Cable TV

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Are You Worried Yet?

Posted by glenfulce on September 11, 2013
Posted in: Business, Cable TV, Government, OTT, Satellite. Tagged: , , , , . Leave a comment
Time Warner Cable (TWC) and CBS (CBS) both had a lot to lose in that standoff over programming fees, but in the end, it was CBS that had Time Warner on the ropes. It’s an outcome that should worry any long-term investor in cable or satellite television sector. If Time Warner isn’t powerful enough to hold programmer demands in check today, they’re all more likely to get clobbered in the fee fights of the future.

Time Warner’s leverage during the CBS fight, which included a 31-day blackout of CBS programming for its subscribers, probably was stronger then that it ever will be again. Some 92 million households see the programmers’ content via cable and satellite television subscriptions. CBS needs pay TV subscribers to build ad revenues and audiences that will watch even more episodes on Internet outlets like Amazon.com (AMZN) and Netflix (NFLX). That’s why CBS didn’t get everything it wanted from Time Warner when the dust settled.

But Time Warner, like all cable companies, needs programming even more. Without popular content, it can’t continue to sell cable subscriptions. NFL games, “Under the Dome,” “Big Bang Theory” — some of the most popular programs on air now – are provided by CBS through channels that include Showtime, TMZ and Smithsonian. That’s why Time Warner mostly caved to CBS demands, reportedly roughly doubling the fee-per-subscriber it paid CBS. It’s also a reason that Time Warner shareholders were more shaken up by the blackout than CBS shareholders.

TWC Chart

NYSE:TWC data by YCharts

The results of this incident don’t bode well for traditional pay television outlets like Time Warner, Directv (DTV), Comcast (CMCSA), DISH Network (DISH), and Charter Communications (CHTR), who will almost certainly see their bargaining power erode further in the future. Even before the Time Warner/CBS brawl, these program buyers were acknowledging in regulatory filings that negotiations over programming fees are likely to get more difficult and disruptive in the future.

It’s hard to exaggerate the problem this presents for cable and satellite companies and their shareholders. Winning the fee wars – or at least minimizing their damage — is one of the most important jobs cable executives do to keep shareholders happy. Programming fees represent the single biggest expense for most traditional pay television companies. If Time Warner, one of the largest cable companies in the country, couldn’t wrestle CBS down very far, its competitors won’t likely fare well either. Rising programming costs is one reason the industry’s costs have been growing.

TWC Cost of Goods Sold TTM Chart

TWC Cost of Goods Sold TTM data by YCharts

Programming companies like CBS and Walt Disney (DIS) have the advantage of a growing market for their content outside of cable and satellite TV. Apple (AAPL), Google (GOOG) and Intel (INTC) all scramble to get into TV series streaming over the Internet along with Netflix, Amazon and Hulu.com. While TV series streaming isn’t a huge market yet, it’s certainly where the growth is. Netflix has trouble with rising content fees too, but its revenues are running up fast enough to keep the share price rising quickly.

NFLX Revenue TTM Chart

NFLX Revenue TTM data by YCharts

Cable and satellite TV subscriptions, on the other hand, have been falling off steadily since about 2006. They’re down some 769,000 subscribers in the second quarter alone, according to a report in The Hollywood Reporter Wednesday.

A more devastating blow may come later from HBO. Traditionally, cable and satellite companies could rely on HBO to trap customers for them, as HBO has steadfastly refused to stream its programs for viewers that do not subscribe to traditional pay TV. However, HBO reportedly is in negotiations with Apple and Google. For the first time, viewers may be able to bypass those cable and satellite bills to watch “Boardwalk Empire,” “Game of Thrones,” and HBO’s other wildly popular content.

For now, the markets are viewing the Time Warner/CBS settlement as a reprieve for the cable and satellite companies. Cable shares, in particular, remain popular because of the fast growing businesses they are building in selling Internet connections.

TWC Chart

NYSE:TWC data by YCharts

Internet services have a long way to go before they replace traditional pay TV. But a transition is on the way, and the programmers see it coming. For cable and satellite investors, the situation is disturbingly reminiscent of another industry that found itself split between new technology and old. Telecom companies like Verizon (VZ) and AT&T (NYSE:T) found their traditional landline subscribers falling off more than a decade ago. They still struggle from the drag of those divisions even while their mobile technology divisions go great guns. As their meager share price gains over the years show, one declining old school business can dampen the joy of investing in a company for a very long time.

Dee Gill, a senior contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine. She can be reached at editor@ycharts.com. Read the RIABiz profile of YCharts. You can also request a demonstration of YCharts Platinum.

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Another Filmmaker Makes the Case Against 4K and for HD

Posted by glenfulce on August 27, 2013
Posted in: 4K, Business, Cable TV, Commercials. Tagged: , , , , , , . Leave a comment
August 26, 2013 By 1 Comment

Majority users still watch SD, even on HDTVs

Ken Simpson is one of those “the best camera is the one you have in your hand” kind of guys. What gives Ken Simpson the street cred to rag on REDHeads and their obsession with ultra high definition (UHD) resolution? Well, Ken has the dubious distinction of being lauded as the director of the first film shot on the iPhone. But that isn’t really what gives his argument heft.  It’s the research he provides to say what Philip Bloom and Ryan Walters have been saying all along.  That 4K is a want, not a need.

I’ve noticed a bizarre trend recently, of filmmakers shooting 4k for webseries.  For the web!  As if it something before was holding them back. – Ken Simpson

For the full story go here:

http://news.doddleme.com/equipment/another-filmmaker-makes-the-case-against-4k-and-for-hd/

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Sony and Viacom Reach Tentative Deal to Stream Cable Channels

Posted by glenfulce on August 19, 2013
Posted in: Business, Cable TV, Networks, OTT. Tagged: , , , , , , . Leave a comment

I don’t see how the broadband providers don’t kill this deal in it’s sleep. They will start putting caps and added cost to heavy internet users. Unless the FCC gets involved (maybe legal, who knows) the cable providers can’t let their competition clog their networks with more OTT programing.

This could get ugly…real quick.
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Sony’s PlayStation, which is in tens of millions of homes, is the backbone of a TV plan.

By
Published: August 15, 2013

In a deal that may signal the start of a new era of competition for entrenched cable and satellite providers, Viacom has tentatively agreed to let its popular cable channels — like Nickelodeon and MTV — be carried by an Internet TV service that Sony is creating.

The agreement is believed to be the first of its kind between a major programmer and any of the technology giants that are trying to disrupt traditional modes of TV delivery. If other programmers follow suit, Sony’s as-yet-unnamed service would let paying subscribers receive live cable channels the same way they use on-demand libraries like Netflix or Hulu. Intel and Google are working on similar services, but try to make it more user-friendly, perhaps the way Netflix does with personalization features and a fancy interface.

Most households today have only a few choices for television service: whatever cable company serves their local area, be it Comcast, Time Warner Cable or others, and two satellite providers, DirecTV and Dish Network. In some parts of the country, television through Verizon or AT&T is also available. Analysts say cable delivered through the Internet could give households many more choices — if the new services give customers more for their money and if cable incumbents don’t smother the services.

To even have a chance, companies like Sony and Intel need the permission of programmers, and that’s why the Viacom deal is considered a breakthrough. Although Viacom and Sony declined to comment on Thursday, a person directly involved in the negotiations confirmed a Wall Street Journal report about the agreement. The person insisted on anonymity because the companies were not prepared to comment on the record.

Having the news spread was advantageous for Sony, though, because having Viacom on board — even just on a preliminary basis — will most likely help the company complete other carriage deals. The company has also contacted other top programmers, like the Walt Disney Company and Time Warner.

That Viacom — which has more than 20 channels, including big ones like Comedy Central and small ones like Centric — was the first to agree to support Sony’s fledgling service is not necessarily surprising, since the company has a reputation for contentious relationships with cable and satellite companies. Last year, Viacom channels were blacked out in DirecTV households for nine days. Sumner Redstone controls both Viacom and the CBS Corporation, which is blacked out in three million Time Warner Cable households because of a contract dispute.

Time Warner Cable, and to a lesser extent other TV providers, has thrown up roadblocks for new entrants by inserting language into some carriage contracts that discourages programmers from selling its channels to Internet TV services. The existing providers say they just want to ensure that the upstarts don’t get better terms, like broader video-on-demand rights or cheaper rates for channels.

Most likely, Sony will pay higher rates — one of the downsides of being new and untested. Any deals between programmers and the Sonys of the world will keep the TV bundle intact, despite occasional public agitation for an “a la carte” option.

“I don’t think the classic pay TV subscription bundle model of television is going away anytime soon — it’s a pretty compelling and cost-efficient smorgasbord,” particularly for older Americans, said Tim Hanlon, a former media agency executive who now runs the Vertere Group. “But all bets are off with the under-40 set — the growing group of folks who just want their video content when and where they want it, preferably without the messy commitment part,” he added.

Sony is well-positioned to reach younger Americans because its PlayStation video game console is already hooked up to TV sets in tens of millions of homes. The company has said almost nothing about its intentions, but it has been interested in selling a bundle of channels at least since 2011. Its TV service could also be made available in the future via smartphones, tablet computers and other devices.

Sony hopes to start selling the service in the fourth quarter of 2013 or the first quarter of 2014, said a media company executive briefed on the plans for it.

If Sony’s service (or another one like it) gets off the ground, incumbents like Comcast, Time Warner Cable and Verizon are also likely to sell their own versions, furthering this new type of competition. What no one knows — but everyone in the industry wonders — is whether these Internet cable services will steal market share; entice people who do not currently pay for any channel bundle to sign up; or fail to sign up customers at all.

The overall number of American households paying for television has remained remarkably steady in recent years, though there are some slight signs of fraying around the edges. Mr. Hanlon said he sensed that as younger viewers were getting better at “cobbling together their own workarounds to all-or-nothing content packages,” the “smart programmers are starting to carefully position themselves to take advantage, just in case the classic carriage model starts to break.”

Of course, all of the alternatives being dreamed up in Silicon Valley and elsewhere are B.Y.O.B. — Bring Your Own Broadband. Video is data-intensive, and data caps or stiffer monthly charges for broadband imposed by companies like Comcast could inhibit the establishment of virtual cable services. In a recent interview, the departing Time Warner Cable chief Glenn Britt acknowledged as much when he was asked about Intel’s interest in TV.

“The reality is, if everybody watched TV over the Internet, and we were out of the TV business, then we would have to recover more money from the Internet service,” Mr. Britt said.

 

Half US multi-channel households have DVR

Posted by glenfulce on August 12, 2013
Posted in: Business, Cable TV, Networks, OTT. Tagged: , , , , , . Leave a comment

More proof that DVRs have entered the mainstream has emerged with fresh consumer research from Leichtman Research Group.

The research and analyst firm found that 52 per cent of households in the US that subscribe to a multi-channel video service have a Digital Video Recorder (DVR), compared to 4 per cent of TV households that do not subscribe to a multi-channel video service. In addition, 43 per cent of all households with a DVR now have DVR on more than one TV set. About 20 per cent of all TV households now have DVR on more than one TV set, an increase from 6 per cent five years ago.

The survey also found an increase in Netflix subscribers having a premium service (51 per cent of Netflix subscribers who subscribe to a multi-channel video service this year versus 43 per cent last year, and 40 per cent in 2010), and a decrease in those who would consider dropping a premium service because of Netflix (20 per cent this year versus 36 per cent last year, and 32 per cent in 2010).

Other related findings include:

  • 71 per cent of Telco video subscribers, 63 per cent of DBS subscribers, and 42 per cent of cable subscribers, have a DVR
  • 81 per cent with DVR on more than one TV set rate the service 8-10 (on a 1-10 scale with 10 being excellent) – compared to 73 per cent with DVR on one TV set
  • 70 per cent of all digital cable subscribers have used VOD – compared to 58 per cent in 2007, and 25 per cent in 2004
  • Overall, 59 per cent of digital cable subscribers, and 64 per cent of Telco video subscribers, used on-Demand in the past month
  • 68 per cent of VOD users who also have a DVR agree (8-10) that their TV service is better because they have both VOD and DVR
  • 26 per cent of Netflix subscribers use Watch Instantly daily, and 59 per cent weekly
  • 79 per cent of Netflix Watch Instantly users use it to watch movies and TV shows on a TV set

These findings are based on a survey of over 1,300 households throughout the United States, and are part of LRG’s study, On-Demand TV 2012: A Nationwide Study on VOD and DVRs. This is LRG’s eleventh annual study on this topic.

“The percentage of all TV households in the US with a DVR has essentially doubled over past five years, and DVR is functionality is expanding to more TV sets in the home,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group. “Consumers are increasingly integrating DVR, as well as VOD and Netflix, on-Demand TV viewing into their TV viewing patterns.”

86% US households pay-TV subscribers

Posted by glenfulce on August 12, 2013
Posted in: Business, Cable TV, OTT. Tagged: , , , , , , . Leave a comment

New consumer research from Leichtman Research Group (LRG) finds that 86 per cent of US households subscribe to some form of multi-channel video service. While major multi-channel video providers reported a cumulative increase of less than 1 per cent of subscribers over the past three years, penetration has slightly declined over that time as a result of a larger increase in the number of rental housing units. Multi-channel video penetration essentially peaked at 88 per cent in 2010 following the digital transition, having increased from 82 per cent in 2005.

Among TV households that do not currently subscribe to a multi-channel video service, 40 per cent subscribe to Netflix, 11 per cent to Amazon Prime, and 7 per cent to Hulu Plus – in total, 42 per cent of non-subscribers get at least one of these three over-the-top (OTT) services, and 58 per cent of non-subscribers do not get any. Overall, this results in 8 per cent of all TV households watching over-the-air (OTA) broadcast TV only (down from 10 per cent in 2010), and 6 per cent watching a combination of OTA and OTT programming. This group includes about 1 per cent of all household that do not subscribe to a multi-channel video service primarily because they can watch all that they want via the Internet or Netflix.

These findings are based on a telephone survey of 1,319 households from throughout the United States, and are part of a new LRG study, Cable, DBS & Telcos: Competing for Customers 2013. This is LRG’s eleventh annual study of the topic.

3 Reasons Your Cable Bill Is Rising

Posted by glenfulce on August 10, 2013
Posted in: Business, Cable TV, OTT. Tagged: , , . Leave a comment

By Demitrios Kalogeropoulos
August 4, 2013

Americans are sending bigger checks to their cable companies these days. Both Comcast (NASDAQ: CMCSA  ) and Time Warner Cable (NYSE: TWC  ) reported last week that they’re collecting more cash from subscribers lately. And while it’s true that big cable is after bigger profits, that’s not the only reason bills are on the rise.

Here’s a look at the trend in average monthly revenue per customer for the two cable giants:

Company 2010 2011 2012 2013 Q2
Comcast $127 $138 $149 $160
Time Warner $97 $102 $104 $105

Source: Time Warner and Comcast financial filings.

It’s important to note that these figures include high-speed Internet and phone services in addition to straight-up cable programing. That said, let’s dig in to exactly why the numbers have been spiking.

Higher speeds and more services
First, people are opting to upgrade to higher Internet speeds. While Time Warner’s video revenue rose by just 3% last year, the company’s high-speed data sales leapt by 14%. The same goes for Comcast. It saw high-speed Internet revenue rise by better than 9% over each of the past two years while cable sales crept up by 1.3% and 2.5% in 2011 and 2012, respectively.

Bundling is also doing its part to raise average bills. The number of “triple play” subscribers on Time Warner’s books jumped by 12% last year as it persuaded more folks to subscribe to all three of its major services: voice, data, and cable. With additional services attached to our bills, it’s no wonder we’re paying more in total.

Expensive programming
And content is getting more expensive for cable companies, giving them a good reason to raise prices. Time Warner’s programming costs spiked by 6.4% in 2012 thanks to a rise in sports-related broadcasting expenses. Comcast expects its content costs to jump by 10% this year. The culprit? You guessed it: sports programming.

That’s been a boon for the likes of Disney (NYSE: DIS  ) , which owns ESPN. Disney reported a sharp rise in affiliate income last quarter that was driven by a 7% bounce in the prices it charges for ESPN. To some extent, cable companies have just been passing those extra costs on to consumers.

Add-on fees
But we can’t let Big Cable off scot-free. Increased fees and plain old pricing changes have been a factor in rising cable bills as well. For example, Time Warner credits price increases and “an increase in equipment rental charges” as helping its revenue last quarter. Comcast says “rate adjustments” contributed to boosting sales toward that record $160 monthly figure last quarter.

Overall, both companies managed to book higher total revenue despite losing a small amount of cable subscribers. The loss from those cord-cutters was more than offset by sales gains from other services.