With streaming video companies looking for ways to stem the slowdown in subscriber growth, a panel of experts at the Next TV Summit said using an old cable tenet — bundling — could help attract more price-conscious consumers into the fold. 

At the “Recession Realities” panel at the gathering Tuesday, part of NYC TV Week, Weather Group senior VP and chief marketing officer Fred Bucher said the same economic forces and price sensitivity that killed the cable bundle are apparently making a comeback with streaming. Already streamers like Disney, with its Hulu, ESPN Plus and Disney Plus bundle, and others are repackaging services to make them more attractive to consumers. 

“Economic forces and price sensitivity is what killed the cable bundle, and that’s continuing,” Bucher said, adding that price sensitivity and churn are driving the creation of different tiers of pricing and services like ad-supported video-on-demand (AVOD) and free ad-supported streaming television (FAST) services.

Weather Group launched its own streaming service — Local Now — to address cord-cutters who missed local news and entertainment content.

“A lot of the answers for the future are in the past,” Bucher said, adding that what built the cable business — aggregation, better pricing and bundling — will likely be cornerstones of SVOD and AVOD models in a few years. 

Panel moderator Jon Geigengack, founder and principal of Hub Entertainment Research, said that as the bundle grows, consumers will crave a way to make finding content easier, and aggregation is one way to satisfy that need. 

DirecTV Advertising Group VP, client success, programmatic and ad operations Rose McGovern agreed, adding that aggregation is what DirecTV does best. Citing recent Nielsen research, she said about 64% of customers wish to have a bundle that includes as much or as little content as they want. 

That includes live and local programming as well, McGovern added, with about 67% of people nationally watching live content every day. 

As content streaming choices grow, Bucher said it is imperative that content companies get the word out, and that means marketing becomes more important than ever. 

“The biggest threat is underinvestment in marketing,” Bucher said. “It starts with great content, great product experience, and great marketing. If you don’t have those three things, you’re not going to win.” 

Bucher added that critical to the marketing effort is that streamers really know their consumers. 

“You have to understand who your consumers are, understand who your hard core users are too  and make them happy,” Bucher said.

And once you’ve hooked a viewer, the trick is keeping them. At AMC Networks, executive VP of performance marketing Sylvia George said engagement is a critical part of the equation. 

“What is so critical is your audience,” George said. “The relationship with the audience, super-serving the audience, making sure that you’re segmenting your audience based on data, based on what is your audience engaging with once they come in — not just the first thing they watch, what’s the second and third thing they watch. Getting people engaged within a specific time period is critical to ensuring retention. If you don’t get your subscriber engaged within a few weeks, you’re at risk of losing them. You can’t get complacent.”

The panel also was encouraged by Netflix’s plan to launch an ad-supported version of the service soon. The company has already partnered with Microsoft to provide the tech infrastructure for the AVOD service. 

“In some ways, they could help re-energize the advertising business,” Bucher said, adding that Netflix doesn’t have the “institutional inertia” of some other companies that have long been in the ad business. “It’s kind of cool to take a fresh look.”

Bucher was especially encouraged by the vast amount of data in Netflix's arsenal, adding that the ad business may never get this chance again. 

McGovern also was encouraged by the potential for more innovation that a Netflix AVOD product could bring. For example, a departure from the traditional 15-second to 30-second ad spot.

But Bucher warned that whatever comes out of the Netflix AVOD experiment will depend on outside pressures. 

“There’s a lot of stuff they could do that could be an enormous amount of fun… but what it’s going to come down to will be how much pressure they’re under to deliver a number of revenue,” Bucher said. “If there are huge revenue expectations, that’s going to diminish innovation, because they are going to default to what they know, and agencies will say, ‘Just make it easy for me.’ That, to me, will be a shame. 

“The irony is that Reed Hastings, who was so dogmatic for so long about advertising, can actually become the person to really reinvent the space,” Bucher continued. “I hope they’re given the time to do that. “ ■ 

As streaming video tightens its grip on the way consumers view and engage with content, advertisers need to find ways to effectively measure audiences in the new paradigm, while at the same time remain flexible in how they sell ads beyond traditional pods and shows, Group M executive director, U.S. investment strategy Adam Gerber said at the Advanced Advertising Summit, leading off NYC TV Week. 

Measurement has been a major concern for advertisers, networks and buyers for years as streaming has further fragmented viewership. Gerber, who kicked off his speech by comparing the current ad environment to the Doomsday Glacier — the massive sheet of arctic ice that is expected to play havoc with world sea levels — said fragmentation is much different today, promoting the need for the industry to work together to find effective solutions.

Also: More Coverage from the 10th Anniversary NYC TV Week

Gerber, in a fireside chat with B+C Multichannel News business editor Jon Lafayette, said that in the past, fragmentation meant more distribution choices — hundreds of cable channels versus four broadcasters — but could still be measured via passive panels. With impression-based advertising, measurement becomes dependent on publishers implementing tags or conducting server-to-server integration with measurement companies, which most publishers choose to avoid.  

Also: AVOD a Growing Part of Streaming: Nielsen 

“That’s the growing problem, as measurement is dependent on a publisher or a media company deploying either an SDK, server-to-server integration or a tag, as soon as one of the big ones decides not to participate in that, you don’t have a view of the marketplace,” Gerber said.

But the answer isn’t necessarily having a new measurement currency for the industry, Gerber said, adding that every advertiser will have a different way to evaluate the marketplace and do deals with publishers. Whether that is through attention metrics, audience based metrics or something else depends on the size of the advertiser. But he does believe that the industry needs a common way to size the overall market.

As streaming becomes more prevalent — Nielsen reported that streaming video share surpassed cable and broadcast for the first time ever during the month of July — Gerber said questions around ad capacity and valuation become more important. That gap could widen as Netflix and Disney Plus unveil the ad-supported versions of their respective services. Gerber said while streaming’s dominance may be a little questionable on the ad-supported side — he said about half of streaming subs are in non-ad-supported services — those that do air ads do so with less frequency. 

The typical linear network airs 16 minutes to 18 minutes of ads every hour, Gerber estimated. For streamers, that ad load drops to between three minutes and seven minutes each hour. That works out to a 60% decline in ad capacity, meaning that every streaming ad impression has to work harder. 

Also: What If They Launched an Ad-Supported Streaming Service and No One Came? 

The solution, he said, isn’t in returning to the old model — something that will never happen, he believes — but in finding new ways to squeeze money out of ad impressions.

“The challenge for streaming companies is to find the right balance,” Gerber said. “It might not be pods and shows. It might be much more tied to some of the things tied to the streaming space, things like voice navigation, things like commerce, things like sponsor-based models in delivery of programming. I think we have to have a creative renaissance in the streaming space to find new ways to engage consumers in ways that don’t tick them off. I think we’re just getting around to it.” ■

Four months after closing the deal that created one of the largest content creators in the world, Warner Bros. Discovery CEO David Zaslav is messing with the magic, mixing new ingredients (a refined direct-to-consumer strategy) with some old ones (a commitment to theatrical film distribution and pay TV) that he hopes will bring the competition to its knees. But with a stock price that has been at best anemic and rival streaming services that have considerably raised the bar, Zaslav is under the gun and the clock to come up with the right incantation to bring the storied media brand back from its current realm of uncertainty.

I promise, the Harry Potter references end here. 

In the days leading up to WBD’s Q2 results, the rumor mill was wild with tales of what Zaslav would do to the company that he bought just a few months before. Thankfully, Zaslav’s new direct-to-consumer path was not laden with the landmines that many expected. There were no massive layoffs, HBO Max isn’t going to disappear into the ether, there are no weapons of mass destruction hidden somewhere on the Warner Bros. Studios’ lot, at least for now. But there are going to be changes. Spending is going to be tighter. WBD is going to take a harder look at how it develops programming. Warner Bros. is going to recommit to theatrical releases for movies. 

Some films earmarked for streaming won’t see the light of day. And there is probably more to come. While Zaslav and team laid out some of the streaming strategy on August 4, more details are expected at a planned Investor Day toward the end of the year, including the new name of the combined HBO Max/Discovery Plus streaming service.

So just what is Zaslav’s new formula for success? Here’s a look at five ingredients in the soup that is to be the new Warner Bros. Discovery:

1. Reformulate the way that it counts streaming subscribers.

WBD said total streaming subscribers (HBO Max and Discovery Plus) rose by 1.7 million to 92.1 million customers in Q2. That growth was mainly outside of the U.S. International added 2 million customers while domestic streaming subscribers fell by 300,000, to 52 million from 52.3 million in Q1. That appears to be a big miss from Q1, when HBO Max said it had 76.8 million total customers, and Discovery Plus reported 24 million customers. The Q2 results reflect a new way to count subscribers. WBD said the earlier subscriber count included about 10 million non-core Discovery Plus subs and HBO Max subscribers that were part of AT&T mobility promotions and never activated service. 

“No one else is telling you how many subs they have that get it for free, whether they watch it or not,” FBN Securities media analyst Robert Routh said “They should really break it down on whether or not it is something that people actually pay for, and if it's something they actually watch. That’s a more valid metric, but we don’t get that metric.”

2. Scrap movies that were originally for streaming only — most notably Batgirl, which the company already spent $90 million on before it was ever seen publicly — as well as the animated Scoob! Holiday Haunt that was four years in the making. 

Some saw the decision to shutter the Batgirl film as a financial one — apparently there were tax incentives to cancel the project this year — while others saw it as a move to erase the legacy of executives before him. Zaslav didn’t really address specific films on the call, but some reports have said that Batgirl fell through the cracks because it wasn’t a billion-dollar blockbuster, and the additional investment needed to market and distribute the film in the theaters would have more than doubled its $90 million price tag. To Zaslav, taking the tax write-off and moving on just made sense. 

Aside from the Batman franchise, WBD has had little luck with the rest of DC’s characters on the big screen — certainly nowhere near the success of Disney’s Marvel Entertainment. But some believe it could be a matter of simply finding the right person to run that part of the studio.

“They have a DC Universe, and universes are really hard to create and cultivate,” said producer and filmmaker Gary Pearl, CEO of Aquarius Content who’s Flowers in the Attic: The Origin aired on Lifetime last month. “Look how many years it took [for the Marvel Cinematic Universe]. Kevin Feige [Marvel Studios president and chief creative officer Marvel Entertainment] had to be born and grow up. I remember when Marvel sold for $60 million. … How is it all of a sudden worth $6.5 billion? Because other people came along and made change.”

Pearl said that one sign that Zaslav is serious about turning around the studio is his hiring of two Hollywood veterans — former MGM chairman Michael DeLuca and former MGM Pictures Group president Pamela Abdy — as co-chairs of Warner Bros. Pictures Group. Both have long track records, producing recent buzzworthy and critically acclaimed films like Licorice Pizza and House of Gucci, as well as past box-office hits like Boogie Nights, Fifty Shades of Grey and Austin Powers. 

“I can understand how people feel about Batgirl,” Pearl said. “I haven’t seen it, but I will guarantee you, it’s a bad film. He’s not going to dump $90 million just to make a statement. He’s saying we have a big asset in DC and it's been mismanaged for 30 years. And my definition of that is ‘I don't have my Kevin Feige yet.’ Maybe he hasn’t been born yet. That guy is that brilliant. So who’s the DC guy? I’ll bet you he thinks that is DeLuca.”  

While some critics have accused new WBD management of trying to erase former WarnerMedia CEO Jason Kilar’s legacy, many forget that the decision to put the Warner Bros. slate on HBO Max endangered a lot of relationships with creatives. Dark Knight and Inception director Christopher Nolan told The Hollywood Reporter at the time that Warner “blindsided” the creative community and instead of working for the best studio, they are working for the “worst streaming service.” 

Many of those creatives changed their tunes when they saw the generous bonuses Warner Bros. offered to compensate for missing out on theatrical box office. But there were still a lot of egos that needed stroking.

After the merger was announced, Zaslav went on a highly publicized listening tour to repair those relationships with the creative community. Committing to theatrical releases is just another part of that. 

3. Double down on Warner’s commitment to theatrical releases of films and release no expensive movie on streaming services before theaters.

Kilar introduced the controversial decision to release Warner Bros.' entire 2021 slate day-and-date to streaming, it obviously goosed HBO Max streaming subscriptions and helped put the service on the map. But that was during a pandemic when theaters were closed and Kilar had let it be known that it was only a one-year experiment.

Nevertheless, some directors and producers were outraged at Kilar’s move, with some vowing never to work for Warner again, claiming that once the day-and-date cat was out of the bag, it would become the norm for the industry. They didn’t and it didn’t.

But it did cast a light on what can be bewildering Hollywood economics, where accountability can sometimes be murky. Zaslav, who according to some reports has been notoriously frugal at Discovery — asking some producers to take out loans to front their own production costs — said during the Q2 call that he can’t justify releasing an expensive movie online.

“We’re not going to release any film before it's ready,” Zaslav said. “There is no comparison to what happens when you launch a film in the theaters. This idea of expensive films going to streaming, we cannot find an economic case for it, we cannot find an economic value for it.”

Pearl said that while Kilar’s strategy worked during the pandemic, it is time for a more pragmatic approach. 

“In a weird way, Jason’s approach worked, but it worked in a pandemic,” Pearl said. “I don't know how you call that solid business change. It was the right thing to do for one year. He was gaining subs. And what was he going to do with all of those movies anyway? Shut down Warner Bros. and not make anything?”

4. Combine Discovery Plus and HBO Max into one streaming product.

That shouldn’t have come as a surprise. WBD streaming chief JB Perrette told the ad community in May at the upfronts the company would do exactly that.  

During the Q2 conference call, Perrette said the combined offering would debut in the summer of 2023, adding that it will first be launched in existing HBO Max markets in the U.S., followed by Latin America later in that year and in Europe and Asia in 2024.

Perrette acknowledged that both services have different audiences: HBO Max is more appointment TV than Discovery Plus, which is more “comfort viewing.” But he was confident that the two services would mesh well.

“These are two critical and powerful components of a strong and sustainable subscription business,” Perrette said on the Q2 call.  

Some analysts wondered how the combined offering would be priced, adding that a combined HBO Max/ Discovery Plus might have some flexibility, especially with existing ad-supported versions of both streaming products. Zaslav said that coming soon are an ad-light service and a free ad-supported television (FAST) offering that should satisfy more price-conscious consumers.

At $14.95 per month, HBO Max is one of the more expensive streaming services. Netflix raised charges for its standard streaming service to $15.49 per month from $13.99 in January and others have followed suit. At the same time, these companies are launching less expensive ad-supported versions. HBO Max has an ad-supported service priced at $9.99 per month. Disney just unveiled plans to debut its ad-supported version on December 8 for $7.99 per month. Netflix plans an ad-supported version this year. Disney released other new pricing details last week. 

Discovery Plus has been fairly steady at $6.99 per month for an ad-free service and $4.99 with ads. Just how that pricing will mesh with HBO Max charges remains to be seen. 

5. Preserve the pay TV distribution relationship, even as cord cutting has accelerated to record highs. 

One of streaming’s dirty little secrets has been that although it is without a doubt the future of content distribution, it is a huge drain on finances. Not one of the major content players is making money off of streaming— not Peacock, not Disney Plus, not Paramount Plus, neither HBO Max nor Discovery Plus. All of them are supported by traditional linear networks that are losing subscribers by the bucketful. So the biggest question among content investors is what happens when the traditional content cash cow, and its fat affiliate fees, dries up? The answer may come sooner than anyone thinks.

The pay TV business lost nearly 2 million subscribers in Q2, according to Leichtman Research Group, up from a loss of 1.2 million customers in the same period last year. So, as subscriber losses accelerate, it's only a matter of time before linear networks can no longer feed the streaming beast. 

But it shouldn’t come as a surprise to programmers.  

MoffettNathanson warned back in 2019 that pay TV subscriber erosion was having an effect on affiliate fee growth. While the pandemic may have slowed that erosion down slightly, cord-cutting has come back with a vengeance. In Q1, MoffettNathanson estimated that overall pay TV subscribers (cable, telco, VMVPD and satellite) were down 5.1%, or 2.1 million customers, in Q1, close to the record 5.5% decline set just prior to the pandemic. It is shaping up to be even worse in Q2, with Comcast and Charter alone shedding more than 700,000 subscribers in the period, and heavier losses at satellite and telco providers. 

Zaslav has long been a proponent of keeping the affiliate fee relationship intact. In his early days at Discovery, he was one of the last remaining holdouts for keeping its content offline. While other networks were releasing episodes of popular series on their websites, Zaslav only allowed clips, adding that he didn’t want to dilute the value of the television subscription.

The 100-Plus Percent

In a blog post, LightShed Partners co-founder and partner Rich Greenfield said more than 100% of WBD’s trailing 12-month cash flow comes from its basic cable networks. 

“Unfortunately for WBD (and everyone else in legacy media), cable network affiliate fees are no longer growing and appear set to enter secular decline (thanks to cord-cutting) and advertising faces increasingly stiff headwinds as linear TV viewership erodes along with the impact of a global recession,” Greenfield noted.

Adding to the concern is that as affiliate fees and ad revenue decline, sports costs are rising exponentially, placing further pressure on EBITA growth. WBD’s rights deal with the NBA expires in 2023.

“It appears WBD is now taking evasive action as their dramatically enlarged (via merger) cash cow cable network business is on its way to becoming a starving cow,” Greenfield wrote.

 Disney’s Better, But Not Best 

 While WBD struggled with forces both in and beyond its control, The Walt Disney Co. made it a little worse by reporting much stronger fiscal Q3 results on August 10. Disney appeared to be firing on all cylinders in FQ3, adding 14.4 million global streaming customers, far outpacing analysts’ estimates of 10 million additions. Disney, with 221 million global customers, is now tied with Netflix for the top spot among streamers. Financially, overall revenue and cash flow growth beat consensus expectations. But Disney revised its subscriber growth estimates for 2024 to 215 million to 245 million from 230 million to 265 million, mainly because of the loss of cricket rights in India. Almost all of Disney Plus’s growth in FQ3 was in India, while its domestic growth was nearly stagnant at 100,000 additions.

That caused some analysts to fear that maybe Disney isn’t being conservative enough with its 2024 growth estimates. 

In a research note, Barclays Group media analyst Kannan Venkateshwar argued that Disney’s revised projections should be lower. The top four streaming services -- Netflix, HBO Max, Hulu and Disney Plus -- showed subscriber declines or minimal growth in the last quarter, which Venkateshwar said “speaks to saturation levels in the marketplace.”

“Streaming growth domestically is increasingly becoming a zero sum game and will need distribution models to change for further growth,” he wrote, adding that while Disney’s FQ3 growth was strong, it was almost entirely outside of the U.S. “Domestically, Disney Plus barely grew and was just 100,000 and could see some slowdown in FQ4 due to price increases.” 

Where Are My $3 Billion in Synergies? 

 When they unveiled the deal in May 2021, both AT&T and Discovery believed they could pull $3 billion in cost synergies out of the business in the first year. After a deeper look at the books, WBD isn’t saying that anymore. Cost savings, at least initially, will come from reduced content spending. Zaslav said HBO’s and Warner Bros. Studios’ budgets will grow, but everything else is fair game.

Pearl, who has more than 30 years in the TV and movie business as an agent, writer, director, producer and entrepreneur, said belt tightening is par for the course, especially during an ownership transition. And Zaslav is no different. 

“Yes of course he’s a cost-cutter,” Pearl said of Zaslav. “Because it’s a business.”

And though the massive layoffs some expected didn’t come, it’s probably a fair guess that there will be some down the line. Discovery has a track record of stealth layoffs according to some reports, reducing its workforce in bursts of 30 employees or less, being careful not to trigger any disclosure requirements. So, layoffs could be a series of small cuts instead of one massive beheading.

That apparently has already started -- Variety reported Monday that HBO and HBO Max will lose about 70 employees (14% of its workforce) amid some other restructuring around chief content officer Casey Bloys.

Whatever form it takes, WBD is going to need to find some way to squeeze those synergies out of the business, because cash flow growth is going to be less than expected for a while. And they need to find something to help pare down debt.

WBD has about $53 billion in debt. EBITDA for Q2 was $1.8 billion for the entire company, down 31% from the prior year. While WBD has said previously it expects EBITDA to grow to $12 billion in 2023, down from previous forecasts of $14 billion, most analysts are guessing it will be even lower. Earlier this week MoffettNathanson analyst Robert Fishman estimated 2022 EBITDA will be $9.2 billion (down from his previous prediction of $10.2 billion) and his 2023 estimate to $11.8 billion (down from his earlier $12.6 billion estimate). 

Waiting it Out

Wells Fargo Securities media analyst Steven Cahall downgraded his ratings on WBD to “equal weight” from “overweight” and reduced his 12-month price target on the stock to $19 from $42 per share. He sees WBD as undervalued -- its 7x cash flow multiple makes it one of the cheaper stocks in the sector due to above average execution and earnings risks, he wrote -- but suggests the best strategy for investors may be to wait it out.

“100 days on and the dust has hardly settled, and we thus think the best course is to let the internal work take its course for a bit,” Cahall wrote. “[Discovery] was a ~$45 stock prior to the deal, these assets are the best in content offerings, so when things do start to improve we think investors will be able to be late and still have plenty of upside.”

Routh added that WBD’s problems may be a combination of being first to publicly tighten its purse strings at a time when investment opportunities for investors are varied and plentiful. 

“He [Zaslav] got penalized for being honest,” Routh said of WBD’s precipitous stock price drop. “We haven't seen the cost savings from this merger yet, [but] the integration of media companies takes time. Currently the Street has a lot of other options in terms of where they’re going to  put their money.” 

WBD shares were hit hard after the August 4 earnings report. The stock dropped by 16% on August 5, the first full day of trading after results were disclosed, and fell another 11% between August 5 and August 9. The price has been down all year, though. Shares got a little lift on August 11, rising 4.4% to $13.68 each, as some began to see a bargain in the world’s second largest content operation, but they were flat on August 12 and fell another 3% in early trading on August 15. WBD shares are down 46% since the deal creating the company closed on April 11 and are down 44% for the year.  

While WBD’s decline has been dramatic, streaming stocks across the board have been feeling the pain for months. Before it released fiscal Q3 results on August 10, Walt Disney Co. stock was down 27% for the year. Even with Thursday's increase, the stock is still down 24% for the year.  

Other content creators with a streaming presence have had similar declines. Paramount Global, parent of Paramount Plus, has fallen 13% this year. Amazon, parent of Amazon Prime Video, is down 15%. Even Apple is off 5% for the year. 

“No one knows how to value the content companies,” Routh said. “Look at any of them, people are not giving any value to libraries, people are giving no value to current production, because they’re saying there are so many platforms now, what are the odds that what you make is actually going to become watched and monetizable and worth what you paid for it?”   

So if everyone is feeling the effect of a slowing streaming business, why is everyone picking on WBD? The company is getting a lot of attention because of the merger and because HBO is one of the content brands most associated with quality, having  received 140 Emmy Awards nominations this year, leading all networks. People just seem to expect more from HBO’s parent. 

Zaslav will have to weather the criticism for a while, at least until Q3 results are released. My guess is he’ll be able to do it. There will be other reasons to panic from other companies, especially if Netflix misses Q3 subscriber targets. 

In the meantime look for other streamers to tighten their belts, keep a closer eye on profitability and nurture relationships with traditional distributors. It’s either that, or blow the whole thing up and start over. Nobody wants to do that. ■

Astound Broadband launched its version of streaming video on Tuesday, introducing Astound TV Plus, an app that will allow customers of its linear TV service to watch programming on their phones, tablets and laptops outside of the home.

Astound TV Plus is available to existing IPTV video customers at no extra charge.  In addition, Astound said it is launching a 1.2 Gigabit per second broadband service in its markets at the same time. The app is available on several platforms, including iOS or Android phones and tablets, including select Android TVs, Apple TVs, and Fire TV devices through astoundtv.com.

“These innovative options provide customers with what they want most – optimal speed, more content, and even better choice and control,” Astound Broadband CEO Jim Holanda said in a press release. “The introduction of 1.2 Gigabit speed offers optimal performance with greater capacity for working, streaming, learning, gaming, conferencing and more. The new Astound TV+ app is also a great complement to our suite of TV and Internet offerings, giving customers more options for accessing and enjoying entertainment on their devices. These new products continue to deliver the best experience for our customers supported by an award-winning customer service team.”

The launches come less than a year after Astound said it would rebrand its systems -- RCN, Grande Communications, Wave Broadband and enTouch systems -- under the Astound Broadband name.

According to Astound Broadband, the Astound TV Plus app allows: customers to stream up to 5 devices simultaneously and register up to 12 devices; includes Start Over and Catch Up functions; lets customers schedule DVR recordings (up to 125 hours included); and has integrated search functions across live TV, On Demand, recordings and streaming apps.

Also: Executive of the Year: True Patriot

The 1.2  Gbps broadband service is available to new customers across the company's serviceable markets, and the app is available across most of Astound’s expanded footprint and will be rolled out to its remaining markets by the end of the summer. 

While the company did not include pricing for the 1.2 Gbps service in its press release, promotional pricing for the service for Astound by RCN broadband customers is $59.99 per month, according to company websites. ■ 

The word is that Apple, Amazon and The Walt Disney Co., possessors of three of the deepest pockets in the media business, are the sole remaining bidders for the National Football League’s out-of-market programming package, NFL Sunday Ticket.  While a lot of the talk around the deal is the price tag — at $2.5 billion to $3 billion annually, it is about twice what current rightsholder DirecTV paid for the package in 2014 — what could be most valuable to the streaming bidders is the impact Sunday Ticket could have on subscriber growth. 

There is no doubt that each of the three players have the financial strength to handle a deal. Apple has a $2.29 trillion market cap, Amazon’s is $1.15 trillion and Disney is, well, Disney. And even though all three could use access to the out-of-market package to their respective advantage, it seems at least for now that the one that would benefit most would be Apple.

In an interview, LHB Media & Entertainment president and CEO Lee Berke said that while Sunday Ticket helped DirecTV establish its linear satellite TV business nearly 30 years ago, the package is most likely to benefit streamers today.

“Now, I think it is best offered up as a streaming product because you want increased bandwidth, you want to come up with betting channels, you want to come up with all sorts of variations,” Berke said, adding that in addition to games, there are opportunities like the Manningcast [Monday Night Football with Peyton and Eli]  and other peripheral programming that could be tied to the package. Also part of the mix are equity stakes in NFL Media — which houses NFL Network and RedZone — and possibly mobile rights, which could allow a streamer the chance to price and package services more creatively. 

“There have been all sorts of opportunities that haven’t been exploited in part because there is a limited amount of bandwidth on satellite,” Berke added. “I think that’s why you’re looking at a substantial streaming presence for Sunday Ticket going forward that allows you to exploit those games in more and different ways than you have in the past.”   

It’s Apple’s Deal to Lose 

While all three bidders have a streaming presence, Berke believes that Sunday Ticket makes the most sense for Apple TV Plus.

“I think that the overall heritage and philosophy of the NFL from a media standpoint is not to put all of your eggs in one basket,” Berke said. “They like to have as many different media companies as possible involved, because you’re not beholden to any one, you get them to compete, they try different approaches, they create, they’re inventive. Since you have Amazon making a major investment in Thursday Night Football, it just seems like Apple, now developing its sports resources with Major League Baseball and MLS, it seems like the next step would be establishing an NFL relationship as well.”

Amazon is paying an estimated $1 billion per year for Thursday Night Football rights. 

While The NFL would likely gain from a closer relationship with the hardware juggernaut, Apple too could use the relationship to create its own opportunities.

“I think there’s upside because everybody is looking at it like there is this finite number of games. No there’s not,” Berke said. “The NFL on its own created RedZone out of this. They created a Fantasy [Football] channel out of it. Now you bring in somebody else with a huge amount of expertise — an Apple, Amazon or Disney. It seems like you’ll get  some other very creative people, some very tech-savvy people that can come up with all sorts of variations.”

Berke added that the attractiveness of Sunday Ticket wouldn’t stop at just bringing more subscribers into the streaming video fold. 

“It’s not just the profitability of the media,” Berke said. “For Apple, does it help them sell hardware? Does it help them sell watches? Does it offer unique functions on an iPad when you get Sunday Ticket? Those are really, really valuable things.” 

Apple also seems more than willing to dive deeply into sports rights after years of sitting on the sidelines. Earlier this month, the company restarted talks for rights to Big Ten Conference college football, which recently expanded to 16 teams by adding Pac-12 powerhouses USC and UCLA.

“[Apple’s] content appetite is seemingly insatiable between Apple TV Plus originals, MLB, MLS and maybe Sunday Ticket OTT,” Wells Fargo media analyst Steven Cahall wrote in a recent research note.

Streaming Growth 

Apple, despite its dominance in the tech sector, is lagging significantly behind its peers in the streaming video business. Launched on November 1, 2019, Apple TV Plus has about 25 million subscribers paying $4.99 per month for its video streaming service. In contrast, Disney Plus — launched 11 days later on November 12, 2019 — has 137 million global customers. Amazon Prime Video has around 200 million subscribers, but most of those are there for the free shipping from Amazon Prime.  

But streamers have seen the explosive subscriber growth of the past few years begin to slow in recent quarters, as inflation, the overall economy and subscriber fatigue have caused consumers to cut back. While most point to Netflix’s 200,000-subscriber loss in Q1 as a sign that streaming was losing its luster, other SVOD companies have seen growth slow. Disney Plus added 2 million subscribers in fiscal Q4 — half of what analysts expected — but seemed to rebound in later quarters, with fiscal Q1 streaming subscriber additions rising by 11.2 million and in fiscal Q2 additions up by 9.2 million. But there are fears that consumers are backing away from some streaming services because of rising monthly charges, prompting many to offer ad-supported versions of their service at reduced fees. 

Tick, Tick, Tick 

There are still a lot of ways this could play out. In 2021, Amazon was said to be the front-runner for Sunday Ticket, with that momentum shifting to Apple in April 2022. More recently, speculation is that DirecTV could still be in the mix, opting to share rights with a streamer or reaching a deal to retain lucrative commercial rights (sports bars and restaurants) for the package. The NFL also could decide to keep Sunday Ticket in-house, possibly making it available through its own direct-to-consumer offering — NFL Plus — which is expected to launch in July. 

And there is still a lot of time to hammer out an agreement. DirecTV’s exclusivity doesn’t expire until after the 2022-23 season, giving several months for further negotiations. 

On the other hand, it is getting close to the time that the NFL has announced previous renewals — DirecTV signed an eight-year extension for Sunday Ticket in October 2014, a month after the final season under its old deal began. Whether this will take longer is anyone’s guess. 

Do You Wanna Pay for Some Football?

While Sunday Ticket has been around for nearly 30 years, its value depends on who owns the rights. In DirecTV’s early days, it was a big catalyst for subscribers to its satellite TV service — you still have to subscribe to DirecTV linear to get access to Sunday Ticket — and paid off in spades in subscriber growth. While there were other factors such as pricing, quality of service, clearer pictures, a national footprint and access to then-rare HDTV channels, Sunday Ticket helped push DirecTV into the No. 1 spot among TV distributors. A year after DirecTV launched Sunday Ticket in 1994, its subscriber base nearly quadrupled from 332,000 in 1994 to 1.2 million in 1995. By 2014 the satellite service had more than 20 million customers. 

Will Sunday Ticket have the same impact on its new owners? Probably not. It’s not even having the same impact on DirecTV, which has shed a huge number of subscribers over the years — it had 14.6 million as of Q2 — all while it continued to offer Sunday Ticket. DirecTV does not reveal subscriber numbers for Sunday Ticket, but estimates put it at around 2 million customers. Other reports estimate that DirecTV is losing about $500 million per year on Sunday Ticket.  

At Kagan, the media research unit of S&P Global Market Intelligence, research director Deana Myers believes the subscriber tally for Sunday Ticket is “well below” 2 million, and while she sees the package having some benefit to streamers, don’t count on it being too dramatic. 

“I think getting Sunday Ticket would likely put Apple TV Plus on the map, but not to the degree that it did for DirecTV,” Myers wrote in an email message. “Sunday Ticket’s value for DirecTV was that it drew a lot of really high-end subscribers who would sign up for the top packages. In the old, successful pay TV world that worked, but it loses a lot of money today for them. Apple could gain subs, they have the cash for such a deal, they have been buying a lot of sports rights and it could help them with their main goal of selling more devices.” 

But Berke believes the benefit of Sunday Ticket lies in more than just a beefier subscriber base.   

“If Apple is potentially a co-owner of NFL Media and they come up with five different ways to take that package and off it up in different fashions and if it helps them create a whole new version of iPhones that are NFL-specific, it’s more than carried its weight,” Berke said.

And Then There Were Three

Apple has re-established itself as the front-runner, according to some reports, but what appears to be holding up the deal are the equity stake in NFL Media and the ultimate price tag. While the NFL reportedly wants as much as $3 billion for the rights, pundits believe the deal will come in lower, perhaps in the $2 billion range.    

That’s still above the $1.5 billion annually DirecTV is paying, but may point to problems with the deal’s structure. According to CNBC,  sources familiar with the deal say that the NFL is requiring that whoever buys Sunday Ticket price it at or above its $300 to $400 yearly market value, mainly because of deals the NFL has with broadcasters CBS and Fox. So there will be no deep discounting of the service, something that DirecTV has done in the past to keep existing sub numbers up and attract new customers. Apple and Amazon also are said to be very interested in international streaming rights, something that Myers believes the NFL would like to sell separately. 

“I think the limitations that the NFL is trying to put on a deal will mean the deal comes in pretty far below what they are asking,” Myers said.

In the end, any deal will come down to who needs Sunday Ticket the most. And if scale still matters in the streaming business, that would seem to be Apple. ■

Despite a disappointing subscriber loss in the first quarter and expectations that Q2 will be even worse, Netflix again topped the Solutions Research Group (SRG) annual “Must Keep TV” list for the fourth consecutive year, beating broadcasters ABC and CBS while fellow streamers Peacock and Paramount Plus gained the most ground among viewers.

SRG’s annual “Must Keep TV” research is based on 1,400 interviews with U.S. consumers aged 12 and older and was conducted in late April 2022. This is the 15th edition of the research since its inception in 2007.

While the top 10 networks and programmers in 2022 remained the same as in prior years, there was plenty of movement otherwise, with TV brands like The CW (rising five spots to No. 13), AMC, Cartoon Network, A&E, TBS, ION and Syfy all showing strong momentum.

Paramount Plus made the biggest move, rising from the 37th spot in 2021 to the No. 12 position in 2022. Peacock, which Comcast’s NBCUniversal launched in 2020, rose from No. 29 in 2021 to No. 16 this year. According to SRG, the only major steamer that didn’t make the top 20 or make a major leap in the rankings was Apple TV Plus, which rose two spots in 2022 to No. 31 from No. 33 in 2021.

Among women aged 25-54, streamers took six of the top 10 “Must Keep TV” spots, more evidence of how that delivery mechanism is gaining dominance in the space. Paramount Plus was the newcomer at No. 10, while Netflix, Hulu and ABC secured the top three positions, followed by Amazon Prime Video, CBS, NBC, Disney Plus,  Fox, and HBO Max.  

HGTV was bumped out of the Top 10 for the first time since 2016, while other brands that lost ground in the demo include Food Network (No. 18, down seven spots), Hallmark, PBS, AMC, History and Nickelodeon.

Brands with strong momentum among women 25-54 include Disney (No. 11, up from No.  20), CW (No. 13 this year, up from No. 27), Peacock (No. 15 up from No. 18) and Lifetime (No.7 vs. No. 32 last year).

Netflix topped the charts among Black audiences for the third year in a row, followed by ABC, CBS, Fox and Prime Video. Newcomers to the segment include The CW and Disney Plus and BET maintains its Top 10 standing among Black audiences, coming in at No. 8 for the year.

Netflix came in first place for Latinx audiences for the fifth year in a row, with Hulu, Prime Video, ABC and Fox rounding out the Top 5. ESPN regained its spot in the Top 10 this year, in the No. 10 position, while Telemundo and Univision continued their strong showings, ranking No. 11 and No. 13 in the segment.

Streamers and networks also showed strength with Asian-American audiences, with Netflix, ABC, NBC, CBS and Prime Video leading the way. ESPN ranked No. 9 and is the top cable network in this segment, while CNN came in 10th.

For LGBTQ2+ audiences, Netflix, Prime Video and Hulu took the top three spots, followed by broadcaster ABC. Networks CBS and NBC are ranked No. 7 and No. 8 respectively, while CNN made a strong showing in the eleventh spot. Paramount Plus and Peacock came in at No. 10 and No. 15, respectively.

Among Americans with disabilities, Netflix is again in the No. 1 spot, followed by ABC and CBS. Prime Video, NBC, Fox, Hulu, Disney Plus, HBO Max and Paramount Plus round out the top 10. ■

With Verizon set to launch its Plus Play bundle of digital subscriptions later this year, Barclay’s Group media analyst Kannan Venkateshwar believes that depending on the structure, the growing trend of bundling streaming services to attract new subscribers could serve as a gateway to the industry’s true direction: an aggregation model similar to what Google did with search, Netflix did with TV networks and Spotify did with recorded music only a few years ago.

With streaming subscriber growth on the fritz over the past few quarters, investors and analysts are understandably paying close attention to how bundling could change the dynamic in the industry. While others have tried bundling services -- Disney has grouped its Disney Plus, Hulu and ESPN Plus streaming services in a $13.99 monthly package ($19.99 ad-free) with relatively strong success. what makes Verizon’s Plus Play different is its decision to pair video with sports news sites like The Athletic, fitness programming from Peloton, music, weight management via WW International and language services from Duolingo. Already other streamers like Discovery Plus, AMC Plus, Disney Plus, A+E Networks and others have signed up to Plus Play, with HBO Max agreeing in April to be available through the service.  

There are Bundles, and Then There’s Bundling

“Bundles are more than the sum of its components,” Venkateshwar wrote, adding that consumers see bundles as separate products with a value all their own.   

“In our opinion, the implications of this are not appreciated enough by media management teams because if they were, fragmentation of content in forms seen over the last few years would not have been enabled by media companies and distributors,” he wrote.

In that vein, the analyst said that more important will be how bundles are constructed, adding that the old way of simply offering fewer channels for a lower price won’t cut it anymore. In fact, he added that in many cases, smaller bundles could be worth more than their fatter counterparts. 

“In our opinion, the nature of bundles as independent products also implies that a 20-channel bundle is not necessarily half as valuable as a 40-channel bundle,” Venkateshwar wrote. “In fact, the smaller bundle could even be perceived as being of more value than the bigger bundle, based on factors such as content mix, nature of experience, and convenience (e.g. full stacking, offline viewership, etc.)”

And he continued that if streamers follow that recipe, it could be bad news for traditional distributors. 

“This is also why a bundled offering of streaming services could accelerate the pace of cord cutting in legacy pay TV bundles, especially if the streaming bundle is offered by an aggregator that eases content discovery,” he wrote.

While Verizon hasn’t yet mapped out what the Plus Play bundle will look like exactly, Venkateshwar predicted it would be a mixed price bundle, where the underlying services will be available individually but potentially more expensive on a retail basis, much like the Disney model for its Disney Plus-Hulu-ESPN Plus bundle. He expects HBO Max and Discovery Plus, which parent Warner Bros. Discovery has indicated will eventually be bundled together, to look the same at least initially. 

Advertising Changes Everything

But Venkateshwar said the dynamic changes again once advertising is added to the streaming mix, especially around the ad-time allocated to distributors. Every major streamer has said it will offer an ad-supported version if they haven’t already, with Disney Plus and Netflix targeting year-end for their respective launches. So-called Free Ad-Supported Television (FAST) services like Tubi and Pluto TV have managed to attract a large swath of consumers -- they have 51 million and 68 million active monthly users, respectively -- another catalyst for other providers to join the fray. 

According to Venkateshwar, while it is possible that streamers will offer distributors the standard 2 minutes of ad inventory each hour in addition to their affiliate fees, similar to linear bundles, some streamers like Hulu and Tubi share ad revenue with their content partners, which may have constraints. Other streamers with fixed cost agreements like Netflix and Disney Plus would have more flexibility and better margins on the advertising side, he wrote. 

“Distributors in the streaming world are also likely to have a more integral role in ad measurement and delivery than in the legacy cable network world,” Venkateshwar wrote. “As a result, compared to the legacy cable bundle world where distributors got the arguably the worst spots (typically at the 26th and 56th minute every hour, when viewership typically dips), distributors may get more leverage in a streaming world.”

Aggregation is the Thing

While Venkateshwar believes that bundling streaming services is all well and good, the real value lies in aggregation. While Verizon will probably bundle streaming video, Peloton, music and gaming under one low, low price, the real driver of value is its wireless service. According to Venkateshwar’s thinking, bundling is more about convenience and adding value to another core service, while aggregation is about the core offering and driving more engagement.

In that scenario, for example, Amazon could embed its Amazon Fire Operating System into TV brands and bundle streaming services with Amazon Prime, giving consumers the benefit of lower pricing, enhanced content discovery and a potential link to the online shopping service. Google could do the same with Android TV and Apple with Apple TV Plus. 

That could be a scary scenario for cable networks, because the best aggregators make underlying applications irrelevant, like Google did with Yahoo, Spotify did with record albums and Netflix did with TV networks, the analyst wrote.

“... now Android TV and other [operating systems] may make Netflix less relevant as a standalone brand,” Venkateshwar wrote, adding that this will force streaming services to work harder to establish their brands. While Disney appears to be the leader on that front, the impact of other brands like Peacock, Pluto TV, Tubi or even Apple TV Plus is less clear.

While it seems like only the huge tech players will come out on top of the aggregator heap, the analyst was somewhat encouraged by Comcast’s mix of assets -- broadband-only service Flex, Peacock, a scaled ad team, strong content base and distribution scale. But he worried that the slow pace of its Flex product rollout in its own footprint could indicate it’s not quite ready to match up with the tech giants. 

“Overall, while bundling is easy to do, it is quite anachronistic given content distribution technologies today,” Venkateshwar wrote. “We believe the real value of bundling will be realized by aggregation, which is still in its very early phases. As this model evolves, content discovery for TV shows may not be very different than, say, Google search, even if the process is more passive for consumers.” ■ 

After Netflix’s disappointing first quarter — and another one due on the horizon — a general sense of panic that streaming video may not be what unseats traditional pay TV from its throne has enveloped the entire industry over the past few months. Wouldn’t it be an actual hoot if what saves Netflix and its broadband-delivered brethren ends up being something as mundane and dumb-pipe-like as fiber deployment?

Netflix said back in April that it lost about 200,000 global subscribers, its first quarterly loss ever, adding that it could lose another 2.5 million in Q2. At the same time cable and telcos are furiously building out fiber networks, fixed wireless access and 5G offerings across the country to close the broadband gap, mainly in rural markets. With that fiber deployment, fueled in part by billions of dollars of federal money, could come millions of new broadband customers itching to try out streaming for the first, or maybe the second or third time.

Netflix obviously has other problems — it has shed nearly $200 billion in market cap since December 31 as its stock price has fallen 71% and investor sentiment has literally done a 180-degree turn on the company. Investors who were unconcerned about the ever-escalating content spend (about $17 billion in 2021) as long as the subscriber growth trajectory was maintained, are now urging Netflix to close its wallet.  

And while Netflix stock has seen its ups and downs in the past, this time it was serious enough to force the company to embrace two things it has vehemently resisted in the past: offering a lower-priced ad-supported version and going after paying subscribers that share their passwords. According to reports, an ad-supported version of Netflix could come as soon as the fourth quarter of this year. 

 Fiber Blowout

Fiber deployment and construction are the new buzzwords in the cable and telco business, with AT&T claiming they will pass an additional 30 million customer locations with the technology by 2025. Cable operators are regularly extending their existing footprints with fiber — Comcast and Charter Communications are adding roughly 1 million homes per year through fiber edge-out programs — and smaller operators are constantly announcing new fiber builds. So far in May alone, nine small operators and telcos have announced plans to build fiber networks, with TDS Telecom pledging to pass an additional 160,000 homes with fiber this year and Wide Open West pledging $400 million to extend fiber to an additional 400,000 homes by 2027. 

Forget that there are still some questions as to whether there are enough skilled techs to actually build networks. Forget that these networks won’t be fully built for another five years at least.  Chances are if there wasn’t a worker shortage, the number of projects would be even greater — because nothing creates a growth surge more than money, and the federal government has earmarked $65 billion for network buildouts in areas they deem have insufficient broadband speeds. And even though a lot of those projects will be done in areas that have incumbent providers, more choice and higher speeds can only be good news for streaming service providers, right? 

Netflix obviously needs more subscribers. And cable operators, telcos and soon-to-be-Twitter owners are all spending huge amounts of cash to extend broadband services to rural areas. And since some of the customers in those markets don’t have Netflix or other SVOD services -- because you need broadband to stream video — that would appear to represent a pretty big untapped market. Maybe not hundreds of millions of people, but at least a few million. And every little million helps. 

Sounds pretty simple?

Some Gray Areas

Not really. Like everything else in the media business, there are some gray areas. 

Perhaps the grayest is just how many homes don’t have sufficient broadband. The federal government says there are 30 million people that live in areas that don’t have sufficient high-speed data, but doesn’t say how many homes that works out to be. And though DSL service may be a lot slower than cable broadband, with top residential  speed of 100 Megabits per second vs. 1 Gigabit per second for cable, it’s still fast enough to stream video. So technically, truly new broadband customers — those who have never had broadband and therefore, SVOD — are probably pretty few. 

That’s what  Leichtman Group president Bruce Leichtman thinks. Sure, he said in a recent interview, new fiber builds may attract some new subscribers to Netflix, but it will be a marginal amount. More likely, he added, is that a combination of faster networks, lower prices for ad-supported streaming and the advent of free ad-supported TV (FAST) could present an opportunity to convince customers in those areas to subscribe to other SVOD services.

“I think it's an opportunity, but it’s more of a gradual opportunity,” Leichtman said of the fiber build’s impact on Netflix and other SVOD providers. “Remember, they have to build these markets, and the building takes a while. And we’re talking about the 86th percentile. These are not the early adopters that we’re talking about.”

But Growth is Growth, Isn’t It?

Although there has been a lot of talk about the slowdown in broadband growth, it’s still growing. Leichtman believes that one of the biggest catalysts for Netflix and other streaming services would be a return to new housing growth, which has been stagnant throughout the pandemic. New homes means new subscribers for broadband as well as SVOD services.

“While the breadth [of the SVOD market] is mature, the depth will continue to grow,” Leichtman said. “That means more services per household.” 

LightShed Partners expects total broadband subscriber additions to be fairly constant over the next three years: 3.5 million in 2022, 3.3 million in 2023, 3.2 million in 2024 and 3.2 million in 2025. 

At the same time, traditional pay TV losses are accelerating. Wells Fargo Securities media analyst Steven Cahall estimated that traditional pay TV lost 2.2 million subscribers in Q1, 400,000 more than in the same period last year. 

Our own Next TV estimated that cord cutting accelerated 31% in Q1, due mainly to losses at virtual MVPDs and satellite TV service providers.    

MyBundle.TV CEO and founder Jason Cohen said what some observers are missing is that broadband is still growing.

“That’s the piece of the puzzle that the streaming marketplace isn’t very focused on,” Cohen said, adding that his company has nearly tripled its number of broadband partners from 31 in June 2021 to 90 currently, including many small market ISPs that are bringing broadband to people for the first time.

“Some of these people still don’t have Netflix,” Cohen said. “Is there another 100 million households for Netflix to gain in the US? No. But we’re talking about, on the margin, there are millions left. If you're talking about the smaller streaming services, there are still tens of millions [of subscribers] to gain. There's a lot of investment happening to bring more broadband to the table.”

Streaming is Not Dead 

Cohen bristles at those who claim streaming is dead, pointing to the roughly 68 million households who spend about $120 per month on traditional linear pay TV subscriptions. (That’s $98 billion annually, for those without a calculator) Those ranks are definitely going to deplete as those homes cut the cord, but that doesn’t mean they are going to start reading books and learning how to play the piano for entertainment. They’re going to stream video, either through a service they already have or via one to which they will soon subscribe.

“This idea that streaming is saturated we think is 100% incorrect. Those dollars are going to be shifting from those cable bills. Whatever it is, more broadband means there is going to be more streaming,” Cohen said, adding that consumers unwilling to pay $15 per month for a streaming service may be attracted to paying $9.99 for an ad-supported one.

Netflix won’t be alone in its ad-supported efforts. Others like HBO Max — which introduced its ad-carrying version in June 2021 -- Paramount Plus, and NBCUniversal’s Peacock all have introduced AVOD tiers to varying degrees of success. Disney Plus said it would launch a lower-priced ad-supported version later this year.

Disney Plus added 7.9 million new customers worldwide in fiscal Q2, exceeding analysts’ consensus estimates of 5.9 million additions. Including its Hulu, ESPN Plus, and Disney Plus Hotstar brands, total customer additions were about 9.2 million in the period. But the company warned that because the first half of the year came in so much better than expectations, the second half may not be as strong.

“...[T]he first half came in better than expected, so that delta that we had initially anticipated may not be as large,” Disney chief financial officer Christine McCarthy said on a conference call with analysts Wednesday to discuss quarterly results. “But we still do expect an increase in the second half to exceed the first half.”  

The push towards AVOD is a logical next step for streaming, and could ease the pressure to spend heavily on new content just from the nature of the business model. With AVOD, the longer a consumer watches, the more money the service makes, while the absence of advertising means as consumers burn through shows, more content has to be created to keep their attention. 

FAST and Furious 

At the same time, free, ad-supported TV (FAST) services like Paramount’s Pluto TV, Fox’s Tubi TV, the Roku Channel and others are becoming the fastest growing segment in the streaming universe. Pluto TV has about 68 million monthly active users, Tubi about 51 million and indications are that the segment will continue to soar as new players enter the fray. 

Cohen added that the FAST segment is where he believes the ad dollars once earmarked for linear networks will go, adding that MyBundle.TV is building a FAST component into its platform to take advantage of that growth.

“We know people want free TV, they want to pay for no adds, they're willing to pay less to get ads, and then some of them are willing to lean back and say, ‘You know what, I’m willing to take a little bit lower quality content so I can flip through channels,’ ” Cohen said. “Whether it's Pluto or Tubi, you name it, there's a real market for that free TV.”

MyBundle.TV obviously is in the position to take advantage of the shift in how programming is delivered, and Cohen believes that his service, which enables customers to navigate the growing number of streaming services to find the content they want to watch, will become even more valuable as choices increase and traditional linear bundles erode. 

That is even more true today as the number of services increases and the sheer amount of available programming balloons. Tubi alone has a content library with more than 40,000 titles. And as more and more content providers are focusing on originals and other exclusive shows, finding programming across the various streaming services can almost become a full-time job.  

It’s About Aggregation, Not Consolidation

“It’s not what I’m paying for my apps, it’s what am I getting out of it,” Cohen said. “Right now if I subscribe to an app and I'm not going to it to find the content and I’m not finding new shows or movies, then that might be a problem. There’s a lot of content out there, and a lot of good content, on multiple different streaming services. … By helping consumers discover new shows and movies across their services there's another way to increase that value.”

“To me, it’s not streamer vs streamer, it’s still streaming vs the $160 billion [in revenue] between the subscriptions and the advertising that is still spent by advertisers on traditional linear TV,” Cohen continued. “That money is shifting over through this new delivery mechanism that is streaming.”

And Cohen believes that the industry can support more streamers, just as long as there are simple ways for consumers to access the content they want.   

“I think that ultimately our view of the market, there doesn't need to be consolidation, but there needs to be aggregation,” Cohen said. “There needs to be a way for consumers to more simply navigate this process. We think this because the way that consumers build their own bundle that will still include Netflix, that will still include these other big services, as well as the niche services for people’s  interests. 

The pay TV industry is not blind to the need for aggregation either. Comcast and Charter Communications unveiled a joint venture earlier this month that would serve as a streaming platform for its broadband-only customers, one that could easily become a streaming app aggregator.

Cohen acknowledged that larger pay TV companies will likely go on their own when it comes to app aggregation. But he added there is plenty of room for the smaller guys, adding that there is a growing number of ISPs with 200,000 or 300,000 subscribers that would welcome help. 

“We do not think Comcast is going to be using MyBundle.TV,” Cohen said. “But for everybody else, we view ourselves as that aggregator. We consider ourselves the streaming aggregator for the broadband industry.” ■

Netflix stock fell again Friday (April 22), ending the day at $215.52 (down 1.2%) and capping a three-day decline that saw the company shed 38% of its share price, more than $55 billion in market capitalization and the unofficial title of Streaming Champion of the World. Now with expectations low for Q2, the company is faced with a dilemma: what to do to regain its crown. 

The last time Netflix stock fell like a stone -- remember January 21? -- there was a quick response from hedge fund managers who saw the drop off as an opportunity to take advantage of the panic, to snap up a good stock for a bargain price and rake in the money later. Now, three months later, during Netflix’s latest share cratering, those earlier white knights have left the castle, and there doesn’t seem to be any replacements at the drawbridge, at least anytime soon.

Back in January, hedge fund Pershing Square and its chief Bill Ackman said they had bought 3.1 million shares of Netflix for about $1 billion, claiming he was “all in” on the streaming space and was ready to reap the profits once Netflix turned itself around, probably in the first quarter. At the time, Netflix predicted that it would add about 2.5 million global subscribers in Q1, substantially lower than in past Q1’s -- typically one of the strongest growth periods for the company -- but strong enough. A few days later, Netflix founder and co-CEO Reed Hastings said he bought $200 million of Netflix stock personally, showing his commitment to the company and the stock. 

Also: Netflix Comeback Could Take a While 

Fast-forward to earlier this week and Ackman sold his Netflix stake for a $450 million loss on April 19, and Netflix didn’t add 2.5 million global customers, it lost 200,000 of them. Adding insult to injury, the company said it would lose another 2 million subscribers in Q2. 

In a note to shareholders on April 19, Ackman said that while he and the Pershing team believe in Netflix’s management, its “enormous operating leverage” means that any fluctuation in the company’s future subscriber growth can impact value. 

“In our original analysis, we viewed this operating leverage favorably due to our long-term growth expectations for the company,” Ackman wrote.

“While Netflix’s business is fundamentally simple to understand, in light of recent events, we have lost confidence in our ability to predict the company’s future prospects with a sufficient degree of certainty,” he continued, adding that given its management’s track record, Netflix can still be a successful company and a good investment. “That said, we believe the dispersion of outcomes has widened to a sufficiently large extent that it is challenging for the company to meet our requirements for a core holding.”

In other words, Ackman and Pershing, like just about every other fund that invested in Netflix, believed that the subscriber growth train would never stop. Only a few years ago, analysts were predicting Netflix would have 300 million global subscribers by 2023. Now, analysts like Needham & Co. 's Laura Martin are wondering if 222 million (its current global tally) is the peak.  

Despite the irrational exuberance that fueled a lot of Netflix’s unprecedented run in the past few years -- its stock price more than doubled from $302.60 on November 18, 2019 to $700.99 on November 17, 2021 -- investors had to think, at least in the very back of their minds, that it couldn’t last forever. Like the booms and busts of past stock market bubbles -- tech in the 2000s, real estate in the mid-2000s, everything in the late 1990s -- it eventually has to come to an end. In the past week, Netflix stock has fallen 38%. Shares are down 63% since the beginning of the year. The ride, it seems, is over.

Who or What is to Blame?

To some analysts, the pandemic is partly to blame -- Netflix added nearly 55 million subscribers globally between 2019 and 2021, the height of stay-at-home orders that forced people indoors and in front of their TV sets. Broadband experienced the same slowdown after a booming two years -- Comcast and Charter alone added a combined 7 million high-speed data customers between 2019 and 2020 and just 2.5 million in 2021. Netflix was different because it kept spending money on content -- $15 billion last year, by some estimates -- had some of its most-watched shows ever during the pandemic and even though the North America market was pretty saturated (about 60% of pay TV households have a Netflix subscription), they were going to make it up in spades internationally.

But COVID was a global problem, and even international customers had more streaming choices in the last couple of years -- Disney Plus, for example, has about 46 million subscribers in India alone, a market that Netflix is just-now taking seriously. In the U.S., Netflix was becoming a victim of its own success. Couple that with very aggressive competitors and international instability -- Netflix suspended its Russian operation in March after that country’s invasion of Ukraine -- and it's no wonder that Netflix has had a tough go finding new customers. 

“In hindsight, COVID pulled forward Netflix to maturity in its oldest markets (North and Latin America and Western Europe),” wrote Evercore ISI Group analyst Mark Mahaney in a note to clients, adding that Netflix has about 60% penetration of North American broadband households, 80% when password sharing is counted. “It’s not easy to raise penetration beyond that level.” 

Netflix says it is going to crack down on password sharing and will introduce an ad-supported tier, but there are questions about how soon either of those can be implemented and whether it will make much of a difference. Wedbush Securities analyst Michael Pachter, a long-time bear on Netflix stock, told CNBC in March, when talk began to circulate that Netflix, like other streamers, would consider an ad tier, that it likely wouldn’t be big enough or fast enough to make that much of a difference. He added that Hulu has an ad tier that brings in about $10 per month per subscriber in advertising revenue. 

“The question is do they make more money at $10 per month for advertising or do they make more money charging $15.49 [for service]?” Pachter told CNBC. “I think it’s a push. …Five bucks, six bucks per month plus $10 advertising, that’s a push. What’s the point?”

Needham & Co.’s Martin believes that the ad-tier will help Netflix, but advertising alone won’t solve its problems. In an April 20 research note, Martin wrote that in addition to a lower-priced ad-supported version, Netflix needs to add sports and news content, bundle the service with other products and/or purchase a large film or TV content library. 

“Every streaming competitor does one or more of these things, which puts Netflix at a structural competitive disadvantage, we believe,” Martin wrote. “Another alternative is for Netflix to acquire other companies that provide one or more of these attributes, as it has done for video games.”

Borrowing For Growth 

Pachter has been a harsh critic of Netflix's seemingly endless habit of continually increasing its content spend -- $17 billion last year, according to some estimates, compared to $4 billion for Disney Plus -- by borrowing. Increasing leverage was OK'd by Wall Street as long as the subscriber growth was strong. When it started to trail off, then investors began to worry.

Netflix still has a junk-bond rating on its debt, but it was expected to move into investment grade territory soon. Moody’s Investors Service raised Netflix’s debt rating two notches to Ba1 in April 2021, based on revenue and subscriber growth, and the belief that as that continued, Netflix would begin to report positive, sustained free cash flow soon. Having steady, sustainable free cash flow would allow Netflix to take its leverage ratio below 2.5 times, consistent with its current rating.    

Moody’s is still optimistic that Netflix will be able to pull itself out of the hole. 

“We still see the company continuing to build on its significant scale to penetrate the world's 800 million pay TV homes and the global addressable homes of over 1.5 billion (both excluding China), sustaining competitively low cost per viewing hour leadership, growing average revenue for member, and reinvesting in even more content as it benefits from this virtuous cycle,” Moody’s SVP Neil Begley wrote. 

But that confidence does not come without caveats. In his Friday note, Begley warned that the causes of the Q1 losses and the “potentially sharp” first half declines in subscribers are still there: price increases; competition; and customers that are taking a break from in-home binge-watching as COVID restrictions are lifted. Moody’s said it will continue to monitor those conditions. 

Not Such a Big Surprise 

Pachter had warned that this day would come for years. In a 2019 article by then-Bloomberg columnist Joe Nocera, the analyst remembered being asked to justify his $183 price target on Netflix shares when the stock was already trading at $368 each. He said to justify his price target, Netflix would have to show a $2 billion improvement in free cash flow and have around 300 million subscribers paying $20 per month. Pachter believed Netflix could get there in a competition-free environment, but that wasn’t the case.

“What will happen if competitors are charging $7?” Pachter asked.

Well, that day is here. Hulu raised the price of its ad-supported service to $6.99 monthly in October, Disney Plus raised its price to $7.99 per month earlier this year and Apple TV Plus and Peacock’s premium tier are still at $4.99 per month. Netflix upped the monthly charge for its standard service to $15.49 per month in January.

Back in 2016, Nocera wondered in an article he wrote for the New York Times what would happen if the Netflix hamster wheel of constantly escalating spending to fuel subscriber growth ever slowed down. In his mind, it would lead to a lower stock price, which would increase the cost of debt, forcing Netflix to increase prices or cut back on costs or both. In a New York Times article at the time, he wrote that it would turn the “virtuous circle” of increased spending fueling increased subscriber growth, into a “vicious circle.” 

For years, Netflix was the bratty younger brother in the media business, making fun of its slower, older and less stylish cousins, while spending the equivalent of dad’s money like it was going out of style. That behavior was tolerated, even encouraged by lenders and Wall Street as long as it kept up its blistering growth pace. Now that growth has appeared to stop, or at least slowed considerably, Netflix’s hijinks just aren’t so cute anymore. 

But probably more important is that despite the ups and downs of the streaming market, Netflix was always a pretty predictable company. Sure, subscriber growth would fluctuate, but in the end it would always be higher than before. Today, a hedge fund that three months ago thought it was a good move to take a $1 billion plunge in buying Netflix stock, now thinks it’s better to take a $450 million bath just to get out of the water. ■

Ad revenue on streaming video jumped 50.8% to 39.5 billion in 2021 according to a new report from the IAB.

Streaming media was a big contributor to an overall increase of 35% to $189 billion for the year.

“We fully expected 2021 to be an exceptional year for digital ad growth, but even we were surprised at the degree of acceleration. Not only was every single digital channel up, but some were up more than 50% year on year,” said Libby Morgan, senior VP, chief strategy officer at the IAB. “This year’s increase is three times what it was last year.”

Digital audio was up 57.9% to $4.9 billion.

Social media advertising was up 39.3% to $57.7 billion.

Search engine ad revenue was slower, posting a 32.8% gain.

Overall, digital advertising revenues were up 35% to $189 billion in 2021, the biggest increase since 2006.

“What’s underneath these numbers is a very clear narrative. We are witnessing the total and complete democratization of access afforded by ad-supported digital channels,” said IAB CEO David Cohen. “Increased consumer usage coupled with extraordinary growth of small and mid-sized businesses during the pandemic has fueled growth across all digital — but especially digital audio and video. We expect this digital migration to drive the continued growth of a healthy and competitive digital marketplace driven by innovation and entrepreneurship.”  ■

 The spring conference season is upon us, a time of new beginnings, when nature and CEOs of major media companies show the world just what they have been hiding under their drab little husks for the past four months. For nature, the metamorphosis bursts forth in an explosion of color, new life and possibilities. For cable CEOs, it comes in a series of presentations and fireside chats with the investment community to prove their businesses aren’t going to die this year.

Investors have been lining up for cable’s funeral for decades. The industry’s death rattle supposedly began in the nineties with competitive threats from satellite TV and telcos. Now streaming video, direct-to-consumer offerings that bypass the traditional bundle and fixed wireless access service that is expected to steal away broadband customers are expected to deliver the fatal blow. But instead, every year cable survives. It weathered the satellite onslaught, the multiple attempts by AT&T to weasel its way into the video business, and by the looks of things, it is preparing itself to ride out the latest storms. 

I’m not saying cable, or any industry, is invulnerable. Taking even a cursory look at the industry is proof that the business is nothing like it was a decade ago. But unlike buggy whips and the Betamax, whenever the collective consciousness began to stray, cable operators have for the most part managed to figure out a way to make themselves attractive again to consumers. 

In the past century, cable pushed back video competition by introducing more channels, more choices and better pictures through digital and later HDTV offerings. Later, competitive wireline phone offerings, high-speed internet service and in the past few years, mobile service have helped the industry not only survive, but thrive. Now cable companies have twice as many broadband customers as video subscribers, and mobile service, once thought of as merely a retention tool, is becoming a real threat to traditional carriers. In the meantime, cable continues to invest in the business, build out fiber networks and reinvent itself.

Even though those moves are far from secret, operators continue to make the seasonal rounds, reminding investors that although they may not be the latest thing, they are what makes that latest thing work.

Investor Conference Rites of Spring

March is the traditional beginning of the spring conference season (I know spring doesn’t officially begin until March 20, but it was 74 degrees in New York this week, for gosh sake), with Morgan Stanley's Technology, Media & Telecom conference on March 7, and Deutsche Bank Securities hosting the next media get-together on March 14. There is expected to be a bit of a reprieve in April, followed by MoffettNathanson’s Media & Communications conference and J.P. Morgan’s Global Technology Media & Communications conference slated for May. Evercore ISI should wind down the spring season with its TMT event expected sometime in June, although others could be sprinkled in between. And then the fall season starts.   

Already, CEOs of the top three publicly held cable companies have hit the conference circuit and have had to reassure investors that: Yes, they still intend to add broadband subscribers; no, they haven’t given up on video quite yet; and yes, mobile service is on the path to becoming profitable.

Comcast chairman and CEO Brian Roberts kicked off the spring season with his March 7 appearance at the Morgan Stanley conference, He spent most of his time telling the investment community that while broadband growth is indeed slowing down, it has lots of runway ahead of it. He pointed to four areas where he sees Comcast can boost broadband growth: expanding its footprint; competing more aggressively; bundling with other products like wireless; and growing its business services reach.

Comcast has been expanding its reach to about 1 million more homes per year within its footprint through edge-out programs. This year, he expects that expansion to be even greater, given government initiatives to build out unserved and underserved rural areas. 

“Where it's been uneconomic previously, it will be economic in the future for us to extend our broadband,” Roberts said. “And we're going to compete aggressively to do that.”

Roberts also defended cable broadband against the latest competitive threat — fixed wireless access from the telcos — adding that at the moment it is an inferior product to high-speed data service from cable, reminding the audience again that cable has a history in pushing back competitive threats. 

“We don't take it for granted, but we've seen lower-price, lower-speed offerings before,” Roberts said. “And in the long run, I don't know how viable the [FWA] technology holds up.”

Altice USA CEO Dexter Goei, who has been dealing with a steep drop in his company’s stock price since it lost broadband subscribers in 2021, spent his time at the Morgan Stanley conference reiterating plans to accelerate its fiber network buildout, and hinting about faster speeds becoming available to a wider swath of customers. 

Altice‘s accelerated fiber rollout has been well-documented, and Goei said at Morgan Stanley that it is expected to make a big difference. 

Goei said Altice has been talking about fiber for three years, and the slowdown in deployment has been a combination of permitting and COVID-19 related delays and the company’s inability to “get its own ducks in a row.” But now with a restructured management and a clearer focus,  growth is expected to take hold in 2023.     

“The goal was to reinvigorate distribution, rebrand the company, address some customer service-related issues we were dealing with and make that a one-time investment,” Goei said, which “leads to a nice payback in 2023.”

Goei hinted at “multi-gig” speeds for its Optimum broadband service in the second quarter, stopping short of saying just how fast its offering would be. But the company has said publicly — back in May 2021 at the MoffettNathanson Media & Communications conference — that its goal was to offer 10 Gigabit per second broadband within 18 months.       

On the video side, Charter Communications chairman and CEO Tom Rutledge said there is “more damage to come” regarding continued customer losses, but all is not lost quite yet.

“There’s nothing about the old model that’s really changed, Rutledge said at the Morgan Stanley conference, adding that prices for traditional video service continue to rise, driven by ever-increasing sports rights fees. “There’s nothing to really constrain the cost of live sports in the linear business and that’s still the glue that holds it together. I see that business continuing to get more and more expensive for consumers.”

Eyeing a Mobile Future

Despite the shift toward streaming, Rutledge isn’t expecting the pay TV business to change that much over the next few years. But he echoed Roberts in saying that the mobile/broadband bundle will be the future. And he acknowledged that he often thinks of how cable could eventually aggregate and package streaming services for consumers. 

“The opportunity going forward is to start to reaggregate and use that aggregation to give a better, more cost-efficient consumer experience to more people,” Rutledge said. “We think about that every day and how that might happen. I don’t want to be overly Pollyannaish and say that is about to happen because the current model is still very much in force. I don’t see that disappearing in the next couple of years.”

But Rutledge said Charter is laying the groundwork for that day when it does come, making itself available on apps like Roku, where it is one of the most used applications. He added that nearly 12 million customers access Charter services (broadband-only as well as video) via an app instead of a set-top box.

“The upside is still yet to be realized,” Rutledge said. “The reaggregation is somewhat far away, but we’ve been thinking about how to build a platform that can be used by customers  in a more efficient way.” 

It’s a concept that has been well-documented in this column over the past year, and a place where, whether participants say it aloud or not, the industry is headed. But it is also an example of something that cable has been famous for, at least during the 30 years I’ve been covering it: No matter what gets thrown at it, this industry has managed to adapt. It sounds a lot easier than it is to do, and the landscape is littered with the carcasses of companies that underestimated the resilience of this business. This March and beyond, cable executives will get to remind investors of that fact once again. ■

Netflix stock, which enjoyed a brief respite from its January 20 decline after two big investors snapped up a large amount of shares, is down again this week, a combination of fear, looming price increases and analyst reports.

Netflix stock took a double-digit nosedive after it released Q4 earnings after hours on Jan. 20. The next day, shares in the SVOD pioneer dropped 25% to $397.50 each and pundits were claiming that the tide was shifting away from the company that basically invented the subscription streaming video business. 

A few days later, on January 27, Netflix shares rose 10% after it was revealed that hedge fund guru William Ackman’s Pershing Square Capital Management said his fund purchased $1 billion in Netflix stock on January 21, boosting confidence in the company once again. Later, on January 31, Netflix founder and co-CEO Reed Hastings said in an Securities and Exchange Commission filing that he bought about $20 million in Netflix stock, which drove the shares up another 11.1% to $427.14 each. The thought was that Netflix stock had weathered the storm, that investors saw the intrinsic value in the company and its business and the stock would return to normal. Netflix shares closed at $457.13 on February 1, up 7% each. 

But it didn’t last long. Netflix shares began to slide and by February 2  fell 6% to $429.48 each. By February 4, the stock was down to $410.17, amid growing fears that Netflix had run its course, that despite spending $19 billion on content, releasing some of the most talked-about programming last year -- Squid Games, anyone? --  no one wanted to watch it anymore.

Also: What $19 Billion Gets You: Netflix Previews Entire 2022 Film Slate 

Those fears were somewhat founded in reality -- subscriber growth was down despite the release of popular programming -- but what got lost in the panic was that every streaming service was experiencing a growth slowdown. Disney Plus, HBO Max and Peacock all added fewer customers in Q4 than in the past. But Netflix was singled out because it spends the most on content and had been considered to be the unstoppable force of streaming TV. 

Shares were down again Monday to $402.10 after Needham & Co. media analyst Laura Martin issued a report claiming that only half of Netflix subscribers were satisfied with the service despite having its strongest content year ever, and 41% say they are more likely to jettison the service this year. Martin surveyed 504 Netflix subscribers in the U.S. (the service has more than 75 million domestic customers) and concluded if the SVOD pioneer wants to stop the bleeding, it has to add an advertising tier, buy an old media library to improve its content ROICs and/or sell out. 

“Netflix can NOT win the ‘streaming wars’ given its current strategy, we believe,” Martin wrote.

Shares have slowly inched back up in the past two days -- they closed at $403.53 on February, 8 and were priced at $404.09 on Wednesday afternoon, but they’re still far short of the $508.22 per share benchmark of about two weeks ago. 

This could truly be another example of the roller coaster ride that comes with being a Netflix shareholder. The stock has historically had big ups and big downs, usually around subscriber news, and maybe this is no different. But something just feels a little more off this time.

For one, there is a lot more competition on the streaming side than there was just a few years ago. Secondly, everybody is experiencing some kind of subscriber slowdown. Thirdly, all indications are that people are watching more video than they ever have, but if they aren’t watching streamers and are increasingly cutting the pay TV cord, what are they watching, video games? 

Or maybe the other explanation is that they are moving toward free ad-supported services like Pluto TV, Tubi and the like. Tubi already predicted that AVOD subscribers will surpass SVOD subscribers later this year. Maybe pricing really is becoming more and more important. 

But whatever it is, providers should take notice, because investors are. Disney Plus parent The Walt Disney Co.’s  stock was down about 5% between January 20 and February 9 and HBO Max parent AT&T fell 12% in the same timeframe, partly because of the fears around streaming.

While Disney seemed to reverse the slowdown in fiscal Q1 -- adding about 11.8 million Disney Plus subscribers, well ahead of consensus and driving its stock up 5.5% early February 10 -- some analysts pointed to possible weakness ahead.  

Fiscal Q1 was helped by new content releases, including the three-part Beatles documentary Get Back, and new programming could help accelerate subscriber growth beyond Q1 levels. But Barclays media analyst Kannan Venkateshwar worried that it may not be enough to get the service back on track to its previous guidance levels. Disney reiterated its guidance of 230 million to 250 million Disney Plus subscribers by 2024. 

“Next quarter may be a trough both seasonally as well as in terms of footprint expansion and content releases,” Venkateshwar wrote. “Q3 will see launches in 40 new territories in addition to tailwind from the IPL [Indian Premier League cricket] in India, which should add to growth, but Q4 will likely bear the bulk of the growth load due to release calendar. Given this cadence, the company may not be able to fully get back to its guidance trendline this year despite strong fiscal Q1.”  

Attracting the most attention from Martin’s survey is that 41% of respondents said they were “more likely to churn” from Netflix in 2022 because of the price increases. Take that with however big a grain of salt you want -- there’s a huge difference between “I probably will cancel”  and “I just cancelled.” But it does cast some shadow on what in the past has been the gold standard for streaming. Martin’s survey also suggests that 70% of respondents say they won’t pay for additional streaming services in 2022, which doesn’t bode well for the remainder of the streamer-verse. 

In her report, Martin wrote the “clear learnings” from the survey were: (1) That consumers believe they’ve watched “everything” Netflix had to offer during the pandemic of 2020 and 2021, and there was “nothing” on rival services like Discovery  Plus and Peacock. “Better to pay for new services than old,” she wrote; and  (2) Netflix still doesn’t offer a lower priced ad-supported tier like most of its competitors, meaning that “consumers that disconnect Netflix can replace it with 2 or 3 different streaming services for an identical monthly fee.”

Martin has been a sharp critic of Netflix in the past, and has called for a lower cost, ad-supported tier ever since Disney Plus came on the scene in 2019 at a $6.99 monthly price point.

Netflix management has been adamant in its resistance to including ads in programming in the past. And maybe all it will take is another popular movie or show or series or whatever to bring people back to the fold. But the fold is a lot different than it was in the past, and most of Netflix’s competition has either raised prices, included an ad-supported tier or both as a result. (FYI, I am leaving Amazon Prime Video, which said it will raise its annual charges by about 32% this year, out of the mix  because the vast majority of subscribers pay for the free shipping, not the video.)  

HBO Max launched in 2020 at $14.99 per month and last year introduced an ad-supported version at $9.99 per month. NBCUniversal launched Peacock nationwide in July 2020; Paramount Plus launched in 2021 with limited ads for $5 per month; and Discovery Plus launched in 2021 at $4.99 per month with ads.

Netflix has raised prices about 6 times since it launched its streaming video version in 2011 -- in 2014, 2015, 2017, 2019, 2020 and 2022. Each time there was a fear of a massive subscriber exodus that never came. But this time may be different. There are a lot more choices for consumers on the streaming video front. 

Netflix co-CEO Reed Hastings has said that he believes Netflix will weather this storm as it always has -- by providing more compelling content. Netflix spends more than any other service on streaming content -- $19 billion this year -- and last week previewed its entire movie slate for 2022. But more shows may not be the answer. Netflix had its most watched show ever -- Squid Games -- in September and still managed to disappoint regarding subscriber growth. And this year it said it expects Q1 subscriber additions to be about 2.5 million, its lowest growth in years. And Q1 is usually one of the company’s biggest growth quarters. 

By their very nature surveys are worded in a way to find out what people are going to do, not what they’ve done. And when those questions are put to people while the wounds of a price increase are still fresh, or shortly after they've binge-watched a show and don’t think they’ll ever be anything else to watch, the answers are usually pretty harsh. Wait a week and cooler heads usually prevail. 

That could very well be the case here. People are ticked off about another price increase, there are a lot of other lower cost choices around and none of them require long-term contracts, so people can drop them and sign up with abandon. But it does raise questions about streaming, which is turning out to be a lot like its predecessors in the video entertainment business, just trying to figure out the most convenient, cost-efficient way to deliver content to people who want it. Only time will tell who will come up with the formula that satisfies everyone's needs best. ■

Netflix stock continued to claw back from the hole it dug itself in the wake of disappointing Q4 results, rising more than 10% on Monday after it was revealed over the weekend that chairman and co-CEO Reed Hastings purchased $20 million worth of company shares.

Hastings purchased more than 50,000 shares of Netflix stock at an average price of $388 each on January 27 and 28, according to a filing with the Securities and Exchange Commission, increasing his personal holdings in the company to 5.16 million shares. 

Hastings’ purchases came on the heels of hedge fund legend William Ackman’s disclosure that his Pershing Square Capital Management purchased about $1 billion in Netflix stock on January 21, which sent the stock up 7.5% on January 27. 

Hastings’ purchases are seen as a vote of confidence in the stock, especially after Netflix missed subscriber growth targets in Q4 and issued Q1 guidance that some investors interpreted as a sign that streaming video was losing favor with consumers.

Netflix shares were priced as high as $427.69 each on January 31, up 11.3% ($43.33 per share), before closing at $427.14 up 11.1%. Since January 25, when the stock closed at  $366.42 -- down 28% from its January 21 close -- the stock has regained about half of those losses.  

Also: Netflix Bulls No More

Netflix isn’t the only streaming stock that has been battered after reporting disappointing results -- Disney and ViacomCBS stocks are both down significantly since reporting sluggish growth in their direct-to-consumer products in November -- and it won’t be the last. But as some investors see the slowdown as a signal to jump ship, others see opportunity. 

In a research note, Wells Fargo Securities media analyst Steven Cahall wrote that he has seen an increase in Netflix interest after the so-called “Streaming Meltdown” from growth-at-a-reasonable-price (GARP) investors, adding that there is some debate as to whether the expected slowdown in Netflix subscriber growth will be as dramatic as the company has indicated. 

“The conspiracy theorists believe this is part of management looking to shatter the annual expectation for 25-30 million net adds, and redirect attention to overall financial growth,” Cahall wrote. “No one has much of a handle on what the new rate of sub growth will be, though there's general agreement that EPS growth will remain firmly in the mid-20%s. With Netflix [Calendar Year] 2023 P/E [ratio] of 24x, this seems like a GARPy opportunity.”  ■ 

Netflix stock fell as much as 25% on Friday after the SVOD pioneer slightly missed subscriber growth targets in Q4 and issued weak guidance for the future, forcing some analysts to rethink their prior bullish stance on the stock.

Netflix shares were trading as low as $380 each on Friday morning, down 25% or $128.25 per share. The stock closed at $397.50, down 21% for the day.

Other streaming-heavy stocks fell as well. The Walt Disney Co., whose own Disney Plus service has shown some signs of slowing subscriber growth, was down 7% to $137.41, while Discovery Inc., which launched Discovery Plus last year and is in the process of merging with HBO Max parent WarnerMedia, fell 4.7% to $26.19 per share. ViacomCBS, whose Paramount Plus service was revamped last year, fell 7.4% to $31.25 each.

While the Q4 subscriber miss had a lot to do with Netflix’s decline -- it added 8.3 million new customers in the quarter, slightly below consensus estimates of 8.5 million additions -- the real damage came in its guidance for Q1. Netflix estimated that it would add about 2.5 million new customers in Q1, its lowest growth in years and particularly surprising given the first quarter’s influence on the rest of the year. Since 2017, Q1 additions have represented an average of 29% of total full year subscriber additions, according to MoffettNathanson media analyst Michael Nathanson. Using that average, Netflix could add as little as 8.5 million new subscribers in 2022. In contrast, it added 18.2 million new customers in 2021 and 36 million in 2020.

Also: Has Nielsen Been Shortchanging Netflix on Streaming Metrics? 

Adding to the concern is that Netflix had some of its most-viewed content in the past year -- Red Notice and Squid Game. If content like that wasn’t enough to drive subscriptions, what will?   

It wasn’t too long ago that a lot of analysts considered Netflix bulletproof, consistently adding subscribers and expanding its reach to the rest of the world on its way toward 300 million global subscribers by 2023. While domestic customer growth appeared to begin to level off in recent years -- Netflix has about 75 million customers in the U.S. and Canada -- international markets were expected to more than take up the slack.

But in Q4, the opposite appeared to happen. Domestic growth at 1.2 million new paying customers was nearly five times consensus estimates of 250,000 additions. Europe and the Middle East also outperformed -- 3.5 million additions versus 3.3 million consensus -- while Latin America and Asia underperformed severely. Analysts had expected Netflix to add about 1.2 million new customers in Latin America -- it added 925,000 -- and 4.1 million in Asia -- it added 2.6 million. 

That sent a signal to analysts that what was thought to be an unstoppable streaming juggernaut had an Achilles heel, and sent them to their excel spreadsheets to recalculate the future.

Barclays media analyst Kannan Venkateshwar, Morgan Stanley media analyst Ben Swinburne, Evercore ISI Group media pundit Mark Mahaney and Macquarie media analyst Tim Nollen all reduced their overall ratings and slashed their 12-month price targets on Netflix stock. Other analysts like Nathanson and Wells Fargo’s Steven Cahall maintained their overall ratings on Netflix, but slashed their price targets.

Nathanson kept his “neutral” rating on the company but cut his 12-month price target by $85 to $375 per share. Cahall maintained his “overweight” rating on the shares, slashing his price target by $200 to $600 per share and adding in a note to clients that the Q1 guidance “has investors rethinking the growth path.” 

Venkateshwar, who has been bullish on Netflix in the past, reduced his rating to “Equal Weight” and wondered if the slowdown expected in Q1 is a longer-term phenomenon. 

In his research note, Venkateshwar wrote that Netflix’s Q1 guidance “plays almost perfectly into the bear thesis” for the stock, as it will be its lowest growth target ever. And because Q1 usually is a big part of overall annual growth, the analyst speculated that the lower guidance could mean that 2022 will be significantly lower than 2021.

“Both the Q1 guide  and ’22 margins were among investor concerns going into earnings and seem to have been validated based on guidance,” Venkateshwar wrote. “Overall therefore, based on company guidance, 2022 is effectively shaping up to be the company's slowest year of growth on most KPIs.” 

Swinburne dropped his rating on the stock from “Overweight” to “Equal Weight,” and slashed his price target to $450 from $700 per share, adding that he expects content spend to continue to rise as subscriber additions slow. 

Macquarie’s Nollen dropped his rating on Netflix to “underperform” from “neutral” and slashed his price target to $395 per share, adding that he was concerned about increased competition and how that could eat into the SVOD giant’s  international growth. 

“Competition is intensifying, especially internationally,” Nollen wrote “This is becoming a bigger problem now: for example a combined Discovery/Warner this year brings strong brand recognition to many countries, with lower-priced ad-supported tiers, while other players like Paramount [Plus] and NBCU are joining forces in Europe on distribution.”

At Evercore ISI, Mahaney dropped his rating on the shares from “outperform” to “in line,” reducing his 12-month price target from $710 to $525 per share. In a research note, Mahaney said that while there are many excuses for the Q4 miss and lower Q1 guidance -- including heightened near-term churn due to an expected U.S. price increase, increased competition, market maturity, the ongoing pandemic and the late Q1 release of key content like Bridgerton -- the “negative inflection implied by the Q1 guidance is significant.”

Mahaney dropped his full year 2022 subscriber growth estimates by nearly 40% to under 17 million new customers from 26 million previously. 

While Mahaney said this could be a one-off and Netflix could recover its subscriber mojo, he noted it also could be a sign of Netflix’s maturation in key markets. And though he wrote that he has been a consistent buyer during other ebbs and flows at the company -- this isn’t the first time it has missed quarter subscriber targets -- he believes this time may be different. 

In his note, he said the reason for the downgrade was twofold -- the Q1 guidance “implies a real, surprising negative inflection point in the company’s growth outlook;” and the shift changes his growth equation for the company from one based on unit and subscriber growth to one based on price and average revenue per customer, “which makes it less attractive/sustainable.” ■

Atlantic Broadband, several months after closing its $1.125 billion purchase of systems in Cleveland and Columbus, Ohio from WideOpenWest, said it will rebrand its systems throughout the country under the Breezeline name, and added that it plans to launch a streaming video product — Breezeline Stream TV — later this year.

Atlantic Broadband, part of Canadian telco Cogeco Communications, had operated primarily on the East Coast, but said in a press release that the addition of the Ohio systems prompted the name change. The company closed on the purchase of the WOW systems, which pass about 688,000 homes and have nearly 200,000 broadband customers, in September. 

“We’re no longer just an East Coast provider, and we’ve long offered much more than broadband, so our company identity must evolve with us,” Atlantic Broadband president Frank van der Post said in a statement. “The name Breezeline marks the beginning of a new, exciting era of transforming our company through new growth, while also elevating the customer experience through enhanced customer care options, innovative products and investment in the latest technologies.”

Atlantic Broadband began expanding its fiber network last year, and plans to extend its reach to more than 70,000 homes in New Hampshire and West Virginia with its fiber-to-the-home technology. 

Breezeline Stream TV is a cloud-based video offering that will allow customers to access live and recorded programming on compatible devices in and out of the home. The service will be available in select markets early this year and will expand throughout 2022. 

Atlantic Broadband said it will introduce Breezeline in its existing markets beginning today (January 10) and the former WOW communities will transition to the new moniker by the summer. The company also has launched a series of new customer care initiatives, including enhanced self-service options, a new online experience and simplified, transparent pricing. A new customer app is planned for release early this year.  

“The Breezeline name was chosen to convey our commitment to providing easy access to connected experiences for our customers,” Breezeline VP of marketing Julie Sullivan said in a press release. “The Breezeline logo, a five-point pinwheel, represents our customers and the communities we serve, the innovation and services that enrich customers’ lives and the elevated experiences we strive to provide in a seamlessly connected world. The pinwheel also implies motion — symbolic of both high-speed connectivity and the ease with which customers can interact with our company and services.”

Atlantic Broadband is the eighth-largest cable operator in the U.S. and provides residential and business internet, TV and voice services to customers in 12 states: Connecticut, Delaware, Florida, Maine, Maryland, New Hampshire, New York, Ohio, Pennsylvania, South Carolina, Virginia and West Virginia. ■ 

Video streaming, including conferencing, was a big driver of mobile broadband network data traffic increases during the pandemic, but it is a long-term driver of explosive broadband data traffic growth as well and operators will need to optimize their networks to make sure performance matches that demand.

That is according to Ericsson's latest Mobility Report, which found an almost 300-fold increase in mobile data traffic in the past 10 years.

Also: Video Will Consume 76% of Mobile Capacity in Five Years

Over the long term, the report said, mobile traffic growth will be driven by the rising number of smartphones tapping into networks--5.5 billion have been added worldwide since 2011--in combination with rising data volumes driven primarily by video streaming.

Based on current and historical network data Ericsson looked at, video traffic currently makes up 69% of all mobile data traffic, and that is expected to rise to 79% by 2027, with 5G predicted to become the the dominant player by 2027, with a global estimate of 660 million subscriptions worldwide by year's end.

Network performance will need to keep up with the demands of that increased traffic to ensure a "positive user experience," but Ericsson suggests streaming will piggyback on the greater need for speed to keep up with Web browsers.

"Video streaming accounts for the majority of mobile network traffic, and has naturally been a focus area for improvement," the report said. "Compression techniques and adaptive mechanisms have been very effective at lowering the time-to-play and adapting to changing network conditions. But while streaming is buffered, web services place higher demands on network performance
as they require instant speed. Therefore, meeting the requirements for web browsing will also satisfy the demands of many other use cases, including HD video streaming and social media." ■

With the vast majority of consumers enjoying streaming video at home on their television sets, the next venue to Netflix and chill may be in not-your-father’s Buick.

A survey by Vericast found that 50% of respondents would like to stream during long-distance trips, if a device and connectivity were available. Already, 26% said they’ve streamed TV during a flight and 36% on road trips.

Streaming would also be particularly desirable in self-driving vehicles. In the survey 41% said they would watch streaming television via a screen on the car’s center console, 24% wanted to watch on a head-up display projected on the windshield and 24% said they’d watch on a screen elsewhere in the whip. Only 37% said they would not consider streaming TV inside a self-driving vehicle.

Vericast found that 75% of consumers currently stream content at home via their television, while 41% stream via a smartphone. That’s a shift from a study Vericast conducted in February that shows 70% of consumers streaming TV, with 68% saying they were willing to share data with brands to improve their TV ad experience.

When traveling to a new destination, 78% of consumers want to receive restaurant recommendations and 70% want hotel recommendations via ads. This presents a big opportunity for brands to connect with consumers on-the-go through channels such as CTV, email and online advertising, Vericast said.

Consumers who commute to work are most interested in seeing personalized ads.

“Technology advancements like 5G and broader accessibility in transportation like self-driving cars will continue to increase availability of streaming TV options among consumers,” said Michelle Engle, chief product officer at Vericast. “While CTV has been an important marketing channel in recent years, it’s becoming even more critical to omnichannel strategies. With consumers looking to stream more outside of their homes – and new types of connectivity coming into play – brands should evaluate how they’re incorporating CTV into their marketing mix to drive further engagement.”

Comcast's Xfinity Flex product, launched in 2019 to attract broadband-only customers to on-demand and SVOD video offerings, may have missed its biggest opportunity by being late to the streaming game, but could still more than double its subscriber base by 2025, according to Bernstein media analyst Peter Supino.

In a research note, Supino estimated that Flex, which is available to Comcast broadband-only customers at no extra cost and offers more than 10,000 free movies and shows, access to apps like Netflix, Disney Plus, Amazon Prime and Hulu, as well as on-demand pay-per view content, has about 1.9 million active monthly users. That base could have been four times that amount if it had launched earlier in the streaming cycle, Supino estimated, but the analyst still believes the service could grow to about 5.6 million monthly active users over the next four years.

“Had Comcast been early with Flex, we think it would presently serve 6-8 million homes rather than its current [less than] 2 million monthly active users,” Supino wrote, adding that while the service is competitive, it’s not superior to other services. “However, Flex should continue to gain market share, however quietly, by targeting cancelling Xfinity video subscribers who keep Xfinity Internet service, as well as the minority of new Internet subscribers who have neither an SMD nor a recent vintage smart TV.”  

Supino predicts that the shift toward streaming video will continue over the next few years, with streaming media devices (SMDs) from Roku, Amazon, Google and Apple, connected TVs and smart TVs dominating the distribution sector.  

In his note, Supino estimated that of an estimated 117 million internet households in 2025, 100 million will be connected via SMDs or connected TVs. The rest, he wrote, will access entertainment via tablets, laptops and smartphones.

Those 17 million households, coupled with an estimated 10% of existing broadband households (about 10 million homes) that may experiment with a new service  and 4 million non-broadband, non-TV households in the footprint gives Flex a potential pool of about 31 million customers to mine. Taking into consideration Comcast’s existing broadband market share of about 24.2% and assuming 50% usage/uptake rate, Flex could add about 3.7 million customers at the low-end, and 4.8 million additions on the high end.

“With the ~3.7M potential net adds, Comcast can expect to have ~5.6M users by 2025,” Supino wrote, adding that with an estimated ARPU of about $45, Flex could earn annual revenue of around $250 million by 2025.

Supino also believes that Flex can help Comcast’s Peacock streaming service as a promotional tool.

“The cost of promotion on Flex should be vastly lower than in third party environments in which Peacock competes with larger streaming players for sign-ups and engagement,” he wrote. “For example, we believe that Roku gained a 10% share of Peacock's advertising inventory in the companies' 2020 carriage negotiation.” 

As more people stream more video they’re finding, technological glitches are becoming more annoying--and more costly.

A new survey by Penthera found that lengthy buffering and repetitive commercials can result in viewers abandoning programming, behavior that hurts streaming platforms and advertisers. More viewers are turning to downloading as a way to get better performance when watching videos.

Penthera’s fourth annual survey of streaming video viewers in the U.S. found that in 2021, the average adult will spend 2 hours and 29 minutes watching digital video, an increase of 6%.

At the same time, a higher percentage of viewers report experiencing frustrations when they stream—92% versus  2020. The frustration is also more frequent. Among those surveyed, 68% said they had a frustrating experience weekly, compared to 55% in 2020.

“It’s likely that as users watch content across more available services, they are less tolerant of interruptions, low quality, and other experiential issues,” the report said. 

Viewers’ reactions to those frustrations are also stronger. In the new survey, 57% of viewers said they will give up and try again later (compared to 39% in 2020) and 32% will leave to try a different video app (compared to 17% in 2020). 

Viewers are less patient than ever and will frequently abandon a video stream for other entertainment, the report noted.

To streamers, having a good experience has become more important than the availability of good content. Increasingly they said videos can’t be enjoyed when problems like low-quality and re-buffering occur.

Of those surveyed, 40% said re-buffering is the most common reason they abandon a stream, compared to 26% who said they leave most often because they don’t enjoy the content. When asked the top factor in deciding which streaming service to use, 51% said ease of use and 41% reported videos not buffering as the most important factor. Only 39% said having shows and movies they like was their biggest consideration.

The same pattern appears when it comes to ad-supported streaming video. In the survey, 43% said annoying or repetitive ads would make them stop using an AVOD service and 40% would stop using because of a poor experience like startup delays or buffering. 

Content was less of a priority, with 39% saying they’d stop using an AVOD service because the content isn’t good.

To find a better experience viewers are increasingly downloading content, even when they’re planning to watch at home. 

Last year’s survey found that 43% of viewers said they watched downloaded videos when on a trip and 35% did so at home. But in 2021, the script flipped with 45% saying they watch downloaded videos on mobile at home, while 32% watch them when on a trip.

“During the pandemic when all travel and commuting stopped, we expected to see a decline in download activity across our customers globally,” said Penthera president and COO Daniel Taitz. “What we learned was actually the opposite. Download activity increased around the world as viewers wanted to ensure they had a perfect viewing experience without interruptions right inside their home. It's just a better way to watch.”

Overall people are downloading at higher rates in 2021, with 92% said they’ve downloaded from a streaming service, compared to 88% in 2020.

“Viewers no longer think of download as merely a feature to use when they travel on planes or commute—they think of it as a better way to watch," the report said. “They’re using it at home as well, even when they have a connection, so they can avoid frustrating delays and interruptions."

Viewers said they like watching ad-supported streaming videos, and half said it’s because viewing ads lets them watch content for free or at a reduced cost. But when the experience isn’t good, they won’t hesitate to stop using an ad-supported service. 

The top frustration is annoying or repetitive ads, and 43% of those surveyed said that would make them stop using a service. Unfortunately, this is a common issue.

The same ad repeating is seen as worse than too many ads. In the survey, 36% of viewers said ad repetition is their top frustration with ad-supported video, while 30% said it was too many ads.

The threat of further direct-to-consumer content consolidation shouldn’t worry traditional pay TV distributors, Altice USA CEO Dexter Goei said at an industry conference Tuesday, because it will help MVPDs weed out what has been an albatross around the industry’s collective neck for years -- unprofitable video customers.  

Analysts expect that other content companies could follow Discovery and WarnerMedia’s attempt to create a streaming video behemoth, but Goei, speaking at the JP Morgan Technology, Media & Communications conference, said that could be an economic boon for traditional distributors. 

With pay TV subscriber rolls steadily eroding over the years, it is evident that consumers are already moving toward an over-the-top, direct-to-consumer model. As content providers look to get larger and gain more streaming scale, Goei said it could allow traditional MVPDs to focus more on highly profitable broadband service, and weed out low-margin video subscribers.

Also Read: Discovery/WarnerMedia Combo Could Have Biggest Initial Impact on Linear Nets 

“Larger players with a full package of offerings on the direct-to-consumer side is good for our business because it focuses our customers on --  instead of 6-7-8 different choices --  on something a lot smaller that in many respects replaces a video consumer that is less and less valuable to us,” Goei said. “And it allows us to focus primarily on our broadband product, allows us to be a partner for content on a direct-to-consumer basis as opposed to a partner on a linear basis and I think will dramatically improve the economic trends of our business from a cash flow standpoint.”

Goei added that the increased focus on DTC offerings could be an advantage for distributors come carriage renewal time, as the equation shifts toward the DTC model. He added that all of Altice USA’s programming partners have some kind of DTC offering.  

“For us, you want a consumer to be a long-term video subscriber that’s a profitable subscriber, [and] you don't want a video subscriber that’s under three years,” Goei said. “Those [under three-year subs] are the ones that are shifting toward the direct-to-consumer offerings and that's good for us. It’s beneficial to our economics. It makes our priorities very clear, in terms of where we focus our capital allocation and our efforts.”

And that means that distributors are going to look hard at DTC offerings when negotiating future carriage deals. 

“We are going to revisit every equation,” Goei said. “... I think we are going to go through, I would call the next two or three years where you will probably see a big transformation in the MVPD world as to how we partner with our content providers. Because it's not sustainable to continue to see price increases every year with viewership falling.”

Comcast said Wednesday that streaming video from apps like HBO Max, Paramount Plus and others accounted for 71% of all downstream traffic on its Xfinity X1,  Flex and Xfinity Stream platforms in 2020, an increase of 70% over the prior year.

In a blog post May 5, Comcast said streaming saw the largest viewing gains on Xfinity platforms in 2020, fueled by the launch of more than 70 streaming services during the year, including HBO Max, its own Peacock and CBS All Access/Paramount Plus. According to Comcast, OTT viewing rose 73% year-over-year on X1 and Flex. 

In addition, 78% of its X1 customers accessed OTT apps each month, up from 68% in the prior year. Of those subscribers, nearly 80% are using more than two apps each month. 

While Comcast is just one company, it is the largest multichannel video programming distributor (MVPD) in the country with 19.4 million video subscribers and 31 million broadband customers. As Comcast and other operators shift the focus of the business toward broadband, streaming and direct-to-consumer services have become increasingly important, evidenced by its own moves into the sector.

Comcast launched Peacock nationally on July 15, and has grown to about 42 million signups at last count. Others DTC services like Disney Plus and HBO Max and Paramount Plus, have 94.9 million, 44.2 million customers, respectively.  

Engagement is also growing. Comcast said that across its entire entertainment portfolio, including X1, Flex and Stream, customers are watching about three hours more per week than they were before the pandemic started. 

Also Read: The Less Discussed Data Points of TVs New Reality 

Viewing was split pretty evenly between ad-supported content and ad-free content, with ad-supported apps like Flex (free to broadband-only customers) and Peacock Premium (free to X1 subscribers). Comcast said that ad-supported content accounted for more than 50% of viewing on Flex, with Peacock, NBCUniversal's Xumo, ViacomCBS' Pluto and Fox's Tubi among the other most-viewed apps on the platform.  

Also Read: Time Spent Streaming Grew 44% in 4th Quarter: Conviva 

Still, Comcast insisted that doesn’t mean that linear TV is dead, especially for sports. Despite the spike in streaming viewing, Comcast said that it saw an increase in traditional linear TV viewing during the year. And they added that data is showing that streaming viewers “value the lean-back experience” of linear. As an example, Comcast pointed to the live guide on Flex, which brings in traditional channels from Peacock, Xumo and Pluto into an integrated guide, is the second most-viewed feature on Flex behind the home screen.

Also Read: JD Power: New Streaming Services Chip Away at Netflix Dominance 

“As we look forward to the rest of 2021, we’re going to continue evolving these three important pillars of our entertainment platforms to meet our customers where they are with the content and features they desire,” Comcast said in the blog post.

Dish Network chairman Charlie Ergen didn’t pull any punches Thursday in the company's Q1 earnings call, predicting the demise of retransmission consent and likening wireless carrier T-Mobile to the lead character in Dr. Seuss' How The Grinch Stole Christmas.

Ergen had a lot to unpack on the call, as the company has been under pressure concerning its wireless partner T-Mobile’s decision to shutter its CDMA network on Jan.1, 2022 -- affecting about 9 million Boost Mobile and Ting Mobile prepaid wireless customers -- and facing some upcoming carriage negotiations with Sinclair Broadcast Group’s RSNs. 

Also Read: Sinclair RSNs Face 'Tumultuous' Period, Analyst Says

Asked about the effect of programmers putting once exclusive linear content like NFL Football and other programming on streaming services, Ergen, who also said  cable network affiliate fees should go down by 50%, said it made it tough for small broadcasters to survive.

“I’m very empathetic to broadcasters, particularly local broadcasters,” Ergen said. “A lot of them started as small businesses and have grown their business. They’re not only having to deal with legacy linear TV, but they are having to compete against their big owners. I think they have to come up with strategic solutions to reinvent themselves. We’d like to work with them to do that. But retrans has peaked.”

Also Read: Satellite TV: Five Years, That's All You've Got

Ergen pointed out that Dish was one of the first distributors to say that regional sports was on its way out “and two or three years later people figured that out. Retrans has just peaked.”

Ergen has predicted the demise of retrans in the past, but his comments, coming as more and more programmers are relying on direct-to-consumer offerings, it could finally come true. 

More and more programmers are going direct-to-consumer, including broadcasters like ViacomCBS with Paramount Plus and NBC with Peacock. As more and more customers cut the pay TV cord, that has led to lighter retrans fees. Kagan, a unit of S&P Global Market Intelligence has said it expects retrans fees to rise just 2% in 2021.   At the same time, there are many operators that are bracing for big increases in retrans fees over the next few years to help broadcasters pay for the recently signed NFL rights deal, which goes into effect in 2023. 

Ergen next commented on Dish’s ongoing dispute with T-Mobile, regarding the wireless  carrier’s decision to discontinue its CDMA network by the end of the year. https://www.nexttv.com/blogs/dish-wireless-pushes-forward Dish’s prepaid business -- Boost Mobile and Ting Mobile -- rely on that network to deliver service and the company has warned that it would have to purchase millions of new handsets for those customers once the transition is made. T-Mobile has said the impact would be on less than 1 million of Dish’s 9 million prepaid wireless customers.

Ergen said  the carrier's numbers were “way low” and called its claim that the government was requiring them to shutter the network false. Ergen later likened T-Mobile to Seuss’ Grinch, noting that at the beginning of the story, the Grinch’s heart was three-sizes too small.

“Once they got their merger done, they looked like every other big company,” Ergen said, adding that like the Grinch, who stole all the toys from the children of Whoville’s (even little Cindy Lou Who’s), T-Mobile was snatching phones out of economically distressed customers’ hands. 

"The Un-carrier has become the Un-caring Carrier, and that’s a shame” Ergen said, riffing on T-Mobile’s marketing tag line. He hoped that like in the Seuss story, T-Mobile will see the light and reconsider the CDMA shutdown. 

Ergen said he had been reading The Grinch to his granddaughter, adding that during that time he saw the Grinch in a different color.  “Instead of green, I kept seeing him in magenta,” Ergen said. “I kept seeing a magenta Grinch.” 

T-Mobile’s logo is magenta.

Liberty Media CEO Greg Maffei was the latest media chief to speculate on Amazon’s reported increased interest in sports rights, telling an industry audience earlier this week that he expects streaming video companies to get more involved in sports, which should drive rights fees skyward.

Speaking at the virtual Deutsche Bank Media, Internet and Telecom conference on Monday, Maffei said the time is ripe for big tech to boost its involvement in streaming sports.

"Amazon is certainly looking pretty actively, it looks like, at the NFL. You’ve seen a lot of interest from various players,” Maffei said. “Have we seen the execution yet? No. Amazon has moved from a bit player in the NFL to being a serious player and I suspect they're only going to get more serious over time and they won't be the only ones."

Amazon first dipped its toes in sports programming in 2017, agreeing to pay about $50 million for 10 Thursday Night Football games broadcast by NBC and CBS. It stepped up that involvement in 2020, renewing its TNF for three years and opening up speculation that it could expand its sports involvement, to possibly include the entire TNF slate. Fox CEO Lachlan Murdoch has hinted that the programmer may concentrate on its NFL Sunday package and give up rights to TNF. Amazon had been considered to be a possible bidder for the NFL’s out-of-market Sunday Ticket package, a notion that has gained more steam after AT&T agreed to spin off its TV distribution unit -- including DirecTV, U-verse and AT&T TV Now -- and selling a 30% interest in the new unit to TPG Capital for about $8 billion. As part of that deal, AT&T said Sunday Ticket, to which it holds the rights through the 2022 season, would move to the new company. 

Sunday Ticket negotiations are expected to wait until next year, as the league and potential suitors continue to circle around other rights. According to Sports Business Journal, Disney’s ESPN hammered out a deal to renew Monday Night Football and its ABC broadcast network will return to the Super Bowl rotation for the first time since 2006. 

On March 10, Disney said ESPN had reached a seven-year deal with the National Hockey League to air games on the cable channel as well as its ABC network and Hulu streaming service. 

But Amazon finally stepping up to the sports plate could have a huge effect on the way fans consume sports content.

"Amazon Prime taking over Thursday Night Football is a watershed moment in TV history that will undoubtedly accelerate the demise of linear TV and the multichannel bundle,” LightShed Partners partner and media and technology analyst Rich Greenfield wrote in a recent blog posting. 

In a research note, Barclays analyst Kannan Venkateshwar cited published reports that speculate Amazon would pay about $1 billion annually for TNF rights, above the $780 million he estimated Fox is paying in the last year of its five-year deal.

Thursday Night Football ratings have been significantly lower than other NFL packages, Venkateshwar wrote. According to the analyst, Amazon streamed the 11 games Fox carried in the 2020 NFL regular season and one Saturday game. The Saturday game generated about one-third of the viewership of an average nationally televised NFL game, and streaming TNF added between 200,000 and 500,000 viewers, according to the Barclays analayst. However, he noted the new deal may be for more games, driving down the cost per contest.  

And ratings may not be the ultimate game for Amazon when it comes to sports or anything else involved with Amazon Prime. 

Back in December, Amazon’s VP of global sports video Marie Donoghue said the online retailer’s interest in sports is tied specifically to what benefit it would have for the Amazon Prime service.

“We are opportunistic,” Donoghue said at the SportsPro OTT Summit in December. “I think sometimes that confuses people, that we do look at everything, but everything has started with the customer and we only do it if it provides value to the customer and particularly their Prime membership.” 

Later in that interview, Donoghue, who spent about 20 years at ESPN expanding its programming offerings before joining Amazon in 2018, stressed that Amazon isn’t a 24-hour sports service, but an entertainment service, and its inherent nature is vastly different from the other types of companies that normally bid on sports rights. 

“We literally start with the customer and work backwards,” she said

Amazon Prime offers free shipping to customers and has about 150 million people worldwide paying about $119 per year for the privilege. So while it would be nice if sports on Amazon Prime Video drew in more subscribers, the value of that add-on to the service is not in drawing in more customers who watch games and leave. The purpose of the video offering, Amazon chairman and CEO Jeff Bezos said back in 2016, ultimately lies in how many consumer products those viewers buy. 

“From a business POV for us, we get to monetize that content in an unusual way," Bezos said at the ReCode Code Conference in 2016. "When we win a Golden Globe, it helps us sell more shoes in a very direct way." 

The entrance of big video streamers into sports rights negotiations has been expected for years, but so far their involvement has been minimal. Any involvement from those companies -- Facebook and Google have been cited as potential major rights bidders -- would bode well for Liberty, which owns Major League Baseball’s Atlanta Braves, and the Formula One racing circuit. At the same time, the traditional cable bundle is showing signs of unraveling -- MVPDs lost about 7 million customers in 2020, according to reports -- and regional sports networks have been under pressure because of their high affiliate fees. 

Also Read: Sports an OTT Streaming Could Squeeze the Past Vestige of Appointment TV

"The most important thing that drives sports rights is competition. To the degree we see new large digital distributors and the like enter the markets, that's a positive," Maffei said. “To the degree we have seen tradeoffs between free-to- air and pay and then a new version of pay, digital, I think having new players, new entrants is probably the most positive effect we have. I do see that likely to happen for some of the sporting events in the countries we have.”

Maffei also said that for smaller sports, breaking into the standalone streaming business can be tricky. Liberty’s own Formula One launched F1 TV in 2018, and earlier this week said it would revamp the streaming service with new features allowing fans to more easily find archived content and adding Brazil, Slovakia and the Czech Republic to the more than 82 countries where the service is available. 

At the Deutsche Bank conference, Maffei said that in the future he sees sports rights holders, especially smaller ones, offering a hybrid of subscription, broadcast and pay TV content. 

“We’ve learned that that can be an unbelievably  powerful fan engagement tool,” Maffei said of F1 TV. “But it’s hard at the amount of content we have -- 23 races and even shoulder content -- to build enough content to probably build a compelling service for a broad, board group of people. To be a fan engagement tool, great, to be something that is amazing for a really dedicated hardcore fan group, perhaps. But to be something which substitutes or overruns our traditional partners or the large pay partners or the large digital partners, I think that is going to be harder to see. I think you’re going to see a lot of sports find difficulty in building -- and we don’t have enough content --  a broad enough content interest on an ongoing basis to build a subscription product that really replaces what they have. Look at what happened to WWE pulling back and going to Peacock. And they have a lot more content than we do.”

Oprah Winfrey swapped most of her interest in her namesake television network for shares in Discovery Inc., a deal that will increase the factual-based programmer’s interest in the channel to 95%, according to  people familiar with the transaction and documents filed with the Securities and Exchange Commission. 

Discovery launched the Oprah Winfrey Network (OWN) in 2011, capitalizing on Winfrey’s global popularity. The channel ran into some difficulties initially -- ratings were low and it racked up several years of losses  -- but found its path later by targeting shows toward African-American women and producing shows with Tyler Perry. 

This isn’t the first time that Winfrey has sold a portion of her interest in OWN to Discovery. In 2017, she sold part of her stake in the network to Discovery for $70 million in cash, increasing Discovery’s interest from 49.5% to 73.99%. The most recent transaction, valued at about $35 million, upped Discovery’s stake in the channel to 95%, according to people familiar with the matter. Winfrey, who owns a 5% stake in the channel, will continue as OWN’s CEO and chief creative officer. 

Discovery filed documents with the SEC on Dec. 22 outlining Winfrey’s production company -- Harpo Inc.'s -- intention to sell about 670,470 shares of Discovery stock, half of her stake in the programmer. 

Harpo has had the right to put the remaining non-controlling interest in OWN to Discovery during four 90-day windows beginning July 1, 2018 and every 2.5 years through Jan. 1, 2026. According to Discovery’s 2019 annual report, Harpo initially exercised that right in August 2018, but in November of that year withdrew the put notice after Discovery agreed that “upon any succeeding redemption the put payment value will equal the fair value of Harpo's equity interest in OWN plus an incremental 9.337% per annum for the 2.5 year period between the July 1, 2018 put right date and the Jan. 1, 2021 put right date.”

According to people familiar with the transaction, the value of Harpo’s Discovery stake is a combination of that earlier agreement and a 30-day average of Discovery’s share price.

News of the transaction comes shortly after Discovery announced plans for its streaming service, dubbed Discovery Plus, scheduled to launch on Jan. 4. That service will include programming from all of Discovery’s networks -- Food, HGTV, Discovery, TLC, ID, Travel Channel, Animal Planet and more -- as well as more than 50 shows from OWN. 

About two years after it paid north of $100 billion (including assumed debt) for Time Warner Inc., AT&T is now floating scenarios including asset sales (DirecTV and possibly Cartoon Network), massive layoffs (in the “thousands”) according to published reports, and seems hell bent on getting back to its core wireless business (the seemingly only bright spot in its most recent financials). Essentially, five years after embarking on the bold new strategy that included doling out more than $150 billion to get into the media business, AT&T appears to want to take a mulligan. 

Also read: DirecTV Merger with Dish Shut Down Again by DOJ

Investors seemed to take it in stride. AT&T stock closed Oct. 13 at $27.75 each, down just 38 cents (1.35%) per share. So far this year the stock is down about 30%.   

News that AT&T has been thinking about selling DirecTV is nothing new. Heck, it’s been floated in one way or another practically since the day it bought the satellite TV giant in 2015 for $48.5 billion ($67 billion including assumed debt). That DirecTV has been bleeding subscribers for the past two years -- it has lost 6 million customers since Q2 2018 according to MoffettNathanson -- isn’t much of a surprise when you consider that the telco seems to have only purchased the company for its programming relationships in the first place. That was evident in the launch of DirecTV Now virtual MVPD service in 2016, a direct competitor to the satellite service and the subsequent abandonment of that platform for the direct-to-consumer offering of HBO Max this year. DirecTV Now, renamed AT&T Now in 2019, once touted as the future of the TV distribution business peaked at about 3 million customers and lost 68,000 subscribers in Q2. It now has about 1 million customers and is expected to lose more.

AT&T has reportedly restarted talks to sell DirecTV again, only this time, offers are coming in for about one-quarter of what the company paid for it, or between $15 billion and $20 billion. At the same time, AT&T has slapped a “For Sale” sign on its Xandr advertising unit -- remember when interactive ads were supposed to take advantage of the 170 million eyeballs AT&T controlled? -- and so far that too has been met with a tepid response. Other assets on the block include Vrio, formerly DirecTV Latin America, which pulled its initial public offering in 2018 and Warner Bros. Interactive, its video game unit. 

Related: AT&T and DirecTV: Divorce Won’t Be Easy 

According to MoffettNathanson principal and senior analyst Craig Moffett,  the only untouchable business in the portfolio seems to be HBO Max, the streaming service it launched on May 27. WarnerMedia, which houses most of the assets acquired in the $108.7 billion purchase of Time Warner, has gone through one massive restructuring earlier this year, which resulted in senior management like WarnerMedia Entertainment chairman Bob Greenblatt and chief content officer Kevin Reilly being shown the exit, and is going through another shift in focus under new chief Jason Kilar that could mean “thousands” of layoffs in the coming weeks.  And though HBO Max seems to be what AT&T is banking its media future on, even some of those assets are not entirely safe from the hatchet.   

In his interview with the Wall Street Journal on Oct. 4, AT&T CEO John Stankey said, for example, that Cartoon Network becomes less valuable for every hour consumers watch its programming on HBO Max instead of the linear channel. But he said he wasn’t ready to jettison Cartoon yet.

Nevertheless, it still sounds a lot like Stankey was casting a line into the water to see if anyone would bite on the channel. And Moffett thought so too, calling his mention of the network in the WSJ piece “a trial balloon” for “potentially shopping” the channel.

Related: It’s Not TV, It’s HB(Uh)O 

There also seems to have been a semantic shift on the part of the AT&T CEO. 

According to Moffett, when Stankey speaks of AT&T’s strategy now, he talks of fiber rollouts and wireless networks. As far as the media business, gone are the mentions of AT&T as a  “modern media company,” replaced instead by words and phrases like  “de-emphasize,” and  “prune” and “strip out,” the analyst wrote. 

Doesn’t sound like the argot of a guy who wants to stay in the media business, does it?

While AT&T seemingly looks to unravel the business it spent a half-decade building, the wireless unit, while a brighter spot than the rest, also is feeling the pain of the pandemic, with plans to shutter 320 AT&T Mobility stores by the end of the year, on top of the 250 stores already closed earlier in 2020. 

Still, it was AT&T’s Mobility unit (which includes wireless) that fared best in Q2 -- revenue was down nearly 1% to $17.1 billion but adjusted EBITDA was up about 1% to $7.8 billion. It’s other units did far worse. Revenue at the Entertainment Group, which includes DirecTV, was down 11.4% to $10.1 billion and adjusted EBITDA fell 18% to $2.3 billion. At WarnerMedia, revenue fell 23% to $6.8 billion and adjusted EBITDA was down 13% to $2.1 billion

Moffett speculated that there could be three possible reasons for the recent urgency around its media assets: AT&T needs capital to participate in the upcoming federal C-band wireless spectrum auctions; it needs cash to make sure it can pay shareholders their dividend; or, it could all be a part of a routine annual review of its portfolio that found many of these businesses to be “strategically superfluous.”

Moffett stressed that he has no direct knowledge of AT&T’s reasoning for the layoffs and divestitures.

“But the pattern is clear: 1) AT&T is trying to sell almost anything that isn’t nailed down; 2) they are, by and large, getting a disappointing response to the assets being offered for sale; 3) they are therefore left to dramatically cut costs, even in businesses that are ‘core’ to their latest version of AT&T.” Moffett wrote.

Moffett isn’t alone in his thoughts. In a telecom black book report issued Oct. 13, Bernstein media analyst Peter Supino said that AT&T’s HBO and Turner are “suddenly sub-scale and their audiences are under assault. With management instability and difficult industry trends, we think Warner Media is the next shoe to drop for AT&T.” 

But Supino added things will have to get worse at WarnerMedia before they get better. 

Supino applauded AT&T management for its stewardship of the telecom business, adding that in “today’s rapidly evolving, increasingly competitive video market, we think they are way outside its circle of competence.”

The Bernstein analyst also points out that the company’s public subscriber target for HBO Max -- 50 million customers by 2025 -- looks easy given AT&T’s 170 million overall customer relationships, it’s not a slam dunk. HBO has about 34 million paying customers, all who will get HBO Max. But he projects that the company will get another 11 million customers over that period, mainly from high-level wireless customers who will get the service for free, leaving it with 45 million HBO Max customers by 2025. That does not include any subscriber lift from an ad-supported version of HBO Max, which should come next year, making the 50 million-subscriber target “plausible, but not easy.”

Supino estimates that the company also is counting on about $2 billion in annual advertising revenue for HBO Max, but he’s not sure how they will get there.

“HBO Max incremental expenses seem to require advertising revenue, or more subscribers than planned, to make money,” Supino wrote. “As relates to more modest strategies, today’s streaming landscape seems unfit for conservative plans. Pick your poison, we think.”

For what it is worth, while the wireless business is performing better than its other parts, it’s no great shakes either. Wireless makes up about 60% of AT&T’s valuation, but is far from a growth business. And it is going to need significantly more investment for 5G services. 

Part of that investment will have to go toward amassing spectrum, and the federal C-band auction set for December fits the bill. Moffett estimated that AT&T’s chief wireless competitor Verizon will have to spend about $20 billion in the C-band auction just to keep up with T-Mobile, the No. 3 wireless carrier that has a significant spectrum advantage. AT&T will likely have to spend even more, but where that money will come from is in doubt. Even if AT&T did sell DirecTV, Xandr and Warner Bros. Interactive, it could still be far short of the mark.

Moffett added that some reports have valued the video game unit at about $4 billion, but that it is probably worth about half that  amount. Xandr, on a good day, could go for around $2 billion. Add $15 billion to that for DirecTV and it would still be short of the $20 billion-plus it needs to spend on spectrum.

And that's assuming it even gets that much for DirecTV. Moffett noted that DirecTV’s subscriber base is shrinking at 18% per year, cash flow is declining at a high-teens percentage pace and it isn’t launching any satellites to beef up its aging infrastructure. That, Moffett wrote, would lead any potential buyer to assume that the business is being run for cash, and the only way for that to be attractive is for the buyer to get in at a very low multiple.

That too, is a problem for AT&T because of its industry leading leverage. According to Moffett, any deal for DirecTV that comes in below 3.5 times cash flow -- its current leverage ratio -- would make AT&T’s leverage worse, not better. And reports so far see 3.5 times cash flow as the high-end range of bids. Moffett estimates that DirecTV is worth about 3.7 times estimated 2021 EBITDA, or about $13.7 billion, which would put it in the same range as reported bids. 

Moffett has never been a fan of AT&T’s forays into media -- he called the DirecTV merger in 2015 a mistake at the time -- and he currently has a “sell” rating on the shares. Back in January, he told CNBC that media companies that have diversified -- like Comcast with NBCUniversal and AT&T with everything else -- haven’t fared too well.

Comcast is currently under pressure to unload or spin-off its content assets because of secular headwinds to that business, too.  

Buying into the media business was supposed to protect AT&T from the volatility of the wireless business and the company even today says that bundling content offerings with various wireless and wireline broadband packages make them more compelling and stickier to fickle consumers. In the Journal piece, Stankey said AT&T’s deal strategy is just the first step in a “wash-repeat cycle” that has fueled growth at the company for decades, adding that its balance sheet has always been a “strategic tool” that can be used to take advantage of opportunities. 

“Sometimes you walk away from an opportunity, but you did it knowing that the best bullet you could put in the chamber was the transaction you did,” he told the Journal.

And sometimes, you just take a mulligan. 

Verizon Media said it is teaming up with Innovid and BrightLine to offer marketers interactive ads on connected TV. 

Amid the pandemic, CTV has been hot, with impression volume growing 66% in August, compared to a year ago.

“There’s no question that audiences have altered their consumption behavior, perhaps for good, as a result of the pandemic. Innovation is now at a premium as brands adapt to new ways of reaching audiences, with interactive ads leading the way in meeting consumer expectations,” Verizon Media said in a blog post.

Verizon said that interactive ads are already six times more engaging than standard pre-roll ads. Interactive ads layer on additional targeting capabilities to reach viewers that are most likely to lean in.

According to the company 71% of CTV viewers use their mobile devices to look up related content while watching TV, creating an opportunity for advertisers to make connections with target audiences.

The two companies Verizon is working with have long backgrounds in interactive TV.

Innovid in 2008 filed the world's first patent to insert interactive objects into video. It delivered an interactive ad for Pringles during the 2019 Super Bowl.

BrightLine’s technology inserts enhanced ad format for CTV across a large footprint of TV partners and OTT technologies. During the 2018 Olympics BrightLine delivered a unique ad experience. It also worked with Hulu to allow shoppable video for Hulu.

Video views in the second quarter rose 64% in North America during the second quarter, indicating continued strength for streaming as the COVID-19 crisis continued in most markets, according to a new report from Brightcove.

In its 2Q Global Video Index, Brightcove said that the second-quarter gains in North America came on top of a 19% jump in the first quarter, resulting in a 41% increase for the first half of the year.

“COVID-19 drove big gains early in the quarter (or, later in the quarter depending on where you lived), but the entire quarter saw Y/Y growth in views,” said Jim O’Niell, Brightcove Principal Analyst and the author of the report. “Consumers’ appetite for streaming hasn’t waned at all and there remains a great deal of opportunity.”

Viewing on connected TVs was up 548% in the quarter. Despite the fast growth, CTV still has just a small 3% share of all views. Viewing on mobile devices rose. Smartphones had a 41% share of viewing with tablets accounting for another 7%. Computers lost views, with their share of views falling to 49% from 56% a years ago.

Britghtcove found that viewers watch four times as long on CTV than on smartphones, and that half of the content that runs more than 41 minutes is watched on CTV.  

Completion rates on CTVs are less than 20%, while computers are highest (51%), followed by smartphones (46%) and tablets (45%).

“With numbers up on every device, content owners will need to consider all devices as primary screens – at least for now. CTVs and smartphones are destined to be the screens of choice,” the report said.

Globally, Brightcove found that consumption of entertainment, news and sports video content rose by 40% in the second quarter, following 23% growth in the first quarter. For the first six months of 2020, video consumption was up more than 30%.

“The streaming industry is exploding faster than we’ve ever seen before. While much can be attributed to COVID-19 keeping people indoors, stay-at-home orders do not account for the entirety of recent growth,” said O’Neill. “There has been significant growth within the video industry, leading to more video content streaming as a whole; OTT services like Netflix added nearly 26 million viewers and Disney Plus topped 54.5 million subscribers in Q2.”

Viewing of sports content was down 54% globally and in June they were down 64%. In the U.S., views of sports programmers were down 42% just before new live games started to be played.

Globally, viewing on connected TVs was up 160% in the second quarter, compared to a 30% increase in the first quarter. CTV’s global was only 3%, but that’s up from 2% in Q1.

“Study after study has shown consumers turning away from traditional TV to embrace streaming content,” the report said. “The ability to build bundles of content that appeal to individuals’ tastes has been a major draw, one that is going to continue to grow even as traditional TV – especially pay TV – loses traction with consumers who want to watch when and where they want to and often on their own personal screens, not a shared one in the living room.”

As streaming increases, ad supported video services are starting to garner a significant share of viewing.

In a new report, titled Beyond SVOD, Nielsen noted that when it measured streaming in July, time spent viewing video sources other than the big subscription VOD services--Netflix, YouTube, Hulu, Amazon, Disney Plus--accounted for a 23% share and minutes spent viewing rose by 57%.

AVOD services--such as Tubi and Pluto TV--accounted for 21% of this “other” category, or 4.8% of the total. Also included in other were video from MVPDs and vMVPDs, other SVOD services, gaming, network and social video.

Related: New Home Workers Use More Digital, Less TV

Nielsen previously has released data on the SVOD services, including estimates of how many people watched top shows on Netflix and Amazon. Data on AVOD is new for Nielsen.

“While much of the streaming discussion focused on high-profile subscription video on demand (SVOD) content like Tiger King, Ozark and Upload, ad-supported video on demand continued to expand its foothold,” Nielsen said in the report.

The price--free--is one reason for AVOD’s popularity. 

“Rising unemployment in the U.S. is a clear indicator of consumers’ ability to spend, and on what. Free will be key for cash-strapped consumers, and consumers with multiple subscriptions may pare down to be more fiscally responsible. If times get tight, ad-supported free models could supplement any gaps left by cancelled services,” the report said.

With the number of both SVOD and AVOD services expanding, the streaming content field is getting more crowded and fragmented.

“That places an increased burden on all parties interested in capturing and keeping audiences engaged,” Nielsen noted.

Last week, Nielsen reported that streaming accounted for 25% of the total usage of TV during the second quarter of 2020, with grow minutes of video streaming watched rising to 142.4 billion minutes from 81.7 billion minutes in the second quarter of 2019.

AT&T chief financial officer John Stephens said layoffs and management changes at its WarnerMedia unit are a “refocusing” at the content division, and not because of “needed" adjustments at its new streaming service HBO Max.

WarnerMedia launched HBO Max on May 27 to a fairly tepid response -- about 87,000 downloads of its mobile app on Android and iOS devices on its first day, compared to 10 million for rival Disney Plus. Later the parent company claimed 4.1 million people activated the streaming service after its launch. 

But last week WarnerMedia underwent a massive management shakeup, with WarnerMedia Entertainment and Direct to Consumer chairman Bob Greenblatt and HBO Max chief content officer Kevin Reilly ousted among a flurry of other executives. In addition, reports surfaced Monday WarnerMedia would lay off about 600 workers across its HBO, Turner and Warner Bros. divisions. 

The moves come a few months after AT&T said it named former Hulu founder Jason Kilar as CEO of WarnerMedia, replacing John Stankey, who at the time was promoted to president and chief operating officer of AT&T. Stankey was named AT&T CEO in July. 

Other media giants are preparing to streamline their streaming businesses as well. NBCUniversal said earlier this month that it will reorganize its TV and streaming units. 

At the virtual Oppenheimer Technology, Internet & Communications Conference Tuesday,  Stephens said that the changes at WarnerMedia was an effort to “super hyper-focus” its management around its direct-to-consumer efforts, allowing all groups within WarnerMedia to “speak with one voice.”

Stephens acknowledged the restructuring also would reduce costs, allowing for a streamlining of back office and support functions, but added that WarnerMedia would invest those savings “into continuing to provide the best content out there.”

“I view it as more of a refocusing of the company,” Stephens continued, adding that the changes should be seen as a “transformation of making things better, not because we needed to adjust anything, but rather because we’re striving to get even better than the launch was…”

The much-anticipated release of HBO Max subscriber numbers notwithstanding, AT&T stock dipped as much as 2.1% on Thursday, after the telco reported losing nearly 1 million pay TV customers in Q2.

AT&T stock was priced as low as $29.54 per share on Thursday morning, down 2.1% from the day before. AT&T had earlier reported Q2 results, adding that it had lost about 886,000 customers to its DirecTV, AT&T TV and U-verse pay TV services, and lost another 68,000 subscribers to its AT&T TV Now OTT service.

AT&T finished the quarter with 17.7 million pay TV customers.

In a research report, Barclays media analyst Kannan Venkateshwar noted that the sub losses are in line with the overall cord-cutting trend in the industry, but haven’t improved over time even after the company rolled off millions of customers from promotional pricing during the past several quarters. 

Venkateshwar also wrote that yields on pay TV subs fell “quite dramatically” by about 200 basis points in the quarter.

Evercore ISI media analyst Vijay Jayant said in a research note that AT&T’s Q2 results were a “mixed bag.”

Related: Brave New TV World 

While the initial response to its HBO Max service appeared to be strong -- CEO John Stankey said 4.1 million people activated the streaming service after its May 27 launch -- analysts weren’t particularly impressed. In a research report, MoffettNathanson principal and senior analyst Craig Moffett said the HBO Max service, expected to be the savior of its Turner content business, has had "a rather inauspicious start."

AT&T said it had 36.3 million HBO and HBO Max customers at the end of the quarter, compared to 34.6 million Dec. 31.

Financially, the results were less impressive. Consolidated revenue was down 9% to $41 billion compared to $45 billion in the prior year. Operating income was down by half to $3.5 billion from $7.5 billion in Q2 2019 and consolidated EBITDA (a measure of cash flow) was down 6.2% to $14.1 billion..

AT&T blamed most of the declines on the COVID-19 pandemic, which it said affected all of its business segments. In its Entertainment Group,which includes DirecTV, AT&T TV, AT&T TV Now and U-verse, revenue fell 11.4% to $10.1 billion and cash flow was down 18% to $2.3 billion. At WarnerMedia, revenue fell 22.9% to $6.8 billion and cash flow was down 13% to $2.1 billion.

Short-form video streaming service Quibi is reportedly in talks with Roku and Amazon Fire TV about creating links to their connected TV platforms, a move that would allow users of the mobile app to watch programming on their home sets. 

According to a report in Variety, Quibi has recently restarted talks with Amazon and its negotiations with Roku are in the early stages. The trade paper said one potential roadblock is Roku’s displeasure with Quibi’s revenue-sharing proposal. 

Quibi launched on April 6 and so far has failed to live up to expectations. The app had about 300,000 downloads on its first day -- well short of forecasts -- and 1.7 million in its first week.  According to the Wall Street Journal, at this rate the service will have less than 2 million paying customers in its first year, about 30% of the 7.4 million it had originally targeted. 

According to Variety, analytics firms Apptopia said the Quibi app has been downloaded about 4 million times between April 6 and May 28, but only 30% (about 1.2 million) are active daily users of the service.

The app also has consistently placed poorly in rankings of apps downloaded from the Apple App Store -- it has since reached deals with Apple Air Play and Google Chrome, but some observers believe that may be too little, too late.  

Quibi founder and CEO Jeffrey Katzenberg has blamed the tepid response to the app on the COVID-19 pandemic, which has hurt the “on-the-go” nature of the service. More recently, he has said Quibi has pulled back on marketing as protests over the killing of George Floyd have swept the country. 

Criticism of Quibi has been heavy in the weeks since its launch and the company has made moves to allow consumers to cast shows from their phones or tablets to their TVs. Creating a TV app would go a long way onward making that action easier for consumers. 

AMC Networks said Wednesday that it has expanded its streaming video offerings, launching AMC Plus and WE tv Plus, two commercial-free SVOD products initially available to Comcast Xfinity cable and Xfinity Flex broadband subscribers.

AMC Plus will cost $4.99 per month and includes original series from the AMC channel and sister networks like Sundance TV and IFC, ad-free with early premieres on demand, along with streaming services Shudder, Sundance Now, and IFC Films Unlimited. AMC Plus also includes a commercial-free premium linear network available on Xfinity’s electronic program guide. 

For Xfinity and Xfinity Flex customers, AMC Plus will replace AMC Premiere, the commercial-free, on-demand service AMC Networks launched to Comcast customers in 2017. 

AMC Networks is offering the new streaming bundles to other pay TV providers as well -- Comcast is just the first of hopefully many to sign on. The programmer said it will continue to support AMC Premiere customers who either subscribe to the service through other distributors, like YouTube TV, or who have signed up for it on their own and authenticate through their current TV provider.

In addition to offering ad-free current seasons of hits like Killing Eve, NOS4A2 and The Walking Dead, AMC Plus will include bonus footage, sneak peeks of future episodes and exclusive behind-the-scenes features.

WE tv Plus includes programming from AMC Networks’ reality channel We tv and UMC (formerly the Urban Movie Channel), and also is priced at $4.99 per month.

According to AMC Networks, both streaming bundles will be available to Comcast customers over the internet and on demand on its X1 and Xfinity Flex platforms, are searchable with the Xfinity voice remote and across a range of devices in and out of the home via Xfinity Stream. Separately, AMC Networks said Xfinity continues to carry Acorn TV, its premium service focused on British and international television.

“We have a long and fruitful history of partnering with Comcast to serve viewers and fans of our content, and these new bundles epitomize our history of innovation and ability to work collaboratively to embrace the new ways in which viewers are consuming content today,” said AMC Networks president of distribution and development Josh Reader in a press release. “Comcast has always been a valued partner, particularly in the launch of AMC Premiere, a pioneering ad-free service. With these AMC+ and WE tv+ bundles, we build on that partnership in service of our fans on both the innovative Xfinity X1 and Flex platforms. We’re confident that Xfinity customers will appreciate the value, convenience and quality of these new offerings.”

HBO Max said it has reached a distribution deal with Comcast for the cable operator’s Xfinity X1 and Flex customers, leaving just two major distributors -- Roku and Amazon Fire TV -- without a deal for the streaming service.

HBO Max launched today (May 27) across the country. The service is available through most major distributors for $14.99 per month.

HBO Max will be available to Comcast’s Xfinity HBO customers at no additional cost, initially through the HBO Max app and website. Comcast said it is working with HBO Max to bring the app to its Xfinity X1 platform and the recently launched Xfinity Flex, a 4K streaming device that is included with Xfinity Internet. New customers will be able to purchase HBO Max directly through Xfinity in the coming days.

Related: AT&T Close to Roku Deal for HBO Max 

“X1 and Flex bring our customers an unmatched depth and breadth of live, on demand and streaming entertainment, and we look forward to partnering with WarnerMedia to integrate the HBO Max app on our platforms alongside close to 200 other streaming services – all searchable with the award-winning Xfinity Voice Remote,” said Comcast Cable SVP, Video and Entertainment Rebecca Heap in a press release.

Existing Xfinity TV customers who subscribe to HBO either a la carte or as part of a package – along with Xfinity Internet customers who subscribe to HBO through Flex – can access HBO Max by signing in to the HBO Max app or website with their Xfinity credentials. When HBO Max launches on Xfinity platforms, it will join Peacock, Hulu, Netflix, Amazon Prime Video, Amazon Music, HBO, YouTube, EPIX, STARZ, Pandora, and other streaming services on X1 and Flex.

”We’re thrilled to cap off the excitement of today’s launch by adding Comcast’s Xfinity to our roster of distributors who are now offering HBO Max to their customers,” said WarnerMedia Distribution president Rich Warren in a press release. “This deal marks another important step in the distribution of HBO Max and provides millions of Xfinity customers with access to the product.”

With a week to go before the full-scale launch of its HBO Max streaming service, WarnerMedia said it has secured a handful of deals with several cable operators and telcos.

HBO Max is scheduled to launch on May 27 with about 10,000 hours of content and is priced at $14.99 per month. On Tuesday, WarnerMedia said it has secured carriage deals for the service with Altice USA, Cox Communications, Verizon Communications and the National Cable Television Cooperative, a buying group that represents about 750 small cable companies. In addition, WarnerMedia said the service also will be available to gaming consoles from Microsoft (XBox) and Sony Interactive Entertainment (PlayStation) as well as smart TVs from Samsung. Earlier, HBO Max reached carriage deals with Apple, Charter Communications, Google, Hulu and YouTube TV.

“The launch of HBO Max is an important milestone for our company, and we’re excited that these valued partners will be on board for the launch,” WarnerMedia Distribution president Rich Warren said in a press release. “Through our expansive distribution pipeline, millions of customers will have immediate access to a best-in-class streaming experience come May 27.”

Existing HBO and HBO Now subscribers will receive access to HBO Max at no additional cost. According to WarnerMedia, HBO will continue to exist as its own brand and linear TV service, but the HBO Max content will live within either the app through mobile, tablets, Apple TV, Android TV, Xbox, PlayStation or Samsung TVs, or via desktop at HBOMax.com. Existing HBO and HBO Now subscribers who get their service through partners with HBO Max will be able to authenticate into it using their login credentials.

HBO Max will be made available at launch to independent cable and broadband operators – such as WOW!, Atlantic Broadband, RCN, Grande Communications, Wave, and MCTV, among others – through the NCTC agreement. Existing HBO customers of the participating NCTC member companies will be given access to HBO Max at launch at no extra cost and new customers will be able to purchase HBO Max directly through their cable or broadband provider.

AT&T chief operating officer John Stankey told a virtual industry audience Wednesday that its latest streaming video offering HBO Max -- set to debut on May 27 -- could eventually be paired with its AT&T TV software based product as the TV business continues to move toward a more compact streaming environment.

Stankey, who will take over for the retiring Randall Stephenson as CEO in July, talked up the HBO Max service at the JP Morgan Technology, Media and Communications conference Wednesday, adding that it is a key part of AT&T’s entertainment strategy.

Stankey said the ultimate vision is to eventually package the software-based AT&T TV and HBO Max together.

“What Max and AT&T TV have in common is they are both software based, independent of any proprietary hardware, allowing customers to get access content over any device, over any hardware platform," Stankey said. "They’re low friction, they can be deployed literally by a flick of a computer switch somewhere in a back office. That’s an important aspect. And that’s what consumers will see as the customer-based Max grows. It becomes a more scaled distribution element within AT&T, certainly something that surpasses 25-28% of households like our pay TV offering. That becomes a lead basis of entertainment and how we get into households.”

Stankey added that as the TV business continues to transition from the old 500-channel universe to more consolidated, streaming offerings of live sports, scripted and unscripted content and news, bundling the products together seems natural.

“You want a platform that can distribute both. So AT&T being software driven, HBO Max being software driven, user interface capabilities, bundling, price start to move together,” Stankey said. “I think we’re at a very natural place to see that begin to occur and our TV business and our SVOD business start to become one as we get out over the next couple of years.”

HBO Max has been aggressively lining up distributors prior to the launch, including Charter Communications, streaming services Hulu, YouTube TV, Apple TV and Android and Google Play platforms.

But Stankey said one key online distributor -- Amazon FireTV -- could be missing from the mix.

“We’re going to be in virtually all app stores, with one exception -- we may not be in the Amazon Fire[TV] app store when all is said and done,” Stankey said at the virtual conference. “We feel really good about the distribution dynamic, the availability of the product. Those that are HBO subscribers immediately move into Max. It ‘s going to be a really strong first day one. I think it’s going to generate a lot of word of mouth socially. It’s going to generate a lot of activity and what we’re doing for promotions attached to AT&T products is going to be beneficial.”

HBO could have some pretty big shoes to fill. The Walt Disney Co. set the streaming app bar high when it launched Disney + in November, attracting more than 10 million downloads on its first day. Disney + currently has about 30 million customers, and projections are for the service to have more than 50 million subscribers by the end of the year.

[embed]https://twitter.com/RichLightShed/status/1260550715967246337[/embed]

On the other end of the spectrum, short-form streaming service Quibi has attracted less than expected interest, with about 2.5 million downloads in its first week. Quibi currently has about 3.5 million customers, and the company has blamed the tepid response to the COVID-19 pandemic.

AT&T has said it expects HBO Max to have about 50 million subscribers by 2025.

ViacomCBS said it has reached a new distribution deal with Google’s YouTube TV, renewing carriage for its broadcast and sports networks and adding 14 additional channels to the streaming service’s lineup.

According to ViacomCBS, the new deal includes continued carriage of ist CBS broadcast stations, CBS Sports Network, Pop TV, Smithsonian Channel and The CW. In addition, 14 other ViacomCBS networks will be added, beginning with BET, CMT, Comedy Central, MTV, Nickelodeon, Paramount Network, TV Land and VH1 this summer. BET Her, MTV2, Nick Jr., NickToons, TeenNick and MTV Classic will also debut among YouTube TV’s growing line-up of premium content.

The deal also includes a continued commitment to distribute ViacomCBS’ premium subscription services, including Showtime, on YouTube TV, as well as an extended partnership on the broader YouTube platforms.

“We are thrilled to have reached an expanded agreement with YouTube TV that recognizes the full power of our newly combined portfolio as ViacomCBS,” ViacomCBS president, U.S. Networks Distribution Ray Hopkins said in a press release. “Google has been an excellent partner, and we look forward to bringing even more of our entertainment networks to YouTube TV subscribers for the first time.”

YouTube TV offers more than 70 channels of live and on-demand TV and can be watched on any screen. Financial terms of the deal were not disclosed.

"We're excited to launch ViacomCBS' portfolio on YouTube TV this summer, " YouTube TV global head of partnerships Lori Conkling said in a press release. "Our expanded partnership delivers on our promise to offer a premium portfolio of content to our YouTube TV subscribers, as well as across the YouTube platforms."

With about two months to go before the broad release of its Peacock streaming service, NBCUniversal has shaken up its television organizational structure, placing its cable, broadcast and streaming businesses under one roof headed by long-time executive Mark Lazarus.

According to NBCU, the new unit, NBCUniversal Television and Streaming, will house NBC Entertainment, Spanish-language network Telemundo, its cable channels (USA Network, Bravo, SYFY, Oxygen, E! And Universal Kids), international networks and Peacock. Lazarus, who a little more than a year ago was named to head up NBCU’s broadcast, cable sports and news units, maintains responsibility for NBC Sports Group, its owned-and-operated TV stations and affiliate relations.

NBCU soft launched Peacock on April 15 to Comcast XFinity, Flex and Cox subscribers. Company executives said last week that debut has fared better than expected, but has not changed plans for a broader launch on July 15. 

“This is the right structure to lead NBCUniversal into the future during this transformational time in the industry,” said NBCUniversal CEO Jeff Shell in a press release. “Mark has a proven track record across every aspect of our television business from sports to local stations to entertainment. He is the ideal leader to oversee our television and streaming portfolio in this newly formed division, which allows us to have a more unified approach to our content strategy.”

The new structure means that NBC News chief Andrew Lack has decided to step down and will leave the company at the end of the month. Taking his place in the newly created role of chairman, NBCUniversal News Group (encompassing NBC News, MSNBC and CNBC) is former Telemundo chief Cesar Conde. A replacement for Conde at Telemundo will be named at a later date. Until that time, Telemundo’s leadership team will report directly to Lazarus.

“Cesar is a well-respected, strategic leader who has succeeded in multiple roles at NBCUniversal since joining the company in 2013,” Shell said in the press release. “Most recently, Cesar has overseen unprecedented growth at Telemundo, which under his leadership has become the number one Spanish-language network, and through its news division has played a critical role in the expansion of news operations, breaking news coverage and trailblazing political reporting. Cesar’s valuable and relevant experience leading broadcast networks and news divisions, combined with his high degree of integrity and proven management skills, make him the right person to lead our news group into the future.”

Both Lazarus and Conde report directly to Shell. NBC News president Noah Oppenheim; MSNBC president Phil Griffin; and CNBC chairman Mark Hoffman will now report to Conde. 

Rounding out the NBCUniversal senior management team, the following executives continue to report directly to Shell:

• Matt Bond, Chairman, Content Distribution

• Bonnie Hammer, Chairman of NBCUniversal Content Studios

• Kim Harris, EVP and General Counsel

• Kathy Kelly-Brown, SVP, Strategic Initiatives

• Anand Kini, EVP and Chief Financial Officer

• Donna Langley, Chairman, Universal Filmed Entertainment Group

• Ron Meyer, Vice Chairman

• Adam Miller, EVP

• Craig Robinson, EVP and Chief Diversity Officer

• Tom Williams, Chairman and Chief Executive Officer, Universal Parks & Resorts

• Linda Yaccarino, Chairman of Advertising Sales & Client Partnerships

Under the new structure, the following executives will lead businesses reporting to Lazarus:

• Frances Berwick, President, Lifestyle Networks

• Ken Bettsteller, President, International Networks

• Peter Bevacqua, President, NBC Sports Group

• Philip Martzolf, President, NBCUniversal Affiliate Relations

• Chris McCumber, President, Entertainment Networks

• Valari Staab, President, NBCUniversal Owned Television Stations

• Matt Strauss, Chairman of Peacock

• Paul Telegdy, Chairman, NBC Entertainment

Amid the thickening jungle that has become the over-the-top landscape over the past few years, it can be tough for an upstart streaming service to make a dent. But at Philo, a streaming service that launched back in 2017, head of advertising Reed Barker said success has been driven by three simple tenets -- good customer service, low prices and ease of use.

Philo offers 59 channels for about $20 per month, minus news, sports and local broadcast channels. Philo does not release subscriber figures (some estimates say they had about 50,000 customers in 2018). Barker said Philo grew customers last year at about a 10% monthly clip.

“This year it’s been an even larger explosion,” he said. “We had what we thought were very ambitious goals. Given what’s happened with current events and people streaming more... we’ve seen incredible subscriber growth that we’re hoping to continue with."

Speaking at an opening keynote session at the Future-produced Virtual Next TV Summit Thursday, Barker said strong customer service -- its customer satisfaction scores are in the 90%-plus range -- not charging for features like DVR and Look Back that other larger providers do and making content easy to find have led to success.

“We built a package that has everything included on it,” Barker told session moderator Paige Bilins, VP of product management at Telaria. “We’re not trying to charge extra for having what we think should be just the table stakes.”

Philo also serves as a complement to SVOD services like HBO Max, Disney+ and Peacock, Barker said.

“We don’t carry content from NBCUniversal, WarnerMedia or Disney/ABC,” Barker said. “It’s pretty easy to add a $6 Disney+ subscription to Philo.”

For advertisers, Barker said the Philo approach is similar.

Barker said the key is listening to what its DSP partners and advertisers say they need to make advertising relevant all the way up the chain.

“Addressability doesn’t work if you’re doing something different from everyone or if you’re not trying to lead,” Barker said.

About six months ago Philo started adding genre, rating and runtime in the content signals for targeting, and has been working to build first party data segments based on its customer usage patterns. That allows advertisers to target a consumer who watches a lot of do-it-yourself programming not just on home shows, but in any program they are watching.

“So you’re able to find those targets that are relevant, not only in the context of what they’re watching, but in the context of what they’ve watched in their watch history,” Barker said. “We think that really helps with relevance, making sure you’re seeing an ad that isn’t annoying.” 

The Virtual Next TV Summit, part of Future's Virtual NYC TV Week Spring, concludes May 1.

WarnerMedia said it has reached a carriage agreement with Apple for its HBO Max offering to fully integrate the streaming service on the Apple TV app.

WarnerMedia plans to launch HBO Max on May 27. Earlier, it said it had reached carriage deals with Charter Communications and YouTube TV. 

At launch HBO Max customers will be able to access the service on iPhone, iPad, iPod touch, Apple TV 4K and Apple TV HD. Customers with second and third generation Apple TV models can stream HBO Max content from their iPhone or iPad to their TV with AirPlay. Existing customers of WarnerMedia’s current streaming offering -- HBO Now -- who are billed through the App Store and HBO subscribers through Apple TV channels can log in and access the HBO Max app at no additional charge. New HBO Max customers will be able to subscribe directly in the app using in-app purchase.

Fully integrating HBO Max into Apple TV will allow subscribers to watch sows across Apple devices, find content easily and search for HBO Max content using Siri and universal search.

“As we prepare for the launch of HBO Max, our focus remains on making it as widely available as possible for customers seeking out this best-in-class streaming experience,” said WarnerMedia president of distribution Rich Warren in a press release. “The availability to HBO Max across Apple devices is a great addition to our distribution offering and will provide seamless access for millions of customers.”

HBO Max will have 10,000 hours of curated content and a programming slate including new original series, series and films from WarnerMedia’s library and third-party licensed programs and movies.

The company recently announced its day one programming slate. 

On the surface, Quibi seems to press all the right buttons for success in the new streaming-centric entertainment world. 

It is mobile-only, because all the kids today can’t get their darn heads out of their phones. It’s cheap ($4.99 per month with ads, $7.99 without), because kids today can never find their wallets. It concentrates on short-form programming -- most of its original content lasts for 10 minutes or less -- because those same kids have no attention spans and are always watching the dang YouTube. 

It is a streaming service, and given the success of Disney+ -- which the kids seem to really like -- and others, that’s the wave of the future. And finally, it is founded by former Disney and DreamWorks chief Jeffrey Katzenberg, who isn’t a kid but in the past seemed to know what they like to watch.

The fact that Quibi launched on April 6, the height of the worldwide lockdown due to the COVID-19 pandemic, was both bane and benefit. Sure, people confined to their homes were thirsty for content and Quibi is willing to provide. But many pundits doubted that those people under lockdown were going to turn off their TVs to watch short snippets of whatever on their phones. Another setback -- Quibi doesn’t allow viewers to transfer their mobile content to their TVs, so they have to watch on the small screen no matter what.

Those doubts were confirmed during Quibi’s launch -- only 300,000 downloads of its app on the first day, and just 1.7 million downloads in the first week. In contrast, Disney+ had about 4 million downloads on its first day and had about 50 million downloads five months after its launch.

Quibi CEO Meg Whitman said earlier this month that the launch exceeded expectations, telling CNBC that 80% of users who started watching a show completed the first episode, which she said pointed to strong engagement with the brand. She added that while the current focus is mobile-only, Quibi is talking with its engineers about casting programming to TVs.

“We really wanted to get it right for mobile,” she told CNBC. "We had always planned to cast to your TV, so we’ll see if we can accelerate that in the engineering roadmap. We’ll eventually get there.”

But for now, it isn't. And Quibi’s underperformance could be attributed to a lot of things. But for at least some analysts, Quibi has stumbled because it lost sight of the audience it was trying to target in the first place -- preteens and teens -- by offering them content their parents would watch.

In a research report, Barclays media analyst Kannan Venkateshwar called the Quibi download performance, “underwhelming at best,” considering it is bundled with T-Mobile for free in the U.S., is being offered with a generous 90-day free trial through April 30 and was launched when the vast amount of its audience had nothing better to do.

Related:Quibi’s Top Marketing Exec Imbres Leaves Company

But streaming success isn’t always based on logic. Take a look at Netflix. In the beginning, Netflix’s success was driven by consumers who wanted to catch up on library content of old shows, basically serving as a really, really big DVR. 

There were more reasons for Netflix to fail than to succeed, the biggest being consumer inertia. It isn’t easy to get people to change the way they consume entertainment, evident by the early pushback when Netflix first tried to change its model from a mail order DVD service to a streaming video service. What won the day was ease of use, the ability to discover shows without having to find a copy of the TV Guide and to watch them when you want to -- no more appointment TV.

Then there is the content itself. Venkateshwar noted that Katzenberg is a media veteran, having run Disney studios and co-created DreamWorks, and Whitman has a long track record as a marketing and strategic planning guru who has run Hewlett-Packard and eBay. Quibi raised $1.7 billion from a host of old school programmers like ViacomCBS, Fox, Disney, NBCUniversal and WarnerMedia.

In other words, old guys.

As an old guy myself, I find nothing wrong with this. But take a look at where some of Quibi’s programming is coming from. Established stars like Jennifer Lopez, Chrissy Tiegen and Steven Spielberg all have shows. Now, I have great respect for JLo, I think Chrissy Tiegen’s twitter feed is one of the most hilarious things online, and don’t get me started on Steven Spielberg, who has rarely produced a movie that I didn’t love (or at least like). But that’s the thing. Quibi was not created for the 56-year old trade magazine reporter demographic, as lucrative as that may sound.

And the perception that Quibi is just another attempt by the olds to show how hip they are could be a big hurdle. Do you know how I get my 14-year-old daughter to look at me in sheer, saucer-eyed terror? I utter this sentence: “Hey, how would you like to watch a bunch of shows starring people I used to watch when I was your age? In 10-minute increments.”

The short-form approach, which many have tried and failed to deliver in the past (go90, anyone?), was supposed to be a selling point for Quibi, fueled by the success of YouTube and TikTok, which also get a lot of consumption over the phone. But here again, Quibi misses the target.

According to Venkateshwar, short-form viewing on TikTok and YouTube has a disproportionately younger audience, with different tastes in content. There is a reason why the top YouTube stars are mainly comedians, gamers, make-up artists and young men who crash into walls: they’re short, sweet and you can share them and make fun of them with your friends over social media. Try doing that with a 10-minute episode of The Most Dangerous Game.

There is definitely a market for that kind of programming, but they are usually older (25-54) and may like the content but not in the “atomized form that it is presented or for consumption on the phone,” Venkateshwar wrote. “Therefore, in some ways, Quibi has chosen the worst of the two worlds – content that is tailored for legacy demos but on a distribution mechanism more attuned to younger demos without any interactivity being allowed.”

Quibi may use the same delivery method that the kids like, but again, it’s like your dad trying to get you to like his Tommy Dorsey records by blasting them 24/7 through every room in the house. There was just no way an 8-year old with Jimi Hendrix posters in his bedroom was ever going to fully appreciate swing, no matter how much he wanted that to happen. (FYI, I grew much later to like Glenn Miller).

TikTok and YouTube work in the mobile environment because they are bottoms-up social media platforms where the video works with the phone in a two-way flow, according to the Barclays analyst. TikTok and YouTube users not only create and upload content but engage with it in a way that is a lot more interactive.

“In other words, the form is the purpose when it comes to the phone,” Venkateshwar wrote. “Quibi on the other hand feels like an old media mindset being literally being squeezed into a new media form factor without any purpose.”

But maybe Quibi is beginning to realize where it needs to focus. According to an April 22 Reuters report, downloads have risen to about 2.7 million and Katzenberg has said users will get the ability to cast shows from their phones to their TVs beginning in May.

And though it’s an easy target being the newest kid on the block, Quibi isn’t alone in struggling to unlock the streaming video code. Venkateshwar even had some criticism for Disney+, adding that despite its success, it has fallen into the same “content first” trap that most streaming services do.

He did not downplay the importance of good content on a service -- The Mandalorian was a major factor in Disney+ early success. But the Barclays analyst argues that content, like technology, is a tool for engagement, which has several dimensions in the streaming business.

“We believe future streaming attempts will need a very different approach to realize their full potential vs. just creating content and putting it on the internet,” Venkateshwar wrote. He added that NBCU’s Peacock could have the greatest potential by serving as an aggregator for content creators that don’t want to spend the money building a streaming service, but want to participate in large scale streaming economics.

In that way, Peacock could be more like what the analyst envisioned for another streaming service Hulu, which has become a defacto “adult Disney+” as a vehicle for racier programming in the Disney library, rather than the content aggregator Venkateshwar had hoped. The analyst has lamented that Disney did not see Hulu as an Amazon for content, offering Disney fare as well as content from ESPN+, Netflix and HBO Max through a single interface. He also wondered why Hulu couldn’t be a transactional platform for Disney, much like Amazon is currently for theatrical content released online during the COVID-19 pandemic.

“In that respect, Peacock can in some ways become the version of Hulu we envisaged earlier but even more useful for consumers by aggregating local content relevant to audiences in various markets thereby allowing advertisers also to engage more effectively with consumers,” Venkateshwar wrote.

So whether Quibi manages to squeeze out a niche, or it gets overwhelmed by the onslaught of OTT offerings that are there and are yet to come, will be left up to a traditionally fickle demographic. Quibi will continue cranking out short form programming -- it launched with 50 new shows and has said it will end the year with 8,500 episodes across 175 shows. But just like my dad and those damn Tommy Dorsey records, just because you can doesn't mean you should. 

Netflix added about 15.7 million global subscribers in Q1, spurred mainly by shelter-in-place orders during the COVID-19 pandemic, but the company expects a slowdown in Q2 as more and more consumers are allowed to leave their residences.

Netflix ended Q1 with 182.9 million global customers, an increase of 23% or about 15.7 million subscribers. In the U.S. and Canada, Netflix added about 2.3 million subscribers in Q1, ending the period with 69.97 million customers.

That helped drive global revenue up 28% to $5.8 billion and pushed free cash flow into positive territory -- $161.6 million in the period compared to a negative $1.7 billion in Q4 -- driven mainly by lower production costs. Nearly all filming on Netflix productions has been stopped because of COVID-19. The company said it has created a $100 million fund to help workers on its productions and has donated another $30 million to third parties and non-profits for emergency relief for out-of-work crew and cast across the broader TV and film industries in areas where it has a large production presence.

The subscriber growth was spurred by the COVID-19 pandemic, which has forced millions of people worldwide to work and play from home. The resulting shelter-in-place orders have spiked TV and streaming content viewing across the board, and Netflix was no different. But Netflix added that as those orders are lifted, it expects growth to subside.

“We expect viewing to decline and membership growth to decelerate as home confinement ends, which we hope is soon,” Netflix said in a letter to shareholders.

Netflix forecast about 7.5 million customer additions in Q2, but added that “given the uncertainty on home confinement timing, this is mostly guesswork.”

Subscriber growth could be higher or lower, depending on when people are allowed to leave their homes and whether they will want to take a break from TV afterward.

“Some of the lockdown growth will turn out to be pull-forward from the multi-year organic growth trend, resulting in slower growth after the lockdown is lifted country-by-country,” Netflix said in the letter. “Intuitively, the person who didn’t join Netflix during the entire confinement is not likely to join soon after the confinement.”

WarnerMedia has set a May 27 launch date for HBO Max, peppering the first day of the much-anticipated streaming service with original shows, documentaries and library content.

WarnerMedia first unveiled its plans for the HBO Max streaming service in October. The service, priced at $14.99 per month, will eventually include about 10,000 hours of content.

So far WarnerMedia has signed on cable operator Charter Communications to HBO Max. Others are expected to follow.

Related: It’s Not TV, It’s HB(Uh)O 

The initial round of content for the service will include original series like scripted comedy Love Life; feature documentary On the Record; underground ballroom dance competition series Legendary; all-new Looney Tunes Cartoons, from Warner Bros. Animation; and Sesame Workshop’s The Not Too Late Show with Elmo.

Related: Stankey: HBO Max Price point ‘Compelling’ 

“Even in the midst of this unprecedented pandemic, the all-star teams behind every aspect of HBO Max will deliver a platform and a robust slate of content that is varied, of the highest quality, and second to none,” said WarnerMedia Entertainment and direct to consumer chairman Robert Greenblatt in a press release. “I’m knocked out by the breadth and depth of our new offering, from the Max originals, our Warner Bros library and acquisition titles from around the world, and of course the entirety of HBO.”

HBO Max will draw content from the WarnerMedia library, including movies from Warner Bros. Studios, New Line, and titles from DC, CNN, TNT, TBS, truTV, Cartoon Network, Adult Swim, Crunchyroll, Rooster Teeth, Looney Tunes, and a selection of classic films from Turner Classic Movies. HBO Max will also offer third-party acquired series and movie titles.

After the initial launch, HBO Max will continue to stream originals on a regular schedule throughout the summer and fall, including The Flight Attendant, starring Kaley Cuoco; the Friends unscripted cast reunion special; all-new original episodes of DC’s Doom Patrol and others.

“Consumers will quickly see that HBO Max is set apart by a foundation of loved brands built over decades but stitched together with a distinctive voice and product experience,” HBO Max chief content officer and president TBS, TNT and truTV Kevin Reilly said in a press release. “Our team has meticulously selected a world class library catalogue and collaborated with top creators across all genres to offer a monthly cadence of original series and movies that we will program and promote for cultural impact.”

WarnerMedia said it has reached a multi-year agreement with Charter Communications, making HBO Max available to all of the cable operator’s customers once it launches in May.

HBO Max will debut with 10,000 hours of curated content and a programming slate anchored by the entire HBO service. The platform will also include new original series and films from across WarnerMedia’s library and third-party licensed programs and movies. 

Related: WarnerMedia Betting Consumers Find Value in HBO Max 

“Charter has been a longtime distributor of our networks and on-demand content, and a valued partner to our company,” said WarnerMedia Distribution president Rich Warren in a press release. “We look forward to working together to bring HBO Max to Spectrum subscribers when the product launches next month.”

As part of the distribution deal, all of Charter’s existing HBO subscribers, including those in its Spectrum Silver and Gold video packages, will automatically be given access to HBO Max and its expanded programming offering for no additional charge and with no action required other than signing into the HBO Max app. All remaining and new customers will be able to purchase HBO Max directly from Charter.

“We are eager to provide Spectrum customers with the highly-anticipated HBO Max offering when it makes its debut next month,” said Charter executive VP programming acquisition Tom Montemagno in a press release. “This new premium streaming experience will be a welcome addition to Spectrum subscribers; we will offer HBO Max on a multitude of platforms for purchase by our video, broadband and mobile customers alike.”

The New York Yankees and the YES Network have agreed to live stream 21 Yankees baseball games on Amazon Prime Video, beginning with an April 17 match against the Cincinnati Reds.

The games will be made available for free to Amazon Prime members throughout the Yankees home-team footprint in New York, Connecticut, north and central New Jersey and northeast Pennsylvania. The games will be simulcasts of games produced by YES for broadcaster WPIX New York and other Yankees’ over-the-air partners.

“We understand that fans are consuming content in a variety of different ways, and we believe our unique partnership with Amazon represents an exciting development in the realm of live sports,” said Yankees Global Enterprises CEO Hal Steinbrenner in a press release.

The telecasts will feature Amazon’s X-Ray technology, which allows fans streaming on Android, iOS mobile, and Fire TV to access live in-game stats, team and player details, and real-time play-by-play information as they watch. The Prime Video app is available on smart TVs, mobile devices, Fire TV, Fire tablet, Apple TV, Chromecast, game consoles, Comcast X1, or from the web.

“We are always looking for ways to enhance the value of a Prime membership for our customers, and we believe Yankees fans are going to love having a selection of games on Prime Video this season,” said Amazon Global Sports Video vice president Marie Donoghue in a press release. “We want to give Prime members access to the broadest selection of content across the broadest number of devices, and this deal gives Prime Video the opportunity to work with the top regional sports network in America and one of the most beloved franchises in all of sports.”

Amazon is no stranger to sports. In 2017 it secured the streaming rights to NFL Thursday Night Football, and is a minority partner in the YES Network. The streamer also carries MLB.tv as a separate subscription service.

“We are excited about teaming up with the New York Yankees and Amazon to make these 21 over-the-air games available through Prime Video,” said YES Network CEO Jon Litner in a press release. “As consumption habits among Yankees fans continue to evolve, we’re embracing new and innovative technologies to enhance the viewer experience.”

Here is the schedule of games set to stream on Prime Video:

Friday, April 17 Cincinnati 7:00 pm

Tuesday, April 21 @Detroit 6:30 pm

Saturday, April 25 Cleveland 1:00 pm

Friday, May 8 Boston 7:00 pm

Friday, May 15 @Houston 8:00 pm

Friday, May 22 Seattle 7:00 pm

Saturday, May 23 Seattle 1:00 pm

Wednesday, May 27 Minnesota 7:00 pm

Sunday, June 21 @Minnesota 2:00 pm

Wednesday, June 24 Baltimore 7:00 pm

Tuesday, June 30 @Baltimore 7:00 pm

Wednesday, July 22 Angels 7:00 pm

Friday, July 24 Boston 7:00 pm

Wednesday, July 29 @Mets 7:00 pm

Monday, August 10 @Kansas City 8:00 pm

Friday, August 21 Toronto 7:00 pm

Friday, August 28 @Cleveland 7:00 pm

Thursday, September 10 Boston 7:00 pm

Sunday, September 20 @Toronto 1:00 pm

Wednesday, September 23 Houston 7:00 pm

Friday, September 25 Tampa Bay 7:00 pm

Comcast said Tuesday that it has purchased ad-supported streaming service Xumo. Terms of the deal were not disclosed.

Xumo, based in Irvine, California, offers free, live and on-demand streaming entertainment, news, sports and features over 190 different genre-grouped channels. Its partners include Roku and smart television brands like Panasonic, LG, Vizio, Samsung and Hisense. Comcast said the company will continue to operate as an independent business inside Comcast Cable.

The deal comes as Comcast is gearing up to launch its Peacock streaming service. That product, which will be free to Xfinity customers, will debut on April 15.

Comcast already has a relationship with Xumo -- it agreed last summer to integrate the Xumo app into its Xfinity set-top boxes. 

“The talented team at Xumo has created a successful, growing, and best-in-class set of streaming capabilities,” Comcast said in a statement. “We are excited for this team to join Comcast and look forward to supporting them as they continue to innovate and develop their offerings.”

Netflix, already focusing heavily on its international opportunity as the U.S. market matures, will likely get most of its future growth from three key areas, with mobile broadband users representing the greatest opportunity, according to a report by MoffettNathanson media analyst Michael Nathanson.

Netflix has about 167 million paid subscribers globally, with 61 million of those in the U.S. and 105 million elsewhere. Domestic subscriber growth has slowed in the past several years from 5.3 million in 2012 to 2.6 million in 2019, and will likely continue over the next few years. Nathanson estimates that paid customer additions will shrink to 1.7 million in 2020 and to 903,000 by 2024.

The flattening out of the U.S. market was just a matter of time, Nathanson wrote. With 61 million U.S. subscribers, Netflix is now streamed in 76% of homes that stream video, and 80% of homes that have broadband. So, it was only logical that growth would decline. And decline it did, sharply. The 2.6 million U.S. subscriber additions Netflix reported in 2019 was 55% below the 4.5 million adds in the prior year. For the next five years at least, Nathanson predicts that U.S. adds will be around 1 million per year.

Nathanson added that even as cord cutting accelerates -- pay TV subscribers are declining at about a 3% annual clip -- it won’t help Netflix domestic subscriber rolls, because its existing penetration with pay TV providers is high. He estimated that with Comcast alone -- which integrated the Netflix app in its X1 operating system in 2016 -- penetration is about 67%.

“In other words, people are cutting the cord because they have Netflix,” Nathanson wrote. “They’re not cutting the cord and discovering Netflix for the first time.”

But it’s a different story internationally, and Nathanson believes that subscriber growth outside of the U.S. should more than double in the next five years. Nathanson estimated that Netflix would have 305.2 million global paid customers by 2024, with 66.4 million in the U.S. and 238.8 million in other countries.

Also helping out Netflix’s positioning internationally, is the near lack of competition from other streaming services. In his note, Nathanson pointed out that Comcast, despite its ownership of British satellite TV service provider Sky, didn’t mention an international component to its streaming Peacock service, which will launch in April. AT&T’s HBO Max will have a delayed international debut as the company agreed to extend its own content licensing agreement with Sky.

“That lack of international competition presents a long and open green field of opportunity for Netflix to keep growing outside the U.S.,” Nathanson wrote.

The analyst expects Netflix subscriber growth to focus on two areas with the most low hanging fruit first: U.S. Clones (those markets with high disposable incomes and broadband penetration and English-language fluency); and “Local Language Giants” (like Japan, South Korea and France).

U.S. Clones could create 16 million more broadband subscribers over the next five years, with 50 million additional high-speed internet customers coming from “local language markets by 2024," he predicted.

“Mobile First” countries like India and Southeast Asia, will require a little more work in terms of lower pricing and greater localization of content, Nathanson wrote, adding that Netflix would have to promote low-cost mobile broadband to drive penetration. He added over the next five years, he expects an additional 35 million broadband customers to come from those markets.

“The real game changer for Netflix, in our opinion, is the mobile opportunity,” Nathanson wrote, adding that based on Facebook and Instagram usage in those markets, the potential is huge. He estimated if Netflix could capture 2% of the Facebook users in Europe, Middle East and Africa and 5% in Asia-Pacific, it would add 50 million new customers to its rolls by 2024.

Although the need for a national privacy policy -- rather than evolving patchwork of state-by-state rules -- and the role of artificial intelligence permeated the dense discussions at the annual State of the Net conference, sessions on streaming media growth and the evolving role of media platforms put attention on current business issues that may have more immediate impact.

With its usual line-up of policymakers and its self-described position as "America's Premiere Internet Policy" event, SOTN2020 offered its usual array of telecom and media status reports during a day-long program in Washington on Tuesday, Jan. 28.

The "Video Streaming" session generated a forecast that after the inevitable shakeout of over-the-top providers, a new ecosystem will emerge that will be a reverse mirror image of today's structure, with ad-supported streaming services taking the role of today's "free" broadcasters and bundles of paid OTT channels replacing today's cable TV bundles.

Kannan Venkateshwar, a Barclays managing director focused on media/telecom research, predicted that "Netflix becomes the traditional broadcast network" because it carries a variety of program categories while other OTT services concentrate on specific audiences (such as Disney+ for families, NBC's Peacock for comedies).

Venkateshwar also examined the shifting global nature of streaming content. With such international expectations, "the scale of spending has gone up," he said. Although Netflix and other firms are creating specialized content in some countries or languages, most OTT content is intended for worldwide distribution. He said the only example of largely domestic content is sports (except for global soccer).

The SOTN discussion took place just as a consultant's analysis emerged, envisioning 50% global OTT revenue growth by 2024, surpassing $200 billion by then.

Another of the panelists, Daniel Ornstein, co-founder and CEO of Bundler Inc., said that a viewer's future collection of streaming channels is not like cable.

"You can pick and delete something" at anytime," he said, underscoring the problems that process will create for broadband pricing, especially if carriers continue to package some OTT channels, such as the current Verizon and Disney+ combination. Ornstein, who heads the new California aggregator and marketplace for media subscriptions, was on the FCC chairman's staff about 10 years ago and later worked at Warner Bros. Entertainment and Warner Bros. TV. He predicted that "companies are going to overlap" and eventually the ecosystem will settle into a combination of new streaming structures.

"There will not be a total revolution of everything direct-to-consumer," he said, opining that "exclusivity is here to stay." He added: "Once you focus on content investment windows, carriage rights are a good way to generate revenue."

Larry Downes, an analyst, pointed to the different ways that Generations X, Y and Z (millennials) embrace streaming media, contending that the youngest cohort sees no difference between "professional" productions and self-produced content (such as small YouTube videos). He insists that these variations will require new business models, which will complicate the evolution of streaming channels.

DeShuna Spencer, founder and CEO of kweliTV, a black-focused streaming service, expects that the "streaming wars" will open opportunities for specialized content channels such as her service. While the major OTT companies are "fighting for the same content," ventures such as kweliTV can develop targeted audience. Spencer also pointed out that her company pays for programming as it runs, not up front as the major streamers do.

"Over time, maybe five years, spending will dry up," she predicted.

The Future of Platforms: Not Just Antitrust

With the evocative question of whether Tech Platforms will "Reign or Get Reined In?" the session on what will happen to the major platforms during the next 10 years generated a predictable range of responses. Most of the panelists agreed that in this volatile category, it's hard to predict whether Google, Amazon, Apple, Facebook or other currently dominant players will continue their juggernauts -- or how upstarts might plunge into these roles.

Their fates will proceed "completely irrespective of what [happens] with antitrust," said Ben Sperry, associate director-legal research at the International Center for Law and Economics. "If we move away from consumer welfare, you'll see a different kind of economy -- not necessarily good for consumers."

Steve DelBianco, president/CEO of NetChoice, warned that antitrust actions could affect innovation, since small companies often build strategies with expectations of being acquired by a major provider, such as the platform companies.

Privacy also plays a major role in the outlook for platform providers during the coming decade, the panelists agreed.

Katie McInnes, policy counsel at Consumer Reports, characterized "privacy as a luxury good." She and other panelists joined the chorus urging a national privacy policy to avert confusing state-by-state laws.

DelBianco also predicted that by 2030, "Government will still be trying to figure out how to regulate artificial intelligence," which will continue to be a major initiative of all the platform providers.

Privacy Focus, Including New Protections for Teens

Rep. Jan Schakowsky (D-Ill.), who chairs the House Subcommittee on Consumer Protection and Commerce, said she is preparing legislation that will restrict digital messages including some advertising to older children (presumably ages 13 to 17). The expansion of the Children’s Online Privacy Protection Act (which covers children 12 years and younger) is expected to be introduced later this week. (Update: Democratic Rep. Kathy Castor of Florida introduced the PRIVCY Act on Jan. 30.)

"We think it's important to put protections into the law to protect older kids," she said, citing it as part of "baseline privacy law." Although the proposed legislation will primarily be aimed at online social media, it may affect other media platforms. Schakowsky cited the need for such legislation because of the "propaganda of fake news" that will emerge during the upcoming election campaign.

“I feel a sense of urgency that we could have a complete fantasy of a message campaign in this election,” she said.

Rep. Cathy McMorris Rodgers (R-Wash.) emphasized the problems that are taking shape as many states -- notably the new California Consumer Privacy Act (CCPA) -- that have the potential to wreak havoc on national policy.

"It's easy to see a patchwork of laws that will be confusing to consumers and difficult for businesses," she said. Rodgers, the ranking member of the House Consumer Protection and Commerce Subcommittee, also pointed out that the parent Commerce Committee is still focusing on mapping of broadband in order to resolve lingering issues about the digital divide, which affects her semi-rural district.

Artificial intelligence was the sole theme of a final keynote by Dr. Lynn Parker, deputy U.S. Chief Technology Officer. She described the pending AI regulatory plan to "consider AI on a use-by-use perspective." She also addressed the emerging controversy about over-reliance on AI, insisting that it "is unethical not to use AI if it can be beneficial."

"Global leadership in AI matters," she said, but admitted that it is "not reasonable to believe every country will have the same approach to AI."

"We're still a ways away from defining" U.S. policy, Parker said.

Netflix said it added 8.8 million additional global subscribers as net income and revenue rose in the fourth quarter. But growth was slow domestically, with the top streaming service adding only 420,000 users in the U.S., the result of increased streaming competition, the company said.

Net income was $587 million, or $1.30 per share, compared to $134 million, or 30 cents a share, a year ago. The company said at average revenue per subscriber rose 12%.

Revenue rose to $5.467 billion, up 31%.

The results come amid added competition in the streaming arena, most recently from Apple’s Apple TV+ and The Walt Disney Co.’s Disney+. Heavy hitters AT&T and Comcast will be entering the market this year with new services.

The addition of competition impacted domestic growth, Netflix said.

“Our low membership growth in [the United States and Canada] is probably due to our recent price changes and to U.S. competitive launches,” Netflix said in its letter to shareholders. “We have seen more muted impact from competitive launches outside the US (NL, CA, AU). As always, we are working hard to improve our service to combat these factors and push net adds higher over time.”

For the first quarter, Netflix is forecasting adding another 7 million subscribers worldwide, which bring its total to 174 million.

It sees first quarter earnings hitting $750 million, or $1.66 a share and revenues increasing to $5.731 billion, up 26%.

The guidance and domestic sub trends were below Wall Street expectations.

"Netflix continues to lead the way among all streamers with a deep slate of original content," said Neil Begley, senior VP and lead Netflix analyst at Moody's Investors Service. "Continued growth in Q4 was fueled by strong international subscriber additions, bringing the company to over 167 million subscribers at the end of 2019. We believe the company remains on track to reach 200 million global subscribers in Q1 2021, along with steadily improving margins and declining negative cash flows."

The company said that Witcher, launched in the fourth quarter, was tracking to be Netflix’s biggest season one TV series ever. Through its first four weeks of release, 76 million households had watched.

“We have a big headstart in streaming and will work to build on that by focusing on the same thing we have focused on for the past 22 years - pleasing members,” Netflix said in its shareholder letter. “We believe if we do that well, Netflix will continue to prosper. As an example, in Q4, despite the big debut of Disney+ and the launch of Apple TV+, our viewing per membership grew both globally and in the US on a year over year basis, consistent with recent quarters,”

Netflix noted that there were more searches for Witcher than there were for Disney+’s The Mandalorian, Apple’s Morning Show or Amazon’s Jack Ryan. 

For more stories like this, visit our sister publication Next TV.

Moody’s Investors Service placed a “credit positive” rating on Comcast Tuesday, calling its Peacock streaming service, set to debut in April, a needed addition to help stem cord cutting losses.

Comcast and NBCUniversal unveiled the Peacock service on Jan. 16, and the ad-supported direct-to-consumer offering will be available free to Comcast subscribers beginning on April 15. Customers outside the cable operator’s footprint will pay $4.99 per month for the ad-supported version, and $9.99 per month for an ad-free offering. 

In a research note, Moody’s said while Peacock is the third D2C streaming service to be launched in about a year -- Disney’s Disney+ and Apple’s Apple TV + were the others -- it addresses the need for distributors to pivot toward online content as cord cutting and cord shaving grow.

Comcast, like its peers, have been hurt by the cord-cutting trend through a declining video subscriber base and an eroding base at its broadcast and cable networks. Moody’s said it expects the rate of pay TV subscriber losses to accelerate between the next 12 and 18 months as new entrants and viewing options emerge.

“This environment is creating an urgent need for a strategic pivot to capitalize on the changing media landscape,” Moody’s wrote, pointing out that consumers aren’t watching less TV, but that the value proposition of the bundle is eroding. Finding out what consumers value more is evident in the fact that Comcast lost 583,000 video customers in the first nine months of 2019, but added more than 1 million broadband subscribers.

Moody’s was also encouraged by Peacock’s ad-supported nature, which it said will leverage Comcast NBCU’s core ad relationships and capabilities.

Related: Peacock Shows Its Plumage 

“Peacock is capitalizing on what the company is calling “white space,” the free premium ad-supported content quadrant,” Moody’s wrote. “Comcast will be able to throw its weight around in the streaming wars given the breadth and avidity of NBCU’s largely existing content. The free and low-cost price points should be attractive enough for most consumers to explore the platform.”

Moody’s anticipates that lighter ad loads -- Peacock will have about five minutes of advertisements per hour, compared to 13 minutes per hour for broadcast TV and 16 minutes for cable networks -- which should mean that the ads will be highly targeted, and Comcast can charge more for them.

“We believe highly targeted advertising can provide as much as 250% higher returns for advertisers than traditional broad-based demographic advertising,” Moody’s wrote.”...The advertising opportunity for a scaled, inexpensive, premium DTC service can be very large and help the company monetize both new viewers and Xfinity video defectors and manage churn.”

Comcast has said it will invest about $2 billion over two years in content for the service, expecting the overall unit to reach break even by 2024. But Moody’s believes that may be a bit conservative.

Related: Analyst: Slow and Steady Wins the Streaming Race 

“Peacock already partnered with select advertising sponsors, bringing in hundreds of millions of initial advertising dollars at launch, which will help support the initial investment,” Moody’s wrote. “However, we believe the company can scale a lot quicker given the service’s price and the revenue potential from scalable, addressable and innovative ad formats we believe advertisers will find favorable.”

For more stories like this, visit our sister publication Next TV.

STIRR, the free, ad-supported streaming service owned by Sinclair Broadcast Group said it will launch a new channel -- 2020 LIVE -- dedicated to live 2020 election events to mark its one-year anniversary.

Sinclair launched STIRR in January 2019 with about 24 channels.  Today the broadcaster said the service has about 1.6 million app downloads and offers more than 100 channels, including live local news and sports.

2020 LIVE will launch the week of Jan. 20 and will offer a continuous stream of live election coverage, with live access to daily campaign event feeds from across the country, including town hall meetings and stump speeches. This coverage will be presented without any commentary.

Related: Sinclair Looking to STIRR-up RSN Content 

STIRR also plans to offer post-broadcast on demand viewing of some of its syndicated shows, like Judge Judy, Dr. Phil, The Ellen DeGeneres Show, Wheel of Fortune, Jeopardy, and many more. That service is expected to be launched late in Q1 and episodes will be available to viewers depending on the city in which they are located.

“STIRR’s offering of live, local news content reflects that its purpose isn’t to solely entertain, but to serve members of local communities and provide information that impacts their lives,” Sinclair CEO Chris Ripley said in a press release. “We’re incredibly proud of the growth and success the platform has seen throughout the year, and look forward to providing users with more value. With the addition of local broadcast TV syndication programming coming to the platform, we’re excited for what the next year has in store for STIRR.”

The STIRR app is available on Roku TV, Fire TV, Apple TV as well as iOS and Android devices.