Posts for 'Hulu'

Yesterday Hulu and Discovery announced that 5 additional Discovery-owned TV networks will now be included in Hulu with Live TV, the virtual multichannel video programming distributor (“vMVPD” or “skinny bundle”), bringing the total to 8. In addition, approximately 4,000 episodes of Discovery programming will be added to Hulu’s SVOD library.

The deal further increases the value of Hulu with Live TV to its subscribers. But it also raises the question, yet again, of ballooning vMVPD programming expenses and how these impact profitability. Traditional multichannel pay-TV providers have steadily raised their rates over the years to offset higher programming costs (leading to the lower price opportunity that vMVPDs are trying to capitalize on).

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I’m pleased to present the 434th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.

First up this week, Amazon is said to be planning a free ad-supported video service, similar to Roku’s The Roku Channel. The new service, dubbed Free Dive, would be targeted to the nearly 50 million Fire TV users. Colin and I both like the move a lot, as we see multiple promotional and new revenue benefits, especially if Amazon can attract TV ad dollars. However, a key challenge is finding enough compelling content to make Free Dive interesting to audiences.

We then transition to talking about Hulu. Colin has developed a forecast for subscriber and revenue growth for Hulu through 2020 which he explains. He sees much of Hulu’s revenue growth coming from its Live skinny bundle service, although its profitability will remain challenged due to high programming costs.

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For all the talk about cord-cutting over the years, the most important trend in pay-TV these days isn’t consumers dropping out entirely, but rather shifting from traditional multichannel services to lower-priced virtual MVPDs or “skinny bundles.”

The trend of skinny bundle gains offsetting  multichannel losses continued again in Q2 ’18 where, according to Leichtman Research Group, the top traditional services lost approximately 800K subscribers. But just the 2 publicly-reporting skinny bundles, Sling TV and DirecTV Now, gained 383K (with the latter accounting for 342K).

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Comcast reported its Q2 ’18 results this morning, with the good news being the addition of 260K broadband subscribers, the best Q2 the company has experienced in the past 10 years, along with the improvement of operating margins. The broadband surge was Exhibit A for management to point to on the earnings call as evidence its strategy of being a “connectivity” provider is paying off.

However, Q2 ’18 also saw the loss of 140K video subscribers, the most in a Q2 since 2014. Video sub losses have accelerated from -4K in Q2 ’16 and -34K in Q2 ’17. On the earnings call, management put the blame squarely on virtual MVPDs or “skinny bundles,” adding that they “expect pressure to continue in the video business” as virtual MVPDs ramp up.

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Comcast has officially dropped out of the bidding for the 21st Century Fox assets, clearing the path for Disney to move forward. Comcast still plans to pursue Sky in the UK. But by dropping its Fox bid, Comcast has also foregone the opportunity to take control of Hulu (by virtue of combining its 30% stake with Fox’s 30% stake). Presumably now Disney will take control of Hulu.

I believe this is a major missed opportunity for Comcast, leaving the company under-optimized in the fast-changing premium video industry. As we all know, today’s key industry themes include the rise of cord-cutting and consumers’ move to lower cost skinny bundles, the shift to on-demand viewing, with the accompanying growth of ad-free SVOD services (e.g. Netflix, Amazon, Hulu), the rapid adoption of connected TV and mobile devices for viewing and the nationalization/globalization of video services, among others.

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Yesterday Netflix announced a very cool new feature called “Smart Downloads,” which automatically deletes an episode you’ve downloaded and finished watching on your mobile device, triggering the download of the subsequent episode. The process happens as soon as you’ve connected to WiFi and occurs invisibly in the background. Smart Downloads is available for Android devices now and for iOS devices later this year.

Smart Downloads is a clever way of automating a manual process, so that users always have something downloaded and ready to watch (although having to manually download a TV episode clearly falls in the category of “first world problems”). Smart Downloads is a a savvy move by Netflix to increase subscribers’ engagement time, which in turn leads to higher satisfaction and better retention. But perhaps most fascinating about Smart Downloads is that it illustrates how fully and quickly Netflix has evolved from an avowed downloading skeptic to an impressive innovator.

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As more TV viewing moves to streaming, connected TV is emerging as the most important new source of premium ad-supported inventory. At our recent VideoNuze Online Video Ad Summit, we dug into this unfolding opportunity on a session Rich Calacci (Chief Revenue Officer, Pluto TV), Jim Keller (VP, Sales, Hulu), Frank Sinton (Founder, Beachfront Media), Seth Walters (VP, Demand Partnerships, Roku), with Colin Dixon (Principal Analyst, nScreenMedia), moderating.

The panel explored the key advantages of connected TV ads, including enhanced targetability (at the user level), measurability, in-flight optimization and real-time feedback loops. The panelists also noted that with more cord-cutting happening, CTV is a critical way to reach certain households and build cross-screen campaigns. Still, the panelists noted that it’s relatively early days for CTVs, as virtually all TV will be streamed within 5 years.

Watch the session video now!

I’m pleased to present the 424th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.

At this past Tuesday’s VideoNuze Online Video Advertising Summit, Colin moderated a session, “Connected TVs’ Ad-Supported Future,” with Rich Calacci (Pluto TV), Jim Keller (Hulu), Frank Sinton (Beachfront Media) and Seth Walters (Roku) participating. In the first segment of this week’s podcast, we discuss the reasons panelists cited for why ads on connected TVs are so appealing to advertisers, among other topics.

We then transition to some of the highlights of the keynote interview with David Lawenda (EVP, Digital Sales and Strategy, CBS), with particular focus on his comments about advertisers’ reluctance to pay more just because ad loads are lighter. A range of TV networks are lightening their ad loads to provide a better experience compared to ad-free SVOD, but the benefits are uncertain according to David.

Finally, we touch on interesting data that Group Nine Media’s SVP of Ad Solutions and Innovation Hayden Lynch made in my interview with him around the difficulties of monetizing video distributed on platforms. Group Nine’s properties generate around 6 billion views/month, but only 10-20% of them are being monetized, which is pretty eye-opening.

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Pivotal Research has released an analysis of Nielsen data on growth rates of U.S. SVOD services, finding that Hulu had grown access by TV households by 39% at the end of May 2018 compared with a year ago. By Nielsen’s estimate, Pivotal said Hulu had 21 million SVOD subscribers, about in line with the 20 million plus that Hulu itself announced on May 2nd.

Pivotal attributed the growth to both Hulu’s programming and its vMVPD service which includes SVOD access. At 21 million, Hulu would have grown 4 million subscribers or nearly 24% vs. its year-end 2017 level of 17 million plus.

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I’m pleased to present the 422nd edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.

This week Hulu’s CEO Randy Freer said in a CNBC interview that the company had “surpassed 800,000 subscribers” for its Hulu with Live TV service. It was the first time Hulu has revealed subscribers for its skinny bundle service which was launched just over a year ago.

Colin and I are both impressed with the number, which represents 4% of its overall 20 million subscribers and probably puts it in fourth place in the category behind YouTube TV, Sling TV and DirecTV Now. Based on rough calculations, the Live TV service is likely generating almost $300 million in run-rate revenue now (whether its profitable is another question). That’s a strong start and more evidence Hulu has found a winning formula.

Back on the SVOD service, we also discuss James Murdoch’s comment that about half of Hulu’s subscribers are taking the ad-supported option, (which Hulu said is actually more than 60%), but that would still be down from “the vast majority” which Hulu has consistently said in the past. Finally, we discuss the pros and cons of either Comcast or Disney taking control of Hulu due to the battle over 21st Century Fox assets. I wrote last week Comcast would benefit more.

(Note, Hulu’s VP of Ad Sales Jim Keller will be on Colin’s panel “Connected TVs' Ad-Supported Future” at the VideoNuze Online Video Ad Summit on June 12th)

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Yesterday’s confirmation by Comcast that it is preparing an all-cash bid for Fox assets that would top Disney’s current bid came as no surprise. All that remains now for this corporate drama to go into overdrive is the decision on June 12th in the AT&T-Time Warner court case. If that deal is approved (which I believe is likely), Comcast is expected to formalize its Fox offer almost immediately. As these machinations continue, one looming question is what will become of Hulu?

Hulu is of course a joint venture among Disney, Fox and Comcast (via its NBCUniversal acquisition), with each company owning 30% and Time Warner owning 10% (that’s rounding as Hulu employees also own a piece). That means the ultimate owner of the Fox assets - Disney or Comcast - will also become a majority owner of Hulu. It seems to me Hulu would be more valuable to Comcast, and indeed Comcast should be angling to try to figure out how to take control of Hulu regardless of how the larger Fox deal sorts out. Why?

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I’m pleased to present the 418th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.

Earlier this week, I wrote how I’ve been rethinking the opportunity for skinny bundles. I’ve been skeptical, but I’m becoming more optimistic because of expanded local broadcast TV carriage (YouTube TV in particular has invested very heavily), parent companies’ larger strategic priorities that are motivating them to subsidize skinny bundles’ lack of profitability and the ongoing value of linear TV if priced appropriately.

On this week’s podcast, Colin and I explore all of these reasons in further depth. Skinny bundles are also benefiting from the quality of SVOD’s programming, which makes second-tier cable networks not included in skinny bundles less missed - a dynamic that could have broad consequences for pay-TV in general. We also discuss how Hulu with Live TV could be one to watch among skinny bundles as it benefits from the 20 million plus SVOD subscriber base.

It’s still extremely early days for skinny bundles but the likelihood of their success is definitely improving.

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Hulu had a lot of updates at its NewFront/Upfront presentation this morning, but among the most interesting for me was that Hulu will offer downloading of its content, but with ads included. Since the vast majority of Hulu’s 20 million+ subscribers are on the ad-supported plan, this means Hulu is going to be breaking some new ground in downloading, relative to its ad-free SVOD peers Netflix and Amazon, both of which have been offering downloading for a while.

VideoNuze readers know I’ve been a huge fan of downloading for years since TiVo first offered it, seeing it as way for time-starved viewers to gain full access to the compelling content available on SVOD or DVR when they’re either not online (e.g. in airplanes), enduring spotty carrier connections (e.g. in trains and cars) or on expensive capped mobile data plans (as most wireless subscribers still are). Since many of us are in these modes very frequently, downloading is essential for allowing us to maximize the value of our monthly subscriptions, which in turn leads to higher satisfaction and reduced churn.

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VideoNuze readers know I’ve long been skeptical about the value proposition of virtual multichannel video programming distributors (“vMVPDs”) or “skinny bundles” as they’re commonly known. But as I touched on in last Friday’s podcast, based on some significant changes over the past year, I’m becoming more optimistic about skinny bundles’ prospects and their broader impact on pay-TV.

To take a step back, 3 main concerns have driven my skepticism about skinny bundles: (1) their incomplete channel lineups (the “Swiss cheese” challenge of too many holes, or missing TV networks) which reduces their appeal relative to pay-TV’s traditional multichannel lineups, (2) the dubious profitability of skinny bundles, especially given underlying programming costs, which raises the question of just how committed the big parent companies of skinny bundles are to them, and (3) viewers’ migration away from linear TV in favor of SVOD, which is driving up cord-cutting.

Here’s what’s changed:

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I’m pleased to present the 413th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.

This week Colin and I wade into the debate over Netflix’s films being banned from consideration at the Cannes Film Festival. We were both struck by Steven Spielberg’s support of the ban, as it seems to us backward-looking and dependent on an outdated definition of what constitutes a “film.” That said, we both understand the deep cultural and economic motivations behind banning Netflix. This week’s BBC report that younger viewers are now consuming more Netflix than BBC content reinforces the global vs. local battle that’s unfolding.

We contrast to this backward-looking approach, by highlighting how Hulu has embraced a viewer-first model, which appears to really be paying off for the service. There are lessons local broadcasters around the world could gain from observing Hulu’s model, starting with giving viewers as much choice as possible.

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In his keynote interview at New Bay’s Advanced Advertising conference yesterday, I was impressed with how Hulu’s SVP of Ad Sales Peter Naylor continually said that viewers are now in charge and have vastly higher expectations of their TV experiences. Nothing could be truer in the online video era and by putting viewers first, Hulu has hit on a winning formula.

One great example of Hulu being viewer-first is how it provides subscribers with the choice of “Limited Commercials” for $7.99/mo or “No Commercials” for $11.99/mo. Naylor reiterated what Hulu has said many times before, that the majority take the ad-supported plan, which on the surface seems incongruous given Netflix’s and Amazon’s success with ad-free services.

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Virtual Multichannel Video Programming Distributors (“vMVPDs”) or “skinny bundles” have become a very hot topic in the video industry. Offering fewer TV networks and at a lower monthly price they’re seen as a way of keeping cord-cutters in the ecosystem while attracting cord-nevers. To learn more about the dynamics of vMVPDs, industry research firm (and long-time VideoNuze partner) The Diffusion Group recently completed a comprehensive study of vMVPD subscribers. I interviewed Michael Greeson, TDG’s president and director of research, to learn more.

VideoNuze: From a top-line perspective, what are the most important takeaways from your research?

Michael Greeson: First and foremost, while these services are successfully connecting with cord-cutters, they are entirely missing out with cord-nevers. Cord-cutters account for 54% of total vMVPD subs. The consumers were largely driven from legacy services by high service costs and paying having to pay for channels they don’t watch, and vMVPD services appear to better address these needs.

Cord-nevers, on the other hand, account for only 9% of vMVPD subs—clear evidence that these offerings are failing to resonate with younger buyers. And for good reason: cord-nevers are largely driven by a genuine lack of interest in multi-channel pay-TV services. They prefer a ‘build it yourself’ service that allows them to select and pay for only the channels they want, versus signing up for a bundle of channels.

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I’m pleased to present the 403rd edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.

First up this week Colin shares thoughts on a keynote session from CES he watched featuring Turner’s Chairman and CEO John Martin and Hulu’s CEO Randy Freer. Colin zeros in on the discussion around addressable/targeted ads and how vital they are to profitability and keeping TV competitive with SVOD. Turner has been among the most aggressive TV networks investing in data and segmentation and is clearly urging the industry forward.

We then transition to discussing Facebook’s News Feed algorithm change, which I wrote about earlier this week. Colin and I are struggling with how to synch up the de-prioritization video is now going to receive with CEO Mark Zuckerberg’s repeated assertion that he wants the company to be “video first” in all that they do.

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I’m pleased to present the 402nd edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.

This week we start by discussing Hulu’s growth to over 17 million subscribers, which it reported earlier this week. Both of us are impressed by the numbers, which makes Hulu a firm #3 in the SVOD market. The key number that we’d like to know is how many new subscribers are taking the ad-supported version, which has dominated in the past.

Hulu’s and SVOD’s growth have come at the expense of viewers owning and renting video, as Colin explains in his review of recent Q4 ’17 DEG data. DVDs fell a whopping 22% vs. Q4 ’16 and rentals were down as well. The only category that grew was SVOD. Related, the dominance of SVOD makes me wonder how Apple is going to monetize its high-profile original TV shows. If Apple sticks with a transactional model it will be facing serious headwinds.

Finally, Colin shares a few thoughts on CES product news from Samsung, LG and Intel.

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Hulu announced that it now has over 17 million subscribers including both its SVOD and live TV service. The last time Hulu publicly reported, in May, 2016, it had 12 million subscribers. So the 5 million increase translates to approximately 250K per month. Though Hulu didn’t break out subscribers to its live TV service, which launched in May, 2017, assuming maybe 5-10% of its monthly gains are for live TV, then the traditional SVOD service is adding around 225K to 240K subscribers per month.

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