Broadband Cable Association of Pennsylvania

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June 5, 2014

When it comes to online video, people may not want to cut the cord. Instead, they want to take the cord with them. People are streaming broadcast television on their smartphones in record numbers, according to Adobe's state-of-the-industry report on digital video viewing.

Online video has reached record numbers, according to the report, compiled by Adobe Digital Index, the marketing and research arm of Adobe. Mobile video viewing went up 57 percent over the same time last year, and overall online video was up 43 percent, representing more than 35 billion viewings. Among the report's more interesting findings are that TV Everywhere - a term for authenticated viewing of broadcast shows from channels you subscribe to on your cable or satellite network - is approaching mainstream use and is growing much faster than other online video sources like YouTube, Hulu or Daily Motion. However, Adobe's numbers do not include Netflix, which has about 48 million subscribers worldwide, so cord-cutting might not be entirely off the table.

TV Everywhere apps include the very popular HBO Go, standalone channel apps like Watch ESPN, Cartoon Network, CNBC, Syfy and similar offerings. Cable and satellite providers also offer their own branded apps, like Comcast's Xfinity TV Go, Time Warner Cable's TWC TV and Dish Anywhere. Most of these apps were announced within the last two to three years, but have been steadily getting the rights to stream more content and have seen a heavy marketing push over the past year. Authenticated TV viewing is more palatable to content providers than services like Netflix, because it encourages people to keep their ad-rich cable subscriptions, and gives them the benefit of streaming the TV they already pay for. Critics have, in fact, charged that TV Everywhere is little less than collusion between cable companies and rights holders.

Nevertheless, as streaming television gets onto mobile devices, people appear to be gobbling it up. TV Everywhere viewing rose 246 percent (you read that right) over last year, said Adobe, driven mainly by interest in sports programming. (To be clear, those numbers do not include streams of the Sochi Olympic Games, which an Adobe analyst said would have skewed the numbers beyond recognition.) "Over one in five households are watching TV Everywhere content," said Tamara Gaffney, an Adobe Digital Index analyst. "That's really beyond early adopter."

Of course, the other thing that's happened to push TV Everywhere growth is that these apps are actually starting to get some channels. Ms. Gaffney said TV Everywhere offerings had increased by 30 channels in just the last six months, as networks start to lower some (not all, but some) of their resistance to digital distribution. The most common way for people to watch TV Everywhere content was with iOS apps. In fact, Adobe said, iOS apps just passed the browser as the most popular portal to streaming TV. Browsers remained the second most popular way, and Android apps were third.

In another interesting twist, though, Adobe said viewing on game consoles and so-called OTT (over the top) devices increased by the highest percentage of any platform - 123 percent over last year. Granted, the amount of TV watched on those devices is still tiny: They have just 6 percent of the TV Everywhere streaming market, but that's up from 1 percent last year. Gaffney said most of that growth was in game consoles, although the category also included devices like Apple TV, Roku and Chromecast. Adobe said the numbers were too small to break out individual devices, but I'll be curious to see if they continue to grow and how much add-on gadgets contribute to the numbers, as opposed to consoles.

TV Everywhere is still significantly less than everywhere, as even the industry itself admits, and the authentication process for watching shows is legendarily annoying. But as that improves - and cable operators extend authentication to devices like Apple TV and Roku - it may be that the best way to cut the cord is to keep the cord. New York Times

Being partners with Netflix does not mean that Netflix is on your side.

Like Comcast before it, Verizon learned that lesson this week, when a journalist who was streaming a television show on Netflix noticed an on-screen message from the company blaming Verizon for congestion that was slowing the stream. The journalist, Yuri Victor, a designer and developer at Vox Media, posted a message on Twitter on Tuesday with a screen shot of the Netflix message, which read: "The Verizon network is crowded right now. Adjusting video for smoother playback."

Netflix said on Wednesday that the message was simply one of many ways the company is testing for notifying its customers about how their viewing experience is affected by their Internet service provider's network. "The current test started in early May and covers a few hundred thousand U.S. members who are served by various I.S.P.s," Jonathan Friedland, chief communications officer for Netflix, said in a statement. He said it was similar to the company's monthly chart showing average speeds connecting Netflix with consumers through a variety of broadband providers.

To Verizon, the whole thing is little more than "a P.R. stunt," a company blog post said. David Young, who oversees federal regulatory affairs for Verizon, said in the post that Netflix's statement about the Verizon network "is not only inaccurate, it is deliberately misleading," "The source of the congestion is almost certainly NOT congestion in Verizon's network," Mr. Young wrote. "Instead, the problem is most likely congestion on the connection that Netflix has chosen to use to reach Verizon's network. Of course, Netflix is solely responsible for choosing how their traffic is routed into any I.S.P.s network."

Just weeks ago, Verizon and Netflix agreed that Netflix could pay Verizon to connect directly to its network, creating a faster connection that bypasses the go-between that carries most content through the Internet. Netflix previously entered one of those deals with Comcast. That gave rise to outrage, as proponents of an open Internet, including, oddly, Netflix, said such a deal violated net neutrality - the belief that all Internet traffic should be treated equally. Verizon and Comcast said the deals with Netflix were outside net neutrality, which they said involves only an I.S.P.s connection to the consumer. They said the interconnection framework is not completely in place, so some Netflix content is still delivered to Verizon customers the old way. New York Times

DirecTV will launch AT&T into the satellite business. But while eyes are focused upward, some of the deal's best opportunities may come from south of the border. In buying DirecTV, AT&T will make a big push into Latin America. That region generated 21.5% of DirecTV's revenue in 2013, with sales growing 9.6% against an increase of 6.8% for DirecTV overall. Indeed, DirecTV Latin America may go far in satisfying one of AT&T's greatest needs: top-line growth. The telecom company eked out revenue growth of just 1% last year.

AT&T's core wireless business is feeling the effects of heightened competition in the U.S. It said Tuesday it expects to add more than 800,000 postpaid subscribers in the second quarter, beating estimates. But there is a cost. About half of AT&T's postpaid smartphone customers are on discounted plans. The shift toward these is eroding average revenue per user and wireless-service revenue. In fact, AT&T said it expects no growth in the latter this quarter. DirecTV won't solve that, but against this stagnant backdrop, Latin America looks inviting. DirecTV says only about 36% of Latin American households have pay TV. That is against roughly 90% in the U.S. AT&T says DirecTV has wireless airwaves covering 43 million homes in Brazil, Colombia, Peru and Argentina. DirecTV already is using this spectrum to expand its offering of a wireless broadband service. AT&T plans to bundle this service with video.

DirecTV likely won't be AT&T's last move in the region. On a call after announcing the deal, DirecTV chief Mike White said AT&T's expertise in wireless could allow DirecTV to consider "wireless opportunities" it might have "shied away from because it's not our core competence." That could pit AT&T even more directly against America Movil, which dominates much of the region's wireless market. AT&T has said it would sell its 8.6% stake in the Mexican firm to appease competition regulators. Granted, increased exposure to Latin America comes with risks of its own. At DirecTV's Sky Brasil segment, for example, revenue declined 2.7% in the first quarter-but was up 15% if currency swings are excluded. Analysts estimate revenue for the segment will rise only 1.9% in 2014, driven by currency depreciation. But in its search for growth, AT&T could still find a trip to Latin America to be worth the ticket. Wall Street Journal

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