One Simple Way to Improve Roku, Apple TV and Over-the-Top in General

When I first got my Roku box I felt some of the giddy sense of possibility I remembered from my first use of the World Wide Web back in the 1990s. Here was an entirely open, easy to use platform that could bring any kind of content to my television. I thought that this box could have a real impact on the television business.

That's not to say that the Roku doesn't have drawbacks. The setup is not hard, nor is adding channels, but the process is a bit arcane. The video quality fluctuates, at least over my wifi and cable modem.

However, the biggest user experience clunkiness relative to a multichannel video subscription is that it is difficult to switch between programs both within the Roku environment (e.g., between Netlfix and MLB.TV) and between the Roku environment and cable.

Channel surfing is the way many people watch ad-supported television, particularly live television.

If I'm watching a baseball game from MLB.TV and it is in commercial, I'd like to catch a few minutes of one of the things in my Netflix queue. Last night it took me 10 button pushes to get there and another 8 button pushes to get back. (The problem would be worse if I had not moved MLB and Netflix to be right next to each other on the channel lineup -- tip: use the * button to do that).  The reason it took so many clicks was partially a function of how far down the list my baseball game and Netflix show were, but I can't control that.  Oh and each time a new app or program loads, that takes some refresh time.  In short, it isn't a very good experience.

For all its well-deserved user-friendliness, the not-open, but otherwise similar Apple TV, is no better in facilitating, er..., stream surfing.

A bookmarking system would seem like an easy way to solve this. Perhaps this functionality needs to sit in the operating system level -- I don't know, I'm not a software developer. I do know that consumers would find it valuable.

The second problem, switching between the Roku environment and cable (or DBS or over-the-air) is a thornier one. If the geniuses who developed Google TV used an IR blaster as the way to solve the problem, that's not a good sign. IR blasters are notoriously finicky (Nilay Patel: "It's really simple: any product that requires IR blaster control of a cable box is doomed to fail.") We are awaiting a better solution.

In the event that cable and broadcast programming is available over-the-top (e.g., Bamboom, ivi or maybe even via TV Everywhere), maybe the second problem doesn't have to be solved, but the first one deserves some immediate attention.

From a different perspective, a cable set-top box that brings in over-the-top apps would seem to have an enormous head start at solving both problems and creating the best user experience.

Starz Walks Away From Netflix

Yesterday Starz and Netflix issued dueling press releases/statements about the end of their affiliation relationship.  The story was first, and most comprehensively, reported in the Los Angeles Times's Company Town blog.

Some are confused about how Starz could walk away from a reported $300 million annual rights fee, up from $30 million annually in its 3-year deal which expires in February 2012.

According to the LA Times story, the dealbreaker was the Starz wanted Netflix to charge extra for subscribers to have access to the Starz content.  This extra price tier content more closely tracks the cable model where Starz is an add-on to basic.  Also, It is not an unusual clause in studio "output agreements" that channels that air movies sold in the "premium window" (which is after theatrical and VOD, but before broadcast and basic cable) cannot be carried on the basic tier.  The theory is that broader exposure will diminish their value for later windows.  However, clearly Starz's movies had been part of Netflix's "basic" offering all along. That position however might no longer have been sustainable as the service grew.

Starz probably had some issues with cable operators about its presence on the Netflix platform. Cable operators are never enthusiastic about additional competition. Time Warner Cable said that it would not carry Epix, a competing pay service, after Epix did a deal with Netflix. While I do not know of any cable operator that has dropped Starz because of its availability on Netflix, it would not be surprising if they did not market Starz as heavily as HBO or Showtime. Since premium channels often sell for $10-15 or more via cable, Netflix's $7.99 streaming offer became a less expensive way to get the content. Unlike HBO or Showtime, that have high profile original programs that become watercooler discussion items, Starz's originals do not have the same profile. In fact, Starz withholds its originals for 90 days from Netflix, playing this card in an attempt to mollify the cable guys. It is unclear how much value that card holds, however.

One of the oddest decisions in the Netflix-Starz relationship is that all of the content was branded as Starz.  Since Netflix subscribers search movies by genre and title first, labeling movies as "Starz Play" was always odd. It is hard to see how it supported sampling, you could only sample it if you were already buying a service that included it!  Having Netflix have the Starz brand on the movies I believe undermines the value of the service to cable operators. So why does Starz do it? It may be a requirement of their studio deals. Starz has the right to show the movies on its Starz channels and can provide VOD access to customers who get the channels. Starz probably does not have the right to sublicense them or include them in a differently-branded environment. This is probably why you can watch only one of the seventeen Starz channels live via the Netflix website; the movies are acquired for the channels, Starz can only sell them to distributors in a package.

Netflix has done a great job establishing its own brand. Netflix is the programmer, aggregating stuff from lots of sources. While some have compared Netflix to Comcast or another MVPD, it isn't, as my former colleague Bruce Leichtman noted. It is a programmer. It acquires individual programs, not packaged, branded channels. Cable operators do this rarely places ("Free Movies on Demand").  A cable operator who drops a popular channel loses the content and the brand; there is no easy substitute for Nickelodeon, MTV or ESPN (and the dropped channel will be carried by competing multichannel distributors). Netflix losing Starz is more like MTV canceling a show -- that happens all the time, it is rarely news. Programs always change within a brand. (The only brands that rarely survive such a change are regional sports networks that lose their primary pro or college games, like Detroit's ProAm Sports System. Netflix does not appear to be one of those.)

What happens? A cynic would note that Starz issued the press release and Netflix did not and wonder if this is a negotiating ploy by Starz, six months before the expiration of the agreement.  There is plenty of time for the parties to reach an agreement, particularly if the extra cost tier issue is not truly a deal breaker. Starz's press release is certainly a way to put pressure on Netflix. If Starz really intends to walk away, it could have done so quietly at the expiration of the deal.

In Praise of the DVR's Incredible User-Friendliness

Compared to many new technologies, it is astounding how user-friendly the generic, cable box DVR is.  Other TV or online technologies could learn from its lessons.

The DVR has one truly great user-friendly feature - the list of recorded shows.  The beauty of this feature is a direct result of the DVR's limitations.  There are a limited number of shows (because hard drive space is limited) and the shows are all relevant to the user (because he or she chose to record them).  This list is easy to navigate (because it is short) and highly personalized.

The list of recorded shows will be easy to navigate from any phone capable of playing video.  The phone's small screen is up to the task of navigating through this simple list.  This becomes a simple and valuable implementation of TV Everywhere once the DVR storage moves to "the cloud".

The contrast with cable VOD and the current, early TV Everywhere offerings could not be more striking.

NFL Sunday Ticket without DirecTV

DirecTV, which has exclusive rights to NFL Sunday Ticket, will be selling the subscription package to any non-DirecTV subscriber for the first time this fall.  In an interview with Multichannel News, Alex Kaplan, DirecTV's Senior Director of Product Management, said that "It's our attempt to open up the universe a bit to people that can't get DirecTV -- students, people who live in big apartment buildings and people who live in New York City -- and it's a new revenue stream for us."

NFL Sunday Ticket via the PlayStation 3 will be cost $339.95 for the season; the package sells for $334.95 on DirecTV.

Letting Others Get Your Crown Jewel - Is that Smart?

It is a widely held belief that the main purpose of Sunday Ticket exclusivity for DirecTV was to attract customers to its platform (instead of cable, Dish or telco video services.  It is well known that NFL Sunday Ticket is, if not a loss leader, does not generate a whole lot of margin for DirecTV.

Making Sunday Ticket available to non-subs, is, at least, a little odd.  It is hard to imagine Cablevision providing News 12 over-the-top to Verizon customers.

Cable operators have long coveted access to Sunday Ticket (no one likes to be the platform WITHOUT a top quality programming service). It seems that if the package is available to cable customers over-the-top, by definition it is no longer is as much of competitive differentiator for DirecTV.

DirecTV's Kaplan says the target is residents in cities like New York, where tall buildings prevent a clear signal for satellites, and video-game playing college students. “There are real revenue opportunities here from non-DirecTV customers, and while they won’t sign up for DirecTV right away, ultimately these people could move to the suburbs, and we’ll have a relationship with them that could lead to a conversion to DirecTV,” said Kaplan.

That sounds fine, if the PS3 is more penetrated in New York City or college campuses, but I think most of the PS3s are probably in the suburbs.

Why PS3?  What About Other Platforms?  We Are in an Experimenting Age

The NFL has argued that Sunday Ticket has a minimal cannibalizing effect on the viewership on the nationally telecast games because its availability is limited to DirecTV. That's important because the vast majority of NFL television revenue is from Fox, ABC/ESPN and NBC, not DirecTV.

However, if the goal was experimentation, the PS3 is an odd choice.  The PS3 accounts for more streaming hours for Netflix than any of its other platforms -- 30% of the total, according to an analysis by Sandvine; this choice was the not obvious toe-in-the-water play, that say, Roku, would have been.

Eagle-eyed observers will note that DirecTV has offered Sunday Ticket via broadband already with Sunday Ticket To Go, a $50 add-on for DirecTV Sunday Ticket subscribers that has been offered since 2008.  STTG is available on iOS, BlackBerry, Android, other consoles, etc.

DirecTV did make Sunday Ticket To Go available to DirecTV non-subscribers in 2009 (in Manhattan) and 2010 (everywhere), but this offer was only available to people who could not subscribe to DirecTV service.  In fact, a prospective customer would have to first sign up for DirecTV, then be rejected by a DirecTV installer.

DirecTV's Kaplan's other interesting comment in the interview is that "We're not going to let it [NFL Sunday Ticket subscriptions on PlayStation] go to an unlimited number.  We're trying to figure out what is the market for this at that price point."  Confusingly, in a later interview with Bloomberg, he added “If this test is successful, we have the opportunity to distribute ‘Sunday Ticket’ through various different devices, and we’re certainly open to relationships with other consoles and Internet-connected devices.”

Perhaps DirecTV thinks that they have already picked off all of the viable satellite television customers who really valued Sunday Ticket. It could be that the real test is less about the incremental revenue the broadband offering will bring, but whether the existing DirecTV Sunday Ticket subscribers will churn out at any greater rate if Sunday Ticket is available over-the-top.

Tangible Evidence of "Cord Shaving"

The title of this post is provocative, but it is not as provocative as the content that inspired it.

For many years, cable executives and some industry analysts have downplayed the impact of cord-cutting on the multichannel subscription television business. The arguments have some merits. Multichannel penetration continues to rise each quarter. Broadcast has been free competition for cable television forever. The most popular online video is YouTube, which, while a wonderful service, is not a substitute for a television subscription, except in the sense that people watch television and people watch YouTube. Netflix, even in its DVD-by-mail incarnation, got a lot closer to being a substitute. The programming (movies and TV series) was the sort of thing that people watched on TV. It did offer a large amount of choice -- one of the primary virtues of a multichannel subscription versus broadcast television. It was an all-you-can-eat subscription that offered a lot of value for heavy users (or multiple person households). Netflix was seen as a good service for "cord shavers" who might drop premium channels like HBO and Showtime and get their movie fix from the company with the red envelopes.

For those waiting for the multichannel television business to be roiled the way that the music business was, the first big cracks were admitted last week. The dirty little secret is porn.  Porn on cable was a wonderful business.  The retail prices were high, the marketing costs were low (consumers who want it seek it out) and the wholesale costs were modest (there are lots of companies that make porn and the cable companies easily pit them against each other; also there are few barriers to entry in the porn business and it requires little capital, so new suppliers are always entering the market).

Multichannel distributors never talked much about porn in their earnings calls before.  The subject was considered...in poor taste.

Time Warner Cable and DirecTV were forced to admit that the reason for the declines in their VOD business were large declines in the sale of porn.

It is no wonder that porn is the canary in the coal mine. Anonymity is a plus for consumers (no need to explain the VOD purchase on the cable bill is a plus in many households). Short form content is often a good substitute for long form content in this genre (most long form content could be considered a compilation of scenes -- the unit of payment for the performers). A relatively small amount of the porn market is branded (Playboy, which doesn't consider what it provides as porn, is the strongest brand name in "adult video"). Also, there is a tremendous supply of free content on the Internet.

What is the next genre to be cord shaved? Many categories of news seem to share these characteristics:  weather information, sports highlights, entertainment news are some of the more obvious examples.  These sorts of services (The Weather Channel, ESPNews, E!) do have the advantage of being bundled on the basic tier, rather than being a separate purchase, for consumers. These channels are also bundled with other channels for sale to the distributor. Therefore they are not easy to drop, even if their value to the bundle is declining. But it sure looks like their value to the bundle is, in fact, declining.

Netflix price increase - an experiment?

I have been surprised in reading all of the coverage of Netflix's new pricing scheme, that nothing I read  has pointed out a possible reason for the new structure -- to create two distinct products, one DVD-by-mail and one streaming.  This is one way, perhaps the only real way, for the company to really understand how consumers value the two offerings.

When Netflix launched streaming in 2007, it was positioned as added-value for the mail-based subscription offering.  This brought a number of benefits.  First, it created broad exposure to the service (because every Netflix subscriber has to have access to an Internet connection to manage one's queue, if nothing else).  Second, because the streaming offering was meagre at first, it wasn't a product that could really stand on its own anyway.  Third, when it was launched it only worked on Internet Explorer on Windows PCs -- Macs, Roku, Xbox, Playstation, connected Blu-Rays and TVs, iPhone and ubiquity came later (and added tremendously to the value). Finally, Netflix probably had no idea how popular the streaming option would be.

Watch Instantly became much more attractive with its deal with Starz in 2008, which brought Watch Instantly premium-window movies -- much higher profile content than its streaming offering had offered up to that point (and arguably the best streaming stuff on the service today).  The explosive growth of the service's subscriber base since 2007 certainly suggests that streaming has had a lot of value (end 2Q07 sub count was 6.7 million; end 2Q11 paid sub count was 23.3 million - yowzah!)

Now, by creating two different subscriptions, Netflix will get some real data on how its customers value the different offerings.   Right now, Netflix has extensive data in how they use the services (time spent watching streams, DVDs ordered per month, platforms used for watching those streams), but, as many people know, there is no test for how people really value a service than actually paying cash for it.

To the extent that Netflix wants to add live television channels (like, say Epix or Starz or Disney Channel, for starters -- ad -supported services will be trickier because advertising has different rights issues), they would prefer to have a subscriber count that does not include people who only use and value the mail-based service.

That said, an effective 60% increase for those, like myself, on the one-DVD-unlimited plan sure seems like a big, big jump.  But that is a discussion on which many others have already commented.

TWCable iPad App revised - what's new in 2.0

On 7 July 2011, Time Warner Cable released its second version of its popular and within-the-industry controversial iPad app.  The app take some major steps forward adding significant functionality, but seems very much like a work-in-progress rather that a polished piece of software.


The first noticeable change in the 2.0 TWCable TV iPad app is that its splash screen is now purple, unlike the avocado shade of 1.0 (my review here).  Branding people will note that TWC's web site is blue with a white logo, some of its trucks are painted with a lime-colored logo on a white field and this app has a white logo on a purple background.

The second change is the semi-persistent navigation below offers 4 choices:  Live TV, Guide, DVR and Settings.  Previously, the only function was Live TV.

Starting with the most mundane, Settings has 3 choices:  Favorites (your list of your favorite channels -- which starts out empty), Devices (which set top box do you want to control via the iPad) and Sign Out.

The Guide button adds new functionality -- the ability to use the iPad app as a remote control for a set top box.  The guide is the familiar scrolling electronic programming guide (EPG) from digital cable.  It launches on channel 1.  It is not the guide for the channels on the app.  When a channel is touched, the user is given the choice of "Watch Now" or "Add to Favorites".  The guide does not require that you look at all 1000 or so channels on the system, it gives a choice of 3 views:  All Channels, Favorites (more on this later) or just the HD channels.  One missing choice, that would seem to be an easy addition would be the list of the channels to which the users subscribes; this would also be much more useful than "All Channels".

DVR also adds new functionality -- the list of Scheduled Recordings on the connected cable box, but not what has already been recorded (and, there is no way to play those recordings via the iPad).  This functionality is provided on TWC's website.

Live TV works much as it did in 1.0, except that users have lost the "Last Five Channels Viewed" navigation option from the previous version.  That's a step backward -- it was one of the innovative navigation features (i.e., something other than a scrolling guide and channel up/channel down).  The Favorites list does not apply to Live TV viewed via the app, only to the set top box guide.

There is significant latency in switching channels.  The app also seems buggy, it crashed twice on me in a short period of time.

There are 15 new channels on the app:  Africa, Cooking, Discovery Health & Fit, DIY, ESPN Classic, Gol, Gospel Music, Great American Country, Jewish Life, Mav, Shop NBC, Smithsonian, Tennis, Universal and Word.  Seven of these are SD, the other eight are HD.  Live sports events have been beefed up with Gol and Tennis, previously only Golf was in that category (ESPNews and ESPN Classic don't show live events).

In terms of new programming ground, the app now contains HD-only services (Smithsonian and Universal), the previous version did not.  The other broad categories of what is not carried continue to be:

• any broadcast channels
• any premium channels (e.g., HBO, Showtime, Starz)
• anything from Viacom (e.g., Nick, MTV, Comedy, Spike)

Channel list in the order they appear in the app is below (which is slightly changed from before).  By my count there are 83 channels.  For those scoring at home, 22 are SD (at least 3 of which are carried in HD on the system - Bloomberg, Cooking and Sundance).  Time Warner Cable is claiming that there are more than 100.  The reason for the discrepancy might be that some of the channels are not available on my system and that I do not subscribe to some of the channels (although I get most everything TWC offers in Northern Manhattan).  I have confirmed that TWC only provides access to services which the subscriber receives on TV. The new additions are in italics:

1. A&E HD
2. ABC Family HD
3. Africa Channel HD
4. AMC HD
5. Animal Planet HD
6. Bio HD
7. Bloomberg (still SD)
8. Boomerang (SD)
9. Bravo HD
10. Cartoon Network HD
11. Chiller (SD)
12. CNBC HD+
13. CNBC World (SD)
14. CNN HD
15. CNN International (SD)
16. Cooking Channel (SD)
17. C-SPAN HD
18. C-SPAN2 HD
19. C-SPAN3 HD
20. Current TV (SD)
21. Discovery Channel HD
22. Discovery Fit & Health (SD)
23. Disney Channel HD
24. Disney XD HD
25. DIY HD
26. E! HD
27. ESPN Classic (SD) - this service is not on the WatchESPN app
28. ESPNews HD
29. EWTN SD
30. Food Network HD
31. Fox Business HD
32. Fox News HD
33. FX HD
34. G4 HD
35. Galavision HD
36. Gol TV HD
37. Golf HD
38. Gospel Music HD
39. Great American Country (SD)
40. GSN (looks like HD)
41. Hallmark Channel HD
42. HGTV HD
43. History HD
44. History International HD
45. HLN HD
46. Home Shopping Network HD
47. Hub HD
48. IFC HD
49. Investigation Discovery HD
50. Jewelry Television by ACN (SD) -- the weird branding continues
51. Jewish Life TV (SD)
52. Lifetime HD
53. Lifetime Movie Network HD
54. Lifetime Real Women (SD)
55. Mav TV HD
56. Military Channel (SD)
57. MSNBC HD
58. Mun2 (SD)
59. National Geographic HD
60. National Geographic Wild HD
61. NY1 News HD
62. NY1 Noticias for Time Warner (SD) -- odd "for TW" branding continues
63. Oprah Winfrey Network HD
64. Ovation (SD)
65. Oxygen HD
66. Planet Green HD
67. QVC HD
68. Reelz Channel HD
69. Science HD
70. Shop NBC (SD)
71. Sleuth (SD)
72. Smithsonian HD
73. SoapNet (SD)
74. Style HD
75. Sundance (still, oddly SD)
76. SyFy HD
77. Tennis Channel HD
78. TLC HD
79. Travel Channel HD
80. TruTV HD
81. Turner Classic Movies HD
82. TV Guide HD
83. TV One HD
84. Universal HD
85. USA HD
86. WE tv HD
87. Word Network (SD)

No longer on the app -- Wedding Central, which was shut down on July 1, 2011.  This review is of the Version described in the iPad Settings section as "Developer Build", for reasons that are unclear to me.  It is Version 2.0.0 in iTunes.