IHS: New Video Services to Add $3.6B in Revenue, Saturate Domestic OTT Market

An influx of pending over-the-top video services is projected to add $3.66 billion to the direct-to-consumer entertainment market by 2023, according to new data from IHS Markit.

The research firm said services from Disney, Apple, and WarnerMedia are expected to launch this year, with NBC Universal launching an ad-supported platform to pay-TV subscribers in 2020.

These services have the potential to add 53 million paying subs to the U.S. market by 2023, effectively growing the total number of subs by 25%.

“Subscriber growth of this magnitude assumes an aggressive strategy from all the major services,” Dan Cryan, executive director of research and analysissaid in a statement.

“This strategy could include making movies available earlier or bundling, either at no extra charge or as a low-cost add-on, with other products and services that already have large customer bases. Less aggressive policies would result in lower overall subscriber growth, but they would still expand the video subscription market.“

According to the “Disney, Apple, Netflix: Scenarios for the Future of Online Video” report, Netflix and Amazon Prime Video will continue to lead the market for the next few years. Apple could potentially catch up with Hulu by 2023, depending on what happens to that service after Disney’s acquisition of Fox has been finalized.

“A successful Disney service would also be among the top-tier services in the U.S. by 2023,” Cryan said.

Regardless of Netflix and Prime Video’s market dominance, IHS said the market for pure-play video services will become “exceptionally” competitive. And despite their burgeoning original content spending, studio-driven upstarts bring their own strong content libraries to the equation.

WarnerMedia Streaming Service Eyeing Original Content in 2020

WarnerMedia is launching a proprietary over-the-top video platform in the fourth quarter featuring catalog content from subsidiaries HBO, Warner Bros. and Turner.

The unnamed service plans to roll out original fare beginning in 2020, according to Kevin Reilly, president of TBS, TNT and head of content and strategy at the new service.

Speaking Feb. 11 at the Television Critics Association annual winter tour in Los Angeles, Reilly said the service would be beta-launched featuring catalog fare from Warner, Warner Bros. Television, New Line Cinema, HBO and Turner subsidiaries such as Adult Swim, The CW, and Cartoon Network, among others.

“Our beta will not have original programming, but we will introduce it in 2020,” Reilly said. “Expect it in all the verticals: kids and family, teens up to adult.”

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While traditional media and OTT services scramble to produce differentiating distribution platforms featuring original content, WarnerMedia intends to walk the fine line between licensing and restricting programming to third-party services.

WarnerMedia made news last year renewing the coveted “Friends” catalog to Netflix for one year for a reported $100 million. It was a move that contradicted in part CEO John Stankey’s stated mission to restrict proprietary programming to Netflix, Amazon Prime Video and other services not named Hulu.

WarnerMedia is a co-owner of Hulu with Disney, Fox and Comcast.

“The dynamic those [SVOD] incumbents are playing with are still 75% to 80% of viewing tonnage is that licensed content,” Stankey told analysts last November. “Their pressure is they’ve got to make this pivot to get people off of viewing content that sits in our library, or the Disney library, and get it onto their own.”

Reilly concurs, saying he expects the “crown jewels” of Warner programming to eventually migrate predominantly to the new service.

“We’re not pulling it away [from third parties] but it certainly is something we’re looking to do,” he said. “I think for the most part sharing destination assets [like ‘Friends’] is not a good model. They should be exclusive to the [new] service.”

The executive said the service would also feature shows such as “Titans,” “Doom Patrol” and pending “Swamp Thing,” heretofore exclusive to DC Universe, the SVOD service launched last year.

“There is no piece of content in the Warner Media portfolio that will not be looked at for the service,” Reilly said. “That doesn’t mean every piece of content will end up on the service or end up on the service permanently. Content goes through a natural life cycle at which it benefits at times being off a platform or being on a new platform.”

 

Criterion Collection Sets April 8 Launch Date for SVOD Service

The Criterion Channel, a new classic movie streaming service, has set an official launch date of April 8 in the United States and Canada and will be available on desktop, Apple TV, Amazon Fire, Roku, iOS, and Android devices.

The streaming service will feature more than 1,000 classic and contemporary art-house films, at a subscription price of $10.99 per month or $99.99 for an annual subscription. Those who sign up before the launch date can do so at a discounted rate of $9.99 per month or $89.99 per year.

Further sweetening the charter subscription offer is a 30-day free trial as well as access to a members-only Movie of the Week between now and launch.

Criterion says the new streaming service (criterionchannel.com) will give subscribers access to “constantly refreshed selections of Hollywood, international, art-house, and independent movies, plus access to Criterion’s entire streaming library of more than 1,000 important classic and contemporary films from around the world.”

Movies in Criterion Collection’s library include Stanley Kubrick’s Dr. Strangelove, Guillermo del Toro’s Pan’s Labyrinth, the Beatles’ A Hard Day’s Night and David Lynch’s Mulholland Drive.

The company said the service will offer “constantly refreshed selections” of Hollywood, international, art-house, and independent movies. Criterion Channel also will include a Sunday Spotlight feature, focusing on a different director, star, genre, or theme as well as exclusive content like guest programmer series Adventures in Moviegoing, Tuesday’s Short + Feature, the Friday Night Double Feature, Meet the Filmmakers, Art-House America, and Observations on Film Art (billed as a 15-minute-per-month film school).

As reported last November by Media Play News, subscriber pushback over the shuttering of the Turner Classic Movies SVOD service FilmStruck led The Criterion Collection to announced plans to launch its own freestanding service in spring 2019 through a special arrangement with WarnerMedia.

Wholly owned and controlled by the Criterion Collection, the independent Criterion Channel will pick up where it left off as an add-on to the FilmStruck service, with thematic programming, regular filmmaker spotlights, and actor retrospectives, featuring major classics and hard-to-find titles from Hollywood and around the world, complete with special features, including  commentaries, behind-the-scenes footage and original documentaries.

The library of films will also be part of WarnerMedia’s recently announced direct-to-consumer platform slated to launch in the fourth quarter of 2019. WarnerMedia shut down FilmStruck Nov. 29.

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.

 

 

 

AT&T Eyeing HBO, Warner Content for AVOD Distribution

AT&T currently markets standalone over-the-top video services DirecTV Now and Watch TV — the latter offering mobile access to 30 pay-TV channels for $15 monthly and no long-term contract.

Watch TV has generated about 500,000 subscribers since its debut last June. DirecTV Now, which jettisoned more than 260,000 subs after ending promotional pricing late last year, has about 1.6 millions subs.

The telecom now appears to be considering ad-supported VOD — long a stepchild to subscription streaming VOD service such as Netflix, Amazon Prime Video and Hulu.

With Amazon subsidiary IMDb.com launching a free ad-supported VOD service, Hulu’s basic SVOD plan featuring commercials, and Comcast launching AVOD for Xfinity subscribers in 2020, AT&T is pondering ad-supported distribution for select content from subsidiary WarnerMedia.

Speaking on the Jan. 30 fiscal call, CEO Randall Stephenson reiterated that companies with “very strong” IP, “deep libraries” of IP are the ones that are going to succeed over time.

He said Warner Bros. CEO Kevin Tsujihara and WarnerMedia boss John Stankey have been analyzing optimal distribution channels and license opportunities for content.

Tsujihara helped craft the recent non-exclusive license extension with Netflix for “Friends,” a deal that lets WarnerMedia stream the venerable sitcom through its pending SVOD service launching later this year.

Stephenson said WarnerMedia content would be targeted toward what he called “two-sided” business models that include SVOD and AVOD.

“There’s a demand and the customers have become accustomed to advertising free subscription services,” he said. “And we think HBO and a lot of the Warner content [is] premium content will fit into that mold.”

While Stephenson didn’t reveal AVOD specifics, he said the recent acquisition of Xandr to help sell targeted digital advertising to AT&T’s 170 million mobile and broadband subscribers, underscored opportunities for advertising-supported models that help keep content (i.e. catalog) prices down, keep consumer costs down and help fund additional content acquisition and purchasing.

“Xandr is a big part of making that model work,” he said. “So, our model will be a two sided model, with a heavy subscription service, with some ad-supported elements to it as well.”

 

 

 

Warner Bros.’ Record Box Office Drives WarnerMedia’s Banner 2018

Spurred by Warner Bros.’ record $5.5 billion global box office, WarnerMedia generated more than $9.2 billion in revenue in 2018 — up nearly 7% from revenue of $8.6 billion when the company operated as Time Warner prior to the closing of AT&T’s $85 billion acquisition.

The media company comprising Warner Bros., HBO, Turner and Otter Media, posted Q4 operating income of $2.7 billion; and $5.69 billion for the year.

The company said it generated $564 million in fourth-quarter (ended Dec. 31, 2018) revenue from the sales of video games and home entertainment, which was down nearly 15% from revenue of $682 million in the previous-year period. For the year, revenue dropped nearly 45% to $1.08 billion from $1.93 billion in 2017.

Sales of packaged media and digital from movies and TV shows topped $1.56 billion and $416 million, respectively, in the previous-year quarter under Time Warner. WarnerMedia does not breakout home video revenue.

In 2018, Warner Bros. theatrical revenue was driven led by Ready Player One and the fourth-quarter releases Fantastic Beasts: The Crimes of Grindelwald and Aquaman, the latter grossing nearly $1.1 billion at the global box office to date.

Warner Q4 revenue topped $4.5 billion and included revenue of $2.1 billion from theatrical product, $1.8 billion from television product and $564 million from video games and home entertainment. Operating expenses totaled $3.7 billion, and the operating income margin was 18.1%.

HBO revenue in the quarter reached $1.7 billion and included $1.4 billion of subscription and $259 million of content and other revenue. Operating expenses totaled $1.1 billion and the operating income margin was 37.2%.

Turner Q4 revenue reached $3.2 billion, compared to $107 million in the fourth quarter of 2017. Revenue during the quarter included $1.8 billion of subscription revenue, $1.1 billion of advertising and $219 million of content and other revenues. Operating expenses totaled $1.9 billion, compared to $59 million in the fourth quarter of 2017. Turner’s operating income margin was 40.2% compared to 44.9% in the year-ago quarter.

The increases were predominantly due to the June 2018 acquisition of Time Warner.

 

‘Three Identical Strangers’ Most-Watched CNN Films Premiere Ever

The CNN Films documentary Three Identical Strangers, the true story of triplets separated at birth, reunited through coincidence as adults, only to later learn of a dark secret behind their separation, debuted Jan. 28 as the network’s most-watched CNN Films premiere to date.

The film was also No. 1 in cable news in both the key demographic adults 25-54 and total viewers. Three Identical Strangers is scheduled to air again on CNN on Feb. 2 at 9:00pm/ET, according to WarnerMedia.

A companion podcast series, Three Identical Strangers: The Science Behind the Story with Dr. Sanjay Gupta is now available.

Gupta, CNN’s chief medical correspondent talks about the film and the issues that are raised within, with the filmmakers, psychologists, and others.

The doc was released on DVD/Blu-ray Disc last October by Universal Pictures Home Entertainment.

 

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.

 

WarnerMedia Launching Tech/Content Incubator

WarnerMedia Jan. 22 announced plans to launch WarnerMedia Innovation Lab, an incubator that will combine emerging technologies with content from HBO, Warner Bros., Turner and Otter Media, to create new consumer experiences and businesses.

The New York-based lab is designed to forge collaborations across WarnerMedia business units and corporate parent AT&T, as well as between key corporate partners and developers of emerging new technologies.

In an era of Netflix, Amazon Prime Video and emerging ad-supported VOD, studios and content creators are looking not only at direct-to-consumer distribution, but content licensing deals and original productions for proprietary brands and third parties.

For example, WarnerMedia just renewed a streaming distribution deal with Netflix for reruns of “Friends,” while earning two indirect Golden Globe awards for “The Kominsky Method,” which it created for Netflix.

“Our goal is to accelerate innovation around how our content can thrive and grow within emerging formats and platforms,” WarnerMedia CEO John Stankey said in a statement. “By taking advantage of AT&T’s technological capabilities we are literally creating a next-generation playground for our creative, tech and strategy executives and key business partners.”

The innovation lab will meld core competencies in areas ranging from the “Internet of Things” (IoT), AI and machine learning to virtual reality and mixed reality with WarnerMedia’s IP and creative talent.

Initial areas of exploration are expected to include AT&T’s 5G infrastructure offerings to develop, deliver and deploy new immersive consumer content experiences in the form of AR/VR/MR/gaming offerings, enhancing real-time interactivity and connectivity.

The lab will also look to combine data and insights from across AT&T’s more than 300 million direct-to-consumer relationships across wireless, video and broadband services with WarnerMedia’s premiere and engaging content, in order to harness the potential of dynamic content, innovative advertising formats and delivery using Artificial Intelligence and Deep Learning research.

One of WarnerMedia’s initial partners will be the NBA. Together, they plan to explore areas including utilizing AT&T’s IoT infrastructure, connected car partners and connected environments across stadiums, airports and cities to re-imagine localized content and fan experiences, as well as utilizing a vast array of creative talent to bring the immersive game experience beyond the court.

“We are always exploring what is next for sports media and what it means for the future NBA experience,” said NBA Commissioner Adam Silver. “This collaboration with WarnerMedia will help identify cutting edge ways to use technology to deliver more immersive experiences to NBA fans.”

Turner, a division of WarnerMedia, and the NBA have routinely driven innovation within the industry by providing fans with novel and engaging experiences. The two organizations will collaborate to further help shape the future of the consumer experience around live sports and entertainment.

Turner and the NBA jointly-manage NBA Digital, the league’s cross-platform portfolio of digital assets, including NBA TV, the NBA app, NBA.com, NBA League Pass and NBAGLeague.com.

Additionally, the Lab will foster further collaboration with WarnerMedia’s Turner division and Xandr, AT&T’s new advertising company. Together, Xandr and Turner are working together to redefine the consumer advertising experience and improve the relevancy of advertising, fueled by data and content connections.

The lab will be led by Jesse Redniss, who will add to his responsibilities as Turner’s EVP of data strategy and product innovation. A marketing and creative product development veteran, Redniss will oversee the lab’s creative priorities and objectives.

“The future of consumer experience will be personalized, both participatory and passive at the same time, while also dynamic based on how viewers want to receive and engage within their media content journey,” said Redniss.

He will work with operating executives across all AT&T’s entities and will be responsible for identifying partners in the creative, emerging technology, agency and consumer brand worlds.

Existing projects include Turner’s VR short film for TBS’ “Final Space,” a partnership between Warner Bros. and Magic Leap to develop a mixed reality theatrical trailer experience for blockbuster Fantastic Beasts: The Crimes of Grindelwald, and a partnership between Warner Bros. and Intel to demonstrate a first-of-its-kind concept car that transports guests to Gotham City, home to DC Comics’ Batman, showcasing the future of immersive entertainment in autonomous vehicles.

 

 

Trump’s Attorney General Nominee to Recuse Himself from AT&T/Time Warner Appeal

William Barr, President Trump’s pick to replace Jeff Sessions as U.S. Attorney General, reportedly is set to recuse himself from the Department of Justice’s ongoing appeal of AT&T/Time Warner merger.

Barr, who is set to appear before the Senate Judiciary Committee for confirmation hearings, has about $1.2 million in AT&T stock, according to financial disclosures reported by Reuters.

Barr also served on the Time Warner board from 2009 to 2018 when it was acquired by AT&T for $85 billion.

As Attorney General, Barr would oversee the government’s antitrust appeal, which claims the merger that created WarnerMedia is bad for consumers and that the federal judge in the original case erred in applying the law.

Reuters reports Barr informed Senator Amy Klobuchar (D-MN) of his decision.

“He told me he was going to recuse himself from the Time Warner-AT&T appeal because he was involved in that, the Time Warner side,” Klobuchar said.