2018 Will Be Netflix’s Best Year (yet)

Netflix’s growth, especially outside the United States, has been so robust that some analysts had to change their outlooks. “These forecasts are a lot higher than the last edition of this report,” says Simon Murray, principle analyst at Digital TV Research, of his Netflix Forecasts report. “Similar to many other analysts, we underestimated the fast take-up in international markets.”

That fast take-up suggests Netflix will have its strongest year ever in 2018 as it adds 28 million subscribers. Its growth should slow after that, Digital TV Research believes.

By the end of 2023, look for the SVOD leader to count 201 million subscribers around the world. That’s up from 111 million at the end of 2017. By the end of 2023, North America and Western Europe will make up 62 percent of Netflix’s customer base. That’s down from the 76 percent they made up in 2017 thanks to surging demand in other countries. For example, look for the Asia Pacific region to make up 14 percent of Netflix’s base by the end of 2023.

“Netflix expanded to 130 more countries (notably excluding China) in January 2016 to bring its total to 190 countries.” says Simon Murray, principle analyst at Digital TV Research. “The 130 new countries will have 40 million subs combined by 2023, quintuple the 8 million at end-2017. The 2023 figure corresponds to 20 percent of Netflix’s global total; up from only 7 percent in 2017.”

As for revenue, look for it to grow from $11.3 billion in 2017 to $28.8 billion by the end of 2023. Of that, $11.2 billion will come from the U.S.

U.S. pay TV providers lost 305K subs in Q1, 2018

Leichtman Research Group, Inc. (LRG) found that the largest pay-TV providers in the U.S. – representing about 95% of the market – lost about 305,000 net video subscribers in 1Q 2018, compared to a pro forma loss of about 515,000 subscribers in 1Q 2017.

The top pay-TV providers now account for about 91.9 million subscribers – with the top six cable companies having 47.8 million video subscribers, satellite TV services 31.1 million subscribers, the top telephone companies 9.2 million subscribers, and the top Internet-delivered pay-TV services 3.8 million subscribers.

Key findings for the quarter include:

The top six cable companies lost about 285,000 video subscribers in 1Q 2018 – compared to a loss about 115,000 subscribers in 1Q 2017. Satellite TV services lost about 375,000 subscribers in 1Q 2018 – compared to a loss of about 340,000 subscribers in 1Q 2017. The top telephone providers lost about 50,000 video subscribers in 1Q 2018 – compared to a loss of 325,000 subscribers in 1Q 2017.

Net losses for the top Telcos in 1Q 2018 were the fewest in any quarter since 3Q 2015

AT&T U-verse did not report net video losses for the first time since 1Q 2015

Internet-delivered services (Sling TV and DIRECTV NOW) added about 405,000 subscribers in 1Q 2018 – compared to about 265,000 net adds in 1Q 2017

Traditional pay-TV services (not including Internet-delivered services) lost about 710,000 subscribers in 1Q 2018 – compared to a loss of about 780,000 in 1Q 2017

“The number of pay-TV subscribers for the top providers peaked six years ago. Since 1Q 2012, top providers have lost about 3.4 million total pay-TV subscribers,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc. “Since the industry’s peak, traditional services have lost about 7.2 million subscribers, while the top publicly reporting Internet-delivered services gained about 3.8 million subscribers.”

How HBO gets into 50 percent of US homes

According to HBO CEO Richard Plepler, the company has an opportunity to reach 50% penetration of homes in the US. Reaching that goal requires a lot more growth because HBO is in around a third of homes today.

HBO grew subscribers an impressive 5 million in 2017. Moreover, Mr. Plepler says the 35% of the company’s growth has come in the last five years. Performance such as this is likely the reason Mr. Plepler believes he can ultimately drive the service into half of US homes:

“We think there’s a lot of growth left. We’re going to attack it.”

However, where is all that growth coming from today, and where is it likely to come from in the future?

HBO Now growing strongly

HBO launched its direct-to-consumer online service HBO Now in April 2015, after several years of relatively little subscriber growth for the premium channel. It took the company almost two years to reach 2 million subscribers. However, 2017 was a watershed year for the service. The company saw subscribers climb from 2 million in February to 5 million by the end of the year.

The increase of 3 million subscribers in HBO Now helped propel the channel to its best year of subscriber growth ever, increasing by 5 million. So, where did the other 2 million subscribers come from, and how will it get to 50% penetration?

Traditional pay TV unlikely to help

If HBO saw any subscriber growth from traditional pay TV operators at all last year, it was minimal. Cable, satellite, and telcoTV operators are shedding subscribers at a steady clip. They lost around 3.5 million in 2017. However, their customers are also dropping premium tiers like HBO to save money. Mr. Plepler says that his best pay TV operator partners have HBO in 50% of customer homes. However, deepening penetration of a shrinking market may not result any growth at all.

vMVPDs an important part of HBO’s growth

Virtual MVPDs like Sling TV and DirecTV Now allow customers to subscribe to HBO through their services. For example, a DirecTV Now customer can add HBO for just $5 a month. Sling TV and PlayStation charge the standard $15 a month.

In 2017, vMVPDs grew strongly. Sling TV finished the year with 2.2 million subscribers, up 40% from one year earlier. DirecTV Now ended the with 1.46 million subscribers, up from 200,000 one year earlier. Assuming the same penetration level of vMVPDs as regular pay TV, HBO could have more than a million subscribers coming from Sling TV and DirecTV Now. Penetration at DirecTV Now could be even higher, with HBO through DirecTV Now costing a third of HBO Now.

The number of HBO subscribers from vMVPDs is likely higher still. PlayStation Vue and Hulu Live both allow customers to subscribe to HBO. However, neither Sony nor Hulu have announced how many subscribers they have to their vMVPD services.

Around half of traditional pay TV cord-cutters sign up for a vMVPD. As cord-cutting accelerates, expect vMVPDs to continue strong growth for some time to come.

YouTube TV could deliver a big bump in subs

There is one major vMVPD that currently doesn’t have a reseller arrangement with HBO: YouTube TV.

Google does not report how many subscribers it has for YouTube TV. However, in the Q4 2017 Video Trends report from TiVo 8.5% of survey participants said they were using the service. 3.8% said they used DirecTV Now and 2.3% used Sling TV.

read more here: nscreenmedia.com

Top 10 pay-TV operators to lose $20bn

Despite adding 84 million subscribers between 2017 and 2023, subscription and PPV revenues for the world’s top 517 pay-TV operators will fall by $18 billion (€14.67bn) to $183 billion, according to analyst firm Digital TV Research. From the total, 29 pay-TV operators earned more than $1 billion in revenues in 2017, but this total will drop to 25 by 2023.

About $20 billion of the revenue losses will fall to the top 10 players; bringing their total down to $87 billion. The pay-TV revenue share for the top 10 operators will fall from 53 per cent in 2017 to 48 per cent in 2023.

All of the top 10 operators in 2017 will lose revenues over the next five years. In fact, 168 of the 517 operators (32 per cent) covered in the Global Pay-TV Operator Forecasts report will lose subscription and PPV revenues between 2017 and 2023.

Pay-TV subscriptions for 517 operators with 747 platforms [132 digital cable, 126 analogue cable, 286 satellite, 137 IPTV and 66 DTT] across 135 countries covered in the report will increase from a collective 880 million in 2017 to 967 million by 2023. These operators took 87% of the 1,006 million global subscribers by end-2017, with this level expected to inch up to 88% of the 1,100 million total by 2023.

“The good news is that 15 operators will add more than $100 million between 2017 and 2023, with China Telecom up by $1.4 billion,” advised Simon Murray, Principal Analyst at Digital TV Research. “However, five operators, including four from the US, will lose more than $1 billion in revenues. Seven of the top 10 losers will be in the US.”

Top 10 operators by revenues ($ million)

Operator Country 2017 Operator Country 2023
1 AT&T (total) USA 30,740 1 AT&T (total) USA 23,577
2 Comcast (total) USA 20,017 2 Comcast (total) USA 15,433
3 Charter merged (total cable) USA 15,589 3 Charter merged (total cable) USA 11,942
4 DISH Network (satellite) USA 12,310 4 DISH Network (satellite) USA 10,381
5 China Radio & TV (total) China 8,562 5 China Radio & TV (total) China 7,405
6 Sky (satellite) UK 5,258 6 Sky (satellite) UK 4,613
7 Verizon Fios (IPTV) USA 3,857 7 China Telecom (IPTV) China 3,753
8 Cox (total) USA 3,691 8 Sky (satellite) Brazil 3,662
9 Sky (satellite) Brazil 3,586 9 Verizon Fios (IPTV) USA 3,268
10 Altice USA (total cable) USA 3,190 10 Cox (total) USA 2,829

Source: Digital TV Research

Netflix Q1 exceeds expectations

Netflix’s Q1 numbers show that the OTT operator is growing as fast as ever. It added a net 7.4 million global subs during the quarter, only slightly down on the previous quarter’s record-breaking 8.33 million.

US new additions were also healthy at 1.96 million. Overall, this latest quarter year were the second-biggest ever, and the quarter-year exceeded all consensus expectations, and to a total of 125 million subs. International operations now generate 50 per cent of revenues, and 55 per cent of its subscribers.

Netflix generated $290 million (€234m) net income on revenue of more than $3.7 billion. That compared to net income of $178 million and revenue of $2.63 billion during the previous-year Q1 period.

Netflix’s CEO Reed Hastings and Chief Content Officer Ted Sarandos took the analyst call with Benjamin Swinburne of investment bank Morgan Stanley, and confirmed that they would be spending “upwards” of $8 billion this year on content.

As to the recent bundling of Netflix into the pay-TV operations of Comcast and Sky, Gregory Peters, Chief Product Officer, said: “We love the fact that we can work with these partners to access whole new groups of consumers, make it easy for them to find out about Netflix, to sign up and have a great way to access the service and watch more and more. So you’ll see us leverage that sort of evolving strategy not only in the markets that we’ve been in for many years, but also in these new markets.”

Netflix confirmed that it will be launching a dedicated service to mobile phones. Peters said: “We definitely want to have a mobile experience which allows us to access more of that market and access a group of consumers who basically only want to have their relationship with Netflix on a mobile device. And so whether that is making sure that our apps are lightweight enough so they load really quickly and have a great experience there, to making sure that our encoding is very, very efficient, so that even if you have a less-than-great network connection, you can still get a really incredible video experience on that mobile phone.”

read more here: advanced-television.com

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.”

read more here: www.bloomberg.com

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.

read more here: www.nscreenmedia.com

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.

read more here: www.nscreenmedia.com

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.