VideoNuze Posts

First up this week on Inside the Stream we discuss YouTube’s advertising revenue for Q1 ’23, which was $6.7B, down 2.6% from Q1 ’22 of $6.9B. Obviously growth, not contraction, is the goal, but given the huge headwinds blowing through the ad business, in my view, a slight dip can rightly be considered a clear win. And the quarters that YouTube is now lapping were extremely strong to begin with, so comps will be tough by definition.

We also spend a few minutes discussing YouTube’s four priorities outlined in the earnings call. I’m looking forward to attending YouTube’s NewFront presentations on Monday morning, especially “AI and the Future of Creative Transformation.”

Next up, we both like how Paramount is leveraging Pluto TV by having it stream “THE TONY AWARD: ACT ONE,” preceding the main Tonys broadcast on CBS and Paramount+ on June 11th. ACT ONE is a perfect example of how “shoulder content” that can drive free streaming viewership (helping build Pluto’s brand) while acting as lead gen for Paramount+ and maybe even a little incremental retention for pay-TV.

We expect to see a lot more of this “shoulder content on FAST” playbook run in the future elsewhere too. It’s a solid, synergistic play.

Last, we make a maiden foray into the intersection of AI, video and music, prompted by a well-reported - though maybe slightly over-dramatic - article in The Verge about “AI Drake.” It’s a bit of a head-spinner to keep track of the machinations, but the net of it is that - no surprise to anyone - generative AI is already kicking up some dust related to copyright and Fair Use.

Big players like Google and Microsoft will have to sort out what positions they ultimately want to stake out given their varied business interests. We do our best to decipher things and discuss implications. No easy answers here, but expect a lot more about AI on Inside the Stream in the future.

Listen to the podcast to learn more (31 minutes, 59 seconds)

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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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This week on Inside the Stream we focus on two main topics: first, is Warner Bros. Discovery’s decision to brand/bundle its streaming services under “Max” going to be successful, or is it going to be “Min” (as in have Minimum impact)? There’s little daylight between how Colin and I see things.

Of all the many issues, to me the most worrisome is the fact that the discovery+ library is being thrown into Max for no additional cost. That means WBD assigns its incremental, measurable value in the bundle at $0.

Next we turn our attention to the dynamics in the CTV/device industry. Colin is excited about a new initiative Google unveiled this week, where it provides improved guide/UI access to 800+ FAST channels. Colin sees this as a meaningful competitive differentiator, and believes Google TV / Android TV will grow briskly outside of the U.S. and even gain a few points of market share domestically.

It’s hard to argue against better discovery being valuable, yet I don’t see it as a game-changer in the CTV space, at least domestically, because, well, to start with, very few people actually use Google TV domestically.

In fact, according to insights from Beachfront’s CTV Marketplace for H2 2022, Google TV’s share of impression volume was a measly 1.9%. Meanwhile Roku, the perennial market share leader in the U.S., notched 39.2% of impressions, roughly consistent with the range I’ve seen for Roku for years.

While Colin and I agree that Google TV / YouTube / YouTube TV is a formidable collection of assets for Google, I remain quite sanguine about Roku’s ability to compete in the land of the giants. There have been no shortage of Roku naysayers over the years, since I wrote “Scrappy Roku Makes More Deals, Keeps Elbowing Its Way Into the Big Leagues” back in January, 2013, following a keynote interview I did with CEO/Founder Anthony Wood at NATPE in Miami.

In the 10 years since, Roku has more than held its own, and is arguably the most innovative company in the ad industry. Roku is focused and relentless, and it has a very strong talent bench. As I put it in 2013, Roku remains “more a work horse than a show horse.” As for Google, a sub-2% CTV/device share after all these years? The good news: there (continues to be) really only one way to go from here.

Listen to the podcast to learn more (36 minutes, 47 seconds)

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Each week on "Inside the Stream" Colin and I try to share fact-based conclusions about critical industry issues. Listeners have continually told us that they derive value from having a weekly resource that helps demystify the confusing cross-currents found in the daily headlines. By seeing things just a little more clearly, listeners are able to be more effective in their roles and hopefully help their companies succeed.

However, given all of the various independent and interdependent industry drivers, it’s impossible for anyone to have a “crystal ball” on where things ultimately land. So today, Colin and I take a step back to consider all of the different factors that we believe will influence average SVOD spending going forward (in truth the acronym SVOD is practically outmoded with the leakage of live sports from pay-TV to IP/mobile networks and the prevalence of hybrid paid/ad-supported services, so it might just be better to call everything a “streaming service”). We were prompted to consider the question based on a new forecast from Ampere.

Colin and I agree on one thing up front: average U.S. household spending on SVOD/streaming services will be higher in 5 years than it is now. This conclusion reflects simple Price x Quantity (“P x Q”) economics; prices for streaming services are only going in one direction, and the number of streaming services the average household subscribes to will almost certainly increase as content proliferates and sports migrates to streaming.

But how much higher spending will be is a function of many different factors. We identify 6-8 of these factors and try to flesh out their respective influences. Whether they will all net out to average SVOD spending increasing by 2%, 6%,12% or something else vs. current is anyone’s best educated guess. But educated guesses are better than nothing.

Listen to the podcast to learn more (29 minutes, 34 seconds) and let us know what you think.

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In October, 2021 Comcast and Sky announced “Sky Glass,” a package including a Sky-branded smart TV, Sky Stream (a streaming satellite TV service) and aggregated CTV apps. Colin was in London this past week attending a conference at which Sky executives spoke - but revealed little information about how Sky Glass is doing.

On this week’s podcast we dive deeply into the Sky Glass model, in which Sky customers either purchase upfront or in 48 monthly installments a smart TV (3 sizes available, 43-inches, 55-inches or 65-inches), then subscribe to a Sky Stream package, and also gain access to built-in apps from third-parties.

Sky Glass immediately intrigued me because it seemed to align with a concept I had been noodling around for the prior 6-9 months: the idea of TV OEMs either giving away smart TVs and/or pricing them so ridiculously low that consumers would be compelled to take the offer.

With each CTV advertising conference I hosted, it was becoming more and more apparent that CTV advertising would continue to boom simply because of linear’s demise and advertisers’ imperative to continue achieving their reach/frequency goals (I have referred to this as the “follow the eyeballs” rocket fuel that has powered CTV’s rise in the past 5 years). That’s all before discussing the targeting, optimization, interactivity and dynamic creative benefits of CTV.

More exciting to me was that it was beginning to become apparent that in the long-term CTV’s success would evolve beyond “follow the eyeballs” to a lower and/or full funnel medium, allowing it to emulate the massively successful playbook that has been run by search and social. Given the choice between selling smart TVs at negative gross margins, or simply giving them away to consumers, with some guaranteed monetization hooks in both high-margin CTV advertising and SVOD/MVPD services, the choice to me seemed relatively straightforward, particularly for certain TV OEMs.

I envisioned a third-party startup in the middle of the action (I subsequently discarded the idea for various reasons).

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This week on Inside the Stream Colin and I do an “around the horn” of four significant industry topics. We lead off with the expected bankruptcy filing of Diamond Sports Group earlier this week, the largest owner of regional sports networks (RSNs), resulting in a complete wipeout of the equity-holders. Where to from here is anyone’s best guess; but I reiterate my stance that sports teams’ franchise values and players’ salaries have already peaked. When the dominant player in an industry - with over 50% market share - goes belly up, nothing good happens next.

Next up is an update on WBD’s planned pricing strategy for its combined HBO Max and discovery+ streaming service launching soon. Colin’s been all over this one for months and is really scratching his head, as am I.

In time for March Madness, YouTube TV has launched a new feature called “multiview” allowing subscribers to stream a mosaic of four pre-selected games and choose which audio feed they prefer. I think it’s really cool, and as you’ll hear in real-time I realize that it might mean YouTube TV “automagically” just quadrupled its ad inventory for multiview users. If so, that’s a neat trick; new CEO Neal Mohan is off to an even stronger start than I expected!

Finally, Colin gives a short wrap-up of the latest doings in the burgeoning FAST market. It’s getting harder and harder to keep up.

Listen to the podcast to learn more (27 minutes, 11 seconds)

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Beachfront’s head of strategy and operations Laura Wu discusses connected TV advertising innovations in a 10-minute interview below. Laura dives into how publishers are better controlling/monetizing ad pods, using first-party data and converting CTV into a lower-funnel channel. Laura also explains how consumers crave simplicity, which will likely lead to more bundling going forward.

If you want to hear more from Laura, then after the jump, check out her recent session at VideoNuze’s Connected TV Advertising PREVIEW: 2023, “The Big Picture: Trends and Opportunities in CTV in 2023.” Laura is joined by Aaron Goldman (Chief Marketing Officer, Mediaocean), Paul Josephsen (Chief Strategy Officer, WMX Content & Media Division @Warner Music Group) and Brian Wieser (Principal, Madison and Wall), with Danielle DeLauro (EVP, VAB) moderating.

Watch Laura’s interview now.

Pay-TV providers lost another 7 million subscribers (approximately) in 2022 as losses accelerated from 2021. The losses span those actually cutting the cord, plus those that simply don’t take on a pay-TV subscription in the first place.

On this week’s podcast Colin and I discuss pay-TV’s melting iceberg, and among its consequences, what’s it mean for sports teams’ valuations and players’ salaries. Since cord-cutting came along, there’s always been a notion of sports providing a “firewall” bottom on pay-TV subscribers. But with so many sports rights now leaking into the streaming domain - having been snapped up by Big Tech - the paradigm-busting question looms larger.

Another, related consequence of pay-TV’s implosion is the demise of regional sports networks (RSNs). They’re also experiencing financial turmoil due to bad deal-making, disconnects with audiences and sub-par demand. Even mighty ESPN has been the subject of M&A rumormongering as newly restored CEO Bob Iger has to pick his priorities.

All of this is to say that the economics of the sports business are changing in front of our eyes. If sports networks’ financial viability is impaired, rendering them unable to competitively bid for rights, then the question becomes, will Big Tech step in as a backstop, building on their current commitment? As I assert in the podcast, I think their commitment to becoming a viable backstop will only become known as the ultimate CTV ad monetization opportunity crystallizes. Specifically, if CTV can legitimately become full/lower funnel - bringing in buckets of cash with it - then backstop viability is far more likely. Absent that it’s jump ball. We’ll see.

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