Posts Tagged ‘Streaming Video’

Selling TV By The Byte

A recent article on the Fierce Video Web site suggests that smaller cable TV system operators like Cable One and Mediacom might be better advised to let cord-cutters walk away and switch their service offerings toward straight broadband access. The two companies have lost 10.3% and 5.5% of their subscribers Y-Y and in fact, Cable One has stated that they lose money on every pay TV subscriber now.

Given the increasing number of television homes that access premium content via streaming (and that includes yours truly), it’s looking like cable MSOs might be better off simply providing fast Internet service at multiple tiers, letting consumers decide what do with their access.

This model isn’t unlike that of your local electric utility – they simply charge by the kilowatt hour – or even your mobile phone service provider, who stopped charging for minutes and texting and now bills you for how many gigabytes of data you use every month.

What about the big guys, like Comcast, Charter, Cox, and AT&T? In the article, analyst Craig Moffett of research firm MoffetNathanson states that none of these companies are likely to give up on pay TV bundles any time soon, but “…If Verizon Fios and Cox—we suspect they would likely be the first two—and then later Altice and Charter, decide to stop even trying to stem the bleeding, well … then the bleeding will get worse.” Moffett goes on to say that Comcast would probably be the last MSO to drop pay TV packages because of its ownership of NBC and Universal.

Things are even worse in the satellite TV business. Moffett estimates that Dish Network, which is pushing Sling TV as an alternative to Dish, is losing almost 11% of its subscribers Y-Y. And AT&T is trying to switch DirecTV customers to cable and broadband delivery.

From my perspective, moving away from expensive TV bundles, which are largely underutilized by customers (the average pay TV customer watches 17 channels at most) and not popular at all, to a model of delivering megabytes and ultimately gigabytes of data, makes a lot more sense and is considerably easier to service and maintain.

Just about every TV you can buy today comes with some sort of on-board intelligence, an operating system, and an Internet connection (wired or wireless). Content providers Amazon, Hulu, and Netflix have set up large server farms across the country to stream content more reliably to the home, and major cable companies like Comcast have added Netflix and Amazon Prime apps to their IT-based sidecar boxes.

So, the groundwork is being laid as I write this to adopt a simple “pay as you go” broadband delivery system. Will it happen soon? My guess is that you’ll see such a transition within the next decade, especially with companies like Apple getting into content creation and delivery and more customers dropping pay TV bundles in favor of streaming.

Moffatt’s firm states that the cost of delivering video content would likely increase and prices for fast broadband prices would also increase as fewer subscribers opt for double-play and triple-play packages. However, that would improve operating margins since pay TV is more expensive to operate than broadband.

My own experience with Comcast is that they’ve set a target dollar figure they want to get from households each month, and they apply more aggressive discounts to bigger bundles (and fewer discounts to smaller bundles) to achieve that number, which appears to be north of $200/month before taxes and fees. I would suspect that target would hold with cord-cutting households that opt for a “single play” of fast broadband.

It’s no wonder that Comcast and other MSOs are venturing into services like home security and mobile phone service to try and prop up revenues, de-emphasizing video. Even Comcast Cable CEO Dave Watson was quoted in the article as saying “…his company’s strategy is centered on broadband and packaging in video only where it makes sense.”

UltraViolet: Gone, And Best Forgotten

As you can imagine, I get endless emails every day from PR agencies, manufacturers, trade shows, and technology research institutes. It takes a while to clear out all of that stuff and I usually do a quick scan through my Web-based email to save the few missives worthy of attention, deleting the rest.

On January 31, I almost deleted an email that at first appeared to be spam. But something about the header caught my eye: It appeared that the online movie and TV content locker UltraViolet was shutting its doors.

Sure enough, when I downloaded and read the email, that’s exactly what was happening. Here’s a quotation from the first few lines:

“We are writing to inform you that the UltraViolet service is planning to shut down on July 31, 2019. You are receiving this message because you signed up for an UltraViolet Library or for a service that created an UltraViolet Library for you.”

For those readers not familiar with the service, UltraViolet started nearly a decade ago as a way for people to secure unlimited access to digital copies movies online after purchasing physical DVD and Blu-ray discs. You entered a special code on the Blu-ray/DVD box in your UltraViolet account, and voila – you could then watch a digital copy anywhere you had an Internet connection.

It sounded like a good idea at the time, except that the process of registering discs and then logging in and accessing your digital copies was so convoluted that most people just gave up and moved entirely to streaming services like Amazon Prime and Netflix. UltraViolet was further hampered by lacking any movies from Disney, which was planning to roll out its own streaming service.

That service eventually became Movies Anywhere, which is now supported by Universal, WB, Sony Pictures and 20th Century Fox. And last year, 20th Century Fox, Universal Pictures and Lionsgate stopped distributing new-release movies on UltraViolet.

Practically speaking, there are very few movies I even want to have on Blu-ray discs these days. I think the last one I bought was the original Guardians of the Galaxy. More recently, I’ve downloaded movies from Google Play to my tablet and Roku receiver, the most recent being “First Reformed” (which should have gotten a best picture and best actor nomination, by the way).

For that matter, I hardly watch Blu-ray discs anymore, even though I have a pretty good-sized library of them. It’s just so much easier to stream movies from Netflix and Amazon Prime over my fast Comcast broadband connection, and the picture quality is impressive on the 92-inch screen in my rarely-used home theater. (Yeah, I’m getting lazy these days…)

The UltraViolet email advises customers to link their accounts to another retailer (presumably Amazon, Google, or iTunes) before they turn the lights out on July 31 of this year. But so what? I still have the original Blu-ray discs and quite a few players sitting around that I never use, so if I REALLY want to watch Men In Black II or Guardians again, I can just load up the disc and hit play.

It’s probably a sad commentary that so little coverage was provided for the shutdown. Variety was one of the first outlets to report it and TechCrunch had a story not long after. That’s about it. My guess is, despite UltraViolet’s claim that they had over 30 million customers, most of those customers registered accounts a long time ago and have since moved on to other streaming and download services.

Gone, and best forgotten…

By The Numbers – Or Maybe Not

Several news stories crossed my desk this morning that are each worth closer scrutiny. The first one comes from Reuters and says that Dish Network’s quarterly revenue missed forecasts as more customers disconnected their satellite antennas.

Dish stated that they had lost 23,000 subscribers on a net basis for the quarter ending September 30. In the same time period a year earlier, the net loss was 12,000 subs, almost half as many. And apparently the company’s new $20/month streaming service, Sling TV, isn’t proving to be as popular as expected.

The combination of DirecTV with AT&T also puts Dish at a competitive advantage, since AT&T can offer bundles of service (including mobile telephone) at competitive prices. Satellite TV has always been at a disadvantage to cable and fiber optic services due to issues with reception during inclement weather and the inability of some home and apartment sites to “see” the satellites, ruling out installations.

In my neighborhood, several folks canceled service from Comcast in recent years and picked up Dish and DirecTV as a cost-saving measure, only to drop both when Verizon laid fiber optic cables for FiOS and offered some low-cost, triple-play bundles that Dish and DirecTV couldn’t beat. (Internet service via satellite isn’t exactly fast and reliable.)

Right now, Dish’s most valuable asset is the UHF frequency spectrum acquired in FCC auctions- but it looks like that spectrum may go back for re-auction next February. And the DirecTV / AT&T juggernaut may force Dish into a merger to stay alive – or perhaps an outright sale.

So things aren’t looking too good for pay TV service providers? Not according to TDG Research. In a story on the Multichannel News site, TDG claims that “the percentage of adult broadband users (ADUs) who were moderately or highly likely to cancel their pay TV service in the next six months dropped 20% since last year.”

TDG went on to say that the group of consumers saying they “definitely will cancel” their pay TV service in the next six months has been cut in half — down from 2.9% in early 2014 to 1.4% in early 2015.” They cite the fact that Comcast only lost 48,000 video subscribers in Q3 2015, as opposed to 81,000 in the same quarter a year ago.

The problem with opinion surveys vs. market trends is that opinions can change abruptly. After a series of mishaps with Comcast’s Xfinity platform earlier this year (and well-documented on this site), I was about ready to throw in the towel and switch over to FiOS myself! But after my original complaint was resolved (replacing the buried cable from the drop to my house) and I wound up with a new modem (802.11ac 2.4/5 GHz), plus much faster Internet speeds and new Xfinity set-top boxes, I decided to stay with the devil I know – for now.

So the TDG data may reflect consumer preferences right now, but what will actually happen remains to be seen when the next set of quarterly data becomes available in January or February of next year.

There’s no arguing with numbers, however. From the Digital Entertainment Group (DEG) comes a report that consumers spent more money on digital video downloads and video streaming through the first nine months of 2015 than on rentals and purchases of DVDs and Blu-ray discs.

According to a story on the TWICE Web site, consumers forked over almost $6.5 billion on downloaded and streamed videos. The “digital” category includes subscription streaming and video-on-demand (VOD), plus digital downloads such as movies to tablets and smartphones. (Like I do when I fly cross-country).

In contrast, the dollar amount spent on rentals and purchases of optical disc media amounted to $6.3 billion – close, but still in 2nd place. From January through September, revenue from downloads and streaming rose by almost 16% Y-Y, while revenue from DVD/BD purchases declined by 14% and disc rentals dropped 7.1%.

Within the streaming/downloads category, the lion’s share of revenue (3.65B, or 57%) went to subscription streaming, while digital downloads captured 21% or $1.34B. The rest went to subscription video-on-demand ($1.41B, or 22%).

What’s interesting is that in 2014, the DEG states that “consumers spent more on physical media, about $6.93 billion, compared with $7.53 billion spent on digital downloads and streaming.” Overall, that means that in 2014, consumers whipped out their credit cards to the tune of $14.46B, or about $1.2B per month. Through September of 2015, that number is $12.74B total, or $1.42B per month – an increase of about 15%.

So there you have it. Cord-cutting (or “dish dumping”) is on the rise. Or maybe it isn’t, if we are to believe the preferences of consumers. Or maybe it’s the HDMI cable we’re cutting, preferring to stream and download videos as opposed to playing them back from optical discs.

One statistic I wish the DEG would delve deeper into concerns the installed base of Blu-ray players – almost 80 million households own one now, according to DEG. But how often are they used for playing movies, as opposed to streaming movies and TV shows from Netflix, Hulu, Amazon Prime, and other services? We just don’t know.

 

DEG: Here’s The Rest of the Story

The headlines sure look impressive: “Overall Consumer Spending on Home Entertainment Up 2 Percent in First Half of 2013!” “Blu-ray Disc Sales Up 15 Percent Over Mid-Year 2012!” “Electronic Sell-Through Surges 50 Percent!”

Yes, it’s the latest Home Entertainment Report from the Digital Entertainment Group, the industry association that promotes the Blu-ray disc format, and to a lesser degree digital downloads and Internet streaming of movies and TV shows.

The DEG’s original mission (and its predecessor’s, the Blu-ray Disc Association) was to push Blu-ray into every home as a replacement for the standard-definition red laser DVD. But a funny thing happened along the way while the Blu-ray and HD-DVD camps were slugging it out: Consumers discovered streaming, specifically from Netflix. And many of those same consumers decided they didn’t need an optical disc format anymore.

DVD sales began to tank in 2005, and DVD rentals starting falling off a few years later. The popularity of video-on-demand (streaming, downloads) grew so quickly that it surpassed the revenue from optical disc sales and rentals in 2011, and quite frankly, very few people saw that coming.

The problem with streaming and digital downloads is that they’re not as profitable as selling and renting optical discs, or “packaged media” as Hollywood calls them. Blockbuster found this out the hard way, as did Hollywood Video a few years earlier. And 3D did absolutely squat to boost the fortunes of the Blu-ray format after all of the hullaballoo died down.

It would appear that consumers who want to watch movies have decided they don’t need an actual physical copy sitting on their shelf. All they need is “anytime, anywhere” access to that movie. The net result is $4 and $5 rentals of Blu-ray quality movies through iTunes, Nook, Amazon, and other online stores…and not sales of $20 and $25 Blu-ray combo packs at Best Buy, Wal-Mart, and Target.

So what’s with the skepticism? you may ask, given the upbeat headlines from DEG. Hmmm…If you scan the press release in more detail, you’ll find these gems hidden within:

* Overall DVD and Blu-ray disc sales fell 4.7% Y-Y to nearly $3.6 billion in the first half of 2013.

* Overall rental revenue, including digital, fell more than 5.5% Y-Y to nearly $3.1 billion.

* DVD/BD rentals from physical stores like Blockbuster fell 12.6% Y-Y to $522 million.

* Subscription-based DVD/BD rental revenue declined nearly 21% Y-Y to $531 million.

* Revenue from DVD/BD kiosks fell nearly 4% Y-Y to $955 million.

Notice the underlined words “fell” and “declined.” And how they all apply to optical disc formats. These trends haven’t changed significantly in the past eight years for DVDs, and an uptick in revenue from the sale of Blu-ray movies (usually in combo packs with DVDs and a digital copy) to the tune of 15% so far this year hasn’t been enough to offset any of these trends.

DEG, who has been known in the past to cherry-pick the data but not fill in the blanks, also stated that “Consumers bought more than five million Blu-ray compatible devices during the first six months. There are now more than 61 million Blu-ray players in U.S. homes.”

An interesting data set, but the big follow-up question is; how exactly are those “Blu-ray compatible devices and players” being used? Keep in mind that iPads, Galaxys, Kindles, and Nooks are in one sense “Blu-ray compatible devices” in that they can play back 1080p movies with 8-bit color. As for those 61 million Blu-ray players – are they functioning more often than not (as my experience tells me) as low-cost streaming media boxes, with the occasional BD loaded up now and then? DEG doesn’t say, so the number hasn’t any real significance right now.

Well, what was the good news, if any? For starters, video-on-demand services were up 6.9% Y-Y, earning nearly $1.1B.  And subscription-based streaming (read: Netflix) saw a gain of 32% Y-Y, generating about $1.5B in cold hard cash for studios and media conglomerates. And total home entertainment spending in the USA hit $4.63B for the first six months of this year, up 3% Y-Y.

In other words; streaming and downloads are in, physical disc rentals are on the way out. And to some degree, so are physical disc purchases. And that’s a perfectly logical development: If you can access any movie any time you want on any device, why on earth would you buy a physical copy of it that you might watch only once or twice?

As has been pointed out to me on more than one occasion, streaming doesn’t provide anywhere near the quality of a blue laser optical disc. True, and you also don’t see “buffering” on-screen messages or suffer through locked-up I-frames when watching a Blu-ray disc, unless your BD player has a problem.

Lately, I’ve been renting movies in HD resolution (1080p/60) and downloading (not streaming) them to my Nook HD+. I can watch them on a plane, anywhere in my house, or even on my family room TV or through my home theater projection system simply by plugging in an HDMI cable.  That’s pretty doggone convenient, and easy to carry around.

New releases usually command a $4 to $6 rental fee at the Nook store and I have 30 days to watch any movie after paying for it. I downloaded two movies for a recent flight to Italy (Amelia and The Great and Powerful Oz; I passed on Flight for obvious reasons!) and while I enjoyed both of them, I have no desire to own either movie or rent them again. I suspect I’m not unlike many consumers in feeling that way.

Long story short; while the DEG headlines raised my eyebrows, the true story behind the numbers did not. DEG’s data clearly indicates that the trend away from physical media continues to accelerate, albeit slowly. What that means for the BD format in the near future is uncertain, particularly when MPEG4 H.265 (HEVC) is implemented in a couple of years and we will be able to stream 1080p/60 content at 2-3 Mb/s – slow enough for the average cable Internet connection.

And that’s the rest of the story…

When a Butterfly Flaps Its Wings – Pete Putman

Two weeks ago, I wrote about the decline in television sales and how manufacturers are scratching their heads trying to figure out a way to kick-start consumer interest and get those cash registers jingling again, as the all-important 2012 holiday selling season is barely two months away.

 

Misery loves company. Hollywood is in a similar pickle as declining sales of movies on optical disc and increasing use of streaming video-on-demand (SVOD) are challenging revenue projections, particularly for ‘weak’ theatrical releases that could previously count on back-end physical media sales to make up revenue.

 

The steady decline in optical disc sales and rentals since 2005 has been well-documented by myself and other industry analysts, and has been tracked and confirmed by a number or research organizations. While it is true that Blu-ray disc sales continue to grow, they haven’t made up for the drop-off in DVD sales and rentals – and are unlikely ever to do so.

 

What’s ‘hot’ these days is streaming and playback of movie and TV show files on portable devices. On a flight back from California last week, the passenger next to me enjoyed Battleship on an iPad, downloaded from iTunes. While making a trip to the restroom, I noticed at least ten other passengers watching video on tablets, e-readers, and even a smart phone.

 

In contrast, just about every laptop I spotted appeared to be open to a word processor or spreadsheet program. I had my Toshiba laptop with me on the flight, along with a couple of Blu-ray movies, but the combination of a tight middle seat and a very large passenger to my right made using my laptop difficult, so I opted to read an eBook on my Nook Simple Touch instead.

 

But I digress. In a recent Home Media article, Viacom CEO Philipe Dauman was quoted as saying that the continuing decline in optical disc sales has led Hollywood to change their economic model, forcing producers, directors, and actors to share in the risk of a movie and reap any rewards at the back end instead of getting a large upfront payment.

 

“We don’t mind sharing the upside [of a movie with talent] as long as we don’t have a downside, or we have a sharing of that risk,” said Dauman. “Digital revenues are growing, but it’s not a perfect transference [with disc sales] at this point.” As a result, Viacom is one of many content owners seeking to make up revenue by licensing programming to SVOD companies Netflix and Amazon Prime Instant Video.

 

Some movies are produced exclusively for DVD and Blu-ray sales. This is a big part of Disney’s revenue stream, as they are the largest producer of packaged media. But Disney has already taken steps to move to a SVOD model, ramping up a digital delivery portal two years ago to transition away from physical media for its ‘direct to disc’ releases.

 

The explosive growth of packaged media in the 1980s and 1990s – something Hollywood vigorously fought against at the start – turned out to be a very profitable business in the end, and strong sales on VHS and DVD after a theatrical run made it possible to ‘greenlight’ some movies that otherwise would have been major box office flops. (The Austin Powers series is a good example.)

 

But the butterfly started flapping its wings about seven years ago with the first stirrings of streaming video (YouTube). That gentle breeze has now turned into a storm, with movies and TV shows watched across an almost bewildering variety of platforms.

 

And that storm is impacting TV sales as well. With new e-readers from Amazon and the latest iPhone now coming to store shelves, buying a new TV or upgrading an older model isn’t at the top of nearly as many holiday shopping lists as it would have been two years ago.

 

Even the digital video recorder – an integral part of the transition to digital TV a decade ago – is threatened by SVOD. A recent Advertising Age article points out that media companies and ad buyers are anticipating a day in the near future where demand for ‘anywhere, anytime’ playback will displace the ability to skip advertising.

 

According to Alan Wurtzel of NBC Universal, “Video on demand is going to play a major role in how people consume video going forward.” Subscribers to  SVOD services can already watch recent episodes from major broadcast networks and a few pay TV channels ‘on demand’ on almost any device, but they give up the ability to skip advertisements.

 

Not surprisingly; TiVo, the company that basically invented the DVR, is in the thick of this transition. The article quoted Tara Maitra, senior vice president for TiVo’s content and media sales and operations, as saying that consumers really don’t care how they access programming as long as it is on their own terms.

 

What does all of this portend for the display industry? Simply that consumer demand, going forward, won’t be for big, cheap, and thin televisions stuffed with apps and other goodies. No; it will be for small, ‘go anywhere’ displays that offer higher resolution, brighter screens, improved viewing angles, and enhanced sound. And consumers will demand improved wireless access with higher broadband speeds to fully enjoy movies and TV shows, served up from ‘the cloud.’ (Can’t have a storm without clouds!)

 

It all starts when a butterfly flaps its wings.

 

(This article originally appeared on Display Central on Monday, September 24.)