Netflix vs HBO v3 (2 17-14)
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Transcript of Netflix vs HBO v3 (2 17-14)
The Present and Future of Pay-TV and SVOD
Chris Van Noy February 17th, 2014
Vs.
Chris Van Noy, CVN 2014 2
“If you know the enemy and know yourself, you need not fear the result of a hundred battles. ”
~ Sun Tzu, The Art of War
“I hate television. I hate it as much as peanuts. But I can't stop eating peanuts.”
~ Orson Welles
Overview
Chris Van Noy, CVN 2014 3
1. Takeaways 2. Key Concepts – Lies, Misunderstandings and
other Conventional Wisdom 3. What is Netflix, HBO – Not the same business but
still compete 4. Key Comparisons – How they match now 5. Threats Opportunities 6. Strategies 7. Future Predictions/Projections (HBO/Netflix,
Ecosystem)
Take-Aways • Netflix surpasses HBO in Revenue in 2014 and Contribution Profit in 2017 but does not
exceed HBO in Profit Margin or Total Subscribers
• Large threat to Netflix threat that is concerning is the amortization and cost of licensed content. Netflix has to maintain blistering subscription growth (virtuous cycle) to keep ahead of content cost or be swallowed by it.
• Large threat (also an advantage) to HBO domestic is being tied to MVPDs and their spiral into higher prices, lower subscribers
• HBO Int’l ARPU is much lower than Netflix Int’l – a competitive advantage as Netflix scales
• HBO has other significant revenue streams besides subscribers. Content licensing will grow 36% between ’12 – ’16
• Netflix will start to own content but the content licensing opportunity is not big enough assuming an aggressive int’l rollout for traditional streaming
• Tipping point for cable vs broadband within 3-4 yrs. More channels (competition) will move to broadband. (HBO GO, ESPN etc.) Look for
• Main threats are large companies that don’t need to make money on content: Amazon, Google, MVPD+Hulu. Data is a competitive advantage: Amazon, Google could have this advantage.
• International - Increase in International Middle Class, increase in Fixed BB HH and Mobile BB, Increased market for Netflix, HBO, HBO Go and Content Licensing
Chris Van Noy, CVN 2014 4
Key Concepts #1 HBO does not have 114M subscribers
Chris Van Noy, CVN 2014 5
In 2013 HBO has 29.2M Domestic and 57M Paid Subscribers for a Total of 86.1M The popular 114M Subs numbers is HBO and Cinemax combined Domestic and International
#2 Netflix will not, nor ever have ads, sports, pay-per-view movies, news or live content.
Netflix’s mission statement and customer focus is to have great movies and TV shows in one place available anywhere. When a user wants to watch great entertainment Netflix is what they think of
#3 HBO is not only a subscriber business. HBO has healthy revenue streams from content licensing and DVD/Digital sales
#4 HBO will not go digital only in the US any time soon. HBO has a significant cost savings and revenue upside by being tied to the MVPD ecosystem. In addition, Time Warner leverages HBO to get more affiliate fees for their other cable networks HBO may offer HBO Go with a broadband subscription from an MVPD
What is Netflix and Will Be What it is Not and Won’t Be
Chris Van Noy, CVN 2014 6
Netflix Is: • Wide-ranging selection of TV shows and
movies • Pure on-demand choosing and viewing with
the highest video quality possible • Personalized, intuitive, evolving UI on all
internet screens • Inexpensive, $8/month, unlimited viewing,
Need an ISP (avg. $40/month) • No commercials, no commitments, no
contracts
Netflix is Not: • Not: Pay-per-view new movies (i.e. Apple,
Amazon, Google, etc.) • Not: Ad-supported free content (YouTube, Hulu
etc.) • Not: Sports, contestant, news, music video,
instructional, or user-gen video • Not: All movies and TV shows in one place
HBO Is: • Rotating selection of DVD window movies
and award winning original series • Linear broadcasting of content with some on-
demand and online options • Linked to the MVPD ecosystem, for better or
worse • Not Cheap, $12 - $18/month, 5 channels and
HBO Go, Need an Cable package (avg. $80/mo.)
HBO is Not: • Not: Pay-per-view new movies (i.e. Apple,
Amazon, Google, etc.) • Not: Ad-supported free content (YouTube, Hulu
etc.) • Not: Sports, contestant, news, music video,
instructional, or user-gen video • Not: All movies and TV shows in one place
What is HBO and Netflix?
Chris Van Noy, CVN 2014 7
TW Publishing TW Networks TW Film & Entertainment
NYSE: TWX
Excavating HBO’s Businesses from Time Warner for a relevant comparison with Netflix
19 businesses
HBO HBO Multiplexes HBO On Demand HBO Go HBO Video HBO License/Distribution HBO Films HBO Miniseries HBO Entertainment HBO Docs HBO International HBO Latin America Cinemax Cinemax Multiplexes Cinemax On Demand Cinemax Latin America HBO Independent Prod PictureHouse Studios Warner Channel E! Latin America
19 businesses
1 Media Conglomerate -> 3 Divisions -> 32 Nets -> 19 HBO Businesses -> 12 HBO Biz
What is HBO and Netflix?
Chris Van Noy, CVN 2014 8
HBO HBO Multiplexes HBO On Demand HBO Go HBO Video HBO License/Distribution HBO Films HBO Miniseries HBO Entertainment HBO Docs HBO International HBO Latin America
vs.
Domestic Streaming International Streaming DVD Rental Netflix Production DVD Sales Netflix Licensing/Distribution (Potential)
Excavating HBO’s Businesses from Time Warner for a relevant comparison with Netflix
HBO HBO Multiplexes HBO On Demand HBO Go HBO Video HBO License/Distribution HBO Films HBO Miniseries HBO Entertainment HBO Docs HBO International HBO Latin America Cinemax Cinemax Multiplexes Cinemax On Demand Cinemax Latin America HBO Independent Prod PictureHouse Studios Warner Channel E! Latin America
19 businesses 12 businesses
1 Media Conglomerate -> 3 Divisions -> 32 Nets -> 19 HBO Businesses -> 12 HBO Biz
Key Comparisons
Chris Van Noy, CVN 2014 9
Key Business Drivers HBO Netflix
Attached to MVPD Ecosystem, Lower costs, Higher Margins, Leverage over pricing
Attached to MVPD Ecosystem, Higher customer cost, declining ecosystem
Not attached to ecosystem, low cost of consumer entry + partnerships
Heavily Exposed to Content Costs Exposed to Content Costs
Large, Serviceable Addressable Market. Domestic and Int’l
Large, well funded competitors that don’t depend on video rev but don’t have domain expertise (excepting HBO)
Early entrant with significant brand equity. CE Devices, platforms and soon ISPs need them
Multiple Revenue Streams and larger, potential Int’l Market
Mature Domestic Market
Key Comparisons
Chris Van Noy, CVN 2014 10
Netflix , HBO Paid Subscribers 2012 2013 2014 2015 2016
Netflix Domestic 25.5 31.4 37.0 42.1 45.0 Netflix Int'l 6.1 10.5 15.6 25.3 32.4
HBO Domestic 28.7 29.2 29.5 29.7 29.8 HBO Int'l 50.0 57.0 67.4 73.3 78.3
(Millions)
Key Drivers Observations • HBO Domestic: Declining cable viewership, Subs
• HBO Int’l: Consolidation of HBO Asia and soon HBO Lat Am, Fast increasing Pay-TV subs result of growing int’l middle class
• NFLX Dom: Increasing BB HH, Connected TVs/Devices increase, original content, MVPD/CE partnerships
• NFLX Int’l: Aggressive Int’l rollout: W & E Europe, Asia Pac and Lat Am. China, India, Russia not incl but could be
• NFLX Dom passes HBO Dom (paid subs) in ’13 • HBO has more Int’l subs than NFLX but at
a lower APRU ($2.5 vs. $6.28) • NFLX Dom growth slows after 2016 (due to
price increase) • HBO has significant Int’l sub growth due recent
consolidation and global growth
Key Comparisons
Chris Van Noy, CVN 2014 11
Cost of Acquisition / Churn Minimization Cost Per User
Netflix 2012 2013 2014 2015 2016 Domestic New $ 46.9 $ 46.0 $ 47.1 $ 51.3 $ 88.9 Domestic All $ 9.5 $ 8.3 $ 7.1 $ 6.2 $ 5.8 International New $ 47.2 $ 46.1 $ 48.5 $ 27.8 $ 41.0 International All $ 32.9 $ 19.2 $ 15.8 $ 10.7 $ 9.0
HBO Domestic New $ 91.7 $ 119.9 $ 281.8 $1,158.9 N/A Domestic All $ 1.8 $ 1.9 $ 2.0 $ 2.0 $ 1.6 International New $ 12.7 $ 15.7 $ 12.4 $ 24.2 $ 29.8 International All $ 1.9 $ 1.9 $ 1.9 $ 1.9 $ 1.9
Key Comparisons
Chris Van Noy, CVN 2014 12
Cost of Acquisition Marketing Cost Per New User
Netflix 2012 2013 2014 2015 2016 Domestic New $ 46.9 $ 46.0 $ 47.1 $ 51.3 $ 88.9 International New $ 47.2 $ 46.1 $ 48.5 $ 27.8 $ 41.0
HBO Domestic New $ 91.7 $119.9 $281.8 $1,158.9 N/A International New $ 12.7 $ 15.7 $ 12.4 $ 24.2 $ 29.8
Key Drivers Observations • HBO Domestic: Established service, most value in churn min
• HBO Int’l: Lat Am consolidation in ‘15
• NFLX Dom: New, increasing original content, increasing SAM
• NFLX Dom: increased price in ‘16 increases customer value
• NFLX Int’l: Aggressive Int’l rollout plan – new markets with some existing brand value
• HBO Int’l low ARPU causes low acquisition cost
• NFLX Dom increase due slowing SAM growth / and increased ARPU
• HBO Dom very since HBO Dom is focused on churn minimization
• Netflix Int’l fluctuates due to continually entering new markets
HBO’s marke=ng spend focus isn’t on acquiring new users. They have a mature/declining market domes=cally. Their focus is on “churn minimiza=on” (next slide)
Key Comparisons
Chris Van Noy, CVN 2014 13
Churn Minimization Marketing Cost Per All Users
Netflix 2012 2013 2014 2015 2016 Domestic All $9.5 $8.3 $7.1 $6.2 $5.8 International All $32.9 $19.2 $15.8 $10.7 $9.0
HBO Domestic All $ 1.8 $ 1.9 $ 2.0 $ 2.0 $ 1.6 International All $ 1.9 $ 1.9 $ 1.9 $ 1.9 $ 1.9
Key Drivers Observations • HBO: seems that both Dom and Int’l spend
to minimize churn
• Netflix Dom: Paying less per user as subs reach scale, tech is more mature and original content
• HBO Int’l low ARPU causes low acquisition cost
• NFLX: could lower churn min spend reflect confidence in UI, Rec Engine, Original Content, better licensed content etc. ?
Key Comparisons
Chris Van Noy, CVN 2014 14
Cost of Delivery / Operations 2012 2013 2014 2015 2016
Netflix Domestic Streaming Tech Costs (Minus Delivery) $160.5 $194.1 $221.2 $256.7 $272.7 Streaming Delivery Costs $38.6 $44.3 $57.3 $40.2 $52.0
Total Delivery Costs $199.2 $238.4 $278.5 $296.9 $324.8 Cost Per User $7.34 $7.19 $7.14 $6.69 $6.84
Netflix Int'l Streaming Tech Costs (Minus Delivery) $8.8 $33.3 $44.6 $91.5 $89.0 Streaming Delivery Costs $17.4 $28.1 $45.8 $45.8 $71.0
Total Delivery Costs $26.2 $61.4 $90.3 $137.3 $160.0 Cost Per User $4.28 $5.84 $5.80 $5.43 $4.94
HBO Operational Expense ( - Streaming) $445.6 $496.1 $529.3 $580.9 $603.1 HBO Go Digtal Streaming $1.0 $1.3 $2.9 $4.6 $11.6
Total Operational Expense $446.6 $497.4 $532.2 $585.4 $614.7 Cost Per User $5.64 $5.73 $5.39 $5.55 $5.56
Key Comparisons
Chris Van Noy, CVN 2014 15
Cost of Delivery / Operations
Netflix Domestic Streaming
Netflix Int’l Streaming
HBO
Key Drivers Observations • HBO: Operations costs increase as efforts to
consolidate HBO Asia and HBO Latin America succeed
• NFLX Int’l: delivery costs rise even per user as new markets are entered
• NFLX Dom: Higher investment in UI, User Retention, Streaming tech and platforms as competition increases
• TDB
2012 2013 2014 2015 2016 Total Delivery Costs $199.2 $238.4 $278.5 $296.9 $324.8 Cost Per User $7.34 $7.19 $7.14 $6.69 $6.84
Total Delivery Costs $26.2 $61.4 $90.3 $137.3 $160.0 Cost Per User $4.28 $5.84 $5.80 $5.43 $4.94
Total Operational $446.6 $497.4 $532.2 $585.4 $614.7 Cost Per User $5.64 $5.73 $5.39 $5.55 $5.56
Netflix, HBO Revenue Streams
Chris Van Noy, CVN 2014 16
62.9% 16.2%
20.8%
Domestic Sub
DVD / Digital
Int’l Sub
Content Licensing
Int’l HBO Go
Domestic Sub
Int’l Sub
DVD Rental
HBO Observations ‘13 – ‘16
• Aggressive Int’l Growth • Drastic Decline in DVD • Domestic still Growing
in Rev
Netflix Observations ‘13 – ‘16
• Content Licensing Growth • HBO Go Int’l Minimal • Still Some Juice in
DVD/Digital • Dom & Int’l Sub Growing in
Rev but Int’l in %
HBO 2013 Rev: $4,373
HBO 2016 Rev: $5,181
Netflix 2016 Rev: $7,150
Netflix 2013 Rev: $4,358
61.9%
30.5%
7.7%
63.9%
4.3%
22.8%
8.2%
0.8%
60.2%
3.5%
26.5%
8.7%
1.2%
Netflix vs. HBO ARPU, Costs and Profitability
Chris Van Noy, CVN 2014 17
2013 2014 2015
Netflix HBO Netflix HBO Netflix HBO
$7.99 $7.67 $7.99 $7.98 $7.99 $8.22
Content Licensing
Original Content
Marketing
Contribution Profit
ARPU / Month
* HBO and Netflix Domestic
As HBO’s domestic business stabilizes it’s only growth is in APRU forced from MVPDs Netflix has increasing costs on multiple fronts but subscriber growth is enough to increase profit margin
22.5%
47.0% 24.6%
40.6% 28.5% 35.9%
10.1%
4.3%
8.5%
9.7%
7.5% 13.4%
9.9%
21.5%
11.8%
22.6%
14.9%
23.6% 57.5%
27.2%
55.0%
27.1% 49.1%
27.1%
Netflix vs. HBO ARPU, Costs and Profitability
Chris Van Noy, CVN 2014 18
16.9%
47.4%
22.5%
47.2%
24.6%
44.0% 28.5%
41.3% 37.7% 29.8%
11.8%
4.1%
10.1%
4.1%
8.5%
6.5%
7.5%
8.3% 6.2% 17.1%
20.7%
9.9%
21.5%
11.8%
22.5%
14.9%
23.5%
16.0% 26.2%
71.3%
27.8%
57.5%
27.2%
55.0%
27.0%
49.1%
26.9% 40.0%
26.9%
2012 2013 2014 2015 2016
NeTlix HBO NeTlix HBO NeTlix HBO NeTlix HBO NeTlix HBO
$7.99 $7.67 $7.99 $7.98 $7.99 $8.22 $7.99 $8.46 $8.99 $8.72
Content Licensing
Original Content
Marke=ng
Contribu=on Profit
ARPU / Month
* HBO and NeTlix Domes=c
Opportunity: International Markets
Chris Van Noy, CVN 2014 19
Emerging Markets moving from Commodities Economy to Durables and Services Economies
The world market for entertainment – both Pay-TV (HBO) and SVOD (Netflix and HBOGo) -- is rapidly growing as the gains in average per capita income creates a large, international consumer middle class. In 17 yrs. there will be Three Billion more consumers for video entertainment
Source: Goldman Sachs Investment Research
Average income increases from $12.5K to $23K USD
Emerging Market Avg: $12K Emerging Market Avg: $23K
Netflix International Driving Forces
• Growing Disposable Entertainment Income in Emerging Markets
• Broadband (MVPD, Telco) Expansion
• Higher Functioning, Less Expensive Devices
• Proven Demand
Chris Van Noy, CVN 2014 20
21 World Map
HBO Global Channels 47 Countries, Expanding to 60 Countries
Chris Van Noy, CVN 2014 21
22 World Map
HBO Global
HBO’s International Channels: In ‘12 HBO reaches 47 Countries and 50M Subs By ’15 will reach 60 Countries and 73M Subs Revenue to grow 56% between ‘12 and ‘16
HBO’s Content Licensing: HBO content is seen in over 160 Countries Content Licensing revenue to grow 36% from ’12 to ’16 with larger deals and more content
HBO SVOD and HBO Go (Stand Alone) :
HBO VOD reaches over 2M people and HBO Go is expanding from Scandinavia to Latin America
HBO Home Entrainment: HBO DVD, Blu-Ray and Digital are distributed in over 70 countries WW
Chris Van Noy, CVN 2014 22
23 World Map
Netflix Global Coverage 30 Countries, Expanding to 60+ Countries
Chris Van Noy, CVN 2014 23
World Map
Netflix Global Rollout
Netflix International Streaming: In ‘13 Netflix is available in over 20 countries with 10.5M Subs.
Netflix International Rollout: In ‘14 we believe that Netflix will continue to grow in Scandinavia and launch in the rest of Western Europe through ’15 & ‘16 Major launches in Japan, S Korea, Australia in ’15 Countries in Eastern Europe and SE Asia will being to have access in ‘16 – ‘18
Chris Van Noy, CVN 2014 24
Netflix Potential Revenue Hedge Opportunity: Content Licensing
Chris Van Noy, CVN 2014 25
2014 2015 2016 2017 2018 Price per M for Catalog $1.13 $1.19 $1.27 $1.34 $1.42 Customer (MVPD) Reach 46.1 110.5 117.6 124.7 131.8
Total Licensing Rev (M) $52.0 $132.0 $149.0 $167.4 $187.5 % of Total Rev 1.0% 2.2% 2.1% 2.1% 2.1%
Customer (MVPD) Reach 92.20 177.25 224.65 264.26 284.84 Total Licensing Rev (M) $103.9 $211.8 $284.5 $354.7 $405.3
% of Total Rev 2.1% 3.5% 4.0% 4.4% 4.6%
2014 2015 2016 2017 2018 Price per M for Catalog $3.30 $3.40 $3.40 $3.50 $3.50 Customer (MVPD) Reach 116.9 124.1 131.3 138.6 145.8
Total Licensing Rev (M) $387.70 $417.80 $448.90 $480.70 $513.50
% of Total Rev 8.20% 8.40% 8.60% 8.90% 9.10%
Content licensing to Int’l TV Networks is a good revenue stream and hedge if Netflix is not going to have an aggressive international rollout of streaming service. Otherwise it’s not worth it for Netflix.
Aggressive Int’l Streaming Rollout
Non -Aggressive Int’l Streaming Rollout
Compare To:
Netflix and HBO Projections
Chris Van Noy, CVN 2014 26
0.0
20.0
40.0
60.0
80.0
100.0
120.0
2012 2013 2014 2015 2016 $-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
2012 2013 2014 2015 2016
Total Subscribers Total Revenue
Netflix HBO
Netflix and HBO Projections
Chris Van Noy, CVN 2014 27
Total Contribution Profit Contribution Profit Margin
Netflix HBO
0%
10%
20%
30%
40%
50%
60%
2012 2013 2014 2015 2016 $-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2012 2013 2014 2015 2016
Netflix and HBO Projections
Chris Van Noy, CVN 2014 28
Total Operating Profit Operating Profit Margin
Netflix HBO
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2012 2013 2014 2015 2016 0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2012 2013 2014 2015 2016
Content Benefits & Costs
Chris Van Noy, CVN 2014 29
hcp://qz.com/177549/neTlix-‐is-‐outdoing-‐hbo-‐and-‐show=me-‐with-‐its-‐buzzy-‐original-‐shows/
Appendix
Chris Van Noy, CVN 2014 30
Netflix HBO Subscribers Potential for Growth or Decline
Graph with NeTlix and HBO projec=ons next to their Serviceable Addressable Markets Will show that: 1. HBO Domes=c has a shrinking SAM 2. NFLX Domes=c has a growing SAM but growth slows aler ’16 3. HBO Int’l SAM has grown because of consolida=on but no new opening
markets 4. NFLX Int’l show a rapidly expanding SAM with significant barriers to entry
Chris Van Noy, CVN 2014 31
HBO Opportunities
• Content Licensing
• International Channels
• HBO Go
• Increasing Revenue from MVPDs
• Expanded Content Production
Chris Van Noy, CVN 2014 32
Netflix Opportunities
• Domestic Expansion
• International Expansion
• Content Licensing
• Increasing Serviceable Addressable Market (Domestic and International)
• Partnerships (ISP, Devices, Studios, TV)
• Data
Chris Van Noy, CVN 2014 33
Threats to Netflix & HBO Large companies that don’t need to make money on content streaming
Chris Van Noy, CVN 2014 34
MVPD +
• Premium Catalog and Original Content • Future: Ad Supported, Premium TV Content • Already large player in content ecosystem (2nd largest HE Retailer) • Prime Video as a value add to Amazon Prime service
Google/YouTube: • UGC, Original Content, Some Premium Catalog Content • Wide Distribu=on • Video as a value add to Google Ecosystem to gather data and serve ads
• Premium TV Content, Early Window, Catch up TV + some movies • Exclusive content deals • Video as a value add to Google Ecosystem to gather data and serve ads
Threats to Netflix
• Content Costs – Amortization of Content, Content Costs Rising
• International Rollout Stagnation
• Content Digital Distribution Competition (see other slide)
• Fracturization of audience attention
Chris Van Noy, CVN 2014 35
NFLX 10K or annual report
Threats to HBO
• Lowering TV Viewership – Fracturization of audience attention
• MVPD Cost escalation
• Rising Content Costs
• Content Digital Distribution Competition (see other slide)
Chris Van Noy, CVN 2014 36
HBO Strategy
• Continue to consolidate international channels, increase ARPU
• Increase premium content • Increase content syndication (raise costs) • Negotiate better output deals • Experiment with HBO Go domestic and roll out
international • Cut down costs on sports content (CVN) • Reduce risk in content creation (CVN) • Reduce churn – decouple from MVPDs (CVN)
Chris Van Noy, CVN 2014 37
Netflix Strategy • Increase Revenue
– Increase Domestic Subscriptions – Expand Internationally
• License Content (CVN) • Raise Consumer Price 2015 (CVN) • Reduce Costs
– Tech / Delivery – Content Licensing – Strategic Partnerships
• Reduce Churn • Improve Infrastructure (Tech)
Chris Van Noy, CVN 2014 38
Netflix Almost As Popular As Cable For Young Adults
Chris Van Noy, CVN 2014 39
% of American adults who subscribe to the following Pay-TV services, by age (Oct ’13)
Effect of Monthly Netflix Use on Regular TV Consumption (June ‘12)
Chris Van Noy, CVN 2014 40
Netflix vs. HBO ARPU, Costs and Profitability
Chris Van Noy, CVN 2014 41
2012 2014 2016
NeTlix HBO NeTlix HBO NeTlix HBO
$7.99 $7.67 $7.99 $8.22 $8.99 $8.72
Content Licensing
Original Content
Marke=ng
Contribu=on Profit
ARPU / Month
* HBO and NeTlix Domes=c
As HBO’s domes=c business stabilizes it’s only growth is in APRU forced from MVPDs NeTlix has increasing costs on mul=ple fronts but subscriber growth is enough to increase profit margin (with a licle help from a price increase)
16.9%
47.4% 24.6%
44.0% 37.7% 29.8% 11.8%
4.1%
8.5%
6.5% 6.2% 17.1%
20.7%
11.8%
22.5% 16.0%
26.2% 71.3%
27.8%
55.0%
27.0% 40.0%
26.9%
TV Content Moving Online Retrans/Affiliate Fees – Retrans 3.0 over soon Digital Rights more important in nego=a=ons MVPDs partnering with sports for Regional cable nets – cut out middle man and bolster nego=a=ons MVPD Revenue/Profit Change (TV -‐> BB) Declining TV Viewership Declining MVPD Subs MVPD consolida=on Melinials and subsequent genera=ons not watching Cable Fragmented Mindshare Increasing BB Penetra=on, Connected Devices Hulu cour=ng MVPDs Comcast HBO Go experiment MVPDs promo=ng online video Increasing value of licensing content – larger rev stream of content providers, to online companies Online video has big players that don’t make money on online video MVPDs – how to leverage/exploit last mile more
Chris Van Noy, CVN 2014 42
MVPDs similar to Nets • Fewer TV watchers overall (digital/online and other options - attention fragmentation), rising
costs (content production/purchasing, higher affiliate/re-trans rates), more competition (more cable channels, telco/satellite)
• MVPDs similar to networks, death spiral– smaller audiences, charge more for rev (MVPDs: customers, Nets: Ads, MVPDs) Smaller audiences need to go broader and cut costs
• Competition for both gaining MVPDs – telco, satellite, digital/online and other options (attention fragmentation), TV Nets: other channels, digital/online and other options (attention fragmentation)
Chris Van Noy, CVN 2014 43
Random Thoughts and Threats • NeTlix surpasses HBO in Revenue in 2014 and Contribu=on Profit in 2016 but does
not exceed HBO in Profit Margin • Domes=c Streaming: Amazon bigger compe=tor than previously thought -‐ Hulu
like service (becer adver=sement) with Prime Domes=c Streaming: • Tipping point for cable vs broadband within 3-‐4 yrs. HBO GO with ISP partners
(lower base rate) • NeTlix will start to own content and make revenue from that soon HBO's business
is much different outside US -‐ JVs, Licensing content etc • Immersive entertainment -‐ NFLX could be early provider for this experience of
content =tles -‐ becer data • Poten=al partnerships with Facebook, plaTorms exploited -‐ lower acquisi=on
costs, higher reten=on • Can NeTlix or HBO get becer, deeper data on users? Amazon, Google has this. • Increase in Interna=onal Middle Class, increase in Fixed BB and Mobile BB,
Increased market for NeTlix, HBO, HBO Go and Content Licensing • Many of the subscriber number assump=ons for HBO are flawed. 73 Int'l Subs,
114 Global Subs (INCLUDING domes=c) for both HBO AND Cinemax. Many do not differen=ate between HBO and Cinemax
Chris Van Noy, CVN 2014 44