Hulu Launching ‘Pause Ads’ into Programming

Hulu will soon begin placing on-screen ad images when programming is put on hold.

Dubbed “pause ads,” Hulu, beginning in the second quarter, will insert “non-intrusive” images of Coke and Charmin products on select test screens after a user has paused programming for at least three seconds. The image disappears when viewing commences.

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“Our research found that consumers generally preferred ads that were subtle … and that extensive audio and video [spots] when pausing was considered disruptive,” Jeremy Hefland, VP, head of advertising platforms, wrote in a Jan. 31 blog post.

Paused Hulu programming with Charmin image/ad.

Hulu, which currently runs ads on its $5.99 subscription plan, is looking to increase margins from its 25 million subscribers. The platform co-owned by Disney, Fox, Comcast and WarnerMedia continues to generate hundreds of millions of dollars in equity losses for its corporate partners.

Hefland said the pause ad takes advantage of the “natural behavior” exhibited by viewers streaming TV. He said the ads consists of two elements: a creative image supported by contextually “relevant” messaging along with a background gradient to distinguish the ad from the content scene.

“The research so far has shown a positive response from viewers,” he wrote.

 

 

 

Analyst: Major Studios Could Squeeze Netflix on Original Programming

As Netflix continues its global domination in subscription streaming video, the market leader is facing a looming threat to its vaunted original content pipeline from major studios such as NBC Universal, Warner Bros., Disney and Fox.

With WarnerMedia and Disney launching branded over-the-top video platforms later this year, and Comcast rolling out ad-supported VOD service to its subscribers in 2020, the studios at the same time remain creators of original content for Netflix.

Specifically, the four studios provide about 20% of Netflix’s overall content measured by available hours and nearly 40% of hours viewed on the service, according to Wedbush Securities digital media analyst Michael Pachter.

The analyst, citing a study published by Recode, said that 13 of the 20 most-viewed programs on Netflix were provided by the aforementioned studios, including the top six.

“By the end of 2020, we expect all of this programming to disappear from Netflix, and we think that the company will find replacing the content with originals a daunting task,” Pachter wrote in a Jan. 28 note.

The analyst said Netflix faces replacing existing content from the studios and competing against Amazon Prime Video, Hulu and potentially four competing new streaming services for original fare.

“The balancing act Netflix faces is potentially enormous,” wrote Pachter, a long-time Netflix bear.

He said Netflix continues to juggle licensed originals such as “Ozark” and “House of Cards,” which are owned by Media Rights Capital, and Lionsgate-produced “Orange is the New Black,” with proprietary original fare “Stranger Things,” among others.

Licensed content is subjected to recurring fees. The streaming service can offset the loss of Disney, Fox, Warner and NBC Universal content by licensing equal amounts of content from other sources or by creating its own – a strategy Netflix is pursuing with the hires of former ABC Entertainment President Channing Dungey; Ryan Murphy, producer of “American Horror Story,” Shonda Rhimes, creator of “Grey’s Anatomy” and “Scandal,” and Kenya Barris, creator of “Black-ish.”

Pachter contends the original content will be the subject of a bidding war with Prime Video, Hulu, HBO Now, WarnerMedia and Disney+, among others.

“We think that with lower access to high quality content, Netflix may actually end up spending less than it has historically, although the company must replace existing third party content with its own and may redouble its owned original efforts,” wrote the analyst.

 

Hulu Eyeing 23 Million Subs by Year’s End

Hulu is reportedly expected to top 23 million subscribers by the end of the year, according to comments made Dec. 4 by CEO Randy Freer at the Business Insider’s Ignition confab in New York.

The SVOD service co-owned by Disney, Fox, Comcast and WarnerMedia includes online TV platform Hulu Live with TV as part of its subscriber growth. The tally suggests Hulu added more than 3 million subs since it disclosed reaching 20 million subs at its upfronts content presentation earlier this year.

“I think our numbers will be really impressive,” Freer said, as reported by TechCrunch.com. “But we need to get 30, 40, 50 million homes in a way that we can scale.”

Indeed, even reaching an improbable 50 million subs would keep Hulu seven million shy of Netflix’s Q3 domestic count.

“Netflix has solidified their place for now,” said Freer. “Everybody else is going to fight out over what those four or five other selections are.”

Hulu has achieved one distinction even Amazon Prime Video can’t match: “The Handmaid’s Tale” remains a weekly Top 10 streaming favorite, according to Parrot Analytics.

Launched in 2008, Hulu is the only streaming service that offers both ad-supported ($7.99) and commercial-free ($11.99) subscription streaming options. Hulu with Live TV ($39.99) bowed in May, reaching 1 million subs in September.

The service features libraries of network TV series and movies; in addition to original content such as Emmy and Golden Globe Award-winning drama “The Handmaid’s Tale,” Emmy-nominated series “I Love You, America With Sarah Silverman,” Emmy-nominated series “The Looming Tower,” “Future Man,” “Marvel’s Runaways,” “Castle Rock,” “The First” and Golden Globe-nominated comedy “Casual,” as well as upcoming series “Catch-22,” “Ramy” and “Little Fires Everywhere.”

 

Stankey Discusses Advantages of Leveraging Licensed Content

As Disney and WarnerMedia ready flagship over-the-top video platforms for launch in late 2019, SVOD services such as Netflix are scrambling to minimize their risk to third-party content obligations.

Witness Netflix’s decision to cancel “Daredevil,” which was foreshadowed last month by the SVOD behemoth’s termination of original Disney/Marvel series “Iron Fist,” and “Luke Cage.”

Netflix’s exclusive pay-TV access to Disney theatrical titles ends this year.

While Netflix hinted that more adventures of Daredevil could eventually materialize in other mediums, the service took the high road saying — in a statement — that the three existing seasons would remain on the platform “for years to come,” while the Daredevil character “will live on in future projects for Marvel.”

To John Stankey, CEO of WarnerMedia, which owns Warner Bros., HBO and Turner, the move by Netflix to distance itself from third-party license agreements in favor of proprietary fare underscores ongoing changes in the OTT video landscape.

“A lot of those incumbents [i.e. Netflix] should expect that their libraries are going to get a whole lot thinner,” Stankey said Nov. 29 on AT&T’s analyst day event. “They are not going to be the same size they are today.”

Indeed, WarnerMedia and Disney can enhance the consumer value of their pending SVOD services simply by denying their content brands to Netflix & Co. — in effect depriving competing OTT services streaming access to valuable IP.

Stankey said the challenge for Netflix and other OTT services is to get their subs to pivot away from licensed content (about 70%, according to Stankey) to proprietary original fare. Regardless, Stankey said WarnerMedia wins as both a producer and distributor of original content.

“Maybe it sits in our library and maybe it sits in Disney/Fox,” he said.

The executive contends OTT video platforms will be structured differently in the next couple of years, including incorporating third-party content providers looking to piggyback on AT&T/WarnerMedia’s scale.

“I think structurally that is likely what will happen,” he said. “I believe we can play in that world going forward.”

 

AT&T Looking to Sell Off Hulu Stake

When AT&T acquired Time Warner for $85 billion, the purchase price pushed the telecom’s net debt skyward to about $170 billion by the end of the year.

Corporate debt (debt-to-pre-tax earnings ratio) is a relative thing. Too little and investors worry a company isn’t maximizing revenue potential. Too high and concerns about financing the debt and or worse loom into the picture. Wall Street looks for a company to have a debt ratio between 0.3 and 0.6, according to some analysts.

AT&T will end 2018 with a debt ratio of 2.8.

For CFO John Stephens, who is tasked with decreasing that ratio, the solution involves scrutinizing internal overhead costs, reducing redundancies and liquidating non-core assets — such as WarnerMedia’s 10% stake in Hulu.

WarnerMedia, which includes Warner Bros., HBO and Turner, acquired the Hulu stake in 2016 for $583 million when it was Time Warner. The SVOD and online TV platform with 20 million subscribers is co-owned by Disney, Fox and Comcast and reportedly valued at more than $9 billion.

With WarnerMedia planning to launch proprietary SVOD service in late 2019, co-owning a rival service makes little sense.

Indeed, eliminating corporate headquarters, minority investments in Sky Mexico and Hulu, among other options, could generate AT&T upwards of $8 billion in cash, according to Stephens.

“If we’re successful in that, that would bring us down to that 2.5 [debt ratio] range [by the end of 2019],” Stephens said on AT&T’s Nov. 29 analyst day event. “We’re going to focus on getting that done. With our [$500 billion] balance sheet, we are in a very good position.”

The CFO contends AT&T will have free cash flows approaching $12 billion at the end of the year, which he said will be applied to reducing the debt. The company expects to generate $26 billion in free cash flow in 2019.

AT&T expects to generate $1.5 billion in cost savings (corporate overhead, procurement purchasing, marketing, etc.) and another $1 billion in revenue savings (churn reduction, cross-selling products) by 2021, including $700 million in savings by the end of 2019, $2 billion by the end of 2020.

“People who know our company, know we’re pretty good with cost synergies,” Stephens said. “Sharing assets and capabilities across the business, we can learn from them and WarnerMedia can hopefully learn from us.”

 

 

Fox Networks Group Renews Deal for Content Distribution on AT&T Video Platforms

AT&T and Fox Networks Group have renewed a multi-year deal to continue distribution of Fox programming across AT&T’s video platforms DirecTV, DirecTV Now and AT&T U-verse.

The renewal includes Fox-owned local broadcast stations in 17 cities and the 22 Fox-owned regional sports networks. It also includes FS1, FS2, FX, FXX, FXM, National Geographic Channel, Nat Geo Wild, BabyTV, and Spanish-language services Fox Deportes, Nat Geo Mundo and Fox Life, as well as the Fox Soccer Plus pay-per-view service.

“We are pleased to have closed a multi-year deal with Fox for their entire array of content. Our customers will continue to enjoy their programming live and on-demand on all their devices, both at home and on-the-go,” said Daniel York, chief content officer and senior EVP for AT&T Communications, in a statement. “Fox has worked with us in this deal to deliver more choice for consumers and better value to AT&T customers.”

“We’re pleased to expand our partnership with AT&T through this wide-ranging agreement which ensures that our top-rated entertainment and sports programming will remain broadly available to DirecTV, DirecTV Now and U-Verse customers for the foreseeable future,” said Fox Networks Group president of distribution Mike Biard in a statement.

Fox Networks Group consists of Fox Television Group, which includes Fox Broadcasting Company and 20th Century Fox Television; Fox Sports Media Group; Fox Cable Networks, which includes FX Networks and National Geographic Partners; and Fox Networks Group Europe and Latin America.

Hulu Expands Fox TV Content Deal With Animated Hits

In a deal that further expands its licensing agreement with 20th Century Fox Television Distribution, Hulu has added all 13 seasons of Emmy Award-winning “King of The Hill” exclusively to its service.

In addition, the company has locked in the exclusive post-broadcast streaming rights to Emmy-winning comedies “Bob’s Burgers” and “Family Guy,” as well as “American Dad!,” and all episodes of library series “The Cleveland Show” and Emmy-winning “Futurama.”

Hulu is now the exclusive subscription streaming home to the largest offering of animated programming from 20th Century Fox Television, according to the service, as well as animated shows from other content partners including “South Park,” “Rick and Morty,” “Robot Chicken,” “Adventure Time.”

‘The Predator’ Stalking to Digital Nov. 27, Disc Dec. 18

The Predator will stalk to digital (including Movies Anywhere) Nov. 27 and 4K Ultra HD, Blu-ray and DVD Dec. 18 from Twentieth Century Fox Home Entertainment.

The film made $50.9 million at the box office.

The studio will also release a special-edition “Predator” four-movie collection, which includes Predator, Predator 2, Predators and The Predator on 4K Ultra HD and Blu-ray Dec. 18. It includes four collector cards of the original film poster re-issue with some of the franchises most iconic quotes on the back.

The hunt has evolved in the next chapter of the “Predator” series, from director Shane Black (Iron Man 3). The most lethal hunters in the universe are stronger, smarter and deadlier than ever, and only a ragtag crew of ex-soldiers and an evolutionary biology professor can prevent the end of the human race.

Extras on The Predator releases include deleted scenes, “A Touch of Black,” “Predator Evolution,” “The Takedown Team,” “Predator Catch-Up” and a photo gallery.

Starz Joins Hulu Streaming Platform

Starz, a Lionsgate subsidiary, on Oct. 23 announced that its app is now available on Hulu, including the online TV service “Hulu with Live TV.”

Hulu, which is co-owned by 20th Century Fox, The Walt Disney Co., Comcast and WarnerMedia, said its 20+ million subscribers can now add the Starz app (for $8.99 monthly fee) and gain access to the network’s live Starz and Starz Encore pay-TV channels, in addition to on-demand current and past seasons of original series “Outlander,” “Power,” “Vida,” “Counterpart,” and “American Gods,” among others.

Movies include Sony Pictures Jumanji: Welcome to the Jungle and Spider-Man: Homecoming, among others.

Hulu with Live TV ($39.99) includes live and on-demand programming from more than 50 sports, news, entertainment and kids’ channels, including CNN, Fox News, ESPN, TBS and local ABC, CBS, Fox and NBC channels.

In a previously announced deal, Hulu has been the exclusive subscription streaming home to past seasons of Starz original series “Power.” Since “Power” launched on Hulu last year, subscribers have streamed nearly 50 million hours of the series.

All past episodes of the drama series through season four are currently available on-demand to all Hulu subs, and now with the Starz app, users can watch all episodes of “Power” – including season five – on supported devices.

Starz joins HBO and Cinemax as premium add-on apps available to Hulu subs. Hulu subscription plans include its $7.99 per month “limited commercials” plan; $11.99 per month “no commercials” plan and the Hulu with Live TV plan.

Fox Selling Sky Stake to Comcast — With Disney’s Blessing

Rupert Murdoch is a sly fox. After his 21stCentury Fox media company lost to Comcast in a weekend auction for outstanding control of Sky Plc., the media tycoon has agreed to sell Fox’s 39% stake (worth about $15 billion) in the British satellite TV distributor to Comcast – at the new elevated share price of £17.28 ($22.60).

To do so, Fox had to get Disney’s approval after the latter acquired select Fox assets, including 20thCentury Fox Film and Fox’s stake in Sky, for $71 billion.

After Comcast emerged victorious last weekend in a special auction held by British regulators – an event that saw Comcast agree to pay nearly 70% more for Sky than Fox had original offered, fiscal common sense prevailed over ego.

In a statement, Fox said it wished its colleagues at Sky well going forward. Murdoch helped launch Sky in 1989 through the merger of Sky Television and British Satellite Broadcasting.

“In light of the premium Comcast has agreed to pay for Sky, we and Disney have decided to sell 21CF’s existing 39% holding in Sky to Comcast. We congratulate Comcast on their pending acquisition,” said Fox.“We are proud of the role our company has played in building Sky, and of the outstanding value we have delivered for shareholders of 21CF and Sky, and customers across Europe.”

For Disney, the transaction, coupled with the divestiture of the Fox Sports Regional Networks, significantly reduces the amount of debt it would incur in acquiring Fox assets.

Disney, in a statement, said it would rather focus its “considerable investment” in the branded direct-to-consumer offering launching in late 2019 and the new ESPN+ sports streaming service. It will also seek to increase investment in Hulu’s content offerings and international distribution. Disney and Fox each currently hold 30% stakes in Hulu.

“Along with the net proceeds from the divestiture of the RSNs, the sale of Fox’s Sky holdings will substantially reduce the cost of our overall acquisition and allow us to aggressively invest in building and creating high-quality content for our direct-to-consumer platforms to meet the growing demands of viewers,” said Disney CEO Bob Iger.

The acquisition has received formal approval from shareholders of both companies, and Disney and 21st Century Fox have entered into a consent decree with the U.S. Department of Justice that allows the acquisition to proceed, while requiring the sale of the Fox Sports Regional Networks. The transaction is subject to a number of non-U.S. merger and other regulatory reviews

For Murdoch and Co., selling Sky marks the end of an era.

When Murdoch-led Fox launched Sky nearly three decades ago, it nearly went broke operating four channels produced from a prefab structure in an industrial park on the fringes of west London.

“We bet — and almost lost — the farm on launching a business that many didn’t think was such a good idea,” Fox said. “Today, Sky is Europe’s leading entertainment company, a world-class example of a customer-driven enterprise … and we have created more than 31,000 jobs across the continent.”