The Online Reporter

Digital Media & Broadband Industry News, Research and Insight

TV Set Makers Are Bypassing Pay TV & Adding OTT-Delivered “TV Channels”

This week we begin tracking another emerging trend: traditional pay TV channels being threatened by the apps that TV set makers are adding in their quest for a cut of the revenues of over-the-top services and to increase the availability of UHD content. Makers of UHD sets are driven by consumer demand for more UHD content, especially now that sales of UHD sets are a) declining in price faster than many expected, which is causing b) sales of UHD sets to increase faster than expected. For verification, ask any sales rep in an electronics store.

Currently, only Netflix offers UHD content that can be viewed on any brand of UHD TV (but not on every UHD set as we learned this week). The catch is that Netflix currently has only 10 pieces of UHD content but four are video-candy pieces that are intended to show off what native UHD content can look like — there’s not even any narration as a documentary might have. That leaves only six pieces of shows and movies. Fortunately, one is “Breaking Bad” and its 63 episodes and the other is the entire second season “House of Cards,” a US version of the BBC series from the year 1990.

One indication of this emerging trend is that Sony and Samsung have already begun assembling and offering libraries of UHD shows, a few free ones but mostly purchased. Samsung has contracted out the management of its library to a company called Deluxe and Sony’s TV division has probably assigned operation of its UHD library to a division of Sony Pictures Entertainment.

However, Sony and Samsung’s UHD libraries can only be viewed on their UHD TVs: Sony’s on-Sony TV and Samsung’s on Samsung TVs. That leaves other UHD makers such as LG, Vizio, Haier, Hisense, TCL and Seiki out in the cold. We have heard as yet unconfirmed reports that LG, Vizio and Seiki as well as Sony and Samsung are already in negotiations for UHD content that can be delivered over broadband via apps on their UHD TV sets Doing that means UHD set makers don’t have to wait for pay TV services to get their act together and start offering UHD channels. DirecTV has said that although it may rent/sell UHD shows on its VoD service this year, it could be 2016 before it can offer “live” TV channels. In the meantime the only source for UHD content is OTT services.

When pay TV subscribers are watching the UHD on a UHD OTT service, they are not watching the ads on traditional pay TV channels, which is very costly to owners of pay TV channels and to pay TV services.

If UHD set makers want to sell more UHD TVs by increasing the amount of available UHD content, they’ll have to do it over-the-top with…

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Content Owners Win Big in OTT Platforms

The recent slate of quarterly earnings results by the big content owners point to just how lucrative OTT platforms are to the studios. As the OTT players Netflix, Amazon and Hulu continue to ramp up their respective content acquisition battles, studios and broadcasters are enjoying all-time high prices for their titles across platforms.

“We now have VoD, SVoD, AVoD, it’s a lot of letters, but it adds up to bigger numbers and viewers and revenue,” CBS head Leslie Moonves said, during the company’s recent earnings call. “New technologies are supporting our programs, and the winners are the content creators.”

CBS Leverages OTT Players against One Another
CBS, which isn’t an owner of Hulu, has carved out its own unique strategy for developing lucrative revenue streams from online platforms for its summer TV series, through streaming deals with Amazon, Hulu and Netflix.

Amazon is rumored to have paid $900,000 per episode of “Under the Dome,” and Netflix is paying around $1 million for each episode of “ZOO”; while earlier this year, CBS licensed “Elementary” to Hulu and WGN for around $3 million per episode, according to The Hollywood Reporter. Streaming deals for the summer shows were struck before the shows had premiered on TV, which The Hollywood Reporter points out, ensures those series are profitable before they even air.

Moonves said CBS will continue to leverage OTT platforms against one another to extract high licensing fees. “We feel very good about our prospects, having already announced our 2015 summer event series, ‘Zoo,’” Moonves said. “Just as we did with Amazon for ‘Under the Dome’ and ‘Extant,’ we presold the SVoD rights for this series – this time to Netflix – meaning that ‘Zoo’ will also be immediately profitable for us.”

He also hinted that CBS will begin producing content for OTT platforms in the near future. “Going forward, we will be producing more and more shows for more and more outlets, including major streaming companies and other emerging distributors,” he said. He later added, “You’re going to hear us being in business with some of the SVoDs with original programming.”

CBS will announce more international and domestic streaming deals as part of its syndication business. “The international business continues to grow substantially,” said Joseph Ianniello, CBS’ chief operating officer. He said that as Netflix and Amazon grow internationally, CBS enjoys a more competitive content marketplace. “You’re seeing huge international numbers, bigger than I’ve ever seen before,” he said.

21st Century Fox on Hulu
Of Hulu’s three broadcast partners, (Comcast, Disney and 21st Century Fox), only Fox mentioned the streaming service during the latest round of quarterly calls.

Fox head Rupert Murdoch said digital platforms are “going to be tremendously important part of our future, particularly the mobile ones.” He said analysts often speak of OTT services as though they were in competition with broadcasters such as Fox, but said that in reality, it’s broadcast content that is seeing the most demand on those platforms.

“Hulu, as it evolves, is offering an array of premium original content without a linear channel,” said Fox head Rupert Murdoch. “I think these digital platforms will provide an array of opportunity to package products.”

In contrast to Netflix and Amazon, Murdoch said Hulu will continue to focus on the domestic market. Hulu’s current CEO, Mike Hopkins, is a former Fox executive.

Disney and Netflix Partnership Is Mutually Beneficial
Disney CEO Bob Iger had warm words for Netflix during the company’s quarterly results call. Iger said the two companies, who struck a first-of-its-kind deal together for streaming Disney movies back in 2012, are growing their respective businesses together.

“We believe in their [Netflix’s] platform and its future,” Iger said. “We also believe that our brands can be well monetized on their platform, which is evidenced [by] what they are paying for our brands and our content.”

Netflix now streams Disney movies before any pay TV channel can distribute them. Disney is also developing original content that will appear exclusively on Netflix.

“We’ve got brands and content that they want and they have a platform that we like and that we want and they are willing to pay the right price for our content – good prices for our content,” Iger said. “I think it’s mutually beneficial.”

Lionsgate and Its Over-Performing Digital Download Business
As for the film studios, Lionsgate and Sony are the two big OTT winners. Sony Pictures Television owns many of the TV series that are streamed to OTT services, including “House of Cards,” and it has its own OTT service, Crackle, which offers some of its TV programs and some of its full-length films.

Lionsgate is the studio behind the Web series “Orange Is the New Black,” which CEO Jon Feltheimer touted as “an important new brand” for Lionsgate, which has “exceeded expectations on every measure” across domestic and international markets.

It has also released a number of…

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In This Week’s Edition of The Online Reporter…

The weekly UHD Reporter, focused on UHD (4K) and related matters, is now available. It’s free to subscribers because the articles originally appeared in The Online Reporter. It’s $595 a year for non-subscribers. Please look at a free copy by emailing paperboy@riderresearch.com.

THIS WEEK’S HEADLINES

Content Owners Win Big in OTT Platforms

Pay TV Services Could (and Should) Offer OTT-Delivered UHD Shows

Sony Struts Its PS 4 Sales Numbers: 10m

Apple Said to Be Close to Launching New iPads

UHD

TV Set Makers Are Bypassing Pay TV & Adding OTT-Delivered “TV Channels4

Prices of UHD TV Sets Dropped Again Last Weekend

The Importance of Upconversion on a UHD TV

Not All UHD TVs Can Play Netflix’s UHD Shows

UHD Set Makers to Add More Links to UHD Content

 
OTT

Lionsgate Looking to Launch More OTT Services in International Markets

Film Pre-Sales May Go to Netflix in Future

More Concerts Go Over the Top

BROADBAND BEAT

Brits Consider Impact of an Everything-Online Future

ADTRAN’s Frequency Division Vectoring Will Help Telcos Migrate Faster to G.fast

ENABLING TECHNOLOGY

Simultaneously Watch 4 TV Channels on One TV with 4SeTV

Intel Ships New Chip for Tablets: Smaller, Less Power & Fan Free

 
HOME NETWORKING

HomeGrid Selects Asian-Based Certification Lab

G.hn Close to Being in 1905.1a Standard

The Case for Wireline Home Networks

NET-TOP BOXES

Apple’s New NTB Should Have UHD and Linear TV Listings

LIES, DAMN LIES AND STATISTICS

CBS Enjoys LargeTime-Shifted Audiences

Chromebook Sales Will Triple to 14.4m by 2017

Bandwidth Demand Rises but Revenue Doesn’t for ISPs

At Last: Ratings for OTT Programs

DIGI GRAMS

Netflix: More & More UHD Coming

BT Sports Adds More Sports, Rugby This Time

Jobs Saw the Need for Universal Wi-Fi Networks

Android TV Threatens Apple TV & Roku

At Last: A New USB Connector that’s Reversible

Windows on Less Than 14% of All Computing Devices

C Spire Is Using ADTRAN Gear to Roll out FTTH in Mississippi

Intel Was Right about Flood of Low-Cost Tablets

Intel was right when it predicted a coming flood of low-cost tablets that used its microprocessors. Last weekend, Office Depot was offering for $99, normally $129, an Apex brand 7-inch, 16GB tablet from TMAX Technologies, which also makes TV sets. An 8GB version is available for $84.99 on Amazon.

The Apex tablet uses Android, of course — well maybe not so “of course” because Microsoft is giving tablet makers for free the RT version of Windows for use on smaller-sized tablets.

The Apex is a very usable and useful tablet. It uses the KitKat 4.4 version of Android and has all the features and functions most people would want, including front and rear cameras (2.0 and 5.0 megapixels respectively), voice commands, micro USB and memory card slots, Wi-Fi and Bluetooth. With free Wi-Fi hotspot networks spreading rapidly, it can connect to the Net almost anywhere.

It’s a good viewing device for watching Netflix and other OTT services when a TV or larger tablet is not available or convenient. It has enough power — Intel’s 1.2 GHz Clovertrail microprocessor — to handle most tasks a person would want to do on a tiny tablet.

The Apex tablet is a good buy for anyone looking for a low-cost tablet, say maybe for a younger child, to leave in the bedroom, comparison shopping ventures (it fits in a purse or men’s pants pocket) or carry on a trip. It would be great for outdoor workers who might damage or lose a tablet.

Apex and other such tablets are a real problem for makers of higher priced tablets, such as Apple, Samsung and Microsoft. Consumers are less likely to buy their tablets as a second tablet. Everyone needs two tablets, don’t they? At these prices, buying a second one is almost a no-brainer.

And?
One thing that became evident after buying the Apex tablet is that there is not very much of a replacement market for tablets…

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Sony & Samsung Set up Showrooms in Best Buy Stores

A recent trip to the local Best Buy showed a redesigned showroom area for consumer electronics with TVs commanding the most square-footage. Samsung and Sony have the two largest display areas with other set makers such as Toshiba, Panasonic, Sharp and LG squeezed in between, each in much, much smaller and less attractive spaces.

Sony Electronics said that starting in May 2014 it began opening new Sony home theater retail areas in approximately 350 Best Buy stores. It’s a major commitment by Sony to its TV division and a major commitment by Best Buy to Sony’s TV operations.

The showroom-within-a-showroom has new fixtures, interactive demonstration areas and knowledgeable Sony and Best Buy representatives.

Sony Electronics president and COO Mike Fasulo said the company wants shoppers “to experience the best of Sony with a premium and unique shopping experience at Best Buy.” He did not say how much the remodeling costs, who will pay for the new fixtures and displays — probably Sony — or whether Sony is paying Best Buy for the prime floor space.

Best Buy’s chief merchandising officer Mike Mohan said, “Sony’s 4K Ultra HD televisions have to be seen to be believed. Our newly transformed home theater areas will, for the first time, allow customers to test, try and experience how all of the Sony products work together.”

You can’t get that at Amazon or other online-only stores.

Mohan said the “the Sony Experience at Best Buy” will showcase …

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