Author Archives: Chris Broussard

Comcast Corp (CMCSA.O) on Thursday unveiled a wireless service with an unlimited data plan, making it the first major U.S. cable provider to enter the highly competitive wireless market.Unlimited data, talk and text will be available by mid-year for $65 per line for up to five lines, or $45 per line for customers with Comcast’s top X1 packages, which bundle TV, internet and phone services, the company said. U.S. wireless carriers Verizon Communications Inc (VZ.N), AT&T Inc (T.N), T-Mobile US Inc (TMUS.O) and Sprint Corp (S.N) have recently offered unlimited monthly plans ranging from $50 to $90 for a single line.

Link to Story: Comcast enters U.S. wireless business with unlimited data plans | Reuters

The string of deals within our Connected Society and Content is King investment themes have been staggering over the past 12 to 18 months.  The tailwinds behind it are the influence of increasingly mobile society, cord cutting and original content through non-traditional sources such as Amazon, Netflix and others.  Something we have documented often in Tematica Investing the past year and tailwinds that have served us quite well on several of our positions.

Today we see Comcast, not to be left out of the wireless category, is launching its own mobile phone plan, likely in response to the move it is seeing in customers canceling their cable service. The cable operator likely sees the coming 5g rollout giving customers a reason to cancel not only their cable plan, but possibly even their home internet service too. Without those two legs of the stool, how else will Comcast distribute all of its content?

Of course, the irony of it is the service will run on the back of Verizon’s wireless infrastructure, so VZ wins either way.

 

This week the House of Representatives officially confirmed Congress’ decision to repeal ISP protections which, as we discussed last week, permits internet providers like Verizon and AT&T to sell your browsing history and location info to advertisers.But never fear — PornHub is here. According to our extensive “research,” they’ve officially rolled out a secure, HTTPS version of their site to keep peeping ad toms from seeing what you’re into.Just kidding. We read that they rolled it out. Winky face.What’s different now?Well for one, there’ll be a little green padlock next to their URL. But more than that, HTTPS protection defends against stolen passwords and requires third-party advertisers to be HTTPS certified (so none of those “duck shooter” banner ads that trick you into downloading malware).It also keeps internet providers from seeing specific browsing details, like what videos you’re watching or searching on the site.So, even though Big Brother will still be able to see how many pages you’ve viewed on the ‘hub (or similar sites), they won’t know exactly what you’re looking at. Which is probably best for everyone involved.

Source: PornHub to the rescue

Back in the days of the Dot-com boom, the saying around San Francisco was that the only things that actually made money on the web were financial services and porn. We’re talking cold, hard cash money making, not the funky VC valuations that threw millions of dollars at 20-something CEO’s for their supposed traffic.

Certainly today, that has changed with the emergence of companies such as Amazon (AMZN), Netflix (NFLX) and many others. It’s why our Connected Society, Content is King, and Cashless Consumption investment themes are among our best performers. But, when you see the stats for a site such as Pornhub — 38th most popular site on the internet with 75 million DAILY visitors — you understand that porn is still very much a money maker.

At Tematica Research, we develop our investment themes by looking at the intersection of shifting economics, demographics, psychographics, technologies, and of course, mixed in with regulatory mandates and other forces. In this case, it’s the actions by the Government that is rearing its ugly head — and it’s always good to see a company bob and weave when necessary, something the porn industry has been doing since . . . well, since always.

Since the advent of the VCR, the basic formulas has been the same: release the movie into theaters, and then after a period of time release to directly to consumers, whether it’s a premium cable channel, VCR tape, DVD, or streaming service.  Of course, what has changed has been the decrease in the period of time between theatrical release and the direct to consumer offer.  Studios are about to test to see if they can make it not only shorter, but immediate:

Theater chains have long resisted the idea of letting studios release movies direct to consumers any sooner than 90 days after the films arrive in the cinemaplex, but reality is starting to set in.In 2016, DVD sales fell nearly 10 percent to $5.49 billion, according to the Digital Entertainment Group, but the overall home-entertainment industry grew 1.4 percent, thanks to streaming and digital sales. Studios get a higher profit margin from digital sales and would rather make their films available sooner rather than letting them linger in theaters for weeks making diminishing returns. A shorter window could also help save on advertising spending, eliminating the need for a separate campaign for home rentals. One answer is charging viewers a higher fee for a chance to see a movie at home just a few weeks after its theatrical release — what’s called a premium on-demand window. Among the major studios, Universal Pictures, Warner Bros. and 20th Century Fox have been the most publicly vocal about this approach. Executives have floated rental prices from $25 to $50, according to people familiar with the matter.

Source: Coming Soon to a TV Near You: Hollywood’s Latest Blockbusters – Bloomberg

On the face of it, $25 might seem staggering; however, when compared to the cost of a family of 4 to go to the movies topping $50 even before the concession stand, it seems like a good deal.  The obvious thematic headwind coming out of this development is the negative impact on the movie theaters. The other thematic headwind to consider is mall owners who are banking on the movie theater as being the new “anchor store” of the mall as retailers such as JC Penney (JCP), Macy’s (M) and Nordstroms(JWN) continue to struggle.

If you’re a fan of that one show where the undead aren’t the biggest threat to the living, or the one where the Cinnabon guy used to be a shady-ish lawyer, but you want a little more from the shows, you’re just the person AMC is looking for: The cable network is preparing to launch an online video streaming service featuring content related to its popular shows.Reuters, citing people familiar with the matter, reports that the planned service would be available only to customers who also subscribe to a cable TV package and would likely air supporting content — such as short digital-only segments — for its traditional shows.

Source: AMC Reportedly Working On Streaming Service Connected To Cable Packages – Consumerist

This article reports that AMC’s plans to launch its own streaming service is actually in support of cable TV rather than a threat to it.

Come on now, really?

While this first iteration of the service requires an authentication with a cable account, we see this as a trojan horse as AMC builds out its infrastructure and once the cord-cutting tipping point arrives, it’s ready to go to flip the switch and open up streaming to cord-cutters as well.

Google’s YouTube on Tuesday unveiled a web-TV service that will offer a package of over 40 broadcast and cable channels for $35 a month, making the tech giant the latest entrant in a race to win over millions of consumers who are shifting away from traditional TV.The new service, dubbed YouTube TV, is set to launch in the next few months. It will have all the major broadcasters, including ABC, CBS, NBC and Fox, as well as several dozen well-known cable channels, such as ESPN, FX, USA, MSNBC and Fox News.

Source: Google’s YouTube to Launch $35-a-Month Web-TV Service – WSJ

The launch of YouTube TV is about as obvious as when Starbucks launched coffee ice cream.  People loved Starbucks. They love ice cream. Coffee drinkers like coffee ice cream. Boom, Starbucks Mocha Java Chip ice cream was born and America’s waistline continued to expand just like the coffee.

YouTube’ dominance of the online video world is unmatched, and so cutting the deals with the networks to launch live YouTube TV makes sense. What jumped out to us, however, was this one line:

There’s no question millennials love great TV content,” said YouTube Chief Executive Susan Wojcicki. “But what we’ve seen is they don’t want to watch it in the traditional setting.”

It reflects the realities of today’s Connected Society in that the ability to always access the web from anywhere, anytime has led to place-shifting of traditional content consumption. “Thursday Must See TV” is long gone, as is the family gathering around the TV to all watch a big game. Sure there are services that have been around that let you access your cable content from anywhere, but that means double payment to both the service provider and the cable company.

Of course, the biggest question is if Alphabet can cut this deal, what’s Apple’s problem been for so many years?

Amazon over the past couple of years has become the prime player (sorry for the pun) in our Connected Society investment theme given it’s dominance in the eCommerce and cloud computing space. That same dominance and push into eCommerce also places it at the heart of the

The third theme Amazon dances around is Content is King, given its push into original programming as of late. And it’s not just content, it’s really, really good content that is starting to win awards, and in some cases even rewriting the rules around awards shows such as the Emmy’s. We haven’t added it to that theme yet, simply because the firm doesn’t derive much if any of its operating profits from its content — most speculate that it’s actually a loss. And that is likely not going to change given this quote from a story in the NY Post:

For Amazon, however, the game is not simply about winning awards. The bigger prize is getting customers to spend more time at the site so they will click around and start shopping.

Source: Jeff Bezos wants Amazon to be the next HBO, Showtime | New York Post

Sort of harkens back to the days when large brands like GE used to be the sole sponsors of TV shows, and in some cases a company name even made it into the title of the show: Hallmark Hall of Fame, Texaco Star Theatre, The Colgate Comedy Hour, Kraft Television Theatre.

Does viewership of Man in the High Castle or Amazon’s breakthrough hit this year Grand Tour lead to more shopping? We’d like to see the math behind that, but nevertheless, you can’t argue with the strategy. Plus, we love much of the content and the free 2-day shipping!

Amazon founder Jeff Bezos would make almost any list of the world’s most powerful people. In retail, he’s clearly on top, and in tech, he’s close to it. In book publishing, he would be the undisputed No. 1 for 10 years running. In addition to a $65 billion stake in Amazon, Bezos owns the Blue Origin rocket company, The Washington Post, his own venture capital firm and a founder’s stake in Google. He might be the most powerful businessman alive, and his company is a credible contender to be the stock market’s first trillion-dollar corporation.

But the music business remains unconquered territory for Amazon. The company’s early lead in CD retailing was undone by MP3 piracy, and during the digital downloading craze Amazon was overtaken by Apple’s iTunes Store. A 2005 internal experiment with music streaming at Amazon was scuttled before it launched, creating a opening that’s now filled by Spotify, with 40 million subscribers, and Apple Music, with 20 million. The company’s latest bid for more eardrums is Amazon Music Unlimited, a subscription-based streaming service launched in October 2016.Alexa, Amazon’s branded digital assistant, will be the determining factor in its success. The sophisticated voice-recognition algorithm that

Alexa employs has emerged during the past year as the leading technology of its kind. Having captured this lead, Bezos has been pushing Alexa hard, first through his Amazon Echo speaker, and, more recently, through its diminutive companion, the Amazon Echo Dot, which was the company’s top-selling item this past holiday season. Bezos’ enthusiasm has spread to the music industry, where executives speak in glowing terms of the devices. “The metric you look at more than any other to determine whether a subscriber is going to stick around is engagement,” says Ole Obermann, chief digital officer of Warner Music Group. “It’s still early days, but the engagement numbers we see from these devices are really, really good.”

Source: Amazon’s Jeff Bezos & Steve Boom on Starting a New ‘Golden Age’ for Music | Power 100

Hollywood, these days, seems remarkably poised for a similar disruption. Its audiences increasingly prefer on-demand content, its labor is costly, and margins are shrinking. Yet when I ask people in Hollywood if they fear such a fate, their response is generally one of defiance. Film executives are smart and nimble, but many also assert that what they do is so specialized that it can’t be compared to the sea changes in other disrupted media. “We’re different,” one producer recently told me. “No one can do what we do.”

That response, it’s worth recalling, is what many editors and record producers once said. And the numbers reinforce the logic. Movie-theater attendance is down to a 19-year low, with revenues hovering slightly above $10 billion—or about what Amazon’s, Facebook’s, or Apple’s stock might move in a single day. DreamWorks Animation was sold to Comcast for a relatively meager $3.8 billion. Paramount was recently valued at about $10 billion, approximately the same price as when Sumner Redstone acquired it, more than 20 years ago, in a bidding war against Barry Diller. Between 2007 and 2011, overall profits for the big-five movie studios—Twentieth Century Fox, Warner Bros., Paramount Pictures, Universal Pictures, and Disney—fell by 40 percent. Studios now account for less than 10 percent of their parent companies’ profits. By 2020, according to some forecasts, that share will fall to around 5 percent. (Disney, partly owing to Star Wars and its other successful franchises, is likely to be a notable outlier.)

Source: Why Hollywood as We Know It Is Already Over | Vanity Fair

Content is King — so much so that we have an entire investment theme created around the concept. The players in that theme seem to be evolving each and every month as the mix of content creators seems to be changing. Who would have thought just 3 years ago that Amazon would be vying for Emmy Awards? Or that YouTube wouldn’t just be repository of pirated video clips and homemade movies, but actually a news source more popular than the 3 major networks combined.

Now it appears that the very core of the content creation industry of the country, if not the world, is under an innovation attack. This in-depth article from Vanity Fair breaks it all down and exposes the realities of a broken system and the fact that most of the participants in that system don’t even know it is broken.

Yes, folks, the seeds of destructive innovation have already been sown. And thanks to the components of our Connected Society investment theme those seeds are being constantly watered and are sprouting up everywhere. Soon tourists could be going to Hollywood to see how TV shows and movies used to be made!