The Other Pay-TV Bundle

Hulu’s virtual pay-TV service went live in selected cities this week, offering a basic bundle of 60 channels for $40 a month ($73 a month with enhanced DVR capability). The launch, still officially in beta, brings to six the number of live, multichannel over-the-top services now available, including DirecTV Now, Sling TV, Playstation Vue, YouTube TV, and Fubo TV. More are likely on the way.

But while Hulu was rolling out, many traditional pay-TV providers were rolling over. According to an analysis by MoffettNathanson analyst Craig Moffett, based on publicly reported results and estimated results for privately held companies, traditional pay-TV providers collectively lost at least 762,000 video subscribers in the first quarter of 2017, more than five times their losses in the same period last year.

“For the better part of fifteen years, pundits have predicted that cord-cutting was the future. Well, the future has arrived,”  Moffett wrote in his latest quarterly overview of the industry. “It leaves the Pay TV subscriber universe shrinking at its worst ever annual rate of decline (-2.4%). And it was the worst ever accelerate in the rate of decline (60 bps).”

The news spooked investors, who sent shares of media companies tumbling. Read More »

In Cable, The Rich Get Richer

Daniel Frankel, over at FierceCable, noted an interesting pattern in the Q1 data from cable operators this week. All of the vaunted rebound in video subscribers during the period was concentrated among top-tier providers.

Comcast, Time Warner Cable and Charter collectively added 89,000 video subs.

Mid-size operators, however, all experienced continued erosion among video subscribers. Cablevision lost 15,000; Cable One lost 13,000; and Mediacom lost 2,000 across its two operating units.

money_bagsFirst-quarter data on smaller providers, which is compiled by SNL Kagan, is not yet available. But it would be surprising if the pattern there were different from that of the mid-size providers.

In both cases, operators are increasingly making a de facto, if not quite formal, decision not to fight very hard to attract or retain video subscribers because of the high programming costs that come with them and to focus their business primarily on their broadband service.

“The lower end of the market can no longer afford the big bundle; the number of disruptive OTT technologies and vendors are now multiplying rapidly; and the millennial generation has very limited interest in traditional TV viewing,” Cable One CEO Thomas Might told Fierce. “These patterns will inevitably bring an end to the ubiquitous fat bundle, but only slowly and painfully.”

Slowly and painfully perhaps, but the data also suggest it could happen at very different speeds in different markets, depending on the size of the local providers’ national footprint. Read More »

The FCC Plays For Time in Charter-TWC Merger

The Federal Communications Commission and the U.S. Justice Department this week each signaled their intent to approve Charter Communication’s $65 billion acquisitions of Time Warner Cable and Brighthouse Networks, subject to several conditions.

The mergers will create the second largest cable-TV provider in the country, with 17.4 million subscribers, behind Comcast’s 22 million. Strikingly, though, none of the conditions attached by the FCC and DOJ have to do with the provision of cable-TV service. Instead, they deal almost entirely with promoting over-the-top video as a viable competitor to cable.

FCC_headquartersUnder the deal with the FCC, the merged company will be prohibited from imposing usage-based pricing or data caps on its 19.4 million broadband subscribers, a tactic many cable internet providers have turned to lately to discourage video cord-cutting by indirectly raising the cost of using OTT services like Netflix.

Charter will also be prohibited from charging Netflix and other OTT providers with interconnection fees for delivering traffic to Charter broadband subscribers.

Under the agreement with the Justice Department, Charter will be barred from inserting or enforcing most-favored nation (MFN) clauses in its carriage agreements with programmers — a tactic many pay-TV providers, particularly TWC, have used to discourage programmers from making their content available on OTT platforms. Read More »

Cable’s Q4 Bundle of Joy

Comcast, Time Warner Cable and Charter all reported strong video subscriber growth in the fourth quarter of 2015, adding 172,000 between them. That was a far cry from a year earlier, when they collectively lost 35,000 video subs.

The results led some to speculate that the worst days of cord-cutting are now behind the industry and that cord-nevers may be starting to change their minds about paying for TV.

Maybe, although the pay-TV industry as a whole continues to lose subscribers, at a rate of about 1 percent a year, according to an estimate by comcast_vanMoffettNathanson analyst Craig Moffett. Most of that shrinkage in the fourth quarter came from telco and satellite providers, as those two businesses undergo restructurings.

Between them, Verizon’s FiOS TV service and the combined AT&T/DirecTV lost 6,000 video subscribers in the quarter, as Verizon shifted its video focus to its new mobile streaming service Go90 while AT&T shed U-Verse subscribers as it prepared to swallow DirecTV.

In Comcast’s Q4 earnings call, CEO Brian Roberts acknowledged that some of cable’s gain last year probably reflected a market share shift, reversing several years in which cable was losing share to satellite and telco. Read More »

Going Over The Top Without Cutting The Cord

Trying to figure out what the stealthy startup Layer3 TV is planning to unleash later this year has become something of a parlor game among pay-TV industry watchers. The VC-backed company, founded in Boston by two cable-industry veterans but now headquartered in Denver, has said little about its plans beyond its goal to become “a next generation cable provider spearheading a new era of home media, combining the best of television, social, and digital life.” How it plans to do that, though, remains a closely guarded secret.

The company’s name — Layer3 — refers to the 7-layer TCP/IP stack, specifically the packet routing layer, which may be a hint. And its two co-founders, Jeff Binder and Layer3 TVDave Fellows, are a couple of confirmed gear-heads. Binder was the founder of VOD systems provider Broadbus Technologies, which was sold to Motorola in 2006, while Fellows is a former CTO at Comcast and AT&T Broadband. So it’s reasonable to assume that whatever Layer3 is planning will leverage existing cable-cum-broadband plant.

The announcement of a second-round of funding in June that raised $51 million offered further hints.

“Cable television may have dominated the business press this year but consumers continue to crave a simple, yet elegant, solution for managing the newest innovations in video, social and digital,” Binder said in a statement. “Layer3 TV is the new cable — putting subscribers at the center of the universe by giving them seamless control of their entertainment relationships.” Read More »

The FCC’s Imperfect Path To Increased Video Competition

The conditions the Federal Communications Commission has attached to its approval of AT&T’s merger with DirecTV are being met with a predictably mixed response. Some groups, such as Comptel, a Washington-based lobbying group representing Netflix, Amazon, Cogent Communications, Level 3 and other network operators and service providers, praised the FCC for requiring AT&T to disclose details of its network interconnection deals. Others, such as Free Press, blasted the conditions for not going “nearly far enough” to address the problem of pay-TV consolidation.

Here’s what we know, from a statement issued Wednesday by FCC chairman Tom Wheeler:

An order recommending that the AT&T/DirecTV transaction be approved with conditions has circulated to the Commissioners. The proposed order outlines Federal Communications Commission (FCC) Chairman Tom Wheeler gestures at the FCC Net Neutrality hearinga number of conditions that will directly benefit consumers by bringing more competition to the broadband marketplace. If the conditions are approved by my colleagues, 12.5 million customer locations will have access to a competitive high-speed fiber connection. This additional build-out is about 10 times the size of AT&T’s current fiber-to-the-premise deployment, increases the entire nation’s residential fiber build by more than 40 percent, and more than triples the number of metropolitan areas AT&T has announced plans to serve.

In addition, the conditions will build on the Open Internet Order already in effect, addressing two merger-specific issues. First, in order to prevent discrimination against online video competition, AT&T will not be permitted to exclude affiliated video services and content from data caps on its fixed broadband connections. Second, in order to bring greater transparency to interconnection practices, the company will be required to submit all completed interconnection agreements to the Commission, along with regular reports on network performance.

Importantly, we will require an independent officer to help ensure compliance with these and other proposed conditions. These strong measures will protect consumers, expand high-speed broadband availability, and increase competition.

Read More »

ESPN and the Skinny Bundle

The results of a consumer survey released Wednesday by Digitalsmiths raised some eyebrows for what they said about pay-TV viewers’ channel preferences in a hypothetical a la carte pay-TV universe, particularly with respect to ESPN.

Asked if they would prefer to be able to select the channels they subscribe through a la carte, rather than in pre-selected bundles, nearly 82 percent said “yes.” That espn_leadergroup was then given a list of 75 channels and asked to pick their own, ideal bundle. Fewer than 36 percent included ESPN in their ideal bundle, putting the top rated cable network in the U.S. well behind the Discovery Channel, which was cited by 62 percent of respondents.

Even Digitalsmiths was surprised.

“The top channels selected by this group were ABC, Discovery Channel, CBS, NBC, and the History Channel,” the company wrote in the accompanying report on the findings. “Digitalsmiths finds the high demand for the Discovery Channel (ranked second) to be very interesting, but even more shocking is ESPN, which ranked
twentieth. ESPN is some of the highest-priced content compared to other channels and is likely more expensive than the Discovery Channel” (full chart below). Read More »

YouTube and Twitch Channel Cable TV

With the upcoming launch of YouTube Gaming, YouTube will have dedicated apps for its three most popular categories of videos: music (Music Key), kids (YouTube Kids) and now video games.

While the Google-owned site has long supported discreet “channels,” those are largely a convenience for individual video creators as they look to build their own YouTube_music_keycorporate or personal brands. They were not created by YouTube with an eye to sorting the content in its vast online library by category or genre. Nor, by extension, were they created to try to segment YouTube’s vast audience by interests, tastes or demographics  the way, say, a category-specific cable TV network like Nickelodeon or CNBC seeks to do.

By creating category-specific apps, however, YouTube is clearly edging toward that model.

The launch of YouTube Gaming, of course, is also Google’s response to the rapid growth of Twitch, the live-streaming gaming site it came close to buying last year only to have Amazon snatch it away at the last minute. While Twitch’s audience of 100 million active monthly users is a small fraction of YouTube’s more than 1 billion, they’re a dedicated bunch. The average Twitch user spends 106 minutes a day on the site, according to the company, and peak concurrent usage can reach 1.5 million. Read More »