Katsjing! Netflix adds 29m subs in 2018

In reporting its Q4 results, Netflix has revealed it finished 2018 with 139 million paying memberships, up 9 million from quarter start and up 29 million from the beginning of the year.

The SVoD service grew annual revenue 35 per cent to $16 billion in 2018, and nearly doubled operating profits to $1.6 billion, though this was short of Wall St expectations. Netflix said that as expected, Q4 operating margin dipped to 5.2 per cent vs. 7.5 per cent prior year as a result of so many titles launching in the quarter.

Netflix added a record 8.8 million paid memberships (1.5m in the US and 7.3m internationally), higher than its beginning-of-quarter expectation for 7.6 million paid net adds and up 33 per cent year over year. For the full year, paid net adds grew 33 per cent to 29 million vs. the 22 million it added in 2017.

In a Letter to Shareholders, Netflix advises that it changes pricing from time to time as it continues investing in “great” entertainment and improving the overall Netflix experience. “We want to ensure that Netflix is a good value for the money and that our entry price is affordable. We just increased our US prices for new members, as we did in Q4 in Canada and Argentina, and in Japan in Q3. The new pricing in the US will be phased in for existing members over Q1 and Q2, which we anticipate will lift ASP,” it advises, adding that its multi-year plan is to keep significantly growing its content while increasing its revenue faster to expand its operating margins.

In terms of content, Netflix says it is making significant investments in productions all over the world “because we have seen that great stories transcend borders”. For example, Bodyguard (co-produced with BBC One, from ITV Studios) ranks as one of its most enjoyed co-productions. Baby, its second original series from Italy, and The Protector, its first Turkish original series, both saw strong viewing both inside and outside their home countries. All three of these debut seasons from around the world were each enjoyed by over 10 million member households in their first four weeks. Netflix says that a result of its success with original content, it is becoming less focused on second-run programming.

In terms of competition, Netflix notes that in the US, it earns around 10 per cent of television screen time and less than that of mobile screen time. In other countries, it earns a lower percentage of screen time as a result of lower penetration of its service. “We earn consumer screen time, both mobile and television, away from a very broad set of competitors. We compete with (and lose to) Fortnite more than HBO. When YouTube went down globally for a few minutes in October, our viewing and signups spiked for that time. Hulu is small compared to YouTube for viewing time, and they are successful in the US, but non-existent in Canada, which creates a comparison point: our penetration in the two countries is pretty similar. There are thousands of competitors in this highly-fragmented market vying to entertain consumers and low barriers to entry for those with great experiences. Our growth is based on how good our experience is, compared to all the other screen time experiences from which consumers choose. Our focus is not on Disney+, Amazon or others, but on how we can improve our experience for our members.”

TMT analyst Paolo Pescatore described the results as  “a modest quarter to end a mixed year for Netflix,” suggesting that the year ahead will be pivotal. “More providers will be launching SVoD services and they will want to pull their programming off Netflix. Also, expect the likes of Apple to make significant moves in video/TV, leaving the market awash with video services. “Users will be spoilt for choice, maybe a bit too much,” he says.

“Worryingly, the company is burning through a lot of cash. It needs to recoup this by adding customers more quickly, increasing prices or taking on more debt. Therefore, expect price rises in all key markets,” he advises

“Cable and telco partnerships will remain important for further subscriber and revenue growth over the next twelve months,” he says, reflecting Netflix’s comments in its Letter to Shareholders that it is also expanding its bundled offerings which now include: Telefónica in Spain, Comcast and T-Mobile in the US, Sky in the UK and Germany, Free in France, and KDDI in Japan.

According to Josh Krichefski, CEO at MediaCom, Netflix’s growing catalogue of exclusive shows and ongoing push to create original content is clearly reaping rewards, noting that recent hits such as Bird Box and Haunting of Hill House are generating the same buzz as Oscar-winning films. “This is all well and good but it does beg the question of how much longer Netflix can sustain itself without an advertising model, with the likes of Prime Video and NOW TV making up ground quickly. While Netflix currently leads the way in streaming platforms, investing millions and millions into its own content may not be enough to enjoy unbridled success in the future.”

read more here: advanced-television.com

Study: Consumers Who Watch Ad-Supported OTT Are Younger, Higher Income

It turns out there’s a large group of Americans who don’t watch just Netflix or other ad-free video services: 45% of consumers who regularly watch video online say they mainly watch ad-supported over-the-top services.

That’s according to a new study from the Interactive Advertising Bureau. The online-advertising trade group’s research also found that the largest audience segment of ad-supported OTT viewers comprises adults 18-34 years old, and on average they have higher incomes than the overall U.S. population (with 34% of ad-supported OTT viewers reporting income of $75,000 or more).

In addition, consumers who mostly watch ad-supported OTT services skew higher among men; black and Asian consumers; and households with children, the IAB study found.

As a cohort, ad-supported OTT viewers are harder for advertisers to reach through conventional TV (while pure subscription-based video-on-demand services like Netflix, Amazon Prime, or HBO Now do not carry advertising). On average, primarily ad-supported OTT viewers watch 10.4 hours of cable TV per week versus 14.7 hours among TV-only viewers. Meanwhile, about 52% of ad-supported OTT viewers are cord-cutters or cord-shavers, with over one-third citing “better content on streaming services” as a reason for choosing ad-supported OTT over other services.

IAB released the findings at its inaugural NewFronts West advertising event in L.A., which runs Oct. 9-10. Sue Hogan, the trade group’s SVP of research and measurement, said the study points to “the high value that brands should place with increased investment in ad-supported OTT.”

The IAB’s study defined ad-supported OTT video viewers as those who watch video through a free streaming service with ads (such as YouTube, Pluto, the Roku Channel, Crackle or Vevo); via an online pay-TV provider (e.g., Sling TV, DirecTV Now); through a streaming app that requires a cable, satellite or telco login (e.g., Discovery Go, FX app, WatchESPN, Comcast Xfinity); or through a subscription-streaming service that includes ads (e.g., Hulu or CBS All Access with limited ads).

The IAB study also found that the predominantly “ASV OTT” cohort showed higher ad receptiveness than those who mostly watch SVOD or only watch TV — which is not surprising, but a key point for marketers. About 59% of ASV OTT users agreed that “I don’t mind seeing ads if I’m getting to watch content when I want,” compared with 47% of primarily SVOD viewers and 34% of TV-only viewers.

In addition, ad-supported OTT viewers reported spending more on online subscription purchases — $119 per month — than subscription VOD viewers, at $89 per month. ASV OTT fans also are more likely to follow social influencers: 25% said they regularly watch videos from YouTube personalities, vs. 17% of SVOD-dominant consumers and 5% of TV-only viewers.

read more here: variety.com

Nielsen: Americans Now Spend Nearly 6 Hours Per Day With Video

Americans’ appetite for video just keeps rising. Measurement specialist Nielsen released its Q1 2018 Total Audience Report today, finding that U.S. adults now consume 5 hours 57 minutes of video per day. That’s an increase of 11 minutes per day just in the last quarter.

Of that 5 hours 57 minutes, 4 hours 46 minutes goes to live and time-shifted TV viewing, up 2 minutes this quarter. The biggest gain is with TV-connected devices (including internet-connected devices, game consoles, and DVDs) which average 46 minutes per day, up from 40 minutes last quarter.

Video on a computer gets 10 minutes, video on a phone (either through an app or browser) gets 10 minutes, and tablets get 5 minutes, all of which are fairly flat.

Looking at Americans’ total media diet, Nielsen finds we spend 11 hours 6 minutes each day connected to some kind of media. This figure includes all internet, phone, and radio use. That’s up from 10 hours 47 minutes in the previous quarter.

Two-thirds of U.S. homes own devices that let them stream video to the television set, and 2.7 percent subscribe to a skinny bundle (vMVPD) while 64 percent subscribe to a subscription service (SVOD). Even cord-cutters and cord-nevers find plenty to watch, as over 80 percent of non-TV homes still watch video.

For more, download the full Nielsen report (registration required).

The Math of OTT: A Formula Of Addition, Not Subtraction

With 820 million connected video devices in the U.S. and hundreds of different streaming services, the over-the-top video ecosystem is about delivering more to the consumer. The Video Advertising Bureau (VAB) just released it latest report.

More…Distribution
71% of Internet users use an OTT service at least once a month

More…Content
Consumers have a voracious appetite for content, in fact a large majority of OTT HHs (70%) also have a multichannel subscription

More…Choice
Nearly one-third of OTT subscribers hold 3 or more means of accessing OTT content, an eight-fold increase over just the last two years

More…Convenience
45% of streamers say it’s important to them to be able to watch TV programs “on the go” while 81% say it’s important to them to watch TV programs whenever they want

More…Advertising Opportunities
Currently, advertising comprises 45% of all online video revenue and is projected to grow to almost 60% over the next 10 years

65% of people who use a second screen while streaming have looked up info on a product that’s been advertised in a TV show

To learn more about VAB’s competitive OTT video ecosystem, click here to download the report.