The day after NBC had an uninspiring first night of the season, Comcast CFO Michael Angelakis reiterated that the company believes it will take a while for the fourth-place network to move up the charts. "A multiyear turnaround ... it's going to take time," he said at an investor event, adding that a move simply to third place could offer a significant boost in advertising revenues. On Monday, NBC finished fourth in the 18-to-49 demo with "The Sing-Off" and debut of drama "The Playboy Club." Angelakis backed up what NBCUniversal CEO Steve Burke said last week: NBC stands to collect enormous revenues from the payments cable and other operators offer in carriage fees. "Retransmission consent is an opportunity for NBC, no doubt about it," he said. "We're happy about that." It's not all good news for Comcast at large, where its cable operations will wind up paying rights fees to hundreds of stations across the country that are attached to NBC and other networks. In the case of the NBC portion, much of that money will move from one pocket to the other. Comcast has known that retransmission-consent payments would be growing for several years and is confident it can manage through it, Angelakis said. Separately, as some worry the ad market could take a dive, he said the Comcast cable side could post about 7.5% growth for its core business -- not including political dollars -- this year. Through the first six months, there was a 6.7% overall gain to $967 million. Comcast, which has been trying to reverse some customer losses in its video business, has been working to improve customer service and marketing, where it has rolled out its Xfinity brand in about 90% of its footprint. Marketing expenses were up 15.6% to $1.18 billion for the first half of the year. There is also an effort to upgrade the video product, whether it be through viewing opportunities on iPads or a better user interface. "The entire experience for our customer in terms of the product has increased substantially over the least three or four years," he said.
Car share company Zipcar has tapped comedian Dan Levy for a video series central to a social media push to promote the Boston-based service as an automotive solution to the frenetic urban life. The effort, "One Crazy Day," is a Facebook-based program where consumers give Levy a series of tasks that have to be completed in one day. The videos chronicle Levy doing them -- and of course he has to use ZipCars to get himself from place to place. Levy gets three missions, sourced by Zipcar Facebook fans, and he has to do them around the New York metro area. People whose suggestions are chosen as tasks for Levy get to ride shotgun as he goes around doing them. Winners also get $250 in Zipcar driving credit. Six runners up will receive $100 in free Zipcar driving. Said Rob Weisberg, Zipcar's CMO: "We're launching 'One Crazy Day' to give our fan base the opportunity to contribute to a comical video series that pays homage to our often crazy, busy lives, and have some fun along the way." "'One Crazy Day' is going to be pretty sweet," said Levy in a statement. "I want to be the next viral video star -- look out Giggling Panda, Dan Levy is here. Prepare to be entertained," he said. The company is taking the mission ideas at Zipcar's Facebook page, where people can also vote on the final three missions and watch the live video of Levy's Sisyphean travails around Manhattan on Oct. 14. Through Oct. 10, fans can log onto the Facebook page, click the "One Crazy Day" tab, and submit the missions, which muat take two to three hours and require a Zipcar, and must be able to be performed all in one day in New York City. Then from Sept. 23-26, fans can vote for their favorite missions and Zipcar will announce the first of three winning missions on Sept. 27. The two final missions will be announced in the weeks leading up to the "One Crazy Day" event. Although Levy's efforts will be streamed live on Oct. 14, videos will run on Facebook and on Zipcar's YouTube Channel starting in late October. The company says it has 605,000 members and over 9,000 vehicles in its fleet in the U.S., Canada and the UK.
Mobile ad platform Tapjoy is rolling out a new in-application video ad unit that allows users to interact with the ad without having to leave the app they're in. The aim is to provide a more seamless experience and higher engagement. In return for watching an entire video ad, a user playing a game will be able to earn virtual currency to unlock special features or content within the game. As part of the offering, people will have a choice of what video ads they watch to help ensure that ads are viewed all the way through. That's because Tapjoy, which focuses on incentive-based advertising in apps, will only get paid (and consumers will only earn virtual currency) on a completed view. Until now, video ads from Tapjoy have not played within the app -- and advertisers have not been guaranteed a completed view. After watching a video, advertisers can provide more options for people to engage with their brand through actions, such as following the company on Facebook or Twitter, forwarding the video to friends, or visiting the advertiser's Web site. It also allows users to make purchases directly via their mobile device. The company will charge on a cost-per-engagement basis for each 15-second video ad viewed in its entirety. The minimum cost will be 10 cents, but could go higher, depending on any additional post-view action, included in the engagement. Among the advertisers using the new ad unit at launch are Gap, Old Navy, Gamefly, Netflix, eHarmony, Intuit, and Zynga. For app developers that will be able to embed the video ads into apps through the Tapjoy SDK (software development kit), the goal is to generate more incremental revenue. And users will receive virtual currency in proportion to the level of engagement they have with a video ad. Getting a Netflix subscription after watching an ad, for instance, would deliver a larger reward than just watching the ad. According to second-quarter data released by mobile video ad network Rhythm NewMedia this month, the completion rate for pre-roll video ads running at launch between game levels and other screen changes within apps is 30%. Tapjoy believes its "value-exchange" approach can improve on that rate and capitalize on growing interest in mobile video advertising. The company, formerly known as Offerpal Media, boasts that its platform already provides exposure to 50 million daily active users and 280 million unique users overall. Its growth has been fueled by $51 million in venture funding this year, including $30 million in a round raised in July from investors, including JP Morgan and Rho Ventures.
As Netflix concedes that pricing increases have cost it customers, consulting firm Frank N. Magid Associates says it is at risk of bleeding even more subscribers. A Magid survey, conducted before the price increases went into effect for current customers, shows up to 30% could cancel their memberships. The beneficiary, Magid suggests, may be RedBox. The survey found that 9% of respondents said they would cancel their Netflix membership rather than switch to one of the new Netflix plans. An additional 7% said they would cancel for a reason not related to the price change, while 14% more said they were seriously considering cancelling. The survey included 1,000 U.S. consumers, including 700-plus were Netflix subscribers. Magid stated that Netflix's growth could be hampered by reasons beyond the pricing dissatisfaction, including the lack of content available for streaming. Redbox, which offers $1 overnight rentals, could be a beneficiary, as Netflix is dividing its business and launching a Qwikster DVD-by-mail offering, Magid stated. "A major reason that many consumers are not happy with their Netflix service is due to the quality of the content selection in the streaming service," stated Mike Vorhaus, president of Magid Advisors. "Netflix will need to improve the breadth and timeliness of their streaming content to rebuild major consumer momentum." Netflix is at risk of losing streaming access to Sony and Disney films after negotiations with Starz have apparently collapsed. The Magid study found that 60% of Netflix subscribers use Redbox and nearly 30% suggest they will use Redbox more because of the Netflix price alterations.
Netflix's recent and dramatic business model changes -- price increases, branding shifts -- were made because of a quickly changing marketplace, say company officials. "There have been too many examples in history of companies that don't move fast enough to position their brands... for what we feel is the long-term marketability for Netflix," says David Wells, chief financial officer for Netflix, speaking at Goldman Sachs Communacopia conference. "We have a long history of having been very transparent with our consumers... We'll take our licks as we get them." What were those changes? A drastic number of new consumers and even its hybrid DVD-mail order/streaming service. Netflix effectively increased its monthly price to $16 a month from $10 -- a 60% rise for many of its consumers starting in September. It did this by separating its DVD-mail order and streaming video business. The DVD business is now called Qwikster; the streaming video division, TV/movies, will retain the Netflix brand. Wells says the DVD-only business, while still generating a lot of revenue, suffered a bit because of the new digital technology consumers were using. This longtime Netflix business has found it increasingly difficult to get resources and attract talent. Thus, separating the two businesses was the way to go. "It's the larger opportunity of streaming," says Wells. "We have already seen declines in DVDs. It was our feeling that this business is mature." Netflix witnessed a net drop of 600,000 consumers in the third quarter, due to the price change announcement in July. "From what we see, word of mouth did have a impact. The news cycle certainly didn't help us." Still, Wells says, not much has changed for the company: "We are well-positioned; we are still the market leader." What about creating more a la carte business structure for movies/TV -- or video on demand? Wells says: "It's a low-margin business. We aren't interested in that." When asked whether Netflix would be better served to repair consumer relationships by lowering prices -- even for the short term -- Wells said this amounts to "kicking the can down the road." He said it would be a greter help to consumers to spend more on getting better TV and movie content.
Blockbuster has been hit with a new privacy lawsuit alleging that it violates a federal law by keeping detailed records about Web users. "Blockbuster maintains a virtual digital dossier on millions of consumers nationwide," Minnesota resident Baseem Missaghi alleges in the lawsuit, filed in federal district court in Minnesota. "These records contain not only its customers' credit card numbers and billing/contact information, but also a highly detailed account of their video viewing histories and preferences." Missaghi quietly filed the case earlier this month. Netflix is also facing a class-action suit alleging that its record-keeping violates the Video Privacy Protection Act, a law passed in 1988 after a newspaper in Washington obtained and published the video rental records of Supreme Court nominee Robert Bork. The statute prohibits movie rental services from disclosing information about the movies people watch without their consent, and also requires movie rental companies to promptly destroy personally identifiable information. This isn't the first time Blockbuster has been sued for allegedly violating the Video Privacy Protection Act. The company was also hit with a potential class-action in 2008 for participating in Facebook's Beacon program, which told users about their friends' activity at ecommerce sites. That matter eventually got rolled up in the Beacon settlement. Before then, however, Blockbuster unsuccessfully argued that the case should go to arbitration because its contract with users called for disputes to be settled out of court. In 2009, a federal judge rejected Blockbuster's position, ruling that the company's contract with users was "illusory" because the agreement said the movie rental store could change the terms and conditions at any time. Since then, however, the U.S. Supreme Court made it easier for companies to enforce arbitration clauses. That court ruled in April that AT&T was entitled to enforce an arbitration agreement against consumers who tried to bring a class-action against the company. The consumers had alleged that AT&T advertised discounted cell phones but charged tax on the full price. It's too early to know whether Blockbuster will be able to get this latest lawsuit dismissed. Regardless, many people who rent movies probably would find it unsettling if a list of movies they had rented or streamed was made public. Blockbuster and Netflix undoubtedly believe that the data they glean from users' records is critical, and that the risk of leaks is small. Whether the companies are right about that remains to be seen.
In a world with ad networks and exchanges, where companies are looking to aggregate content and audiences in scale, is the "destination" model still a valid business strategy? The largest destinations will continue to get significant share of media spend -- but for new content players, especially in the video category, syndication can be a critical element in getting scale -- arguably much more than SEO. In fact, comScore's latest VideoMetrix rankings, released this week, show that online syndicators are creating scale and gaining traction in many categories. Syndication is not a new concept. It's historically been applied to the TV marketplace, where great content is syndicated to broadcasters and there is a share of revenue at the local and national levels. Personalities like Oprah, Dr. Phil and Dr. Oz all found their place in this market. But the audience sizes here have to be huge to justify the infrastructure cost. In the online world, the added benefit is the ability to syndicate in vertical audiences that aggregate more targeted audiences. So if you can find enough skateboarding properties, and you have great skateboarding videos, you can syndicate to these sites and aggregate that audience for all the product marketers in that vertical. Ultimately, if you specialize in great content for a specific audience and cut deals with those who own audience, syndication is a win-win: audiences will want it and advertisers see great value in getting scale with their most enthusiastic and engaged consumers. Syndication is not about fixed reach, it's about expandable reach. Agency buyers need to understand the potential available and get experience with running campaigns here to understand the capacity of a content syndicator for their audience. In a fixed destination, the metrics are more well understand around reach, but the metrics are now solved, with companies like comScore now measuring syndication companies and counting their full audience. Another issue has been confusion with ad networks. Content syndicators do sell across more than one site, but are very different from ad networks. Content syndication brings content and creates audience engagement and value rather than ad networks who rely on partners to bring both content and audience. Content syndicators can provide clear context with a guarantee of quality. Instead of buying a square of real estate on a page, you're buying your ad against great content, served to an audience. With content syndication, advertisers have a guarantee of running with content they approve of and this is why it makes it more difficult. So how do you as a media buyer effectively evaluate video content syndication companies? 1. Quality of content: Content syndicators can be original producers, licensers, allow/not allow UGC. Original producers have the most control over quality, but you need to decide if that's a priority for you. The quality of engagement metrics is key to deciding if that partner meets standards you want to reach for your brand. Companies that allow for high-volume content creation on a crowdsourced basis may not have quality control in place to pull content that may be offensive or have consistent quality levels across the board. 2. Distribution quality: You can get views with all kinds of mechanisms, but what is the quality of the view? Are they selling content with sexy thumbnails but losing the audience after 10 seconds? Auto-play vs. user-initiated streams? Do they support AdSafe or DoubleVerify to ensure content is placed on the right kind of properties? 3. Advertising features-enabled: What are the assets your brand wants to deliver: two minute video? A pre-roll with companion banner for call to action? Brand integration into the content experience itself? All of these are elements of an ad environment that can be molded to meet a brand's objectives. Content syndicators who know their vertical will be able to support key ad units that achieve high value in their category.
Just as dumb companies do not turn innovative overnight, innovative and smart companies don't turn dumb suddenly. Past performance is generally a good indicator of future performance, at least in the near term. Netflix was the darling of video innovation, becoming the largest paid video subscription service in the U.S. (by subscriber count) and creating a tsunami of buzz of what the future of video was all about. Then the company implements a price change and suddenly stands to lose a million subscribers. The news is abuzz about them miscalculating the market, being too hasty, ham-handed and even foolish in implementing the price change. Netflix has gone from a darling among innovative companies to one that seemingly turned dumb overnight. The range of speculation on what is causing this loss of subscriber count has everything and the kitchen sink thrown in. The question I have is not what caused this subscriber loss, but rather, so what?! Netflix has 24 million subscribers: 24 million!! I think that still places Netflix ahead of Comcast, a milestone that rattled the windows in Q2. The worst hit Netflix will take as a result of the price increase is behind them, and it still has 24 million subscribers! Nowhere have I read a mention of ARPU, one of the metrics subscription services live by. With financial guidance remaining the same, ARPU is trending north. Playing to quarterly results for the Street is the death knell for growth companies. Clearly, Netflix ignored this by implementing the price increase. No one is dumb enough not to recognize that it will take a hit on account of the price change. So what if it is one hundred thousand, or one million. In the long game, Netflix is executing a strategic shift that is bound to hit some unexpected bumps along the road. That raises the question of metrics. Innovative companies chart course by their own metrics, not those of analysts or the Street. I recently read an article that Steve Jobs made Apple what it is by ignoring profit (that of course is what Wall Street lives by). I subscribe to the thesis, and Apple is just one example. The beauty of all this is that the companies or people we admire the most don't play by the rules we understand. I for one would like to think of Netflix as one of those companies. We were surprised when it was bidding against the likes of HBO for original content or shelling out nine figure licensing fees for premium content. Give it some time and I believe that we'll see a Netflix bounce again. Maybe a quarter or two and we'll be singing the praises of Netflix (disclaimer - I am not nor have ever been a stock holder of NFLX) That said, as I have said before here and here, Netflix has its own conundrum for achieving long-term success. It may weather the current onslaught of subscriber response to the price changes, but whether it can make it to the big leagues in the transforming online video industry is to be seen. Netflix hopefully knows what this will require better than any of us. This round may be a play to get to the finals of that league -- rather than what a 19% drop in stock price might seem to indicate.