Posts for 'Netflix'

There's lots of ink being spilled about yesterday's Netflix-Comcast interconnection agreement with some saying this is basically just "business as usual," while others are proclaiming that this is the "end of the Internet as we know it" and "evidence that net neutrality is required."

I'm not a network engineer, but since I've worked in the space long enough, I know enough to be dangerous. And from my vantage point, it seems like this is an appropriate, market-driven solution to a problem that is somewhat unique to Netflix, which now drives around 30% of the Internet's traffic during primetime hours.

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Comcast has announced that it will acquire Time Warner Cable in an all-stock transaction valued at $45.2 billion. Comcast is already the biggest video and broadband provider in the U.S. and will now get even bigger, assuming the deal is approved. Comcast has committed to divest around 3 million of TWC's video subscribers to stay below 30% of the total U.S. pay-TV market, so the combined company would have approximately 30M video subscribers. Broadband subscribers would be a little less than 30M.

For me, the big takeaway from the deal is that in the broadband era, scale matters a lot - and to compete effectively, a company simply has to have it. Nearly ubiquitous broadband and wireless connectivity, plus massive proliferation of devices, have enabled online-only players to have easy access to massive global audiences. This context has helped fuel the rise of companies including Google, Facebook, Amazon, YouTube, Netflix, Twitter and many others. With innovative services and solid execution, it's now possible to create huge businesses quicker than ever.

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Nielsen released its latest Digital Consumer Report yesterday, finding among things, that 52% of broadband-only homes in the U.S. are in the 18-34 age range. Nielsen notes this group accounts for fewer than 5% of total U.S. households, but believes it's important to understanding the future digital living room. Nielsen said 80% of this group owns game consoles and 41% tablets, both twice the rate of traditional TV households.

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I'm pleased to present the 211th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.

In today's podcast we review Netflix's stellar 2013 results, particularly focusing on international. Then we discuss how Verizon will use OnCue, part of the Intel Media assets it acquired earlier this week. Colin sees them as key to upgrading the current FiOS service. I think that's right short-term, but longer-term I see Verizon using the assets to launch a nationwide virtual pay-TV services delivered over both wired and wireless networks. If Verizon does, it could really shake up the industry.

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A year ago, following Netflix's Q4 '12 earning report, I wrote "Netflix Q4 Earnings Improve, But It's Not Time to Pop the Champagne Just Yet." Well, now, following yesterday's strong Q4 '13 earnings report, I think it is that time as Netflix capped off a bona fide champagne year.  Below are my key observations, broken into the same buckets as my analysis a year ago.

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I'm pleased to present the 210th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.

2014 is shaping up to be another very busy year for all things video. In this week's podcast, Colin and I share our top trends to look for in 2014 and why. And in the spirit of accountability, we also review our 2013 predictions from a year ago - what we got right and what we got wrong.

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Click here to listen to the podcast (23 minutes, 26 seconds - sorry, for running long, lots of content this week.)

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Earlier today the DC Court of Appeals threw out the FCC's Open Internet net neutrality rules. Net neutrality advocates are upset with the FCC for pursuing an illogical regulatory path from the start. They are deeply worried that now, unencumbered by net neutrality regulations, big broadband ISPs (which also happen to be the biggest pay-TV providers) will begin to discriminate against third-party online video services by shunting them to "slow lanes" and charging new delivery "tolls."

I completely understand these concerns, but I for one don't envision any of this happening, at least not in the foreseeable future. Some of you are no doubt thinking - Will's naive, he's an idiot, he's a shill, etc. so let me explain.

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Judging by the pre-show buzz, the main focus at this year's CES (which kicks off next Tuesday) will be on Ultra High-Definition TV, or "4K" TV. If this seems familiar, it's because UHDTVs were the main focus of last year's CES as well. Clearly TV manufacturers have settled on UHDTV as the next "big thing" to motivate consumers to upgrade. However, in 2013, UHDTV's high prices, impractically large screen sizes and lack of 4K content led to extremely limited adoption in the U.S. So the question is: will UHDTVs find better success in the U.S. in 2014?

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Netflix released new research on binge-viewing among its subscribers today, revealing that 61% of them binge-view at least 2-3 episodes every few weeks. The data adds yet more weight to the binge-viewing story line: in September Nielsen found that 88% of Netflix subscribers have watched 3 or more episodes in the same day (70% for Hulu Plus) while research from Piksel found 94% of viewers binging in one way or another. (caveat, there's some apples vs. oranges in comparing the data)

No other company has done more to promote binge-viewing than Netflix. Whereas the phenomenon started with viewers binging past seasons of shows like "Mad Men" or "Breaking Bad," Netflix has shrewdly capitalized by releasing all of its own original episodes at once, making binge-viewing a current season behavior as well. As a result, TV network executives must now ask whether their traditional approach of scheduling new episodes should be revamped.

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I'm pleased to present the 206th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.

This week we discuss 3 of our key takeaways from this past Tuesday's VideoSchmooze, which over 230 industry executives attended. The morning was jam-packed with learning and insights, which I'll continue to share in the coming weeks, along with the session videos.

First, Colin shares the observation of Craig Moffett, who was on the opening session, that many content providers are assuming Netflix/other OTT providers are not a substitute for pay-TV over time. Craig believes this is an incorrect assumption and that if content providers come to depend too heavily on digital licensing revenues from Netflix and others, they run the risk of addicting themselves, even if/when their core businesses suffer due to audiences shifting.

Next, on the mobile video session I moderated, Silvia Lovato from PBSKids Digital shared the stunning data point that 75% of its viewership from its 2-5 year-old audience now occurs on mobile devices. I believe this has incredibly profound societal implications 10, 20 and 30 years down the road, as kids learn from the earliest age to expect programming fully on-demand.

Last, we turn to Smart TVs. On the online video advertising session, John Nitti from ZenithOptimedia (who oversees $10 billion of client spending) Eric Franchi from Undertone said Smart TVs are too fragmented to be an appealing environment for advertisers for now. As more online viewing shifts to the big screen, it's imperative that advertising follow, but the separate ecosystems of each Smart TV manufacturer makes it difficult for both developers and advertisers for now. Some form of aggregation/streamlining must occur to create the scale advertising requires.

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Amazon's PR machine is gearing up to support the company's imminent push into original programming, with a high-profile piece on Saturday in the Wall Street Journal and today in the NY Times. In both, Amazon video executives are quoted explaining the process by which Amazon selected its first crop of originals, with a particular focus on Garry Trudeau's "Alpha House," the first series that will launch on November 15. No doubt we'll see lots more PR around Amazon's subsequent originals' release.

The PR emphasis is a departure for famously reticent Amazon, but its presence is a sign of how strategic original video has become for the company, and how high the stakes are for it to succeed. Over the past 2 years Amazon has become much more competitive with Netflix in licensing hit TV programs from networks and studios to be included for its Prime members. Now the battleground is shifting to originals.

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Binge-viewing is a bona fide phenomenon that's not only changing consumers' TV viewing behaviors, but also creating fissures in the TV industry. Recently, in "For U.S. Cable Operators, Netflix Partnerships Are Fraught With Risk," I outlined how binge-viewing is driving a competitive dynamic over content rights between Netflix and pay-TV operators' VOD and TV Everywhere plans. Adding further detail, this past Friday, Vulture published an excellent article with specific examples of how this battle is brewing.

According to Vulture, FX and Turner are telling studios from which they obtain TV shows that they need rights to stream the full current season of shows (known as "stacking" rights) not just the most recent 3-5 episodes. Part of the networks' rationale is they need to give late-coming viewers an easy path to watch from the beginning of a season, rather than just enabling existing viewers a way to catch up.

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Netflix now has over 40 million global subscribers, including over 31 million is the U.S. alone, after reporting strong Q3 2013 results. Domestically, Netflix now has more subscribers than the biggest pay-TV operator (Comcast) and the biggest premium cable network (HBO).

Every research report I've seen continues to verify that to date Netflix is NOT driving cord-cutting (which is relatively small anyway). Still I can't help but ask the question in light of the company's renewed momentum: though it's fully justifiable to consider Netflix as an augment to pay-TV service today, is it fair to continue thinking of it that way forever? In other words, could a very different Netflix - as it might look, say, 3 years from now - become more of a substitute for pay-TV service for certain people?

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I'm pleased to present the 200th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. This week we debate whether U.S. cable operators should partner with Netflix, a prospect that was reported this past Monday by the WSJ.

Colin and I have very different opinions on the topic - I believe that on balance it would be disadvantageous for operators to partner and integrate Netflix into their experiences while Colin thinks it would be beneficial for them. As I wrote earlier this week, I think that operators helping Netflix get bigger and stronger ultimately means it becomes a stronger competitor and therefore a more potent cord-cutting and shaving threat.

Conversely, Colin believes integrating Netflix (as a couple of European operators are doing) would help their subscribers' user experience, which should be their overriding goal. Colin doesn't see Netflix as a threat, even as it looks more and more like HBO over time. I think that's underestimating Netflix's competitive potential. Rather than partnering with Netflix, operators should be doing everything possible to enhance their TV Everywhere and VOD initiatives.

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The WSJ has reported that Netflix is holding early stage discussions with at least two U.S. cable operators, Comcast and Suddenlink, about having its app included in their set-top boxes. I've been seeing a lot of arguments for why Netflix partnerships would be good for cable operators, but it seems to me there would be a lot of risk involved for them if such deals materialized.

Helping Netflix become bigger and stronger would be disadvantageous for cable operators. First and foremost, this would be felt in the area of content rights. By securing past seasons of TV programs, Netflix has driven the binge-viewing phenomenon and become its biggest beneficiary. I expect binge-viewing will only gain in popularity going forward as more people experience it and more devices make it ever easier to do. Adoption of binge-viewing means those distributors with strong video libraries will do better.

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(Note: I will NOT disclose anything about last night's series finale, so fans, you're safe to read on without spoilers.)

Last night was the series finale of the hit AMC show "Breaking Bad." I count myself among the millions of super-fans who fell in love with the series from the start and have been loyal ever since. Importantly though, my viewing experience with Breaking Bad distinguished itself from every other TV show I've ever watched: it was the first one where I watched every single episode on-demand and without ads.

In fact, my experiences with Breaking Bad perfectly illustrate so many of the video industry themes I write about on VideoNuze each day that I thought it would be worth sharing some of them and what I learned.

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Nielsen released additional data from its Q2 2013 Cross Platform report substantiating the trend toward "binge-viewing." Nielsen found that a whopping 88% of Netflix users and 70% of Hulu Plus users say they watch 3 or more episodes of the same show in one day.

The Nielsen data is directionally in line with survey results that Piksel released last week showing 94% of respondents engage in some type of binge-viewing behavior, either watching episodes together as quickly as possible, watching 1 or 2 every few days, or some combination of the two behaviors.

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I'm pleased to present the 194th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. First up this week we discuss CBS CEO Leslie Moonves' remarks on CNBC essentially declaring victory in the company's retrans dispute with Time Warner Cable because it had preserved its ability to license its programs to Netflix and Amazon. Listeners will recall that 3 weeks ago on the podcast we talked about how OTT licensing was at the heart of the dispute and the consequences for TV Everywhere.

Next we transition to questioning whether there's any real benefit for TV networks and pay-TV operators to stream linear channels to connected TVs. Colin observes that recent data from the BBC indicating very low levels of linear streaming on connected TVs appears to question the value of the Disney-Apple TV and Time Warner Cable-Xbox 360 deals. We speculate that these are mainly meant for 2nd or 3rd TVs that don't have pay-TV set-top boxes.

Last, we chat briefly about the massive 3-part series that the NY Times ran just before Labor Day on ESPN's dominant role in college football - a long, but fascinating read. As I wrote, it's well worth the time for anyone interested in the influence of big time TV money not only on college sports but also on the broader American higher education system.

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I'm pleased to present the 193rd edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia. This week Colin and I discuss our experiences with Chromecast, adding details to our respective previous posts (here and here), as well as our initial podcast from a few weeks ago just after the device was announced.

Overall, we're both very positive about Chromecast. Among other things, we like the easy set-up, the "tab-casting" feature, and of course, the low price of $35. We both believe it is hugely strategic for YouTube and other video providers who are outside the pay-TV universe to gain access to the living room. Colin has had a few issues with Netflix crashing his Nexus 4 when trying to use Chromecast (though when it has worked the quality has been strong) and he has had trouble using Chromecast's capability of turning the TV on and off.

I haven't had any problems using Netflix, though the streaming quality feels slightly lower than when I watch on my iPad or via my connected Blu-ray player. I did have problems with Chromecast when trying to watch golf and suspect it would be difficult to watch faster-action sports.

Still, we're both impressed and believe Google deserves lots of credit. We're both expecting big things from Chromecast this holiday season.

On a closing note, we'd like to thank all of you for listening to our weekly podcasts. It's been an incredibly busy summer for online video and we both believe the best is yet to come. For those of you with a long Labor Day weekend ahead, enjoy, and we'll see you in September!


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I'm pleased to present the 192nd edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.

In this week's discussion, we talk more about the unexpected role that Netflix and Amazon are playing in the CBS-Time Warner Cable retransmission consent dispute, which has knocked CBS off the air in major markets like NYC, LA, Dallas and elsewhere. As I wrote earlier this week, though "retrans" disputes have become commonplace, a new wrinkle in this particular one is that digital distribution rights are actually the main sticking point.

Having made lucrative digital deals with both Netflix and Amazon, CBS is justifiably reluctant to simply throw digital access to its programs into a deal with TWC, as it has in the past. The standoff highlights the uphill battle that pay-TV operators are having gaining content rights for their TV Everywhere services, which remain like Swiss cheese, with major holes in program availability. It also underscores the transformational role OTT powerhouses like Netflix and Amazon are having on the broader TV industry.

Further, Colin believes there's an opportunity for new market entrants (e.g. Intel Media, Sony, Apple, Google, etc.) to bid for both digital and linear rights, and then package access for consumers in inventive new ways. Colin sees broadband's lower cost of delivery creating a big advantage for these new players. I'm skeptical however, noting that the huge expense involved in licensing content and promoting a service from scratch would more than outweigh delivery savings. But, with so much change happening in the market these days, nothing can be counted out.

Click here to listen to the podcast (19 minutes, 25 seconds)

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