Roku Selling 1 Million Shares for $80+ Million

Streaming media pioneer Roku May 16 announced it is offering 1 million shares of common stock through Morgan Stanley.

The offering is expected to generate more than $80 million in funds the Los Gatos, Calif.-based company said it would use for working capital and general corporate purposes.

Founder/CEO Anthony Wood May 15 appeared on CNBC’s “Mad Money” with Jim Cramer to explaining how Roku — since launching with Netflix in 2008 — has brought streaming video in the living room through a user-friendly interface and low-cost hardware.

Roku CEO Anthony Wood

“Our goal is to build scale of our active accounts by licensing our technology to third-party TV manufacturers and advertising,” Wood said. “We help a lot of new streaming services build audiences for their platforms.”

Indeed, Roku has almost 30 million registered subscribers accessing proprietary and third-party content, including Netflix, Hulu, Amazon Prime Video and pending Disney+ and Apple TV+ services.

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“Streaming video is very popular right now,” Wood said. “We had almost 3 million people cut the [pay-TV ] cord last year, more than 1 million in the quarter alone. So there’s a lot of momentum right now.”

Wood was asked if big media companies such as Comcast (parent of “Mad Money” creator NBC Universal), which are launching their own over-the-top video platforms, have become “frenemies” with Roku.

“Media companies are partnering with us, not destroying us,” Wood said. “Back when we launched Roku, it was just Netflix and most media companies were trying to avoid streaming. Now they realize it’s the future and they’re heavily invested.”

He said Comcast advertises on the platform and the Xfinity TV app is on the platform, in addition to NBC content.

“Content is what drives streaming,” Wood said. “We have built a purposeful operating system for the TV. It’s designed for the business model TV.”

Report: Pay-TV Providers Lost 1.3 Million Subs in Q1

It was a bad quarter for the pay-TV business.

New data from Leichtman Research Group found that the largest pay-TV providers in the U.S. — representing about 95% of the market — lost more than 1.3 million video subscribers in the first quarter (ended March 31) — up 426% from a net loss of 305,000 subs in the previous-year period.

Pay-TV providers now account for about 87.8 million subscribers — with the top six cable companies having 46.7 million video subscribers, satellite TV services (28.3 million subs), telephone companies (8.9 million), and the top publicly reporting online TV with 3.9 million subs.

Satellite TV services such as Dish Network and DirecTV drove pay-TV losses with about 810,000 subs dropping service compared to a loss of about 375,000 subs in the previous-year period.

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Cable operators lost about 335,000 video subs — compared to a loss of about 285,000 subs last year. Telephone providers lost 105,000 video subs, up from a loss of 50,000 subs last year.  Online TV services lost 75,000 subs, compared to a gain of 405,000 subs last year.

Notably, AT&T had a loss of about 625,000 subs across its three pay-TV services (DirecTV, AT&T U-verse, and DirecTV Now) compared to a gain of 125,000 subscribers in 2018.

“The leading pay-TV provider in the U.S., AT&T, accounted for 47% of the net losses in the quarter,” analyst Bruce Leichtman said in a statement. “[The quarter] was the third consecutive [period] of record pay-TV net losses.  This accelerated downturn in the pay-TV market coincided with the decisions by AT&T and other providers to increasingly focus on long-term profitability when acquiring and retaining subscribers.”

 

Pay-TV Providers Subscribers at end of 1Q 2019 Net Adds in 1Q 2019
Cable Companies
Comcast 21,866,000 (120,000)
Charter 16,461,000 (145,000)
Cox 3,980,000 (35,000)
Altice 3,297,300 (10,200)
Mediacom 764,000 (12,000)
Cable ONE 320,611 (11,500)
Total Top Cable 46,688,911 (333,700)
Satellite Services (DBS)
DirecTV 18,679,000 (543,000)
Dish Network 9,639,000 (266,000)
Total DBS 28,318,000 (809,000)
Phone Companies
Verizon FiOS 4,398,000 (53,000)
AT&T U-verse 3,704,000 0
Frontier 784,000 (54,000)
Total Top Phone 8,886,000 (107,000)
Online TV
Sling TV 2,424,000 7,000
DirecTV Now 1,508,000 (83,000)
Total Top Online TV 3,932,000 (76,000)
Total Top Providers 87,824,911 (1,325,700)

 

 

Bob Iger: Disney Prepared to ‘Pivot’ in New Direction with Hulu Ownership

Disney’s acquisition of Comcast’s 33% stake in Hulu for total control of the SVOD platform is part of the Mickey Mouse company’s move toward engaging with consumers directly, CEO Bob Iger told an investor group.

The transaction also enables Disney to roll out Hulu and Disney+ internationally unfettered by possible conflicts with Comcast’s ownership of Sky and streaming service Now TV.

Speaking May 14 at the 6th Annual MoffettNathanson Media & Communications Summit in New York, Iger said full control of Hulu (and Hulu with Live TV) coupled with ESPN+ and Disney+ streaming service (launching Nov. 11) would enable the company to target consumers separately through sports, TV content and movies, or collectively in a digital bundle.

“Managing your customers seamlessly across platforms, I think, has real value,” Iger said. “We have the ability to leverage the content engines in the company [Fox, FX, ABC, Disney, etc.] in a significant way here.”

For example, the executive envisions content creators such as FX and ABC producing programming for streaming on top of their pay-TV and broadcast channels.

“There’s a lot to this [internal synergies],” he said.

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Iger said his focus on direct-to-consumer distribution occurred on a “fateful” day in August 2015 when he claimed to be “rather candid” on an earnings call about the state of the pay-TV ecosystem, and ESPN in particular.

“We were seeing the disruptive effect of technology on traditional businesses,” Iger said, adding that none of the Disney business units (i.e. movies and TV shows) at the time — outside of the Disney Store and theme parks — interacted with the consumer directly.

“We decided we should be in the direct-to-consumer business,” he said, adding that theater operators, pay-TV operators, big box stores and ecommerce platforms have “known and owned” the Disney customer.

“We didn’t and we thought it was a big hole in terms of the company’s value proposition,” Iger said.

That realization prompted Disney to make an initial investment in BAMTech, which later (2017) morphed into complete ownership of the streaming tech company powering HBO Now, MLB.tv and NHL.tv, among other OTT platforms.

“Knowing essentially who [Disney’s consumers] are, we think we can create more value for the company and for them,” Iger said.

Disney Acquiring Full Stake in Hulu

As expected, Disney is acquiring Comcast’s stake in Hulu and Hulu with Live TV, a transaction that becomes effective in five years. As part of the deal, Disney assumes full voting control of Hulu immediately.

Comcast has the option to sell its 33% stake in Hulu for $27.5 billion or what the SVOD platform is appraised at in 2024, which ever is greater in value.

On last week’s fiscal call, Disney CEO Bob Iger indicated the media giant was in discussions with Comcast about acquiring the cabler’s Hulu stake.

Disney previously acquired Fox’s Hulu stake after purchasing 20th Century Fox Film Corp. Hulu separately acquired WarnerMedia’s 10% stake.

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Regardless, Disney agreed Comcast’s ownership interest in Hulu would never be less than 21% over the next five years, and that Comcast is guaranteed to receive at least $5.8 billion under the agreement.

Comcast also agreed to extend the Hulu license of NBC Universal content and the Hulu Live carriage agreement for NBC channels until late 2024 and to distribute Hulu on its Xfinity X1 platform.

NBC Universal can terminate most of its content license agreements with Hulu in three years’ time, and in one year’s time NBC will have the right to exhibit on its own OTT service certain content that it currently licenses exclusively to Hulu in return for reducing the license fee payable by Hulu.

Roku CEO: We Are the No. 1 Smart TV Operating System in the U.S.

Roku said 33% of all Internet-connected “smart” televisions sold domestically in the first quarter (ended March 31) featured its branded operating system. That’s up from 25% of all TVs sold in 2018.

“In less than five years, the Roku TV has gone from a disruptive idea to the market leader,” founder/CEO Anthony Wood said on the fiscal call. “We have taken the leads from Samsung and are now the number one smart TV OS in the country.”

Anthony Wood

Wood attributed Roku’s transition from streaming media device manufacturer to ad-supported VOD distributor to ongoing consumer moves away from linear TV toward over-the-top video — and the CE industry’s sluggish efforts to develop “homegrown” software OS platforms in televisions.

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“We really think in almost all cases those [OS] solutions are probably uncompetitive and that we will just continue to see gains and share of licensed OS [platforms],” Wood said. “So there is a lot of room to grow. It’s a big opportunity.”

Meanwhile, Roku continues to drive an expanding AVOD market through its branded Roku channel. The AVOD market gained momentum following Viacom’s acquisition of Pluto TV, Comcast’s planned launch of AVOD distribution, Shout! Factory’s Shout TV, Sony Crackle and San Francisco-based Tubi, among others.

“We are excited about the increased investment and focus by major media companies on bringing free content over-the-top,” said Scott Rosenberg, GM, platform business. “When they do this, they ultimately accelerate the consumer move into OTT and expand the economic pie for all of us. We share in their success.”

Indeed, Roku said user accounts increased 40% to 29.1 million from 20.8 million last year. Consumer streaming hours increased 74% to 8.9 billion hours compared to 5.1 billion hours in the previous-year period.

“The most exciting thing about the Viacom/Pluto tie-up is the fact that Viacom is taking content that was previously only available through pay-TV subscriptions and making it available free through AVOD services,” he said. “That not only will that drive viewing on the platform, I think it will also help accelerate the shift of ad dollars over to streaming.”

Disney CEO Bob Iger Ups Possibility of Acquiring Comcast’s Hulu Stake

Disney CEO Bob Iger May 8 confirmed the existence of discussions with Comcast about the possible acquisition of the cabler’s 33% stake in Hulu and Hulu with Live TV online platform.

Disney owns 66% of Hulu following its $71.3 billion acquisition of select 21st Century Fox assets and WarnerMedia selling its 10% ownership stake.

Speaking on the fiscal call, Iger didn’t disclose additional details except to say Disney remained mindful of its fiduciary duty to keep Comcast in the loop on Hulu activities, including global expansion and content licensing.

Disney CEO Bob Iger

“There has been dialog with Comcast about them possibly divesting their [Hulu] stake, and you can expect that if that were to occur, there would probably be some ongoing relationship as a result of [shared] programming,” Iger said, adding that any expansion of the service abroad would have to be done with Comcast’s cooperation.

“We’re bullish about Hulu for a number of reasons, but mostly because we see it as the best consumer television proposition out there,” he said.

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While Disney invests heavily in the ramp-up of subscription streaming video platform Disney+, it remains proactive about Hulu – despite the service’s ongoing fiscal drain.

Indeed, Disney “Direct-to-Consumer & International” business segment, which includes Hulu, Disney+ and ESPN+, saw revenue for the quarter increase 15% to $955 million and segment operating loss increase from $188 million to $393 million.

The increase in operating loss was due to ongoing investment in ESPN+, which was launched in April 2018, costs associated with Disney+, a loss from the consolidation of Hulu and higher losses from streaming technology services (formerly BAMTech), partially offset by an increase at International Channels.

As a result, upon the closing of the Fox transaction, Disney recorded a one-time gain of $4.9 billion as a result of remeasuring its initial 30% interest in Hulu to fair value.

 

 

 

Hulu Touts 28 Million Subscribers, 58 Million Users

Hulu May 1 disclosed it has 28 million subscribers, including 26.8 million paid and 1.3 million promotional accounts. The service claims 58 million “subscribers” when adding in password sharing. Hulu ended 2018 with 25 million subs.

Netflix ended its most-recent fiscal period with 60.2 million paid subs in the United States, excluding 1.56 million free trials.

The SVOD service co-owned by Disney and Comcast revealed the data during its Hulu ‘19 Presentation at The Hulu Theater at Madison Square Garden, N.Y.

“In today’s direct-to-consumer world, viewers are demanding better when it comes to TV — from the user experience to their content choices to the advertising,” CEO Randy Freer said in a statement. “Hulu’s continued growth, as well as the shows and initiatives announced today, reflect our deep investment in product, programming, brand, customer experience and business strategy to ensure that with Hulu, consumers can connect with the stories they love, at the right time and price, on any device.”

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Hulu’s strong uptick in subscribers comes following years of minimal sub gains as Netflix and Amazon Prime Video saw their sub bases grow exponentially.

With Disney assuming majority control of Hulu following its $71.3 billion acquisition of 2oth Century Fox Film Corp., the company is staking much of its over-the-top video future on Hulu and pending SVOD service Disney+.

Separately, Hulu said it has expanded its Marvel partnership for two new live-action series, with “Marvel’s Ghost Rider” and “Marvel’s Helstrom” slated to debut on Hulu in 2020.

The series come after Netflix ended its run of original Marvel TV series.

Hulu is also partnering with Vox Media Studios, David Chang’s Majordomo Media, and Chrissy Teigen’s Suit & Thai Productions to develop and produce a slate of food-centric programming.

Nicole Kidman and Emmy-winning producer Bruna Papandrea will adapt the latest book by New York Times bestselling author Liane Moriarty, Nine Perfect Strangers, for Hulu via their respective production companies.

Emmy-winning producer David E. Kelley and John Henry Butterworth will co-showrun and co-write the series.

Cinedigm’s CONtv, Docurama Available on Comcast’s Xfinity Service

Cinedigm April 26 announced that its subscription video-on-demand services CONtv and Docurama are now available on Comcast’s cloud-based Xfinity X1 platform.

X1 subs can stream CONtv’s roster of classic cult films and forgotten series, and Docurama’s library of award-winning documentaries directly on their televisions. The two Cinedigm properties follow faith-based network The Dove Channel, which launched on X1 last year.

CONtv and Docurama can be added to X1 customers’ service for $4.99 and $2.99 per month respectively, and Internet-only customers can also subscribe via Xfinity Flex.

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This month, X1 customers can enjoy CONtv’s newest additions such as childhood classics “Where on Earth is Carmen San Diego” and “Angela Anaconda,” as well as the art tutorial “The Joy of Painting” with Bob Ross, the sword-and-sorcery Arthur & Merlin, and Selena Gomez in the 2014 rock n’ roll comedy Behaving Badly.

Curated by the industry’s top experts and critics, Docurama delivers hundreds of hours of acclaimed documentaries suited to viewers of all tastes—boasting a content roster covering everything from personal profiles, sports, and music, to hard-hitting political exposés and insightful interviews.

“These launches further our commitment to redefining the traditional viewing experience and provide even more viewers across the country with the same programming that our networks are known for — appealing to viewers of all tastes, whether they’re sci-fi enthusiasts or looking for something a little more down-to-earth,” Erick Opeka, president of Cinedigm Digital Networks, said in a statement.

Comcast in Talks with Disney to Sell Hulu Stake

Comcast reportedly is in talks with Disney to sell its 30% stake in Hulu, which includes online television platform Hulu with Live TV, according to CNBC, which cited internal sources.

CNBC is owned by Comcast business unit NBC Universal.

Disney currently owns 60% of the 12-year-old streaming service with 25 million subscribers after it acquired 20th Century Fox. AT&T’s WarnerMedia unit just sold its 10% stake back to Hulu for $1.43 billion.

The discussions, which CNBC said are in the preliminary stage, were revealed hours after Comcast chairman/CEO Brian Roberts told investors the cable giant enjoyed owning a large stake of a Disney asset.

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“On Hulu, the relationship with NBC, it’s very much in everybody’s interest to maintain,” Roberts said on the all. “And we have no new news today on it, other than it’s really valuable. And we’re really glad we own a large piece of it.”

At the same time, with Disney firmly in control of Hulu and Comcast heretofore reluctant to move too far away from the pay-TV business model, selling its stake in an over-the-top business could help Comcast alleviate more than $100 billion in corporate debt following the $39 billion Sky acquisition.

Comcast reportedly could get $4.5 billion for its stake in Hulu, which lost $1.5 billion in 2018. Disney doesn’t expect Hulu to become profitable until 2024 — and only after possible international expansion.

At the same time, NBC Universal CEO Steve Burke remains skeptical of OTT business model, including Netflix.

“To be worth $150 billion, someday you’ve got to make at least $10 billion in EBITDA,” Burke told CNBC last year. “There’s at least a chance Netflix never makes that.”

Comcast, which only recently incorporated direct access to Netflix for its Xfinity pay-TV subscribers, plans to launch an OTT service for Xfinity in 2020.

Comcast Sheds 107,000 Q1 Video Subs; Sky Adds 112K

Subscriber losses to linear pay-TV in the United States keep adding up.

Comcast April 25 said it lost 107,000 residential video subscribers in the first quarter, ended March 31. That compared to a loss of 93,000 video subs in the previous-year period.

Comcast Cable ended the period with 20.8 million video subs, down 358,000 subs from the previous-year period.

The cable operator also lost 14,000 business video subs to end the period with about 1.01 million compared to 1.05 million last year.

Offsetting in part video sub declines, Comcast added 352,000 high-speed Internet customers, up 1,000 from last year.

The company ended the period with 25.4 million broadband subs compared to 24.2 million last year.

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Comcast also added 23,000 broadband business customers to top 2.1 million customers – up from 2 million in the previous-year period.

“Comcast Cable had the best quarterly [pre-tax] growth in over a decade,” Comcast chairman Brian Roberts said in a statement.

Separately, new business unit Sky upped its total subscriber count by 112,000 compared to a gain of 38,000 subs in the previous-year period.

The London-based satellite operator with business units in Germany and Italy ended the period with 23.7 million subs – up 809,000 subs from 22.9 million customers last year.

Sky generated $3.8 billion in direct-to-consumer revenue, which was down from $4.1 billion last year. DTC revenue also includes transactions such as packaged media, over-the-top video daily, weekly and monthly passes, pay-per-view and “buy-to-keep” content.

The Sky Store includes a DVD with every digital movie/TV show purchase.