Digital Media Strategies

We cover all of the major media sectors, including advertising, TV and video, music, games and social media.

February 23, 2015 15:25 dmercer

My colleague at Decipher, Nigel Walley, has done a great job of summarising many of the key differences between the British and American TV markets. I have covered many of these issues over the years in our own research and blog. Like Nigel, it never ceases to amaze me how little is understood in each country about TV on the other side of the Pond. I would go further and extend this argument to the rest of Europe, although there are again many differences between European countries which make them even more alien to a US visitor.

I would add a few notes to Nigel’s review. He rightly mentions the importance of the cable providers (MSOs) in the US ecosystem. The origins of cable are a little different from how he explained them, but again illustrate the historical differences between the UK/Europe and the US. Cable technology originated in the 1940s as a means of getting free over-the-air signals to places which were out of reach of broadcast signals. Viewers paid service and installation fees to get this “free” programming and payment has therefore been a familiar part of the US broadcast landscape for more than 50 years, even though some of the programming is available free-to-air where broadcast signals are available. After many years of evolution (98% of US homes are now passed by a cable system) and the addition of premium channels, most US consumers don’t think twice about paying for TV, if only at the level of “basic” fees.

I’m not sure either about the arguments about picture quality. Even in the old days of analogue there was a fierce debate between NTSC and PAL proponents, but now that the systems are entirely digital it is more a question of how much bandwidth is allocated to each channel. As with all media distribution networks, what the viewer sees on the TV screen is subject to a huge number of variables. And it’s worth noting that the US mandated HD for terrestrial broadcasts, which, quality issues aside, is one reason, amongst several, why HD took off earlier in the US than in Europe.

The net result in the US is the significant power of operators in the cable as well as satellite and telco sectors. There are indeed still many small, local operators, but there are also a few mega-players who are set to consolidate even further in the coming months and who have huge influence over the future direction of television technologies and services. These companies manage the revenue streams which deliver the vast bulk of income to the US TV industry and there has always been a resulting tension as well as close relationships between content owners/broadcasters and their distributors. The OTT players have certainly been shaking things up in recent times, and there are even signs that pay TV is in decline, by some measures, as I wrote here. But we should never underestimate the power of Comcast, AT&T and others to maintain their leading positions.

Finally, I would emphasise once again the critical importance to the shape of the UK television industry of the licence fee business model in the UK, something which often still has to be explained when visiting the US. It is something we take so much for granted, and yet UK residents often fail to appreciate just how different the UK market is because of how we pay for the BBC.  US executives have often liked to quote the BBC’s success in some digital venture as evidence of its potential in other markets, forgetting that without the licence fee the BBC would be unable to explore such new ventures free of any concern over such mundane matters as revenue streams or RoI. I remember particularly this report relating to the iPlayer, which turned out to be somewhat prescient given the absence of any similar broadcaster VOD services in the US since it was written six years ago.

Many of the differences Nigel mentions – the competition in free-to-air platforms, the relative lack of advertising – are only with us because we pay £3.7bn ($5.7bn) in annual fees. Some friends in the US, on hearing this, question how different that is from “pay TV”, and it’s a reasonable point. One thing is for sure – we should realise what a difference it would make to many aspects of the UK TV market if the licence fee model was to be radically altered at the next Charter renewal in 2016.

David Mercer

 


February 18, 2015 15:18 MGoodman

Sony sold its online game division, Sony Online Entertainment (SOE) to New York investment firm Columbus Nova for an undisclosed sum. The former SOE will operate under the name Daybreak Game Company and keeps its development teams intact. SOE, which launched in 1996 as part of Sony’s 989 Studios, was built to develop and run subscription-based massively multiplayer online games (MMO). They developed and released numerous MMOs including EverQuest, DC Universe Online, Planetside 2, and the recently launched zombie MMO H1Z1.

So given how important Sony Computer Entertainment and PlayStation are to Sony, why would it divest itself of one of its game studios? At its core, SOE ceased to be a strategic asset and just as they did a year ago when they sold off their PC business to focus on mobile it was time for SOE to go. Sony’s focus is on the very profitable PlayStation business and SOE’s focus is on developing pay-to-play (P2P) MMOs (primarily for the PC), in a market that is rapidly shifting towards free-to-play (F2P) games that require publishers to give games away and generate revenue through in-game micro-transactions.

Sony’s divestiture of SOE does not mean that it is getting out of online games, rather it signifies a sharpening of its focus on other aspects of its digital games business such as the PlayStation Network, full game downloads to the PlayStation 4, and downloadable content (DLC) such as maps, levels, and expansion packs. Furthermore, the cash from this transaction will enable Sony to invest into its other, more profitable divisions.


February 13, 2015 20:13 MGoodman

Not content to allow Netflix’s European expansion to go unchallenged Wuaki TV announced that it plans to expand to 15 countries in Europe in 2015. Wuaki TV, which was acquired by Japan’s e-commerce giant Rakuten in 2012, has 1.85 million users, up 85% YoY, and is currently available in Spain (1.25 million subscribers), the U.K. (400k subscribers) and Italy, France, and Germany, where it launched in late 2014, and which account for the remaining 200k subscribers. Wuaki TV will launch in Austria and Ireland in the first half of 2015 and later expand to the Netherlands, Belgium, and Portugal followed by launches in Denmark, Norway and Sweden.

At its core, Wuaki TV is a premium video-on-demand service focused on rental and sell-thru (movies and TV shows), however, unlike Blinkbox which Tesco recently sold off to TalkTalk (see Digital Media Strategies Insight TalkTalk Acquires Video Rental Service Blinkbox from Tesco) or Target Ticket which is being shuttered as of March 7th, Wuaki TV also offers a monthly subscription service, Wuaki Selection. Wuaki Selection offers older movies and TV shows making less attractive than similar subscription VOD (SVOD) offerings from Netflix and Amazon.

According to Wuaki TV CEO Jacinto Roca about 15% of Wuaki TV users subscribe to the monthly service. Wuaki TV does not offer original content. The advantage of premium VOD is that is that new releases are available earlier as rentals or sell-thru, often taking weeks or months before making their way to subscription services (see Exhibit 1). Despite this consumers are flocking to SVOD service such as Netflix, Hulu, and Amazon due to the convenience and value these services provide. According to Roca “It is in Rakuten’s DNA as an e-commerce company to offer a transactional model. It feels better with our core business, especially since DVDs and other packaged media have been a big part of our business”.

Continuing along this vein, Wuaki TV also supports UltaViolet, providing consumers who purchase a movie on DVD or Blu-ray with a digital copy, similar to Carrefour’s new online video service, Nolim Films (see Digital Media Strategies Insight Carrefour Launches Online Video Service).

While Wuaki TV may believe strongly in the transactional model what truly sets it apart is it support for sell-thru, subscription and rental simultaneously. If Wuaki TV can build out its subscription library and develop cross marketing opportunities between its sell-thru, subscription and rental businesses it will be in a strong position to offer something no one else currently does, a complete video offer.


February 5, 2015 18:20 MGoodman

Live sporting events, along with reality TV, have long been one of the driving forces behind linear TV but even this is changing. NBC Sports Live Extra, powered by Adobe Primetime, delivered 2.5 million unique views of the live stream of Super Bowl XLIX on desktops and tablets, according to NBC, up 9% from last year’s Super Bowl. (Mobile viewing is not included in this total as NBC Sports Digital does not have NFL mobile streaming rights). At its peak, 1.3 million concurrent viewers saw Patriots CB Malcolm Butler make his game-winning interception, up 18% vs. last year’s Super Bowl on FOX (1.1 million).

Some other stats from NBC include:

  • The live stream produced 2.5 million unique views, up 9% vs. FOX last year and up 19% compared to NBC’s live stream in 2012 (2.1 million), the first-ever live stream of a Super Bowl.
  • Viewers of the live stream consumed 213 million minutes, besting the previous Super Bowl record set by CBS for Super Bowl XLVII in 2013 by 86% (114.4 million minutes).
  • The 800,000 average viewers per minute was up 52% when compared to FOX’s stream of Super Bowl XLVIII last year, which averaged 528,000 viewers per minute.

While this viewership pales in comparison to the 114.4 million that watched the New England Patriots defeat the Seattle Seahawks on TV it does further reiterate the growing impact of broadband (fixed and mobile) and connected devices on the distribution, consumption and monetization of movies and TV shows.


February 5, 2015 02:12 lkawasaki

Super Bowl XLIX was the most-watched program in the U.S. television history as approximately 114.4 million watched the New England Patriots beat the Seattle Seahawks this past Sunday, up 2% from last year’s Super Bowl (and this does even count all those who streamed the game). Not only did the audience increase but so too did the ad dollars spent on the Super Bowl. While OTT video continues to pressure TV viewership, when it comes to live sports events TV continues to triumph.

It’s estimated that NBC generated over $360 million in ad revenue from this year’s Super Bowl, up 8% from last year’s event. The price tag for a 30 second slot during this year event was up 7% from $4.2 million 2014 to $4.5 million in 2015. Even more impressively, this one event will account for nearly 0.5% of the total 2015 US TV ad spend. TV ad spend during the Super Bowl has grown significantly over the past 5 years with a CAGR of 12%. Overall, the average ad spend per viewer during this year event was $3.15, up 6% from $2.96 in 2014, and up 71% from $1.84 in 2005 when New England Patriots last won a championship.

 


January 16, 2015 17:16 MGoodman

When Sony first launch its cloud gaming service, PlayStation Now, it allowed for individual game rentals in increments of 4-hours, 7-days, 30-days, and 90-day. This model, however, is confusing, cumbersome, and costly. For example, God of War: Ascension cost $5.99 for a 7 day rental and $14.99 for 90 days while NASCAR ’14 cost $5.99 for a 4 hour rental and $39.99 for 90 days. PlayStation Now needed uniformity in pricing and a simple subscription model.

Sony knew that this was an issue and according to a November post on the PlayStation blog by Director of Marketing of PlayStation Now, Peter Jamshidi, a subscription option “was coming” to PlayStation Now. Well that time has arrived. At CES, Sony unveiled a subscription service for PlayStation Now. This service includes unlimited access to about 100 titles and costs $19.99 for one month or $44.99 for three months.

This announcement is a big step forward for Sony as it rounds out the PlayStation digital distribution model. At its core, there are three ways to monetize games – subscription, rental, and sell-thru (plus free). Sony has now embraced all of them, including free. The only remaining question is whether Sony has priced PlayStation Now’s subscription service to high. At $19.99/month or $44.99 for three months PlayStation Now is charging a pretty high premium compared to a service like OnLive, which has monthly packages ranging from $9.99 to $12.99. As evidenced by Netflix and other subscription VOD services the sweet spot for cloud based on-demand subscription services seems closer to $10 than $20.


January 12, 2015 20:11 lkawasaki

The 2015 Golden Globe Awards was filled with surprises for the TV entertainment industry and was a significant indication of changing consumer viewing behaviors. Amazon made history earning Golden Globes in both categories it received nominations, best TV series, musical or comedy and best actor in a television musical or comedy series for its original series Transparent. In doing so, Amazon beat out nominees from Netflix, HBO, Showtime, Channel 4 (UK), FX, and CW in the respective categories. Meanwhile, Netflix which was nominated in seven different categories won best actor in TV series, drama for Kevin Spacey portrayal of Frank Underwood in House of Cards.

Another significant observance from the Golden Globes is that the top four U.S. broadcast networks, ABC, CBS, NBC and Fox did not win any awards. This is big for the TV industry as it brings further credibility to online video service and shows the diversity of programming in Hollywood. This was not only a victorious night for the individual services but also reinforced the changing landscape in TV entertainment. More and more individuals are seeking alternative means to access television programming and video service providers continue to enhance the value proposition of on-demand entertainment.


January 12, 2015 17:11 lkawasaki

Digital advertising revenues are closing the gap with traditional media as consumers internet usage continues to grow. In fact in many countries ad spending on traditional platforms such as print (newspaper/magazine) and TV have started to flatten out and in many cases even decline.

Digital advertising is driving the majority of growth in the Western European advertising market, with all countries expected to see double digit annual growth rates between 2014 and 2018. The video advertising and social networking segments are expected to see the highest growth across all territories. Digital media will account for more than half of total ad spend by 2018 in the United Kingdom, Denmark and Sweden. In contrast, despite continuous growth in digital ad spend, traditional advertising mediums will continue to dominate in Germany, Italy and Spain as these remain the favorite means for major brands to reach audiences.

For a detailed breakdown of Western Europe advertising market forecast by country and segment please see the Advertising Market Forecast: Western Europe. The key territories covered in this forecast are the United Kingdom, Germany, France, Italy, Spain, Denmark, Finland, Norway, Sweden and the Rest of Western Europe. The segments covered include: TV, print, radio, cinema, out-of-home (OOH), search, display (video/banners/others), classified, social networking and mobile advertising.

 


January 7, 2015 07:47 MGoodman

This morning I participated on a panel at CES on Internet TV and its impact on multichannel video providers. As these panels so often do the conversation ranged across a series of topics, including the future of windowing in television, the decline of television viewing, the impact of interactive advertising, and what television will look like in the future. Some takeaways from this panel include the following.

  • OTT video is leading to a democratization of television. In the past, consumers had little choice but to subscribe to what one or two video providers offered. Today, the growth of broadband (fixed and wireless) and connected devices is giving consumers the freedom to choose what they want to view, when they want to view it, on what devices, and even where they want to view it. In addition, these options give consumers more control over what they have to pay than ever before.
  • As consumers video options become more numerous the need for search, discovery, curation and personalization become ever more important. Within the next five personalized, curated content will become the norm, at least in North America and Western Europe. One result of this will be consumers becoming much smarter about how they watch video. Today, it is difficult at best for consumers to find the content they want. And who has the time to search through multiple services and TV apps to find the best value for a movie or TV show. For example, that movie you just rented on Vudu might also be included in Netflix for no additional charge or for free on VOD via your multichannel video provider.  As we move into a world of unified search and discovery consumers will be able to make more informed decisions.
  • Regarding the question of whether consumers are viewing less television the answer depends on how you define the question. If you consider television viewing to only include linear TV then yes television viewing has declined, about 4% YoY according to Nielsen. But television viewing is not just linear TV, the same programming is also viewed via VOD, catch-up TV, DVRs, and SVOD. It is viewed on TVs, smartphones, and tablets. In total, consumers are viewing far more television than ever before.
  • Lastly came the question of content acquisition and the question was posed could windowing survive in an on-demand world where Netflix, Hulu, and Amazon are making entire series available day and date. The answer is yes and no. Not all programming is suitable for windowing. For example, sports programming and reality series are not suited for windowing at all. However, TV series are uniquely suited for windowing and this practice will not go away. Content owners want to maximize the return on their programming the best way to do this is to ensure that they maximize the revenue produced in one release window before allowing it to be shown in another window. Earlier windows have more value and allow content owners to extract greater value from the distribution partners in this period. For provider in later release windows to move up they would have to compensate content owners greatly to make up lost revenue in earlier release windows. A scenario not likely to occur.

 


December 29, 2014 20:26 MGoodman

BitTorrent, once the scourge of the Internet, is making an effort to reinvent itself as a legitimate content provider. In June of 2013, BitTorrent first began allowing select artists to legitimately distribute content via the BitTorrent platform.  Now they are expanding it.

In September of 2014, Radiohead’s Thom Yorke made his second solo album, Tomorrow’s Modern Boxes, available via Bit Torrent. Over 116,000 users downloaded the free track, A Brain In A Bottle and its accompanying video, in the first 24 hours after its release. Downloaders then had the option to pay $5.99/£3.86 for the rest of the album. In the first two month after launch the album was been downloaded 4.4 million times.

To further entice artists and address their concern that they are not making enough from streaming music services, artists keep 90% of the revenue generated via BitTorrent Bundles. In comparison, Spotify pays out 70% of revenues to artists. In addition, artists get all the associated data, including number of impressions and downloads, as well as stream information and email addresses.

Now BitTorrent is expanding into video. Children of the Machine, an eight-episode science-fiction series, will be available on Bit Torrent in August 2015 as either a free ad-supported version, or ad-free version for $4.99. A premium version of the show containing bonus content will be available for $9.95.

By its very nature, torrenting is a social act, one that makes it a great way to share content like music and video. With content becoming more and more social every day artists will be able to spread their own BitTorrent Bundles. Should this gain traction it will present serious problems to services such as Spotify, Pandora, Rdio and others who are already struggling to become profitable.