Posts Tagged ‘Netflix’
Trends: Ignore Them At Your Peril
- Published on Thursday, 04 September 2014 09:57
- Pete Putman
- 0 Comments
On August 15, Leichtman Research Group of Durham, NH released its quarterly revenue and subscription numbers for U.S. cable TV providers. And there was a surprise to be found in the calculations.
For the first time ever, the number of broadband service subscribers for major cable TV service providers exceeded (barely) the number of cable TV channel subscribers. This happened during the 2nd quarter of 2014 and represents a milestone for pay TV services. (And yours truly predicted it would happen a year earlier, in a DD posted a few years back. Oh well, close enough for government work…)
The actual differential favoring broadband subscriptions was small, amounting to about 5,000 more broadband customers. The actual totals for cable TV systems (not including Wide Open West, an overbuilder) were 49,915,000 for broadband, and 49,910,000 for cable channel service. What’s more interesting is that thirteen largest pay TV providers in the US (about 95% of the market) lost about 300,000 net video subscribers in 2Q 2014, compared to a loss of about 350,000 video subscribers in 2Q 2013.
To offset that decline, the 17 largest pay TV providers added about 385,000 broadband customers during the same time period. Cable TV companies control the lion’s share of broadband service revenue and have a 59% market share vs. AT&T’s U-Verse and Verizon’s FiOS services. The latter companies stayed essentially flat in new subscribers as an almost equal number of customers dropped DSL service (627,000) compared to those who signed up for faster broadband (636,000).
For all cable and telcos that Leichtman surveyed, the total number of broadband subscribers was about 85 million. Of that total, industry giant Comcast claimed 21.27 million and #2 service provider Time Warner Cable accounted for 11.97 million. Among cable TV companies, those numbers represent 42% and 23% market shares, respectively. (Keep that in mind as you ponder the consequences of a potential Comcast – Time Warner merger.)
Now for some additional perspective: Netflix recently broke the 50 million worldwide subscriber mark, with 36 million of those subscribers located in the United States. That’s larger than any cable TV or telco subscriber base. In fact, it’s more than Comcast and Time Warner combined, and is indicative of the meteoric growth Netflix has experienced since it commenced a streaming service in 2007.
Combined with the shift toward consumption of digital media online vs. renting or buying optical discs (as outlined in my last Display Daily), it’s clear that broadband is becoming the more desirable service for many households. I’d also venture an educated guess that customers who subscribe only to broadband services tend to skew much younger (Millennials) while traditional cable TV channel subscribers skew older (Baby Boomers).
While AT&T and Verizon have a smaller share of the pie, it’s still a large enough slice to motivate Comcast, Time warner et al to keep increasing their broadband speeds and not lose any competitive edge. I am a Comcast subscriber and while writing this article, checked my download speeds using CNET’s Internet Speed Test. The result? 20 Mb/s downstream at 5 PM, which is a considerable boost from what I had three years ago. Could the fact that Verizon ran optical fiber through my front yard a few years ago have anything to do with it?
What does all of this mean, long term? First off, the preference for faster broadband vs. a pile of pay TV channels that most people never watch will continue to re-shape the business model for cable TV companies. (The median number of channels watched in pay TV households currently stands at 17.) Continued price increases and increasing reliance on wireless (and not wired) phone service will prompt more customers to drop so-called “triple play” offerings and just go with broadband (and probably use services like Ooma for VoIP calling).
Secondly, the sheer size of Netflix and its expanding category of both rental movies and original series provide even more impetus for disgruntled pay TV subscribers to dump costly channel packages and stream everything from the Big Red Father. Both House of Cards and Orange Is The New Black are wildly popular – there’s no reason to assume Netflix won’t hit a few more home runs. (And their success is prompting HBO to finally discuss publicly a subscription streaming service independent of cable TV delivery.)
Finally; it may take more time than I prognosticated several years ago, but cable TV companies and telcos will slowly and inevitably morph into something that looks more like your local electric company, providing metered high-speed broadband connections and letting customers decide what they want to watch, and when. The DVR may even pay the ultimate price and fall by the wayside in favor of streaming from cloud servers as this comes to pass.
Even the biggest fires start with a tiny spark, and most people don’t even notice trends until they are well under way. Ignore them at your peril…
Stuffing Your Brain With Video
- Published on Friday, 04 April 2014 13:13
- Pete Putman
- 0 Comments
A recent poll conducted by the Harris organization revealed that 81% of respondents engage in “binge viewing” on a regular basis – that is, watching two or more episodes of a TV program in a single sitting.
The survey, conducted in mid-March on behalf of Comcast, included over 2,000 adults nationwide and 200 viewers in each of the top ten media markets. Dallas, San Francisco, and Washington D.C. had the highest number of binge viewers among respondents (88%), according to a story on the Home Media web site.
Philadelphia, New York, Los Angeles, and Houston also placed well above 80%, with half of the Los Angeles respondents saying they “binge view” at least once a week. Typically, a viewer decides to check out a new series via pay TV on-demand or streaming from Netflix or Hulu, and settles down in a comfortable chair with food and drink.
I’ve engaged in binging in the past. After CBS began running older episodes of Dexter on late-night TV during the writer’s guild strike a few years back, I got hooked on the show and downloaded Season 2 in SD to my TiVo HD DVR. I followed that with a download of Season 3 in HD, and then began watching on a regular basis via Showtime.
My wife and I would knock off two or three episodes at a time, for that was as long as we could remain seated comfortably. (Dexter episodes, like other premium channel series, usually run about 50 – 52 minutes each without commercials.)
Binge viewing is actually nothing new. The major broadcast TV networks used to run miniseries programming on a regular basis, playing out all episodes of a program during the course of a week. Roots started it all back in 1977, but the difference then was the absence of DVRs – you couldn’t skip the commercials. Miniseries programming ran its course in the 1980s and was largely gone by the end of the 1990s.
To binge view, you need a Netflix, Hulu, iTunes, Google Play, or Amazon Prime account, and an Internet streaming connection (Roku, Apple TV, etc.) or a DVR connected to your pay TV service. And in recent years, we’ve seen DVRs become increasingly powerful: TiVo’s Roamio Plus system has six channels of recording and you can add TiVo Mini satellite terminals to record and watch in different rooms – each Mini takes over one of the DVRs and uses Wi-Fi to stream the program.
Many of us wonder (and rightly so) why we’d want to record six programs at once in the first place. With my circa-2006 TiVo, I can record two shows at once and if need be, use my TV’s antenna to watch a third. But there have been a few times when a third DVR would have been really handy.
Apparently, I’m a piker. Verizon just announced it will roll out a set-top box with the ability to record 12 shows at once, offering enough storage capacity for 200 hours of HD programming. (A good rule of thumb for determining DVR capacity is about 8 – 9 GB per hour for HD programs, so I’m guessing the solid state/hard drives used in the Verizon box, manufactured by Arris, have a maximum capacity of 2 terabytes.)
Memory is cheap. You can pick up 32 GB micro flash cards for about $16 these days and a quick check online shows 256 GB flash drives selling for less that $200 at Amazon. So that 2 TB drive doesn’t add an awful lot to the cost of the new Verizon set-top box. Until Verizon’s announcement, Cablevision customers had bragging rights for the “monster truck” of DVRs, with the ability to record ten channels at once.
Even so, you can pile up programs in a hurry this way, creating a formidable list of time-shifted programs that you may never get to. (We don’t always watch everything we record.) A study conducted by Motorola Mobility (now owned by Arris) one year ago revealed that at least 41% of the programs we record are never watched – yet we continue to schedule recordings and pile up TV shows in our DVRs and complain about not having enough recording space.
All of this begs the question: Why not just stream the programs when you want, and skip the recording process altogether? For binge viewing, this approach seems to make more sense, particularly since you can access a video stream from any platform – TV, phone, computer, or tablet.
The devil in the details is bandwidth. We never seem to have enough of it, and it is costly to expand. During my booth visits at the NAB Show next week, I’ll be paying particular attention to demonstrations of the new HEVC H.265 codec. H.265 promises to slices bit rates by half for any video content, meaning it should be possible to stream 1080p video at data rates in the range of 3 – 4 megabits per second (Mb/s), with 720p streams requiring as little as 1 – 2 Mb/s.
If H.265 really takes off (it’s already supported in some 2014 models of televisions), the balance could be tipped back towards streaming from cloud storage and away from DVRs – that is, if there is a way to retain the commercial-skipping feature that viewers love so much and which you can’t use with most Internet streams.
Perhaps the future model is an online cloud with a monthly subscription that lets you watch shows when you want, anywhere you want, commercial-free. (Oh wait, we’ve got that already – it’s called Netflix…)
A La Carte TV: No Blue Plate Special?
- Published on Friday, 13 December 2013 10:38
- Pete Putman
- 0 Comments
As the winds of change push more and more consumers away from conventional pay TV packages and toward streaming, “over the top” video, an interesting report has just arrived from Needham and Co. analyst Laura Martin.
The report, detailed in the Los Angeles Times, says that moving to an “a la carte” model for delivery of TV programming would result in higher costs for consumers and possibly knock the foundation out from under media companies.
According to Martin, a la carte delivery of pay TV channels would cause at least 124 smaller channels to disappear altogether, taking with them 1.4 million jobs and at least $45B in advertising.
Martin has calculated that a typical entertainment cable channel costs about $280 million per year to operate and requires (with current retransmission and rights fees) about 165,000 viewers annually just to break even. As a result, only 50 or so channels would be likely to survive out of the nearly 200 channels of programming currently available across a multitude of pay TV outlets.
Martin also notes that the typical subscriber watches perhaps 20 channels at most out of an average selection of 180 channels. I think that number is high; anecdotal evidence from friends and colleagues suggest the number is much lower and close to 10 – 15 channels.
The Needham study states that, in addition to the economic cost of a move to a la carte pay TV – pegged at $80B to $113B of “U.S. consumer value” – the costs to subscribe to existing channels would also increase, as they would inevitably lose subscribers as well.
I’ve previously detailed the growing calls for moving sports channels to their own tier, given the additional cost burden they add to the average monthly cable bill (about 10% to 12%). Not surprisingly, companies like Disney (ABC, ESPN), Fox, Comcast (NBC), and CBS oppose a move like this.
But the fact is; consumers are increasingly voting to switch off pay TV services and instead rely on the likes of Comcast and Time Warner to deliver broadband connectivity, and nothing more. This “cutting the cord” trend finally gained the recognition it deserved earlier this year when it was revealed that pay TV subscriptions went into decline for the first year ever.
Aereo, the disruptive “remote antenna” service that is rolling out nationwide and faces continued court challenges, charges about $10 to stream over-the-air broadcasts through the Internet to connected TVs, tablets, and phones, and is another approach to OTT delivery. Yesterday, the company petitioned the 2nd Circuit of the U.S. Court of Appeals for a Writ of Certiorari – in essence, forcing the issue to the Supreme Court for review.
If Aereo wins here – and it could – then the floodgates will surely open for other, competing OTT services that could cherry-pick channels and deliver them to the home in an attempt to lower monthly subscription costs. And even the cable companies are paying attention: Comcast announced in October a limited entry-level pay TV channel bundle that also includes fast Internet and HBO Go for about $60 – $70/month.
Even so, Netflix is still the largest pay TV service in the world, closing in on 30 million subscribers. And all you need to watch it is a fast Internet connection (if it’s fast enough, you might even be able to watch Netflix’ 4K movie service that is scheduled to roll out next year). In many markets, all you really need as a Roku or Apple TV box plus an antenna to get a nice selection of free and premium programming.
Granted, you won’t get as many sporting events, but studies have shown that only about 4% of pay TV subscribers watch sports channels on a regular basis to begin with. And many big-ticket events like NFL games, major league baseball, college football and basketball, and (of course) the Olympics are still available on broadcast TV channels.
While Martin’s study is interesting, it discounts the “free market” effect of consumers voting to save money and find other ways to access TV programming. There are always winners and losers in a free market system, and the fact is; pay TV subscriptions continue to rise annually at rates above inflation. Consequently, consumers are making necessary economic decisions about the price paid versus the value received, which is why interest in OTT video is slowly growing.
Starting next year, Canada will require pay TV services to “unbundle” TV channel packages as a way to rein in expensive monthly bills. So we have the perfect test lab north of the border to see just how a la carte pay TV will work, or won’t work. Stay tuned!
Faster Broadband Means Abandoning the Pay TV Ship
- Published on Tuesday, 04 June 2013 10:10
- Pete Putman
- 0 Comments
The concept of “watching television,” now over 70 years old, continues to evolve away from traditional, scheduled mass audience broadcasts through the ether to multi-channel delivery over wired connections. And the next stage in that evolutionary process is picking up steam.
That next stage would be cord-cutting, the practice of discontinuing linear pay TV program services in favor of Internet delivery of video in an “any time, any place, any viewing device” format. Pay TV service providers have long scoffed at the impact of cord-cutters, stating that as younger viewers mature and form families, they will return to traditional pay TV services with monthly subscription fees.
Well, the executives of pay TV service providers sound more and more like they’re whistling past the graveyard these days. In a recent story on the eMarketer Web site, 60% of U.S. respondents to a study conducted by market research firm AYTM stated that they still had a pay TV subscription to go along with their broadband service.
However, another 23% of Internet users said they had dropped their multi-channel video service, while 17% responded that they didn’t have any TV service at all. The combined 40% who either cut the cord or don’t watch pay TV is the highest number I’ve seen to date in surveys of cord-cutting trends.
A Leichtman Research Group study conducted back in March found that 27% of U.S. adults watched videos on non-TV devices every day and more than half of survey respondents did so on a weekly basis. AYTM’s study dug a bit further and discovered that found that 29% of respondents watched YouTube videos at least daily in May, and more than half of respondents did so more than once a week.
According to AYTM, over half of cable TV viewers said they watched less than half of the channels available via their subscription and 74% said they would prefer to choose individual channels rather than paying for a whole bundle. Until recently, there was no chance of a la carte channel pricing, but broadband video channels are now providing that option.
Not surprisingly, the most popular broadband video service is Netflix. Leichtman’s numbers showed that 22% of respondents stream Netflix content weekly, up from 4% in 2010. That is an incredible growth rate and the main reason why Netflix’ subscriber base is rapidly closing in on 30 million customers.
The controversial Aereo DTTB-to-Internet service, which recently launched in Boston, has plans to expand to several other cities this year. But the end game may not be broadcast TV redistribution after all.
According to a story on the Advanced Television Web site, Aereo boss Barry Diller’s game plan is to break up controlled, centralized video distribution systems (broadcast, cable, satellite, and fiber) and move all content to Internet delivery. Diller was quoted in the story as saying, “The more you can get all forms of video over Internet Protocol; the better off the world is going to be.”
Let’s ignore some of the logical and technical fallacies in that statement and see if this goal is even realistic. You may be surprised to learn that true high-speed broadband service is only available to a relatively small percentage of the population. An FCC study published last year said that less than 10% of U.S. households could count on sustained data rates of 2 – 3 megabits per second all day long.
Ironically, broadband speed enhancements are largely coming from pay TV system operators, who may be shooting themselves in the foot as they try to keep up with Verizon and Google Fiber: Speed up broadband service, and you speed up the exodus from pay TV subscriptions to Internet-only services as consumers try to cut their ever-escalating monthly bills.
Advanced codecs like H.265, which promises a 50% bit rate reduction over H.264 and which will start to roll out next year, will only hasten this process as consumers fully embrace “anytime, anywhere” Internet video. Abandon ship!
This article originally appeared on Display Daily.
TV, Over The Air and Everywhere!
- Published on Friday, 10 May 2013 14:35
- Pete Putman
- 0 Comments
In a Bloomberg story from May 3, Aereo chairman Chet Kanojia is calling the TV networks’ bluff. Aereo’s “streaming terrestrial broadcasts over the Internet, one antenna at a time” service, which is expanding to Boston, has stirred the ire of News Corporation (parent of Fox) and CBS.
Executives at both networks, having suffered two setbacks in court, have threatened to shut down their broadcasts completely and move to cable/satellite distribution exclusively if Aereo doesn’t relent and pay a retransmission fee to carry their New York City signals.
Kanojia was quoted in the article as saying, “The reality is, they want to get paid twice, and Aereo is just an excuse to articulate that business strategy. Good luck to them.” Practically speaking, CBS and Fox would face several logistical hurdles to pull this off, not the least of which would be answering to Congress if they did shut down their terrestrial transmitters, viewed by at least 15% of the American public.
Strangely enough, both network’s sugar daddy – the National Football League – has yet to be heard from in this kerfuffle. The NFL has repeatedly stated it does not want to sign rights deals that would restrict broadcasts of its games to pay TV channels, giving only Monday Night Football to ESPN. If CBS and Fox decided to pull their 8VSB power plugs, what would Roger Goodell say?
More importantly, how does Goodell feel about Aereo carrying NFL games for which they haven’t paid any rights? The NFL is scrupulous about enforcing so-called “public” performances of NFL games outside of bars, restaurants, and other places of public accommodation. They’ve even come after churches for hosting free Super Bowl parties in the past. So, where’s the indignation at Aereo?
I suppose if CBS and Fox went ahead with their threat, we could always fire up that ol’ Blu-ray player or smart TV function many of us don’t use. In a Home Media story also published on May 3, the Nielsen Company announced that Blu-ray Disc and transactional video-on-demand (VOD) “made significant gains as the primary means for consumers to acquire home entertainment movies and TV shows in 2012.”
According to Nielsen, 83.6% of consumers used a DVD or Blu-ray player to watch video at home, while 45.1% of the sample audience used video game console and 44.1% favored digital video recorders. The number of respondents who preferred streaming rental movies increased by 32% in the past six months of 2012 compared with the same time period in2011.
During the same interval, 29% more opted for transactional VOD to watch TV shows, 12% more preferred using Netflix to watch movies, and 24% more jumped on board subscription video-on-demand services to watch TV programs.
Intriguingly, 14% more survey respondents said they bought a Blu-ray movie over 2011, while 25% said they preferred Blu-ray for TV shows. (I assume that meant mostly boxed sets?) And you may be surprised to learn that adult female respondents who use the Internet are more likely to buy movies or TV shows on optical disc than adult male respondents.
The rise in popularity of streaming and transactional VOD may be due to the fact that of 56% of all households with broadband Internet access now have at least one TV set connected to the Internet. So says The Diffusion Group in a recent report. Streaming media players lead in the connected category for accessing streaming services, followed by video game consoles like the Xbox and PlayStation platforms. Connected Blu-ray players came in third, followed by smart TVs.
The NPD Group sees that pecking order changing soon, stating that by next year, connections through dedicated streaming boxes (Apple TV, Roku) and smart TVs will eclipse connections via Blu-ray players — another sign of people moving away from movies on discs. They also found that 40% of households with Internet-connected TVs watch videos from Netflix, 17% watch YouTube videos, and 11% watch movies and TV shows via Hulu.
So, is streaming the hot ticket? Not necessarily, unless you have the patience of a saint, says a story on the Streaming Media Blog Web site. Conviva, a company heavily involved in research and development of more effective and reliable streaming solutions, analyzed over 22 billion (yes, BILLION) video streams in 2012 with an eye toward reliability. These streams included Netflix, ESPN, HBO, Viacom, VEVO, MLB, USA, NBC, and others, said the story.
The result? 60% of all streams experienced quality degradation. Re-buffering affected 20.6% of streams interrupting programs, while 19.5% of the streams were impacted by slow video startup and 40% were plagued by grainy or low-resolution picture quality caused by low bit rates. (Check your home broadband speed sometime between 9 and 10 PM, using CNET’s Broadband Speed test. You may be shocked by the results!)
Drilling down, 60% of views were impacted by stalls, low resolution or buffering. 39.3% of streams were impacted by buffering and 4% (900 million streams) never started at all. And while many consumers are watching on a screen capable of displaying high-quality (HQ) video, 63% are viewing below HQ resolution anyway. Hate waiting in line? Conviva said that in 2012, a staggering 124.8 billion minutes were spent in buffering.
You know what? I think I’ll just go read a book. (No, make that an e-book. Wait, I have to download it first! Buffering…buffering…buffering…)