As we get ready to enter the second half of 2019, we will see several streaming video services launching, including the high profile ones from Disney and Apple, with more to follow in the coming quarters. No surprise as consumers flock to that aspect of our Digital Lifestyle investing theme, preferring to watch what they want, when they want on the device they want.
The question we are thinking through is how long until we see the once quality content filled streaming services become the new cable – filled with subpar programming and in some cases ads?
It seems every week there is a new streaming video service with recent ones including the ability to watch Broadway shows and short-form programming. An example of the latter is Quibi by Jeffrey Katzenberg, one of the former Disney Hollywood wonders, and in a world of other streaming services as well as short-form videos from Snap, Twitter, Facebook and Instagram, the Tematica jury is out on its success.
What’s interesting in the price point at $7.99 for an ad-free subscription, which is less than the $6.99 starting price for Disney+. That same $6.99 starting price was one of the factors that led Comcast to rethink its own streaming service in favor of selling its stake in Hulu to Disney.
The bottom line is we’ve seen these rushes in the past, and invariably there is a shakeout that will washout a number of entrants looking to capitalize on the trend.
Quibi, the short-form video platform founded by Jeffrey Katzenberg, hasn’t even launched, but has already booked $100 million in advertising sales, according to a report from The WSJ this morning. The company, which aims to cater to younger viewers with premium content chopped up into “quick bites,” says it has already booked advertisers, including Protector & Gamble, Pepsi Co., Anheuser-Busch InBev, Walmart, Progressive and Google.
It still has around $50 million in unsold ad inventory ahead of launch.
It’s hard to imagine how a service like Quibi will compete in a market dominated by paid streamers like Netflix and free services like YouTube — both preferred by a younger demographic. But Quibi has been raising massive amounts of money to take them on. In May, it was reported that Quibi was going after another billion in funding, on top of the billion it had already raised.
Beyond the industry’s big bet on Katzenberg himself, Quibi has booked big-name talent, including Steven Spielberg and Guillermo del Toro, and is filming a show about Snapchat’s founding, which may draw in millennial viewers.
But it sounds like Quibi may also be relying on gimmicks — like Spielberg’s horror series that you can only watch at night (when it’s dark outside). Not to mention the very idea that Quibi thinks it’s invented a new kind of media that falls between today’s short-form and traditional TV-length or movie-length content found elsewhere.
On Quibi, shows are meant to be watched on the go, through segments that are around 7 to 10 minutes long. Some of the content will be bigger, more premium productions, while others will be more akin to what you’d find on cable TV or lower-cost daily news programming.
The service will launch April 6, 2020 with two tiers. A $4.99 per month plan includes a pre-roll ad before each video segment. The ad is 10 seconds if the video is less than 5 minutes, and it’s 15 seconds for any videos between 5 and 10 minutes. Some ads themselves will tell “brand stories” throughout the program breaks.
A $7.99 per month tier offers an ad-free experience.
Over the last several quarters, one of the few blemishes to be had with Disney has been ESPN as chord cutters moved away from the sports programming behemoth. While it took some time for Disney to get its digital offering together, which included some headcount pruning and other cost-saving measures, this past April it launched ESPN+. Priced at $4.99 per month, the service just signed up its one millionth paying subscriber.
This is significant for a few reasons. First, it shows the Content is King aspect of our Digital Lifestyle investing theme remains firmly intact. Second, it shows Disney can win consumer wallets with a streaming service that is value priced compared to some of the other streaming service bundles like those found at Netflix or Hulu. Third, in many ways, this is a test bed for Disney’s other streaming initiatives that will leverage the soon to be acquired Fox content and character library alongside those from other Disney properties such as Pixar, Marvel, and Star Wars.
While the haul to be had from those one million ESPN+ subscribers is relatively small relative to Disney’s overall revenue stream, as the subscriber base continues to grow investors will begin to value the company differently. Yes, it will take time – one million is a far cry from the 130 million at Netflix, but Disney has one of the best content libraries to leverage. I’ll continue to watch the progress of ESPN+ as well as the adoption of its other streaming efforts.
ESPN said it has signed up more than one million paying subscribers for the streaming service it launched in April, a boost of confidence for majority-owner Walt Disney Co.’s effort to win over cable TV cord-cutters.
The ESPN+ streaming service, priced at $4.99 a month, offers fans hundreds of live Major League Baseball and National Hockey League games, college football and soccer matches from around the world.
It also carries Top Rank Boxing, Ultimate Fighting Championship matchups, and original studio programming like “Detail” hosted by Kobe Bryant. The service doesn’t carry live streams from ESPN’s TV channels.
ESPN has lost millions of subscribers to its cable channels in recent years, stoking concerns on Wall Street about the sports TV juggernaut’s financial health and more broadly about how deeply the cord-cutting phenomenon will hurt the entire pay-TV industry.
In a statement, Mr. Pitaro said “combining sports, technology and the ESPN brand is a very powerful combination, and we are just getting started.”
ESPN+ has been a big part of Disney’s efforts to take a piece of the burgeoning streaming economy. Disney Chief Executive Bob Iger has said that the company’s pending acquisitionof 21st Century Fox Inc. is a foundational part of its plan to take on Netflix Inc. globally.
ESPN+ faces an array of competitors. Other media companies like AT&T Inc.’s Turner andCBS Corp. have released sports-focused streaming competitors, while tech companies likeAmazon.com Inc., Alphabet Inc.’s Google, Twitter Inc. and Facebook Inc. have showed keen interest in competing with ESPN for marquee sports rights.
In March, longtime Disney corporate strategy executive Kevin Mayer took over a new streaming and international division that will oversee both ESPN+ and a new family-focused streaming service that Disney will launch in 2019.
We are on the cusp of seeing 5G network service being deployed, just not in the application that many of us would expect. That’s right, not the smartphone but rather for in-home wireless service and it’s from Verizon. Pretty interesting given that Verizon mostly stopped expanding FiOS fiber-to-the-home service in 2010 and since then has been focused on completing existing builds. Of course, rather than laying fiber to every home, a wireless 5G in-home service is far less costly to deploy and with speeds rivaling its wired speeds ranging from 100 to 500 Mbps vs. 300 Mbps to peak speeds of nearly 1 Gbps it looks to be an optimal solution as Verizon looks to combat Comcast and other cable providers.
Verizon’s 5G broadband internet service will go live later this fall, with installations starting on October 1st in Houston, Indianapolis, Los Angeles, and Sacramento, the company announced today. This marks the first 5G commercial service to launch in the US, and it sees Verizon make good on its promise to do so in November 2017. Verizon is calling it simply 5G Home, quoting “typical speeds” of 300 Mbps and peak speeds of nearly 1 Gbps, depending upon location.
This isn’t true mobile 5G, which will be the more impactful rollout of the new internet speed standard that was finalized last December when all networks and phone manufacturers support it. But theoretically, it should bring faster broadband speeds for home internet that are on par with, or at least in the range of, gigabit fiber networks. It also helps Verizon in its rollout of mobile 5G in the future, which will involve a dizzying number of different technologies, hardware, and partnerships to get off the ground.
It will cost $50 a month for existing Verizon Wireless customers, and $70 for non-Verizon customers. If you’re one of the first members to sign up for the service, Verizon will sweeten the deal with free router installation, three months of complimentary service, a free Chromecast or Apple TV 4K, and three months of free YouTube TV. According to Verizon, the service will be up and running once installation is complete.
During the June quarter earnings call, the CEO of Charter Communications Tom Rutledge caved to mounting cord cutting pressure on its TV business admitting that it no longer sees cable TV as a stand-alone product. On the one hand, we are surprised to see this admission as it casts some serious strategic questions on the company. On the other hand, it comes as no surprise to us given the plummeting cable TV subscription numbers as consumer embrace the mobility that comes with streaming.
Let’s keep in mind this follows the removal of landline phone services as well, which means the long ago thought that cable TV companies run the risk of becoming dumb pipes is looking more likely. It also means we’re probably going to see higher prices for that data pipe coming into our homes… at least until 5G mobile networks go mainstream.
All of this makes Comcast’s move into content look far smarter. It also raises questions over the viability of Charter and those other cable companies that haven’t embraced content or some other competitive moat about their business.
“We’re going to use video aggressively. But what we’re saying is, it really isn’t a standalone product in its current situation,” Tom Rutledge said during Charters 2nd quarter earnings call.“All of that it putting pressure on traditional video but at the same time, video is the perfect way of selling content, so it isn’t just going to go away overnight. How fast? I don’t know. But I think we can manage our way through it and use video to drive relationships for the foreseeable future,” Tom Rutledge said.
If we needed any confirmation that aspects of our Digital Lifestyle investing theme are bleeding over into in-person fun, here it is – theme parks are adding free Wi-Fi. Now, in some cases, it may be to stream videos, but more likely it’s to access maps, schedules, and tickets that one finds inside a theme park’s app that can also be used to book ride and dining reservations. Let’s not forget all the picture posting to social media.
Odds are that burst of activity spread across thousands of people degrades what cell signal there is, which means Disney (DIS), Comcast (CMCSA), SeaWorld (SEAS), Cedar Fair (FUN), Six Flags (SIX) and others are spending to pick up the connective slack.
Stand by the Hyperion Theater at Disney California Adventure Park and you may be able to connect to the internet with speeds fast enough to stream a video about your day in the park.But if you try that on the boardwalk at nearby Pixar Pier, you’ll find yourself on a less-than-nostalgic trip to a pre-internet age, said Paul Barrie, host of “Window to the Magic,” a biweekly podcast about Disney attractions and other happenings.“If I’m streaming, I have to be careful where I am to get best possible picture out of the park,” he said.In this pics-or-it-didn’t-happen era, a selfie unposted represents a financial opportunity squandered for theme park operators. For that reason, parks have begun investing heavily in improving internet access for visitors, primarily by expanding their free, in-park Wi-Fi systems.“People can’t live without Wi-Fi anymore,” said Dennis Speigel, president of the Ohio-based consulting firm International Theme Park Services. “They need access to it all of the time.”The Disneyland Resort recently has been adding new Wi-Fi hot spots throughout its two Anaheim parks, and Universal Studios Hollywood said it has worked over the last two years to expand and upgrade its Wi-Fi service throughout its park. Six Flags Magic Mountain began offering free Wi-Fi parkwide in 2016.None of the parks would disclose how much they have invested in such upgrades, but industry experts say such systems can cost millions of dollars, depending on how many park guests the system is expected to serve.
The dust has barely settled on the legal ruling that is paving the way for AT&T (T) to combine with Time Warner (TWX), and we are alread hearing of new products and services to stem from this combination. No surprise as we are seeing a blurring between mobile networks and devices, social media and content companies as Apple (AAPL), Facebook (FB), Google (GOOGL) and now AT&T join the hunt for original content alongside Netflix (NFLX), Amazon (AMZN), and Hulu, which soon may be controlled by Disney if it successfully fends of Comcast to win 21st Century Fox.
While we as consumers have become used to having the content I want, when I want it with Tivo and then the content I want, when I want it on the device I want it on with streaming services, it looks now like it will be “the content I want, when I want it, on the device I want on the platform I choose.” All part of the overlapping to be had with our Connected Society and Content is King investing themes that we are reformulating into Digital Lifestyle – more on that soon.
In short, a content arms race is in the offing, and it will likely ripple through broadcast TV as well as advertising. Think of it as a sequel to what we saw with newspaper, magazine and book publishing as new business models for streaming content come to market… the looming question in my mind is how much will today’s consumer have to spend on all of these offerings before it becomes too pricey?
And what about Sprint (S) and T-Mobile USA (TMUS)…
Taking advantage of the recent approval of its merger with Time Warner, AT&T on Thursday announced WatchTV, a new live TV service premiering next week — and initially tied to two new unlimited wireless data plans.
WatchTV incorporates over 30 channels, among them several under the wing of Time Warner such as CNN, Cartoon Network, TBS, and Turner Classic Movies. Sometime after launch AT&T will grow the lineup to include Comedy Central, Nicktoons, and several other channels.
People will be able to watch on “virtually every current smartphone, tablet, or Web browser,” as well as “certain streaming devices.” The company didn’t immediately specify compatible Apple platforms, but these will presumably include at least the iPhone and iPad, given their popularity and AT&T’s long-standing relationship with Apple.
The first data plan is “AT&T Unlimited &More”, which will also include $15 in monthly credit towards DirecTV Now. People who pay extra for “&More Premium” will get higher-quality video, 15 gigabytes of tethered data, and the option to add one of several “premium” services at no charge — initial examples include TV channels like HBO or Showtime, and music platforms like Pandora Premium or Amazon Music Unlimited.
&More Premium customers can also choose to apply their $15 credit towards DirecTV or U-verse TV, instead of just DirecTV Now.
WatchTV will at some point be available as a $15-per-month standalone service, but no timeline is available.