Roku CEO Won’t Discuss Netflix Merger Rumors, Says All TV Advertising Is Moving to Streaming

Market speculation about a possible corporate merger involving erstwhile streaming video partners Roku and Netflix may continue to generate media buzz, but Roku CEO Anthony Wood is mum about the topic.

“In terms of Netflix, obviously I can’t comment on rumors,” Wood told CNBC’s Julia Boorstin June 22 from the Cannes Lions film festival in France.

It’s an interesting choice of words considering Wood wouldn’t dispell the scuttlebutt either. The executive was Netflix’s short-lived head of internet TV in the early 2000s as the by-mail DVD movie rental service was readying to launch the subscription streaming video (SVOD) industry.

Instead, Wood launched Roku with seed money from Netflix to manufacture streaming devices — including the “Netflix Player” in 2008 — that enable consumers to connect the television to the internet. Fast-forward to the present and the SVOD market — led by Netflix — is embracing advertising as the standalone subscription video business plateaus.

Roku, through its pioneering ad-supported The Roku Channel is now a major player in the AVOD and free ad-supported streaming TV market with more than 60 million active accounts. The Roku Channel was a top five channel on the Roku platform in the U.S. by reach and engagement through the most-recent fiscal quarter.

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For the first time, TV streaming devices surpassed legacy pay-TV devices (set-top devices and DVR) in weekly reach in the United States, with 65% of adults aged 18-49 streaming TV compared with 63% watching legacy pay-TV, according to Nielsen.

“Our ad business has been growing like gangbusters,” Wood told Boorstin.

Indeed, in Q1 the top 10 broadcast TV advertisers increased spend on Roku nearly 80% year-over-year, while spending 7% less on legacy pay-TV, according to Roku.

“All television is going to be streamed. That means all TV advertising is going to be streamed,” Wood said.

The executive contends the biggest impediment to growth for Roku — and all streamers — is that marketers’ mindsets are still used to spending dollars through legacy pay-TV.

“The economy is causing to marketers to think harder about how they spend their money, how they can be more efficient,” he said.

When asked how Netflix’s pending foray into ad-supported VOD could impact Roku, Wood deflected, saying that the evolution of TV has been driven by advertising.

“Ads are great because they bring down the cost for consumers,” he said. “We’ve been a big partner, we have a great relationship with Netflix for a long time. But we have great relationships with a lot of streaming content companies whether its Disney, YouTube or Hulu.”

Analyst: Netflix Buying Roku is ‘Absurd’

Shares of Roku June 8 jumped about 5% in pre-market trading following speculation the streaming device manufacturer and AVOD platform operator is in possible merger talks with Netflix.

The scuttlebutt followed reports Roku had halted employee stock trading. Roku shares, which are down about 60% year-to-date, appear primed for some type of corporate reaction. Meanwhile, Netflix has its own Wall Street challenges — the stock is down about 66% year-to-date — the result of ongoing fallout following a 200,000 net subscriber loss in the most-recent fiscal period.

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Netflix and Roku have a long history in streaming, with Roku founder/CEO once VP of internet TV at Netflix. Indeed, Netflix in 2007 launched its pioneering streaming service with a short-lived branded “Netflix Player” device manufactured by Roku.

M&A talk involving Netflix acquiring Roku irks longtime industry analyst Richard Greenfield with Lightshed Partners.

Speaking June 8 on CNBC’s “Squawk Box,” Greenfield said the notion made little sense.

“This is one of the most absurd things I’ve ever heard in 27 years following media stocks,” Greenfield said. “Netflix owning hardware and basically prioritizing one hardware, meaning themselves, over the thousands of devices that Netflix runs on seems completely antithetical to everything that [the service] has built over the last 20 years.”

Then again, Roku is much more than a consumer electronics company — generating the bulk of its revenue from advertising on The Roku Channel and branded platform. And Netflix is working on a lower-priced ad-supported SVOD option to consumers.

Regardless, Greenfield says the idea that Netflix would suddenly rely much of its fiscal future on advertising — after more than a decade spent refuting the concept seems illogical.

“To spend $20 billion, let’s just say, to buy Roku to make advertising this huge, huge piece of [Netflix] would seem very, very out of character,” Greenfield said.

Report: Ad-Supported HBO Max to Cost $9.99 Monthly

WarnerMedia’s June debut of an ad-supported version of HBO Max will reportedly cost subscribers $9.99 per month, compared to $14.99 for the current ad-free option that launched last May. HBO and HBO Max ended the most-recent fiscal period with 44.2 million combined subs. The platforms are projected to have from 120 million combined subs by 2025.

CNBC reported the price point, citing sources familiar with the situation.

“Whether a customer chooses to buy the ad-supported product or buy the straight subscription product, it’s accretive in the same ways to our business,” AT&T CEO John Stankey said on the company’s recent fiscal call. The executive said the ad insertions are not reflective of a failed SVOD platform, but rather a way to mine incremental revenue. Max will only add commercial spots to exclusive programming, not HBO shows.

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WarnerMedia had originally considered charging $4.99 for the ad-supported option, but reconsidered, arguing a higher subscription price is a sign “of strength,” according to Stankey.

“It’s always been the plan,” he said.

Rival ad-supported plans from Paramount+ and Peacock cost $4.99. Hulu’s ad-supported plan costs $5.99 monthly.

 

Bob Chapek: Direct-to-Consumer is ‘My Sweet Spot’

New Disney CEO Bob Chapek, who was abruptly named to the position Feb. 25, with former CEO Bob Iger transitioning to the executive chairman role, says he’s well-equipped to run the global media brand.

Speaking with Julia Boorstin on CNBC’s “Fast Money,” Chapek said he plans to take the “strategic pillars” Iger established over the past 15 years and further implement them into the direct-to-consumer market.

At the same time, Chapek, who most recently headed Disney’s Parks & Recreation unit, including currently shuttered (due to the COVID-19 virus) amusement parks Disney Shanghai and Disney Hong Kong, said he would be looking “around the corner” for any “disruption” that might be going on in the marketplace that would “necessitate a fresh look.”

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“But right now, the course that Bob has laid is one that we fully intend to follow and I think will pay dividends for our shareholders for years to come,” Chapek said.

The longtime executive said ongoing concerns about COVID-19 underscore a “function of our consumer demand” for the Disney product. Chapek said Disney would weather the storm and emerge from the challenge as it has other setbacks.

“[The] affinity for the brand and our storytelling will way outlast any short-term blip that we have from Coronavirus,” he said.

When asked about ongoing cord-cutting among pay-TV subscribers and the growth of over-the-top video distribution, Chapek said his background in home entertainment and consumer products would serve well dealing directly with consumers.

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“It’s not ironic that our strategy for the media business now is a direct-to-consumer business, where we have the one-on-one relationship with the customer without having a lot of middlemen in between,” he said. “That’s my sweet spot, and I think that’s something I can leverage now throughout all my experiences, not even Disney but even before Disney, in terms of figuring out how we take the data, the information, the technology and, once again, our storytelling right direct to the consumer so that we can take the great equities that we have and continue to build those for our shareholders.”

ViacomCBS Dealing With OTT Video Largesse

Until this year, Viacom had scant over-the-top video product — Noggin, a $7.99 monthly service targeting young children with Nickelodeon-type fare.

Viacom in March acquired ad-supported VOD service Pluto TV for $340 million. This summer the media giant launched BET Plus — a $9.99 service targeting African-American streamers.

Following the re-merger with CBS Corp., Viacom inherited CBS All Access ($5.99), Showtime OTT ($10.99) and Smithsonian Channel Plus ($4.99) SVOD. In the process, Viacom has myriad OTT distribution while at the same time giving mixed signals about a unified ViacomCBS vision digital leadership going forward.

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Speaking Dec. 9 with CNBC’s David Farber, Bob Bakish, CEO of ViacomCBS, was asked about the fact that Marc DeBevoise, CEO of CBS Interactive, reports to him for the all digital assets. And  to Joe Ianniello, CEO of CBS, for CBS Interactive.

“That doesn’t sound like an efficient way to go about trying to extract synergies and the growth,” Faber asked Bakish.

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The CEO claimed Viacom’s digital properties operated successfully under separate silos before the merger, a reality the merged companies could rejigger going forward.

Bakish agreed that working together on paper is different than in practice. He alluded to Viacom International originally operating independently and now as a multinational unit. Bakish added that when he became CEO in 2016 (replacing Philippe Dauman), Paramount Pictures operated independently, as did the company’s media networks.

“We took the last three years and really aligned that,” Bakish said.

He said ViacomCBS is putting forward an integrated company with one strategy. He said the revised blueprint would include paid and ad-supported content — with the widest access based on paid content.

“Today, in pay, [we’ve] got 10 million subs in SVOD in the U.S.,” Bakish said. “In free, [we’ve] got 20 million [monthly average users] at Pluto. We’ve got almost 200 million digital users. And we reached well over a billion through our broader business.”

He disagreed with the assertion that a high percentage of Viacom’s digital subs are promotional, rather than paying.

“That’s flat out wrong,” said the CEO, while declining to disclose actual digital revenue. Backish said the data would be revealed in 2020.

“You should expect some additional transparency in the streaming space,” he said. Viacom has heretofore just released Pluto viewership.

“You should expect that to broaden,” Bakish said. “We absolutely are going to operate as one ViacomCBS.”

 

 

 

‘Mad Money’ Host Jim Cramer Wants Netflix Removed From ‘FAANG’

In the world of high-profile Wall Street analysts, CNBC’s frenetic “Mad Money” host Jim Cramer has helped define a cottage TV industry of fast-talking  personalities targeting consumer and business investors.

On CNBC’s “Squawk on the Street,” Cramer said Netflix should be removed from a basket of top-performing tech stocks, dubbed “FAANG” (Facebook, Amazon, Apple, Netflix and Google).

Speaking Oct. 3, Cramer said that with Netflix’s stock down 29% in 2019, compared to a 18% rise for Microsoft, the subscription streaming video pioneer’s status should be re-evaluated.

“We gotta get Netflix the hell out of FAANG,” Cramer said. “I tell you that right now. I don’t know how to do it.”

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Cramer contends Microsoft should replace Netflix (and apparently Google too), thus rendering the tech group “FAAM.”

Tough love from an analyst who just five months ago penned an article in high praise of the streamer and co-founder/CEO Reed Hastings.

“Netflix is about something to talk about Monday morning,” he wrote in April. “It’s about not feeling like a stooge when everyone watched Bird Box. You can’t be a stooge! In other words, as ethereal as it sounds, Reed Hastings is right when he says ‘the real metric is can we keep our members happy.'”

Apparently keeping subscribers and investor happy can be mutually exclusive. That’s because investors care not so much about subscriber happiness, but rather subscriber growth, according to Cramer.

And Netflix laid an egg of sorts during the last fiscal period when it failed to meet sub growth projections worldwide — including losing domestic subs for the first time in more than five years.

“I’m not a Netflix fan, here,” Cramer said, alluding to the pending arrival of SVOD competition from Disney, Apple, AT&T and Comcast — the latter parent to NBC Universal’s CNBC network.

“There’s too many competitors,” he said.

Netflix reports third-quarter (ended Sept. 30) financials on Oct. 16.

 

CEO: ViacomCBS Merger Offers ‘Unmatched Scale’

Corporate synergy and scale are two key economic points underscoring the $30 billion re-merger of Viacom with CBS.

Speaking Aug. 14 with CNBC, Robert Bakish, current Viacom CEO and future head of the renamed ViacomCBS, said the combined media company would offer “unmatched scale” with 140,000 television catalog episodes and 3,600 movies, including content from Paramount Pictures and CBS Studios.

Bakish said CBS’ early move toward direct-to-consumer content distribution with CBS All Access and Showtime OTT, and Viacom’s acquisition of ad-supported VOD service Pluto TV well-positioned the rebooted media company in the in the streaming video era .

“[That’s] not something people have talked about a lot [regarding the merger],” he said.  “You unite those two together and you really have a D-to-C ecosystem. Very compelling, both with substantial — millions of users.”

When asked whether ViacomCBS could successfully match Disney, Netflix or WarnerMedia, Bakish said scale could be viewed subjectively.

“Between the studios that we operate, Paramount, CBS Television Studios, Nickelodeon Animation and Viacom International Studios, we have 750 series ordered or in production. There is true content scale here,” he said.

“There’s no question the companies are stronger together than they were independently. And, you know, we’re going to start executing with that.”

The executive defended the companies’ downward revised cost savings from $1 billion to $500 million.

“This is excluding programming, excluding marketing, excluding revenue. So, there’s a very material opportunity. And as we get into it we’ll move forward and begin to realize that [cost saving],” Bakish said.

The initial pushback on the deal from former CEO Les Moonves disappeared following  the executive’s ouster due to #MeToo allegations.

Bakish contends the cultures at Viacom and CBS have a lot in common — with both companies focused the content creation and distribution.

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“An employee of CBS News loves CBS News, just like an employee at MTV loves MTV,” he said. “There’s incredible value in the combination. You look at the strategy we’re going to start executing against. Building a real leadership position in D-to-C through this combination of subscription product and ad-supported product. This ecosystem, tremendous opportunity there. You look at expanding the partnerships and building new partnerships with advertisers, with distributors. Tremendous opportunity there for all of the people that work in that area. You look at being one of the most significant content suppliers in the world. Tremendous opportunity there. So, I think very quickly this culture will come together.”

With Moonves out, former CFO Joe Ianniello has held the acting CEO position. Following closure of the merger, he will become CEO of CBS, reporting to Bakish.

Ianniello reportedly has a clause in his employment contract paying him $70 million severance should he not retain the top executive job.

“I’ve known Joe Ianniello for 20 years,” Bakish said. “I have tremendous respect for what he’s done at CBS. He’s clearly a world class executive. He and I have spoken a lot in the days leading up to yesterday. And including yesterday. And there is a tremendous interest, joint interest, in unlocking the value of these combined companies.”

Bakish said Ianniello would take the leadership position, running the CBS branded assets upon closing.

“We need someone to run those assets,” he said. That’s a big complicated business. He is ideally suited to do it because he has, you know, 20 years of knowledge in that space and a real passion for it. At the same time, he knows that we have to create value from these assets. We are going to have to work across the company. He’s 100% committed to it and I can’t wait to get on with it with him.”

 

Hulu CEO Eyes Ad Growth, Clarity Under Disney Ownership

With Disney agreeing to acquire Comcast’s 33% stake in Hulu, the subscription streaming video service with 28 million subscribers is now under the direction of one company instead of four (Disney, Fox, Comcast, WarnerMedia).

In an interview with CNBC, Hulu CEO Randy Freer said consolidation among the platform’s corporate owners offers increased clarity on the service’s objectives, strategic planning and voice going forward.

Randy Freer

“We’re super excited about the opportunity,” Freer said.

The executive added that Disney’s plan to incorporate Hulu, ESPN+ and Disney+ into a possible SVOD bundle sold to consumers and distributors offers additional opportunities.

“I think it’s another way for Hulu to extend and grow its already fast-growing subscriber base,” Freer said.

With Hulu the only major SVOD service streaming advertising on its basic subscription plan, Freer said marketers are looking for consumer access in over-the-top video ecosystem dominated by ad-free players Netflix and Amazon Prime Video.

“I think the opportunity at Hulu … with huge audiences … long engagement times, a young audience, 20-to- 25 years younger than network television … is a huge for brands to come in and talk to the consumers that they’re looking to reach the most,” he said.

At the same time, Freer cautioned that marketing Hulu as a service with half the ads of broadcast TV is not “okay anymore.”

“We have to find new ways to integrate brands into the ad,” he said.

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Indeed, Hulu has launched a number of new ad formats, including “pause ads,” which displays a static ad when a viewer pauses programming; and “Friends with Benefits” featuring “Easter eggs” hidden on the site that offer special deals from brand partners when clicked.

“There [are] all kinds of ways to make the customer experience on Hulu better than any of our competitors,” Freer said. “And we can’t forget that the most important thing to consumers is choice. What’s more important is giving them the option of an ad service and the option of an ad-free service so they can determine what’s the best experience to view things.”

Report: Apple Video Service Bowing Without Netflix, HBO, Hulu

When it comes to streaming video, Apple has largely been a spectator. In fact, the late Steve Jobs infamously considered Apple TV a “hobby.”

But the company synonymous with consumer electronics innovation is spearheading a major push into OTT video this year, including spending more than $1 billion on original content.

With a brand as powerful as Disney’s, Apple apparently believes it is worth a lot in the OTT ecosystem.

CEO Tim Cook said as much on the recent fiscal call.

“We see huge changes in customer behavior taking place now and we think that it will accelerate as the year goes by with the breakdown of the cable bundle,” he said. “I think that it’ll likely take place at a much faster pace this year.”

Indeed, the Menlo Park, Calif.-based company is upping the ante for third-parties along for the streaming ride on its platform — reportedly set to launch by May without heavyweights Netflix, Hulu and HBO Now.

While both brands are available on the Apple TV streaming media device, CNBC reports the new platform will operate similarly to Amazon Channels as facilitator to original and third-party OTT services — the latter for a cut of the subscriber action.

Apple, which gets 15% commission per third-party subscriber generated through the App store, now wants 30% per sub on the new platform, according to CNBC. The Wall Street Journal previously reported Apple is looking at a 50% split for its pending news streaming service.

Apparently, Netflix, Hulu and HBO aren’t biting, while Lionsgate-owned Starz, Showtime OTT and Viacom are. HBO, Starz and Showtime are available on Amazon Channels.

 

CNBC: Most Americans Stream Video, Use Netflix

The United States is a nation that streams video over the Internet, with more than 50% of streamers using Netflix to view entertainment, according to new data from CNBC’s “All-America Economic Survey.”

In an online poll of 801 adults, CNBC found 57% of respondents use an over-the-top video service, spearheaded by Netflix, Amazon Prime Video (33%), Hulu (14%) and alternative services (2%).

Netflix ended its most-recent fiscal period with 117 million subscribers worldwide, including almost 55 million in the U.S.

A majority of respondents (36%) subscribe to both pay-TV and SVOD, followed by 30% who only use pay-TV, and 20% who are cord-cutters (stream only). Another 12% claimed to use neither, while 2% weren’t sure.

As expected, SVOD use is most-popular among younger demo, with 48% of respondents age 18-34 streaming more than watching linear TV. Among older demo age 50-64, almost 50% said they watch pay-TV more than stream video.