Today's Top Stories Dish Network (NASDAQ: DISH) is diving into deeper OTT waters, announcing it will make its linear TV available over-the-top to subscribers by the end of June. The satellite provider hopes to be the first to sell a full package of live-streaming channels and is negotiating rights with several broadcasters and distributors. Meantime, Time Warner Cable (NYSE: TWC) dipped its toe into the virtual MVPD pool, partnering with Fanhattan to offer live TV and video on demand via the vendor's Fan TV box, engadget reports. TWC is selling the box to subscribers at a pre-order price of $99 and plans to start shipping it in the next few months. The target market for both companies is primarily young adults who are eschewing cable television for online streaming options. "Dish is targeting 18-to-34-year-olds who only want to pay $20 or $30 a month to watch video on smartphones and tablets instead of a traditional TV set," Bloomberg's Alex Sherman and Edmund Lee wrote. Content rights are a key component of Dish's, and likely TWC's service. Dish has secured a rights deal with the Walt Disney Co.--giving it access to channels like ABC, ESPN and The Disney Channel--but is still negotiating with CBS Corp., A&E Networks and Turner Broadcasting. Several conditions are being set in order for the deals to go through: The streaming package must include at least two of the four major broadcasting networks (ABC, CBS, NBC or Fox), along with at least 10 of the highest-rated cable networks. Dish is also negotiating with NBCUniversal, a slightly more complicated proposition due to the conditions placed on the peacock network when Comcast (NASDAQ: CMCSA) acquired it in 2011. NBCU must provide programming that is comparatively and economically equivalent to that of its rivals. "The difficulty so far has been concluding what constitutes an equivalent agreement based on Dish's deal with Disney," an unnamed source told Bloomberg. TWC's Fan TV partnership doesn't have the same reach as Dish's ambitious play. It won't have the same number of channel selections as its cable service does, and channels will vary by region. "New York, Los Angeles, San Diego, Kansas City and Austin will include just about all broadcast and cable channels and packages: premium, cable and local broadcasters like ABC, CBS, Fox, NBC and Univision. All other Time Warner Cable geographies will include premium and cable lineups, but will exclude local broadcast channels," Fan TV's FAQ page said. Fanhattan, originally known for its online TV discovery app, revealed its Fan TV box in mid-2013 and has been courting pay-TV providers since then. It conducted a three-month trial with Cox Communications in Orange County, Calif., last year. The TWC deal is Fan TV's first national cable partnership, and the startup said it's willing "to work with any TV provider" in a quest to make its service available nationwide. For more:
- Variety has this story
- engadget has this story
- Bloomberg has this Dish story
- FierceCable has this coverage Related articles:
Clayton: Dish Network signing over-the-top carriage deals
Sony gears for launch of virtual cable service
AT&T tackles online video market with Chernin Group joint venture, $500M pledge Read more about: Time Warner Cable
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After day one, it's too close to call: Aereo and a group of TV broadcasters faced the Supreme Court in the first day of hearings around whether Aereo's service violates copyright laws. At the crux of the issue is whether the way Aereo's technology is being used constitutes a public or a private performance. Attorney David Frederick, Aereo's counsel, reiterated the provider's public statement that the Court's ultimate decision will have "significant consequences" for the cloud computing industry. He also put forth that Aereo's streaming service is just a new way for a consumer to pick up over-the-air signals by antenna and watch them, just as they always have. "From our perspective, the issue in the case was whether consumers who have always had a right to have an antenna and a DVR in their home and make copies of local over-the-air broadcast television, if that right should be infringed at all simply by moving the antenna and DVR to the cloud," Frederick stated outside the chambers following the hearing, in a press release provided by Aereo. Paul Clement, lead attorney representing the broadcasters, held fast to the broadcasters' argument that public performance rights needed to be protected, and that Aereo was violating that part of copyright law. "The justices understood the technology," Clement said outside the Supreme Court after the hearing, according to a Broadcasting & Cable article. "They understood the stakes in the case. And they were focused principally on the interpretation of the statute. We conveyed to them a relatively straightforward position, which is that a service cannot provide live TV over the Internet to thousands of paying strangers without engaging in a public performance." Justices' questions to both sides revolved around that issue, and also touched on why Aereo should or should not be considered a cable service. The justices also expressed concern over how a ruling against Aereo might affect the cloud services industry and the providers deeply invested in it, such as Apple (NASDAQ: AAPL) with its iCloud service. Chief Justice John Roberts asked whether Aereo's equipment had any purpose "other than to get around copyright laws," according to Bloomberg. But he also said that Aereo's service could be viewed as similar to a consumer going to the nearest Radio Shack to buy their own antenna and DVR and make copies of broadcast programming, The Wall Street Journal reported. The hour-long hearing signals just the start of this review. A ruling in the case will likely not be made before June. Will Aereo prevail? That is hard to tell. Aereo won in most lower court decisions regarding the legality of its service, but in March it lost a 10th Circuit Court of Appeals case filed by four Utah TV stations, forcing it to shut down service in Salt Lake City and Denver. And the Court's careful look at how the case ties into cloud computing may not save the service, if the justices figure out a way to rule against Aereo without gutting a 2008 decision regarding Cablevision's remote DVR service that helped drive growth of the cloud industry. For more:
- Broadcasting & Cable has this story
- WSJ has this story (sub. req.)
- Bloomberg has this story
- read Aereo's post-hearing statement
- and a transcript of the opening arguments (.pdf) Related articles:
Broadcasting is about to change, regardless of Aereo lawsuit's outcome
Aereo CEO Kanojia warns of 'chilling' consequences for cloud industry
Aereo shuts down in Denver and Salt Lake City Read more about: Supreme Court, CBS
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Netflix (NASDAQ: NFLX) will increase its monthly streaming subscription price by one to two dollars, "depending on the country," this quarter, CEO Reed Hastings and CFO David Wells wrote in a letter to shareholders this afternoon. The announcement coincided with the release of Netflix's first quarter results, in which the company notched 2.25 million new customers in the United States. Although the company is raising its rates--it currently charges U.S. users $7.99 per month for its streaming service--Netflix said its U.S. subscribers will enjoy a "generous time period" during which their subscription rates will not increase. Netflix has been toying with different subscription models during the past few months, such as a cheaper option which limited subscribers to streaming on just two devices simultaneously. The provider raised its rates for new subscribers in Ireland this January, from €6.99 to €7.99. Existing Irish subs were grandfathered in at the original €6.99 rate for two more years, so it's not a stretch to assume that U.S. rates will be held for perhaps that long. "These changes will enable us to acquire more content and deliver an even better streaming experience," Hastings and Wells wrote. Netflix said in its 2013 annual report that it had contracted to pay nearly $3 billion in content licensing obligations in 2014. The subscription hike overshadowed the release of Netflix's first quarter results. Netflix also revealed that it expects revenues for its international segment to eventually surpass its U.S. business. Netflix added 2.25 million new customers in the United States during the first quarter, up from the 2.03 million it added in the same quarter a year ago. Netflix now counts a total of 35.7 million subscribers in the U.S. market and 48 million worldwide. Netflix saw revenues of $1.27 billion and a net income of $53 million in the first quarter. It reported free cash flow of $8 million, and recorded earnings per share of 86 cents, up from 81 cents in Q4, beating analyst expectations. Netflix forecast slower U.S. subscriber gains in Q2, about 0.11 million less than the same period in 2013, "due to increased seasonality," the company said in its investor letter. And while free cash flow should be all right through the second quarter, the provider expects a Q4 reduction due to "further international expansion in the second half of this year reducing net income." Interestingly, Hastings and Reed addressed the proposed Comcast-Time Warner Cable merger in the investor letter. "The combined company would possess even more anti-competitive leverage to charge arbitrary interconnection tolls for access to their customers," they wrote. "For this reason, Netflix opposes this merger." Investors cheered Netflix's first quarter results, raising the company's shares around 6 percent in after-hours trading. For more:
- GigaOM has this article
- Netflix has this investor letter (.pdf) Related articles:
3 reasons why Netflix has to raise prices in 2014
Middle schoolers aren't charmed by Netflix
Franken asks Netflix's Hastings to share views on Comcast-TWC acquisition Read more about: Netflix
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AT&T (NYSE: T) jumped into the online video space with both feet Tuesday, announcing a joint venture with the Chernin Group--which holds a majority stake in OTT anime network Crunchyroll. The Tier 1 provider committed more than $500 million to fund SVOD (subscription video on demand) services, advertising and other online streaming initiatives. "AT&T and The Chernin Group are combining our skill sets to address the growing consumer demand for accessing content how and when they want it," said John Stankey, chief strategy officer at AT&T, in a joint press release. "Combining our expertise in network infrastructure, mobile, broadband and video with The Chernin Group's management and expertise in content, distribution, and monetization models in online video creates the opportunity for us to develop a compelling offering in the OTT space." What the investment means for online video services like Netflix (NASDAQ: NFLX), Hulu, Amazon (NASDAQ: AMZN) and others is pretty clear: AT&T and The Chernin Group will compete directly with them for the OTT audience. The Chernin Group's expertise in the online video space will, AT&T clearly hopes, diversify what it can do with its networks. "The company has been looking to expand the kinds of services it can deliver either through its wireless or wired network as it looks to avoid the fate of becoming a 'dumb pipe' that can only make money off of connection fees," CNET's Roger Cheng wrote. It also brings to the surface some pros and cons from the AT&T side: On one hand, AT&T's U-verse buildout, including its Project VIP initiative and recent gigabit network commitment, means a continued increase in broadband speeds for its customers resulting in better, higher quality playback of any OTT service. On the other hand, funding its own SVOD and streaming initiatives means, maybe, another network bottleneck for Netflix, which is already paying Comcast (NASDAQ: CMCSA) for better bandwidth access over its network to reach Netflix subs. AT&T also owns its network, meaning it could in theory control direct access to its broadband customers where it connects to the broader Internet. (Keep in mind, though, that Netflix has never yet implied that any ISP--other than Comcast--is throttling its bandwidth over their networks.) AT&T's investors were happy with the announcement. Shares in the Tier 1 provider rose 23 cents, to $36.29, in late morning trading, according to the Associated Press. The move by AT&T provides perhaps even more justification for Netflix's planned raise in subscription prices this quarter, by $1 to $2 over its current $7.99 standard rate. The online streaming pioneer already knows it faces stiffening competition this year, citing headwinds in its second-half forecast of lowered cash flow during its first-quarter earnings presentation on Monday. AT&T is just one of several threats to Netflix dominance--Verizon (NYSE: VZ) reportedly is looking at getting into the OTT space through similar means, according to the AP. For more:
- AP has this story
- CNET has this story
- The Los Angeles Times has this story Related articles:
AT&T, Chernin Group $500M online video pact plays into bandwidth, content hunger
Netflix to raise subscription prices by up to $2, adds 2.25M U.S. subs in Q1
AT&T, Chernin teaming up on $500M OTT play
AT&T ready to launch ultra-fast broadband in up to 100 cities
Netflix, Comcast peering deal expected to prompt others
Netflix ISP speed rankings prompt new round of fingerpointing Read more about: The Chernin Group, AT&T
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Executives polling two middle and high school students at a recent summit on over-the-top services were set back a bit by the middle schooler's frank admission: She doesn't watch Netflix (NASDAQ: NFLX) much, if at all. Why? There isn't any content on Netflix that interests her, the student told attendees at the OTT Video Executive Summit in Boston on Wednesday. Disney's content, for example, provided exclusively on Netflix, is geared to younger children, she said, while TV series and movie content is either more for an older audience, or no longer fresh enough to be interesting. "Netflix doesn't have many shows geared toward (my demographic)," she said. Both the middle and high-school students, whose names are omitted due to their age, use Netflix for catch-up viewing of earlier seasons. But both prefer to watch their favorite programs either as they air, to DVR them for viewing a few hours later, or to purchase them through Apple's (NASDAQ: AAPL) iTunes. The biggest goal: to be able to talk about a popular series with their friends at school the next day. That doesn't mean Netflix is irrelevant to the younger crowd. A recent informal survey conducted at Marin Academy in San Rafael, Calif., found that 72 percent of its students who were polled have a Netflix account, and 27 percent of users visit the online video service "several times a week," according to a February article in The Marin Academy Voice. Overall, kids of all ages like OTT services including Google's (NASDAQ: GOOG) YouTube. Further, a recent study by family research firm Smarty Pants found they consider OTT services alongside broadcast channels like Nickelodeon, Cartoon Network and Disney Channel without differentiating between the two. The 2013 "Young Love" study, which surveyed more than 6,700 U.S. kids ages six to 12 and their parents and evaluated more than 250 brands across 20 categories, found that personal interests drive tweens--kids between ages 10 and 12--toward OTT services that feed those interests. "YouTube is especially popular with older kids. As they enter their tween years and develop stronger personal interests, they want to explore those interests and broaden their worlds. YouTube offers the ideal venue," Smarty Pants' Melanie Shreffler wrote in a KidScreen Magazine column detailing the study. "Of equal importance to tweens, who are just beginning to deal with social pressures, it provides the opportunity to discover the next hot video and be the first to tell their friends about it." That corresponds with the middle schooler's statement to summit attendees that she visits YouTube mainly to watch music videos. Further, she said she only spends about 10 minutes a day on YouTube--enough time to watch the newest video and talk to friends about it. That interest in discovering new content is an unexploited niche for Netflix, which only just began creating original series for kids, including "TurboFAST," which premiered in December. "Where streaming services lag--and kidnets have an opportunity to gain some more ground--is that they're not specifically made with kids in mind," Shreffler wrote. "Netflix, Hulu and YouTube all launched as services marketed to adults and rank far lower than traditional kids networks in being 'for kids my age,' which correlates strongly to kids' brand affinity." So, does one middle schooler's frank statement about Netflix bode ill for the service? No, but its executives, and those at competing providers like Amazon (NASDAQ: AMZN) and NBCUniversal that are developing original content for kids, need to take a closer look at the way tweens are really using OTT or run the risk of losing those eyeballs. 
For more:
- The Marin Academy Voice has this article
- iKids has this article Related articles:
Amazon shooting 5 original 4K Ultra HD series
Rumor mill: YouTube developing kids' network
Viacom pitches media buyers spring launch of My Nick Jr. interactive channel
NBCU launches Sprout NOW TV Everywhere app
Kids sports network The Whistle eyes 2014 launch on Xbox 360 Read more about: Netflix, tweens, viewing habits
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With Yahoo, others looking to white-label news content, RNN stands on cusp of an OTT opportunity
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