20 July 2015

Comcast's New Video Service "Stream"

Last week Comcast announced a new service for streaming video and DVR service not-very-creatively named "Stream". Priced at $15 a month, it seems like an incredible value, at first.

"With Stream, Xfinity Internet customers can watch live TV from about a dozen networks - including all the major broadcast nets and HBO - on laptops, tablets and phones in their home." according to a Comcast blog post by Matt Strauss.

Inattentive reporters may lump this with Netflix as a service for cord cutters. but that's very far from accurate.

Perhaps the best way to see how this service compares to Netflix, the 800 pound gorilla of over-the-top video, is to use an analysis that I learned from a great architectural historian. In the three-column analysis, the left side has the things unique to the first building, the middle has the things the buildings have in common, and the right has the things unique to the second. Given the horizontal constraints of this blog, I've transposed the analysis to top-middle-bottom.

Unique to Stream:
  • Includes live channels
  • Includes broadcast channels
  • Includes network DVR functionality
  • Content from HBO
True for both:
  • Available in Comcast's cable footprint
  • Available to Comcast Internet subscribers
  • Can be watched in-home
  • Includes significant recent on-demand programming
  • Can be watched on a computer, tablet, or phone
  • Does not require a cable video subscription
Unique to Netflix:
  • Viewable outside of Comcast's cable footprint (i.e., in any part of the US)
  • Available to customers via any form of Internet access
  • Can be watched in- and out-of-home (e.g., office, neighbor's house, mobile, coffee shop)
  • Easily viewable on a TV
  • Large library of movies and TV programs
  • Some high profile original programming
Stream is a very different service from a Netflix.

I believe the target market for this product is customers who don't buy cable video service and customers who don't have a traditional TV set, but are interested in TV programming. I don't know how many people fit in this group, but Comcast clearly will have an easy time finding its Internet customers who don't buy TV service from them. Easy targeting allows for efficient marketing.

In offering this service, Comcast gets the following:
  • An up-sell service for its Internet service
  • A press release -- "we have a strategy to address cord-cutters"
  • A way to monetize TV Everywhere infrastructure (As Comcast's post notes, "Xfinity Internet customers can just sign-up online, download our Xfinity TV app and start watching." (emphasis added))
  • A new service that should not cannibalize the core cable video business.
That's a solid list of benefits for Comcast without a whole lot of downside. Why not?
Is it a threat to Netflix? On some level, Stream is a threat. A lot of the viewing is at home and some of it is not on the TV. Streampix, a component of Stream, does include a library of movies and TV shows, so it is a poor man's Netflix on that dimension. The inclusion of the broadcast channels would appear to have a lot of value. However, if you are the sort of person who does not own a television, I wonder how much you would value broadcast content. Also, Netflix, starting at $7.99 per month, is materially less expensive.
Is it a threat to HBO Now? As an alternative way to get the content, sure. All that we know about the usage of Netflix suggests that vast majority of its usage is in the home. While Stream would not provide the benefit of out-of-home use (or on-TV viewing) that HBO Now does, it offers a lot of other benefits, that could make that trade-off attractive to some customers. Stream seems like more of a threat to HBO Now than to Netflix. Since the price of both services is the same, how do you value HBO Now's benefits (view on the TV, view out of home) vs. Stream's (get broadcast content, get DVR functionality).

Certainly Comcast benefits strategically by creating a threat to any of the threats to its core video business. A good offense is a good defense. By utilizing its existing infrastructure and customer list, the incremental cost of this service should be modest. If it turns out that Stream is cannibalizing the core video business, Comcast can always pull the plug, like Cox did with its OTT service FlareWatch.

In the future Comcast could also address the most ridiculous limitation of Stream and let people watch it on a TV. The limitation is ridiculous because it is so clearly self-imposed and so clearly designed to protect the core video service. While I understand that as a 20-year veteran of the industry; it is exactly the thing that people hate about their cable company. As Wired's headline put it: Comcast's Streaming Service Sounds As Bad As You'd Expect. It hurts because it is true.

05 March 2015

Hi! My Name Is "HBO Now"

The long buildup to the launch of the HBO over-the-top service has passed another milestone. The service has a name: "HBO Now".
The forthcoming HBO service will not share a name with Eminem's alter ego.
Michael Learmouth in the International Business Times reports that HBO Now will cost $15 per month and be available exclusively through Apple at its launch in April.

It is probably not a coincidence that Game of Thrones will premiere its fifth season on April 12.

Others seem less certain that a pure over-the-top offering is the plan. As Todd Spangler notes in Variety: "it’s still not clear if HBO Now will be available to consumers only via broadband providers in a bundled offering — or if anyone with a high-speed Internet connection could sign up." This is a point that many seem to have missed, but consistent with my original post on the subject.

We have a name for the service, but no logo for HBO Now, yet.

Update (9 March 2015): HBO CEO Richard Plepler confirms to Recode's Peter Kafka that going with the cable ISPs is Plan A for the distribution of HBO Now.
Update (10 March 2015): One group that $15/month HBO Now definitely makes look bad -- the distributor charging $17.99/month for HBO.
Update (16 March 2015): Cablevision is the first ISP to sign on to offer HBO Now. "Cablevision plans to provide pricing and other particulars for HBO NOW in the coming weeks." So much for HBO going direct-to-consumer. In the words of Pete Townshend, "meet the new boss, same as the old boss".
Update (20 March 2015): The Wall Street Journal reported that HBO and others were talking to cable ISPs about managed services (a/k/a fast lanes) -- a no-no under net neutrality. Tiernan Ray figured out that does not make sense -- good reporting, something far from common in the coverage of over-the-top video.

21 November 2014

10 November 2014

DirecTV's Complaint Against Al Jazeera America Is Made Public

Today, the Hollywood Reporter and Courthouse News Service reported that the judge hearing DirecTV's claim against Al Jazeera America, Judge Elizabeth Allen White, believed that the complaint should be made public (see the complete albeit redacted version at the end of this post). In essence, DirecTV's claims cover two topics:

  • Service definition (does the AJA service meet the definition in the affiliation agreement, which was done with its predecessor service, Current TV?)
  • Most favored nation provision (did AJA, the company, offer more favorable terms to cable operators that it has to provide, but has not provided to DirecTV?)
The recourse that DirecTV is seeking is to terminate the affiliation agreement and both the service definition and the most-favored-nation provision could represent a way to do so. DirecTV claims that AJA is in material breach of the former.
"None of the proposed programming for the renamed Service fulfilled the Agreement's Section 1.2.1 requirement that the Service consist...[redacted]" [quoted from the complaint]
DirecTV also appears to be claiming that others had more favorable termination rights (e.g., Time Warner Cable, which famously dropped Current when its ownership changed hands), appears to have had a "change of control" termination right that DirecTV presumably did not. DirecTV hired PriceWaterhouse Coopers to audit AJA's compliance with its most-favored-nation provision.
"But AJA has refused to allow PwC to audit the necessary documents to determine whether AJA has complied with its MFN obligations in this regard, and is therefore in breach of the Agreement." [also from the complaint]
Making the proceedings more interesting is the lawsuit between Al Gore, the former owner of Current TV, and Al Jazeera about the money that Gore says Al Jazeera owes him (ironic link to Fox News!) and the countersuit that Al Jazeera filed against Gore as the seller of Current. It is beautiful, if you love chaos (or Kaos, in the world of Get Smart).
I do not claim to know who is right about what parts in any of these disputes. The dispute is notable because relatively few cable network affiliation disputes make it to court.

15 October 2014

HBO Go Without Cable, Maybe

HBO has announced that it plans to offer a streaming service without a cable subscription sometime in 2015.

As way of background, to date, HBO's streaming platform, HBO GO, has only been available as "added value" to an HBO-on-cable-television subscription. (Cable, for these purposes, includes DirecTV, Dish, Verizon FiOS and AT&T U-Verse -- anything the FCC would call an MVPD).
For those who doubted that such a move was inevitable, you were wrong. For those who think this changes everything, I suspect you are also wrong.

Here's why: I strongly suspect HBO will be marketing the streaming service, let's call it HBO GO for these purposes (although it may be a "new" service with a different name and content) in conjunction with its distribution partners -- in this case, the ISPs who provide the nation's high speed home Internet access. And those companies just happen to all be distributors of HBO, the cable channel, on their multichannel television platforms.

After all, many "cable" operators have more broadband customers than video customers.

From the named providers on Leichtman Research's 2Q14 list of top broadband ISPs, exactly two of them, Windstream and Fairpoint, do not offer (yet) their own facilities-based multichannel television service (and both of them do on a non-facilities-basis via partnerships with Dish and DirecTV. respectively).

Much like the HBO with a cheaper smaller cable TV service offered last year (see GigaOm's article from December 2013), the customer will still have a relationship with a distributor. For the distributor, HBO GO represents an "upsell opportunity", something they don't currently have with Netflix, which sells its service direct to consumers.

To actually go direct to consumers would risk HBO's relationship with the multichannel television providers, who, it has often pointed out to the financial community, allow it to be much, much more profitable than Netflix. No need to kill that egg-laying goose.
HBO is here depicted as a woman wearing a purple suit. The MVPDs are represented by the fowl.

Perhaps HBO will offer HBO GO via ISPs that are not also multichannel television distributors, but, if HBO does not, they aren't giving up very much of the potential market. And HBO can always change its mind about that later.

The big losers in this are the multichannel video providers that are not ISPs: DirecTV and Dish Network.

Update (17 October 2014): More support for my view: It looks like the streaming-only HBO service may cost $15 per month, about the same as it costs as an add-on to basic cable.

Update (23 October 2014) via the Wall Street Journal: “Why is giving our distributors the opportunity to sell them an HBO subscription anything less than a win-win?” [HBO CEO] Mr. Plepler wrote in an email. “To us, that’s not cannibalization, that’s growth.” (full article --
subscription required)

Update (3 November 2014) via Multichannel News: About the new HBO streaming service, Richard Plepler said it "would at first be marketed to the 10 million broadband-only customers of its cable and telco-TV affiliates; operators would handle all billing, customer service and customer control; and the service would be sold in partnership with distributors." full article

Update (6 November 2014) via Deadline: Richard Plepler, HBO's CEO "aims first to go after 70M pay TV homes that do not get HBO. In broadband 'we think there’s 4 to 5 million that we can also get with our partners. I’ve talked to all of our distributors. We want to lean in with a new effort in the new year.… I see nothing but upside for us, for the consumer, and for the distributor.'” full post

Others on the news:
David Carr in the New York Times
Will Richmond on VideoNuze
Howard Homonoff on Forbes
Sahil Patel on VideoInk
Mike Farrell on Multichannel News
Peter Kafka on Re/code
Jon Russell on GigaOm
David Lieberman on Deadline
Joel Espelien for The Diffusion Group

06 October 2014

An OTT Watershed Moment

We could soon be looking at the watershed moment for over-the-top video: According to a Multichannel News posting, that the FCC is considering making "being a multichannel video program distributor" (MVPD) an option for online video providers (the conclusion is implied from the actual FCC .pdf release). To date, online video providers have not been able to be considered MVPDs because they do not own the facilities that transmit channels of programming to end users.
Sony's OTT video offering will be delivered to its PlayStation game consoles

In one fell swoop, this could clear up three big issues for potential OTT providers who are direct MVPD competitors, offering a package of linear "cable TV" networks.

#1 Access to top name-brand broadcast and cable network programming

Much like cable and DBS, any MVPD would have the right to negotiate with broadcast TV stations over retransmission consent and the stations would have the right to demand must-carry. For example, Aereo, which the Supreme Court declared was not legal because it distributed programming like an MVPD, but was denied the right to be an MVPD when it used the Supreme Court's argument at the US Copyright Office, would no longer be in a legal no-man's-land. Clarity on this point is overdue, as David Oxenford in BroadcastLawBlog notes, the Sky Angel case has been before the FCC for a long time, long enough, it turns out, for Sky Angel to go bust in its over-the-top incarnation.

#2 A way around online streaming restrictions in MVPD affiliation agreements

Restricting the distribution of cable programming on some "other" technology was a backdoor way to get some exclusivity, now the other MVPDs will have to negotiate exclusivity versus other MVPD competitors through the front door and many programmers have, not unreasonably, been historically reluctant to do exclusive deals that reduce MVPD competition.

#3 A way around rights issues for cable TV programming and advertising (e.g., SAG members get paid differently for commercials produced for the Internet than for those produced for TV)

Right now, only companies that explicitly clear "Internet rights" are allowed to put the programs on their TV channels on the Internet. Once an online video distributor is an MVPD, the linear stream of programs, as presented on a cable program service like Lifetime, can go to any MVPD.

[If the programmer owns the program and all its rights, like Major League Baseball, one can find MLB Extra Innings on cable TV or DBS (with internet streaming as added-value for "authenticated" subscribers), or as a stand-alone OTT offering at mlb.tv (although the TV commercials are usually not included in the Internet stream as the advertisers do not want to pay the performers for both the TV and Internet exhibition).]

Unfortunately for the soon-to-be-nascent-direct-MVPD-competitor, the over-the-top business still has two big remaining issues:

#1 Bandwidth caps

It might be politically poisonous for a cable MSO facing a direct competitor delivering "cable TV service" over-the-top to announce bandwidth caps that would make it uneconomic for any of their customers to use such a service. That said, the cable industry, like many other industries, has historically looked to protect its business against competition. Certainly that's what Netflix thought Comcast was doing when the streaming performance of Netflix customers using Comcast as their ISP declined in late 2013. Bandwidth caps would be great protection for MSOs against online video competition.

#2 The reality of the marketplace

This combines several issues: Is the consumer offering attractive enough? Are the programmers willing to negotiate with these new MVPDs? Are there terms that the programmers will find attractive enough that create a business opportunity for the new MVPDs? On the first one, Sony's rumored $80 per month offering is considerably more expensive than many had hoped.

Cable TV programmers have been supportive of new, clearly legal entrants to the program distribution business. More competition among distributors is always good news for the program suppliers who now have a new set of customers. Viacom certainly thinks so. Going over-the-top and preserving the existing pay-TV packaging (and business model) appears to be more attractive than going over-the-top on one's own like World Wrestling Entertainment's $9.99 monthly offering.

Rather than going-head-on against the pay-TV incumbents, it would seem that a more prudent course for new MVPDs would be to find a segment of the marketplace that is un- or poorly-served by the incumbents, but which also has high broadband Internet penetration. That may be a difficult combination to find.

My earlier post: The Virtual MSO Opportunity (19 July 2013)
Update (14 October 2014): Aereo asks the FCC to classify it as an MVPD (via Deadline), Brian Fung in the Washington Post thinks Aereo is making this request only in the short-term
Update (29 October 2014): FCC Chairman Tom Wheeler makes his views explicit in an FCC blog post "Tech Transitions, Video, and the Future". In short, he supports OTT video providers getting the rights that MVPDs have, believing that it will foster competition.

25 June 2014

SCOTUS Rules Against Aereo 6-3

Broadcasters rejoice! The full description is here (link is to a .pdf) The decision is well worth reading. The short version:

  • Justice Breyer, writing the majority opinion, believes that Congress intended to capture things like Aereo in the Copyright Act of 1976, which directly addressed the legal issues raised by cable television.
  • Justice Scalia, in the dissent, believes that the matter should be decided by Congress now, not by the courts by interpreting what Congress in 1976 might have thought about what Aereo represents today.