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Here’s a rundown of some interesting news over the past few days with links to the stories on LinkedIn where discussions are taking place:

• Roku’s stock chart over the last 6 months has been pretty incredible, with Roku’s stock going from $113 – $317. Once they get a deal done with HBO Max, expect Wall Street to like it even more. https://www.linkedin.com/feed/update/urn:li:activity:6742492275701493760/
• ViacomCBS plans to hold an investor day early next year to discuss its streaming strategy for Paramount Plus, including an update on the content slate, their distribution and marketing strategy as well as an update on Pluto TV, Showtime OTT and their entire streaming ecosystem. https://www.linkedin.com/posts/danrayburn_cbsallaccess-showtime-paramountplus-activity-6742488093514850305-Kbg2
• At an investor conference, AT&T CEO John Stankey says HBO Max has added another four million subs to reach 12.6M as of early December. Their goal is 50M U.S. subs and 75M – 90M subs globally by 2025. https://www.linkedin.com/posts/danrayburn_hbomax-streamingmedia-activity-6742456436393050112-7U3s
• 2020 has seen a massive rise in consumption of media, but has anyone done analysis on streaming fitness apps? Peloton had  3.1 million members in total with 1.09 million being connected fitness subscribers at the end of Q3. https://www.linkedin.com/posts/johnbenjaminclifton_streamingvideo-fitnessapps-ottvideo-activity-6742118520730984448-bqlT
• Nielsen Plans TV-Ratings Overhaul by 2024 With Focus on Multi-Screen Audience, but why is this taking them so long? https://www.linkedin.com/posts/danrayburn_nielsen-plans-tv-ratings-overhaul-by-2024-activity-6742153995202138112-Bv-h
• The Walt Disney Company will webcast its Investor Day 2020 on December 10, 2020. The event, focused on the Company’s direct-to-consumer streaming services, is scheduled to begin at approximately 4:30 p.m. ET / 1:30 p.m. PT.  The Investor Day is expected to last approximately four hours. https://thewaltdisneycompany.com/disney-investor-day-2020/

1. You have to offer something better than others in the market or solve a problem. In other words, you must have a “competitive advantage” in some way.

2. Good execs hire people smarter than themselves. Quibi hired a lot of very smart people, on many fronts, but then didn’t listen to them.

3. Collecting the right consumer data will tell you how consumers want to engage with OTT services. We have plenty of this data in the video world but Quibi ignored it.

4. The power of any mobile content offering is sharing. By not allowing viewers to act as the marketing vehicle for Quibi’s content, Quibi threw away the biggest value of being on mobile.

5. Calling the service Quibi, a name many could not spell or pronounce, results in higher customer acquisition costs due to the education that is required.

6. Marketing the service, instead of specific shows is a mistake. Consumers don’t care about the “channel”, but rather the content. Don’t highlight the “length” of the show, highlight the content. We all know content is king.

7. You have to set the proper expectations with advertisers. 22 brands bought $150M in advertising, #Quibi sold them on the metric of “reach”, but didn’t have it.

Math doesn’t lie and no matter how you ran the numbers, from a P&L standpoint, it would not lead to a profitable outcome. The content costs were too high and the fee they could charge consumers would always be too low. 100% of their revenue was generated from one service, without any revenue diversification like other OTT services have. When you have a plan that is setting yourself up for failure from day one, with a business model that doesn’t work, why should they be congratulated for “trying”? You can’t spend well over $1B to get a service off the ground and then “learn on the way”.

Quibi wasn’t a “startup” with a few dozen people and they ignored their own employees feedback, many of whom were the exact demographic they were targeting. Whitman has said the role of Quibi was for use “waiting for a doctor’s appointment or standing in line at the bank.” In those instances, consumers were not lacking video viewing options. TikTok, Instagram, Facebook, sports highlights, YouTube or the pause button, on any streaming service, works just fine. Qubi was looking to solve a problem that does not exist in the real world.

In all industries change happens and you need to be ready to adjust, even if you don’t know what the change will be. Some employees say there was no “what if this doesn’t work scenario” discussed internally. It can’t be an “all or nothing” approach. Lack of communication kills companies and you have to put in place a strategy to pivot, when the time comes, hopefully proactively instead of reactively.

With Black Friday almost here, I’ve compiled a list of the best deals when it comes to streaming media devices. I’ve not included pricing for the new Xbox Series X/S and PS5 gaming consoles since inventory is extremely limited and pricing varies based on all the bundles offered.

Roku
– Roku SE for $17, Walmart exclusive
– Roku Streaming Stick+ for $30 ($20 discount), direct from Roku and other retailers
– Roku Ultra for $70 ($30 off), direct from Roku and other retailers
* Aside from the Walmart exclusive, all other deals start 11/20 and ends 11/30 or while supplies last

Amazon Fire TV Stick/Cube
– Fire TV Stick Lite for $18, ($12 discount), direct from Amazon (Nov 20-27)
– Fire TV Stick for $28, ($12 discount), direct from Amazon (Nov 20-27)
– Fire TV Stick 4K for $30, ($20 discount), direct from Amazon (Nov 20-27)
– Fire TV Cube for $80, ($33 discount), direct from Amazon (Nov 20-27)

Google Chromecast
– Chromecast (not 4K) for $19 at Walmart
– Chromecast with Google TV for $40, ($10 discount), Google Store, Best Buy, Walmart and others
– Chromecast with Google TV for $90 (comes with 6-months of Netflix), direct from Google Store
– YouTube TV is offering a free Chromecast with Google TV, once you make your first payment for YouTube TV of $65 (Note the offer is only good for first time subscribers and ends December 31st, 2020)

Apple TV
– Apple TV 4K 32GB for $169, ($10 discount), via Walmart
– Apple TV 32GB for $144, ($5 discount), via Walmart and B&H

TiVo Stream 4K
– Retails for $50, no details yet on any discount being offered by any retailer (Amazon reduced the price by $3 on Amazon Prime Day)

During Akamai’s Q3 earnings call (transcript), the company referenced doing away with overage pricing and how that was allowing their customers to have a more predictable spend with Akamai. Due to the holidays and in particular with retail customers, it’s common for customers to see some big peaks in their business, with regards to traffic. While Akamai discussed how this helps better adjust traffic and spend for certain customers, the biggest advantage for Akamai in doing away with overage charges is really a competitive one.

Zero Overage Fixed Fee (ZOFF) pricing, as Akamai calls it, provides a construct where as long as their customer does not exceed their traffic commit by 2x or more for multiple consecutive months, they will not pay any overage charges. So, if there are marketing sites that don’t have massive bandwidth requirements, non-core apps that are not susceptible to bursting, or APIs that are being distributed and protected by Akamai, they can be included in a ZOFF contracting structure without their own separate traffic commits and bills. This effectively allows customers to add additional delivery services to their existing commits with Akamai, at no additional cost or commitment.

Akamai has been quietly changing their pricing strategies to be better aligned to the company’s customer base, with flat fee pricing for large media streaming customers based on subscriber/download volume, and increasingly a zero overage model for businesses that primarily monetize via websites, apps, and APIs. While Akamai says this strategy was designed to de-risk adding any internet-facing application to the platform for fear of incurring significant traffic overage charges, it actually serves an even more important benefit from a competitive standpoint.

Doing away with overage fees helps Akamai keep more traffic on their network from customers who are growing, which in many cases, may have previously been offloaded to a competitor. CDNs would specifically target Akamai customers and tell them to send traffic to their network instead of Akamai’s, the moment the customer hit their bandwidth cap with Akamai. The selling point being that the customer would not have to pay any overage fee to Akamai and would get a lower price point from the competitor as they grow their traffic. By Akamai doing away with overage pricing, that selling proposition by competitors disappears and makes it harder for them to get their foot in the door to get a slice of Akamai’s business.

With this year being marked by unpredictable traffic patterns and pressure for businesses to find savings with their IT vendors, Akamai says they have seen the strongest penetration in commerce, financial services and healthcare verticals, in adopting the no overage pricing strategy. Some may wonder why the media vertical is not called due to OTT video consumption and the reason is because most media contracts for the delivery of video and software downloads haven’t had an overage pricing component tied to them, across the industry, for many years now.

This isn’t to say that all overage type fees have disappeared completely from the CDN industry. There are cases where a customer can be hit with an additional fee if a certain percentage of their overall traffic volume, based on a specific country or region of the world, falls short of what they committed to. But that’s really a fee tied to a specific region, as opposed to overage fees that in the past were simply tied to the growth of a service. Akamai’s smart to have done away with overage pricing, more from a competitive standpoint than anything else. Some might argue Akamai is losing revenue from overages, but that’s short-sighted thinking since there is a greater opportunity to generate more revenue over time, from keeping new traffic on their network.

Here’s a quick recap of what you need to know from Q3 earnings from AT&T, Comcast, Microsoft, Akamai, Fastly, and Limelight. I’ll post another roundup from Apple, Amazon, Facebook, Google and Twitter shortly.

AT&T Q3 Earnings: Lost 590,000 premium TV subs, (37,000 of which were AT&T TV NOW subs). Grew HBO Max to 8.6M subs. A record high 357,000 AT&T Fiber net adds and 158,000 total broadband net adds.

• Total revenue of $34.3 billion, down 3.1% year over year
• Video revenue: $7.0 billion, down 12.2% year over year due to declines in premium and OTT subscribers and the impact of COVID-19 on commercial revenues
• WarnerMedia revenue: $7.5 billion, down 10.0% year over year driven by declines across Warner Bros. and Home Box Office, partially offset by an increase at Turner
• AT&T TV NOW subscribers: 37,000 net loss due to less promotional activity
• More than 90% of all broadband subscribers on AT&T’s fiber network subscribe to speeds of 100 megabits or more. More than 2.8 million fiber subscribers have taken 1 Gb speeds
• Total domestic HBO and HBO Max subscribers top 38 million and 57 million worldwide

Comcast Q3 Earnings: Lost 273,000 pay TV subscribers (down from 477,000 in Q2); 22 million sign ups for Peacock TV (up from 10M in Q2); Revenue of $25.5B (up from $23.7B in Q2).

• Total High-Speed Internet Customer Net Additions Were 633,000, the Best Quarterly Result on Record
• Premier League Viewership Reached Record Levels on Sky Sports, Including the Highest Average Season Viewership on Record for the 2019/20 Season and the Highest Daily U.K. Viewership on Record for the 2020/21 Season to Date
• Cable Networks revenue decreased 1.3% to $2.7 billion in the third quarter of 2020, due to lower distribution revenue and advertising revenue, partially offset by higher content licensing and other revenue
• Broadcast Television revenue increased 8.3% to $2.4 billion in the third quarter of 2020, due to higher content licensing revenue and distribution and other revenue, partially offset by lower advertising revenue

Microsoft Q3 Earnings: Revenue of $37.2B, up 12% y/o/y; Intelligent Cloud revenue of $13B, up 20% y/o/y. Office Consumer products and cloud services revenue increased 13% and Microsoft 365 Consumer subscribers increased to 45.3M.

• LinkedIn revenue increased 16%
• Xbox content and services revenue increased 30%
• Surface revenue increased 37%
• Search advertising revenue excluding traffic acquisition costs decreased 10%
• Revenue in More Personal Computing was $11.8 billion and increased 6%

Akamai Q3 Earnings: Total revenue $793 M, up 12% y/o/y; Web Division revenue $418 M, up 8% y/o/y; Media and Carrier Division revenue $375 M, up 16% y/o/y; Cloud Security Solutions revenue $266 M, up 23% y/o/y. Full year revenue guidance of $3.164B to $3.189B for 2020.

• U.S. revenue was $437 million, up 6% year-over-year, International revenue was $355 million, up 20% year-over-year
• Cash from operations for the third quarter of 2020 was $402 million, or 51% of revenue. Cash, cash equivalents and marketable securities was $2.6 billion as of September 30, 2020
• Revenue from Internet Platform Customers was $51 million, same as in Q2

Fastly Q3 Earnings: Revenue of $71M, up 42% y/o/y; GAPP operating loss of $23M; Capital expenditures of $14M, or 20% of revenue; Adjusted full-year 2020 guidance to $288.2M-$292.2M ($8M from Signal Sciences acquisition).

• As of Q3 2020, Fastly was in 55 markets, providing access to 106 Tb/sec. of global network capacity
• Total customer count increased to 2,047 up from 1,951 in Q2 2020
• Total enterprise customer count of 313, up from 304 in Q2 2020
• Average enterprise customer spend of approximately $753,000, up from $716,000 in Q2 2020
• ended Q3 2020 with $472 million in cash, restricted cash, and investments in marketable securities
• Compute@Edge has moved out of beta and into limited availability

Limelight Q3 Earnings: Revenue of $59.2M, up 15% year-over-year and 1.1% quarter-over-quarter. Reported a GAAP net loss of $4.0M. Leaving full-year 2020 guidance unchanged at $230M-$240M. 20 customers accounted for approximately 79% of their revenue so far this year.

I have been writing for some time on how the CDN industry has been evolving to focus more on value-add services, with security being a major focus area. As Q3 2020 earnings reporting is currently underway, we have begun to hear from the public CDN companies on just how important security has become to their businesses. Despite this growth, or maybe in part because of it, it remains incredibly challenging for businesses to parse through all of the vendor assertions when making decisions around cloud security solutions. When a high-profile site is compromised, IT leaders can be even more confused about what defenses are useful, and which vendors they should partner with.

For example, just yesterday, CNN reported that Donald Trump’s campaign website had been defaced. Cloudflare Radar highlights that election sites are being actively targeted by attackers, so it is clear that there has been an increase in attack activity that could result in a compromise. What is not immediately obvious is the source of the defacement. Specifically, it is possible that attackers circumvented a web application firewall (WAF), or it could be that either credentials were leaked or a phishing scheme allowed an attacker to access the content management system.

The DNS history for donaldjtrump.com shows that Cloudflare has been hosting the site for the past 5 years, and a domain lookup confirms that Cloudflare continues to be the host. Cloudflare did not immediately comment on the topic to the press, but this would not be the first time the company’s products were compromised (if that was the root cause in this case), or that they made mistakes that led to a customer being hacked. So in an election cycle as fraught as this one, it will be interesting to hear how the company speaks to this incident. It will be more interesting to then watch how the market reacts, especially if Cloudflare stays silent. Cloudflare reports Q3 earnings on Friday October 30th November 5th and I’ll update this post if they comment.

There’s been a lot of speculation on just how much Microsoft and Sony are going to rely on third-party CDNs for video downloads when both companies launch their next generation consoles in November. Here’s what I know so far and some specific changes in how downloads will be handled this year.

Sony, which does not have an in-house CDN, plans to utilize third-party CDNs including at least Akamai, CenturyLink (now called Lumen) and Limelight Networks. Other CDNs are being used, especially regionally outside the U.S., but the three companies mentioned I know are involved. What percentage of Sony’s overall traffic each CDN will get is unknown since we don’t know how many PS5 consoles will be sold, in what regions, or even how many consoles Sony is producing. We also don’t know how many games a user will buy and what percentage will be on disc versus 100% digital. The PS5 will launch on November 12th, in both a $499.99 edition and a digital only edition for $399.99

A big change with the PS5 versus the PS4 is how it handles downloads. On the PS4 you have to download the entire game. On the PS5 players will be able to choose which parts of games they want to download, for instance just the single-player version without the multiplayer data. This option is going to make some of the downloads smaller with the customization offered. At the same time, Sony has released the size of a few games and they are still large. For instance “Marvel’s Spider-Man: Miles Morales” is a 50GB download, with the “Ultimate” version of the game being 105GB in size. Based on the initial information Sony has given out, the average file size for the games they have listed is 60GB. To put that in perspective, one game download is 27x larger, from a total GB delivered standpoint, than 60 minutes of video streamed at 5Mbps.

On the Microsoft side, the company uses primarily Azure Front Door a cloud CDN platform and some third-party CDNs for some static delivery of content i.e Xbox downloads, Windows Updates. Microsoft does not disclose what traffic volumes are sent via Microsoft CDN offerings (Azure Front Door etc.) versus 3rd party offerings (Azure CDN by Verizon, Azure CDN by Akamai, etc). The new Xbox will launch on November 10th, with the Xbox Series X costing $500 (or $35 a month for 24 months) and the Xbox Series S (digital only, no 4K gaming) for $300 (or $25 a month for 24 months).

Microsoft is providing a lot of tools to game developers to help them be more efficient with download sizes. Microsoft calls it “Intelligent Delivery” and it will only download the portions of the game needed for that user’s specific setup, for instance if you have no support for 4K. One game developer, Warframe, has said that using the new tech, they plan to knock 15GB off its install size for one of their games.

Even with the newer tech, the total number of bits delivered for the downloads will still be much bigger when compared to streaming video. There is a lot of uncertainty around the impact these new consoles will have on third-party CDNs since we don’t know how many will be sold, by when and in what regions of the world. We also don’t know how many games will be sold, what size they will be and how many games will be digital only with no disc. Some of the new consoles do not support 4K, so games downloaded to those versions will also be smaller.

New console launches are positive for the CDNs involved in doing software downloads, but it’s too early to know what the overall impact will be. We need to see how well the consoles are sold and shipped, the levels of traffic they produce and what regions of the world the traffic is coming from. We also can’t use any data from the last time new consoles were released into the market as it’s just too long ago. The last console launch for Microsoft was the Xbox One S in 2016 and Xbox One X in 2017 and far too much has changed since then with regards to the overall console tech and third-party CDNs. It will be interesting to see if any of the public CDNs talk about the impact of software downloads on their Q4 revenue, if they provide any guidance for the fourth quarter. (Note: Limelight did not during it’s Q3 earnings, Akamai’s are to come on October 27th)

I will start tracing content in November when the consoles come out and collect some data from ISPs as to where they see the downloads coming from, so I’ll have more data to share in December.