead, all positioning themselves as solving the blocking problem.
Comcast's Top Digital Exec Amy Banse to Open New Silicon Valley Equity Fund for Cable Giant and NBC
As Comcast enters the final stages of approval for its NBCU deal, the company this week announced a new NBCU management structure. One item that wasn't formally announced yet, but was reported by AllThingsD earlier this week was that Amy Banse, formerly head of Comcast Interactive Media (now headed by Matt Strauss), will be heading to Silicon Valley to run the combined operations of Comcast's current Comcast Interactive Capital venture arm, and NBCU's current Peacock Equity (a JV with GE). With all the distribution, technology and content assets that will be under the Comcast roof, the fund will be at the top of any online/mobile video startup's list of strategic investors. I've known Amy for a while and have enjoyed having her on industry panels; she'll be a huge asset to Comcast in the Valley venture world.Categories: Advertising, Cable Networks, Cable TV Operators, Deals & Financings, Devices
Topics: Comcast, comScore, ESPN, FreeWheel, Hulu, NBCU, Nielsen, Orb, Time Warner Cable
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Comcast's New Xfinity TV App: Nice Start, Lots More To Do
Comcast unveiled its new Xfinity TV app today for iOS devices, and after downloading and playing around with it a bit, I'd say it's a nice start, though there is a lot more to do. The free app is ultimately meant to allow Comcast digital video subscribers to use it as a guide, program their DVRs, search for shows in the On Demand catalog, view streaming content, create watch lists and access social networking sites to share the viewing experience.
In the press release Comcast noted that the last 3 features will be coming soon. Of these, the viewing feature on the iOS devices is the most interesting, as it will allow authenticated subscribers to view available content wherever they may be. That's the vision of TV Everywhere, and it's good to see Comcast bridging its content to non-Comcast set-top boxes (which is actually quite a rarity in the cable TV business). It's also an example of how Comcast will, in a sense, be going over the top of other pay-TV operators, when its subscribers watch video outside of Comcast territories.
Categories: Cable TV Operators, Devices, Mobile Video
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Netflix Has Added 8 Times As Many Subscribers in 2010 As Top Pay-TV Operators, Combined
Here's a pretty amazing factoid to end your week: in 2010 Netflix has added nearly 8 times as many subscribers as 8 of the top 9 pay-TV operators have, combined (#3 cable operator Cox is private and doesn't report). In the first 3 quarters of 2010, Netflix has added nearly 4.7 million subscribers while the top pay-TV operators have gained 609K.
Breaking down the pay-TV industry net gain further, the 2 main telcos (Verizon and AT&T) have added over 1.2 million subscribers and the 2 main satellite providers (DirecTV and DISH) have added 563K, while the top 4 reporting cable operators (Comcast, Time Warner Cable, Charter and Cablevision) have lost over 1.1 million.
Categories: Aggregators, Cable TV Operators, Satellite, Telcos
Topics: AT&T, Cablevision, Charter, Comcast, Cox, DirecTV, DISH, Netflix, Time Warner Cable, Verizon
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Top U.S. Pay-TV Operators Post Narrow Subscriber Gains in Q3, Rebounding From Q2 Loss
Eight out of the nine largest U.S. pay-TV operators have reported their Q3 '10 results, gaining a slim 66,700 video subscribers, a rebound from a loss of 47,600 subscribers in Q2 '10. The Q2 loss was the first on record for the industry and fueled speculation that "cord-cutting" due to adoption of Internet-delivered video alternatives was rising. With only mildly positive subscriber adds - and 5 of the top 8 operators actually losing subscribers in Q3 - fears that cord-cutting is rising will surely accelerate.
The 8 operators (privately-held Cox Cable, the 3rd-largest cable operator does not disclose its results) represent more than 85% of all U.S. pay-TV households. Though they collectively showed a quarterly gain, if Cox and other cable operators lost subscribers at a comparable rate as the 4 large cable operators in the top 8 (Comcast, Time Warner Cable, Charter and Cablevision), the industry as a whole would have actually lost about 97K subscribers in the 3rd quarter.
Categories: Cable TV Operators, Satellite, Telcos
Topics: AT&T, Cablevision, Charter, Comcast, Cox, DirecTV, DISH, Netflix, Time Warner Cable, Verizon
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5 Items of Interest for the Week of Oct. 25th
Lots more happened this week in online/mobile video, and so to make your lives easier, VideoNuze is once again curating 5-6 interesting industry news items that we weren't able to cover this week. Read them now or take them with you this weekend!
No Longer 'Must-See TV'
The WSJ reported this week that Thursday night TV viewership (live or recorded) among 18-49 year-olds is down 4.3% this season to 48.5 million, a drop of 2.2 million viewers. For this age group, the drop across all nights (live or recorded) is 2.7%. While the decreases have immediate implications on networks' ad revenue, the bigger issue of course is what the drops say about shifting consumer preferences. For example, I continue to hear anecdotes about users with connected devices now tuning in first to their Instant Watch queues instead of channel surfing or visiting their DVR libraries or VOD. The Nielsen data corroborates other data (here, here) about the decline of TV viewing, especially among young people, and is another reason why broadcast networks in particular should be embracing connected devices like Google TV, not blocking them.
CW Says Study 'Dispels Myth' About Aversion to Ads in Online Video
Speaking of networks and their online distribution, this week CW released some interesting new data that detailed extremely low abandonment rates for its shows consumed online, even with ad loads almost equal to those on-air. While it is too early to generalize, the data provides a very encouraging sign that networks may be able to achieve parity economics with on-air, even when they window their online releases for delayed availability. It's also an important sign that online video may be a firewall against DVR-based ad-skipping.
Comcast Launches Free Streaming Video Service Xfinity for All Digital Subs
In addition to releasing stellar Q3 earnings this week (albeit with a bigger-than-expected subscriber loss), Comcast also pulled the "beta" label off its Xfinity TV service this week, and relaxed its rules about who can gain access. Now any video subscriber, regardless of who they take their broadband Internet service from, can access XFTV.
Some began to speculate that it could be a precursor for Comcast allowing non-video subs to also gain access to XFTV. This is the concept I wrote about in over a year ago, in "How TV Everywhere Could Turn Cable Operators and Telcos Into Over-the-Top's Biggest Players." The idea is that TV Everywhere services like XFTV could be offered outside of Comcast's franchise areas to allow them to poach video subscribers from other pay-TV operators. It's still a fascinating concept, but nothing about Comcast's move this week suggests it's coming soon.
Insight To Bow 50-Mbps Internet In Two Markets
If you think all that Netflix and other long-form streaming is going to strain users' bandwidth, think again, as yet another cable operator/broadband ISP, 9th-largest Insight Communications unveiled plans for a speedy 50 megabit per second broadband tier. Big players like Comcast and Time Warner Cable have been offering this for a while already. It's still very pricey, but as some viewers shift more of their consumption to online and away from conventional TV viewing (see above), more bandwidth will be worth the price. Update - I missed this item, that over in the U.K. Virgin Media began taking sign-ups for a 100 Mbps broadband service. Net, net, last-mile bandwidth will keep expanding to meet increasing demand.
Promoted Videos hit half a billion views
Fresh evidence this week that YouTube is finding innovative ways to monetize its massive audience: the company's performance-based "Promoted videos" format achieved its 500 millionth view, just 2 years after being introduced. With Promoted videos, anyone uploading a video to YouTube (brand, content provider, amateur), can buy opportunities to have that video appear alongside relevant keyword-based searches in YouTube. It's a similar format to AdWords, and of course the video provider only pays when their video is actually clicked on. As I said recently, YouTube is becoming a much more important part of Google's overall advertising mix, while for many brands, YouTube's home page is fast-becoming the most desirable piece of online real estate.
Categories: Advertising, Aggregators, Broadband ISPs, Broadcasters, Cable TV Operators
Topics: Comcast, CW, Insight, Nielsen, YouTube
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Is the Comcast Lion Finally Set to Roar In Online Video?
Yesterday Comcast announced that it has taken the "beta" label off its Xfinity TV ("XFTV" as I call it) premium online video service and opened it up to all
video subscribers (dropping the requirement that XFTV users need to also be Comcast broadband subscribers). Comcast also unveiled new remote DVR scheduling and search/personalization features, and touted that it now offers 150,000 content "choices" in XFTV.
Though none of yesterday's individual moves are that significant in and of themselves, after chatting with a spokesperson at Comcast and talking with others in the industry, I think what matters more is that Comcast is signaling the start of an aggressive push into online video distribution. That's worth noting because with NBCU's assets soon to be under its roof, a newfound assertiveness in online video could have profound implications in the video ecosystem. Here are a handful of potential items to watch for:
Categories: Cable TV Operators
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BNI Video Raises $16 Million To Improve Cable Operators' Competitiveness
BNI Video is announcing this morning that it has raised $16 million from the venture arms of the two largest U.S. cable operators, Comcast and Time Warner Cable, along with Boston-area VC firms Charles River Ventures and
Castile Ventures. It is also introducing its software platform, meant to help cable operators better compete with online video alternatives. I recently caught up with Conrad Clemson, BNI's CEO and co-founder, to learn more about the company's approach.
BNI is aiming to solve a key problem that cable operators have today: their inability to quickly roll out web-based services (both video and non-video) that offer the same quality, flexibility and appeal that budding alternatives like Netflix, Hulu, YouTube and others are currently delivering. The inability to quickly deliver their subscribers the content they want anytime, anywhere and on any device is putting cable operators at a growing disadvantage relative to the newcomers. Examples of deficiencies include operators' archaic electronic program guides, slow rollout of TV Everywhere services, inflexible VOD ordering systems and so on.
Categories: Cable TV Operators, Deals & Financings, Technology
Topics: BNI Video, Comcast, Time Warner Cable
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Justice Dept Considering Online Restrictions For Comcast-NBCU
An article in today's WSJ, "Comcast Gets Static on Net TV" describes how the Justice Department is scrutinizing the online video implications of Comcast's deal to acquire control of NBCU. According to the article, the Justice Department is digging in to try to understand what, if any, implications the deal could have on online-delivered TV shows and movies from NBCU.
The article points out that nothing is likely to come out of the investigation that could derail the deal. However, the results could provide the foundation for the Justice Department to impose restrictions on Comcast's flexibility to decide where and how NBCU's premium programming could be distributed online. The purpose would be to head off Comcast somehow gaining preferred and/or exclusive access.
The investigation is merited given the size of the deal and yet the yellow caution flags should be up regarding the government making too many assumptions about how the online video market will unfold. As I've written a number of times, we are continuing to see surprising deals, technologies and products which challenge popular assertions that online video and incumbent pay-TV models are on a collision course with one another, with one winning at the other's expense. Just in the last few weeks, the Netflix-Epix deal, the Cox-TiVo partnership, and possibly this week 99-cent broadcast TV rentals from Apple all show that the market is incredibly dynamic, with a blending of online and traditional distribution becoming more common.
That said, Comcast already has huge market power, and control of NBCU's top-notch assets mustn't deprive others of access from which consumers gain. Finding the delicate balance between just enough safeguards, but without limiting innovation, is the key.
What do you think? Post a comment now (no sign-in required).Categories: Broadcasters, Cable TV Operators, Deals & Financings, Regulation
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Netflix-Epix Deal Ratchets Up Importance of TV Everywhere
Today's Netflix-Epix deal should be setting off alarms in the CEO suites of major cable operators around the country that TV Everywhere must get rolled out ASAP. The Epix deal underscores the extent of Netflix's financial resources and its ambition to gain a bigger chunk both of consumers' entertainment mindshare and their spending.
The first, a shift in mindshare, is already underway. With 15 million subscribers, an expanding streaming library, countless ways to view (e.g. iPad, Xbox, Roku, Blu-ray, etc, etc), a value-packed $9/mo entry tier and a customer-focused brand, Netflix has established a reputation for itself as the cutting edge video leader. In social settings these days, it is practically inevitable that someone will bring up how they're streaming Netflix content to the device of their choosing and how cool it is. Conversely, despite the cable industry's numerous positive digital TV efforts, it is still dogged by lagging customer service, often confusing pricing tiers and suboptimal user experiences.
Categories: Aggregators, Cable TV Operators, Telcos
Topics: Comcast, EPIX, Netflix, Time Warner Cable
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CBS-Comcast Deal Underscores Importance of Subscriptions
Yesterday's 10-year retransmission consent deal between Comcast and CBS further underscores the importance of subscription revenue streams in addition to advertising. Under the deal, CBS is rumored to receive between $.50-$1.00 per subscriber per month from the biggest cable operator in the U.S., putting it in the top tier of cable network compensation. When combined with other deals CBS has previously struck, plus additional ones it will likely conclude in the future, CBS has laid firm claim to the same "dual revenue" (monthly payments + advertising) business model as cable TV networks have long enjoyed.
The CBS-Comcast deal is more evidence of how dynamic the relationships have become between broadcast TV networks, cable TV networks, pay-TV operators and new distributors like Hulu and Netflix. The online/mobile/on-demand era has set off a scramble by premium content providers to lock in payments for their programming, while also remaining nimble enough to gain new distribution opportunities. Likewise, distributors are hungry for exclusive well-branded content.
Consider what's happened in just the last 8 months:
Categories: Aggregators, Broadcasters, Cable Networks, Cable TV Operators
Topics: Cablevision, CBS, Comcast, Hulu, Netflix, Time Warner Cable
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Rogers Pushes TV Everywhere; Where's Everyone Else?
A piece in Light Reading this week noted that Rogers, the largest cable operator in Canada, now has approximately 100,000 of its subscribers registered for its TV Everywhere service, and is on track for getting a few hundred thousand out of its total 2.3 million subscribers using it by the end of the year.
The success at Rogers raises the question of where things stand with TV Everywhere in the U.S. Recently Comcast's Amy Banse told me a million people are regularly accessing its Fancast Xfinity TV service, but she declined to provide any further details. I just read yesterday in B&C that Time Warner Cable has "a small number of subscribers" in a trial in New York.
I've been bullish on TV Everywhere from the start, but have noted repeatedly that execution is key. The world is moving fast toward convergence, and incumbent video service providers need to prove that they can innovate and roll out these new services. Whether it's Netflix, Google TV or others, there are plenty of people outside the ecosystem that want a piece of the action.
What do you think? Post a comment now (no sign-in required).Categories: Cable TV Operators
Topics: Comcast, Rogers, Time Warner Cable, TV Everywhere
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Comcast's Amy Banse Provides an Update on TV Everywhere Rollout
While at the Cable Show early this week, I had a chance to sit down with Amy Banse, President of Comcast Interactive Media, which is driving the rollout of Fancast Xfinity TV - what Comcast calls its TV Everywhere service. After a lot of PR build-up last fall, Comcast officially launched FXTV (my shorthand) last December. As a Comcast triple-play customer myself, I was able to give it a try, and I thought the initial effort was respectable, even though the content selection was limited.
Flash forward 5 months and curiously, Comcast hasn't said a peep about how things are going with the FXTV rollout. Amy explained that with the NBCU deal's approval process underway, the company has chosen to maintain a relatively low profile on FXTV, something she hopes will change in early fall. Amy said about 1 million people are accessing FXTV regularly, with engagement time a lot higher than with the open Fancast portal. Subscribers to premium channels like HBO are the heaviest users and like FXTV the most. Primarily people use FXTV to catch up on missed episodes and past seasons.
Still, Amy noted that the authentication process needs to be improved substantially, reducing the number of steps from its current 8-10 (though I have to say, I just authenticated on my new Mac and it really wasn't that painful). Amy's eager to introduce a universal ID approach, so users don't need to scramble to remember their Comcast login information. And the company is working on getting more content; the key issues to doing so are proving in authentication, building trust with content partners and enabling measurement.
I was an early fan of the TV Everywhere approach and believe it is key to blunting cord-cutting's appeal. I recognize that nothing ever happens as fast as you'd like it to, but Comcast - and other operators - need to hustle more on rolling out TV Everywhere initiatives. As I noted recently, Netflix is banging it out of the park, gaining more mind-share and disruptive potential. They're just one of many new competitors the industry needs to worry about.
What do you think? Post a comment now (no sign-in required).
Categories: Cable TV Operators
Topics: Comcast, Fancast Xfinity TV, TV Everywhere
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VideoNuze Report Podcast #61 - May 14, 2010
Daisy Whitney and I are pleased to present the 61st edition of the VideoNuze Report podcast, for May 14, 2010.
In today's podcast Daisy and I share observations from the Cable Show in LA, where we both were this week. Daisy reports on a panel she moderated that focused on social media and how companies need to develop policies to make sure all company representatives work consistently. We also talk about 3D, TV Everywhere and the new Comcast iPad prototype app I wrote about yesterday, and what it might signal for the cable industry going forward. Listen in to learn more.
Click here to listen to the podcast (14 minutes, 28 seconds)
Click here for previous podcasts
The VideoNuze Report is available in iTunes...subscribe today!Categories: Cable TV Operators, Podcasts
Topics: Cable Show, Comcast, iPad, Podcast
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Comcast's New iPad App is Full of Surprises
Here's something to get your head around: yesterday at the Cable Show, Comcast CEO Brian Roberts did a short demo of a Comcast Xfinity "remote control" prototype app for the iPad, video of which is available on YouTube. I'll get to the app in a minute, but first, if you're a long-time cable industry watcher like me, you'll immediately be struck by several surprising things:
First - when (if ever?!) did you see a cable CEO do a hands-on product demo? Sure, they'll periodically narrate a demo of something, but actually navigating through the experience themselves, a la Steve Jobs? Not in my memory. While Roberts doesn't exude the gusto that Jobs does for his products, the CEO touch is still very meaningful (Jobs's personal touch is arguably what makes Apple so special, turning its product introductions into genuine events). And credit to Roberts - he executes the demo admirably, with no errant moves.
Second - speaking of Apple, a cable CEO demo'ing an unaffiliated third-party's device? And that third party happens to be Apple, which is tacitly sworn to disrupting the cable industry's hegemony over the video ecosystem? Going a step further, Roberts highlights the iPad's virtual keyboard, which allows title-by-tile searching, as addressing "the missing link" with existing set-top boxes (later Roberts says "this liberates us from the cable box"). The iPad's pixie dust knows no bounds!
And third - the irony that the video of the demo is available on YouTube (see below). YouTube! Not Comcast's Fancast portal nor in its VOD menu. Think about it - not long ago YouTube was derided as a copyright infringing haven and collection of user-generated schlock. Now, when the CEO of America's largest cable operator wants to get the word out beyond the audience at the Cable Show about its sexy new iPad app, the vehicle is YouTube. My how the world changes.
Meanwhile, the app itself, which "pairs the iPad to Comcast's set-top box" using EBIF (Enhanced TV Binary Exchange Format, the cable industry's spec for delivery interactive app to set-top boxes), allows the user to navigate through the full channel lineup and zero in on categories like sports and movies, and also drill down on specific shows and VOD selections. When a show is chosen to watch, voila, the app changes the set-top's channel, just like an over-sized remote control. You can also choose to record if you prefer. Lastly, in a nod to social viewing, Roberts shows how he can invite a friend to view the same program. The friend receives a notice on his iPad and with one touch, can tune in as well. Comcast sees lots of upside in the iPad app, with users eventually able to view the programs themselves right on the iPad. The app is both surprising and neat.
The logical question to ask is why is Comcast relying on Apple's latest innovation in order to deliver some of its own innovation? I mean, Apple had nothing to do with video until a few years ago, and arguably is still a nascent player in the space, while Comcast is the largest cable operator in the land. If it wanted to deliver a tricked-out remote control years ago, why didn't it?
There are many different ways to answer the question, but I think it boils down to 2 things: first, while most cable companies have invested heavily in behind-the-scenes infrastructure to deliver broadband and other advanced TV services, relatively few new on-screen services have been created because cable is largely a closed environment for application developers. Cable has been closed because cable operators have it in their DNA to be focused on control of what goes into their subscribers' homes. Letting "a thousand flowers bloom" is not in the average cable executive's mindset.
Second, and as a byproduct of this, most developers have ignored the cable environment. While Apple's App Store boasts of hundreds of thousands of innovative apps, the cable world has lumbered to deliver a tiny fraction of this amount, and at a glacial pace. It's not for lack of interest by developers; going back to the mid-90s there has been interest in interactive apps. But between the technology impediments and the cart-before-the horse negotiations over revenue splitting that cable operators inevitably get into, most developers have simply moved on to the open, flexible Internet. That's been a huge missed opportunity for cable, which could have been an intensely appealing platform for interactivity. Instead the door has been opened wide for others like Apple and Google to rush in.
All of this makes the iPad app from Comcast look like an important, yet admittedly small step forward. It's just one prototype, from just one operator, but it should be a strong signal to the cable community to embrace the technology advances happening all around them, to deliver innovation to their customers. That's what winners like Apple and Facebook are doing, and that's what cable must do as well.
What do you think? Post a comment now (no sign-in required).
Categories: Cable TV Operators, Devices
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Comcast's Roberts: "We Didn't Pick Up on Content Early Enough"
At the Cable Show in LA, Comcast CEO Brian Roberts conceded that Comcast "did not pick up on content early enough and that it is starting later than it should have." He said that Comcast missed opportunities early on - for example with Discovery to play a larger role in content, but noted that it's been working hard to catch up since. His remarks came in a one-on-one discussion with Peter Chernin, former head of News Corp.
Prior to the session Roberts did a short update on Comcast's VOD efforts, disclosing that to date it has delivered 15 billion views, with 350 million new views per month. The average VOD user accesses 20-25 times per month with TV series and kids programming the most popular genres. Comcast offered 100 day-and-date movies last year, compared to just 13 in 2007; in Q1 '10 it already had more than 60. Day-and-date releases on cable are a key strategy for Hollywood studios looking to buttress falling DVD sales and increase margins on digital delivery.
Regarding the pending NBCU acquisition, Roberts said that there are "No plans to Comcast-ize NBCU, particularly because there isn't just one culture at Comcast anyway, with each brand having its own culture." Chernin pressed Roberts to explain how editorial control will work when Comcast owns NBCU. Chernin wondered what Comcast would do in the instance of another controversial film being made like Martin Scorsese's "The Passion of Christ" or when MSNBC host Keith Olbermann blasts the same Republican senators that Comcast might also be courting on any number of regulatory-related matters. After joking resolving these issues is (Comcast COO) Steve Burke's role, Roberts said that since the company's early days in cable it has had to balance the fact that it doesn't agree with everything it distributes, and tries to offer flexibility to customers to opt-out or block certain channels. He resisted getting any more specific, saying the company will find its way after the deal closes.
Chernin also noted that with NBCU, the company will effectively find itself on both sides of the negotiating table when it comes to rates, and wondered how Comcast will decide "what's fair?" Roberts pointed out that there are lots of other players in the market who will contribute to answering the question, so it's by no means Comcast's alone to address. On the topic of content's value, Roberts sees multiple new distributors emerging, which should serve to increase content's value in the future.
Lastly, related to the FCC's net neutrality efforts, Roberts says he doesn't believe the government is "trying to turn the clock back" on cable, saying its actions are "a worry, but not a big worry."
Categories: Broadcasters, Cable TV Operators
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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 theirbilling 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
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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
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NDS Leads $20 Million Investment in BlackArrow for Advanced Advertising
Amid all the coverage that online video advertising receives, it's also important to remember that advanced advertising in on-demand and pre-recorded TV continues to evolve. News today that NDS, one of the largest technology providers to multichannel video programming distributors
("MVPDs") is leading a $20 million Series C round in BlackArrow, a provider of advanced advertising solutions, is a reminder of progress. Last week I spoke to Todd Narwid, VP of New Media for NDS and Dean Denhart, BlackArrow's CEO, to learn more about the deal.
To put the deal and its upside in context, it's important to first understand there's a big difference between how online video advertising against free streams in the open Internet works vs. how advertising against VOD and DVR programs in paid, subscription-based services run by MVPDs works. In the Internet world, there are pretty well-established standards, allowing significant interoperability among sites and ad servers. While measurement challenges persist, the act of getting video ads inserted where they're supposed to be is now pretty straightforward.
Conversely, in the MVPD world, the first challenge is just getting ad serving systems approved and deployed. Because ads are served from within the MVPD's own infrastructure, new ad servers must be tested and integrated with existing video delivery infrastructure residing in distribution centers often called "headends" in the cable world. Unlike MVPDs' broadband deployments, much of MVPDs' TV delivery architecture pre-dates the Internet and therefore is heterogeneous and often difficult to integrate with. In addition, there are the tens of millions of deployed set-top boxes which also differ in their capabilities and openness. MVPDs have made significant progress in creating their own standards and in deploying advanced services, but as anyone who's ever tried to implement any kind of advanced service in the MVPD world can attest, it's hard work and has ground down many promising technology start-ups.
When I first wrote about BlackArrow, on its launch in Oct, '07, I liked its vision of delivering advanced advertising in VOD and DVR programs, but I noted the above challenges gave it a steep hill to climb. Since then, BlackArrow has made progress, deploying with Comcast in Jacksonville, FL and with other operators (though Dean isn't able to mention them due to MVPD restrictions). Still, MVPDs have so many priorities and their resources for testing and integrating new technology are limited. Further, there's a lingering sentiment that MVPDs have only made a half-hearted attempt to really monetize VOD and DVR.
Given these circumstance, the NDS deal appears to offer BlackArrow a lot of
upside. As one of the largest technology providers to MVPDs globally ("conditional access" systems that provide secure MVPD video delivery are its main product line, among others), NDS immediately gives BlackArrow both credibility and significantly improved sales and support reach, particularly outside North America. The companies also announced a joint solution offering, which will be key to realizing actual sales Importantly, NDS gives BlackArrow improved financial footing for what promises to be a very long-term process of deploying advanced advertising by MVPDs. Conversely, for NDS, as Todd explained, BlackArrow provides the monetization piece of the puzzle that MVPDs need to create business cases to help them justify NDS's advanced technology delivery systems.
For MVPDs, who are witnessing the rapid adoption of online video and the threat of cord-cutting down the road, it is essential to be able to offer subscribers more flexible viewing options like VOD and DVR and to give their content partners opportunities to effectively monetize these views. This has been the Achilles heel of VOD and DVR to date, and the scarcity of ad-supported programs in VOD (particularly relative to what's available online) is a direct reflection of this.
Going forward, the challenge for MVPDs will only intensify as content providers face escalating choices about where to optimally monetize their programming. This is where BlackArrow fits in. Plus the company has always had a multi-platform vision, so once it's enabled for TV and DVR, BlackArrow could also provide a pathway to online monetization, which given MVPDs' TV Everywhere initiatives, is also a growing priority.
What do you think? Post a comment now (no sign-in required).
Categories: Advertising, Cable TV Operators, Deals & Financings, DVR, Satellite, Technology, Telcos, Video On Demand
Topics: BlackArrow, Comcast, NDS
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Hurray - Net Neutrality is Dead, For Now
Yesterday's ruling by the D.C. Court of Appeals that the FCC didn't have the authority to cite Comcast for blocking BitTorrent traffic effectively kills "net neutrality," at least for now. That's a good thing and everyone who's interested in seeing continued innovation by broadband ISPs and new video competitors should be cheering the decision. I've been writing about the FCC's unnecessary net neutrality intrusion into the well-functioning ISP market for several years (here, here, here), and it's very encouraging to see this unanimous court decision.
For those not familiar with net neutrality, it would give the FCC the ability to regulate how broadband ISPs manage their networks in order to ensure that
all content is delivered without any bias. Since net neutrality advocates have lacked any sustained pattern of broadband ISP misbehavior to point to as evidence for net neutrality's need, they have instead relied heavily on the argument that pre-emptive regulation is required because ISPs can't be trusted to keep their networks open, and that potential conflicts of interest (many ISPs like Comcast are also big video providers) will inevitably lead ISPs to favor their own services over others.
Concerns about impending, yet hypothetical ISP "fast lanes and slow lanes" have made great soundbites for net neutrality proponents and politicians. And yes, Comcast bungled how it blocked the BitTorrent traffic, and then how it explained itself. There have also been a handful of other ISP infractions. However, if the 70 million plus broadband households were asked to name a single instance where they felt their ISP degraded their access to a certain web site or video service, I am convinced that very few would be able to think of any.
This reflects the fact that broadband ISPs maintain open networks, rightfully policing against illegal behavior or disproportionate use. The ISP business works quite well, and in most parts of America, substantial competition exists between 2 or more providers (with more wireless ones on the way). Further, new video services and devices, which depend on ever-faster, and open broadband networks continue to proliferate, suggesting ample confidence by their backers that robust network access will be available. Consider: did Steve Jobs hesitate to introduce the iPad, which is heavily video-centric, out of fear for network availability? And how about Netflix, ABC, Discovery, MTV and other video providers who quickly introduced apps for the iPad - did they balk due to network concerns? Of course not.
Earlier this week, I calculated that at least $277.4 million was raised by early stage video companies in Q1 '10, bringing the total to at least $570.2 million over the last 4 quarters, despite the worst market circumstances in ages. As I've said many times, investors and entrepreneurs are undeterred though there are no formal net neutrality rules.
It's also important to remember that broadband networks have been built with private capital, in the process creating tens of thousands of well-paying technical and customer service jobs, plus countless other by the content and applications providers who freely ride these broadband pipes each day. And innovation continues, with numerous announcements of 50 and 100 megabit/second services now available. Tinkering with this vibrant sector of the economy with new regulations introduces the risk of unintended consequences.
Rather than presuming that broadband ISP will disrupt their own success formula by arbitrarily blocking supposed competitors, the FCC would be better off staying relentlessly vigilant of ISP behavior. If ISPs do misbehave - thereby offering clear evidence of the need for regulation - the Congress and the FCC should be prepared to act quickly. Until then net neutrality remains a solution in search of a problem, and Washington has plenty of real problems to work on without tackling imaginary ones.
What do you think? Post a comment now (no sign-in required).
Categories: Broadband ISPs, Regulation
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Here's How Google TV Will Work - And What It Might Mean
Last week, the NY Times shared some details of "Google TV," the new set-top box Google is developing in partnership with Intel and Sony. The article provided a good outline, and now, based on additional information I've gathered, I'm able to provide new details on the box and also explain what it might mean.
The first and most important thing to know about Google TV is that it is not being positioned to induce users to "cut the cord" on their subscriptions to
existing multichannel video programming distributors' ("MVPDs" like cable, satellite or telco) services. Or at least that's Google's initial positioning; whether it's genuine or really just a Trojan Horse game plan is another whole matter. For now anyway, Google is taking a "friend of the industry" approach, telling MVPDs that it's briefing that it is looking to complement their businesses by bringing the full Internet to the TV (this follows the same convergence theme as the new Kylo browser).
Google is contemplating an entirely novel strategy for its set-top box, seeking to insert it alongside the existing MVPD's set-top box by daisy chaining them together via HDMI connections. In other words, the MVPD's set-top's HDMI output would be connected to the Google TV set-top's HDMI input, and then its HDMI output would be connected to the TV. The authorized TV channels would still be delivered, but Google TV would collect data from the MVPD's set-top and introduce an entirely new UI for users to control their TV experience, to include searching and browsing channels. It would also add a host of new interactive web-type capabilities around the content.
Since the Google TV box would have a full browser and connect to the Internet via the user's WiFi or wired access, it would also bring all of the rest of the Internet to the TV as well, including the full breadth of online video (yes, that would mean one more thing for Hulu to block). My understanding is that on the whole, the Google TV experience is extremely impressive and well conceived. In short, it will get the attention of any MVPD executive who has a look at it and will certainly get them to thinking about how able - or unable - they are to deliver a similar experience themselves to their subscribers.
A key reason that Google is planning to insert its box this way is because it believes that in order to deliver a compelling Internet experience on TV requires a new web-based, and open platform. For Google that of course means Android, which it is vigorously proliferating on smartphones as well. Throw in Google's Chrome browser that it is promoting for online usage and you get a glimpse of how Google's multi-platform strategy comes together. While Sony would be making the box, you have to believe it will have Google branding on it, a first for the company in the living room too.
Categories: Cable TV Operators, Devices, Satellite, Telcos
Topics: Comcast, DISH Network, Google, Google TV, Intel, Sony
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