The Value of Binging

Ever since Netflix began producing its own series, traditional network TV executives have driven themselves to distraction over its refusal to disclose viewership numbers, or to cooperate with outside measurement companies like Nieslen. Steeped as they are in the world of ratings and advertising CPMs, TV executives have never quite groked that Netflix reckons the value of content differently.

Their obsession has sometimes led to odd spectacles, such as NBC research president Alan Wurtzel’s recent big reveal of purported Netflix “ratings” derived by the network-backed ratings system Symphony, which passively measures Netflix viewing using audio recognition technology, Manchester_by_the_Seaand which Wurtzel seemed to think proved something, although what that was was not entirely clear.

Netflix does not monetize content, as traditional media companies do. It monetizes viewers. How many people watch a particular episode of a particular series within a certain time window, therefore, really isn’t relevant to its value to Netflix. What matters is whether the people who are watching the series continue to do so, and whether that continued viewing enables Netflix’s recommendation engine to surface other series they’ll go on to view. People who continue to watch a series will, presumably, continue to pay their monthly subscription fee.

As discussed here before, Netflix’s different calculus puts a premium on producing and acquiring a broad range of programming, rather than on trying to pick shows that will have a broad appeal and therefore generate high ratings. That, in turn, is attracting a growing roster of A-list talent to Netflix, Amazon and other subscription services, drawn by the opportunity to break out of the creative constraints of ratings-driven television. Read More »

Unbundling The Set-Top Box

Somewhere, Steve Jobs is smiling. Nearly six years after the late Apple CEO complained that real innovation in the TV industry could only happen if you first “tear up” the traditional pay-TV set-top box, the FCC is taking the first steps toward doing just that.

FCC chairman Tom Wheeler this week announced that the commission will vote next month on whether to proceed with a formal rulemaking to “unlock the set-top box,” if not quite tear it up, by requiring cable, satellite and telco pay-TV providers to make elements of their service available to third-party device makers and software developers.

“Today, 99 percent of pay-TV customers lease set-top boxes from their cable, satellite or telco providers,” Wheeler wrote in an op-ed published Push_button_cable_boxWednesday. “Pay-TV subscribers spend an average of $231 a year to rent these boxes, because there are few meaningful alternatives. If you’ve ever signed up for a $99-a-month bundle for cable, phone and Internet and then wondered why your bill is significantly higher, this is a big reason…This week, I am sharing a proposal with my colleagues to tear down the barriers that currently prevent innovators from developing new ways for consumers to access and enjoy their favorite shows and movies on their terms. The new rules would create a framework for providing device manufacturers, software developers and others the information they need to introduce innovative new technologies, while at the same time maintaining strong security, copyright and consumer protections.” Read More »

Apple’s Risky New Metric

With iPhone sales flattening, Mac revenues eroding and iPad sales falling, Apple broke out a new metric in its Q4 (fiscal Q1) earnings release Tuesday in a bid to direct analysts’ and investors’ attention toward those parts of the business that are still showing robust growth.

According to the “Earnings Supplemental Material” released with the earnings report, the “active installed base” of iOS devices has reached 1 billion, a figure Apple CEO Tim Cook said the subsequent analyst call has actually now been exceeded. That figure, which CFO Luca Maestri said Apple-TV-4reflects 25 percent year-over-year growth, represents the total number of iOS devices out there actively downloading apps, using Apple Music, buying music from iTunes, using iCloud and other Apple services in the last 90 days. And it underpinned, Cook and Maestri repeatedly stressed, $5.5 billion in revenue for Apple in the quarter ($4.7 billion net of the portion of some service revenue shared with rights owners), an increase of 15 percent over the same quarter last year.

“The market has not fully understood that we have a portion of our business directly tied to our incredible installed base that’s not driven by quarterly results,” Maestri said. “Those customers engage with our services and that business, which is a $20 billion business, is growing at more than 25 percent during the last 12 months.” Read More »

What Broadcasters Are Talking About When They Talk About Netflix ‘Ratings’

The chattering and sniping touched off by NBCUniversal research head Alan Wurtzel’s release of purported ratings data for Netflix last week during the Television Critics Association winter meeting, taken from network-backed Symphony, is still going strong.

After blasting the numbers released by Wurtzel as “remarkably innaccurate,” Netflix piled it on in its Q4 letter to shareholders this week:

The growth of Netflix has created some anxiety among TV networks and calls to be fearful. Or, at the other extreme, an NBC executive recently said Internet TV is overblown and that linear TV is “TV like God intended” [sic]. Our investors are not as sure of God’s house-of-cardsintentions for TV, and instead think that Internet TV is a fundamentally better entertainment experience that will gain share for many years. The challenge for traditional media companies, most of whom see the future pretty clearly, is to use the revenue from Netflix and other SVOD services to fund both great content and their own evolution into Internet TV networks. Seeso, BBC iPlayer, Hulu, CanalPlay, HBO Now, and CBS All Access are the beginnings of these efforts.

Our titles are watched on the go and at home on a wide range of devices, making measurement of the viewing of any given title difficult for third parties. We don’t release title‐level ratings as our business model is not dependent on advertising or affiliate fees. Instead, we release “ratings “ for Netflix as a whole every quarter with our membership growth report (75 million and counting!). It is member viewing and satisfaction that propels our growth.

It’s that bit about Netflix not being dependent “on advertising or affiliate fees” that is at the core of the controversy. Read More »

Fighting Piracy in Real Time

Ever since Meerkat and Periscope popped up on the scene, live event producers and rights owners have worried about the potential for piracy from mobile live-streaming apps. In fact, Periscope more or less made its bones, with the public at least,  during the Floyd Mayweather/Manny Pacquaio title fight last year, when the Twitter-owned app led to so much re-broadcasting of the HBO and Showtime feeds of the bout that then-Twitter CEO Dick Costolo, rather indiscreetly, declared Periscope the real “winner” of the night.

Since then, the threat has only grown greater as live-streaming apps have proliferated.

iphone_TV“We saw a lot of new live-streaming apps at CES that are just around the corner,” Clint Cox, VP of technical operations at the Ultimate Fighting Championship said at the Copyright & Technology conference sponsored by GiantSteps Media and the Copyright Society in New York this week. “It’s fairly common technology and it’s becoming a unique challenge for rights owners. It’s a very easy place to put infringing content quickly.”

The problem is doubly complicated by the fact that not all unauthorized streaming of live events is clearly infringing from a copyright perspective, particularly when it comes to live sports. While a licensed broadcaster’s pictures, descriptions and accounts of a sporting event are clearly copyrighted, the game itself — the action on the field, court, ice or ring, as it unfolds in real-time — is not.

Someone sitting in the stands pointing a Periscope-enabled smartphone at the field, therefore, may be violating the venue’s terms and conditions printed on the back of the ticket, but they may not be infringing anyone’s copyright. Read More »

Netflix Is A Ratings Winner

NBCUniversal president of research and media development Alan Wurtzel got a bit cheeky with Netflix this week, leaking some preliminary data from Symphony, the network-backed rating system (still in beta) that uses audio-recognition technology to measure viewership of unrated OTT channels like Netflix.

According to Wurtzel, Symphony measured the average audience in the 18-49 demo for each episode of Netflix original series within 35 days of their debut on the service between September and December, and over that time Netflix’s most-watched show was “Jessica Jones,” which averaged piper-orange-is-the-new-black4.8 million viewers per episode. “Master of None” was second, with an average audience of 3.9 million, while “Narcos” pulled in 3.2 million per episode. “Orange is the New Black” remains Netflix’s most-watched series, according to Wurtzel, but the current season was released in June and most of the viewing happened during the summer. During the period covered by the study, OITNB averaged 644,00 viewers per episode.

In comparison, the most watched scripted series in the 18-49 demo on linear TV channels during the 2014-2015 TV season, in the live-plus 7-day window, AMC’s “The Walking Dead” averaged 13.2 million viewers per week, followed by Fox’s “Empire” at 9.0 million and CBS’ “Big Bang Theory” at 8.3 million. Read More »

Fahrenheit 512

The Friday night document dump is a tried and true tactic used by businesses as well as government officials looking to avoid a conflagration over the content of the documents. Waiting until a Friday that happens to fall on New Year’s Eve, however, has a panache all its own.

That’s when the U.S. Copyright Office dropped a Notice of Inquiry (NOI) into the Federal Register seeking comments on whether section 512 of the Digital Millennium Copyright Act, dealing with the procedures for notice and takedown of infringing material, is working effectively and as Congress intended when it passed the law back in 1996. But if the Copyright Office was hoping that few would notice the NOI, or that it might be able to keep the comments down to a dull roar it will almost surely be disappointed.

Library-of-Congress-Reading-RoomNo one who actually has to follow or apply the Section 512 procedures thinks they’re working well or effectively. Google alone was processing nearly 20 million takedown requests per week at the end 2015, while copyright owners see the system as a hopeless game of Whac-a-Mole, in which files get removed only to reappear quickly under a different URL. Litigation between copyright owners and online service providers — over the scope of the Section 512 safe harbor, which shields service providers from liability for infringing content posted by users if they follow the proscribed takedown procedures, the legal standard for culpable knowledge of infringing activity, and the efficacy of enforcement against repeat infringers — has formed a near-constant backdrop to the law almost since it took effect in 1998, most epically in the seven-year legal battle between Viacom and Google over content posted to YouTube. Many have been waiting years to get a crack at rewriting the safe harbor rules and they’re not likely to let the opportunity pass. Read More »

At CES, OTT Stacks Up

LAS VEGAS — If there was a consistent OTT theme running trough CES here this week it was about the need for solutions providers to move up the monetization stack as over-the-top streaming becomes a more important component of media companies’ bottom lines.

Previously focused on largely on video delivery and optimization as content traveled across the web, technology providers like cbs all accessConviva, Ooyala, Nagra and Adobe are increasingly focusing on building tools designed to help media companies make sure direct-to-consumer streaming becomes additive to their current business rather than cannibalistic,by better monetizing OTT viewing and viewers.

“This year we’re very focused on going further up the food chain at media companies,” Adobe’s directly of product marketing for Adobe Primetime Campbell Foster told Concurrent Media. “A lot of our [media] clients are looking to us to help drive net viewer increases, not just service the viewers they already have.” Read More »

The Fault In Our Stars: Lessons From The 2015 Box Office

Economists have long recognized that the sports and entertainment industries exhibit elements of what University of Chicago economics Sherwin Rosen called the economics of superstars in his classic 1981 study, in which small differences in talent or popularity can lead to outsize differences in returns. Anyone who reaches the NBA, for instance, is by definition an elite athlete. But Star-Wars-Force-Awakens1if the superior skills of a LeBron James or Kobe Bryant added a mere 2 points per game on average to his team’s total, in a league where the average point differential per game is 0.06, over the course of a season they could easily add a half a dozen or more wins to the team’s record, making the difference between first place and missing the playoffs. Given the financial payoff for the team’s owners of reaching the playoffs, James and Bryant are worth almost any price, as in fact their salaries reflect.

Similarly, there are many talented performers in the entertainment industries. But people tend to prefer to listen to the same music and see the same movies as their friends. So if their friends start to listen to Adele or Taylor Swift more than other artists, even by a small amount, that difference in popularity is quickly amplified through network effects to where Adele and Swift tower over others in the charts and can command almost any price for their concerts. Read More »

How The CRB Has Done The Music Industry A Favor (Updated)

With the possible exception of Taylor Swift, Janet Yellen may now be the most powerful person in the music business. As chair of the Federal Reserve, Yellen controls the levers that control the rate of consumer inflation in the U.S., a number on which potentially millions of dollars in music royalty revenues will now turn in the wake of Wednesday’s ruling by the Copyright Royalty Board (CRB) setting the royalty rates that internet radio services like Pandora and iHeartMedia must pay to record labels and artists for the next five years.

Under the new rate card, internet radio services will pay 17 cents per 100 streams in 2016 ($0.0017 per stream), up nearly 20 percent from the 14 yellencents per 100 streams they pay today but well below the 25 cents per 100 that SoundExchange, which collects digital royalties for artists, had sought. After that, the rate will be indexed to the Consumer Price Index (CPI), the main gauge the government users to track inflation, for the next four years, which means the rate could go up or down with the price of bread.

It was an unexpected and deeply peculiar move that looked like nothing so much as an effort by the CRB, an arm of the Library of Congress, to get out of the rate-setting business, which itself would be mighty peculiar insofar as its role in setting royalty rates for webcasters is mandated by Congress and not really optional on CRB’s part. Read More »

Zero Tolerance

As the FCC awaits the fate of its open internet order (a.k.a. net neutrality) in the D.C. Circuit Court of Appeals, language that could have mooted much of the legal case by limiting the commission’s authority to regulate internet access was stripped at the last minute from the 2000-page omnibus spending bill unveiled by congressional leaders Tuesday night to keep the government running into 2016.

The removal of the rider was a blow to ISPs, which had lobbied to keep the language in the spending bill, but net neutrality advocates have found plenty of other things to complain about lately regarding the behavior of ISPs. Top of the charts: the growing number of streaming services ISPs are selectively exempting from data caps.

FCC_buildingIn just the past three months:

  • T-Mobile introduced its Binge On plan, which allows mobile users to stream video from roughly two-dozen “partner” services, including Netflix, HBO Now, Sling TV, MLB.tv, Showtime and Starz, without those bits counting against a subscriber’s data cap;
  • Comcast launched Stream TV in a handful of markets, a live and on-demand streaming service that, unlike Netflix, for instance will not count against Comcast subscribers’ data caps where those are in place (as no doubt they soon will be everywhere);
  • Verizon launched Go90, its in-house streaming service for which data usage is “sponsored” by advertisers and therefore isn’t counted toward the user’s data cap;
  • AT&T hinted broadly that it, too, will launch a mobile streaming service that, like Verizon’s Go90, would be “sponsored” by someone other than the user.

Read More »

The Future of TV: Platform or Service?

Amazon on Tuesday unveiled its expanded Prime Instant Video service and it seems to be more or less as advertised. Prime subscribers will now be able to add subscriptions to other over-the-top streaming services, including Showtime, Starz and an array of niche channel for prices ranging from $3 a month to $8.99 a month for Showtime, on top of the $99 annual price ($8.25 per month) for Prime.

Amazon SDDChannels can be ordered a la carte, and subscribers can change their line ups each month. Prime subscribers can also user their Amazon credentials to log in to any of the standalone apps for their add-on channels on other streaming platform, which means Prime subscribers can watch Showtime on Apple TV despite the absence of Prime on the Apple set-top box.

For the participating networks, the expanded Prime means forgoing a direct relationship with subscribers, as Amazon will handle all billing and customer service functions, presumably in exchange for a cut of the add-on subscription fees, while gaining the leverage of Amazon’s reach and merchandising strength. Read More »

Aereo’s Fuzzy Legal Legacy

While the FCC seems to have backed off for now from a proposal to update the regulatory definition of multichannel video programming distributors (MVPDs) to include certain types of over-the-top services, the battle over how the law should treat online video rages on along other fronts.

aereo_antennaOn Wednesday, a redacted copy of an opinion issued under seal last month by U.S. district court judge Rosemary Collyer, concluding that OTT broadcast service FilmOn X was not entitled to the compulsory license that cable and satellite services rely on when they retransmit copyrighted content contained in broadcast signals, was released to the public. And even with the redactions, it’s now clear that Judge Collyer took a 180-degree different view of the question than U.S. district judge George Wu took last year in ruling that FilmOn was, in fact, entitled to the compulsory license.

The two questions — who qualifies as a MVPD under FCC regulations? and who qualifies for the compulsory copyright license MVPDs rely on? — are legally distinct, but closely related. Read More »

Amazon’s On-Demand MVPD

At a congressional oversight hearing last month, FCC chairman Tom Wheeler indicated that his earlier proposal to classify certain over-the-top video services as “multichannel video programming distributors” (MVPDs), a regulatory term of art that applies to cable and satellite providers, was on more or less indefinite hold.

“The purpose of rulemaking is to learn,” Wheeler told the committee. “We learned that [a] vast number of things are developing very rapidly, and we have not moved forward on that notice of proposed rulemaking and don’t see, until situations change, we would.”

Among those “vast number of things,” no doubt, were Amazon’s confidential plans to bundle third-party OTT services in with Amazon Prime, monitor_globeallowing Prime Instant Video users to put together a package of OTT channels through a single subscription. As first reported by BloombergBusiness, Amazon Prime customers “will have the option of adding other online subscriptions to their accounts, including major, well-known movie and TV channels, and Amazon will also sell prepackaged bundles of its own creation…[T]he new feature may go live as soon as next month.”

The offering would “resemble something between a cable-TV subscription, though without live programming, and the online array of video offered through devices from Roku Inc., Apple TV or Amazon’s own Fire TV,” according to Bloomberg. Read More »