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.