Dish Allows Alexa Voice Control of Set Top Boxes (May 22, 2017)
I’ve been watching the news from the recent TV upfronts and waiting for the definitive article that summarizes what’s been said and done, and while I’m not convinced this is it, it does a good job of characterizing the basic trends at issue. The two big underlying trends are the continuing decline of live linear viewing of traditional TV and the massive growth of online advertising, which could be presumed to have put an enormous dent in TV ad spending but actually haven’t. However, the TV companies still see online advertising platforms as a big threat, and spent an unusual amount of time during the upfronts trashing Facebook and Google (though mostly not by name) while talking up their own massive reach. At the same time, though, these companies are increasingly mimicking the very same things that make Facebook and Google’s ad platforms attractive: detailed targeting of ads and tracking of what happens after viewers see them. At the same time, the TV networks seem somewhat lost on the content side, rebooting old shows and formats, latching onto new gimmicks like live musicals, and generally showing a lack of imagination in protecting and rejuvenating their brands. Meanwhile, the strongest audiences on traditional TV are live sports fans and older generations watching procedural franchises like CSI and NCIS. And of course the big online platforms are investing in lots of both traditional sports content and some new formats of their own. Therefore, though each side would like to paint itself as providing unique value, the two are increasing converging on a similar set of content and ad capabilities, while the audience continues to shift from traditional linear TV to a host of online and streaming alternatives, which will inevitably pull ad dollars that way too.
via LA Times
Amazon Video App May Finally Come to Apple TV in Q3 (May 5, 2017)
HBO Will Pull Shows from Amazon Prime After Next Year (May 3, 2017)
YouTube and Netflix Dominate Teens’ Video Viewing (May 2, 2017)
★ Twitter Announces a Dozen New Video Deals (May 1, 2017)
Comcast reported Q1 2017 results this morning, and in keeping with past trends, the numbers were generally good. It saw another rise in TV subscribers as the cable companies continue to take share from the telcos, despite the overall trend of cord cutting, and it also saw strong growth in broadband subscribers, which now significantly outnumber its TV subs. Interestingly, it also began placing more emphasis on its home automation and security business this quarter, and reported that it has almost a million subscribers, or around 4% of its broadband base. The big theme that’s emerging from this quarter’s earnings reports from these providers is bundling – Comcast continues to see the percentage of customers taking more than one product rise over time (it’s now reached 71%), while AT&T suffered precisely because it can’t offer broadband/TV bundles to DirecTV customers. The wireless-TV bundles it can offer aren’t the ones consumers are looking for, which makes Comcast’s push into wireless somewhat questionable too. At NBCU, we’re seeing many of the same trends we’ve seen before too – subscriber numbers and viewing are down, but contractual rate increases with MVPDs are driving revenue growth anyway (of course those rate increases are rising costs on the cable side). Ad revenue was down in the cable networks business but up slightly in the broadcast business despite lower ratings because prices have been rising, though my analysis across the TV industry suggests the rate of price increases is slowing dramatically. Comcast continues to be a powerhouse across the categories where it competes (which also includes movies through Universal) but it’s facing some significant headwinds in the form of cord cutting, ratings declines, and rising content costs, which are going to take an increasing toll over the long term.
Note: you can see all my earnings posts or all Q1 2017 earnings posts specifically by clicking on the relevant tags below.
ESPN Lays Off 100 On-Air Personalities (Apr 26, 2017)
★ AT&T Reports TV and Wireless Subscriber Losses in Q1 2017 (Apr 25, 2017)
AT&T reported Q1 2017 results today, and it looks to have been a grim quarter across its consumer business. It reported net adds of 2.1 million, but in reality saw a drop of 641k subscribers in the quarter due to the disconnection of 2.3 million subscribers as it decommissioned its 2G network and a removal of 400k reseller subs due to an unspecified “true-up” of its reporting. On the TV side, AT&T lost a total of 233k subscribers, a worsening of the past trend, which had been close to zero on a net basis between significant U-verse losses and good DirecTV gains. Those losses mostly came from those customers taking standalone DirecTV service without a bundle, and that’s worrying because although AT&T has been offering wireless-TV bundles since the merger closed, it can’t offer a national broadband-TV bundle, which is the one consumers mostly care about. That, in turn, is going to make it hard to turn that trend around, especially given that AT&T is already offering strong incentives for customers to bundle TV with wireless, including a $25 bill discount for TV and free HBO.
On the wireless side, connected devices (such as connected cars) continue to be the salvation for its overall subscriber numbers, because its postpaid business actually shrank in the quarter for the first time ever (as did Verizon’s), while its reseller numbers dropped like T-Mobile’s (possibly because big MVNO Tracfone disconnected 1.3m subs in the quarter). The re-introduction of unlimited plans was, however, a hit, with around 4.4 million new subscribers since the change, a more than 50% increase in that base. However, AT&T characterized its position now as being more or less the same competitively as at the beginning of the quarter, suggesting it doesn’t see any kind of permanent lift from the change. Financially, things overall were a little better – AT&T has been holding costs down in wireless which has allowed its margins to expand despite revenue challenges, and although equipment revenue is dropping rapidly due to much lower phone upgrade rates, that’s effectively zero-margin revenue anyway.
NBC Lines Up Affiliates for Streaming Distribution Deals (Apr 13, 2017)
This is another example of Roku’s inevitable move into gathering more data from its devices and using those to both serve up recommendations and potentially help target advertising. Last week, I covered a piece about Roku offering to target specific demographics among its user base, and this week Roku says it’s going to track the video its users watch through the inputs to its smart TVs and offer up recommendations. Presumably, it’ll also use that data to help build profiles on users for those ad offerings. Though this article suggests it will only use this technology to track what users are watching through inputs, it can of course already see what users are watching through its smart TV interface already, so users shouldn’t assume that that activity won’t be tracked too (and likely already has been for some time). As we’ve already seen with Vizio, this kind of tracking is often non-transparent to users, as is the ability to opt out, so Roku is going down a somewhat risky path here, and one which will likely set it apart from Apple, which uses any tracking exclusively for recommendations and not for advertising purposes (Amazon’s stance here is less clear as it builds up its ad business).
I wrote a piece last week for Techpinions about the fragmentation in the TV market as everyone launches their own streaming services, and here comes yet another example of that. It sounds like Comcast is working on a service that would combine content from NBC and the NBCU cable networks into a single subscription package, although the conditions on the Comcast-NBCU merger make it unlikely that it will debut in the next 18 months or so. But we’ve already seen the premium cable networks (HBO, Starz, and Showtime) go over-the-top, along with broadcaster CBS and NBC itself with a comedy subscription service called Seeso. As cord cutting and cord shaving eat into cable network subscriber numbers, we’re going to see lots more of this direct-to-consumer stuff. In principle, that sounds great for consumers, who will now be able to pick and choose just the content they want, but in practice they’re likely to end up spending more and dealing with multiple bills, user interfaces, and content models to get it, which is in turn going to lead to an opportunity for re-aggregation down the road.
It looks like the embargo on reviews of YouTube TV lifted this morning and a slew of those reviews have now emerged. On balance, the reviews seem positive about the user interface and features (notably the DVR), but note limitations across content, including the complete absence of Turner and Viacom channels, geographies (the service is only available in five cities to start, due to local broadcast rights), and devices (only Chromecast and Google Cast-enabled TVs, no Apple TV or Roku). I’ll link back here to my first take on YouTube TV following the launch event, because my overall sense of this service hasn’t changed. But it does seem as though the app does better on some key concepts than the other offerings already out there, notably that DVR feature and the way it taps into favorite shows and sports teams. As you’d expect from a brand that’s always stood for ease of use and discovery in video consumption, it’s good at those things. But those limitations are going to mean it’s not a viable competitor in the vast majority of the country for now. The limitations are, in fact, probably a good thing in that they’ll allow YouTube TV to avoid some of the scaling issues suffered by DirecTV Now when it launched last fall, but it’s going to need to find a way to go national sooner rather than later, which means working out those complicated local affiliate rights which have bedeviled everyone else in this business too.
AT&T hasn’t bought Time Warner yet, but that’s not stopping it from doing deals involving Time Warner properties, including this new promotion with HBO. AT&T had already been using HBO as a lure for driving DirecTV Now subscriptions, as it’s bundled the channel first at a discounted rate and then free for subscribers. But now AT&T is also giving away HBO for free to its higher-tier unlimited wireless data customers. Though the merger hasn’t closed yet, there’s a good chance that future prospect has been part of the companies’ closer relationship on this side recently, and it’s easy to imagine more of this kind of thing should the deal go through. It’s never made sense that AT&T would seek to limit distribution of Time Warner content following the merger because that would be counter-productive for the content business even if it benefited wireless subscriber numbers. But zero rating and bundle discounts make a lot more sense, as they lock customers into a much higher total spend and likely lower churn at a fairly low customer acquisition cost, and of course once TW is part of AT&T the cash cost of deals like this will be minimal. And AT&T’s real goal with the merger isn’t so much synergies from owning content and distribution as it is simply owning content, because that’s where the real value is long term.