YouSaid · the spoken record

Michael Nathanson

lines on the record: 34
first: 2015-11-20
most recent: 2015-11-20
sittings or episodes: 1
sources: podcast

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“Well, this has been a huge year in terms of regulatory disruption. That's part of the reason that investors are having a hard time thinking about where this industry is going. And without getting too arcane, the FCC, the Federal Communications Commission, made a pretty meaningful decision a couple months ago. They determined that they should be regulating broadband services the same way they have historically regulated monopoly voice phone services. And so that gives them a lot more leeway to look at the behavior of broadband network operators and potentially have greater influence in terms of how they deliver and price products to the consumers, although it's vague.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“So just wrapping up, we talked a little bit about this, but what's the government doing in this? This has traditionally been a space where there's a fair amount of regulation and government regulation or incentives can really dramatically change the landscape. What do they kind of keeping their eye on? And is it a level playing field as far as the government's concerned?”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“But you might have four or five on the mobile space. And so it's kind of interesting to us that investors have expressed a lot of concern about the positioning of cable companies as their traditional pay TV model appears under threat. And yet they're the ones who are also typically delivering the best broadband connection to the consumer. And so our sense is that it's very hard for their infrastructure to be avoided. And so it would seem that they're going to find a way to evolve their business model to make sure that they continue to generate the return on those assets that you think they should be able to get based on their favorable position in the market.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“It's obviously a great game for us to predict who the winners and losers are going to be, and because we're still early in this evolution, calling out the names can be hard. But what we can do is we can say, well, what are the characteristics that a winner might have? And if you believe that the reason payTV is being disrupted is because more consumers are streaming their content through a broadband connections, then our guess would be that if you have a great broadband network, you're probably positioned as a winner. And so you look at the cable companies and you say they generally speaking have a lead over their competitors in terms of delivering a great broadband experience and in some ways partially mobilizing that through a rich network of Wi-Fi hotspots in their communities. Wireless operators also have a form of a broadband connection, although you could argue it's not as scarce, meaning if you're a consumer, you probably have one or two choices in your home for who's going to give you fixed broadband.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“400 channels and it's 80 bucks kind of take it or leave it and you're already starting to see the the traditional pay tv operators experiment more aggressively with more affordable options all right well here's a 40 you know option it only has 40 channels but in the 40 channels there's some good stuff in there potentially it might include a sports network it's going to have some of the broadcast networks and it'll have a variety of maybe higher quality basic cable networks and so we're probably going to move into this world where the consumer has more choice and price points to choose from”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, DBR, VOD, and those types of services. But people, I think, are still getting a great deal of utility out of their television service as a consequence. It's really fascinating when you take that five hours of consumption and the average cable ARPU is roughly $80 per month. And if you kind of run the math of how much are people paying per hour of consumption, yes, 30 cents. That's real, 25, 30 cents. And you put it in that context, it certainly seems cheap. But we are going to probably go into this world where the younger cohort is comfortable not having the service. The other thing I think that you'll start to see happen, and it's happening already today, is that the pay TV operators are going to continue to offer a wider variety of options. This is a business that for most of its history, it was one size fits all.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“It has been steady. And what's interesting is it does shift, as you might suspect, between five, ten years ago, that five hours was almost exclusively live viewing, but the five hours is now sort of shifted from less live to more.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“On the subscriber side. The reason to think that it remains somewhat modest and kind of a uniform decline I think has a lot to do with sort of the generational aspects of the PayTV subscriber base. And what I mean by that is you have young people graduating university and sort of matriculating into adulthood, what we're starting to see is that cohort, that young 20-something cohort is just not subscribing to pay TV at the same propensity as prior generations before them. Among older age cohorts, they're still really enjoying their pay TV. They're still watching a lot of television. The average consumer's still watching five hours of television per day.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think on the content side, the entertainment side, our expectation is that you'll probably have about somewhere between 1% and 2% annual declines in paid television over the next several years.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“So, how do you see this playing out over the next couple years? Some of these trends have been going on forever. But as you see this play out, you're an optimist around PayTV in the long run. Who do you think the winners and losers are here?”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“Well, some of the largest cable companies a couple years ago signed an agreement with a major wireless provider that would give them the right to resell that wireless provider's network under their own brand to their own customers if they wanted to. And that agreement has kind of been sitting there dormant for a while, but media reports have come out recently that we might see some of those cable companies begin to take advantage of it. And investors are very curious to see what they're going to do. Is it simply going to be a way for them to fill in the gaps between their Wi-Fi hotspots, which would be sort of a very small move into improving their broadband service? Or could they potentially be interested in taking advantage of that mobile infrastructure to launch a whole new type of video product that they don't have today?”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“I'd say it's an interesting question that the industry is grappling with. It's quite clear that a lot of video is being consumed on mobile devices. But some of that is actually happening in your house. And so trying to get your content to someone who's sitting on their sofa through a Wi-Fi connection is very different than trying to get it to somebody who may actually be viewing that content over a mobile network where the cost structure and the physics of delivering that signal are very different. But it's also really driving towards more convergence and we've been using that phrase to talk about the telecom industry for a long time. Initially that meant companies that owned wireless networks might also own a wireline network. But now what we're saying is that a service needs to be able to move across multiple networks in a way that's seamless to the end user. And as a result of that, some of the companies that have the most scale in the video market like the cable companies are realizing they may need to have a wireless strategy.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“You both talked a lot about mobile, about mobile phones, and people are getting much more accustomed to watching programming, whether it's live or whether it's something that they can pull up on demand on their phones. How's that going to play out over time? I mean, what's the impact of mobile on this landscape?”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“This actually speaks to another advantage that the traditional PTV companies have. We become so accustomed to watching streaming content that a lot of consumers aren't aware of how difficult technologically it is to send a live stream to a consumer over the internet, especially if it's to a mobile device. And we have seen some streaming services launch over the last year that unlike the traditional ones, which are mostly a library of content you can watch whenever you want, they're actually attempting to send you live sporting events, live TV events, and they're crashing quite often. And so the streaming infrastructure is great if you want to watch something that was aired yesterday or a movie coming off a library, but there's still some meaningful tech.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“That's right. Exactly right. So the bigger concept here is there is increasing value in the live programming. The viewership numbers are holding up a lot better. In some cases they may still be growing. The pricing for advertising spots within that programming as a consequence also continues to move up because the demand is there. Another great thing about live sports programming is roughly 98% of it is watched live. When you see scripted dramas and comedies, more than half of the audience is going to record that on a DVR and then fast forward through the commercials and that's a negative for the advertising. So that doesn't happen with sports, but it's not just sports though. A lot of the broadcast networks try to do other live events, live musical events and live specials. The award shows are garnering bigger audiences and those are live events. And so the TV channels are doing what they can to sort of create a lively life.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“Most of the major sports contracts have recently been renewed and in many cases they stretch out for a decade or longer. And so there's not probably likely to be a lot of movement between now and call it maybe 2020, 2021 in terms of how sports video is distributed. That's one of the brighter spots if you own some of these contracts. But what the major networks are doing with their sports rights is they do recognize that there's an incredible amount of demand for this content and not everybody can be at home in front of their television set when the World Series is on. They might be traveling for work and they have a tablet or they have their mobile phone. And so a lot of these companies have done a great job of getting that content distributed through to those other devices. If we're talking about a cable network, you still have to be a subscriber to a pay service.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“Seems like a key advantage right now is that a lot of these sports networks and leagues have long-term agreements with the paid TV providers. How are TV providers using that to sort of protect their franchise?”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“And it might simply be that the distribution model evolves instead of taking their content and packing it into a huge bundle of channels that come into your receiver, they may ultimately work with these companies and say, perhaps we can stream through your network and you can help us distribute our product on a streaming basis. That has only happened at a very nascent level, but really the Huge scale and the huge base of existing customers is one of the biggest advantages. And of course, the PTV companies own the infrastructure. There's only a couple different ways you can actually get video content to a consumer. You're going to go through a network. You're either going to go through a PayTV cable network. You're going to go through a satellite TV network, or maybe you're going to go through a broadband connection.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“This actually gets back to something we were just talking about, which is the challenges that a content provider has going direct to consumers. So the big operators in the pay TV space, the cable companies and the satellite companies are huge distributors. That's what their model is. So they already have tens of millions of customer relationships. And so they get all the cost advantages of serving a large customer base. And the history of the model and payTV has been that the PayTV companies distribute bill do customer service and the media companies just create great content and turn it over to them. So if these big media companies decide that they would like to go direct to consumer, they have to create billing departments and marketing departments and customer service departments. Some of them have such great content and such interest in the product that they can justify the investment. But the average provider of programming probably wants to work with a distributed.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“So let's talk about some of the advantages that TV providers, television providers have over the new entrants. What might help them maintain or even expand their market share given what's going on today?”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“No, that's exactly right. The internet provides a significant advantage over TV and being able to target very narrow niches. So if you're trying to sell diapers, you can go online and find women who just had a baby in the past six months who have household income of 100K or more, you can find those people at a very low CPM. And so they are moving in that direction. And TV just doesn't have that technology and that capability today. And they need to come up with some type of solution, but it's not that easy.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“It's an increasingly challenging space for the marketers. Almost every major marketer, the bulk of their budget has gone to television, probably 40, 50, 60% of their total advertising budget has been dedicated to TV. And TV has generally served them well in efficiently reaching a mass audience. But what's changed over the past two years is that we're now seeing a greater decline in the audience levels across the whole universe, some channels more, but we're talking about high single to low double digit declines in viewership. Now, as you might suspect, the content companies, the media companies are trying to offset declining viewership by charging more per viewer for the advertising so they can sustain their own advertising growth. So the market, when confronted with this, are now starting to shift their attention more aggressively to alternatives. And there's a number of large internet-based companies that are offering audience reach and a scaled basis.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“Licensing to third party streaming services. How they're potentially impacting paid TV subscribers and the cord cutting behavior we talked about, and maybe not charging enough. The good news is that in most cases, the contracts are pretty short-term. Those contracts will eventually come up for renewal, and so there's potentially an opportunity to correct that.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“Always, let's talk about the direct to consumer model. There's a handful of examples of these, but the price points that the companies have been establishing in general are actually premiums to what they're able to get. So there is some logic to what they're doing.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“This creates crying a challenge for them, so they don't want to break away completely, make a clean break from this bundled service that has all these advantages. But at the same time, they see that the consumer is spending more and more time with these devices online over the top. So in some cases, they've been licensing some of their television programs to streaming services that are owned by third parties. In some cases, They're creating their own streaming services to be delivered direct to the consumer for a discrete fee.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“Maybe as high as 60% EBITDA margins. It's still a business that is growing. Obviously, the subs aren't growing, but the price per sub on a wholesale basis is continued to grow because that's built into their contracts. The advertising part has been slowing, but it is still eaking out a little bit of growth. It's sort of flat to slightly up.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“There's a number of different strategies that they're using, and it's every company's got a slightly different view on how they're moving forward. And the strategy that they take in many cases has a lot to do with the assets that they have within their portfolio. A lot of the entertainment companies are vertically integrated. So they make programs, television shows at a TV studio. They may have a TV channel, whether it's a broadcast or cable channel that's trying to aggregate audiences and sell advertising against it. They may have a premium cable network. And so there's a number of different business models, a number of different assets. But you do see different attempts to tap into this trend. I think the challenge is that the bundled paid TV service and that business model has been incredibly lucrative to them. This is a business that's characterized with very high margins, anywhere from 30% EBITDA margins to”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“I would say it's a combination of a couple things. On the technological side, we're now at a point where just about everybody has a smartphone and a lot of people have tablets. So you now have devices in your hand or in your pocket that allow you to watch streaming media anywhere you are. And we're also at a point where all the national wireless carriers have broadband wireless networks called 4G networks, and most homes have a broadband connection. So over the last few years, you've gotten to the point where you're almost always covered by broadband and you almost always have a device where you can use a broadband network to consume video. And because of that, we've seen an increase in a number of streaming services that are available. But there's another piece of it as well, which is economics, which is that a traditional pay TV package from a satellite or a cable company is very expensive. And that's because the large bundle of programming that they're selling you costs a lot for them to buy from the content generators.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“That's probably less than 1% of the overall people who paid for TV today, but still you're starting to see declines and may signal the onset of a trend. So, what's really at the heart of this whole debate is this just changing consumer preferences, technological disruption, a little bit of both.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“That's right. But to your earlier point, it's totally not new. In fact, investors have been talking about this to one degree or another for the better part of probably two years. But when you looked at the numbers, they were just small. It wasn't very significant. In fact, since 2012, the amount of cord cutting or the decline in paid TV subscribers, it's about 1% over that timeframe, but second quarter is the one that kind of got people's attention and said, wow, are we at an inflection point and is something changing here? To put more precise numbers around it, it was there were about 600,000 people that disconnected their pay TV service.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“I think there were really two reasons for that. The first reason is that some of the entertainment companies talked about missing forward guidance because they were seeing an acceleration or a more significant decline in the subscriber counts. And the second thing is when you did the bottoms up of total number of people subscribing to paid television as reported by cable, satellite, and telco providers, what you saw in the second quarter was a significant acceleration in that decline. So you kind of got warning signals from both the entertainment and the content companies saying”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“Got it. So it's not new, obviously, it's been going on for a while cord cutting, chord shaving, chord never, but it seems like the markets noticed and there was a big sell off some stocks tied to paid TV and content. So why did the investor focus increase so intensely just in the past several months?”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“So at the most basic level, cord cutting is when consumers cancel their pay TV subscription. That could either be with a cable company, which is how the phrase cord cutting came to be, or the satellite company, in order to exclusively watch video through streaming services. But cord cutting is really only one thing that's happening with regards to how the PTV ecosystem is changing. There's a few other chord words we use. There are also people called chord shavers. So those are people who are downsizing to smaller video packages primarily to save money. So they're not actually canceling pay TV, but they're consuming less of it or they're paying less for it. There's a group of consumers we call Cord Nevers, and these are generally younger consumers or millennials who don't cut the cord. They never actually become pay TV customers to begin with. So when they graduate college and move out of the home, they exclusively consume streaming services. There's a subset of the Cordnevers.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT
“Brett drew perhaps the hottest issue in the media and telecom space right now is cord cutting. For some of the listeners who might not be as familiar with this concept, explain what cord cutting it is and why it's a significant topic right now.”
2015-11-20 · Goldman Sachs Exchanges · Cord Cutting Goes Prime Time · IDENTIFIED FROM THE TRANSCRIPT