Aereo's final chapter - Broadcasters Picking its Bones

Aereo is the undisputed leader when it come to my favorite company to write about over the past couple of years. You will remember them as the ambitious startup that aimed to stream live broadcast television and offered cloud based DVR services to subscribers for a small monthly fee. Roll forward to this past Friday, months after the devastating loss they suffered in the Supreme Court, they filed for bankruptcy. Although this seemed to be the final chapter in their short lived history, it doesn’t have to end this way. While the courts ruled that Aereo’s business model ran afoul of copyright law, the underlying technology, which uses tiny antennas to stream video to subscribers, could still be very valuable. The reality is that Aereo only foreshadowed a massive industry shakeup that is changing everything about television.  As more people cut the cord and switch to on-demand services like Netflix and HBO Go, cable television (as we now know it) will slowly die out as will the lucrative retransmission fees they pay the broadcasters. Apparently I'm in good company with my prediction as Reed Hastings CEO Netflix has thrown down the gauntlet to the traditional television business, declaring it will be dead by 2030.

The latest news that has peaked my interest is this weeks comment from their Lawyers stating that there is "plenty of interest in the company’s assets" and asked the bankruptcy judge for an auction to be scheduled for Feb. 17. More: Bloomberg 11/24/14 - Aereo’s Assets Eyed by Possible Bidders, Lawyer Says

Amazon Launches Fire TV Stick

In the growing competitive field of Streaming Sticks, Amazon introduced the Fire TV Stick today. Designed to take on challengers like the Roku Streaming sticks and Chromecast dongle, Amazon’s HDMI-based media adapter represents a smaller, less expensive complement to their $99 Fire TV box. The new smaller and even more affordable device sells for $39 and features access to Netflix, Prime Instant Video, Hulu Plus, Twitch, WatchESPN and a variety of other services right out of the box.  Jeff Bezos, Amazon.com founder and CEO, said in announcing the new product, “The team has packed an unbelievable amount of power and selection into an incredible price point.”

The company said the Fire TV Stick has 50 percent more processing power and 2x the memory of Chromecast, and 6x the processing power, 2x the memory, and 32x the storage of Roku Streaming Stick It supporting standards like DIAL allowing users to fling shows from services like YouTube, Spotify, and Netflix (coming soon) from an Android phone or iPhone. They began to take pre-orders today and will start shipping the new product on 19th of November.

Overall the specs look good and based on Amazon great success with the Fire TV Box, which launched a little more than six months ago and quickly became the best-selling streaming media box on the e-retailer, the Fire TV Stick might be the first product that will be a serious challenger to Chromecast in terms of both features and value. Obviously Mr. Bezos believes he has a winner, the rest of us will have to wait and see how it performs in the real world to be sure. More: TechCrunch.com 10/27/14 - Amazon’s New Fire TV Stick Is A $39 Chromecast Competitor With A Hardware Remote and Variety.com 10/27/14 - Amazon Whips Out TV Stick Against Google’s Chromecast and Roku and/or Twice.com 10/27/14 - Amazon Unveils Fire TV Stick

The “a la carte” TV model... Not If but When!

The pace of industry consolidation as well as the businesses general move towards IP distribution models were never more evident than they were this past week.  On the heels of HBO's announcement of a plan to offer a Web-based service that doesn’t require a cable or satellite TV subscription, CBS announced that it will launch an All Access video-on-demand service that comes with a $5.99-per-month subscriber fee and has current and past seasons available for viewing. Local CBS television station streams will also be available through the subscription in 14 markets.  "It seems pretty apparent that every media company in America is thinking about direct-to-consumer, mobile, digital" said Les Moonves after the announcement.  ReCode also reported that CBS is considering an HBO-like service for its premium network Showtime. “We are always looking at ways of expanding our audience and it is certainly something that we have been examining for some time” said Moonves.

What HBO and CBS have done suggests the future of TV will be messier and more confusing in the near-term but ultimately consumers will have more choice of what they watch and how much they pay for it. No doubt this weeks developments suggests an avalanche of television networks and studios moving quickly to announce online apps and services. Sony, Dish and ABC all have been developing streaming strategies. And in the way that chattering about changing technology helps propel that change, the HBO and CBS announcements, separated by one day, creates a new momentum. Things are going to change even faster now. It’s a sign that the content business is suddenly racing into the broadband space.  MORE: ReCode.net 10/16/14 - Now CBS Is Selling Web Subscriptions to Its Shows, Too 

Dish Digital prepares to Launch Nutv

In what appears to be a common theme trending in the industry today, Dish’s internet TV service, Nutv, plans to launch before the end of the year. Dish Digital, the satellite operator’s online business subsidiary that is going to be in charge of the new service, has filed a number of trademarks for the brand, including one with a logo that could be used at launch.

The Nutv brand has also surfaced in conjunction with one of Dish Digital’s existing apps, suggesting that the app may be used for the new service as well. Dish has secured digital licensing deals with The Walt Disney Company and A+E Networks so far to program the service. It's unclear at this point if it will make more content deals, given that obtaining a low under $30 price point is key to the new offering. A Dish executive recently said that the company plans to target “cord cutters, cord nevers and… cord haters” with the service.  Dish chairman Charlie Ergen said during the company's second quarter earnings call in August, "We'd like to get them started on pay-TV. We'd like to get them started on ESPN. My concern is that we're missing a while generation of customers."

Shomi - A New Kind of Video Streaming Service

Shomi is a future Canadian video streaming service owned jointly by Rogers Communications and Shaw Communications, tentatively planned to launch in November 2014. According to the companies press release, the new subscription-based service that provides access to shows on-demand, with apps for tablets, phones, web, Xbox 360 and set-top boxes at launch. The shomi service will be available only to Rogers and Shaw Internet or TV subscribers n its beta form, and it’ll be available beginning in November for $8.99 per month price tag, the same, as Netflix.

Shomi’s entire launch document for this service is an obvious attack on Netflix, with the inference being that for Canadians, at least, it’ll provide a much better content library, offer over 11,000 hours of programming. The focus seems to be especially on TV shows, though in addition to 14,000 episodes and TV titles spanning 340 series, shomi will have 1,200 movies. In keeping with Canadian content regulations imposed on broadcasters in the country, 30 percent of the content is Canadian.

As for other advantages, shomi offers trailers to preview its content, as well as “factoids for movie titles,” whatever the hell that means. Surprisingly, given this is coming from cable companies, shomi isn’t being stingy with viewing permissions, allowing up to six profiles per account and simultaneous viewing on two devices as well as their set top boxes. Netflix, which doesn’t make a big deal about shared accounts, still allows simultaneous streaming on only two screens at a time with its basic account. Plus, this will presumably work on user’s existing cable boxes in the country, which could drive adoption based just on convenience.

Connected TV Device Market to Grow 100% by 2017

If you don't have a streaming media player (we have two and I'm considering a third already!) by now, it's likely you will in the next few years. According to the NPD Group, the number of streaming media devices in the U.S. will reach 204 million with in the next three years, an increase of 100% and a total that will be more than double the number of projected households connected to the Internet.
The connection rate is also projected to increase. While 60% of Internet-capable devices are currently connected, NPD projects that 76% of installed units will be connected by 2017. The evolution of hardware and digital content distribution is constantly changing the TV viewing experience," said Buffone, executive director of NPD Connected Intelligence, “The hardware is able to engage with consumers in ways that it hadn’t before. Over the coming years, the consumer’s preferred device for apps on TV will be shaped by the next generation of video game consoles, Smart TVs, and a new wave of streaming media players.” MORE: RapidTVNews.com 07/23/2014 - Connected TV device market to skyrocket in US or MediaPost 07/22/14 - Connected TV Device Market Set To Explode

Netflix Maintains Lead over Amazon for Top Movies, TV Shows

Piper Jaffray analyst Michael Olson opened the book on his findings of how Netflix, Amazon, Hulu Plus, and Redbox Instant compare in their offerings of top 50 movies available for streaming over the past three years and top 75 TV shows available from the past four years. The report revealed that Netflix continues to outpace Amazon.com’s subscription-video service in terms of content-licensing, delivering substantially more of the top movies and TV shows from the last few years.  There’s no question that Netflix, by stocking more hit shows and movies, would to some degree appeal to a wider base of consumers than Amazon’s service. But Netflix hasn’t decisively won the SVOD war: Amazon remains aggressive in looking for exclusive TV licensing deals to expand its 40,000-plus title Prime Instant Video service. More: Deadline 07/03/14 - Amazon Narrows Gap with Netflix in Hit TV Shows but not Movies
 

Apple TV, Roku _ Who's Winning the OTT War and what are we Watching

Among those who use streaming media players, Roku owners access new subscription video platforms more than Apple TV which becomes more interesting when you factor in that currently there are more Apple TV devices deployed. This new research was published and presented at this week's NAB show by Parks Associates where they profiled the different device owners streaming and content purchasing habits. Their findings showed that 86% of Roku owners use one or more subscription OTT service, versus only 77% of Apple TV owners. Additionally, 75% of Roku owners use Netflix, compared to 63% among the Apple TV crowd. As a point of difference, more Apple TV owners use Amazon Prime Instant Video – 40% versus 28% and Apple TV also has a clear lead in sales passing $1 billion last year. On a similar topic, the latest study from video delivery firm Qwilt shows that Amazon's Instant Video is the third largest video site (March 2014), behind Netflix (57.5 percent) and YouTube (16.9 percent). Although it's sitting at a modest 3%, Amazon is still beating out Hulu (2.8 percent). I expect to see this number rising  considerably, since this data was collected before the Fire TV set-top box hit the market last week. More: 04/09/14 Advanced Television - More Roku owners than Apple TV owners use OTT and 04/09/14 Multichannel News - Roku Tops Apple TV In OTT Usage: Study and Qwilt 04/04/14 - Amazon Rising – Amazon’s Streaming Video Surpasses Hulu and Apple

Roku gets Smart (TV)

Anthony Wood broke the news late Sunday prior to the CES show that Roku has decided to take another route to win the war for controlling your TV, soon Roku will be integrated into your new smartTV. Partnering with TCL and Hisense, the company plans to release the Roku TV later this year. This is a bold move from a company that has already positioned themselves as the leader in the OTT world. The field however is becoming crowded with existing and new entries all over at the 2014 CES show. This new strategy if carried out correctly could be the beginning of an entirely new era for connected TV's.
 MORE: Roku Blog - 01/05/14 Introducing Roku TV or WIRED - 01/06/14 Roku TV Is the First Smart TV Worth Using or

Netflix in Discussions for U.S. Cable Carriage

In an effort to continue to expand their subscriber base and to create a second revenue stream, Netflix is in talks with Comcast, Suddenlink Communications and several other cable operators about integrating its streaming video service with leased set-top boxes. Obviously U.S. MVPD's have taken notice of Netflix’s new arrangement with Virgin Media and, more recently, with Sweden’s Com Hem and are weighing out the potential future impact those deals may have state side.  At this point the company's mix of original series and large catalog of TV shows and movies, has essentially become a new premium subscription service that can do battle with HBO, Starz and Showtime. According to the Wall Street Journal, Netflix doesn’t have all the distribution rights it needs to offer its entire service on leased boxes in the U.S., at least not yet.

 

According to industry insiders, at this point in the game, Netflix would not gain much from a U.S. cable deal. The current distribution of cable STB's with IP capabilities, is very small and the overwhelming number of boxes deployed in the field today don’t speak IP (which at this point is critical to support a Netflix app). While cable operators are starting to deploy IP boxes, they will represent a fraction of the market for the near term future.

Technology aside the WSJ reports the biggest holdup between Netflix and U.S. cable companies is cable providers' fear of losing viewers of its own services and advertising. Currently they are 30 million Netflix subscribers in the U.S. alone and they will continue to access the service one way or another – via gaming consoles, retail TiVo boxes, Roku boxes and smart TVs – with or without cable’s help. In my opinion having Netflix on the set-top box would at least keep subscribers engaged with the cable video platform and prevent them toggling to a different video input and a different video device. MORE: MediaDailyNews - Netflix May Cut Deals with Cablers - 10/14/13 and Adweek - Is Netflix Looking for Cable Distribution Deals? by Sam Thielman 10/14/13

 

Amazon Plans OTT Set Top Box

Amazon is on track to release a video-streaming STB prior to the end of the year, according to the WSJ. The device code-named ‘Cinnamon’ is said to be similar to the Roku 3 or Apple TV players and is similarly styled as a platform to run applications and content from a variety of sources including the obvious choice, Amazon Prime. A set-top box would deepen Amazon’s reach into the living room, where it is currently dependent on other hardware makers to reach consumers watching video on TV sets. Providing a device of its own is a potentially crucial component to Amazon’s ambition of expanding beyond its core online marketplace business.

 

In recent weeks Amazon has approached a variety of app developers and cable TV providers seeking partnerships for the rollout of its set-top box. They have set a deadline of mid-October to submit apps for the device, said the Journal's sources. More: CNET 10/04/13 - Amazon recruits variety of apps for set-top box, report says and WSJ Online 10/03 - Amazon Readies Set-Top Box for Holidays

Online Video Viewing on the Rise

According to Nielsen’s 2013 OTT Video Analysis, released last week September, viewers are streaming video at a breakneck pace - up 38% year over year, largely direct by the rapid growth of tablets and smartphones.  The data also surfaced details that some 38% of Americans are users or subscribers to Netflix, 18% are Hulu users (including 6% who subscribe to Hulu Plus) and 13% are Amazon Prime Instant Video users. The report also found that 88% of Netflix customers and 70% of Hulu Plus customers are binge users who stream three or more episodes of the same TV series in one day. This new ability to watch multiple episodes or even entire seasons of certain programs in one sitting is shifting the way viewers consume content and demonstrating incredible binge appetites for programming available anytime and anywhere on services such as Hulu, Netflix and Amazon Prime. MORE: 09/18/13 Nielsen.com - "Binging" is the New Viewing for Over-The-Top Streamers

STB & Dongle Sales Higher than forecast Thanks to Chromecast

According to ABI Research senior analyst Michael Inouye, the smart set-top box and dongle market is expected to pass 18 million units in 2013 – higher than originally forecast, thanks to strong, early demand for the Google Chromecast streaming dongle. The initial stock of Chromecast devices at online sources such as Amazon sold out rapidly thanks to the low price ($35) and a promotion that included three free months of Netflix.  Meanwhile, customers who purchased the Chromecast at Amazon after the cut won’t get their hands on the product until mid-September, or longer.

Inouye expects more dongle form factors in the smart set-top box market. The price of these devices will also allow lower tier TV manufacturers to separate the connected TV component, keeping prices lower and enabling customers the option to upgrade the connected platform as desired without replacing the TV. Competition from a range of connected CE devices will still remain stiff as the smart set-top box and dongle market offers an equally compelling user experience often at significantly lower price points. At this point “Google’s Chromecast device in particular sets a new low price bar for the connected CE market and as more applications are added to its library its value to price ratio will continue to grow,” according to analyst Michael Inouye.

Aereo Can Stream in New York for the Foreseeable Future

The U.S. Court of Appeals for the Second Circuit denied a broadcaster request that the full court review a three-judge panel of that court's April decision not to stop Aereo from delivering broadcast signals over the Internet while a lower court considers a broadcaster challenge to the service's legality. The central issue in the Aereo case is whether the start-up’s decision to provide one antenna for every subscriber makes it a legal private transmission under copyright law or, instead, an illegal public broadcast so the broadcasters claim.

Meanwhile Fox Broadcasting isn't taking no for an answer, "We will now review our options, and determine the appropriate course of action," said a statement from Fox. CBS has also vowed to fight the company wherever it launches its service, which is available in New York, Atlanta and Boston (where it's already been sued by Hearst).

Aereo is a well funded startup that is challenging the current broadcasting model. While this ruling is another win for Aereo in its ongoing battle against broadcasters, their time in court is far from over. More on this to come...

Turner To Launch Live Streaming for TNT, TBS

Not to be out done by yesterdays ABC live streaming announcement, Wednesday Turner Broadcasting released news about their newly created "Watch TNT" and "Watch TBS" apps for tablets and smartphones . The networks will both stream on-air content live across multiple platforms 24/7, available via the networks' websites as well as the apps.  Turner continues its push to become a year-round home to original programming as they also announced their upcoming new scripted and unscripted fare including series from top producers like Steven Spielberg, Diablo Cody, Denis Leary, Sylvester Stallone, Dick Wolf and Jamie Foxx.

I expect many more networks to soon join the ranks of HBO, Turner and ABC as more programmers and distributors reach "TV Everywhere" deals. Obviously these are designed to make content more available to subscribers and stave off competition for new OTT rivals. For now all of this seems great speaking from the perspective of one who travels a great deal. At some point however I see an upcoming post about the frustrations of manage 100's of individual apps in order to see my favorite shows while on the road. That app from DishTV looks like it will be the benchmark for other video providers in the future and these separate networks app's are simply a short term work around.

Yahoo eyes Hulu

Add Yahoo to the growing list of Hulu-suitors. According to reports, Yahoo CEO Marissa Mayer and Chief Operating Officer Henrique De Castro recently met with executives at Hulu, the premium video service whose owners have been considering selling it for some months. Hulu would make a powerful weapon to add and they also have mobile applications for their premium subscribers, making the company a natural fit. Mayer's drive into the mobile & digital content spaces seem to offer this deal synergies that could justify the enormous cost of this acquisition. She has made it no secret that her company has been looking to expand its video assets, recently acquiring the exclusive rights to all of SNL's classic clips from 1975 through 2012 while expanding their original exclusive programming. While speaking this past Tuesday during the Wired Business Conference, Mayer's stated that "video is important across all of the company's properties" and that Yahoo is becoming a "mobile-focused firm".

Hulu's board still has a lot of decisions to make and Yahoo has not made and offer. One thing does seem clear at this point and that is that if Yahoo is to pick up the video company, it will fundamentally change the online video landscape, and put Yahoo into competition with a host of new firms.

Cable Spectrum Allocations - less video for more internet

I’ve spent a lot of my career in and around cable operations and it might come as surprise to you but there is not very much profit in the video side of their businesses anymore. The programmers have eaten it up with rising rates and bundling. The Broadcaster have received their share through retrains fee's and the spiraling cost of Sports content… let’s not even bother to start that discussion. So where are the profits? Well for the past 7-8 years it’s been from voice and data services.

So it’s become obvious to cable operators that internet access bandwidth increasingly is more valuable than video entertainment bandwidth.  That is reflected in the growing recognition that it is broadband access which is becoming the foundation service for cable operators, gradually replacing television revenues. Eventually, as linear TV is viewed less, the spectrum it now uses on cable and fiber will be reallocated to expanding data transmission.  Netflix and other streaming video services now are driving bandwidth consumption in the U.S. ISP business. Since at least 2011, real time entertainment content has represented at least 49 percent of peak hour traffic in North America.  Industry statistics reflect that by the end of last year, video had grown to represent as much as 75 percent of peak hour broadband traffic. With gradual attrition of video revenues, it will at some point make sense to allocate more cable bandwidth for Internet access, and less for linear TV.

This kind of evolution to the cable business is not new.  Operators in past decades had prioritized analog signal delivery over digital. As the need to support Internet access grew, operators gradually shifted to “more digital” in the mix, and finally to “all digital,” as doing so freed up additional bandwidth for use for Internet access. The future is yet to be determined but the signs are strong. MSO's have always fought with the "dumb pipe" label but now it is exactly that pipe that holds the keys to power over the consumer's household.

Amazon will soon enter your Living Room with their own OTT/STB

Online retail giant Amazon is developing a set-top box device that will stream video content from the web to your TVs, according to Bloomberg Businessweek. The STB device, which is due later this year, will provide access to Amazon’s expanding video services, which include Amazon Prime Instant Video, a service which provides access to more than 37,000 feature films and TV episodes for free. Users will also be able to buy/rent film and TV titles via Amazon Instant Video. Much like other streaming devices from Boxee, Roku and Apple, Amazon's box will also offer access to video services like Netflix and Hulu Plus, though Amazon's video offering will likely be heavily integrated into the device.
 
Some could say that Amazon is late to the OTT game, but the reasons for doing a set-top box are obvious, with its original content being the most popular on the platform since it launched. As Amazon finds its way to more niche shows that it can present exclusively, the reasons to grab an Amazon-branded device for your TV makes more sense. In the same way that Apple leverages each of its devices to sell new ones, Amazon is learning how it’s done. Jeff Bezos leads his company by taking smart, calculated steps all the while capitalizing on mistakes made by others. Kindle-TV anyone?

Netflix - Masters of "Backward Integration"

This past February Ted Sarandos, Netflix’s chief content officer, said during an interview with GQ magazine “the goal is to become HBO faster than HBO can become us.” The company, once the leader in the DVD mail order rental business has masterfully reengineered itself into the leader in online video streaming. A strategy that appears to be paying off when yesterday the company released its first quarter results and they were much better than analysts expected. Its stock soared 24% in after-hours trading to $215.40 after they announced that it had gained two million new U.S. customers in the first three months of 2013, a total of 29.2 million and a additional 1 million internationally.

At $7.99 per subscription, revenue nearly equaled the full price of the $100 million "House of Cards" series that debuted early this year. So did "House of Cards" lure 2 million more people, alone? That's doubtful and as Piper Jaffray analyst, Michael Olson, told the New York Times, ”It appears original programming may be driving better subscriber numbers. At the least, we believe original exclusive programming is reducing subscriber churn.” A very important factor in the subscription business and a strategy that helped them to edge out HBO in total subs for the first time. That said, Netflix has a ways to go before catching up worldwide. According to SNL Kagan, HBO has 114 million subscribers across the globe, a far cry from the 7.14 million Netflix has outside the U.S. Now... I must get back to my binge-viewing... popcorn anyone?

The Netflix Effect

Television viewing of both cable and broadcast networks fell among adults under age 50 in the fall season. According to Nielsen, the major broadcast networks lost an average of 15% of their viewers in the 18-49 demographic compared with the prior season. In contrast, A record 456.6M online videos were watched in 2012 by more than 182M users. The switch is obvious in my test lab (aka: household) where my tech savvy wife and highly connected teens stream 90% of the video they watch from the web. While this all makes sense I have also noticed the ginormous audience growth that each new season of shows like "Breaking Bad", "Sons of Anarchy" and the resent return of "The Walking Dead" were seeing. Is there a snowball effect to new seasons viewing because of the easy access to past episodes? Just how are streaming services like Hulu, Netflix and others effecting the viewership of television? In a quest for quantifiable data to answer these questions, I uncovered two 2012 studies, one done by Bernstein Research and the other by GfK North America that confirmed my theory and shed some light on my questions.

The Bernstein Research analysis of viewing patterns was conducted in Tivo homes during the first quarter of 2012. What the study identified was that ratings for AMC, which exclusively licenses several of its original series to Netflix, were actually 15% higher in homes with Netflix than non-Netflix homes. Tie this back to the lift in viewers for the new season of "The Walking Dead" where it recently returned for the second half of its already much-improved third season to even higher ratings than before: 12.3 million viewers. Impressive numbers especially when you consider that it was up against the Grammys on its premier night.


Netflix itself seems to back up the finding by contending that its service gives viewers more opportunities to sample programming in its first window by providing older episodes that let them see what they've missed hence, they are more likely to watch new episodes of those shows when the new seasons return.

The GfK study concurs, stating that more than half of the Netflix subscribers in their focus groups said that it had no effect on their viewing from more traditional sources. But what’s even more interesting is how many respondents said they watched scheduled TV even "more" than they did before subscribing to the service.

Singling out first-run dramas, for example, reveals 22 percent of respondents said they watch more new episodes of dramas on scheduled TV than they did before getting Netflix, with 10 percent who said they watch less (See GfK chart below for more details on viewing patterns.)