Netflix: The New Arch-Frenemy
The Albanian Army is coming everyone, watch out!
We’re only into week 1 of big media companies reporting their quarterly earnings and the most prominent name hasn’t been CBS Corp, Time Warner Inc, Comcast Corp, and Viacom — instead it’s all been about Netflix.
Pretty much on each of these companies’ conference calls, the $4 billion company from Los Gatos, California was a key reason for a boon to the bottom line by supplying ’found money’ by digital licensing of shows that would have been gathering dust on a shelf somewhere in Hollywood. But also on the calls for several of the same companies, Netflix was seen by analysts as a threat to their future. Let’s not forget the four who reported this week have combined market value of over $160 billion.
At CBS on Tuesday, which most people see as a broadcast and billboards advertising company, the first quarter was given a nice bump from its licensing of old CBS shows like”‘Cheers” but also by newer cable shows like Showtime’s “‘Dexter” and “Sleeper Cell”. Here’s the ever ebullient CBS CEO Les Moonves telling analysts on Tuesday how great Netflix and other copycats are:
“Content is forever and quality content never goes out of style. Nowhere is this more evident than the way we monetize our content digitally. In addition to the deals we struck with Netflix and Amazon, other online video distributors are looking to license our library content. These deals are having a big impact on our financial results, adding meaningful, very high margin dollars to our bottom line”
Vevo relaunches with closer Facebook ties
Vevo, the music video company, has relaunched the popular site with a more personalized, social, long-play viewing experience getting closer and further away from that MTV experience at the same time. One of the big changes is that you can now only get the full benefits of Vevo with a Facebook login in, which allows you to create a personalized Facebook playlist and share the videos you’ve watched with your friends on Facebook.
Vevo was the second most watched online video service in the U.S. in January with more than 51.5 million unique visitors watching an average of 62 minutes of video that month according to comScore. It is also YouTube’s number 1 partner.
A reminder that Vevo is owned by Universal Music Group, Sony Music Group and the Abu Dhabi Media Company, It also features music videos from EMI and many independent labels but not Warner Music Group, the third largest label owner.
Vevo’s changes are going down similar routes as many other ambitious online services which believe they need to have a significant social presence to grow and keep users involved sharing detailed traffic data voluntarily and adding value for advertisers and other partners.
In some senses you could argue there are ‘no surprises’ from the MTV of the early 21st Century.
Here’s Vevo executive Michael Cerda talking through the changes on Vevo’s blog:
Viacom chief Dauman plays down Nickelodeon ratings dip, sees more ads
Viacom Chief Executive Phillipe Dauman tried to play down the Nickelodeon surprise double-digit ratings drop in September as a Nielsen glitch which is being worked on and would not impact the upcoming quarter.
Dauman, speaking at a UBS Media and Technology investment conference, expressed his frustration at the issue but said there was little that could be done about it at this stage. He said “Nielsen is the only game in town”.
He described the timing as unfortunate coming in the crucial September quarter ahead of the holiday season.
Dauman said the current quarter was looking a lot better
“The dynamics are good as we look to the next quarter we expect to see strong ad growth. We’re feeling very good about the transition from this difficult situation that we had.”
MTV lays off staff; Viacom chief cuts outlook
As Viacom Chief Executive Philippe Dauman was managing investors expectations speaking downtown at the Goldman Sachs Communicopia conference, back at its midtown Times Square HQ, staffers at flagship unit MTV Networks were fretting as pink slips were being handed out. There was widespread concern internally, according to a source. (AdWeek reported it last night).
Dauman was his usual deadpan self as he lowered outlook, saying advertising sales would still be up but by “high single digits” percentage growth rather than the double digits growth he had promised as recently the third quarter call just last month.
Viacom shares tanked by some 9 percent on Thursday, more than a wider market downturn, as investors read Dauman’s cutback as an early sign of worse to come. The worry on everyone’s minds is of another major 2008-like ad recession may be round the corner. Shares are off another 3 percent on Friday morning. It’s worth noting CBS, whose revenue is 70 percent advertising, dropped by 7 percent despite bullish comments by CEO Les Moonves a day earlier. It shows how jumpy everyone is right now.
But in fact Dauman explained that the cut back was due to a short-term programming ratings issue rather than economic headwinds.
Here’s Nomura analyst Michael Nathanson said he had “unpleasant flashbacks to May 2008″ when Viacom lowered advertising guidance during a Q&A he had Dauman. However, there are a number of key differences.” He says Viacom has less debt load than 2008, it’s trading at a lower valuation than in 2008 and he feels it will benefit from ongoing profit margin expansion at its international business.
“The company blamed a short-term ratings issue for the lower numbers rather than a change in tone from advertisers. Despite widespread comments that the market is healthy, we worry that slowing national TV scatter, as we picked up in August channel checks, is as much to blame as ratings.”
As for the staff cuts? We’ve heard they were not “big sweeping” cuts but “isolated changes” at a brand and business unit with the Music Group Digital being the most affected. Less than a 100 we’re assured, but no one at Viacom is willing to confirm numbers just yet. We’re also privately assured by a person familiar with Viacom that Dauman’s Thursday presentation saying ad sales being pretty strong even as pink slips were being handed out was an unfortunate coincidence.
Today In Music: Rhapsody’s added 100,000 new subscribers since April
Rhapsody, one of the pioneers of music subscription services, has added more than 100,000 net new subscribers since the company was restructured in April President Jon Irwin (pictured, left) told Reuters. This means they’ve overcome a long period of slow or no growth during which its two major owners Real Networks and MTV Networks tried to figure out what to do with the business amidst the usual issue of conflicting agendas in joint ventures.
As you may recall, last February both owners agreed to reduce their stakes by bringing in two major label owners Universal Music Group and Sony Music Entertainment as minority holders and also offered warrants to Warner Music Group and EMI Group. The company actively became independent in April.
Now with those closer relationships with the music business but more importantly its expansion through mobile platforms like the iPhone and Google’s Android platform, business is growing. Irwin said Rhapsody has been adding as many customers as its key music subscription rivals have altogether– it now has around 750,000 subscribers. Last we heard a couple of years ago it was around 700,000-mark.
Rhapsody estimates there are around 1.5 million U.S. music subscribers giving it around half of the market. Last year Forrester Research forecast there were around 2.1 million music subscribers via the cloud in 2010.
Irwin puts the recent success down to its new independence allowing for quicker innovation and also a better relationship with the music business. He said the company is now focused on being the best music service available and, unlike in the past, labels now really get it.
“The labels are looking forward to what’s going to make their business grow as CDs sales continue to fall and download sales flatten,” said Irwin.
As well as mobile being a key driver of growth, Rhapsody is also in talks with cable television companies to bundle the Rhapsody music service with high speed Internet connections.
“Jackass 3D” tops “Avatar” on Viacom Chief’s movie list
“My favorite 3D movie of all time is Jackass 3D,” Viacom’s Chief Executive Philippe Dauman said on Wednesday at Reuters Global Media Summit. The movie, which grossed $116 million in the United States, according to Box Office Mojo was “relatively low cost” and “significantly profitable,” Dauman said. “You’ll see more of that coming.”
What else might the future hold for Viacom in 3D? Possibly Snooki.
Reuters Breakingviews columnist Rob Cox asked Dauman if audiences can soon expect a Jersey Shore in the third dimension.
“I’d love to see that,” Dauman said, “Gym, tan and laundry in 3D.”
Earlier this month, Viacom said it is selling Harmonix, the video game publisher behind Rock Band and this year’s Microsoft Kinect hit “Dance Central.” Dauman said the sale is proceeding swifty but declined to divulge details prospective buyers. Media Summit guest chief executives Bobby Kotick and Strauss Zelnick from Activision Blizzard and Take-Two respectively, said they’re not interested.
“Whoever puts the best proposal forward from all perspectives will be the winner,” Dauman said.
Universal Music pulls videos off MTV website
Universal Music Group has pulled its music videos off of MTV’s websites in a dispute over syndication rights for Universal’s co-owned music site Vevo.
With Universal Music’s previous online music video contract with MTV Networks ending on Aug 1, the music company had planned to use Vevo as the distribution platform for its music videos. But the problem for MTV is that would mean adverts around the videos would be sold by Vevo, not MTV, something the music television business found difficult to agree to.
Vevo was launched in December by co-owners Universal Music and Sony Music Entertainment as a dedicated online venue for premium quality music videos – an MTV for the digital age if you like. It features music from EMI as well but Warner Music Group is yet to ink a deal.
Here’s what MTV thinks of Universal’s decision:
For almost 30 years, MTV has enjoyed long and colorful partnerships with all the music labels, including UMG and their talented roster of artists on MTV, VH1 and CMT. As the industry evolves, we continue to seek out new and innovative ways to connect artists with their fans that are beneficial to everyone. However, during our recent discussions with VEVO, we were unable to reach a fair and equitable agreement for rights to stream UMG artists’ video content. As a result, UMG has elected to pull their music videos from our web sites. We are disappointed by this move and sincerely hope that UMG will work with us toward a fair resolution and allow their artists to once again connect with the millions of music fans who visit MTV.com, VH1.com and CMT.com every day.
Here’s what Universal Music says:
“MTVN has been unwilling to negotiate a fair syndication deal with Vevo to carry our artists’ videos and consequently our videos will not be shown on their online properties. We believe that using Vevo as our online music video syndication platform is the best way to maximize revenue for our artists, our songwriters and ourselves, while bringing our videos to the widest possible audience. In less than 8 months since its launch, Vevo has already become the web’s #1 rated video network with over 49 million unique visitors monthly, dramatically eclipsing those on MTV’s online properties, while attracting scores of major advertisers and tens of millions in advertising dollars. As a result, our artists are enjoying tremendous exposure on Vevo on YouTube and Vevo.com, and will enjoy even more as Vevo continues to complete syndication deals supplementing the existing arrangements with leading destinations as AOL and CBS Interactive.”
If you seriously think about it, who actually uses MTV’s websites for watching music videos. People actually want the MTVN channels on television to play the music, not its websites. So users found other places to watch videos that being the popular delivery method started by YouTube and has stayed with YouTube. I think UMG and Vevo are on the right track staying with YouTube over MTV.com
Viacom digs up more YouTube documents for court case
Viacom’s ongoing legal fisticuffs with Google over alleged piracy on YouTube rages on. The MTV and Nickelodeon owner on Thursday put out nine additional exhibits in addition to the hundreds of pages that were put out last month including transcripted deposition from Google CEO Eric Schmidt. Viacom, which extended CEO Philippe Dauman’s contract today, said the exhibits “make clear one of our core claims in the case: that Google made a deliberate, calculated business decision not only to profit from copyright infringement, but also to use the threat of copyright infringement to try to coerce rights owners like Viacom into licensing their content on Google’s terms.”
Viacom is making that claim based on various statements from Google senior employees while management was considering buying YouTube.
As for Schmidt’s deposition from May 2009 it’s not particularly controversial, with perhaps the most interesting statement being that he owns 30 computers and claims it has been his practice for 30 years to not retain his emails unless asked specifically.
(Photo: Reuters)
Digital content disputes only end up hurting the consumers
A $1 bln suit won’t stop Google from getting its Dauman
The big highlight of the McGraw-Hill media summit in New York when NBC Universal’s Jeff Zucker took a couple of shots at Jon Stewart.
But our favorite story came at the end of the day, courtesy of Viacom top dog Philippe Dauman. The background to this story was a question about Viacom’s $1 billion lawsuit against Google’s YouTube over copyright infringement.
That led Dauman to mention that his son, Phillippe Dauman Jr., happens to work at… wait for it… Google.
Here’s the CEO’s described the chain of events that led to his son’s hiring:
“It just so happens that he was being interviewed at business school by someone at Google on the very day we sent our massive takedown notice.
So he called me up the next day, Saturday. ‘Dad you really screwed me up.’
I said, ‘What do you mean?’ I had no idea.
‘I had a great interview with Google yesterday,’ he said. ‘And they aren’t going to hire me.’
I said, ‘Oh? Well, you’re right, they probably won’t. But you’re a smart kid and you’ll get lots of offers.’
Now I give Google a lot of credit because his interviewer — who was actually a very senior guy — called him the next week. ‘We liked you,’ he said. But he couldn’t escape who my son was because he’s, well, a junior. But he told my son they make offers on merit, and he invited him out to Mountain View and ran him through the computerized tests — and he got a job offer.
It was actually down in the end between Apple and Google, he had offers from both companies. So my son called me up. ‘I know you have this thing with Google,’ he said. ‘But I really liked Google. I told him Google’s a great company, and we have a dispute at the moment at the top, but it’s still a great company.
‘You should go there.’
The next time I saw Eric Schmidt — because I did find out they ran it up the flagpole to him because it involved my son — I said to him, ‘I admire what you did. It could have come out differently.’
And my son’s doing very well there. He loves it. But we agreed, and my son is meticulous about this, that we don’t talk about it.”
And what exactly does Philippe Dauman Jr do at Google?
“He’s in content acquisition.”
Throwing an orgy of pessimism? Well, don’t invite Viacom
How bad is the advertising market? Pretty bad, says Viacom Chief Executive Philippe Dauman. And it’s only going to get uglier.
“It is clear that while as cable network owners we are in a more favorable media segment than most, advertising comps are likely to get worse before they get better,” he said on a conference call today.
This comment may seem dry, but we’re totally ready to cut him some slack since it came shortly after this poetic gem: “And despite the orgy of pessimism prevalent of the late, the economic tide in our economy and our industry will rise again.”
Dauman, whose job means he oversees MTV, VH-1, Comedy Central and so on, assessed the situation this way: Advertisers who committed dollars during the upfront for the first quarter are holding solid, but are getting shaky for the second quarter.
Viacom finance whiz Tom Dooley expanded on that. “In terms of second-quarter option exercises, many of the moves have been shifting dollars from quarter-to-quarter. Some advertisers have done so but come back later in the quarter to make smaller buys in the scatter market. It is this activity combined with the overall economic trends which leads us to believe that ad market will get worse before it gets better.”
Not exactly an orgy of optimism, guys.
