On Friday, ETCentric provided an update to recent stock activity based on the negative customer reaction to Netflix splitting its services. The company cut its domestic subscriber forecast by 1 million, suggesting it no longer expects growth for its U.S. customer base this quarter. “News of the 4 percent cut in its subscriber outlook knocked 16 percent off Netflix’s share price, sending the stock to its lowest levels in 2011,” reported The Wall Street Journal. “Netflix, though, continued to defend its recent pricing change.”
Shortly after, ETCentric staffer Phil Lelyveld submitted a paidContent report that put the stock decline at nearly 19 percent and suggested “the honeymoon period with Netflix may be over.” The article includes a compelling visual that illustrates consumer viewing habits. According to Phil: “The most interesting part of this story is the chart. The chart breaks down how consumers acquire the movies that they watch, and how often they acquire them.”
Yesterday, Netflix CEO and co-founder Reed Hastings responded to his subscribers via a blog post, that started with “I messed up. I owe everyone an explanation.” ETCentric staffer Dennis Kuba was quick to publish the news: “Hastings explains his reasoning for a decision to create separate DVD and streaming businesses and websites. His customers react negatively to his blog posting (see more than 600 comments following Hastings’ post).”
“We feel we need to focus on rapid improvement as streaming technology and the market evolve, without having to maintain compatibility with our DVD by mail service,” writes Hastings on the Netflix blog. “So we realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently.”
According to Hastings, the new DVD business will be named “Qwikster” and will add a video game upgrade when it launches in a few weeks.
“A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated,” he explains. “So if you subscribe to both services, and if you need to change your credit card or email address, you would need to do it in two places. Similarly, if you rate or review a movie on Qwikster, it doesn’t show up on Netflix, and vice-versa.”
Hastings concluded: “Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.”
YouTube introduced a new video editing tool this week that allows users to make basic changes to uploaded video content without losing the video’s URL, view count and comments.
In addition to basic trim edits to make up for shaky camerawork, the new editor includes features such as picture rotation, contrast and color adjustment, and image stabilization. There is also an option for reverting back to the original video at a later date.
“YouTube has joined up with photo-editing website Picnik, both Google owned, to offer some striking color treatments of videos, including Lomo-ish, cross process and thermal,” reports Digital Trends. “Whether YouTube will later offer Picnik’s premium color treatments, for a fee, remains to be seen, although no doubt it’s something they’re looking into.”
The post includes an interesting video introduction to the new editing options.
Dish is expected to introduce a streaming movie service under its Blockbuster brand next month. The move will introduce a competitor to Netflix and coincide with that company’s recently announced price increase.
When Dish acquired Blockbuster’s assets in April for $320 million, it received content rights that it has sought to beef up through discussions with the studios.
“This ought to begin changing the way investors think about Dish,” said Ryan Vineyard, an analyst at RBC Capital Markets. “It goes from being an old-school pay-TV company to launching what could be a really high-growth business.”
Dish currently ranks as the second largest U.S. satellite-TV provider behind DirecTV.
Netflix walked away from another deal with Starz after that company insisted on a tiered-pricing model similar to what they would get with a cable channel. Netflix did not want to tamper with the simplicity of its monthly fee model.
Netflix had reportedly offered Starz more than $300 million per year to renew their agreement.
With the demise of the Starz deal, Netflix customers may feel that they are paying more and getting less. Still, Netflix counters that their Starz content accounts for only 5-6 percent of domestic viewing.
Netflix will be challenged by competitors like Hulu, Amazon, Apple and Microsoft XBox Live. Moreover, cable companies are increasingly offering similar access to video through TV Anywhere services.
Starz may either sell its content to a Netflix competitor or try and create its own streaming brand like HBO.
As the bidding war for Hulu continues, Financial Times reports that Yahoo, Amazon and Dish Network are all expected to offer near 2 billion dollars for the company, its subscription service and the rights to exclusive content for at least two years.
However, Google is rumored to have proposed a significantly higher bid for an acquisition proposal on a larger scale. Details have not been released, but some speculate that Google may offer a couple billion dollars more in exchange for more content for a longer period of time. It is not clear if the Google proposal includes a longer deal for content or possibly something else — or if Hulu would even be interested in a new plan.
According to The Wall Street Journal: “Since that’s not what Hulu’s owners have put on the table, ‘normally we would have thrown people out if they’d said that,’ says an executive familiar with the sales process. But Google ‘indicated that there’s enough money’ involved so that Hulu’s owners are at least thinking about continuing the discussion.
The video site would fit nicely with Google’s YouTube, which has struggled in landing the type of long-form premium content that Hulu owns. And if rumors are accurate, Google is willing to pay.
But would the content owners agree to terms with Google, which is already the largest video website worldwide, when they were earlier holdouts on Google TV?
Rovi has announced DivX Plus Streaming that allows cloud-based movie services, such as Best Buy’s CinemaNow and other sites integrated with the Rovi Entertainment Store, to stream movies securely to DivX-compatible devices.
New features include being able to pause on one device and seamlessly resume on another, improved video quality, and support for multiple language tracks and subtitles.
“Other content-protection companies, such as Google’s Widevine subsidiary, offer some similar capabilities to service providers, so Rovi is playing catch-up to a degree. And not every Hollywood studio allows its movies to be distributed in the DivX format,” reports the Los Angeles Times. “Rovi executives insist, however, that they’ve leapfrogged the competition with some features, including the near-Blu-ray-quality images and the ability to support multiple alternate-language soundtracks and subtitles in the same stream.”
Although integration into specific products has yet to be announced, Rovi explained the technology will be available to many existing devices through a firmware update.
Online video subscribers of Netflix and Amazon Prime paid almost $50 on average for video subscriptions during a recent six-month period.
According to new research from Parks Associates, subscribers spent less than half of that amount on a la carte video purchases.
The number of movie and TV show downloads declined 56 percent from 2009 to 2010, and movie rental downloads decreased 70 percent.
“Based on the reported usage of video download services by U.S. survey respondents in Q4, consumer spending on a la carte video during a six-month period ranged from $12 to $26,” reports Home Media Magazine. “Comparable spending on video services subscriptions during that same period reached at least $48 per household.”
“The all-you-can-eat-style subscription approach taken by Netflix has proven successful in the U.S. market,” Parks said in its report. “It has helped to drive up consumption — and spending — for online video.”
Netflix ended the most recent fiscal quarter with more than 25 million subscribers in North America.
In its first international venture, Hulu is launching its subscription service in Japan where it will offer hundreds of premium feature films and thousands of TV shows for $19.19/month.
The service will be accessible via select connected TVs and smartphones (Engadget reports that Panasonic Blu-ray players, Sony Blu-ray players and TVs, Xbox 360 and PS3 consoles and Android tablets are relegated to the “coming soon” list.)
Content will be provided from CBS, NBCUniversal, Sony Pictures Entertainment, Twentieth Century Fox, The Walt Disney Company and Warner Bros. Additional local market content will be added including Japanese-produced and other Asian content.
Hulu is also announcing an exclusive mobile marketing partnership with NTT Docomo. Details will be forthcoming.
A follow-up post from GigaOM yesterday outlines the differences between Hulu’s current U.S. offerings and its plans for the Japanese market, “that could give a hint at what Hulu might look like in the future.” So is there a “no ads, higher fees and more content suppliers” future for Hulu outside of Japan? If so, watch out Netflix!
Hollywood Suite is a new video-on-demand service with plans to launch in Canada this November.
Available via cable, the Internet and satellite TV, the service will offer 450 titles per month in HD from MGM, Warner Bros. and others.
The Toronto-based platform will also feature independent action, romance and relationship films.
According to Home Media Magazine: “Movie titles, subscription fees and rental programs, which are expected to rival rates charged by Netflix, will be announced closer to launch date, according to industry veteran Jay Switzer, co-founder of Hollywood Suite.”
“These channels are designed to meet the strong audience demand for movies across all platforms and support Canada’s television service providers,” Switzer said.
Since Fox implemented its 8-day delay of content availability on Hulu, downloads from BitTorrent for shows such as “Hell’s Kitchen” and “MasterChef” have increased 114 percent and 189 percent, respectively. Others are watching Fox shows on video sites including YouTube.
Moreover, the situation is creating negative consumer reactions as consumers are forced to find content elsewhere.
“One of the main motivations for people to download and stream TV shows from unauthorized sources is availability,” reports TorrentFreak. “If fans can’t get a show through legal channels they turn to pirated alternatives.”
The post suggests that some consumers have indicated they will be returning to their DVRs and may even dust off their VCRs in response.
Verizon Wireless launches Verizon Video this week — a new version of its video-on-demand application for mobile phones, providing Android users with more than 250 current full-episode TV shows from ABC, NBC, CBS, MTV, Comedy Central, Disney Channel, ESPN, Cartoon Network and others.
Premium content is also available including live sports coverage from NFL Mobile, NFL RedZone, NBC’s Sunday Night Football and NFL network.
The 4G LTE and select 3G service will cost $10/month or $3 for 24 hours.
According to the press release: “Verizon Video updates V CAST Video on select devices and current V CAST Video subscribers will be prompted to update the app the next time it launches. After the upgrade, it will then appear under the name Verizon Video.”
An increasing number of viewers are turning to rental programs for movies and TV shows, according to a report from Digital Entertainment Group.
DEG also reports that consumer spending on home entertainment has stabilized with an unexpected recovery to the disc-based business in the second quarter.
The report concludes that consumers spent $4.2 billion on transactional video services — disc rental, streaming and VOD — during the first half of 2011. These figures mark an 11 percent increase over the same period last year.
The report also mentions a 16 percent drop in disc purchases, with combined Blu-ray and DVD sales falling to $1.8 billion in the second quarter. However, rental — including streaming and VOD — was up 11.16 percent. (Blu-ray sales increased 10 percent, while demand for DVD declined.)
Netflix rose 45.7 percent in the first six months of this year, while kiosk rental (mostly Redbox) rose 39.8 percent.
The Hollywood Reporter adds: “Spending on Blu-ray Discs was up a solid 10 percent in the first half. DEG estimates that the number of U.S. households with at least one Blu-ray Disc playback device rose 16 percent in the first six months of 2011 to bring total household penetration to more than 31.6 million, making the format one of the fastest-growing new technologies in the home entertainment industry.”
Hulu will unveil an original documentary series on August 17. “A Day in the Life” is produced by documentary filmmaker Morgan Spurlock, and will be available exclusively on Hulu.
The half-hour show will follow the daily lives of celebrities, including business mogul Richard Branson and musician will.i.am.
Hulu is not the only online video site to venture into original programming. In March, Netflix announced an original series of its own: “House of Cards,” starring Kevin Spacey.
The series is Hulu’s largest and most ambitious original production, and will premiere as the service continues to court prospective buyers. Yahoo, Google, and Amazon are rumored to be potential bidders.
Rovi Corporation filed suit against Hulu last week, claiming that the video site infringes on its patents for electronic program guides.
Santa Clara, California-based Rovi provides technology that powers streaming services from Blockbuster On Demand and Best Buy’s CinemaNow. The company also licenses its technology to others such as Apple, Microsoft and Comcast.
The digital entertainment solutions provider claims that Hulu’s infringement “presents significant and ongoing damages to Rovi’s business.” The company is seeking compensation for lost license revenue and treble damages.
As previously reported by ETCentric, Hulu has been offered for sale by its owners (Disney, News Corp., NBC Universal and Providence Equity).
The BBC’s popular iPlayer is an on-demand broadband television and radio service that has been available in Great Britain for four years.
As of last week, the service is now available through an iPad app to 11 countries in western Europe (Austria, Belgium, France, Germany, Italy, Luxembourg, Ireland, the Netherlands, Portugal, Spain and Switzerland) — with plans to launch in the U.S., Canada and Australia by the end of the year as a pilot program.
The app will allow users to stream programs over 3G and Wi-Fi, with the option to download for later viewing offline. International users will have access to some content for free, while full access will be subscription-based.
Luke Bradley-Jones, managing director of BBC.com, describes iPlayer as a VOD service: “We will have content from the last month, but also the best from the catalog stretching back 50 to 60 years.” He added, “What we’re trying to test in the pilot is the ability to drive exploration and discovery through a programming approach rather than an algorithm-based approach. We’re not trying to compete against a Netflix or a Hulu. This has to be tailored and hand-crafted, so we can create a tone of voice.”
