Weekly Digest from the West
Jean-Baptiste Piron
Cultural Attaché I Attaché culturel I Québec Office Los Angeles
-Amazon is driving more transaction-based revenue for TV networks and studios: Amazon has become a growing source of transactional revenue for TV networks, studios and other video producers selling movies and TV shows through Prime Video. According to an executive from a U.S. cable network that makes its TV shows available for rent and purchase on Amazon Prime, Amazon surpassed both iTunes and Google Play last year to become the biggest source of sales and rentals. This year, Amazon will deliver more transaction-based revenues to this network than both Apple TV/iTunes and Google Play combined, the exec said. Overall, this network, which is exploring whether it should put more of its video library on Amazon Prime, makes about “high six figures to low seven figures” per year from EST (electronic sell-through, or when users buy movies or TV shows to own) and TVOD (transactional video-on-demand, or when users rent a movie or TV episode for a limited amount of time), the exec said. “It’s incremental — not a large amount of money just yet — but it’s free money, and it’s increasing year over year by 100 to 200 percent across the different platforms,” the exec said. A longtime film distribution executive at an independent studio said Amazon has grown substantially over the past 12 to 18 months as TVOD revenue provider for the studio, which as an indie studio finds more success in getting people to rent versus buy outright. The exec didn’t provide specific revenue figures — “it depends on the film” — but said Amazon Prime and iTunes now combine for a lion’s share of the studio’s transaction-based revenues. “It used to be iTunes would account for the lion’s share or at least half of total revenue, but now that’s being shared between Amazon and iTunes in most cases,” the exec said. Amazon’s growing influence as a provider of transaction-based revenue for media companies should come as no surprise. The company has never disclosed how many of its Prime members — now surpassing 100 million, according to comments made by CEO Jeff Bezos earlier this year — actually use the video service, which offers a huge library of movies and TV shows. But internal documents leaked to Reuters earlier this year reported that Amazon had 26 million Prime video users as of early 2017. Considering that Prime video users have likely grown since then, it’s a fairly sizable audience that’s already used to watching movies and TV shows on the platform.
https://digiday.com/media/amazon-is-driving-more-transaction-based-revenue-for-tv-networks-studios/
-Netflix CFO David Wells Is Leaving the Company: David Wells, a 14-year veteran of Netflix who has guided the company through a period of massive growth since 2010 as chief financial officer, announced plans to leave the company. Netflix said Wells will step down after helping the company choose his successor and announced that its search for a new CFO will include “both internal and external candidates.” Wells said in a statement that after exiting Netflix, he intends to focus more on philanthropy “but I’m not sure yet what that looks like.” Hastings, in a statement, said, “David has been a valuable partner to Netflix and to me. He skillfully managed our finances during a phase of dramatic growth that has allowed us to create and bring amazing entertainment to our members all over the world while also delivering outstanding returns to our investors.” As CFO, Wells has engineered a debt-fueled binge on content spending, with Netflix projecting programming costs of upwards of $8 billion in 2018 (on a P&L basis). He also was a key leader in Netflix’s aggressive international expansion of the streaming service to more than 190 countries.
-Netflix, Amazon Video, and Xfinity are accidentally re-creating cable TV: Since the advent of streaming online video, industry insiders have wondered what impact it would have on the future of television. As more companies move toward launching their own proprietary subscription streaming services, the future hasn’t been entirely decided yet, but new clues are emerging, pointing toward a potentially surprising answer: all this disruptive new media is just gradually re-creating familiar old-media models. Recently, Comcast announced that it struck a deal to add Amazon Prime Video to the online content available through its Xfinity X1 service. Amazon’s original content will join other services available through Xfinity, including Netflix, YouTube, and Pandora. In a statement, Comcast’s president of consumer services, Dana Strong, argued for the addition: “Amazon Prime Video’s growing list of originals, movies, shows, documentaries, and kids’ programming will be an excellent complement to the overall X1 viewing experience.” This is a big deal for Amazon, which had previously refrained from partnering with any US pay-TV service to offer Amazon Prime Video. (The full scope of the deal is unclear at this point; neither partner revealed financial terms.) It’s arguably a bigger deal for Comcast, however. The partnership lets it remain relevant by allowing it to at least temporarily bypass the existential terror felt by cable providers in response to cord-cutting, the trend for viewers to shift from traditional cable television to streaming services. These days, small, niche streaming services like Shudder, Filmstruck, Fandor, Crackle, and Mubi are proliferating, while major studios are moving to establish special subscription services for their own content. That’s likely to change the audience’s attitude toward, and relationship with, streaming content moving forward. For example, imagine what the science fiction fan of 2019 will need to do to keep up with the genre’s most prominent franchise content. Star Wars will live on Disney’s new proprietary service, but new episodes of Star Trek (both Star Trek: Discovery and the upcoming Next Generation sequel) are only available on CBS All Access. Meanwhile, The Expanse is exclusive to Amazon Prime. If fans want to watch DC’s superhero shows, as well, that’ll require a DC Universe subscription — although the CW shows featuring DC characters will only be available via the CW app — or, for patient fans who want a commercial-free option, Netflix. If they want to catch up on classic Doctor Who, they’d better have a Britbox membership.
-U.S. SVOD Subs to Reach 208 Million: The number of SVOD subscriptions in the U.S. is forecast to increase from 132 million in 2017 to 208 million in 2023, according to new figures from Digital TV Research. The North America OTT TV & Video Forecasts report estimates that 73.5 percent of TV households (88.5 million) will subscribe to at least one SVOD platform by 2023. The average SVOD household will pay for 2.35 SVOD platforms. This is compared to 55 percent of TV households (65.1 million) subscribing to at least one SVOD platform by end-2017. The average SVOD sub paid for 2.03 SVOD platforms by end-2017. Simon Murray, principal analyst at Digital TV Research, said: “Our SVOD subscriber forecasts are gross. Many homes pay for more than one SVOD service. We believe that this proportion will rise as more platforms establish themselves.” Murray continued: “Our SVOD forecasts include homes watching Amazon Prime Video as part of their Amazon Prime subscription. We have included half the Amazon Prime fee as an SVOD subscription to Amazon Video homes, even though homes are not directly paying for Amazon Video.” Netflix is poised to remain in the top spot in terms of popularity with 67.3 million U.S. subscribers in 2023, up from 52.8 million in 2017. Amazon is expected to follow with 60.6 million subscribers, up from 45 million in 2017. Hulu will rank third, with 28.1 million, up from 16.5 million, then HBO Now with 7.9 million, up from 4.1 million.
https://worldscreen.com/tvusa/u-s-svod-subs-to-reach-208-million/
-Health Care Is Broken. Oscar Health Thinks Tech Can Fix It: In the late 1990s, two graduate students in Stanford’s computer science department set out to organize the world’s information. Shortly thereafter, a visiting scholar named Mario Schlosser arrived on campus, set on figuring out how trust could be built into peer-to-peer networks. The original server used by the graduate students, who were now running a little outfit named Google, had formerly been crammed under a desk in the office Schlosser now used. lphabet, Google's parent company, invested early in Oscar through its venture capital fund Capital G and its health services spinoff, Verily. But today they’re announcing a much larger, and more strategic, investment of roughly $375 million. Neither company will give exact figures, but it seems that Alphabet will now own roughly 10 percent of Oscar. One of Google's earliest employees, Salar Kamangar, former CEO of YouTube, will also join Oscar’s board. I spoke with Schlosser for an hour on Monday about the deal, privacy, data, and whether, one day, we’ll actually treat our gastroenteritis through an app.
https://www.wired.com/story/oscar-health-ceo-mario-schlosser-interview/
-Verizon Is Close to Apple, Google Deals for 5G TV: Verizon Communications Inc. announced deals making Apple Inc. and Google its first video providers for a superfast 5G wireless service the company plans to launch in four cities later this year. The home broadband service will debut in Los Angeles, Houston and Sacramento, California, as well as the newly announced fourth city of Indianapolis, Verizon said Tuesday in a statement. With the introduction, Verizon will provide 5G customers either a free Apple TV box or free subscription to Google’s YouTube TV app for live television service, according to people familiar with the plan. After shelving its own online TV effort, New York-based Verizon decided to partner with the two technology giants for video content, a first step toward eventually competing nationally against internet and pay TV providers such as AT&T Inc. and Comcast Corp. Using fifth-generation wireless technology, Verizon plans to beam online services to home receivers, delivering speeds that match or exceed landline connections. The announcement confirms a Bloomberg report earlier Tuesday. Subscribers to the 5G service will also be offered live NFL and NBA games, as well as news programs through Verizon’s own Oath media division. The Apple TV box would serve as the portal for living-room access to video programming, while Google’s YouTube TV offers more than 60 channels of live television for $40 a month.
-The Best Way for Netflix to Keep Growing: Currently, Netflix is in the business of buying or making content, which it sells consumers access to at prices and on terms it fully controls (a monthly subscription). That’s unlike a platform such as YouTube, which enables myriad content providers to sell directly to users at prices they control, with limited intervention by YouTube other than the enforcement of some content guidelines. Netflix’s model has been undeniably successful to date. However, fighting the blockbuster battle over content acquisition and creation is becoming ever more expensive, and it involves an increasing number of combatants (including Amazon, Apple, Disney, and Google). All these companies already have or will have digital download and streaming services. Furthermore, the growth of Netflix’s subscriber base is slowing down. The company lost more than 15% of its stock market valuation over the past month after its growth numbers disappointed investors. In this context, it seems obvious that Netflix can and should become a platform, using one of the models described in my 2017 HBR article with Liz Altman. Why? Netflix’s big subscriber base (130 million worldwide) and content-delivery infrastructure are potentially very attractive to many third parties. In addition to video content providers, these third parties include marketers and the developers of cloud gaming or other services. How would Netflix become a platform? Simply by allowing these third parties to sell their products or services within Netflix’s service but outside Netflix’s subscription, on terms controlled by the third parties. Becoming a multisided platform in this way would allow Netflix to tap a different dimension of growth: selling more stuff to the same subscribers. And the beauty of the platform model is that Netflix can grow without having to buy or produce the new stuff itself. It just has to attract third parties to develop and sell the content, and then it can take (as is common) a share of the revenue or a transaction fee. Moreover, third parties could experiment with new forms of content, which could be very valuable to Netflix’s content acquisition and production efforts. In this way, Netflix would follow in Amazon’s footsteps. That company started as a pure retailer of products it bought from sellers and sold in its own name, before adding a marketplace where customers purchased directly from third-party sellers. Netflix can aim to become a similarly powerful reseller-platform hybrid, except it will have digital content rather than (for the most part) physical products.
https://hbr.org/2018/08/the-best-way-for-netflix-to-keep-growing
-Amazon & YouTube Are Reportedly Interested in Buying Fox Regional Sports Networks: As part of the deal to get Department of Justice approval of the Disney and Fox merger was a requirement that the Fox Regional Sports Networks (RSNs) would be sold off. According to the deal, when Disney closes on the sale of most of 21st Century Fox they would sell off the regional sports networks currently running under the Fox Sports name. Now Amazon and YouTube are interested in buying the 22 RSNs. It seems both Amazon and YouTube are hoping by buying these networks they could expand their online sports streaming abilities. Recently both YouTube and Amazon have pushed hard into live sports streaming. Many see live sports as one of the few cord cutting–proof futures of TV. As many Americans want to watch sports live they are also forced to sit through ads, making sports and other live events relatively cord cutting resistant or at least that is what some hope. YouTube and Amazon are not alone in their interest in the 22 Fox RSNs. It is also reported that Sinclair, Blackstone, CVC Capital Partners, and Apollo all also have their eye on the 22 networks. Yet Disney still needs to complete the sale of Fox before they can even consider the purchase of the Fox Sports Networks.
-Amazon could be working on a DVR box to record live TV: Amazon already makes several devices to plug into the back of your TV set, but there’s apparently another one on the way: a DVR device for recording live TV that will let you catch up on your favorite shows whenever you've got time. Bloomberg reports that the device, codenamed Frank, will have local storage space as well as connecting to streaming players including the Amazon Fire TV. The same wireless tech that’s built into the Amazon Echo range of speakers will also be built into whatever Frank turns out to be, according to an inside source. As well as recording shows and movies, the upcoming box will also be able to then send that content to smartphones and other devices, the report says – putting it in competition with the likes of Sling TV and TiVo.
https://www.techradar.com/news/amazon-could-be-working-on-a-dvr-box-to-record-live-tv