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.”

U.S. Supreme Court to Hear Byron Allen’s $20 Billion Racial Discrimination Lawsuit Against Comcast

The U.S. Supreme Court has agreed to hear a $20 billion racial discrimination lawsuit filed by Byron Allen, CEO of Entertainment Studio and owner of The Weather Channel, against Comcast Cable.

Allen also co-owns with Sinclair Broadcast Group 21 regional sports networks acquired from Disney following its purchase of 20th Century Fox.

The suit, filed in 2015 by Allen and the National Association of African American Owned Media, alleged Comcast worked to keep black-owned media networks off its platform.

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The suit was dismissed in federal court and then overturned last November by the Ninth Court of Appeals in San Francisco.

Comcast, which appealed the ruling to the Supreme Court, denies it has engaged in a discriminatory manner, saying it carries more than 100 networks targeting diverse audiences.

“We believe the Ninth Circuit Court of Appeals decision was incorrectly decided,” Comcast said in a statement. “At this stage, the case is about a technical point of law that was decided in a novel way by the Ninth Circuit. We hope the Supreme Court will reverse the Ninth Circuit’s unusual interpretation of the law and bring this case to an end.”

Allen said Comcast upped its content diversity only after his litigation.

“This case is not about African American-themed programming, but is about African American ownership of networks,” said Allen. “Unfortunately, the networks Comcast refers to as ‘African American-owned’ are not wholly-owned by African Americans and did not get any carriage until I stood up and spoke out about this discrimination and economic exclusion.”

TiVo ‘Wins’ Another Round in Comcast Patent Dispute

TiVo June 4 received a favorable ruling by Administrative Law Judge MaryJoan McNamara of the International Trade Commission (ITC) that select aspects of Comcast’s cloud-based X1 video platform infringe Rovi’s patents.

Rovi, which acquired DVR pioneer TiVo in 2016 for $1.1 billion, operates under the TiVo brand name.

TiVo has a worldwide portfolio of over 5,500 patents. Patents involve advertising, analytics, DVR, guide, search and record, interactive TV and apps, AR/VR, multi-screen, parental controls, VOD/OTT, social media, sports, personalization and voice.

This was the second positive ruling for TiVo. In November 2017, the ITC issued a final ruling that Comcast had infringed two Rovi patents around ‘remote record’ functionality.

Comcast subsequently removed this feature from their products, according to TiVo.

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Then on May 23, the ITC launched a third investigation into Comcast for infringing six Rovi patents including: X1 Sports App, multi-room DVR features, and set-top box integrations of apps like Netflix.

That query has also been assigned to McNamara.

“We are thrilled by yet another legal victory,” Arvin Patel, EVP and chief intellectual property officer at Rovi, said in a statement. “We hope that today’s decision will encourage Comcast to pay the necessary licensing fees so their customers can once again access advanced cable features.”

That may be wishful thinking.

McNamara’s ruling is just one required step before the ITC can mandate Comcast make additional changes or pay license fees to TiVo – which the latter would prefer.

The cable behemoth contends TiVo’s technology is outdated and has instituted proprietary technology in the X1 platform.

In a statement, Comcast viewed McNamara’s decision a victory since the judge found “no violation” regarding two of the three other patents involved in the complaint.

“We look forward to the full commission’s review of the one remaining patent later this year, but we are confident, regardless, this ruling will not disrupt our service to our customers,” Comcast said. “We will continue to resist Rovi’s efforts to force Comcast and our customers to make unreasonable payments for aging and obsolete patents.”

 

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. 12) 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.