Online Pay TV Streaming Services Have Few Subscribers (Oct 4, 2017)
In a blog post I wrote in August about cord cutting in Q2 2017, I noted that there were likely around 3 million online pay TV streaming subscribers as of June, compared to around 4 million subscribers that had cut the traditional pay TV cord during the period those services had been available. The Information today reports that there are around 3.4 million of those online pay TV subscribers, including 2 million at Sling, half a million at AT&T’s DirecTV Now and slightly less than that at Sony’s PlayStation Vue, with just 200k at Hulu’s new live service, with a few more at YouTube. The Information uses this information to suggest that these services haven’t yet been all that popular, and that’s certainly one way to look at it, but given that until this year they mostly either came from unknown brands like Sling or were heavily limited in terms of their mainstream device support like PlayStation Vue, I’d bet we’ll see some faster growth going forward with the entry of Hulu and YouTube into the market, and I’d argue that AT&T’s rapid growth to the same scale as Sony in a much shorter period is evidence of that. With both Hulu and YouTube gearing up for big promotions in the coming weeks for their services, that growth will accelerate further. Meanwhile, cord cutting is also accelerating, and that acceleration is likely to be exacerbated by this growth in streaming options, leaving cable networks with fewer subscribers as users both cut and shave the cord. None of this is great news for the traditional TV industry.
via The Information
YouTube TV Will Advertise During World Series Games (Oct 3, 2017)
Google’s YouTube TV online pay TV streaming service will be a sponsor of this year’s baseball World Series, marking its first big ad push to gain new subscribers. That’s a reflection of the service’s broad reach now that it’s secured rights for local channels and launched in 49 of the 50 largest US markets, covering 2/3 of the US population. But it’s also something of a funny choice given that YouTube still doesn’t have the Turner channels, of which TBS carries the National League playoff games leading up to the World Series, though of course it’s possible that YouTube TV will have added those channels by the time baseball season rolls around again. In general, though, YouTube TV feels like it has very low awareness among cord cutters in general, in part because it has limited its rollout to areas where it can offer local channels, and hasn’t made a ton of noise about launching in new markets. With a big sponsorship like this, that could change, and it could quickly become one of the more popular pay TV streaming services out there, giving existing brands like Sling, DirecTV Now, PlayStation Vue, and others a run for their money.
Microsoft has today announced that it’s killing off its own streaming music service, Groove Music, and will be partnering with Spotify instead as the latter builds an app for Windows 10 and the Xbox One. This isn’t a huge surprise – Microsoft’s various incarnations of music streaming services have never done as well as its base of Windows users should have enabled them to – but it’s an admission of how completely Microsoft has failed when it comes to consumer content services, where it’s basically a non-player. That, in turn, is indicative of Microsoft’s continued challenges as a consumer ecosystem, especially relative to Amazon, Apple, Facebook, and Google, which dominate much of consumer time and content consumption. Microsoft’s consumer presence is largely limited to its de facto standard status as a maker of paid productivity software and increasingly free standalone productivity apps on mobile platforms, alongside its search and gaming platforms. None of that engenders much positive loyalty to Microsoft from consumers, and it generates very little revenue for the company on the consumer side. And yet it continues to try to straddle the consumer and enterprise worlds in a way few have ever managed to do successfully. Giving up in music is a logical and sensible step, but it’s certainly not going to get Microsoft any closer to cracking the consumer market. Meanwhile, it’s yet another channel – albeit likely not a big one – for Spotify to sign up more streaming music subscribers.
via The Verge
Amazon streamed the first of its Thursday Night Football games last night, and this Mashable piece does a good job summarizing the experience for fans (I had other commitments and only tuned in very briefly). It appears the stream mostly held up bar some audio hitches, which hasn’t always been the case for new streaming video services in their debuts but should be par for the course with a provider like Amazon that already has massive streaming scale. The most noteworthy thing about the broadcast is how little innovation Amazon built around it, with the only meaningful departure from a normal broadcast being an alternative audio feed with British commentators providing color for those more familiar with a version of football where people actually use their feet. Twitter, of course, had the rights last year, and at least tried to pair the video feed with relevant tweets, an integration that offered little value at the time, but one on which Twitter has iterated since with more recent live events. By contrast, there was seemingly nothing about last night’s broadcast which felt uniquely Amazon-like, while the ads suffered from the same problem as most streaming video: too much repetition. I’m hoping Amazon was playing things reasonably safe with its first broadcast and will do more interesting things later in the season, because at this rate the NFL might as well just license the streaming rights to traditional broadcasters too.
Amazon is adding voice control features to its mobile music apps for iOS and Android to give users more ways to control their music even when they’re not using an Echo or other Alexa-enabled device. That’s a logical place to extend Alexa functions given that music playback is a major use for voice speakers, and the symbiosis between the two has already made Amazon Music a much more widely used service over the last couple of years that it would have been otherwise. A recent survey I ran suggested that under 20% of US Prime subscribers use the music feature, but even at 20% that would be millions of users in the US alone, and I would guess many of those are likely Echo users. Adding a voice feature to a third party app still isn’t nearly as convenient as invoking it from an external button or a voice command from the lock screen, but for those committed to Amazon’s ecosystem, this is still a useful value-add. We’re going to see the connection between voice and music become considerably stronger over the next few years, with Apple’s entry into voice speakers through the HomePod as well as Sonos’s announcement next week. A big question is whether voice becomes an important way to drive playback on mobile as well as in the home – voice assistant use on mobile remains fairly low overall and high mostly in specific circumstances like while driving, but that could change as assistants get more sophisticated in understanding commands relating to music, something Apple’s clearly been working on lately.
FX, a division of 21st Century Fox, today announced a broadening of its FX+ add-on service for pay TV operators to Cox Communications’ pay TV subscribers, in addition to its existing partnership with Comcast. But in some ways more interesting were comments its head made about the network’s future approach to licensing content. In essence, FX has had to pay a lot of money to undo past deals which gave various other entities rights to its content so that it could put that content back on its own streaming service, and he says he doesn’t plan to make that mistake again. Netflix was singled out in particular as a streaming service FX had licensed content to in the past but wouldn’t again, and Netflix’s shares were down around 5% today seemingly as a result. All of this of course validates Netflix’s decision a number of years ago to invest much more heavily in its own original content, which has three major drivers of which hedging against such decisions was one of the big ones. Netflix needed to control its own destiny when it came to content, and there was always the risk that it would lose its licensing deals as it increased in popularity and power. I think the 5% drop based on comments from one content owner is likely overblown – there certainly wasn’t such a strong reaction to Disney’s recent pullback, at least not right away – and in general Netflix is in pretty good shape content-wise and retains some of FX’s most popular shows for now. FX, meanwhile is pursuing a very limited strategy with its add-on network, limiting it to pay TV subscribers rather than going after cord cutters, either independently or through Amazon’s powerful Channels product, which has driven lots of subscribers for similar packages. That feels like a mistake, and something FX should rectify sooner rather than later if it wants to reach a considerably larger potential base of customers.
It’s been increasingly clear in recent months that Spotify has big ambitions for its advertising operation, even going so far as to pitch itself as a threat to Google and Facebook in time. One thing essentially every big ad platform has in common, though, is self-serve tools to enable the long tail of small and medium-sized businesses to buy ads, and that’s an area Spotify hasn’t emphasized enormously just yet. One big challenge is that audio ads are rather tougher to create for small businesses than display ads, and that’s one of the things Spotify is now looking to solve with what it calls the Spotify Ad Studio. The tool will allow advertisers to upload a script and choose music and other options while text-to-speech technology creates the voiceover. That sounds like it could be terrible if it’s anything like other robotic sounding TTS software, but the key is that it dramatically expands the range of advertisers that could run audio ads on Spotify, which now has a large and rapidly growing audience in the US. Given how poorly ad-based streaming music is monetized today, anything which boosts the demand side of the ad market should help raise prices and therefore improve the overall economics, though it’s never likely to rival paid streaming in terms of revenue per user.
The Recording Industry Association of America (RIAA) today issued its report for the industry’s performance in the first half of this year, and it showed a by now familiar trend: stronger growth driven by rapid growth in streaming. That growth far more than offset the decline in both physical and download sales, with physical sales now just 16% of total revenues compared to 31% back in the first half of 2013. More importantly, downloads have dropped from 44% of industry revenue to just 18%, barely ahead of physical sales, while streaming is now 58% of total revenue. As always, though, it’s worth noting that it’s really subscription streaming that’s driving numbers up, with 61% year on year growth in that category and 74% of total streaming revenues, with just 12% coming from ad-based streaming despite the much larger user numbers. The RIAA says there were an average of 30 million paid subscribers in the US in the first six months of the year, up from 20 million in the same period last year. In its report (linked below) there’s the usual griping about that ad-based revenue stream, a stream the industry continues to go along with but moan about at the same time because it knows it can’t really live without it, even though paid streaming is far more lucrative. In the paid streaming department, the US continues to be quite some distance ahead of most of the rest of the world. A recent survey I ran showed that Spotify and Apple Music alone had captured 23% of online adults as customers between them.
via RIAA (PDF)
Pandora has been testing a new ad model for some time and is now launching it broadly. The model offers users an opportunity to trade watching a video ad for extra skips and playbacks, both of which are normally limited under its ad-based option. That’s a familiar model from the mobile gaming market, where games often offer users additional lives or other in-game features in return for watching video ads, although anecdotal evidence from my own family suggests that those ads aren’t really being “watched” in any meaningful way – they basically insert a 30-second delay in game play during which the player does something else. Pandora says a high percentage – 42% – of its active user base has signed up for this program, which is called Video Plus, so that’s a good start, but the key metrics here aren’t the number of signups or even the number of times people agree to trade an ad view for in-app functionality, but brand recall and other more traditional ad metrics which would demonstrate that users are actually watching and taking in the content of video ads. There’s no mention of any of that in the Adweek article linked below, and whether this new model ultimately succeeds or fails will depend entirely on whether brands actually see a decent return on the investment.
Roku today made public its S-1 filing with the SEC as the first step towards a long-awaited IPO. I’ve been tweeting charts and nuggets from the filing for the last couple of hours in this thread, but I’ll provide a brief summary here. The long and the short of it is that Roku is growing at a decent clip, is currently unprofitable with little sign of that changing, and is in the midst of a big shift in its business model. Whereas for most of its history selling its streaming boxes has been its core revenue stream, it’s recently added a platform licensing business, but that’s not actually where its new revenue streams are coming from. Rather, it licenses its platform very cheaply and monetizes usage by taking a cut of certain subscriptions sold through its platform and serving up ads. It’s the latter which is a surprisingly important part of its business model (though there have been signs of this shift) and which is a major focus of much of the text in the S-1 filing. Last year, this advertising and subscription revenue share was nearly $50 million out of its $400 million in total revenue, and half of its platform revenue, and that accounted for essentially all of its growth in 2016. In that sense, though Roku on paper looks like principally a hardware company, it’s in some ways more like a Facebook or a Google – a company that collects millions of data points on its customers (18TB of uncompressed data per day) and will use that to target advertising. In that sense, Roku is an unusual player in the streaming space, given how many modern streaming services eschew advertising, but sees itself as a key beneficiary of the move of TV advertising dollars from traditional channels to streaming. This is going to be a fascinating IPO to watch and I’ll have plenty more analysis on Roku in the next few days.
Despite SoundCloud’s repeated protestations that it’s not on the verge of going under, the scuttlebutt has been that it is indeed just a few months from running out of cash, and two recent new investors have been reported as potential saviors: Singapore’s Temasek Holdings and the Raine Group. SoundCloud is now reportedly communicating with existing investors and asking them to back the rescue effort by these two new backers as a last-ditch attempt to avoid having to wind down the business. Some of the numbers involved are a bit crazy – the new investment is $169.5 million at a $150 million pre-money enterprise valuation and some existing shareholders will see their liquidity preference slashed by 40%. But all this would apparently put the company on a much sounder financial footing and allow it to consider searching for a way out of its current predicament. I’m still bearish that there’s any way to really turn SoundCloud around given its history and what’s happened in the industry since it experienced its meteoric rise, and imagine the most likely long-term outcome is still an acquisition for intellectual property and possibly customer data. Update: Recode is reporting that the CEO will be replaced and kicked upstairs to the board chair role in favor of former Vimeo CEO Kerry Trainor if the deal goes through, which now seems very likely based on other reporting later in the day.