Amazon Prime Video By The Numbers

Prime Numbers

Reuters obtained audience numbers for Amazon’s Prime Video subscription service. According to the internals, by early 2017 Amazon Video had drawn more than 5 million people into the Prime loyalty program, and about 26 million people overall were watching content on the platform. Amazon now spends $5 billion per year on original content, as entertainment has proven a powerful on-boarding ramp to Prime membership and a virtuous cycle of consumer spending. Those video numbers also point to why Amazon keeps its most valuable content ad-free behind a subscription paywall, since it isn’t about recouping ad revenue for the studio investments. It’s about the lifetime value of a Prime subscriber compared to a mere logged-in Amazon shopper.

Fickle Friend

Facebook is offering to fund news publishers’ shows for its Watch video hub. But publishers, fed up with Facebook’s tendency to flip-flop on such offers, are proceeding with caution, WSJ reports. Facebook pulled a similar stunt with its Live section, spending $50 million to fund year-long projects for news pubs, and then failing to renew those deals the following season. Still, publishers are willing to take the risk if it means access to Facebook’s huge audience. “I think anytime Facebook is willing to pay, we’re more willing to play,” said a publishing exec. “The problem is that when these pilot programs expire, there is still no clear revenue channel. Then you’re stuck.” More. Related: The chairman of NBC News slammed Facebook, AdAge reports. “You can’t have a relationship with them.”

Asleep At The Wheel

Snapchat’s shares sank almost 5% Thursday after pop singer Rihanna called out the app for running a tasteless ad that asked users to decide whether they wanted to “slap Rihanna” or “punch Chris Brown.” Snapchat removed the ad, which ran inside a mobile game on the platform, and chalked it up to an error by its review team, which is supposed to block any content that violates its policy banning“shocking, sensational or disrespectful” content. “We are so sorry we made the terrible mistake of allowing it through our review process,” Snap said in a statement. “We are investigating how that happened so that we can make sure it never happens again.”

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Analyst: US pay-TV revenues to fall by $27bn

US pay-TV revenues peaked in 2015, at $101.71 billion (€82.51bn), according to the eighth edition of the North America Pay TV Forecasts report from Digital TV Research. A $26.58 billion decline (26 per cent) is forecast between 2015 and 2023 to take the total down to $75.13 billion.

Cable TV revenues peaked in 2010 at $54.11 billion, but they will fall to $36.75 billion by 2023. Cable will lose nearly 12 million subscribers between 2010 and 2023 (although most of the heaviest losses have already taken place).

“Cable TV is not the only platform to suffer,” noted Simon Murray, Principal Analyst at Digital TV Research. “Satellite TV and IPTV are also losing subscribers and revenues. Much of this is due to the operators shifting their subscribers to online platforms. However, growth from vMVPDs is not expected to make up completely for the subscriber and revenue shortfalls from traditional pay-TV.”

IPTV’s fall is mainly as a result of AT&T encouraging its U-Verse subscribers to convert to DirecTV, its other pay-TV asset. This is the reverse of what has happened in most other countries. IPTV revenues spiked in 2015 at $9.60 billion, and they will halve to $4.77 billion in 2023. The number of IPTV subs topped 12 million in 2014, but it will decline to 6.26 million in 2023.

Satellite TV revenues will fall from $39.78 billion in 2017 to $33.61 billion in 2023 – or down by 16 per cent. Satellite TV subscriptions will drop by 4.08 million between end-2017 and 2023; having fallen by nearly 3 million in 2017 alone. DISH is pushing its vMVPD platform Sling TV hard, with DirecTV Now also making an impact.

The number of US traditional pay-TV subscribers will fall from a zenith of 100.34 million in 2012 to 90.35 million by end-2017 and down to 80.33 million in 2023. Pay-TV penetration will fall from 87.6 per cent of TV households in apex year 2013 to 66.7 per cent in 2023.

Although Canada is losing pay-TV subscribers, its problems are not as severe as its Southern neighbour. Pay-TV penetration reached a high point in 2013 at 85.1 per cent. The level will fall to 74.8 per cent by 2023. However, the number of pay-TV subscribers will be 11.17 million by 2023 – about the same as 2017. Pay-TV revenues will fall from a peak of $6.82 billion in 2015 to $6.01 billion by 2023.

Free trials work! 60% convert to paying customers

It can be a struggle to find and retain subscribers for smaller SVOD services. New data from Vimeo shows that a free trial is a critical tool in converting subscribers and apps help cement the relationship.

Vimeo has been helping content rights holders launch online video services for more than a decade. It has plumbed data from 3.6 million worldwide online subscribers to bring some insights into how to build a successful video service. Two of the five data points in the just-released The 2018 OTT Revolution report struck me as particularly useful to any online video service provider looking to boost subscribers and increase customer lifetime value.

Free trials work

Online video service providers (OVSPs) could be forgiven for hesitating to provide a free trial. There are risks that many people will signup, binge the content they want, and then bolt without paying a dime. New data from Vimeo shows it is worth taking the risk. Vimeo data shows that any online video service provider (OVSP) would foolish not to allow free trials of the service. The company found that 60% of people that sign up for a free trial from any platform end up becoming a paying customer.

The company saw the highest conversion rates through iOS devices, 69.6%, and Roku devices, 69.4%. 68.4% of those signing up through a web interface converted to paying customers. Android TV and Android conversions were slightly lower, 64.7% and 62.7%, but only slightly.

The challenge is to get people to sign up for a free trial. Vimeo says an OVSP can increase its chances of that happening by one-third if it can get them to use the service app rather than the web interface. Since downloading an app implies a bigger commitment than browsing the website, it makes sense that free signups would be higher. The trick, however, is to get people to download the app in the first place.

Apps a critical part of the ecosystem

Vimeo says that it examined subscriptions to hundreds of online video services it powers. It found that more than 73,000 people subscribed through a web browser in 2017. Of those, over three-quarters also watched through an app. 32% watched through an app on their iPhone, 20% on an Android device, 2.4% through a Roku, and 3.3% through an iPad. This data strongly supports the idea that when consumers signup for a service they expect to have access to it through all the screens they use.

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U.S. cable, satellite and telcoTV lost 3.5 million subs in 2017

Cable, satellite, telcoTV all lose subs

The traditional pay television industry in the United States had its worst year ever in 2017. The top seven public companies, which jointly account for 85% of pay TV subscribers, lost 3 million residential subscribers. If this 3.7% decline holds true for the operators serving the other 15% of subscribers, the industry will have lost 3.5 million subscribers.

Telco TV faired the worst in the year. AT&T U-verse lost 17% of its subscriber base. The huge loss is primarily attributable to the fact that AT&T is working hard to retire the service, pushing subscribers to switch to DirecTV and DirecTV Now. Verizon FiOS lost 1.6% of its pay TV customers.

Satellite operators lost 5.4% of its customers. Dish Network subscribers lost 10.3%, down an amazing 1.14 million. DirecTV lost 554,000 customers, or 2.7%, despite AT&T making a huge marketing push to bring U-verse customers to the services.

Cable held up the best in the face of this broad overall decline. Comcast, Charter, and Altice jointly lost 1.1% of their video customers. Comcast had the lowest overall decline, losing just 0.8% of subscribers. Charter was down 1.8% and Altice down 3.8%.

The X1 bubble has burst

Last year, Comcast enjoyed the first full year of growth in pay TV subscribers in 10 years. The company gained 103,000 subscribers. The company’s market-leading X1 service seemed to be doing a great job attracting disaffected subscribers from other pay TV services. Showcases such as the Rio Olympics, which Comcast integrated into a unique experience on X1, did a great job of marketing the service.

In 2017 far more customers left rival satellite and telcoTV providers than in 2016. Unfortunately for Comcast, most appear to have left traditional pay TV altogether rather than switching to its premium X1 experience. As my podcast partner Will Richmond remarked to me last week, it seems like Comcast has already won all the customers that would want its high-priced TV experience.

vMVPDs enable an exit from high price plans

The biggest beneficiary of the massive decline in traditional pay TV is the new online virtual MVPDs. The existence of services like Sling TV and DirecTV Now is a major reason many people now feel they can live without their cable or satellite company. Before these companies existed, it was impossible to get content from channels like ESPN and TNT without pay television. Now, a $20 a month subscription to Sling TV provides both.

Dish Network reported that Sling TV gained 710,000 subscribers in 2017 to reach 2.21 million. DirecTV Now reached the 1 million subscriber mark in December, impressive performance by the barely 1-year-old service. Overall, vMVPDs have about 4.6 million subscribers or about 5% of total MVPD subscribers.

Compared to traditional pay TV, the vMVPD business is terrible. nScreenMedia estimates that even after YouTube TV’s $5 price increase the service is barely breaking even. The same is likely true at other providers, like DirecTV Now. However, none of the major vMVPDs show any sign of backing away from their aggressive pricing. Linear television services are part of more important strategic initiatives that make low or non-existent profit margins tolerable for companies like AT&T and Google.

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Global pay-TV subscribers total 969MN in 2016

A study from Digital TV Research has found that 2016 saw an estimated 254 million additional pay-TV subscribers between 2010 and 2016, an increase of 35%, to take the global total to 969 million.

The Global Pay TV Subscriber Databook found that digital cable TV created the most additions by platform – at 256 million between 2010 and 2016 just as analogue cable TV lost 218 million, dampening overall cable gains. There were 76 million extra subs for IPTV to nearly quintuple its total. Satellite TV added 77 million subs and pay-DTT five million. The survey also showed that excluding analogue cable TV, the digital pay-TV market rocketed from 380 million subscribers in 2010 onto 852 million at end-2016.

Looking at regions, the survey found that pay-TV subscriber counts doubled in 53 countries between 2010 and 2016. The Asia Pacific was the world’s largest pay-TV subscriber region, contributing three-fifths to the global total. China supplies about a third of the world’s pay-TV subscribers, with 313 million by end-2016. However, the research also noted that pay-TV subscriber numbers fell in nine countries, with the US down by 4.4 million and Italy by 2.3 million.