Tag Archives: Disney

Expect Big Changes from Streaming Video

One of the biggest uses of bandwidth continues to be streaming video from the many online vendors like Netflix, Disney, Hulu, and many others. Final 2022 earnings reports show that this is an industry segment in crisis.

  • Warner Brothers, which owns HBO and Discovery reported losses for online video of as much as $2.3 billion in 2022.
  • Paramount reported losses of $1.8 billion for its online platform.
  • Comcast and its NBC Universal subsidiary that operates Peacock reported losses in 2022 of $2.5 billion.
  • Disney reported a loss of $4.1 billion for its Disney Plus platform, which is hard to fathom with a platform that has 162 million subscribers.

Altogether, the losses for just these four video platforms were almost $11 billion in 2022. There are other big platforms like Apple, Google (YouTube), and Amazon that don’t specifically report on the performance of the video streaming segment. There is one exception to the trend towards losses as Netflix, with 230 million global customers, reported profits of over $6.5 billion in 2022.

The companies with the losses have already reported taking measures to trim the losses. That involves some staff cuts, but mostly it’s going to mean cutting back on the budget for developing new content.

This raises some interesting questions about how the performance of the video streaming industry segment will affect broadband. There has been a significant proliferation of video platforms. Ten years ago, you could count the video platforms on one hand. The earliest platforms like Netflix and Amazon spent almost all of their content budget buying existing TV shows and movies.

But in 2013, Netflix broke the mold with the introduction of House of Cards, followed by a ton of original content. Amazon followed suit in 2015 with the introduction of The Man in the High Castle and Mr. Robot, and now with a wide array of original programming. It now seems that every platform has original content, which seems to be the primary strategy for attracting new subscribers.

It’s hard to think that the industry can sustain these kinds of losses for a long time. Netflix purposefully lost money as it was building its platform, and the company knew it wouldn’t be profitable until it eventually got a lot of subscribers. But with the proliferation of platforms, the idea of any platform suffering losses to get to the top seems like a difficult model to repeat.

One of the ways for the industry to become profitable is to raise rates, but with so much competition, that doesn’t look like an easy solution. Anyone who has tracked subscribers at platforms like Hulu or SlingTV can see how customer counts shrink and grow quarter to quarter. Very few of these platforms have developed a stable, loyal customer base, and the online platforms have made it easy for subscribers to come and go at will – their big differentiator from traditional cable.

The chances are that poor performance, or even the disappearance of a few platforms won’t make much of a difference in the industry overall. If a few of these platforms fail, the subscribers will watch video elsewhere. Probably the only thing that would cause cord-cutting to slow might be if the online platforms raise rates to the point where people decide to keep traditional cable.

Probably the best news for online platforms is that traditional cable companies keep raising rates, largely in response to the ever-climbing cost of traditional TV programming. The programmers seem determined to raise rates significantly every year, even in the face of losing customers. For many traditional programmers, the loss of American subscribers is being offset by a growing audience around the world.

The Onslaught of New Content

As if cord cutting isn’t bad enough, online OTT programming is exploding with numerous new options. One has to think that these many options will lure a lot more homes to ditch traditional cable TV.

Disney+. This service is hitting the streets with huge fanfare. It’s priced at $6.99 per month or $5.83 per month with an annual subscription. Disney+ will contain the content provided by Disney, Marvel, Lucasfilm, Pixar, and National Geographic. Disney owns the Star Wars franchise and is planning a lot of new Star Wars content. There will be new content created only for the Disney+ service like a series produced by the Jim Henson Company. Disney also owns most of Hulu and will be offering a bundled package of Disney+, Hulu, and ESPN+ for $12.99 per month.

Apple TV+. The service launched November 1 with a monthly fee of $4.99. It’s being offered for free to customers that buy an expensive Apple product like an iPhone, iPad, Mac, or Apple TV.  The company has set a goal of having 100 million customers within 3-4 years and will launch in over 100 countries. Apple is also offering new content created just for the service. They have announced partnerships for content from Oprah Winfrey, from Reese Witherspoon’s Hello Sunshine production company, and from Steven Spielberg’s Amblin TV. While not yet announced, Wall Street expects Apple to accumulate a library of older content. For now, the service doesn’t work on Amazon Fire and Roku devices, but should in the future.

HBO Max.  This is being offered by AT&T and slated for launch sometime in the spring of 2020. The company is offering this at $14.99 per month, the same price as HBO Now – which is the current online HBO offering that only carries the library of HBO content. Customers subscribing to HBO on a cable system might get the new service for free. The company will likely migrate HBO Plus customers to the new service. HBO Max brings in the vast library of content owned by Warner Media. There will be a curated revolving list of classic movies. They’ve also bought the rights to shows like Friends. The company hopes to have 50 million paying customers by 2025. This is the only online service that doesn’t care if customers buy their prime HBO content online or from a cable company.

Peacock. This is owned by Comcast and is scheduled to launch in April 2020. The service is named for the NBC peacock logo. The service will provide new content including shows from Alec Baldwin and Demi Moore. It will carry the vast library of NBC’s programming. The new offering will also tie into Olympic coverage. For now, Comcast is thinking of giving this free to every Comcast customer and may make it free to everybody.

Quibi. This is a new service created by Jeffery Katzenberg of DreamWorks. It will launch in early 2020 and contains a lot of new content. The unique thing about the service is that it will consist of short-duration content and will only be available on smartphones. The company is working with over 30 partners to create content that is aimed at younger views. The typical content will be 7-10 minutes in length. It’s attracted big names like Steven Spielberg, Kevin Hart, Tyra Banks, and Jennifer Lopez. There are plans for vignettes from traditional series like Punk’d, Varsity Blues, Vikings, and How to Lose a Guy in 10 Days.

Bloomberg. Just to show that all new content isn’t entertainment related, Bloomberg is also planning a new online offering. It will be subscription-based and will offer all of Bloomberg’s current business content plus new content. For example, there are plans for a series, Moon Shot that looks at major scientific breakthroughs. Accelerate will look at test-driving cars of the future. Prognosis will look at cutting edge medicine.

The question faced by customers of traditional cable TV is if they want to continue to pay the big monthly bills for traditional TV and also subscribe to some of this new content. There are a lot of households that are going to want to watch the Disney catalog of programming or see the new content on Apple TV+ or HBO Max. It seems likely that this flood of new content is going to convince more homes to cut the cord.

The Future of Video Streaming

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I predict that we are going to see a huge shake-out in the online video market over the next few years. The field of OTT providers is already crowded. There are providers that offer some version of the programming offered on traditional cable TV like Sling TV, DirecTV Now, Playstation Vue, Hulu Plus, YouTube TV, fuboTV and Layer3 TV. There are also numerous providers with unique content like Netflix, Amazon Prime, CBS All Access, HBO Go, and more than 100 others.

The field is going to get more crowded this year. Disney is planning a Netflix competitor later this year that will include Disney’s vast library of content including unique content from Marvel, Lucasfilm, 21st Century Fox and Pixar.

AT&T also plans to offer a unique-content platform that includes the vast library of content it acquired through the merger with Time-Warner along with the content from HBO.

Apple has finally been creating unique content that it will start showing some time this year. Amazon has stepped up the creation of unique content. Comcast is planning a launch with the unique content it owns through NBC Universal and Illumination Studios.

But the biggest news is not that there will be more competitors – it’s that each of the creators of unique content is intending to only offer their content on their own platform. This is going to transform the current online landscape.

The big loser might be Netflix. While the company creates more unique content than anybody else in the industry they have benefited tremendously from outside content. I happen to watch a lot of the Marvel content and my wife sometimes refers to Netflix as the Marvel network – but that content will soon disappear from Netflix. Disney owns the Star Wars franchise. NBC Universal (Comcast) recently purchased the rights to Harry Potter. CBS owns the Star Trek franchise. AT&T owns the Game of Thrones. Amazon bought the rights to develop more Middle Earth (Lord of the Rings) content. Is Netflix going to be as attractive if they are unable to carry attractive external content in addition to their own unique content?

Each of the major content owners is aiming to capitalize on their most valuable content. For example, the industry buzz is that there are numerous new Star Trek efforts underway and that CBS All Access will become all Star Trek, all of the time. Each of these content owners is making similar plans to best monetize their content.

This looks it is going to turn into a content arms race. That means more content than ever for the viewing public. But it also means that a household that wants to watch a range of the most popular content is going to need numerous monthly subscriptions. I think 2019 is going to become the year when the monthly cost of online content starts climbing to rival the cost of traditional cable.

My family is probably fairly typical for cord cutters. We watch local channels, traditional cable networks and sports through Playstation Vue. We have subscriptions to Netflix, Amazon Prime and Hulu. During the year we add and subtract networks like ESPN Plus, CBS All Access, HBO NOW and several others. And we also buy individual TV shows and movies that aren’t included in these various platforms.

I’m not unhappy with our array of content. Each of our three family members gets to watch the content they want. We’re each free to use the devices we like and watch at times that are convenient.

The number one reason cited for cord cutting is to save money. I’m pretty certain that as a family that we already aren’t saving anything compared to what content cost us before we went online. However, saving money was not our primary reason for going online. I look forward and I suspect that we’ll probably add some of the new content this year such as Disney, so our costs are likely to keep climbing.

A few years ago there was a lot of speculation about where the industry is headed. A lot of people thought that the Amazon super-aggregator model was the future, and Amazon is doing well by reselling dozens of unique content platforms under its name brand. However, it looks like the industry is now headed in the opposite direction where each big corporate owner of unique content is going to want to extract the maximum value by selling directly to the public.

I have to wonder what this all means for the public. Will the high cost of buying numerous online packages dissuade many from cutting the cord? It’s also confusing trying to find what you want to watch with so many different sources of content that are in separate silos. It’s going to be interesting to see these industry giants battling each other for eyeballs.

More Crowding in the OTT Market

It seems like I’ve been seeing news almost weekly about new online video providers. This will put even more pressure on cable companies as more people find an online programming option to suit them. This also means that a likely shakeout of the OTT industry with such a crowded field of competitors all vying for the same pool of cord-cutters.

NewTV. This is an interesting new OTT venture that was founded by Jeffrey Katzenberg, former chairman of Walt Disney and headed by Meg Whitman, former CEO of Hewlett Packard Enterprise and also from Disney. The company has raised $1 billion in and has support from every major Hollywood studio including 21st Century Fox, Disney, NBCUniversal, Sony Pictures Entertainment, and Viacom.

Rather than take on Netflix and other OTT content directly the company plans to develop short 10-minute shows aimed exclusively at cellphone users. They plan both free content supported by advertising and a subscription plan that would use the ‘advertising-light’ option used by Hulu.

AT&T already owns a successful OTT product with HBO Now that has over 5 million customers. John Stankey, the head of WarnerMedia says the plan is to create additional bundles of content centered around HBO that bring in other WarnerMedia content and selected external content. He admits that HBO alone does not represent enough content to be a full-scale OTT alternative for customers.

AT&T’s goal is to take advantage of HBO’s current reputation and to position their content in the market as premium and high quality as a way to differentiate themselves from other OTT providers.

Apple has been talking about getting into the content business for a decade, and they have finally pulled the trigger. The company invested $1 billion this year and now has 24 original series in production as the beginning of a new content platform. Among the new shows is a series about a morning TV show starring Reese Witherspoon and Jennifer Aniston.

The company hired Jamie Erlicht and Zack Van Amburg from Sony Pictures Television to operate the new business and has since hired other experienced television executives. They also are working on other new content and just signed a multiyear deal with Oprah Winfrey. The company has not announced any specific plans for airing and using the new content, but that will be coming soon since the first new series will probably be ready by March of 2019.

T-Mobile. As part of the proposed merger with Sprint, T-Mobile says they plan to launch a new ‘wireless first’ TV platform that will deliver 4K video using its cellular platform. On January T-Mobile purchased Layer3 which has been offering a 275 channel HD line-up in a few major markets.

The T-Mobile offering will be different than other OTT in that the company is shooting for what they call the quad play that bundles video, in-home broadband (delivered using cellular frequency), mobile broadband and voice. The company says that the content will only be made available to T-Mobile customers and they view it as a way to reduce churn and gain cellular market share.

The Layer 3 subsidiary will also continue to pursue partnerships to gain access to customers through fiber networks, such as the arrangement they currently have with the municipal fiber network in Longmont, Colorado.

Disney. Earlier this year the company announced the creation of a direct-to-consumer video service based upon the company’s huge library of popular content. Disney gained the needed technology by purchasing BAMTech, the company that supports Major League Baseball online. Disney also is bolstering its content portfolio through the purchase of Twenty-First Century Fox.

Disney plans to launch an ESPN-based sports bundle in early 2019. They have not announced specific plans on how and when to launch the rest of their content, but they canceled an agreement with Netflix for carrying Disney content.

OTT News – August 2017

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It’s been a busy time in the OTT market with players coming and going and the choices available to customers growing more complicated and confusing.  Here are some of the bigger recent events in the industry.

Continued Cord Cutting. The major cable providers lost 946,000 cable customers in the second quarter – the worst quarterly loss ever. This puts cord cutting at an annual loss rate of 2.7% of customer, up from only 1% a year ago. It’s obvious that cord cutting is picking up momentum, and the wide variety of OTT viewing has to be a contributor. Nielsen recently reported that 62% of homes now watch OTT content at least occasionally.

It’s getting harder for analysts to count cable customers. For example, Dish Networks is not reporting on the specific performance of its satellite service versus SlingTV. The losses for the quarter were also eased a bit by the fact that Charter began counting seasonal customers even when they go dormant, such as the snowbird in Florida who subscribe only in the winter but who keep the account active.

ESPN / Disney OTT Offering. Disney announced that it would be launching two new OTT offerings in 2019 – a standalone ESPN offering and a standalone Disney offering. Along with this announcement they announced they will be withdrawing Disney content from Netflix. The ESPN offering will not duplicate the cable version of the network and will not include things like the NFL and NBA. But it will include major league baseball, the NHL, major league soccer, grand slam tennis events and college sports. Analysts think this offering is mandatory since ESPN has lost 13 million subscribers since 2011 and advertising revenues dropped 8% last quarter.

The standalone Disney offering is also interesting in that the company has decided to take Netflix on head-to-head. Because of contractual arrangements Netflix will still have access to content produced by Disney such as the numerous shows produced by Disney’s Marvel Studios. But starting in 2019 Disney is going to make new content only available on their own platform. This prompted Netflix to purchase Millarworld, a major comics producer.

NBC Closing Seeso. NBCUniversal says that it will be ending the Seeso OTT offering later this year. This is an offering that consisted largely of NBC comedy and related entertainment such as Saturday Night Live and the Tonight with Jimmy Fallon.

This failure is a big warning to the many cable networks that have been contemplating using the strategy of shoving existing content online. Industry analysts say that simply taking linear content online is not a recipe for success. It seems that the platform is just as important as the concept and the bigger platforms like Netflix keep customers engaged and enabling them to move from show to show without leaving the platform. But it’s too easy for a customer to leave a limited-offering platform, thus diminishing the perceived value for customers to buy a subscription.

Facebook OTT Offering. Facebook has announced the launch of Watch, an OTT service that will include content from A&E, Univision, Major League Baseball and other content such as worldwide soccer. For now the new service is being launched overseas with some limited US trials, but is expected to hit the whole US market later this year.

The offering is being structured like YouTube to enable content creators to launch their own channels. Facebook is currently funding some content providers to seed content on the new service. They are hoping that within time the platform becomes self-sustaining and can be an alternative to the wildly popular YouTube. Facebook is counting on their ability to lure enough of their billion plus users to the new platform to make it a success. The company’s goal is to keep people on their platform for more than just social networking.

Apple. Apple will be entering the OTT world and announced that they will spend $1 billion to create programming content over the next year. This puts them into rarified company with Netflix that is spending $6 billion, Amazon at $4.5 billion and HBO at $2 billion. There is no news yet of the nature or timing of an Apple OTT offering.