Cable providers pay to prevent streaming TV; Time Warner responds: Duh

Time Warner Cable, like others in the pay-TV industry, has been essentially paying off content partners to prevent web-based streaming, Bloomberg reports. Incentives to lock-out content providers from streaming their properties online include monetary bonuses and threats to drop programming. Deals brokered between TWC and its partners are largely private, but some of their details were leaked to Bloomberg by anonymous inside sources.

"Exclusivities and windows are extremely common in the entertainment industry," said NY-based TWC spokeswoman Maureen Huff in response to Bloomberg's report. "It’s absurd to suggest that, in today’s highly competitive video marketplace, obtaining some level of exclusivity is anticompetitive."

Admittedly, deals peppered with stipulations of exclusivity aren't exactly a new thing. With more than 300 deals under its belt though, TWC makes no bones about its feelings toward would-be online disruptors.

Huff added, "In fact, the amount and scope of exclusivity and windowing in Time Warner Cable’s arrangements with programmers pales by comparison to that found between other players in the entertainment ecosystem."

In a nutshell: we do it, but others do it more.

Other companies, like Charter and AT&T, are also guilty of similar practices. AT&T is purportedly paying less to content providers who simultaneously provide online streaming while Charter claims to use such incentives and penalties to protect its cable-based "ecosystem".

If you're thinking deals like these are to blame for the poor state of TV streaming though, AllThingsD reports that may not necessarily be the case. Citing TWC as an example, its executive sources claim the company doesn't have those types of arrangements with the biggest players in the industry, names which include the likes of Viacom, Discovery and NBC. Hugely successful media companies have tons of bargaining power and often aren't so short-sighted to lock themselves into a no-streaming deal.

Rather, TV streaming outfits like Apple TV, Google TV and possibly even Intel have difficulty striking bargains because purchasing content to stream online is identical to the process used by cable companies: they must spend large sums of money on inflexible channel bundles -- a practice which the industry uses to subsidize its least popular properties with its most desirable ones. Even worse, since tech companies generally don't have much clout with big media, they often times wind up paying more than companies like Comcast and TWC for the same content.

{Source: TechSpot]

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Netflix splits its movie services

19 September 2011 Last updated at 15:46 GMT Qwikster will be the name for Netflix's DVD by post rental service Netflix has decided to split its DVD-by-post business from its movie streaming service.

The streaming service will keep the name Netflix but the postal DVD rental business will be renamed Qwikster.

The announcement comes two months after US firm Netflix bumped up the price of the combined renting and streaming service by 60%.

The price hike is thought to be behind the sharp drop in subscriber numbers Netflix has seen.

In July, Netflix reported that it had about 25 million subscribers. In an earnings report last week it said it now expected subscribers to number 24 million at the end of September.

The news caused shares in the firm to drop 19% which brought the total decline in its share price to almost 50% following the July price rise.

Netflix boss Reed Hastings took to the company's blog in a bid to calm the ongoing furore by explaining its reasoning behind the changes.

He said problems had arisen as Netflix evolved from the DVD rental business that spurred its initial growth to a company in which most of its customers were streaming movies via the web.

"...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," Mr Hastings wrote.

This was the reason it split DVD rental and streaming into separate businesses and charged for both, he said.

After the split, customers will be charged for each service they use and their bank and credit card statements will show separate payments. In addition, any feedback they give on good or bad movies via one service will not be mirrored on the other.

"Arrogance" based on past success meant the company neglected to keep its customers informed, he said.

"I messed up," he wrote. "I owe everyone an explanation."

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Netflix user numbers fall sharply

15 September 2011 Last updated at 21:20 GMT Users who want to rent DVDs by post are now having to pay more Shares in US internet film streaming and DVD mail rental company Netflix have slumped by 19% after it confirmed that it was losing customers following a recent price rise.

Netflix said it would have 24 million US subscribers by the end of September, down from 25 million in July.

It follows after Netflix announced in July that it would be increasing the cost of its DVD service.

The move has raised the monthly bill of some of its users by 60% or $6 (£3.90).

Netflix chose to increase prices on the DVD side of its business as more and more of its customers had instead switched to streaming its available movies via the internet instead.

However, the rise has had an angry response.

Analyst Barton Crockett of Lazard Capital said the decision was a "rare, large and surprising misstep" by the company and its chief executive Reed Hastings.

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Report: 2 million+ subscribers will cancel Netflix

 Thomas Hooke / netflix.com

Netflix mailers will still go out to members, just not as many as before

Despite the outcry after Netflix announced a 60 percent price hike and separate DVD and streaming plans, most will stay with the service and change their plans, according to a recent survey.

After interviewing 500 customers who currently subscribe to both DVDs and streaming, TDG (The Diffusion Group) "predicts that between 12 percent and 15 percent of dual-service Netflix subscribers will in fact cancel their service in the next six months specifically because of the new pricing scheme," which amounts to between 2 million and 2.5 million subscribers.

In its announcement today of its second-quarter earnings, Netflix revealed it now had 25 million members all over the world, from 15 million a year ago. "During the quarter, the streaming only plan continued to gain in popularity, with nearly 75 percent of our new subscribers signing up for it," Netflix stated. "With the rapid adoption of streaming, DVD shipments for Netflix have likely peaked."  

Netflix seems to verify TDG's prediction: "Our estimate is that by end of Q3 in the U.S., we’ll have about 22 million people subscribing to our streaming service, about 15 million people subscribing to our DVD service, and about 25 million total U.S.subscribers (with about 12 million people subscribing to both streaming and DVD)."  

While that seems like a lot — and it is — it's a loss that Netflix can deal with, with that kind of buffer. In the TDG analysis, it's "a cost Netflix considers justified and reasonable in order to (a) realign its cost and revenue structure, and (b) wean its subscribers away from DVDs and toward streaming video (a strategic imperative)."

Netflix expects to see the brunt of the impact from cancellations in its third quarter, when the pricing changes take full effect (beginning in September).

In the 22-page report, TDG elaborates a bit more about that business rationale: "Simply stated, Netflix has been on a rip, fueled by a growing base of very satisfied consumers—especially when it came to streaming video users. At the same time, Netflix was spending a fortune to buy distribution rights to better content on better terms and planning for rapid international expansion."

Have you canceled your Netflix membership?

YES. I decided to make a clean break with any Netflix plan.NO. I am keeping a DVD plan, but canceling streaming.NO. I am keeping my streaming plan, but canceling DVD rentals.NO. I am keeping my plan as is.VoteTotal Votes: 27159

When Netflix first broke the news to its subscribers, 80,000 vented on the company's Facebook page about it, with most saying that they were ready to cut ties completely. (When last we wrote about it, there were 30,000 comments.)

But now, this targeted report from TDG appears to show some compromise on the part of Netflix members, while still registering their disappointment over the new pricing plans: 70 percent of the respondents said as much when asked. 

Due to the price increases (i.e. a plan that included both DVDs and streaming went from $10 to $16), TDG found that 44 percent of the report's participants were likely to cancel their DVD subscription, while keeping streaming; 34 percent would do the opposite. At least in this questionnaire, streaming seems to have the edge.

Those who said they'd ditch Netflix entirely named "a rental kiosk like Redbox" as the number one replacement option (42 percent), while 17 percent were prepared to check out streaming alternatives, such as Hulu Plus and Amazon. 

Maybe one of the reasons folks are going to end up cooling down and sticking with Netflix has to do with its long history of customer satisfaction, including a No.1 ranking as of February in delivering "the best overall attributes of any brand."

Another reason: most of the respondents on this survey (75 percent), at least, already pay more than the minimum. A little over 46 percent paid between $10 and $14 monthly and nearly 23 percent pay between $15 and $20 a month. Participants in the report rented an average of six discs a month, with most falling in the 3 to 5 disc range (41.4 percent). 

To soften the blow, Netflix is adding more to its streaming content: In news that should make quite a few "Mad Men" fans happy, Netflix shared that "in a few days, every episode of 'Mad Men' will become available in syndication exclusively on Netflix." 

Also some newish-oldies but goodies will make it too:

We reached agreements with Miramax and Revolution Studios to add several hundred movies on a rotating basis, giving our subscribers access to critically acclaimed films such as "Pulp Fiction," "Good Will Hunting," "Black Hawk Down," "Across the Universe," and "Shakespeare in Love” as well as box office favorites like "Daddy Day Care," "Hellboy," and "Anger Management."

If Netflix is indeed trying to wean its customers off DVDs and onto streaming, it seems to be working. On average, respondents spent 7.1 hours a week watching streamed content, with younger subscribers likely to log more hours than older members.

While there were varying degrees of dissatisfaction with Netflix following the announcement of the separation plans, the biggest group still says they're definitely not going to cancel: almost 24 percent of respondents. The next biggest block, at 16.7 percent, remained neutral in their plans.

Ultimately, the report shows that Netflix may be able to weather this storm and come out ahead:

"TDG believes that, when all this plays out, Netflix will ultimately be a winner because of this new pricing scheme — but this is only a cautious endorsement of the move. The company is growing so fast that it is very likely any cancellations will be made up over one or two quarters, which leaves them with increased prices, decreased cost of service (primary postal savings), and the majority of their legacy subscribers still on board. Translation: greater revenue and improved margins, a great combination to help Netflix fuels its growth."

They definitely don't see Hulu Plus or Amazon as real competitors: "We are also mindful of Hulu Plus and Amazon Prime. Hulu Plus added about 325,000 subs in Q2; we added close to 2 million. We invest much more than Hulu Plus in content, in marketing, and in R&D ... So far, we haven’t detected an impact on our business from Amazon Prime." 

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Check out Technolog on Facebook, and on Twitter, follow Athima Chansanchai, who is also trying to keep her head above water in the Google+ stream.

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Nielsen: Hulu users watch more TV than Netflix members

Nielsen

Nielsen study shows what people are watching on Netflix and Hulu

As people begin to seek alternatives to Netflix after the brouhaha caused by its 60 percent price hike and separation of DVD and streaming plans, Hulu is one option where users are already watching more TV than their Netflix counterparts.

Nielsen recently conducted a survey of "more than 12,000 online interviews in March 2011, focusing on usage and attitudes for over-the-top video, particularly Netflix and Hulu."

Hulu

Hulu users watch a lot more TV than their Netflix counterparts. Here, a screenshot from one of their choices, "The Colbert Report."

At this exclusively streaming site that never had DVDs, Hulu watchers are definitely fans of the small screen, as they outnumber Netflix members 73 percent to 11 percent of respondents who said they use the services to watch TV shows. Movies are big in the Netflix world, with 53 percent of members using it to watch flicks, while only 9 percent of Hulu users do the same.  

Twice as many Netflixers watch TV and movies equally (36 percent), in comparison to 18 percent over at Hulu.

Regardless of what they're watching, Netflix subscribers do so on a TV screen (58 percent) rather than on their computers, while Hulu users consume most of their viewing on a computer (89 percent).

You can read more about how viewers connect to Netflix and Hulu — especially through video game consoles — through this related story.

Hulu is free, but those who want to shell out $7.99 a month can upgrade to Hulu Plus, which yields even more movies and TV shows, through current seasons. Netflix also offers up to a month on a trial basis, while Hulu Plus only allows that option for students (two weeks for everyone else).

More stories:

Check out Technolog on Facebook, and on Twitter, follow Athima Chansanchai, who is also trying to keep her head above water in the Google+ stream.

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