Comcast Eyes Leasing X1 Software to TV Manufacturers

Comcast is reportedly considering licensing its X1 set-top box software to third-party consumer electronics manufacturers of smart televisions. Such a move would put Comcast in competition with Roku, Google and Amazon, among other tech companies affording TV manufacturers with Internet-connected consoles.

First reported by Protocol.com, citing sources familiar with the situation, Comcast engaged in initial discussions with TV manufacturers in January at the pre-COVID-19 CES confab in Las Vegas. The cable operator, which is slowly coming to grips with a changing pay-TV market — underscored by the departure of more than 815,000 subscribers through June 30 — currently licenses X1 technology for third-party set-tops to Cox Communications and soon Charter (Spectrum TV Plus).

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Roku cut its teeth licensing its operating system through set-top devices manufactured for the former 21st Century Fox’s NOW TV. Comcast now owns NOW TV through its acquisition of Sky from Fox. Samsung, one of the world’s largest TV manufacturers, has begun licensing its Tizen OS smart TV technology to third parties.

Comcast’s move into software licensing could be accelerating after attempts to sell NBCUniversal’s Peacock streaming service through the Roku platform fell through. Similarly to WarnerMedia’s HBO Max, Peacock is also not available on Amazon Fire TV.

Launched in 2012 as Comcast’s antidote to Netflix, Amazon Prime Video and Hulu, cloud-based X1 platform now represents about 60% of the cabler’s pay-TV subscriber base. Since then X1 offers subs access to Netflix and YouTube apps. Comcast also launched broadband-only Xfinity Flex online TV platform.

Netflix, Roku Close Near Record Highs on Wall Street

Wall Street continues its love affair with over-the-top video, sending shares of Netflix and Roku near record highs at market close on Aug. 26. Netflix ended trading at $547.53 per share, which was less than 0.003% off the record close of $548.73 set last month.

Roku closed at $164.28, which was just 3.3% off the streaming media device manufacturer’s all-time high of $169. 86.

Both stocks, which collaboratively created the SVOD market in 2008, slipped in early trading the next day, Aug. 27. As of 9:15 a.m. PT, Netflix was back down to $529.70, while Roku was at $161.

The gains came after both stocks received kudos this week from Wall Street firms, including Citigroup Research and Piper Sanders — the latter suggesting Netflix bested all streaming video services among survey respondents/subscribers once the COVID-19 crisis is over. In addition, individual analysts on Seeking Alpha praised the companies for their resilience during the COVID-19 pandemic.

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“Roku will be able to translate solid operational improvements into accelerating revenue growth and probably improving profit margins too,” Andres Cardenal wrote on Aug. 14 in a note underlying why he thinks the stock is undervalued.

Separately,  Vishesh Raisinghani considers Roku the “ultimate winner” of the streaming wars driven by surging user base and average-revenue-per-user (ARPU) doubling within the next few years.

“[Roku] isn’t perceived as a threat or a competitor by any of the content creators … [and is] “small enough to minimally annoy device manufacturers such as Amazon or Google,” Raisinghani wrote.

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Meanwhile, Beulah Meriam K, writing on Seeking Alpha, said Netflix’s ongoing content gains trump ARPU and sub growth. The analyst contends the promotion of Ted Sarandos to co-CEO underscored the company’s faith in original content separating itself from the competition.

“The first sign that ‘content is, indeed, king’ is the fact that Sarandos has been [promoted],” Meriam K wrote on Aug. 18. “Few [competitors] focus on the content side of things; and, at the end of the day, isn’t that the real growth engine? It’s fine to look at the effects once in a while but, without getting to the underlying cause, it’s merely mathematical probability and error-prone projections.”

Roku Firing on All Cylinders During Pandemic

With the coronavirus pandemic throwing conventional entertainment consumption on its ear, streaming video device pioneer Roku has emerged a star on Wall Street as increasing numbers of consumers migrate to over-the-top video.

Roku, together with Netflix more than 12 years ago, helped create the subscription streaming VOD market. It now markets a line of Chinese-made smart televisions, in addition to a branded operating system for third-party consumer electronics. The San Jose, Calif.-based company operates an ad-supported VOD platform, The Roku Channel, and boasts more than 40 million platform subscribers.

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In its most-recent fiscal period, Roku saw revenue surge 41% to $43 million, with streaming hours skyrocketing 65% to 14.6 billion. Average revenue per subscribers rose 18% to $24.92 — underscoring the fact a lot of people use Roku to access third-party streaming services such as Netflix, Disney+, Amazon Prime Video and Hulu.

Last Friday, Roku joined Apple and Google in distributing the Sept. 4 premium VOD (dubbed “Premier Access” by Disney) debut of the much-delayed live-action film adaptation of Mulan.

Citigroup Research analyst Jason Bazinet, in an Aug. 26 note, believes Roku will increase its platform sub base to 125 million subs by 2022, with revenue per active account growing from $23 in 2019 to $32  in the next two years.

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“In the U.S., we think there are just two firms: Netflix and Roku,” Bazinet wrote. “Their business models couldn’t be more different. But, the fate of the equity we suspect is similar. Both turn on sub growth and rising value per sub.”

Indeed, with increased numbers of consumers housebound due to the pandemic, the stay-at-home market has proven a boon for Roku with platform and player revenue up 46% and 35%, respectively, since last year.

But Roku is hedging much of its future on AVOD, contending that the traditional linear TV business model will migrate to connected televisions it either manufactures and/or empowers.

According to Magna Global, U.S. TV ad spending is expected to decline 24% and domestic digital ad spending is projected to drop 5%. Roku claims its monetized video ad impressions grew about 50% in the most-recent fiscal quarter — with first-time ad buyers up 40% year-on-year. The retention rate among advertisers spending $1 million or more in the first half of 2019 was 92%.

“Our performance advertising business, a newer category catering to direct response advertisers, grew 346% year-over-year, aided in part by marketers re-evaluating their social media spending,” CEO Anthony Wood and CFO Steve Louden wrote in the shareholder letter.

In June, Roku launched “OneView Ad Platform,” a proprietary shopper data partnership with supermarket giant Kroger that targets and measures advertising using retail purchase data.

“When we look at the major tech players, there doesn’t seem to be dominant IPTV strategy,” Bazinet wrote. “Alphabet [parent of Google/YouTube) and Roku cover the entire waterfront: they sell IPTV hardware, push their TV OS and hope to monetize IP video with their app that sits inside the OS.

“Other players such as Amazon, Apple and Netflix are more focused on a narrower slice of IPTV opportunities.”

 

Disney Offering ‘Mulan’ Access via Roku, Apple, Google Play

The Walt Disney Co. is a longtime champion of preserving the traditional theatrical window, eschewing industry efforts to push premium VOD in the home for new release movies.

As a result, the company’s decision to offer the live-action remake Mulan directly to consumers on Sept. 4 for $29.99 is a one-time bet requiring maximum distribution.

To that end, Disney will sell “premium access” to Mulan to Disney+ subscribers via Google Play, Apple and Roku. The move is significant considering that when CEO Bob Chapek first announced direct-to-consumer access to Mulan on the the company’s fiscal call, it was through Disney+ exclusively. Now Disney will share Mulan revenue with Apple, Roku and Google.

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The move suggests Disney might be having difficulty convincing Disney+ subs to directly purchase the film on its app.

“Starting Sept. 4, with Premier Access, you can watch Mulan before it’s available to all Disney+ subscribers,” Disney said in its FAQ section. “Disney+ will offer Premier Access to Mulan for $29.99 on DisneyPlus.com and select platforms, including Apple, Google and Roku. Once you have Premier Access to Mulan, you can watch as many times as you want on any platform where Disney+ is available. Your access to Mulan will continue as long as you are an active Disney+ subscriber.”

The movie thus far is not available through Amazon Fire TV, Sony PlayStation and Microsoft Xbox, despite the platforms affording access to the Disney+ app.

Cinedigm’s Comedy Dynamics Streaming Service Available on Roku

Cinedigm’s OTT video partnership with Comedy Dynamics has gone where HBO Max hasn’t: Roku.

Comedy Dynamics Aug. 17 officially launched its AVOD app on Roku, showcasing a library of comedy content. The app is free to Roku users and features a substantial supply of stand-up comedy specials curated by the Comedy Dynamics team. The app is powered by Matchpoint Blueprint, a service provided by Cinedigm.

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“We have a saying here that ‘We Are Where You Are,'” Brian Volk-Weiss, CEO of Comedy Dynamics, said in a statement. “I believe this partnership with Roku is a huge step forward to fulfilling that commitment.”

Founded in 2008, Comedy Dynamics is one of the largest independent producer and distributor of stand-up comedy content in the U.S. and is home to the largest indie comedy audio catalog, including multiple Grammy Award nominated specials. 

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Programming includes stand-up specials from comedians such as Jim Gaffigan, Tom Segura, Iliza Shlesinger, Whitney Cummings, David Cross, Gary Gulman, Maria Bamford, Mike Birbiglia, Bill Hicks, Cameron Esposito, D.L. Hughley and Janeane Garofalo, among others. 

When WarnerMedia launched HBO Max, it failed to secure distribution on Roku and Amazon Fire TV due largely to money and data issues. NBCUniversal’s Peacock service is also not available on Roku — the largest standalone subscription media device market holder.

Roku Saw Record Q2 Digital Movie, TV VOD Transactions; CFO Steven Louden to Continue

With more and more households streaming video, over-the-top device/platform pioneer Roku is reaping the benefit, helping consumers adopt Internet-delivered content, including movies and TV shows.

San Jose, Calif.-based Roku Aug. 5 announced it was the No. 1 connected device based on hours streamed for Disney+ in the week following the movie release of Hamilton, according to Comscore. Digital movie and TV rentals/purchases hit an all-time high in the second quarter, ended June 30, as direct-to-home feature movies Scoob! and Trolls World Tour helped more than double year-over-year subscriptions through “Roku Pay,” the company’s integrated billing platform.

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Longtime CFO Steve Louden, who earlier announced he was leaving to relocate in Seattle, Wash., is staying in his position and will telecommute.

Steve Louden

“Steve has proved that he is more than capable of performing the CFO role while residing in Seattle,” Woods wrote. “Hence, we are delighted that Steve will be staying on as Roku’s CFO and we have ended the search for his successor.”

Meanwhile, active account growth accelerated 41% year-over-year, with accounts topping 43 million, driven by sales of both players and Roku TV models. Player unit sales increased 28% led by growth in the U.S. and in certain international markets. Notably, existing Roku users added almost three million new Roku streaming devices to their accounts during the quarter. Roku TV sales accounted for one in three smart TVs sold in the U.S.

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The Roku Channel more than doubled its reach in the U.S., with the ad-supported VOD service watched by households with an estimated 43 million residents.

“We believe the pandemic has accelerated the long-term trend toward all TV being streamed,” founder/CEO Anthony Wood and CFO Steve Louden wrote in the shareholder letter.

Roku tripled its net loss to $42.2 million, from $10.4 million during the previous-year period — due in part to 36% increase in R&D costs; 75% uptick in sales and marketing; and 56% spike in general and administrative costs. Revenue increased 42% to $356.1 million, from $250.1 million a year ago.

The executives declined to give guidance on the current fourth quarter due to the increasing prevalence of COVID-19 infections around the world and the potential for disruptions and changes to historical consumer behavior and spending patterns during the back-to-school and holiday seasons.

“Q4 is the seasonally largest quarter for Roku and there is a wide range of potential outcomes given increased consumer interest in streaming on one hand, and the possibility of retailer, supply chain and advertising constraints at critical times on the other,” Wood and Louden wrote.

 

Roku: MLB Return Not Driving Pay-TV Viewership

The return of Major League Baseball during the coronavirus pandemic hasn’t resulted in a return to pay-tv, according to new data from Roku. The streaming media device manufacturer/distributor, citing internal research, found that 70% of households that watched baseball in 2019 did not tune in to watch the 2020’s delayed season opening weekend.

A loss of live sports due to COVID-19 is the primary reason 25% of survey respondents said they have dropped pay-TV. Just 20% of those subscribers said they would re-new pay-TV with the return of live sports. The findings counter claims by Disney-owned ESPN and Fox Sports about record opening weekend baseball ratings.

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“The return of MLB was a swing and a miss when it comes to viewership for traditional linear TV as less than one third of baseball’s 2019 household audience tuned in to watch any of the opening week games on linear television,” Gaurav Shirole, director of audience measurement at Roku, said in a statement.

Shirole believes that as live sports returns, fans have found new ways to consume it via video streaming services such as MLB.tv, the SVOD platform affording subscribers out-of-market games live or on-demand.

“Blacked out games are typically available to stream about 90 minutes after their conclusion,” he said.

Other MLB streaming sources include YouTube TV (a sponsor of last year’s World Series), Sling TV, Hulu with Live TV, AT&T TV Now and fuboTV, among others.

Games are also broadcast across a variety of channels, including ESPN, ESPN2, FOX, FS1, TBS, MLB Network and regional networks including NBC Sports and Fox Sports.

Roku Says Nearly 1 in 3 U.S. TV Households Have Cut the Cord

Roku July 21 reported that about 32% of U.S. TV households do not have a traditional pay-TV subscription (cable, satellite, telecom), while another 25% of households identified as “cord shavers” scaled back their service during the coronavirus pandemic. When asked about the intent to drop pay-TV in the next six months, 45% of the latter households said they were likely to do so.

Citing data from separate surveys of 7,000 Americans ages 18 and over in March, followed by 2,000 Americans ages 18 and over in May to understand changes amidst the pandemic, Roku found primary drivers for pay-TV termination to be the pandemic and lack of live sports.

“While we entered 2020 with significant momentum around cord cutting, we’re now seeing that the pandemic and the pause of live sports has caused consumers to rethink how they access home entertainment and what they are willing to pay,” Matthew Anderson, chief marketing officer, said in a statement.

Anderson said the abundance of free ad-supported VOD content, free trials to low-cost are contributing to a redo in home entertainment consumption.

Survey respondents said they saved about $75 per month dropping pay-TV, with some of the saving earmarked for SVOD services.

“The vast majority of [respondents] agreed that they are satisfied with their decision and wish they had cut their pay-TV service earlier,” Anderson said.

Value is an important factor in driving cord cutting. Nearly half of all U.S. TV household respondents said they have been watching more, free ad-supported TV during the COVID-19 pandemic than they did before. In addition, 40% of recent households that dropped pay-TV said that access to free trials and extended free trials to premium subscription services helped convince them to cut traditional pay TV service.

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Roku, which helped Netflix launch the subscription streaming video-on-demand market in 2007, offers a platform for third-party SVOD services, in addition to The Roku Channel branded AVOD platform.

Roku found less than 20% of cord-cutting households said they would re-subscribe to pay-TV when live sports returns. Instead, 31% said they were likely to subscribe to a live sports streaming service, such as ESPN+ and fubo TV. More than half (52%) of traditional and “cord shaver” households said they are likely to reduce their pay-TV package if televised live sports does not return.

SVOD Spotlight This Week: Netflix Posts Numbers; Peacock Bows Service

With the entertainment industry still largely on hold due to the coronavirus pandemic, two over-the-top video services this week look to confirm the market reality and potential of subscription video-on-demand in an age of uncertainty.

Netflix, which releases second-quarter (ended June 30) financial results at the close of the market on July 16, is coming off a first quarter that blew expectations out of the park. The service added more than 15.8 million new subscribers worldwide (obliterating all projections), driving revenue and profit skyward while much of the entertainment economy came to a screeching halt.

NBCUniversal on July 15 formally launches Peacock nationwide to a saturated direct-to-consumer market featuring both subscription and ad-supported distribution options.

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For Netflix, the week aims to justify renewed Wall Street salvos that saw the company’s stock balloon 8% at market close on July 10 to an all-time high of $548.73 per share. Netflix thinks it will quietly add 7.5 million new subs in Q2, while Goldman Sachs contends the streamer will add 12.5 million. Revenue is projected to skyrocket 123.5% to $6.o8 billion from $4.92 billion during the previous-year period.

“[Cautious sub growth] fails to capture the reality of Netflix’s earlier stage markets and a dramatically changing world that is pushing changes into every corner of consumer behavior,” Goldman Sachs wrote in a note, adding it thinks the SVOD pioneer will boast more than $100 million in free cash due to the dearth of new content production.

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The Peacock bow comes as consumers face a plethora of choices driven by Netflix, Amazon Prime Video and Hulu, with newcomer Disney+ quietly achieving podium status with more than 53 million subs through May.

The $9.99 monthly Peacock without ads ($4.99 with commercials) will showcase NBC programming, including new and catalog, in addition to Universal Pictures movies and some third-party content.

Similarly to rival newbie HBO Max from WarnerMedia Entertainment, both services lack key distribution through third-party streaming devices Roku and Amazon Fire TV.

Neither platform is carrying Max or Peacock apps — critical to consumer adoption. At issue reportedly is the hosts’ mandate keeping third-party user data, including viewing habits and content choices. Both Roku and Fire TV would offer Peacock and Max on The Roku Channel and Prime Channels distribution platforms rather than as separate standalone apps as is the case for Disney+ and Netflix. Both Disney and Netflix maintain control of their user data.

“This severely limited the [Max] launch, considering that [Roku, Amazon] combined have a dominant market share and are the primary way a large portion of the population connects to SVOD,” Michael Pachter, media analyst with Wedbush Securities in Los Angeles, wrote in a July 7 note. “Commentary from HBO post-launch suggests that it is playing hardball with Roku and Amazon, and in our view it did not suggest that a resolution was imminent.”

TiVo: 30% of Americans Using Smart TVs to Stream Video

In an over-the-top video ecosystem, new data from the latest TiVo Video Trends Report finds that more than 30% of Americans surveyed access streaming video through Internet-connected televisions. That compares with 16.3%, 15.4% and 14.3% for the next three most-popular streaming media devices, including mobile devices, Amazon Fire TV and Roku, respectively.

The data, which is based on a first-quarter (ended March 31) survey of 4,367 adults in the U.S. and Canada, would appear to slightly undermine Roku’s actual market share considering the streaming media pioneer’s OS software powers most Chinese-made Smart TVs not branded Samsung.

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TiVo said Samsung’s Wizen operating system is found in more than 50% of Smart TVs, followed by Google-owned Android TV (14.1%), Roku (13%) and LG’s WebOS (2%). Mobile devices are primarily powered by Apple iOS and Google Android.

Notably, Peacock, NBCUniversal’s pending streaming service, will be available on Vizio SmartCast TVs and LG Smart TVs when it launches July 15. Meanwhile, WarnerMedia’s HBO Max launched May 27 without distribution on Roku and Fire TV, underscoring the platform’s sluggish launch.

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According to data from Sensor Tower, 87,000 people used the Apple App Store and Google Play to download the HBO Max app on its first day. That was dwarfed by rivals Quibi and Disney+, which generated 380,000 and 4 million mobile downloads, respectively, on their first days of operation.