Time Warner’s Turner unit, which acquired English-language US rights to the European club soccer tournaments from UEFA earlier this year, has announced that it will be launching a new steaming service next year to carry the games. A subset of the games will also be broadcast through its linear channels, but it sounds like this service will be the only way to get the full set. This is a great example of the kind of approach big TV companies should be taking with online streaming services, where we’ve seen two broad strategies be successful: recreating a linear / pay TV offering in the digital world, or creating something entirely new (Turner here is doing the latter). This should provide a very direct way to recoup the $180 million Turner is allegedly spending on three year’s rights for the soccer tournaments, while also allowing it to experiment with streaming models for sports. It sounds like it’s interested in adding other sports over time, though not the basketball content that’s already a big deal on its linear networks, and I worry that could be a distraction or dilution for what will otherwise be a very clear value proposition.
Right after both Business Insider and Mashable posted sourced stories about it launching tomorrow, Facebook appears to have decided to take the wraps off its new video tab today instead. That this was coming was widely reported, and now we just know a few more details – the new tab in Facebook is called Watch, and will showcase lots of different kinds of videos, although the focus appears to be on personality-driven stuff of the sort that dominates the more popular YouTube channels. In general, the model here feels very YouTube-like, with a subscription model, though Facebook’s apps for TV platforms in recent months have signaled the broad structure and interface, with a combination of videos recommended or liked by friends, things you’ve saved, things that are popular on the platform, and so on. What I don’t see much of in Facebook’s announcement today is the longer form, more produced stuff that’s supposed to be coming too, probably because it’s not ready yet. There will be some other content in there too including the live MLB coverage Facebook acquired rights to a while back starting next season, but in general this is a hub for all kinds of video on Facebook, from professionally produced stuff to the stuff your friends share. Simply calling out video into its own tab, though, is going to raise its profile and thereby push people to spend more time in videos, where they’ll see ads only every few minutes, as opposed to scrolling through the News Feed, where they’ll see ads every few seconds. I’m more and more convinced that’s a risky move for Facebook, because all the anecdotal evidence I’ve seen so far suggests people are really put off by interruptive ads in Facebook videos (I certainly am too), and this whole effort could end up backfiring. That’s something I’m hoping to write about soon. Update: Variety has a listing of additional shows from professional producers which wasn’t in Facebook’s blog post.
NBCU to Shut Down Seeso Comedy Subscription Service (Aug 9, 2017)
Netflix is (somewhat remarkably) making its first ever acquisition, buying comic book company Millarworld, which was started by Mark Millar and some former colleagues who had all written comic books for DC and Marvel and wanted a bigger stake in their creations, nearly 15 years ago. The terms of the deal aren’t being disclosed, so it’s far from clear what the immediate financial impact on Netflix will be, either in terms of the acquisition price or the revenue or profits from adding this first bit of diversification to the business. The whole announcement from Netflix reads like a subtle dig at Marvel, which is interesting given the close relationship the two companies currently enjoy. Millar is described as a “modern-day Stan Lee”, when of course Stan Lee himself is still alive and actively involved in the community if not actively creating new content, while the release also says that Millar was behind a number of the characters whose stories have been turned into movies by Marvel Studios over the last few years. Clearly, the claim here – somewhat farfetched – is that Millarworld is the new Marvel. Several of its characters and stories have already been turned into movies in recent years, and with some success, so it’s not a totally absurd claim. But overall few of them have the mass-market name recognition of Marvel or DC’s characters, and some quick feedback from people on Twitter who are more into this world than I am suggest that as a competitor it’s a pretty distant third behind the big two. This is clearly an attempt to secure more original content for Netflix, but also something of a hedge against the time that Netflix’s deal with Disney and therefore Marvel goes away, though on the latter point the acquisition also likely raises the risk that deal does go away, so perhaps Netflix has already had signals (or has simply decided independently) that it won’t renew. But it doesn’t sound like it’s going to provide anything like the same quality or quantity of content for Netflix that the Marvel deal does.
via Netflix (PDF)
Discovery to Acquire Scripps Networks for $14.6 Billion (Jul 31, 2017)
Facebook Readying First TV Pilots for August (Jul 26, 2017)
YouTube TV Adds 10 New Markets with Local Channels (Jul 20, 2017)
Snapchat Launches Daily NBC News Show (Jul 19, 2017)
Netflix today kicked off the Q2 earnings season with the first official earnings from a company that I cover, and reported stronger than expected subscriber growth off the back of a House of Cards season launch that was pushed back from Q1. Netflix was way off on its sub growth forecast, and though it surprised on the upside this time around that hasn’t always been the case in several recent guidance misses. Even though Netflix didn’t mention it this quarter, the delayed HoC launch screwed around with lots of year on year comparisons both this quarter and last, since Q1 is usually by far its strongest quarter for subscriber adds and Q2 is usually the low point of the year. Taking a step back, though, Netflix continues on its recent tear, with international growth the major driver, and profits domestically continuing to grow nicely off the back of last year’s price increases. Importantly, Netflix is now projecting that the international business will be profitable on a contribution basis for 2017 as a whole, which will be another major milestone after total non-US subs surpassed US streaming subs for the first time in Q2. The cash flow drain continues to be rapid, with an average of over half a billion dollars per quarter in negative free cash flow over the past year, and over $2 billion in cash content costs in Q2, and $8 billion over the past year, relative to the $6 billion Netflix protected for 2017 on a P&L basis (see this Variety piece I wrote last month for why cash and P&L spending are so different). For now, the subscriber and associated revenue growth are keeping Netflix out ahead of its content spending, but Netflix absolutely has to continue to grow at close to the current rate if it’s to continue to finance massive original content costs and grow profits at the same time.
This is a good time to remind you about the Jackdaw Research Quarterly Decks Service I also offer, which provides slide decks and videos on roughly a dozen major tech companies including Netflix each quarter during earnings season. Tech Narratives subscribers get a 50% discount, so let me know if you’re interested and I’ll send you a coupon code. The Q2 Netflix deck is available now, and will be updated in a few days when the 10-Q is out with more data. You’ll find some of the charts in this Twitter thread from earlier.