TV Tech

All posts tagged TV Tech

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/

G

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.
G

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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.

Blu-ray, UltraViolet Sales Jump in First Half of 2013

Posted by glenfulce on August 12, 2013
Posted in: Business. Tagged: , , , . Leave a comment
Sales of combined Blu-ray Discs and associated electronic sell-through (EST) digital content leap 24% in first 6 months of 2013. Also, 13 million Ultraviolet titles sold.
By Jason Knott, August 06, 2013

Not to steal a page from Mark Twain, but it appears the reports about the death of the Blu-ray have been greatly exaggerated.

The entertainment industry has found a way to revive previously sagging sales of Blu-ray Discs by offering digital download versions of the titles, known as electronic sell-through (EST). Combined, Blu-ray Discs and EST staged a remarkable comeback in the first half of 2013, with sales up 24 percent, according to The Digital Entertainment Group‘s “Mid-Year 2013 Home Entertainment Report.”

While overall consumer spending rose 2 percent compared to the first half of 2012, sales of Blu-ray Discs and EST rose at a much faster clip, underscoring the favorable consumer response to the convenience and ease of digital collections and the increased availability of digital content at retail. The increases in Blu-ray and EST sales offset the declines in DVD sales leaving total sell-through flat versus a year ago.

DEG’s data show:

Blu-ray Disc sales continued to grow steadily in the first half of 2013 with consumer spending up 15 percent compared to 2012. Sales of new release product on Blu-ray rose 19 percent during the first half of 2013 and catalog titles on Blu-ray were up more than 8 percent versus the first half of 2012.

Digital distribution provided additional growth in the first half of the year due to a healthy consumer reaction to EST, which led to a 50 percent increase in EST consumer spending compared to mid-year 2012. The overall consumer spend on digital product was up more than 24 percent versus a year ago.

With more than 10,000 film and TV titles available to watch on an array of devices, UltraViolet has grown to 13 million accounts. The digital viewing experience is now available to consumers through major retailers in six countries, the latest being Australia and New Zealand.

More than five million Blu-ray Disc compatible devices were sold in the first half of the year (inclusive of BD set-tops, PS3s and HTiBs). There are now more than 61 million Blu-ray compatible devices in U.S. homes.

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.

Digital Video Rights Are Hurdle in CBS-Time Warner Cable Fight

Posted by glenfulce on August 9, 2013
Posted in: Business, Government, Networks. Tagged: . Leave a comment

Online Services Add Tension to Dealings Between Content Owners and Distributors

[image] Associated PressTime Warner Cable customers in some major cities have been without access to CBS programming since last Friday. Shown, CBS President Les Moonves, left, with TV host David Letterman at an event in New York in May.

Digital video rights have become a major sticking point in the carriage dispute between Time Warner Cable Inc. TWC +0.21% and CBS Corp., CBS -0.91% highlighting how new online TV services are adding more tension and complexity to the dealings between content owners and distributors.

Some three million Time Warner Cable customers in Los Angeles, Dallas and New York have been without access to CBS programming since last Friday because the companies haven’t reached a new carriage agreement. Talks have resumed as the blackout continues, the companies said Thursday.

Digital video rights have become a sticking point in the dispute between Time Warner Cable and CBS, highlighting how new online TV services are adding more tension and complexity to the dealings between content owners and distributors. Amol Sharma has more. Photo: AP.

In their negotiations, the companies made significant progress on the money Time Warner Cable would pay to carry the CBS TV signals, but one big roadblock was that the cable operator believes those fees should also buy it the rights to distribute content via on-demand platforms, people familiar with the talks say.

Under the companies’ now-expired TV carriage deal, struck in 2008, CBS had granted Time Warner Cable expansive on-demand rights. For example, the cable operator could automatically have the rights—at no additional cost—to any programming licensed to streaming video players like Netflix Inc. NFLX +0.94% and Amazon.com Inc. AMZN +0.51%

Now CBS wants to roll back those rights to give itself more flexibility to strike lucrative licensing deals with the online video players and new entrants like Intel Corp. that are vying to offer cable TV channels over the Internet, the people say. In CBS’s view, the TV world has changed fundamentally since 2008 and the old terms are outdated.

In a sign of how far apart the companies have been, Time Warner Cable wanted at one point the rights, at no incremental cost, to put entire current or past seasons of CBS shows on its video on-demand service, compared with the current offering of just a few recent episodes, a person familiar with the situation said. Those are the type of rights CBS and other TV networks have begun selling to Netflix for large sums.

Martin Franks, CBS’s executive vice president of planning, policy and government relations, told a New York City Council committee on Thursday that Time Warner Cable’s aim is to “use those outdated terms to hamstring our ability to do business with Netflix, Amazon, Hulu Plus and other new entrants that pose a new competitive threat” to the cable company.

Time Warner Cable has been dropping CBS, as the companies battle over fees. Why cause such a massive disruption over what amounts to pennies-per-day per per subscriber? What’s at stake for the cable and broadcast industries? WSJ’s Jason Bellini has #TheShortAnswer.

Time Warner Cable says it is willing to agree to a fee increase for carriage of CBS but only if the old terms for on-demand rights remain in place. The cable operator believes CBS should be happy to grant it expansive digital rights since it is already a big customer of the broadcaster by virtue of buying traditional TV rights, a person familiar with the situation said.

The cable company denies it is trying to crowd out CBS from doing deals with new entrants. “CBS wants us to pay a lot more for a lot less and take content away from our customers so that they can give it to someone else exclusively,” a Time Warner Cable spokeswoman said in an emailed statement. “We want our customers to get what they pay for.”

At one stage Time Warner Cable also wanted to make recent TV episodes on CBS.com available only to pay TV subscribers, who would gain access with a username and password, a person familiar with the situation said. Other consumers could only access those shows eight days after they air. That request isn’t in Time Warner Cable’s most recent proposal to end the blackout.

Currently, CBS puts shows up on its website the day after they air, without restrictions on who can access them, and generates about $100 million per year in online ads, a growing revenue stream it doesn’t want to jeopardize, the person familiar with the matter said.

Digital rights have been part of negotiations between programmers and distributors for years. But the prominence of the issue in the Time Warner Cable and CBS dispute reflects how much the online video marketplace has matured since the companies last negotiated a carriage agreement five years ago.

“The original deal was struck in 2008—a lot of digital distribution as we know it now didn’t exist then,” said Mike Morris, an analyst at Davenport & Co. Media companies, seeking to adapt to changing consumer viewing habits and generate new sources of revenue, have become more aggressive about licensing their content to digital platforms, he said.

Like others in the cable industry, Time Warner Cable has been losing video subscribers and has blamed programming costs for driving up consumers’ bills. It has received support during the standoff with CBS from rival distributors.

“We do not have the profit margins to absorb those costs and are forced to pass them on to consumers,” said Dave Shull, chief commercial officer of Dish Network Corp., in a statement Thursday. Dish is involved in a blackout dispute with broadcaster Raycom Media in 36 smaller markets.

In his testimony Thursday, CBS’s Mr. Franks said Time Warner Cable can afford to pay higher programming fees without passing on costs to customers, citing the cable operator’s “handsome profit margins” from its high-speed Internet business. “They could easily choose to absorb these programming costs,” he said, “and still be very profitable.”

Write to Amol Sharma at amol.sharma@wsj.com and Shalini Ramachandran at shalini.ramachandran@wsj.com

A Winner in the Battle for the Living Room

Posted by glenfulce on August 7, 2013
Posted in: Business, OTT. Tagged: , , , . Leave a comment

Now these guys completely disagree with the last article. I still believe content is King. And the cheerios theory tells us people love cheerios (content) but don’t really care where they get them so long as they are about the same price and they don’t have to work any harder to get them. The problem I see for Netflix is that they have lost their exclusivity on the “cheerios” and thier new “original content” is to expensive to maintain.  Right now Netflix is still cheap to get each month, but for how long. If they don’t keep their prices down then Amazon, Hulu and iTunes will just keep chipping away at them. The “mail to your home DVD market” may be all they have left.

Just sayin’
G
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A Winner in the Battle for the Living Room

By Andrés Cardenal – August 7, 2013 | Tickers: AAPL, GOOG, MSFT, NFLX | 2 Comments

Andrés is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Industry giants like Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG) and Microsoft (NASDAQ: MSFT) are stepping up their efforts to win the living room war, an area that could have huge financial and strategic implications over the years to come. It´s still too soon to tell who the winner will be, but one thing is looking quite clear, though: Netflix (NASDAQ: NFLX) seems to be in an outstandingly strong position to profit from the future of TV.

The Giants

Microsoft is having a hard time lately: sales of Windows 8 have been a disappointment since tablets have continued displacing PCs over the last few quarters, and the company is having serious troubles in mobile with lackluster demand for its Surface tablets.

But the company has always remained strong in gaming with its Xbox console, and it’s trying to leverage that strength to expand into computing and TV with the new Xbox One. The new console is intended to be an all-in-one entertainment solution combining games, music and online video with the ability to jump from one to another as simply as changing a TV channel.

We still need to see how the Xbox One resonates among consumers, but Microsoft has a product that sets it apart from the set top boxes built by competitors like Apple and Google. If the company succeeds in its attempt to make the new console a Trojan horse to conquer the living room, this could be a real game-changer for Microsoft.

Apple knows it needs to do much better in TV if it wants to be at the same level it has achieved in smartphones and tablets, and the company is admittedly working on that area.

Tim Cook has said on several occasions that the company has “intense interest” in smart TVs, and a full-blown television set from Apple has been rumored for a long time. The company has only taken modest steps, like improving its $100 TV box so far, but according to reports from The Wall Street Journal, Apple is also collaborating with cable companies and TV networks for a new online TV service, which may even include a premium option allowing users to skip ads.

Apple is a famously secretive company, but one thing looks quite clear: the Cupertino giant is moving forward with its plans to revolutionize the TV.

Google TV has not achieved much success, but that doesn’t mean the search giant is giving up on the living room. On the contrary, the company has recently launched its new Chromecast: a 2 inch-long, $35 device that plugs directly into TV sets and streams video and other digital content from mobile devices.

Chromecast lacks the breadth of content provided by other dedicated streaming media players, but it’s inexpensive and easy to use, and it has received mostly positive critiques so far. Considering these advantages, and the fact that Google owns key strategic assets like Fiber and YouTube, the company has serious potential to become a relevant player in the smart TV competition.

Netflix Everywhere

Microsoft, Apple and Google have many things in common: one is that the three companies are trying to revolutionize the TV, and another is that the three of them have partnered with Netflix in that competition. This is quite telling about the strategic position the company has achieved; if you want to compete for the living room, you need to have Netflix on board.

With nearly 30 million members in the US and 8 million in international markets, the company has positioned itself as the industry leader, and that means that hardware manufacturers need to play nice with Netflix if they want to succeed. Both customers and industry players know that Netflix is the best way to quickly and effectively access huge amounts of content.

Original content is a big part of that strategy, and it goes well beyond short term profitability. Netflix will not make enough money with new subscribers to pay for “House of Cards” or “Arrested Development,” certainly not on a middle-term horizon, but the company is playing this game for the long-term.

For $7.99 a month members have access to a wide variety of titles, and there is a big chance that some of that content will be considered valuable enough to pay the modest membership fee. As the company continues building its library for the same price, the proposition gets even more attractive over time.

At this stage, and increasingly more over time, finding reasons to subscribe to Netflix is much easier than finding reasons for not doing so, and that’s a great thing for Netflix and its shareholders.

Bottom Line

The war for the living room is on, and it will only get more intense over time. While major industry players fight each other to own the hardware and software in the new TV paradigm, Netflix is simply focused on providing plenty of high quality content at a compelling price. The way things are going, Netflix is securing its position in the future of TV.

Netflix’ Worst Nightmare Becomes Real

Posted by glenfulce on August 7, 2013
Posted in: Business, Networks, OTT. Tagged: , , , , . Leave a comment

Netflix’ Worst Nightmare Becomes Real

TheStreet.comBy Richard Saintvilus | TheStreet.com – Tue, Sep 11, 2012 6:30 AM EDT

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AMZN 297.00 -3.75

NEW YORK (TheStreet) — I’m now into midway through watching the second season of “The Office.” In a span of two days, I’ve been able to watch almost two years of shows. This would not have been possible had it not been for streaming movie giant Netflix NFLX . The ease with which the service is able to make television shows that were old new again is certainly Netflix’ best quality to the consumer.

For investors, however, the question is how much worse can things get? Retail and tech giant Amazon AMZN has just signed a content deal significant enough to challenge Netflix for subscribers. Yet, that’s not even the worst of it. The deal announced last week is with premium TV joint venture Epix, bringing content to Amazon’s Prime Instant Video streaming service. Though terms of the deal were not disclosed, it is said the partnership will bring popular hit movie titles such as “Hunger Games,” “Thor” and “Iron Man 2” to Amazon’s streaming offerings. What this means is exactly what many Netflix investors had feared would have occurred — no more exclusivity. What was once originally a five-year deal, of which two were exclusive, has lapsed. Now enters Amazon. But what is Netflix thinking? This continues the streak of yet another misstep for the struggling movie giant, which has seen its stock price erode during the course of the year. Several weeks ago, as the stock traded just above $80 per share, I asked if the company can stay afloat and survive the unrelenting assaults it receives not only from Amazon, but also from cable giant Time Warner TWX and Coinstar CSTR (Redbox). While it may have been able to avoid death from these three, the story changes when one considers Apple AAPL and Google GOOG have TV and potentially movie plans of their own. What are the odds that Netflix is able to survive a living room revolution unlike anything the market as ever seen? I still maintain that a takeover is its best option. Outside of that there is no chance Netflix will survive. By having allowed Amazon to forge a deal with Epix, I’m starting to wonder if Netflix truly appreciates the dire situation it’s in. It is as if it no longer values its streaming content — the same reason why it opted to ignore its once-popular DVD model. Now it does not appear to want to protect that decision. Even worse, during its second-quarter earnings report, Netflix said that although it expects to remain profitable in the third quarter, it is forecasting a loss for the fourth quarter due to international market expansion. So essentially, the company has (for all intents and purposes) killed off its DVD business, allowing Amazon to chip away at its streaming division by losing exclusivity, but somehow thinks international expansion in Latin America and continental Europe is worth a fourth-quarter loss. It would stand to reason that a change in focus would be the wise decision until Europe gets its act together – at least that would be the option for a smart management team. However, no one has ever accused Netflix of having one. I would stay away from the shares until things get more clear in terms of the company’s strategic direction. Until then, there is only one direction the stock will go and that is down — affirming that things can indeed get worse. Follow @rsaintvilus