Posts for 'Netflix'

Four topics for this week’s podcast:

Both Google and Roku announced new streaming media devices this week, with Google launching its Google TV Streamer, which is positioned as the “next generation of Chromecast,” and Roku releasing an updated version of its Roku Ultra. As we discuss, these are two companies at far ends of the TV OS battle, with Google somewhat surprisingly still a laggard, and Roku still a leader.

Next up, Disney+ officially launched its paid sharing globally, following its announcement earlier this year. Disney+ is clearly hoping to emulate the success Netflix had following its rollout of paid sharing, though as we detail, there are important differences between how Disney+ is executing that could lead to much different results.  

Then we discuss a newly announced initiative by Whip Media to bring more transparency to FAST viewership across channels. While this would be a step forward, as Colin explains there are critical challenges to making this a reality.  

Finally, we circle back to a report last Friday about remarks from Netflix’s co-CEO Greg Peters concerning the possibility of the company leaning into live sports. Peters said “never say never” about live sports and with nearly 280 million global subscribers, Netflix would have an immediate impact.

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Viewers’ shifting consumption from linear TV to streaming is well-documented, but multibillion-dollar write downs in Q2 ’24 at Warner Bros. Discovery and Paramount helped quantify just how costly the shift has been to big media companies.

In today’s podcast we discuss the write downs and the broader industry context. When Discovery acquired WarnerMedia, it made a bet-the-company wager on the resiliency of linear TV that has gone completely wrong. Wall Street has ruthlessly punished WBD, knocking its stock down from a high of $77 in March, 2021 to just $7 recently, valuing the company at approximately $17 billion. To put that in context, Netflix’s market cap is now over $290 billion, over 42x WBD’s.

It’s hard to see any near-term positive catalysts for WBD, and if anything, TNT’s loss of NBA rights following this season will create even more pressure. As we detail, Internet economics have come to the TV industry, wiping out the artificial economics of the pay-TV world, and exposing the true current value of legacy cable TV networks. It’s a very unsettling picture.

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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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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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Memorial Day weekend was a disaster for Hollywood, with approximately $128 million in box office, down 36% from 2023’s total, and the worst in decades. There are some specific reasons, such as the steep underperformance of “Furiosa: A Mad Max Saga.” But as we discuss, any poor box office performance these days must always be viewed in the context of streaming’s myriad choices for viewers. Compounding matters for the box office are streaming’s inexpensive new bundles; on last week’s podcast we noted that Xfinity subscribers in particular can now access 6 top streaming services for just $30 per month.  

Next we return to bundling topic, in light of new research from Antenna showing subscriber loyalty to top streaming services. No surprise, Netflix has the highest loyalty, which in turn begs the question: how does Netflix benefit from participating in discounted bundles? We offer our thoughts.

Also on our radar this week is FreeWheel’s latest research from its Viewer Experience Lab, focusing on factors that diminish the viewer’s ad-supported experience. The testing found that viewers were most bothered by slow or buffering ads (78%), ads that unnaturally interrupt the programming (71%) and “we’ll be right back” slates (33%). The research is important because as CTV advertising becomes an ever more critical revenue stream, delivering top-notch ad experiences will be essential for optimizing monetization.

Last up, we review new research from Horowitz Research which found that of sports viewers, 58% of 18-34 year-olds and 57% of 35-49 year-olds say they’re likely or very likely to subscribe to the new Venu Sports streaming service for $35-$40 per month. While the research validates basic interest in Venu, it still feels early to accurately estimate true demand for Venu. A big looming question for Venu’s value proposition is whether TNT is able to renew its NBA package.

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Earlier this week Comcast took the wraps off StreamSaver, its new streaming bundle available for Xfinity subscribers. For $15 per month, StreamSaver bundles Peacock Premium, Netflix Standard with ads and Apple TV+. If subscribed to separately the combined total would be $25 per month, as of July 1st when Peacock Premium’s price will rise to $8 per month. That means StreamSaver provides a bundled discount of $10 per month, or 40% off the standalone rates.

As Colin and I discuss, StreamSaver’s discount is in the same range as Disney’s Duo and Trio bundles, which fall between 35% and 44%. It also means that if Xfinity subscribers took both bundles, they would get 6 top streaming services - Netflix, Disney+, Hulu, Apple TV+, Peacock and ESPN+ for $30 per month, or an average of $5 per month per service.

From our standpoint, all this seems really appealing, especially to budget-conscious consumers. Think for a moment about the vast selection of entertainment and sports programming across these 6 services - all for $30 per month, which is far less than it would cost to take a family of 4 to a single movie, for just 2 hours of entertainment.

But as we also discuss, these discounted bundles need to perform their critical function of reducing churn and extending subscriber lifetime value. With so many different decisions required by viewers about what bundle (if any) to choose, it’s gong to be challenging to pinpoint causalities and correlations, making the elusive goal of streaming profitability ever more opaque.

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[UPDATED]

Netflix revealed at its Upfront this week that it now has 40 million monthly active users on its lower-priced ad-supported tier. It’s not clear how monthly active users and subscribers relate to each other. But I think it’s probably fair to assume that closer to around 10% of Netflix’s 270 million global subscribers are now ad-tier subscribers (Colin and I will clarify this further on next week's podcast). Not too shabby since the ad tier only officially launched in November, 2022. No surprise, Netflix is also creating its own ad-tech stack with partners.

In addition Hub Research released survey data showing that 15% of respondents cited Netflix as the brand that would most likely make them sign up for a bundle (Amazon followed with 12%, followed by AT&T with 10%).

As Colin and I discuss, all of this nicely positions Netflix to play a lead role in the “streaming bundles” age that has already begun (note that Comcast announced a Netflix-Peacock-Apple TV+ bundle this week, pricing TBD). And with the Netflix app ubiquitously available, it could be a key “on ramp” to targeted streaming bundles, based on viewers’ demonstrated interests. Given Netflix’s newfound scale in CTV ads, a bundling play could also find Netflix with a lead role in selling/managing ads across bundled services.

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First up on this week’s podcast we discuss Fubo CEO David Gandler’s statement that the company is in a “duel to the death” with Spulu, the new sports JV from Disney, WBD and Fox. He makes a good point that if the 3 companies allow the JV access to their sports networks without requiring the JV to also pay for non-sports networks as companies do with typical pay-TV deals, this would put the JV at a cost advantage compared to pay-TV operators like Fubo.

Next, Variety reported Apple spent $700 million on just 3 movies last year, a bet that Colin and I both believe is far too concentrated for a streaming service that is struggling with high churn and badly needs catalog depth. Finally, both Max and Disney+ are trying to emulate Netflix in cracking down on password sharing and on improving churn. Can they catch up with the clear market leader?

Finally, all the session videos from last week’s VideoNuze CTV Advertising PREVIEW: 2024 virtual are available.

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Netflix added 13.1 million global subscribers in Q4 ’23, its best fourth quarter ever. As we discuss, the company is capitalizing on the introduction of paid sharing and a lower priced ad-supported tier. Paid sharing, which requires those who were using someone else’s login credentials to start their own subscription, has been especially effective. Netflix designed a smart strategy to eliminate this long-valued benefit. It could have become a PR nightmare, but instead has rolled out seamlessly.

Netflix said that the ad-supported tier now accounts for an impressive 40% of new subscriptions in markets where it is available. In yet another move to optimize revenue, Netflix is discontinuing its $11.99 per month Basic plan, which will drive more new subscribers to the ad tier or the least expensive ad-free tier which is $15.49 per month.

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Big TV manufacturers made news at CES with new models and improved viewer experiences. Meanwhile NBCUniversal and Disney stepped up their ad games with announcements of many new initiatives. Separate, Netflix said it now has 23 million monthly active users, up 8 million in the past couple of months. Lastly, Amazon announced broad headcount cuts to Prime Video, MGM and Twitch.

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Keeping with our annual new year’s tradition, this week Colin and I offer our top predictions for streaming TV in 2024. They cover a wide range of topics including SVOD, CTV ads, TV OS, sports, FASTs, AI, cord-cutting and more. Let us know what you think - agree or disagree with us?

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This week on Inside the Stream we discuss our top 10 streaming video stories of 2023. As longtime listeners know, the top 10 countdown is our tradition for the final podcast of the year.

In 2023, our top picks include the rise of smart TVs, the Actors and Writers strikes, TV OS wars, CTV advertising, traditional TV’s continued fall, Disney acquiring the rest of Hulu, YouTube’s growth, SVODs drive for profitability, sports migration to online and Netflix remaining the king of SVOD. We dive into all of them and explain why each is significant. Let us know what you think of our top 10 - did we miss anything?

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On this week’s Inside the Stream Colin and I dig into Netflix’s first engagement report, released earlier this week. The report details what subscribers watched during the January-June 2023 period. It includes viewership of over 18,000 titles, which comprises 99% of all viewing on the service. Colin has used the data to make several calculations about Netflix’s overall business. Hopefully other streaming services will share similar data in the future.

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Netflix has begun rolling out its account sharing limitations in the U.S.. The rollout effectively puts an end to one of the most-loved features of Netflix subscriptions - the ability to share log-in credentials with family members and others. For years Netflix “looked the other way” on this activity as it sought to bake Netflix usage into as many viewers’ lives as possible.  

But all good things come to an end. With subscriber growth slowing as the market matures, Netflix has flipped its approach, linking a subscription to a household, meaning anyone that who doesn’t live under the same roof does not qualify. Those people will need to start an “extra member” account, being offered for $8 per month. We discuss the pricing decision as well, and how it relates to the $8 per month ad-supported plan.

We also discuss the launch of Comcast’s new streaming service NOW TV. Neither of us believes there’s much value and will likely have only limited appeal. We explain why.

At the beginning of the podcast I also mention a new report released by the Goteborg Film Festival, the largest festival in the Nordics, called the “Nostradamus Report: Everything Changing All At Once.” I was among a small group of industry professionals interviewed for the report, which is extremely well-done and comprehensive. It’s free and for anyone looking to get a strong overview of our evolving industry, I highly recommend downloading it.

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Most media and technology companies have now reported Q1 ’23 results. We dig into who’s up, who’s down and who’s pick ‘em, and where they all might be headed. We share all this with the caveat that one quarter’s results are not the final word on a company’s ability to survive and thrive going forward. We hope we’re not in any way contributing to the short-term, quarterly performance myopia so common on Wall Street.

Rather, we’re looking at these companies’ results in the context of prior results, the competitive landscape and their particular products’/services’ positioning. All while trying to do some basic “pattern recognition” - what have we seen before and how is this likely to play out in TV and video. Our discussion is primarily focused on Netflix, Roku, Amazon, AMC, Disney, Comcast, Vizio, YouTube, The Trade Desk, Paramount, Diamond Sports Group, Tegna, Dish and how they’re sorting themselves in the up, down and pick ‘em categories.

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Back in our Oct. 21, 2022 podcast, “Netflix is Poised for 2023 Revenue Growth,” Colin and I articulated all the reasons we were optimistic about Netflix’s upside in the new year. Primarily we were focused on its newly launched $7/month “Basic with ads” tier and its plans to eliminate password sharing throughout the world.

Flash forward 7 months, and Netflix provided its first tangible results and commentary from the initiatives, as well as optimistic signs of where things go from here. In today’s podcast, Colin and I dig into these signs, including most prominently Netflix’s disclosure that $7/month "Basic with ads" subscribers already produce a higher average monthly revenue than do its $15.50/month "Standard" plan (ad-free) subscribers. Some basic math reveals that "Basic with ads" subscribers drive at least $8.50/month in ad revenue for Netflix, which in turn means that aproximately 55% ($8.50 / $15.50) of "Basic with ads" subscribers’ total revenue is already derived from ads, not subscriber payments.

That Netflix accomplished all of this despite 1) it still being very early days for the ad offering, 2) a massive headwind in the ad business due to recession/etc. worries, 3) all of its ad revenue being “linear TV replacement” or upper-funnel reach and frequency inventory, with nothing yet from more valuable full/lower funnel offerings, suggests the ad business is already a big win for Netflix and has huge potential.

(At this point I can’t resist noting that I have been badgering Netflix for years to launch a lower-priced ad-supported tier because of the upside…see “Why Netflix Will Launch an Ad-Supported Tier in 2020” from Dec. ’19, “6 Reasons Why Netflix Should Launch an Ad-Supported Tier Now” from Mar. ’20, and “Revisiting Why Netflix Should Launch an Ad-Supported Tier” from Mar. ’21 for a sample of my haranguing. So, in the category of “better late than never,” hallelujah, Netflix finally, finally put aside its religious objections to advertising and saw the light.)

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On this week’s edition of Inside the Stream, nScreenMedia’s Colin Dixon and I dig into four topics: World Cup streaming quality and the lack of 4K differentiation, Netflix’s offer to refund advertisers due to inventory shortfalls, WBD’s decision to remove “Westworld” from HBO Max, and the proliferation of music-oriented FAST channels.

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In Q3 ’22 Netflix added 2.4 million subscribers globally, beating its forecast of a million additions, and more importantly, reversing the two prior quarters’ declines. As nScreenMedia’s Colin Dixon and I discuss on this week’s Inside the Stream, there’s a lot of action just ahead for Netflix as it rolls out its ad-supported tier and modifies its longstanding account sharing approach.

The latter will likely impact tens of millions of subscribers, who will have multiple variables to consider in order for family members to retain access to Netflix. We do a little back of the envelope math that illustrates  the significant revenue opportunities all of this will create for Netflix.

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On the podcast this week nScreenMedia’s Colin Dixon and I dig into four topics that have caught our attention: Disney’s rumored membership program, Netflix’s plan to charge advertisers CPMs of up to $65, Paramount’s bundling of Paramount+ and Showtime, and how “diginet” channels and FAST linear services are converging.  

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