Speaker 1 0:02

Welcome to this week's edition of the Dan Rayburn podcast, the show that curates the streaming media industry news that matters most, unvarnished, unscripted and providing you with the factual data you need to know, without any of the hype, the Pulse of the streaming media industry.

Speaker 2 0:20

Welcome to the Dan Rayburn podcast. I'm Dan Rayburn, back for another episode with co-host Mark Donegan. Mark, we're at almost 100, what are we? 96 here.

Speaker 3 0:29

Yeah, that's great Nice growth we're getting there.

Speaker 2 0:33

For those that don't know and actually nobody knows, because it hasn't dropped yet but Mark and I recorded a second podcast this week because of all the sports news that came out.

Speaker 2 0:42

That's right week because of all the sports news that came out. That's right. So we're going to highlight some of the sports news today, but really not go into detail or in depth about it, since we just did a whole sports episode. We're going to cover some of the earnings we've had about a week ago that Mark and I never got to. Also, we had a bunch of presentations, obviously this week with the upfronts in New York City, so we're going to cover that as well. So, mark, from a high level, let's just talk real quickly about some of the most important sports news. Sure, obviously, the JV now has a sports name and also the.

Speaker 2 1:14

Netflix's NFL deal. So, yeah, called Venu Sports V-E-N-U. All we know here is the name. I wish we knew more, but no pricing has been given out. Uh, they've not talked about when they're going to launch. They simply say they'll launch this fall. Uh, I do expect the service to launch, with some some minimal customization and personalization back end being driven by Fox right now, but there's not a lot of time left to get this product to the market. They do have a CTO. The CTO did recently upgrade his LinkedIn so you can see who he is if you just search on LinkedIn. So they do have a CTO, formerly many years ago, from the Disney side on ABC.

Speaker 2 2:02

And then the other thing we should point out, mark, is the sports jv has highlighted that they're not yet agreements in place with the jv partners. That's right, so they're still working on that as well. Obviously, we expect that to be to be wrapped up by the time they launch. So, mark and I talk about, uh, the the new venue potential offering in terms of when it comes out on the other podcast. So we'll let you guys listen to that one. Let's move on, mark, to obviously Netflix deal with the NFL is huge. You and I talked a lot about that on the other podcast.

Speaker 2 2:39

So a couple of key things I'll just say here is we don't know the pricing. Multiple news outlets are putting it between $75 million to to 150 million per game, depending who you listen to. In 2003, the NFL accounted for 93 of the 100 highest rated shows on TV. So you've got that to contend with now going to the largest streaming service in the world. That to contend with now going to the largest streaming service in the world. But what listeners should really know here is is that this is the first streaming exclusive offering that's global.

Speaker 3 3:16

That's right, that's a big deal and yeah, yeah, we commented yesterday that you know that hasn't hasn't really been highlighted as much as I think it should be Agreed by news coverage, you know.

Speaker 2 3:25

Correct, correct. So let's go into some of the things around advertising the ad tier. So Netflix VP of Finance was at a conference this week talking more about it. So one of the things, mark, that he said and I didn't know this maybe some listeners know this or had heard this before. I'd never seen this referenced in any of their SEC filings. But he said that when someone adds an extra member to their account, they do not count that as a new subscriber. That I didn't know, so I thought that's interesting because that obviously changes our poo.

Speaker 3 4:02

Yeah, yeah, that makes sense, though, yes, you know, in x I mean, I guess, okay, the extra member is paying, but it's sort of like a bundled discount deal under the, you know, under the household account or or whatever.

Speaker 2 4:19

So yeah, interesting takeaway, because I don't remember netflix ever disclosing that so netflix is getting more and more open in terms of what they're sharing.

Speaker 2 4:28

Some would disagree and say, wait a minute, next year they're going to do away with subscriber numbers. Yeah, but I get why they're doing that. Where are they in the process of going, after all the households sharing passwords? Is it 100%? Yet he wouldn't say so. We know the number is more than 100 million plus, or more than 100 million households were sharing passwords. So he wouldn't disclose what percentage of the households Netflix has already cracked down on or the conversion rates he was asked. But he did say that he no longer sees password sharing at Netflix as a quote separate initiative and it's now just part of their regular business. So it's clearly not 100%, but we don't know what that number is.

Speaker 2 5:14

Yeah, exactly he was also asked and this was a great question how does Netflix decide to raise pricing? What are the different factors that go into it? So he said that Netflix looks at the quote current trends in retention, acquisition, engagement, competitive landscape, disposable income and inflation All makes sense. He also said that Netflix looks at engagement as a quote primary factor and that's the key metric they use to determine the value Netflix is offering. So he highlighted that if they see users watching a lot more Netflix content, they feel Netflix members are getting a lot more value out of it. So maybe that's the right time to raise the pricing because members see value. So it was interesting how he talked about it in detail.

Speaker 2 6:04

Up on my LinkedIn account you can see a link to I shouldn't say see it. You can see a link to listen to the audio recording of him talking at the event. It's about 45 minutes long, but it's pretty interesting. So I would definitely listen to that if you want to hear some more. I would definitely listen to that if you want to hear some more Regarding the ad tier. So a couple of things. We now know Netflix ad tier now has 40 million monthly active users. Note, that's not accounts or subscribers In regions where the ad tier is offered. 40% of all new signups are for the ad tier. Marcus, this is the same number they've given us previously the 40% so that hasn't changed. A new number they gave out here is over 70% of Netflix. Ad tier members stream at least 10 hours of content per month.

Speaker 3 6:57

Yeah, that's right.

Speaker 2 6:59

An interesting number, but the problem I have, mark, is I don't know what to compare that to. Yeah, so what are the non-ad members stream per month? They didn't say.

Speaker 3 7:08

Well, have they not given out that some sense of that previously? I?

Speaker 2 7:16

think they have in bits and pieces here and there.

Speaker 3 7:20

I think if somebody has done the research there or can dig up some numbers, that would be really interesting. Because is that trending on par? Do they watch more?

Speaker 2 7:31

Well, they don't give it out often enough for us to really be able to compare it, it's true. So we don't know. Now the key here. I think it's smart that they're giving out these numbers because it's AVOD. They're making more money over time on advertising so naturally, the more hours consumers watch, the more ads they're going to insert, the more money Netflix will make. So I do expect them to continue to give out a number on the AVOD side. But we'll see. Netflix also is going to launch its own ad tech platform.

Speaker 2 8:02

I'm not really sure why some of the media were so confused by this Mark. I got a good laugh that I saw some people writing well, you know, that's very complicated. That's not what Netflix does. It's going to take them years to do that and to get it right. I'm like aren't these the same people who said Netflix could never roll out an ad tier in the first two years? Come on, and they did it in what? 10 months? So just stop.

Speaker 2 8:25

Netflix knows what it's doing. It's also been very clear to Wall Street that the ad model is a multi-year approach. Yes, yes, I saw a major news outlet say that Netflix quote is in direct competition with established tech titans like Google, not accurate. Netflix is only selling ads in their own service, not third parties. That's where Google makes most of their money. So you can't use Netflix ad platform to buy ads outside of Netflix. So they're not competing. And if you think about what Netflix is doing here, we all know Netflix wants to control the experience, so now they control buying and placement and targeting with their ad stack Total sense.

Speaker 3 9:09

Yeah, yeah, so. So, dan, I I took a quick look. I'm just thinking, like Roku, you know how many streaming hours per active user, um, you know. Or on Roku, just to get an idea of how much usage, and roku in, let's see, I'm just looking here at the third quarter of 23. So last year, uh, roku, customers who were active, so active accounts, streamed 3.9 hours per day. Yeah, per day, you know. So, you know, depending, depending exactly how you do the math there, you know, it's like you know 100 and I don't know, call it 100 and 110, 120 hours, right A month.

Speaker 2 9:53

Yeah, the issue is a lot of that's free.

Speaker 3 9:55

Oh yeah, but this is this is ad. This is, you know, yeah, and I'm not. I'm not, I'm not in any way trying to make the point like, oh, you know, Netflix is only getting whatever 10% of Roku's streaming hours on the ad tier, that is. But it's just, you know, it's just a reference point.

Speaker 2 10:13

Yeah, I mean if you look at some of the others out there, similar to the Roku channel, the numbers are high yeah.

Speaker 3 10:20

They're definitely high, but then what's the CPM?

Speaker 2 10:22

What's the comparison? Exactly, yeah, exactly.

Speaker 3 10:26

And you know Netflix is going to be reporting on this number. I would anticipate. Maybe not, but I would anticipate on a somewhat regular basis. You would think they would want to show that growing. But you know we'll see.

Speaker 2 10:41

But you know we'll see yeah, we'll see Some other things here. I'll just say the final piece on Netflix. Mark is going back to the NFL. I forgot to mention. We talked about it in the other podcast, but Netflix did confirm for me that they will decide whether or not they want to stream two games on Christmas next year and the year after.

Speaker 2 11:01

Because it says they'll stream at least one, but up to two. Some people were like, well, I don't understand that. I didn't either. So I reached out to them and they just said they will decide at a later time. But it is Netflix decision whether or not they want to stream a second game on Christmas and 25 and 26.

Speaker 2 11:18

Paramount Global no real update there for listeners. If you haven't been following the paramount global saga drama, don't, you don't need to. We don't really have a shakeout yet there. Uh, there was a news report that they're in conversations with Amazon about potentially doing something um, you know, bundling something. But okay, they're in discussions with these guys all the time. That's not news. So nothing there. Mark, let's go to youtube. So you could youtube have what they call their brand cast in new york city this week, where they a little bit different from from the others, uh, who really talk about some of their their advertising uh, formats and and just what they're doing from a technology standpoint and obviously also highlight the content they have coming out with the upfront presentations. Youtube calls their brand cast. They bring out artists, they bring out celebrities from YouTube. That's really what they did most of the time. They did give us a few stats, though. Viewers watch more than 1 billion hours of content on TV screens daily.

Speaker 3 12:25

Wow, so specifically TV screens Feels like a big number. It does seem like a big number, netflix I mean.

Speaker 2 12:32

YouTube definitely wants to be thought of as TV. I still don't think of them as that. Yeah, but all the content I'm watching on YouTube is still at most a few minutes in length. Yeah, that's it, so I don't consider that TV.

Speaker 2 12:46

Well, there was one content deal, though, mark. This was interesting. So Google and Script Sports reached an agreement for locally televised WNBA Friday night games to be streamed on YouTube TV in home and away markets of the teams that are playing. Youtube TV and home and away markets of the teams that are playing. So YouTube TV will be the only pay TV provider carrying both local and national WNBA games, a season starting at the end of this month. I don't really know if that matters.

Speaker 2 13:17

I don't know what the viewership is there. I know it went up obviously for that one person lately. He's getting a lot of exposure, yeah exactly.

Speaker 3 13:24

Yeah, I'll have to Google her name real quick, but she seems to be definitely the rising star of the WNBA.

Speaker 2 13:31

For sure, yeah, and who was it? Whatever paid Fox, maybe whoever had the pay TV broadcast rights, put out a release already saying their viewership was up because of that.

Speaker 3 13:42

Because of that yeah.

Speaker 2 13:44

Because of her people wanting to watch, okay. Okay, let's move on to some earnings here. Uh. So we have numbers from fox which we're not going to go through, really don't need to. There's nothing streaming related, but we did get some interesting, one interesting tid point, uh, here on tubi. So they didn't discuss any metrics out of MAU and total viewing time, but there's only percentages. That doesn't help us. But Fox's CEO came out and said that 90% of time spent viewing on Tubi comes from VOD content not their fast channels, but I thought fast is supposed to save us all Fast is dead as far as I'm concerned.

Speaker 2 14:25

Fast is dead, Dan, you know, save us all. Fast is dead as far as I'm concerned. Fast is dead, Dan, Dan.

Speaker 3 14:28

Dan, you're not. You're not reading all the marketing messages I am. This is not working on me.

Speaker 2 14:35

Fast is dead because, unless you're a major brand where you actually have content that people want to watch, your content is lost across all these channels, and I hear from from content owners all the time who complain Dan, I gave my content to Roku channel, whomever. Yeah sure and to share advertising revenue. I literally get a check of $50 a month Like what am I doing? Yeah Well, your content's not that good. That's the first problem.

Speaker 3 14:59

Yeah, that's exactly.

Speaker 2 15:01

Um, so there's some issues there, but uh, but I thought that was interesting. Fox put that out. Also, someone pointed to a podcast that Tubi's CEO recently did. It was actually last month. I missed some of the statements in that initially, but she did come out and say that Tubi is not profitable. So now we actually have something on the record, so that's good.

Speaker 2 15:27

Fox's CEO was asked what Tubi will look like over the next three years with everything going on in the market. The only answer we got was quote Tubi will continue to grow. But then he also said quote there will be some headwinds for the whole marketplace in the next quarter. So ad revenue, as we know, still taking a hit. But that's all we got from Fox. We got no revenue numbers, but based on the revenue numbers Fox previously put out for Tubi I put this up on LinkedIn when they actually announced it in one quarter Tubi was on a run rate last year for $700 million. So we know they had at least $700 million last year in revenue. So it gives us a little size and scale for the business.

Speaker 2 16:16

Let's go on to some cord cutting here, Mark. So in Q1. You had Verizon, Comcast, Charter, Altice, Echo Star, and Wow lost 1.55 million pay TV subs. Hulu TV lost 100,000. Sling TV lost 135,000. Fubo lost over 100,000 as well. So you combine all this, it's 1.8 million live TV losses in Q1 when compared to Q4. Fubo did add subscribers year over year, which somebody nicely pointed out on LinkedIn. I had the number right, but it was year over year, not quarter to quarter. So you're talking about almost 1.9 million pay TV losses. So we don't know what YouTube TV got for the quarter and if they got new subs, lost subs.

Speaker 2 17:16

but we can see it's very clear that consumers still like pay TV, but they're just not as interested in a live linear channel lineup. Now, peacock has live content. They gained 3 million subscribers in Q1. Paramount Plus has live content they gained 3.7 million. Max gained 700,000 subscribers in Q1.

Speaker 3 17:39

And they currently have for free the Bleacher Report sports add-on yeah, that's right which seems to be continuing month over month, which is great for consumers, which is great they still don't have to pay.

Speaker 2 17:50

Yeah, so we know that sports content still drives live TV. Yeah, but so far virtual MVPDs are not benefiting from a steady stream of new signups. Yeah, and so, mark, I put on LinkedIn the Hulu chart. Somebody. I put on LinkedIn the Hulu chart, somebody I'm not going to call them out, um, I really should.

Speaker 2 18:09

But someone who a lot of people read said on LinkedIn that quote Hulu plus live TV in particular is adding customers as a at a steady clip, end quote. Well, that's just not accurate. It's just not accurate. So in the previous two years, the total number of subscribers for Hulu Plus Live TV has not deviated by more than 10%. Yeah, the past five quarters it drops down to 6.5%. Yeah, so six quarters ago, hulu Plus Live TV had 4.5 million subscribers. A year and a half ago, in Q1, disney reported it had 4.5 million subscribers. A year and a half ago, in Q1, disney reported it had 4.5 million subscribers. So it's not adding users at a steady clip. I don't think the person writing this truly understands the numbers. If we look at pay TV cord cutting figures from last year in Q1 of this year, so five quarters and not including virtual MVPDs, mark, just pay TV cable satellite. I estimate they're going to lose about 5 million subs combined this year, which would be a loss of about 7% of total pay TV households in the US. That's a big number.

Speaker 3 19:36

So cord cutting always something we have to watch. Mm-hmm. A little bit to the Comcast news of. You know Comcast is offering a subsidized package of. Let's see what is it. We'll get to that later.

Speaker 2 19:50

Oh, am I jumping ahead here? Yeah, okay.

Speaker 3 19:53

I am Okay, sorry I'll stop here. It's just a lot of news.

Speaker 2 19:58

No, but you're talking about the bundle of the channels.

Speaker 3 20:02

Exactly Talking about. You know just how it's fascinating and we'll get to that news that I referenced, but it's fascinating that the bundle is broken apart. Now. It's getting more, it's harder, it's complicated. Frankly, I just wonder if you know if content consolidates back to cable or paid you know traditional pay TV outlets. I wonder you know if some of some of these numbers are going to reverse. We're going to start seeing net ads from Comcast.

Speaker 2 20:40

Yeah, it's interesting to watch and you talk about just the fragmentation and other services that are, that are live, you know, and you know, like you say, virtual MVPDs are on eight different broadcast outlets, slash streaming.

Speaker 2 21:05

So CBS, fox, nbc, espn, abc, nfl Network, amazon, netflix and Peacock. So I broke it down on nights Thursday night games on Amazon they have 16. They're all streaming exclusive. Peacock has one Friday night game streaming exclusive. Nbc has 17 games Sunday night, but they also have two on a Thursday night because of holidays. Yeah, fox has at least 98 games Sunday afternoon and CBS has at least 96. Now, the reason I say at least, it's because week 18 double headers are still to be determined, so we don't know yet exactly how many games, but they're both going to have about a hundred games. Yeah, sunday morning all four of the international games are in the NFL network, so that's another one you have to throw in there. Yeah, monday night you have 21 games across ESPN and ABC. If they have a double header, they're doing one on ESPN, one on ABC, and then you've got two games on Christmas this year on Netflix.

Speaker 3 22:04

That's right and then. But didn't Amazon sign a Black Friday, another Black Friday special.

Speaker 2 22:12

That. I believe that's included in my 16 games oh, you oh okay. Okay, yeah, I'm including that, yeah, and, like Peacock, has just one from Brazil. Yeah, exactly Week one which is on an actual Friday night, even though normally they have them on different days. Yeah, so there's one or two oddities in there. But think about that that's eight different outlets. Wow, it's incredible. So bundle, bundle, bundle is all we're talking about. At the same time, mark, I've always said for many years streaming is the new pay TV. Bundle, yes, but at the same time.

Speaker 3 22:44

Mark, I've always said for many years streaming is the new pay TV bundle.

Speaker 2 22:45

Yes, yes, it's a little bit different in the sense of okay, how it's delivered and whatnot. And we could all play semantics here on words, whether it's pay TV, whether it's cable, whether it's fast, whatever you want to call all these things, but the bottom line is we, as consumers, have to decide how we piece together the content we want to watch. That's right and that is our personal bundle.

Speaker 2 23:04

Yeah, yeah, the fact that other companies are saying hey, we've made a bundle for you, but we've already preselected the content you can watch. Okay, that's just a different type of bundle.

Speaker 3 23:14

Yeah, that's right, that's right.

Speaker 2 23:16

But it's still bundles. Yep. Big announcement here from Amazon. The CEO of AWS, Adam Selesky, is stepping down from his role next month and they're going to replace him with Matt Garman, who's the SVP of sales and marketing AWS. So this wasn't a you know, Adam got fired Just time to step away. But AWS, as we mentioned, $100 billion run rate this year Incredible, just what he's built that business into over time. Not just him, plenty of others as well. Let's go on to Warner Bros Discovery Marks. They had earnings. They added 2 million direct to consumer subs. 700,000 of those were from theS. They ended the quarter with 99.6 million DTC subs, so just about 100 million there. For WBD, Revenue for direct-to-consumer was 2.46 billion. Now they actually had a profit of $86 million on adjusted EBITDA profit. So we're talking about these streaming DTC services trying to get to profitability.

Speaker 3 24:26

Yeah.

Speaker 2 24:27

Here's one that got the profitability that quarter. Yeah, pretty interesting. Global DTC ARPU mark was $7 and 83 cents, which was up 4%. Let's go into some other things I said here. So, mark, you and I are talking wholesale all the time and I'm always pointing out that wholesale deals people in the industry talk about them. Oh, you know, this is great, they'll get more subs, but it impacts their numbers because they're charging less. They're getting sorry, I should say they're getting paid less because it's a wholesale deal. That's right. So we've already heard this from Disney. Well, wbd said quote our international subscriber growth was partially offset by lower subscribers in the US, largely resulting from continued linear wholesale subscriber declines. And yet those wholesale deals are ones that are bundled in many cases, yeah.

Speaker 2 25:23

So people in the industry seem to think bundles is something that's you know, just okay, it's going to really drive so many more new subs. We don't know that it's possible, it could. But my point is we don't have the details yet, we just don't know. Wbd's TV networks revenue was down 8%, with their advertising revenue down 11%. Studio segment revenue was down 12%. It's the other side of the business, as we've seen from others.

Speaker 3 25:50

Yeah, it's not doing too well, it's such a hit driven. Yeah, I mean, shoot the studio side. You don't make a good movie in a couple of quarters and wow.

Speaker 2 25:59

It's a problem. Yeah, Now let's see what else do we have here? The company debt stands at 43.2 billion. They repaid 1.1 billion in debt during the quarter and they also announced, though, 1.75 billion cash tender aimed at further reducing its debt. But, as we know, they have a lot of debt.

Speaker 3 26:20

Yeah, they have a lot of debt. But we've commented before. You know that they, they really they are aggressive, they are going after improving their financial condition big time. You know, and they have to. Well, they have to. You can say, well, what choice do they have? But you know, certainly they. There have been anyway examples.

Speaker 2 26:41

They've made it a priority.

Speaker 3 26:43

Yeah, they've made it a priority, exactly they've made it a priority, exactly yeah, which is great, that's good.

Speaker 2 26:47

Now let's get to what you were talking before, Mark. Yeah, so this summer, Disney, Warner Bros, Discovery announced they'll launch a new streaming bundle including Disney+, Hulu and Max. Yeah, we have no idea what it will cost. We don't know what percentage of content, for instance, will be available in the new bundle. I also wonder okay, I sign up for the bundle, but can I add on something like the Max Sports add-on, or will I have to go to Max directly?

Speaker 3 27:18

Yeah.

Speaker 2 27:20

I really don't know. The bundle will be offered as both ad-supported and ad-free. I really don't know. The bundle will be offered as both ad-supported and ad-free. So that news was out probably a little over a week ago. And then actually Mark, the news you're talking about is the news that came out this week, and that is that Comcast is going to bundle in Netflix and Apple TV+ right. Yes, so, Peacock.

Speaker 2 27:45

Apple TV and netflix is going to be bundled in. Yeah, again, we don't know launch date. We don't know price. Um comcast ceo said something. The effect of it would be highly discounted or very discounted. We don't know what that means. Yeah, but that's another triple bundle, I guess. Guess let's call it of content coming to the market. So not surprising that we're seeing these companies partner up on content services. But I think the industry is going a little too hard and heavy here of, like you know, this is the future. If this doesn't work, if they don't see more signups or better retention or engagement, it's not going to continue. So let's call this what it is test.

Speaker 3 28:26

Yeah.

Speaker 2 28:27

It's what it is, it's a test. Now let's go to Dish Echo Star. Uh, so Echo Star lost a lot of subs, yeah, a lot of subs. Dish TV lost 200, 213,000 paid TV subs. Sling TV lost 135,000. So sling TV now has 1.9 2 million subscribers million. Yeah, and to put this in perspective, I had to look this up, but sling TV has been in the market for eight years, yeah, and it's never surpassed more than 2.6 million subscribers at its peak. Yeah, 2.6 million, that's the number now peak.

Speaker 2 29:04

Yeah, 2.6 million, that's the number. Now what we really have to think about here is what would happen to Sling TV if Echo Star Dish filed for bankruptcy. So that is looking more and more likely because in March their CFO said that the company must pay a $2 billion debt in November. Wow, after it made a debt payment in March using cash on hand.

Speaker 3 29:26

Yeah.

Speaker 2 29:27

So he then was quoted as saying quote we do not currently have necessary cash on hand or projected future cash flows to fund fourth quarter operations or the debt due coming in November. We are in discussions with funding sources at all levels on our capital structure. Now they could go out and raise money. Yeah sure, sure there's, it's possible, man, they'd be paying quite some interest.

Speaker 3 29:55

Yeah, I was going to say the terms will be onerous. Onerous is a polite way to put it.

Speaker 2 30:00

Yes, so we don't know what's going to happen. I'm not saying they're going under, but it's looking more and more likely that they're going to have to do something drastic. Yeah to survive in the market.

Speaker 3 30:13

Yeah, yeah, the sling tv story is, you know, really fascinating and and a little bit sad, you know as to why they've just never been able to get that above two and a half million subscribers.

Speaker 2 30:29

Well, I mean okay. So here's my take on that Mark.

Speaker 3 30:32

Okay.

Speaker 2 30:32

Which is from day one. They and a bunch of the other virtual MVPDs came out and said this is not cable TV. Yeah, you can pick and choose what you want.

Speaker 3 30:44

Yeah, and what I?

Speaker 2 30:45

get after Sling TV. For for many years is they called their service? It was in the upper left-hand corner of their homepage, a la carte. Yeah, there's nothing a la carte about it. Yeah, that's right. A la carte means pick the channels you want.

Speaker 2 30:57

Yeah, you literally, just yeah you pay per channel, you Right, that's a la carte. So I don't feel from day one they even came to the market properly setting expectations for consumers. Also, over time they seem to limited set of channels, which is fine for some, but remember they were missing a lot of key sports.

Speaker 3 31:28

Oh, they were missing a lot and they launched at what $35, I think was was their first uh.

Speaker 2 31:36

Oh, I think they were cheaper than that Was it, even was it yeah.

Speaker 3 31:38

I think it was in the twenties.

Speaker 3 31:40

Okay, okay, might might have been so but you know, but in this is an eight years ago though, you know the cable, you know cable kind of still reigned Supreme and so you know they were able to say, hey, your average cable bill is $95 or whatever it was at the time. You know easily in that range where a third of that you know. You know 30 bucks or whatever. Again, you have to go back and check the numbers. So they launched for $20 a month, $20. Okay, february 9th 2015.

Speaker 3 32:09

Okay, 20. Yeah, yeah, well, yeah, I mean that was disruptive at the time, but it was cheap. Yeah, it was really cheap but it was such a truncated you know set of channels but I don't think people really keyed in on that. I remember how excited everyone was talking in our industry, you know about. This is the disruption that is going to kill cable, kill pay TV.

Speaker 2 32:36

Well, it also came down to channels what they had, what they didn't have. Because remember when they launched they had the sports extra pack. And that included Univision channel. It included ESPN buzzer beater, espn bases loaded, espn goal line, something called Universal Sports.

Speaker 2 32:56

I don't remember what that was at the time, but that's who's watching that stuff yeah right, so that at five dollars a month, hey, that's cheap, but that's not the content people were looking for. Yeah, so it started 20 bucks, yeah, 20 bucks a month. Wow, it's funny because it mentions services in here that no longer exist when it first launched yeah, and that's how much the market's changed in eight years. The market's just so we'll see what happens with, with, with sling tv uh let's move on to vizio, mark.

Speaker 2 33:27

So vizio is having a problem here, which is that their smartcast active accounts. You know it's just not growing like it used to. Growth is really slowing. So at the the end of Q1, they added only 100,000 accounts. To end Q1 with 18.6 million Platform plus net revenue was up 27% to just about 160 million Smartcast. Average revenue per user was $34.24. That's trailing 12 months. So divide by 12. That's up 17%, mark. Here's a number for you. Talking about number of hours streamed, the average SmartCast active account streamed 101 hours per month. They now have over 300 fast channels.

Speaker 2 34:16

But the issue here is Vizio only gets a smart cast active account user if they sell a tv. Yeah, that's right. So unless they start offering vizio smart cast well, platform plus, take whatever brand they want to call it and start getting that on other devices and platforms which they could do, but then they'd be competing with a lot of other people it's going to be very hard for them to continue to grow that business. Yeah, so that's that's the reality of of the numbers, sinclair. Also one other key point there, mark, was that let's see, oh, the ARPU of up 17% year over year. Arpu's still growing, which is great, but the rate of growth of ARPU's also slowing.

Speaker 3 35:07

It's interesting. I'm looking at their year-to-date stock performance. Oh yeah, what is it? I haven't looked. Well, you know it's fascinating. So let's see here. February 5th, they were right at like ten dollars dipped down to, like you know, you know, gone up a little bit.

Speaker 2 35:49

That's because the walmart news though it, but it just continues.

Speaker 3 35:54

You know kind of it's like the market is kind of priced in. You know the slowing TV growth. I would assume I don't know it is strategically though. You know, when you think about kind of the go-to-market and how they're going to grow, it is really challenging because they need to branch out. Actually, have they sold their TV OS as separate or is it only available on their TVs? It's only on their TVs, yeah, and I am not suggesting that that's an easy market or that they should go out and try and do that, because that's brutal and there's no way they're going to win Samsung right.

Speaker 2 36:35

And Walmart may not want to be in that business.

Speaker 3 36:37

Yeah, correct, correct, absolutely, if the deal goes through business. Yeah, correct, correct.

Speaker 2 36:39

Absolutely, if the deal goes through, yeah if the deal goes through. Yeah, they're still up $3 because of the deal news and that was, to your point, February 20th, yeah, February 20th where?

Speaker 3 36:50

it really well. There were two spikes. So there was a spike from call it February 5th to February 13th, where the stock went from basically seven to just under $10.

Speaker 2 37:04

So that's when the rumors came out of. Walmart, and then the 20th spike is when the news came out.

Speaker 3 37:09

Yeah, yeah, exactly, and then it jumped up basically another dollar at that point, you know, and then it stayed, you know, right there. So yeah, year to date it's up 40%. It's up.

Speaker 2 37:19

Yeah, I mean let's see last 12 months. It's up 47%, but if you take out the Walmart news it is 637. It's only up about a dollar over the last 12 years minus Walmart.

Speaker 3 37:33

Exactly yeah.

Speaker 2 37:35

Yeah, not surprising.

Speaker 3 37:36

Yeah, yeah, yeah. I wonder if Walmart would be interested in this strategy. I don't think it really fits a retail strategy, but I wonder if they would price the TVs at an incredibly low point. You know, maybe even where they're not making money on the sale of the TV.

Speaker 2 37:56

Have you been to Walmart, Mark? They're almost free.

Speaker 3 37:58

They are. Oh, I know they are, they're already so cheap. Yeah, no, Dan, I haven't been in recently, but yes, I do know that the TVs are. Yeah, it's incredible how cheap TVs have gotten.

Speaker 2 38:12

I was in Florida at a Walmart and I assume Walmart's kind of all priced things the same. Probably, but it seemed like Florida's TVs were cheaper. I don't know why I thought that. Maybe I'm just wrong, but there was a 42-inch at $99. Yeah, and I think it was like insignia, right, it wasn't?

Speaker 3 38:29

a Samsung, obviously. Yeah, yeah, yeah.

Speaker 2 38:32

But $99 for 42.

Speaker 3 38:33

But you know, the thing is, dan, I'll bet you the Samsung was only only like I don't know 299, which, of course, oh, but that's three times more. Yeah, but it's a sam, it's like a major brand, you know. In other words, tvs are just so cheap, it's incredible what tvs have gone to.

Speaker 2 38:47

Yeah, yeah, a couple more pieces here, mark. There's rumors that sinclair is looking to sell more than 30 percent of its 185 owned or operated broadcast broadcast stations, including the tennis channel, and we've heard about the Tennis Channel potentially changing hands over the last year. Yeah, so not surprising. Sinclair's CEO said that the company is always open to offloading parts of its business if it makes sense, so sounds like they're looking at potentially selling some of the stations, but other than that, we don't have more details.

Speaker 3 39:20

Yeah.

Speaker 2 39:21

Let's do earnings here from two other companies. So Brightcove had earnings which has kind of been lost in all the news.

Speaker 2 39:30

It's coming out with bundling and sports. But Brightcove's Q1 earnings had a revenue of $50.5 million, so it's flat from Q4. It's up 3% year over year. Their net loss was $50.5 million, so it's flat from Q4. It's up 3% year over year. Their net loss was $1.6 million. This was interesting, mark. They announced that they monetized a portion of their patent portfolio. They didn't say what the patents were and they didn't say to whom. What I was told was just keep an eye on some of the things that I watched on the patent side and there'll be an announcement of this company taking over the patents.

Speaker 3 40:02

Oh, okay, so we'll figure out what they are. So they basically sold the IP or did some sort of a deal.

Speaker 2 40:07

Yeah, so they sold them, but they're still allowed to use the patents.

Speaker 3 40:10

Oh sure, Sorry.

Speaker 2 40:11

They're still allowed to leverage the technology that is tied to the patents themselves. They generated $6 million from that.

Speaker 3 40:19

From that yeah.

Speaker 2 40:21

So they also said that 2024 revenue guidance. Right now they kept it the same range they gave out before of $195 million to $198 million and a non-GAAP loss from operations of $1 to $3 million. So what that is is for listeners breakout this year is projecting it'll do almost $200 million and it'll lose $1 million to $3 million. So what that is is for listeners Breitkopf this year is projecting it'll do almost $200 million and it'll lose $1 million to $2 million. They ended the quarter with $200 million. Sorry, $200 million. They would wish they had that much.

Speaker 2 40:50

Sorry, with $22.9 million in cash and cash equivalents. So at $195 million to $198 million, breitkopf, year-over a year has the revenue decline again by a couple percentage points. So showing growth in the market for many of these vendors is challenging. It's challenging. Yeah, let's go to Akamai. Akamai at Q1 earnings. Let's take a look here. Revenue is $987 million. It was down from Q4 revenue $995, but up 8% year over year. Security revenue is up 21%. Delivery revenue is down 11%, $352 million. Not surprising if you track the delivery side of the market. Compute revenue was 145 million. That's up 25% year over year. The key takeaway number here for listeners is for Akamai, security and compute revenue represented 64% of total revenue in Q1. It's a great number and it continues to grow. Their gap net income was 175 million and at the end of the quarter they had $2.3 billion in cash, cash equivalent, marketable securities. They authorized a new $2 billion share repurchase program and then the final number here is their full year 2024 guidance is $3.95 to $4.02 billion At the midpoint. That means their total revenue year over year for the company would grow about 4%. Wall Street really wants that back up into the high single digits. That's what they're looking for Now on the delivery side, mark the company gave out a little bit of information, some numbers here.

Speaker 2 42:37

So for the Olympics they expect to see $3 to $4 million in revenue. I saw some Wall Street folks say, oh wow, $3 to $4 million in revenue from NBCUniversal, for Peacock is great. No, that's not what they said. They said $3 to $4 million from Olympics revenue. They have dozens of customers that they are tied to that have to do with the Olympics inside the US and outside the US. So all the business combined for Akamai for the Olympics, of all the services they're offering tied to the Olympics, it's $3 to $4 million in revenue.

Speaker 2 43:07

And what I love with them giving out that number, which they've done in previous years, is it makes some understand on wall street who think all of a sudden, because the Olympics happened, that's a catalyst for a large portion of revenue for any content delivery network. It's not. Yeah, and here's the number to prove it. So another thing here that took place which was unknown to some people, as Akamai said, due to a social media customer who has optimized their platform to save money, akamai would take a hit of $40 to $60 million in revenue from the year due to less traffic from this single customer. Now, akamai didn't say who the customer was, but I'll tell you it's TikTok. They've been prefetching less content differently. They've optimized their entire infrastructure stack the past few quarters. They've been re-encoding their video like we've seen a lot of people do for just optimizing video quality outside of tiktok. Akamai also said that quote slowing traffic growth across the industry. Because of that, they expect to see 20 million to 30 million less delivery revenue for the year.

Speaker 3 44:23

Yeah.

Speaker 2 44:25

They also said at the end of the quarter they'll have repriced five of their seven largest delivery customers and they expect the remaining two to reprice by Q3. Now, unlike Fastly, akamai said the pricing they are seeing is in line with what they expected. Fastly said they were really surprised by the pricing they were seeing in the market.

Speaker 3 44:46

Let's see.

Speaker 2 44:47

And I think you commented regarding.

Speaker 3 44:49

Fastly's response is that how could they be surprised by? That, don't know, that was kind of surprising to me, yeah exactly, and and akamai is very, very much, uh, connected right in the middle working with their customers. They know the market incredibly well, so, yeah, they're not shocked no, they're not surprised.

Speaker 2 45:16

The tiktok thing too not surprising, considering what they're doing now.

Speaker 3 45:20

There's some architecture, things there which you talked about, you know, is that this is not just them. You know, going to Akamai, driving the price down. You know reducing bit rates. There's some architecture that you know, I'm aware of, that is changing significantly and also.

Speaker 2 45:36

TikTok has their own DIY CDN, but it's primarily APAC. Only today and Akamai was asked about this on the call Do you see, is this because of their DIY? And they said no, we have not seen any traffic takeaway yet.

Speaker 3 45:50

Yeah.

Speaker 2 45:51

Yet Right. So could that happen over time? It could, yeah, but TikTok could also just disappear from the US market completely.

Speaker 2 46:00

Exactly From a legal standpoint. Yeah, so we don't know what's going on there. Now for people who are also saying, okay, this is all you know. Dan just said video. Delivery traffic is down. Hold on, what did I say? I said delivery, yeah, I didn't say video, yeah. The reason I'm pointing that out is because Akamai specifically came out and talked about gaming download traffic not growing at the rate they'd previously seen. So this is not just video. There was also a report that Akamai is dropping their delivery pricing just to win business. They're not. That's just not happening. They did say on the call Mark that the delivery business is quote highly profitable. So if we were wondering if they're making money from a profitability standpoint in delivery, they say it's highly profitable. They also gave out a number here that they've reduced their delivery capex cost to quote low single digits. Low single digits. That's 50% less or lower, I should say than a few years ago. Amazing.

Speaker 3 47:04

So that's certainly good yeah.

Speaker 2 47:06

Uh, and then you know. For those wondering, wait a minute, why is traffic going down? What's going on, well, just on the video side. Forget software downloads and gaming. Just look at the subscriber numbers from OTT platforms. Sling TV lost subs.

Speaker 3 47:18

Yeah.

Speaker 2 47:19

Hulu plus live TV lost subs. You have sub losses in quarters. You have other quarters where there's not that many new subs that are gained. Wbd only had 700,000 in North America in Q1. And then if you're using a multi-CDN approach which most are almost everybody, pretty much everyone outside of Major League Baseball that I know, is using a multi-CDN approach having an extra amount of traffic for 200,000 subscribers in a quarter doesn't move the needle if you're also subtracting others from it. And then if you're talking about optimizing encoding and lower bit rates, it really all adds up, mark. I also don't track gaming too closely, but I have seen that there were a couple companies that put out some big games that did not go over very well. So that's impacting downloads as well.

Speaker 2 48:12

And then a final piece here, mark, for okay, so for the real OGs listening right, and I'm talking like super, super, like folks who were around in the mid nineties, before we even get to 2000. Yeah, this goes back. I think anybody you ask for building out the first content delivery network as a third-party service that content owners could rent. Even before Akamai they were running a CDN just before Akamai it's pretty close. So Sandpiper Networks they really helped invent a lot of the technology back then in terms of in terms of caching and what they were doing. Um, they ended up getting acquired, basically based on a stock deal, where digital island acquired them in october of 1999. Uh, sandpiper's cdn offering at the time is called footprint for those that don't remember. So I saw this news thing come up and it said a patent lawsuit had been filed against Google regarding caching and their content delivery methods across uh content that they deliver for YouTube and also third party content across Google's cloud CDN platform Google's Cloud CDN platform. So got a hold of the filing, read everything.

Speaker 2 49:55

So it turns out that these patents, which were owned by Level 3, really Lumen and it's a long story here in terms of how it went from Sandpiper to Digital Island. Digital Island got bought by Cable Wireless. Cable Wireless North America went under. Their assets got acquired by who was it? Man, I totally forget and then that got acquired by Level 3. That turned into Lumen. So there's been a whole bunch of different companies involved here.

Speaker 2 50:21

But when Lumen shut down at CDN earlier this year, they sold off the patents. So a new company called Sandpiper CDN LLC was formed to acquire the patents. So a new company called Sandpiper CDN LLC was formed to acquire the patents. Now I don't know who's behind it. I did reach out to the two Sandpiper original founders who created the patents or created the technology and patented, who are named as the ones creating it in the document, the legal document. So Andrew Swart and David Farber. I reached out to both of them days ago. Neither one replied, so I don't know if they're actually the ones behind Sandpiper CDN LLC. I would not be surprised if they were. So that LLC has acquired the patents and now they're suing Google. Llc has acquired the patents and now they're suing Google.

Speaker 2 51:32

No-transcript, now that's not accurate. Yeah, okay, that's just level three exit of the market because some of its largest customers, including Apple and Disney, moved to other third-party solutions. Apple built its own CDN, disney consolidated traffic from like six CDNs down to two, and Lumen was not one of them. So Lumen's revenue did not decline due to a lack of companies licensing their patents. There's no way they're going to be able to prove that in court. You can just look at the numbers that are out there. So their CDN business started declining, also before 2023, year-over-year growth in terms of total revenue. That trend in terms of what customers were doing. It's well-documented with public data, so this is going to be an interesting one to watch.

Speaker 2 52:23

Mark, I also just threw up a disclaimer there in my blog post. Disclaimer there in my blog post. Over the last 20 years I have worked on a lot of patent cases as an expert, specifically tied to CDN. So patents going back to progressive networks, burst Move Networks, microsoft, viatech, spotify, nokia. I have worked, meaning been paid to do a lot of prior art look up to explain to a lot of legal people who don't understand the streaming industry how all this worked, what adaptive bitrate streaming is.

Speaker 3 53:01

Yeah, exactly.

Speaker 2 53:02

Variable bitrate. So I am not working on this case. I don't have any involvement to it. That's not business I take on anymore. It's a lot of work, but this is one I'm going to watch really closely. Yeah, just because it's interesting to me, and it dates back to Sandpiper, and I think Sandpiper was first formed in 1994 and started offering in in late of 1998, uh, september of 1998 is when it was officially sort of announced. But they were, they were testing things earlier than that. So it's, it's fascinating to me because it's just, it's one of the companies that really started if not the company that started, the content delivery business for being a third-party external service.

Speaker 2 53:51

I did reach out to Google. Google was determining whether or not they had any public comments they wanted to put out this time. If they do, I'll update the blog post on that. But certainly a blast from the past with that one. It is the industry. Is that old? If people don't know, it's three decades, it's well, I shouldn't say the industry, but the technology is 30 years old. The industry is. A couple couple came a couple of years after that, but uh, yeah, that's it was. It was fascinating to see Sam Piper's name come up. So, mark, that's what we've got this week For those wanting to know about sports.

Speaker 2 54:31

Depending when you're listening to this, the sports episode might be out. Mark and I are going to drop that two days after we drop this one. So that is all. Sports all the time. That's all we talked about on that sports webcast. So much going on in the space. So, mark and I appreciate you listening we're going to be off for about a week as I do a little bit of traveling, so we'll be back, maybe with about a week break there, but we'll be back with some more information. Mark, it's fascinating just to think throughout the year how much news comes out, but so far, the last I would call it 10 days, 10 to 12 days in May more news has come out. That's important I would just put it that way with the size of the companies, the bundles, the sports, the NBA rights which we're going to hear about soon Netflix, the earnings, the upfronts. It's been a busy two weeks. So for those that can't track all this, hey, man, I feel for you, cause I'm putting in 12, 14 hours every day.

Speaker 2 55:34

Yeah, yeah, there's exactly, you're putting someone emailed me today and they're like dude, you put up more stuff. Do you ever sleep? And I'm like I'm trying, but there's a lot of big news coming out, Uh, but if you have any questions, reach out to Mark and I. Everything we talked about today is up on my LinkedIn. We appreciate everyone listening. Mark downloads are really growing A lot more exposure coming to the podcast, which is awesome. We appreciate everyone's support. If you have something you want Mark and I to cover, certainly let us know as well, but we definitely appreciate everyone listening. So, everyone, have a great week, be safe and we'll talk to you soon.

Speaker 1 56:09

If you enjoyed the show, send it to a friend, have questions for Dan or Mark, connect with them on LinkedIn at any time, and be sure to check out Dan's blog at streamingmediablogcom.