Then Again...
TDG's Weekly News Wrap & Commentary
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Of no surprise to TDG Members, PS Vue is up for sale
Précis
– According to an exclusive from
The Information
,
Sony is working with Bank of America Merrill Lynch to offload its virtual pay-TV service, which has stalled at around 500,000 subscribers.
TDG – Members will recall that, in early 2018, TDG predicted that 1-2 vMVPDs would close their doors or be sold off by 2020, as demand for these services would be insufficient to support the litany of competitors jumping into the space. When asked which services were most vulnerable, we told attendees of the 2018 Pay-TV Show that PS Vue and FuboTV were the most vulnerable. Chalk one up for TDG. Notably,
The Information
report also said that FuboTV was one of the companies Sony had approached about buying Vue. If the sale price is only in the tens of millions, as suspected, that might be doable, but FuboTV has only half the subscribers of PS Vue and throwing more money at a bad business model to achieve modest scale isn’t the answer.
So, who could be in the market for a failing vMVPD? Amazon and Apple come to mind, as does Verizon. But buyers will need very deep pockets and the patience to hang around until the space further shakes out, which favors tech-media firms and not mobile operators.
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Netflix bellies up to the bank to fend off new competitors
Precis – Just weeks before Disney and Apple launch their new SVOD services, Netflix will
sell $2 billion in senior unsecured bonds
, bringing its gross debt to $14 billion. The proceeds will be used on a variety of “general corporate purposes,” but primarily to acquire or create new content.
TDG – Funny that Netflix spent so much time in its Q3 investor presentation denying that new services like Disney+ and HBO Max would threaten the world’s largest SVOD provider, only to turnaround and spend $2 billion more to build up its content war chest. Such is the cost of being the market leader.
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Q3 legacy pay-TV numbers rolling in and it's not pretty
Precis – Early reports point to growing legacy losses:
TDG – Remember the handful of analysts that predicted 2019 would be the year U.S. pay-TV losses softened? They’ve crawled back under their rock, just as they did when 2018 losses didn’t moderate as predicted.
As we’ve long contended (beginning in 2012), legacy pay-TV is in secular decline—as in
long-term
decay. Yes, there will come a time when subscriber losses slow, but that time is not now. 2019 will set yet another record for legacy losses, a phenomenon to which many operators have largely resigned.
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Expectations high for Apple TV+, at least according to Morgan Stanley
Precis – Morgan Stanley
forecasts
that Apple TV+ will generate $9 billion in annual revenue and have 125 million worldwide paid subscribers by 2025.
TDG – Now that’s an optimistic forecast! Morgan Stanley assumes that one-in-ten Apple customers in 2025 will subscribe to the service, which is not unreasonable, especially given Apple’s decision to include a 12-month free trial with the purchase of any new Apple device. For some, this will make spending $150 on an Apple TV streaming box a bit less painful. The question, of course, is whether those that enjoy a free trial of the new streaming video service will choose to pay $5/month once that trial expires. A high conversion rate is key to the service’s viability, and the quality of content and experience will be key to conversion.
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ATSC 3.0: The long & winding road
Precis – Though “NextGen TV” will appear in televisions at 2020 CES, advocates admit that it will take at least
five years before broadcasters grow significant revenue
, even longer to achieve a ROI. Station owners promised to launch NextGen TV in 61 markets in 2020, though it will take years before infrastructure is fully built out in those markets (think 5G deployments but without the billions in funding). Achieving a national transmission infrastructure will take 10-15 years and cost billions.
TDG – ATSC 3.0 is a long-term game, with sparse and incomplete regional deployments expected during the next five years. Now expand the time frame to 10-15 years, and you can imagine the roadblocks likely to pop up. For one, TV OEMs could lose patience and move on to other new technologies and features. Yes, there are a few OEMs onboard early efforts, but they are a fickle bunch. If sales fail to ramp in a reasonable time frame, they are highly likely to lose enthusiasm as they look for the next "big thing." Second, in the next five years, residential broadband services will top 90% penetration. As such, any IP-based value-added service that ATSC 3.0 delivers will already be available in most US homes. Thus, in the end, the only real differentiator for the technology would be (wait for it) free over-the-air broadcasts, only now in 4K. Then again, given how expensive pay-TV prices will by that time, free 4K broadcasts could prove much more compelling to consumers than it is today.
Such is the path forward for ATSC 3.0, but the road is long and winding, with a number of roadblocks to address.
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Recent & Upcoming Reports
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Cogitations
"Philosophy consists mostly of kicking up a lot of dust and then complaining that you can't see anything."
Gottfried Leibniz
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