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.

flareWatch: Cox Goes OTT on Itself

Updated (2 July 2013) with numerous details.

Cox, a major US cable operator, has launched something that I believe is without precedent: an IPTV service that competes with its existing traditional cable TV service (Todd Spangler's article in Variety). Here are the relevant details:

• Customer must purchase Cox's cable modem service
• Cost is $34.99 per month (incremental to the cable modem service cost)
• 97 channels are included with 60 HD channels
• includes all local broadcast channels (update: ABC, CBS, NBC, Fox, Uni, PBS, Ion, CW, etc. and, it appears, all of the digital multiplexes carried on the system -- more than 25 channels)
• includes a cloud or network DVR with 30 hours of storage; update: playback only within the home
• works with Fanhattan's Fan TV set-top box
• does not incorporate Netflix or Hulu Plus (at least not currently)
• is not available outside of the home
• does count against the cable modem service bandwidth cap
• cable channels include: ESPN, ESPN2, TNT, Disney, ABC Family, Fox Sports West, TWC SportsNet, CNN, CNBC, Nickelodeon, A&E, Discovery, Bravo, USA, TLC, MTV, Fox News and Syfy (update: also FX, TBS, WGN, MundoFox, QVC, HSN, MSNBC, Headline News, Galavision, BET, VH1, Weather, Spike, Travel, Food, HGTV, Lifetime, E!, Comedy Central, History, Fox Sports Prime Ticket, AMC, TCM, TV Land, Cartoon, Animal Planet, Speed, CMT, Golf, TWC Deportes, C-SPAN, C-SPAN2, National Geographic, Palladia, Velocity, The OC Channel, Cox 3/California Channel). This lineup appears similar to a typical expanded basic with the addition of a few purely HD services that are usually bundled with expanded basic for customers with HD boxes, namely Palladia and Velocity.
• update: free on-demand is "coming"

demo image of the flareWatch interface

Some thoughts:

• Cox is certainly taking the position that the cable TV rights that it has are suitable for this IPTV service. While it is new for an operator to offer IPTV service as well as traditional cable on the same system; it is not unusual for operators to offer IPTV service (AT&T and Google Fiber offer IPTV service exclusively; many other distributors offer it on some systems).
• Why are any of the channels carried in SD?
• Typically cable operators break out the broadcast channels in a separate tier from the cable channels to minimize their copyright royalty payments (e.g., a $20 basic broadcast tier is available, then a $40 cable program service tier --that 90%+ of subscribers purchase -- is available above that -- copyright fees are based on the $20 price, not the $60 price). Is this package subject to a different (or no) copyright royalty payment scheme?
• This package appears to contain most, if not all, of the most expensive cable channels -- usually cable operators are trying to create new packages which exclude those services (like Cox's own TV Economy package).
• What is the complete channel lineup? (I have searched cox.com, but haven't been able to find reference to flare or flareWatch yet). Update: flareWatch has its own website that does not mention Cox, except in the fine print at the bottom. Is Cox's brand name an impediment to selling the service? The branding of the service is inconsistent. The URL for the site is watchflare.com. The service name is styled "flareWatch" on the site and simply "flare" on the demo.
• If the target for this service is customers who have Cox Internet service, but do not have Cox TV service, why is the lineup so traditional in its selection of services?
• Update: the consumer has to buy the box (and remote) for $99; live TV pausing is not a current feature of the service (from Rich Greenfield's blog post includes video demonstrating the -- notably easy -- sign-up process and captured video of the flareWatch promotional video)

screenshot of flareWatch sign-up screen with pricing

Update:
Cox's site for "flareWatch" -- watchflare.com (includes a :34 unembeddable video)
Michael Greeson's take (The Diffusion Group) with some interesting notes about the price point and services included

Nimble TV's DVR Is More Interesting than Its TV Everywhere

TV Everywhere seems both wildly misunderstood and greatly overstated. In this post I will lay out what it is, why it makes sense, and how a startup announced today, Nimble TV fits into the TV Everywhere picture.

The general concept of TV Everywhere is that the multichannel television subscriber should be able to watch anything anywhere, not just at home via the set-top box provided by its MVPD (multichannel video programming distributor). A key question in understanding TV Everywhere is: What is the use case? Or, more precisely, since multichannel television is a household rather than individual subscription, what are the use cases?

1. In the car, young children in the back seat. Live Nickelodeon or Disney Channel or prerecorded programs (from the family DVR). This use may supplement or take the place of viewing DVDs on portable or car-based players. (Best Buy's selection of such products is extensive.)
2. Waiting for the bus (apologies to ZZ Top) or plane or train or whatever. There is dead time and while the smartphone has done an admirable job filling such moments with Angry Birds or podcasts or catching up on Facebook, sometimes watching a game, a bit of live news or part of the program on the DVR would be an attractive additional option.
3. A "second set" within the home. Several MSOs have created iPad apps that offer this functionality already -- Time Warner Cable, Cablevision and DirecTV among them -- and it seems to be pretty popular with everyone except Viacom. Oh, yeah, and there are people who have second sets connected to second set-top boxes, too.
4. Deep library. One of the appeals of HBO Go is the ability to watch things that no longer air on HBO, like earlier seasons of current shows (How did Game of Thrones begin?) and shows from HBO's past (The Sopranos).

TV Everywhere is added value to your existing multichannel subscription. Because it is not sold separately, it is not a substitute for it. It is "added value" rather than an extra cost service because few would likely pay for it and, more importantly, multichannel operators want to raise the cost of the package (in part because programming costs are growing faster than inflation). While everyone would prefer to create something that would inspire people to pay more for greater functionality, the last service to succeed with that model was the DVR. If the distributor does not charge a discrete amount more to the customer, the distributor has a good argument that it should not pay more to the programmer for these rights (and, in turn, the programmer has a good argument to its program providers that it should not and the program providers have a good argument that the members of the guilds who create the programs should not get anything more either). Presumably, if this innovation adds value to the system, that value will trickle down the food chain, enabling each seller to do a bit better upon the renewal of their deal with each buyer. While there will be the usual squabbling about the terms, TV Everywhere has a few real strengths as an addition to the pay-TV ecosystem.

1. It is easy to explain to consumers, since it is adding convenience to an existing service, rather than creating a new service.
2. It is not displacing a significant revenue stream for the programmers. In fact, all of the attempts to create additional TV subscription businesses haven't exactly been huge successes, with the exception of Netflix, which is only truly competitive with pay-TV on deep library (and which does provide some real money to a few programmers, most notably the CW.)
3. It enhances the value of the subscription and, thus, helps support price increases, in much the way that addition of channels to the basic package did a decade ago.

All of this brings us to Nimble TV, the startup du jour that looks to be about TV Everywhere. Nimble has an interesting business model. The concept is that it will subscribe, for a user, to a package of television service, of the user's choice, from a multichannel operator. Nimble TV doesn't need a deal with the programmer, the theory goes, it only needs a deal with the MVPD. Nimble TV will charge the MVPD's going rate for the package and then mark it up by "around $20" for the benefits that Nimble is providing. In that way, it is like buying stamps at the UPS Store; there is a markup for the convenience of purchasing them there instead of at the post office. 

The convenience, in this case, has a number of qualities:

1. The set-top box is not in your house, it is at Nimble, taking up their space and sucking down their electricity.
2. You get full-blown TV Everywhere. Every single program, including those on your DVR (more about that below) is accessible anywhere you have an Internet connection. Nimble TV will deliver a single stream of video from "your" set-top box to your iPad or web browser (the first two available clients) via the Internet. In this way, the functionality is similar to a Slingbox, but with the convenience of not having to buy the Slingbox. 
3. Instead of purchasing DVR service from your television provider or TiVo, Nimble TV will provide a DVR service with the storage of 10,000 hours (!) of your programs "in the cloud". 

Here's the issues that I see:

1. Multichannel operators may not be willing to allow a third party to have the billing relationship with one of "their" customers, particularly if it allows customers to switch providers more easily (more on that in a moment).
2. The value proposition for Nimble for a consumer may not be compelling. For subscribers who really value watching TV on their computers or other devices, Nimble does offer that. However, until it also provides service direct to the television (via a game console or Roku or some other box), it appears to offer a more compelling offering on secondary and tertiary viewing devices than it does on the primary device. Addressing this concern, however, should be trivial for Nimble, if they can make an iPad app, I'm sure they can make a Roku app. Getting onto the game consoles, which are far, far more penetrated in US households than Roku boxes, may not come as quickly.
3. The concept of a single-stream service seems not particularly useful for multiperson households. A Time Warner Cable customer with only one set-top box can still use an iPad as a a "second set" within the household (and a computer as a third set and smartphone as a fourth). While TWC TV's app does not have the same functionality as Nimble's, it does have a large portion of that functionality and Cablevision's app has more. These apps have also improved substantially in the short period they have been on the market. [I'm sure Nimble can provide more than one stream, but doing it with more than one-box would put the kibosh on using the Slingbox as legal precedent.]
4. The $20 monthly fee for TV Everywhere might not be compelling for many customers. To the extent that the subscriber is getting the DVR functionality from Nimble instead of the core provider, the savings on the television subscription might offset Nimble's cost, in whole or in part, especially as MVPDs raise the prices of their DVRs.
5. An increasingly large number of multichannel customers purchase more than television service from their provider (e.g., Internet, phone and/or home security service). If the customers takes off the video, substituting Nimble, the price of the other elements of the bundle may go up making the economics of Nimble for a customer a even more challenging.

In his highly recommended and thorough post on Nimble, I believe Rich Greenfield of BTIG Research, is mistaken in his belief that MVPDs will agree to work with Nimble and, if they do so, that the MVPDs will allow Nimble to ignore the geographic boundaries of their systems. Mr. Greenfield foresees a Nimble customers on Long Island, upset with an MVPD's drop of a popular channel during a carriage dispute (e.g. Fox-Cablevision during the 2010 World Series), simply switching to another provider's service. For the same reason that incumbent cable operators have generally not overbuilt each other, there is little reason to see why they would think they would benefit if Nimble facilitated such competition. Verizon and other overbuilders (and the DBS services) would have greater reason to sign up.

Even if the MVPD signed up to work with Nimble, it is impossible to imagine that the programmers and program providers (e.g., sports leagues, movie studios) would agree that the geographic restrictions in place when they license their programs all of a sudden do not apply to Nimble. Regional sports networks do not license their service to MVPD to provide it to customers outside of a defined geographic area and US cable networks that buy movies from the big studios usually do not have the right to distribute them in other countries. Someone else owns those rights. If Nimble does not think that ignoring these rights restrictions would be problematic, they are either hopelessly naive or woefully ignorant.

[One ancillary but related question that comes to mind is: if an MVPD is offering service via Nimble outside of its franchise area -- which community gets the franchise fees? Presumably it has to be the community in which the box resides, but the community in which the subscriber resides might not agree.]

Pulling back a bit, what seems truly compelling to me about Nimble TV is less the TV Everywhere part, than the very high capacity DVR part.  Certainly a large amount of DVR storage is a benefit that is difficult or expensive for consumers to create on their own (via a DVR Expander - 1TB of hard drive space holds about 150 hours of HD video and costs about $100; an individual DVR expander that would hold 10,000 HD hours would cost $6600, at that rate). In my household, managing storage on the DVR is a bit of a pain. While a consumer could add a DVR expander, those products have a reputation for flakiness, as do hard drives in general. Putting the DVR into the cloud, giving it a ton of capacity and making it available on my phone and iPad is something no cable operator is providing right now. However, to make that truly compelling, Nimble needs support for the TV and multiple streams to accomodate everyone in my household. Go down that path a bit and it starts to sound more and more like a service that the MVPD should be selling. Perhaps Nimble ends up going down that route eventually, being a vendor of services to the MVPD. [That was part of Sling's original plan, but being owned by Charlie Ergen didn't put Sling in a good position to be a vendor to its competitors.]

Other takes: GigaOm (Ryan Kim), CableFax (Steve Effros)

Dog Bites Man - Broadcasters Sue Aereo

Well, that didn't take long. Pioneering antenna-and-DVR-rental-Internet company Aereo's innovative service to rent a user their own antenna and DVR and send the broadcast signals to the user over the Internet has been sued (link to Engadget post) by the broadcasters (lotsa named plaintiff logos below!) whose distribution will be exploited / expanded / irreparably harmed by the service.

There's another suit by ABC, NBC and CBS, in case you thought they might feel differently.

Essentially the complaint by the broadcasters is that Aereo does not have the right to transmit their service over the Internet without their consent. Aereo sees their antenna rental approach as similar to Cablevision's successful network DVR case. The broadcasters seem to have skipped attacking the antenna-rental part of the Aereo service, which is pretty similar to the network DVR part of the Cablevision case, and focused on the converting-and-transmitting-that-antenna's-feed-over-the-Internet part, which is not quite akin to anything in the Cablevision case. (The network DVR transmitted content only on Cablevision's closed network and it was all content for which Cablevision had a license agreement already.) The transmitting-it-over-the-Internet part seems to be what tripped up Zediva in its DVD player-rental-Internet approach (and FilmOn.com and ivi.tv which, like Aereo transmitted broadcasters, but only had one antenna for all their users). For those who do not know, I am not a lawyer, just a practitioner in the field.

Aereo's logo looks a bit like a logo for a bandage to my eye

Links of interest:

• Techcrunch, no fan of the broadcasters, on the suit
• The Hollywood Reporter, no fan of tech guys, on the suit
• my 15 Feb 12 post on Aereo and Zediva
• .pdf of actual complaint, first suit from the NAB website, in case you weren't sure if this was a coordinated effort

Aereo (Beta) Arrives in NYC - Broadcasters Likely Peeved

Aereo launched its beta yesterday in the New York City DMA. For those unfamiliar with the company, formerly known as Bamboom, it will rent tiny digital antennas to people and then transmit TV signals to those people from "their" antenna via the Internet so that users can watch it on their computer or tablet or phone. If the "renting an antenna" part sounds odd, it makes sense because consumers can transmit content from a device that they have rented to themselves according to the precedent in the Cablevision "network DVR" case, although that didn't fit in the somewhat-similar Zediva "remote DVD player" case.

How tiny are the antennas?  This tiny. That's a good thing since Aereo needs one for every customer it signs up.

While it might appear that getting TV on one's computer, tablet or phone is the raison d'etre for the service, Aereo looks much more significant to me for other reasons. The first and biggest is that it appears that Aereo may be the first company to offer a service that provides broadcast TV programming without entering into retransmission consent agreements with the broadcast stations. This is significant because the strong stations are collecting increasingly healthy fees for providing their retransmission consent to cable, DBS and telco multichannel providers. (The service provided by ivi TV provided broadcast content without retransmission consent, but ivi lost that suit and was forced to shut down, although the decision has been appealed).

If Aereo's approach withstands the inevitable legal challenges, that precedent could give some multichannel providers a work-around to avoid paying retransmission consent fees themselves. The ironies are rich and multiple:  Aereo's approach takes advantage of the long-standing way that people received television -- pulling down the signals with an antenna. Most broadcasters consider cable their enemy, in fact, the broadcaster's own over-the-air signal itself is the root of this threat to their revenue. Cable which was originally seen by broadcasters as helping them expand the reach of their stations and the stations' advertising and then became the enemy when it competed for viewers is now the savior as it provides retransmission consent fees.

Aereo's consumer offering stakes out a unique place in the market. For $12 per month, a customer gets the service equivalent to a 2-tuner DVR connected to an antenna. The closest alternative to that is probably TiVo's $19.99 per month service which requires the use of its box (the least expensive of which is about $100) and, of course, an antenna. There are other options, most of which involve using your computer to do the recording and an antenna to pull down the signal, typically with no monthly fees. These options have not been that popular in the marketplace despite being available for years, perhaps, like many computer solutions, they haven't gelled yet to reach the mass market.

Aereo's approach also suggests a possible work-around for cable. Instead of a single master antenna pulling down a station's signal and distributing it to many subscribers, perhaps the cable company could create its own array of many little antennas and rents one to each subscriber and distribute those signals to the subscriber via IP. The problem for the cable operator is that doing such a thing in lieu of its current carriage would be illegal:  the cable operator is required by law to provide the broadcast stations to all video subscribers. It wouldn't be illegal for DBS to do so however. DBS has no such forced buy-through. I would think it would not be difficult to build Aereo's service (or their own version of it) into an Internet-connected DirecTV or Dish set-top. It would not be hard to see the cable industry lobbyists sinking their teeth into this opportunity shortly thereafter.

Rich Greenfield's comprehensive demo of Aereo...lots of pushing the play button

One other thing that Aereo supports, if it survives, is over-the-top substitution in general. Right now all consumer solutions that involve replacing subscription multichannel television involve getting good reception on an antenna on your own premises. Certainly there are those that might take a cord-cutting or cord-shaving step that do not meet that standard either because the location cannot receive a good signal (e.g., in a valley) or because putting up an antenna that can is inconvenient or impractical (e.g., in an apartment building). Aereo could represent an attractive option for that group.

Other takes: Richard Greenfield of BTIG Research, Todd Spangler in Multichannel News,  Matthew Moskovciak in CNET.com