04/25/16: China closes iTunes Movies and iBooks Store; Netflix and NCTC near cable integration agreement; Facebook News Feed to favor engagement time



CYNOPSISDIGITAL
04.25.16

Good morning. It’s Monday April 25, 2016, and this is your first early morning digital briefing.

TODAY’S CODEBREAKER
 

SDK: Short for Software Development Kit. An SDK is a set of software development tools that allows for the creation of applications for a specific development platform. For instance, developers creating an iPhone app would need the iOS SDK.

 
 
TOP NEWS
 

Only six months after Apple launched iTunes Movies and the iBooks Store in China, a Chinese regulator has shut down the two services. In recent months and years, China has been going out of its way to open doors for domestic tech companies – and that has meant restricting the operations of their foreign competitors, particularly American companies. (The distrust sown by the 2013 Edward Snowden leak is often cited as a motivating factor.) Still, Apple had seemed uniquely immune to China’s restrictions, and the shuttering took observers by surprise. It’s not good news for Apple: The Chinese market is the tech giant’s second largest after the U.S. And Apple’s e-services, which are tightly woven into its device ecosystem, are a key driver in iPhone and iPad purchases. “We hope to make books and movies available again to our customers in China as soon as possible,” said an Apple spokeswoman in a statement.
 
Is Netflix coming to your cable box? FierceCable reports that the National Cable TV Cooperative (NCTC), which conducts negotiations for more the 700 cable systems, is nearing an agreement that would give NCTC members the option to integrate Netflix into their own video service offerings through TiVo’s interface. (The deal, not surprisingly, is being negotiated in conjunction with TiVo.) Like the master agreement recently reached between the NCTC and Hulu, the prospective Netflix agreement would be geared toward a revenue-sharing model.
 
 

AD TECH
 

According to figures from the mergers & acquisitions specialist Results International, ad tech/marketing tech transactions in Q1 2016 amounted to $2.4 billion dollars. That’s the third-highest quarterly total on record. RI noted 108 total deals. Companies including Dentsu Aegis, Rakuten, and Oracle each made multiple such deals.
 

 
PROGRAMMATIC ADVERTISING
 

The programmatic marketing provider Rocket Fuel announced that it has integrated Merkle‘s DataSource national consumer database into its platform. DataSource is a national customer marketing database focused on addressable data segments. Rocket Fuel says that the integration will give its customers increased insights.


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VIRTUAL + AUGMENTED REALITY
 

Want some evidence that Google is taking VR extremely seriously? For its Google I/O 2016 developer’s conference next month, the tech giant will be holding seven separate sessions focused on various areas of virtual and augmented reality. By comparison, the company has scheduled a grand total of two conferences centering on home streaming devices such as Chromecast and Android TV. It might be noted that Google often makes late changes to its I/O schedule – but still, seven is a lot. And it shouldn’t surprise anyone; it’s been widely reported that Google has grand plans for VR, including the development of its own hardware. It’s safe to say that Google is thinking beyond the Cardboard.

 
 
SOCIAL MEDIA
 

Facebook’s News Feed algorithm is an ever-changing beast, and publishers would be well advised to pay attention to those changes. The social media giant will now place a larger emphasis on engagement time, or the duration that users tend to spend on a post. So a note to publishers: Better make sure you’re putting out content that users actually linger on; eliciting a quick like or click won’t cut it. In addition, Facebook will now minimize the frequency with which users see multiple posts from the same publisher in quick succession. Other recent News Feed algorithm changes include placing a greater emphasis on video content – especially live video.
 
 

PROGRAMMING + CONTENT ACQUISITIONS

 
Last week, Amazon launched an $8.99-a-month standalone plan for its Prime Video SVOD service. How can Amazon sweeten the deal? Content, content, content. The service reached a deal with Broad Green Pictures, an indie production company founded in 2014. Broad Green has produced films such as the Robert Redford-starring A Walk in the Woods and Sarah Silverman’s I Smile Back. Now, Broad Green’s catalogue will call Amazon its premium TV home. Broad Green’s titles will be available for streaming and download via the Prime service following their theatrical and home entertainment windows.
 
You have to spend money to make money – just ask Google. Parent company Alphabet Inc. recently reported $5.25 billion in net income. If that sounds awesome to you, then you don’t know what it’s like to be Alphabet; it was over $300 million under analysts’ expectations. And as MarketWatch points out, part of the reason is that spending beat analyst’s expectations by $285 million. Much of that went toward Google’s cloud offerings, and toward content acquisition costs for the YouTube Red paid subscription service. Speaking of which, Google CEO Sundar Pichai said that 15 to 20 more original projects will debut on the service later this year. The investment in YouTube is understandable; at least one respected analyst has projected that YouTube will account for a major portion of Google’s revenue by the end of this decade.
 
 

PLATFORMS + DEVICES
 

Yes, the FCC has voted to let third-party manufacturers like Apple and Google create their own set-top boxes that can receive satellite or cable TV programming. But the major cable companies are resistant, and now National Cable & Telecommunications Association President Michael Powell has vowed that his association will sue to block the FCC’s proposal if need be. “An agency of limited jurisdiction has to act properly within that jurisdiction," Powell said in a press conference.” Powell wasn’t alone. Matthew Polka, the President & CEO of the American Cable Association, called the FCC’s actions “unlawful,” and insisted that if the FCC moved forward, its proposed mandate should be limited to MVPDs with 600,000 or more video subscribers. FCC Press Secretary Kim Hart tried to assuage concerns. “[T]he Commission is committed to protecting the content creator’s copyright,” she said, “and will not interfere in the business or content agreements between MVPDs and content providers.” Make no mistake: This fight isn’t ending anytime soon.
 
Sean Parker, the Napster co-founder and former Facebook honcho, is relaunching the group video-chatting service Airtime. Initially launched in 2011 as a website, the service quickly fizzled. Now it’s launching as an app for iOS and Android. Jumping on the messaging-app bandwagon at this particular moment in time seems like a sound bet; apps such as Facebook Messenger, Snapchat, and WhatsApp, which are monumentally popular and only getting more so, have amply demonstrated the format’s potential. The only question is, can Airtime deal with the competition?
 
 

RESEARCH
 

People are using streaming services on a wide scale, but the prevalence of all-out cord-cutters may be overblown. At least, those were the findings of a recent study from Consumer Reports. CR found that 47% of U.S. households use some sort of streaming service, whether an SVOD service like Netflix or a TVOD service like iTunes. That percentage is almost certain to reach majority territory in the near future. Nonetheless, 68% of respondents said they still subscribe to a pay TV service. And, notably, three quarters of those individuals said that they’re happy with their pay TV provider, and don’t intend to drop it. You can learn more about the study here.
 
Consumer Reports also recently put together a list of the top-ranked streaming services and devices, based on a voter survey. Acorn TV, a niche streamer focused on British content, scored highest (and also received high marks for its overall value), while Netflix and iTunes tied for second in the rankings. Vudu came in next, followed by a tie between HBO Now and Amazon Video. As for devices, Roku 4 came in at first in CR’s ratings, followed by the Roku 3 at second and the Roku 2 at third.  (Roku, it seems, should pat itself on the back.) The Amazon Fire TV came in at fourth in the rankings. The survey is available only to CR subs, but you can learn more here.
 
Content is king – but just how important is quantity? The Wall Street research firm Barclays found that Amazon Prime Video has four times as many films available for streaming as Netflix. And when taking both movies and TV shows into account, Hulu has more content than both. Since last year, Netflix has been increasingly content to let licensing deals expire in favor of commissioning exclusive films and series. Judging by Netflix’s dominance in the streaming market, it seems like a sound strategy in terms of retaining and growing its subscriber base. Going forward, it’s worth paying close attention to whether Netflix’s increasingly astronomical content costs represent a sound investment, or whether the spending drags down its net revenue. Time will tell – though historically speaking, betting against Netflix rarely yields dividends.
 
A new report from Leichtman Research Group finds that 65% of U.S. TV households have at least one streaming device connected to their TV, or a smart TV set connected to the Internet. That represents some very rapid growth. In 2013, LRG found that the number was 44%. The 2016 study also finds that 74% of streaming households have more than one connected device.
 
A recent story in the Wall Street Journal looked at the effects of broadband data caps from cable providers. The WSJ concluded that such caps adversely affect streaming services, encouraging audiences to ration their Internet video consumption and watch more cable TV. You can check it out the report here.   
 
 

TRIVIA
 

Last September, Netflix allowed a major movie licensing with Epix to lapse. Seeing an opportunity, another streaming service then swiftly partnered with Epix on a multi-year licensing deal. Which service was it? You can find the answer here.
 


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DIGITAL SPOTLIGHT
 

Google’s audience-targeting capabilities are off-the-charts, and they’re improving every day. That’s incredibly helpful if you’re an advertiser trying to sell your brand. And apparently it’s also helpful if you’re trying to combat prejudice and xenophobia. Using YouTube and Google Search, the Zurich branch of the agency FCB partnered with the German nonprofit Refugees Welcome to run a targeted messaging campaign against anti-migrant sentiment. The results are pretty breathtaking. Check out a video overview here
 
Watcheroo Premieres and Tune-in Alerts for April 25-May 1:
People Now at People.com, Monday-Friday at 8:30a ET and 11:30a ET: Guests include fitness expert Tracy Anderson, actress Shay Mitchell (Freeform’s Pretty Little Liars), and former Olympic gymnast Shawn Johnson
Acorn TV: The U.S. season 9 premiere of the period detective drama Murdoch Mysteries (AKA The Artful Detective) debuts on the streaming service today, April 25
Netflix: Special Correspondents, an original film starring Ricky Gervais, debuts April 29
Netflix: The documentary Team Foxcatcher debuts April 29
go90: Relationship Status, a new scripted series from StyleHaul, debuts on Verizon’s mobile streaming service April 29
Yahoo Finance: Warren Buffet’s Berkshire Hathaway Annual Shareholders Meeting will be live-streamed on April 30
Watcheroo
is Cynopsis Digital’s tune-in guide, categorized alphabetically by platform or network. Programming includes digital premieres, ongoing shows, live-streamed events and linear TV digital integrated series.

See you tomorrow,
David Teich
04.25.16

Roberta Caploe: Publisher @robertacaploe
Diane K Schwartz: Senior Vice President, Media Communications Group

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