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 »

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 »

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 »

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 »

CBS All Access: Live Long And Differentiate

The original five-year mission of the Starship Enterprise was to explore strange new worlds and to seek out new lives and new civilizations. When it next leaves space dock, in 2017, it’s mission will be to explore a new strategy for transporting network TV content over-the-top.

CBS this week thrilled Trekkers throughout the galaxy by announcing the debut of a new, as yet untitled Star Trek series in January 2017, the first new series since the cancellation of “Star Trek: Enterprise” in 2005. But in a plot twist worthy of a Romulan cloaking device, the series will only be viewable in the U.S. on CBS All Access, the network’s $5.99 a month over-the-top streaming service.

Mr-SpockThe move caused many a media head to be scratched. CBS hasn’t disclosed how many subscribers CBS All Access has, but it’s almost certainly fewer than a million, a tiny fraction of the audience reach of CBS itself. Even if CBS wanted to make the new series streaming-only, Netflix has 40 million U.S. subscribers, Amazon Prime Video isn’t far behind, and Hulu has more than 9 million.

CBS All Access is sure to grow between now and 2017, of course. The app is on the new Apple TV and other OTT platforms, and the network continues to negotiate with the NFL for streaming rights to at least some of the games CBS currently broadcasts, all of which should help drive subscriptions. But even with those opportunities it isn’t going to reach Netflix-like numbers by 2017, and maybe not even Hulu numbers. So why such a small platform for such a big franchise like Star Trek? Read More »

Rethinking Music: What The Industry Could Learn From Netflix

It seems fair to say that no one in the music business right now is happy with how it’s being run. As streaming, including both paid and ad-supported, has replaced CD sales as the industry’s main economic engine, the record companies have seen gross revenue decline sharply, artists and songwriters have seen their royalty income diminished, and the companies doing the streaming are losing so much money they’re losing the ability to raise more of it.

In an interesting thought experiment at the Future of Music Policy Summit in Washington this week, musician and CEO of touring van rental service Bandago Sharky Laguana, considered how one component of the industry’s current business model — how subscription revenue Music_Festivalfrom paid streaming services is ultimately allocated to individual artists — might be made more fair, if not necessarily more lucrative.

In very broad strokes, of the $10 a month most subscription services charge consumers, the streaming service keeps $3 (30 percent) and $7 (70 percent) is paid out in royalties (theoretically to artists and songwriters but in practical terms to labels and publishers who are supposed to then distribute them). The portion of that $7 accruing to any one label is calculated based on how many times songs recorded by any of the artists under contract to the label are streamed by subscribers, typically resulting in a per-stream value of a fraction of a penny. Read More »

Search Me, Search Me Not: Apple TV And The Battle For Screen Time

At $149, it’s hard to say at this point whether the new Apple TV will gain much traction against less expensive competitors that do substantially the same things. But as I and others have noted, Apple TV will have at least one potentially compelling feature the others don’t have: universal content search via Siri, with deep links into individual apps.

Users will be able to search for titles, actors, directors and other criteria by voice command across multiple apps and then choose which service to use to watch the content you were looking for. As confirmed by Apple CEO Tim Cook in a recent interview with BuzzFeed, Apple TV will be able to tell you with a single search that the hulu_nocbs-1first three seasons of a five-season series you’re binge-watching are available on Netflix while the fourth season is available for purchase through iTunes and the fifth is available only on HBO, a provide you deep links to each without having to go through any particular service’s native UI.

Initially, universal search will only be available with iTunes, Netflix, Hulu, Showtime and HBO. But in the same BuzzFeed interview, Cook said Apple will open an API for any developer that wants their app included in Universal search.

“[W]e’ll have five major inputs into universal search initially. But we’re also opening an API, so that others can join in,” Cook said. “I think that many, many people will want to be in that search.” Read More »

Competing With Free

The RIAA reported had some good news and some not-so-good news this week about the state of the music business. The good news is that while sales of CDs and permanent downloads continue to fall, revenue from paid-streaming subscriptions through the first half of 2015 was up a solid 25 percent from the first half of 2014, to $478 million. The not-so-good news is that the number of Americans actually paying for music subscriptions is growing much slower, up a sluggish 2.5 percent, or 200,000 subscribers, to 8.1 million.

Optimists noted that the first-half data did not include Apple Music, which launched June 30th, and that second-half numbers should be show faster growth. The New York Post reported this week, citing “music industry sources” that 15 million people had signed up for Apple’s paid-streaming service during the three-month free trial RIAA_paying_subscribersperiod, which ends Sept. 20th, and that roughly half those folks — 7.5 million — had not (yet) turned off the automatic payment feature the will soon turn them into paying subscribers. It wasn’t clear from the report, however, how many of those 7.5 million are in the U.S.

The optimists also note that while the number of paying subscribers was relatively flat, average revenue per subscriber was up 21.6 percent, to $118, perhaps reflecting a shift by consumers to more expensive services like Jay-Z’s Tidal.

Yet while growth in the paid-subscriber base flags, free, ad-supported streaming services like Pandora and Sirius XM continue to be hugely popular. Pandora claims to have 80 million active monthly listeners, only a tiny fraction of which pay for its ad-free tier. Due to licensing issues, Pandora is only available in the U.S., Australia and New Zealand, so the bulk of those 80 million users must be in the U.S. Read More »

Hulu’s Ad-Free Epics

Those looking for evidence that Hulu is getting ready to introduce an ad-free, premium-plus tier got a big helping of it Sunday when the streaming service announced a deal with digital movie network Epix after Netflix decided it would not renew its expiring, five-year old deal with the three-studio consortium.

The deal brings to Hulu films from Paramount, MGM and Lionsgate, including such recent hits as  “Hunger Games: Catching Fire,” “Transformers: Age of Extinction,” “Teenage Mutant Ninja Turtles,” “Star Trek: Into Darkness,” “World War Z,” and “Wolf of Wall Street,” marking a major expansion of Hulu’s movie offehulu_nocbs-1rings.

“Hulu already offers some of the best and biggest titles in television programming, but our subscribers have been asking us for more, and more recent, big movies. We
listened,” Hulu’s senior VP and head of content, Craig Erwich said in a statement. “Through this new deal with Epix, we are proud to now be able to offer a huge selection of the biggest blockbusters and premium films. This is a landmark deal for Hulu and it marks a huge expansion for our offering of premium programming.”

Added Epix CEO Mark Greenberg: “Hulu has become one of the most popular premium streaming services and Epix’s agreement is evidence of their understanding of the value that our blockbuster Hollywood films, deep library of classic film titles and original programming brings to consumers.” Read More »

Netflix Flexes Its Muscles

Having played a pivotal role in persuading the Federal Communications Commission and the Department of Justice to reject Comcast’s attempted merger with Time Warner Cable, Netflix has seemingly done an about face and given its blessing to Charter Communications’ bid to acquire TWC. In a letter to the FCC dated July 15, VP of global public policy Christopher D. Libertelli said, “Netflix  supports the proposed Charter – Time Warner Cable transaction if it incorporates the merger condition proposed by Charter.”

reed_hastingsKey to the apparent change of heart was precisely that “merger condition proposed by Charter,” specifically a commitment by Charter to offer settlement-free peering with edge providers like Netflix across its entire expanded footprint.

“Charter’s new peering policy is a welcome and significant departure from the efforts of some ISPs to collect access tolls on the Internet,” Libertelli wrote. “Charter’s policy will promote efficient interconnection with on line content providers and with the transit and content delivery services that smaller online content providers rely on to reach their consumers. Charter’s endorsement of the policy as an enforceable merger condition will ensure that consumers will receive the fast connection speeds they expect.”

Charter outlined the new policy in a separate filing with the FCC, also dated July 15.

Comcast’s successful effort to impose interconnection fees on Netflix was the main reason Netflix aggressively opposed Comcast’s bid for TWC. Peering agreements were also the main focus of Netflix’s lobbying in support of net neutrality, urging the FCC to require open interconnection policies as part of its Open Internet order (in the end the FCC did not include specific rules for interconnection arrangements in its order, but set up a process for reviewing complaints against ISPs brought by consumers or edge providers). Read More »

Apple’s Non-Disruptive 4K Strategy

For all the disruptive innovation Apple has unleashed on the markets for devices and software it has not been particularly disruptive to the content markets it has entered. Often just the opposite.

By the time Apple introduced the iTunes Music Store the record business was already reeling from the impact of Napster and its progeny. Rather than disrupt the business, Apple’s entry created a new market for paid downloads. The record companies later came to rue the terms of Apple_TV_portsthe deals they made initially with Apple, the iTunes store helped restore legitimate commerce to digital music platforms and on balance has been a net positive for the incumbent rights owners.

Apple is now trying to do the same thing in music streaming, relaunching a paid-only Beats Music service as the record companies try to marginalize free streaming platforms. Read More »

Net neutrality disconnection?

As ISPs, both large and small, gear up to sue the FCC over its forthcoming net neutrality order, even strong supporters of net neutrality have begun pointing to potential legal problems with the proposal outlined by FCC chairman Tom Wheeler earlier this month. One of biggest we-can-haz-net-neutralitypotential problems, as far as OTT providers are concerned, was flagged by Free Press policy director Matthew Wood. Read More »

BlackBerry’s two-sided view of net neutrality

Say what you will about BlackBerry CEO John Chen’s blog post last week calling on policymakers to include application/content neutrality as part of any carrier-centric net neutrality rules — and the reviews have been brutal — but there is an important insight about the evolution of the over-the-top video market lurking inside what is otherwise an impractical proposal.

classic_black_frontChen suggests that broadband providers today “are like the railways of the last century, building the tracks to carry traffic to all points,” but notes that “the railway cars travelling on those tracks are, in today’s internet world, controlled not by the carriers but by content and applications providers.” Read More »

TV vs. Cable

The Media Wonk spent last week in Las Vegas at the Consumer Electronics Show where, everybody said, 3DTV would be the big story. And sure enough, nearly everywhere you went on the show floor folks were sporting either polarized shades or the full Geordi La Forge wraparounds and squinting at the new 3D displays tucked into carefully light-controlled alcoves of the display booths, like so many bug-eyed NFL refs going under the hood.

Yet for all the hoopla over 3D, the really important TV story out of CES was the explosion of embedded applications on Internet-capable HDTVs and Blu-ray players for bringing over-the-top (i.e. Internet-delivered) video into the living room. A year ago at CES there were only a few such TV sets on display, from a handful of manufacturers, and about all you could do with them was run a few Yahoo widgets and stream Netflix movies. At this year’s show, it was hard to find a home entertainment device that wasn’t Internet-ready, and if it didn’t come with its own app store it came embedded with one of the growing number of online content platforms from the likes of Vudu, DivX, Rovi and Boxee, among others.

Far more than 3D, set-makers’ growing commitment to enabling over-the-top video delivery to HDTV screens holds the potential to shake up the future evolution of the TV business. Read More »