AT&T announced that it has sold a minority stake in DIRECTV to the private equity arm of TPG. The two parties will establish a new company named DIRECTV (“New DIRECTV”) that will own and operate AT&T’s U.S. video business unit consisting of the DIRECTV, AT&T TV and U-verse video services. Following the close of the transaction, AT&T will own 70% of the common equity and TPG will own 30%. AT&T will net $7.8 billion from the deal, valuing DIRECTV at at $16.25 billion. AT&T acquired DIRECTV for $48.5 billion in 2015, or $67 billion when you include debt.

TPG will contribute $1.8 billion in cash to New DIRECTV and has secured $6.2 billion in committed financing from its bank group, $5.8 billion of which is expected to be paid to AT&T in cash plus the assumption from AT&T of $200 million of existing DIRECTV debt. The New DIRECTV will be jointly governed by a board that has two representatives from each of AT&T and TPG, as well as a fifth seat for the CEO, which at closing will be Bill Morrow, CEO of AT&T’s U.S. video business.

AT&T and New DIRECTV will have commercial agreements in place that will give New DIRECTV video subscribers continued access to HBO Max and to offer bundled pay-TV service for AT&T’s wireless and internet customers. Once the transaction is completed, existing AT&T video subscribers will become New DIRECTV customers and will be able to keep their video service and any bundled wireless or broadband services, as well as HBO Max, plus any associated discounts. The NFL SUNDAY TICKET content deal on DIRECTV, will be a part of the New DIRECTV company.

ViacomCBS held their big streaming service reveal for the March 4th launch of Paramount+ and the company didn’t disappoint. There was a lot of news to digest from the event, both in the volume of new content they highlighted coming to the service, as well as the back catalog of movies and TV shows that will be available. But the biggest news was the announcement that popular Paramount films will come to the streaming service 30-45 days after their theatrical run. All others will come to the platform at a later time, with the company saying some as early as 90 days. Here’s some other key takeaways:

• Paramount+ will have two packages in the U.S., an ad supported offering at $4.99 a month (coming in June) and a “Premium” offering for $9.99 a month. Premium will get you access to live TV with news, local content and more live sports
• Expect 65-75 million subscribers globally for Paramount+ by 2024. That goes along with their projection of 100-120 million MAUs for Pluto TV and an estimated total streaming revenue of $7 billion by 2024
• Paramount+ will have access to MGM films, due to their deal with EPIX, extended through the end of 2023, giving Paramount+ the new James Bond title No Time to Die, amongst other films
• All Paramount+ original series will be made available in 4K with HDR and Dolby Vision
• Similar to CBS All Access, some content will be available for download to mobile devices
• By summer 2021, Paramount+ should have more than 2,500 movies
• A TV show based on the Halo game, being produced by Showtime, will debut on Paramount+ in Q1 of 2022

At some point, ViacomCBS will have an archive of their launch event available on their website here.

In a previous blog post I detailed how the pay TV market lost at least 5.6M subscribers in 2020. While that would seem like good news for live linear streaming services like Sling TV, Hulu, YouTube TV, Fubo, DAZN etc. to date, no live streaming service has seen much in the way of subscriber growth. As an example, Sling TV, the first service to the market and the lowest priced, grew by only 260,000 subscribers over the past 4 years. That’s an average of only 65,000 net new subs per year, when pay TV lost between 4-7 million subscribers each year, over that same time period.

Hulu, which saw some big growth in 2019, with Hulu + Live TV subscribers going from 800,000 in May of 2018 to 4.1 million subscribers at the end of 2019, lost 100,000 subscribers in 2020, to end the year with 4 million subscribers in total. YouTube TV ended 2019 with 2 million subscribers and grew to 3 million subscribers as of October 2020, which is the last time Google provided updated numbers. It’s possible YouTube TV could have added a lot more subscribers in Q4 of 2020, but not to the tune of how many pay TV subscribers were lost in the same quarter. Fubo TV did see some small growth last year, closing out 2020 with a total of 545,000 subscribers, adding 229,211 subscribers over 2019.

It’s been reported, but not confirmed, that live streaming service DAZN had 8 million subscribers at the end of 2019, but then lost subscribers in 2020 and have not gotten back to the 8 million number as of yet. To date, the company hasn’t published any official numbers so we don’t know how accurate the estimated numbers are. Then there is Sony Interactive Entertainment, which shut down their PlayStation Vue service in January of 2020. It was estimated they had well less than 1 million subscribers, but to date we’ve never seen any confirmed numbers on that either.

Between one-off big events and platforms with targeted content, live streaming saw a huge amount of growth in 2020. Content from the likes of Twitch as well as Amazon Prime Video, with all the major sporting events they bought the rights too, saw the total number of hours viewed online grow by huge percentages years-over-year. But we have not seen the same growth with regards to live linear services because the services have not evolved into what consumers were told they would become. From day one, the main value proposition vMVPD services pitched to consumers was the cheap cost, when compared to cable TV.

While many services started out that way, they all quickly raised pricing multiple times. The average live streaming package that looks most similar to cable TV now costs $65 a month or more. In January of 2019, Hulu + Live TV cost $40 a month and less than two years later, the price is $65 a month, which is a 38% rate increase. When YouTube TV raised pricing from $50 a month to $65 a month in June of 2020, their rational for doing so was that they were adding eight ViacomCBS’s channels to the lineup. However, there was no option to keep the $50 package and not take the new channels. You had to accept the new pricing and new channels even if you weren’t interested in them. Sounds exactly like pay TV.

Sling TV in particular has called their service “A La Carte”, but you have to buy packages of many channels all together. Adding a premium service like HBO to your lineup for an additional fee per month is not “A La Carte”. The reality is, live streaming services are simply the new pay TV bundles. They are priced like pay TV, bundled like pay TV, and have more restrictions than pay TV, most with a limit on the number of concurrent streams. Companies have used terms like “personalized” and “custom”, to describe how they differ from pay TV services, but there is nothing custom or personalized about having to buy bundles of channels and not being able to opt out of higher pricing with channels you don’t want to watch.

One could easily point the finger at the live linear services themselves and say it’s their own fault for not growing when they keep raising rates. But the real problem is that in most cases, these services don’t own the content and the rates they are being charged by the content owners keeps going up. So the live linear services are in a tough spot as they need the content, but are handcuffed by the pricing and how they package the channels together. Their success, or failure, is really being dictated by the content owners.

If Dish and AT&T weren’t the owners of Sling TV and what is now AT&T TV, I’d argue those two streaming services would have already left the market, just like PlayStation Vue did. The business economics of them standing on their own, as profitable and growing streaming services, without backing from a cable TV operator simply wouldn’t be possible. Content licensing costs are simply too high, along with all the other costs of video ingestion, transcoding, protection, packaging, delivery and playback. They could try the route that Fubo TV is doing right now as a stand-alone company, but you’d need a lot of money to try and become profitable. Fubo TV has recorded a net loss of $402.5 million through the first nine months of 2020 and has negative gross-profit margin. In other words, trying to be a vMVPD on your own isn’t easy and scale doesn’t change your P&L in a positive way.

Even if any of these live linear services get to some sort of real scale, there is little to no profitability on the stand-alone streaming service. Using it to reduce churn inside a cable TV operator or trying to sell other bundled services around it, maybe they have more value. But in the next few years I suspect we’ll see some of the current live linear services exit the market completely. In a follow up post, I’ll outline why I think Hulu will exit the live TV market in the next few years.

With the majority of cable and satellite TV operators in the US having reported Q4 and 2020 earnings, combined, they lost at least 5.6M pay TV subscribers last year. That number includes lost streaming subscribers for Sling TV and AT&T. Operators WOW! and Mediacom have yet to report Q4 and full-year 2020 earnings, but as small as they are, they won’t push the numbers either way by much.

These pay TV losses won’t surprise anyone who follows the cord cutting trend, but what might surprise many is that vMVPD streaming services are not gaining the subs lost from traditional pay TV operators. Year-over-year, Sling TV, AT&T and Hulu all lost live subscribers last year. Fubo TV gained 229,211 subscribers and DAZN and YouTube won’t say how many subscribers they gained or lost in 2020. The fact live streaming services haven’t gained many subs isn’t surprising since all live service saw price hikes last year, with the average package comparable to pay TV starting at $65 a month. Make no mistake, live OTT is simply the new pay TV bundle. It can be called something else, but in reality it is priced like pay TV, bundled like pay TV, and has more restrictions than pay TV, with a limit on the number of concurrent streams from one account.

With all these hard numbers one has to ask the question, where are all these cord cutters going and do consumers really care about live TV anymore, outside of sports and some other specific big events? As viewers content habits have shifted to an on-demand world over the past few years, one could argue that without sports content, live streaming would be a thing of the past. The Grammy’s, Olympics, news and some other one-off events would still garner interest, but it’s clear that the live OTT services simply aren’t resonating with consumers in large numbers.

Live content is a different type of viewing experience and Twitch and other platforms like ESPN+, MLB.TV etc. are seeing some growth in consumption, but that content is targeting a very specific demographic, with specific content, and isn’t hitting the largest swath of the market. As an industry, the real question we have to ask is, what does the future of live video consumption look like and who’s going to control the market? In the near term, live TV via cable or streaming won’t be a linear experience as we think of it today.

Last week, I talked to various individuals tied to the current negotiations between the NFL and CBS, NBC, ESPN and FOX as it pertains to broadcast TV and streaming rights for NFL content. Currently, FOX has the NFC conference rights and AFC conference rights are with CBS. NBC has “Sunday Night Football”, ESPN has “Monday Night Football” and FOX and the NFL Network have “Thursday Night Football”. ESPN’s deal with the NFL expires after the 2021 football season and all the other broadcast deals run through the 2022 season.

While there’s a lot of speculation on which broadcasters might get more or fewer games in the new deals for broadcast TV rights, (“rumored” to be valued at $100B across all networks for 8-10 years), I’m more interested in what the NFL will end up doing with the “NFL Sunday Ticket” package. It’s well known that the current NFL deal with DIRECTV (AT&T), which runs through the 2022 season, will not be renewed. This makes sense since AT&T is trying to sell off the DIRECTV business and I’m told the NFL no longer wants the restrictions that come from distributing the package via satellite, which is completely outdated, as is the current streaming experience.

DIRECTV extended their current contract with the NFL in 2014 and as we all know, seven years later, the business models for the packaging and distribution of video content has drastically changed. This leaves a new platform to become the NFL’s partner on selling a streaming package to consumers, without any legacy restrictions. Multiple people I spoke with said that while talks are still in the early stages, Amazon looks to be in the lead for the new digital direct-to-consumer offering of what is currently branded NFL Sunday Ticket.

In 2020, Amazon signed a three-year agreement with the NFL to keep Amazon as the exclusive partner for live streaming Thursday Night Football games, 11 in total, and Amazon streamed an exclusive national regular-season game December 26, on Prime Video and Twitch. Sources tell me the NFL has been very happy with Amazon’s live streaming production of the 2020 NFL season, so it would be a natural fit for the NFL to extend their relationship with Amazon on a NFL-based streaming subscription product.

Of all the companies you would think of for such an offering, Amazon would make the most sense for the NFL since Amazon can put their marketing power behind it, already has subscriber’s payment info on file and has the resources to execute what would be a very complex video workflow on the backend. Prime Video and Twitch coverage of the NFL is already available to more than 150 million paid Prime members worldwide, and is in more than 240 countries and territories, so Amazon would give the NFL the widest distribution. I can easily imagine Amazon boxes showing up at my house printed with NFL Sunday Ticket promotions like we’ve seen Amazon do with content partners in the past (Minion boxes everywhere!).

Some have suggested Google, Facebook or even Disney, with their ESPN+ offering might be interested in the deal, but Disney would not take it on, nor are they setup to handle it. Even for broadcast TV rights, Disney is being cautious. On Disney’s Q4 2020 earnings call they were asked about the NFL renewal and said, “first priority will be to look and say does it make sense for shareholder value going forward?” Disney still has a lot of work ahead growing and maintaining their own D2C offerings, so building out an entirely new D2C product with the NFL simply isn’t doable for them from a technical stack standpoint.

With respect to Google, Facebook and Apple, I don’t see the NFL Sunday Ticket fitting into any of Google’s current offerings and it would not make sense to try and bundle it in with any kind of YouTube TV or YouTube Music package. I’ve seen some suggest that bundling an NFL offering with YouTube TV would give Google a way to sign up more subs for their vMVPD service, but many wouldn’t be interested in the vMVPD offering and the additional cost. YouTube TV costs $65 a month now and YouTube just announced more “add on” features coming to YouTube TV for an additional unknown cost.

As far as reach goes, the last number Google has publicly given out on subscribers is that YouTube TV has 3 million paying members, a figure they gave out in October of last year and didn’t update during their earnings call in February 2021. YouTube TV launched 4 years ago this month and in that time hasn’t gotten much traction for the service. They look similar to Hulu, which ended 2020 with 4 million paying subs for their Hulu + Live TV offering, losing 100,000 subs year-over-year. The price of live services have all seen very steady increases and not gotten the number of subscribers many thought they would. We saw estimates from analysts and Wall Street firms suggesting Google would get 10 millions subs or more, for the then priced $35 YouTube TV service, within the first year of launch. One could suggest that YouTube could sell a lot of ads against the NFL’s content and share that revenue with the NFL, but that’s something Amazon could do as well. Amazon’s ‘Ads and other’ business did $21.5B of revenue in 2020.

Facebook and the NFL did a content agreement in 2017 which was renewed in 2019 and expired at the end of 2020. As part of the old deal, Facebook didn’t have any live games and provided game recaps that it placed on its Facebook Watch video-on-demand platform. Facebook had to pay an up-front fee for the content and then also split ad revenue with the NFL. In 2016, Facebook did show interest in acquiring rights for live streaming the Thursday Night Games that Amazon ended up getting, but five years later one has to wonder if live streaming of NFL games fits into Facebook’s content road map anymore. When it comes to Apple you have to throw them into the mix due to their reach, but to date Apple hasn’t done anything on the live side, or at scale with video. I know some will suggest they have a younger demographic the NFL wants and the ability to promote services through all the Apple devices and their ecosystem, but I’m not convinced it fits their content strategy.

Based on everything I hear from those closer to these deals than I am, Amazon is in the driver’s seat for the NFL’s new direct-to-consumer offering, although negotiations are early and still ongoing. I’m told that details around pricing for a new streaming NFL Sunday Ticket package and revenue splits have yet to be discussed and that discussions will move along once the NFL finishes the renewals with TV broadcasters. Whomever gets the NFL Sunday Ticket deal, the new streaming service is going to be an exciting product for consumers and will be a huge improvement on what is currently an outdated user experience. And if working with Amazon enables the NFL to bring the price down on a streaming service, which is what Amazon does with all products, the NFL would get a bigger audience, wider distribution for their brand and more revenue based on volume. My bet is on Amazon.

2020 was the year of unexpected changes, but it doesn’t stop there. Join me and Till Sudworth from NPAW — Nice People At Work, as we discuss how the streaming experience is changing in 2021. No pitches, no demos, just real-world information of what’s going to take place this year, all in 30-minutes. We’ll look at some of the new OTT services coming to the market, pricing and packaging changes, the latest in video workflow best practices and we’ll take your questions. Join us on Tuesday February 23, 1pm EST, you can register for free here.

[Updated Feb 11th: I’ve changed the original title of this post because while the company didn’t notify me of this, I see that Apptopia has edited the language in their blog post and has added the words “on mobile”. This makes it clearer that they are now only specifically talking to mobile devices. I still don’t agree with them using the term “new user”, since they don’t know if the user is new, and can’t track if the person even opened or used the app they downloaded, but at least they added some additional words to make it clearer.]

In a February 4th blog post talking about how many downloads Discovery+ had compared to other OTT services, Apptopia said, “During Discovery+’s first month live, HBO Max gained 3.4M new users, and Disney+ gained 3.6M. Peacock TV, on the other hand, only gained 1.9M new users.” These OTT related numbers they are giving out are not factually accurate as presented and are not “new users” of a streaming service. My private checks with some OTT services only confirms what is clear, the data and terminology Apptopia is using is flawed, with many non-existent definitions around the words they are using that’s adding confusion to the OTT market.

AT&T did not break out the number of stand-alone HBO Max subs they acquired in Q4, nor new subscribers, and they didn’t break out any numbers for January of this year. Apptopia calls their numbers “new user growth”, but when I reached out to Apptopia for this post, the company confirmed they can’t measure a new user or a “paying subscriber”. I downloaded the HBO Max app two times in January both for new iPads I acquired, but I was already a subscriber to HBO Max. So clearly my downloads should not be counted as a “new user” like Apptopia says I am. You also have users who watch content via streaming boxes, (which Apptopia doesn’t measure) and might add the mobile app at a later time. These are not “new” users of an OTT service. You also have the instance where someone might get a new mobile phone and have to re-download their app again. All of these use cases, Apptopia defines them as “new users”. On their website Apptopia says they “estimate” first time downloads, but don’t say how they do that or give any details. Their entire FAQ page on methodology is vague with almost no definitions.

It should also be noted that in Q4 AT&T disclosed an updated number of HBO Max “activations”, but they define activations as a “download of the app”, that’s it. You don’t even have to open it or create an account, so an app download does not equal a paying or new customer, hence why AT&T is very specific (and correct) with their language. And yet, Apptopia is using language of “new users gained,” which is not accurate. It’s also the reason why when NBCU talks about Peacock TV they specifically use the term “sign ups”, as they note that a sign up does not equal a “new user” or “subscriber”. Apptopia told me that in the “mobile app industry”, a download is considered a “new user”. Peacock TV and HBO Max are not “mobile apps”, they are OTT services where mobile viewing is one of the many ways you can consume the service. Apptopia’s definitions, headlines and conclusions are flat out wrong.

Apptopia also says, “for engagement, the US app (Discovery+) averaged just shy of one million daily active users in its first month (990K), giving it a stickiness score of approximately 62% (stickiness = DAU/MAU).” In the post, Apptopia doesn’t define what a “daily active user” is so I reached out to the company who pointed me to a definition on their website that says DAU is, “the number of users who opened the app at least once in the last 24 hours.” The problem with that definition is that Apptopia is using DAU’s to also define “engagement”, and putting a “stickiness” score on an app, with a false definition of engagement. Anyone in the video industry knows that engagement is measured by watching video, not just opening an app. Apptopia told me, “we do not have the ability to determine what users are doing once inside the app,” and yet they still put out a “stickiness score”, even though they can’t see true engagement within the app itself.

Apptopia’s Tweet about their blog post says Discovery+ has, “more new users than HBO Max gained in its first month live.” That’s not even close to accurate since Apptopia doesn’t measure OTT services on smart TVs, Roku boxes, Apple TV or desktop web browsers. Saying how many “new users” an OTT service has, for the entire month, when they don’t measure anything on streaming media boxes is simply false. And nowhere does Apptopia use words like “estimate” or imply this is their opinion, they state these numbers as facts. I’ve also seen Apptopia previously use phrases like “streaming sessions”, but there is no definition to go along with it. What is a streaming session?

Apptopia says that because they provide data on more than 7 million apps, “it would be hard to match every industry’s and every company’s exact terms to our own.” That’s a lazy and terrible excuse. When you are giving out data, and selling it to others, the data is only as good as the methodology you are using AND your explanation of what it means. Any company that is going to use slices of their data to say one company/service is doing better or worse than another has a responsibility to use the right terms, with definitions and transparency. Apptopia is doing none of these things with the OTT data they are presenting.

For those in the OTT industry, analysts and members of the media that cover the space, please don’t use Apptopia’s data to describe the success or failure of any streaming service. It’s hurting our industry when the data is used and it creates confusion and false expectations in the market.

Note: I reached out to Apptopia’s CEO before publishing in the hopes of having a deeper conversation than I did with their Head of Communications, about Apptopia’s terminology and methodology, but I never heard back.

I’m testing the Super Bowl stream live across 25+ apps/platforms on Apple TV, Roku, Xbox, PS, Fire TV, iPad, iPhone, Samsung Galaxy Tab, smart TVs from LG, Vizio and Samsung. Follow this blog post for updates.

Updated Feb 9th: The Super Bowl streaming numbers are out and had an average minute audience of 5.7M viewers.

Updated 10:15pm: And that’s a wrap. Other than some issues CBS had with the CBS All Access app at the start, everything else looked good for me.

Updated 7:28pm: Some users of the CBS All Access app specifically reported having trouble logging in right around kickoff, but I don’t know what percentage of people it impacted. Wasn’t a video problem specifically but an issue with the app. I had it running on an iPad and Fire TV but wasn’t impacted. CBS has confirmed the issue has now been resolved.

Updated 6:41pm: Super Bowl stream is looking good across CBS All Access app, CBSSports.com, Yahoo! Sports across Roku, Fire TV, Apple TV and Apple and Android tablets. As you can see from the photo above, the latency across the devices varies based on hardware and app. I have 13 streams running across all devices and so far they all look good.

Updated 6:04pm: The content delivery networks (CDNs) doing the video distribution this year are Fastly, Verizon Media and Amazon Web Services (CloudFront).

Updated 5:40pm: As a refresher on previous Super Bowl streaming numbers, the 2020 Super Bowl stream by FOX had a 3.4M “average minute audience” across all digital properties (including Verizon, NFL, Yahoo and other properties). The 2019 Super Bowl stream by CBS had a 2.6M “average minute audience” across all digital properties (including Verizon, NFL, Yahoo, Tumblr, AOL and other properties). The 2018 Super Bowl stream by NBC had 3.1M “concurrent streams” across all digital properties.

Updated 5:29pm: The max bitrate for the Super Bowl stream, depending on the device you are using, will be 9Mbps. Due to the pandemic and CBS having to do so much remotely, there will be no 4K or HDR variations of the stream.

If you have any Super Bowl streaming issues today with the video or apps please email me at dan@danrayburn.com and I’ll send your feedback directly to the CBS tech team. Make sure you update both the app the device OS you are using as most problems can be fixed simply by doing that. If you have a problem, please include all details when you reach out to me including device, model number, device OS, app, app version and internet connection.

My 2020 Super Bowl post is here and my 2018 Super Bowl post is here.

I’ve seen a lot of speculation over what’s currently taking place with the delivery of TikTok traffic as it pertains to third-party CDNs as well as TikTok’s own DIY efforts. So in an effort to clear up some of the confusion, here are some details on what’s happening. TikTok has been working on their own DIY CDN to deploy hardware they own and operate inside third-party networks. So far they are early in their efforts with some deployments in specific countries, but they are still in the process of rolling it out and expanding their footprint. In September of last year TikTok said it plans to hire about 3,000 engineers over the next three years, mostly in Europe, Canada and Singapore. So while they haven’t gotten their DIY CDN to mass scale yet, we know that is ByteDance’s goal for the delivery of TikTok content.

Around the end of Q2 2020, TikTok changed their approach to delivering videos and other content and moved to a model that relied on what looked to be almost two dozen different providers globally, large and small. When the changed happened, you could see this from public trace routes in various countries. This change was driven by politics due to the Trump Executive Order and was not driven by any kind of performance or capacity problems with the CDNs they were using. Fastly and Akamai were two CDNs that had a large volume of TikTok’s delivery traffic in various regions of the world and at different volumes. For example, we know Akamai was doing a lot of delivery for TikTok in India, where the application has since been banned by the government.

While it doesn’t seem like TikTok will be banned in the U.S. for now, the Biden administration has said they will continue to “hold China accountable” on technology-related topics, though final decisions around its stance on TikTok and other telecom issues have not yet been made. Since the start of the new year, third-party CDNs have started to see some additional TikTok traffic come to their network, in specific countries. This is not an indication that TikTok is going to default back to third-party CDNs, but is a sign that they may once again rely on them more as they continue to build out their own CDN. Even if TikTok had not made the change in their strategy in the second half of last year, it was only a matter of time before they started moving to more of a DIY model in 2021. So while some think the TikTok change was unexpected, we all knew that going DIY was coming sooner than later. It’s also important to note that not all DIY customers move 100% of their traffic to their own CDN platform, especially when they have such a global audience. So even with TikTok’s DIY CDN growing over time, they still might rely on third-party CDNs in specific regions.

There has also been some speculation that if Oracle and Walmart were to get a combined 20% stake in a new company called TikTok Global that, “TikTok will likely move its video to Oracle’s cloud computing platform.” Oracle does not have their own CDN offering as part of their Oracle Cloud Infrastructure (OCI) platform and I would not envision them building out a CDN just for TikTok. As part of the proposed deal it was announced that Oracle would host all U.S. user data on its cloud platform, but that’s not the same as delivering videos. Other cloud based services like origin storage and compute could potentially be moved to Oracle, but one would expect that Oracle would use a multi-CDN strategy of third-party CDNs for video delivery, like all large video customers have adopted.

I think the biggest potential opportunity for third-party CDNs to get additional revenue from the delivery of TikTok related content would be if the deal with Oracle and Walmart went through. Based on the latest data I saw, TikTok had over 100M users for their application just in the U.S. alone. So far we haven’t gotten any information from the new administration on when or if that deal will happen, or what any new requirements might be needed for it to take place. But if that deal were to come to fruition, I would estimate that it would be good for third-party content delivery networks.

Between all the craziness on Wall Street and the number of earnings in the past few days, it’s been a busy week to say the least. With earnings from NBCU, AT&T, Verizon, Facebook, Apple, Microsoft and Charter, along with news from Sling TV, Peacock, YouTube and others, there’s a lot that’s taken place. I’ve broken down all the earnings, news and concise takeaways at the links below to try and make it easy for everyone to catch up on what they may have missed:

• Vimeo’s Business Detailed In IAC’s S-4 Filing: Revenue from first 9 months of 2020 of $199.4M, with a net loss of $44.8M. Has 1.5M subscribers who pay an average of $214 per year ($17.83 a month). See my blog post for the full details: http://bit.ly/2M8v5E1
• Some clarity on Vimeo’s $300M raise. The report by Reuters that they raised $150M on a $2.75B valuation is NOT accurate. Vimeo did a $200M raise at a $5.2B pre-money valuation and a second raise of $100M at a $5.7B pre-money valuation.
• Comcast Q4 2020 Earnings: Lost 248,000 pay TV subs in the quarter, total loss of 1.4M pay TV subs for the year; 33M “sign ups” for Peacock TV in U.S.; Revenue of $103.6B for the year, a decrease of 14.9% y/o/y. More details: http://bit.ly/3r3eRur
• NBCU says Peacock TV brought in $100M in Q4 revenue and that losses on Peacock TV are estimated to be $2B for 2020/2021. Peacock TV has 33M “sign ups” as of this week. CEO says, “Peacock remains primarily an advertising play”.
• AT&T Q4 2020 Earnings: Ended the year with 41.5M combined HBO Max and HBO U.S. subscribers but didn’t break out how many are just HBO Max subs. Lost 617,000 DirecTV and AT&T TV premium video subscribers (27,000 were the AT&T TV streaming service). More details and a chart that breaks down HBO Max subs more here: http://bit.ly/2YtpLxi
• Verizon Q4 2020 Earnings: Lost 72,000 pay TV subscribers. Total pay TV losses for all of 2020 totaled 298,000 subscribers, which was 7.2% of all pay TV customers. Verizon ended 2020 with 3.8M pay TV subscribers. More details: http://bit.ly/2YrvjZf
• Sling TV raises pricing by $5 a month for new subscribers with their base plan now starting at $35 a month. Sling says they are being “forced to raise prices because the television networks keep charging us more.” Customers now receive 50 hours of free DVR storage, an increase from 10 free storage. More details: http://bit.ly/2M8CZ08
• Apple Q4 2020 Earnings: Total revenue of $111.4B, up 21% y/o/y, Services revenue of $15.7B, up 21% y/o/y,; iPhone revenue of $65.5B, up 17% y/o/y. Revenue from China of $21.3B, up from $13.5B y/o/y. More details: http://bit.ly/3afvRaa
• For those that got free Apple TV+ accounts from buying an Apple product, Apple has extended subscriptions for free until July. They were due to roll over to paid accounts in February.
• Verizon CFO: “As the early cohort of Disney+ customers have come off of the initial free 12-month period, more than two-thirds have maintained their subscription, either through their Verizon direct billing relationship or by opting into one of our newest Mix & Match plans with the Disney bundle included.” More details: http://bit.ly/3orVzgx
• Facebook Q4 2020 Earnings: Total revenue of $28.07B, up 22% y/o/y; Monthly active users of 2.8B, up 12% y/o/y; Daily active users of 1.84B; Warns Apple iOS changes could hurt business. More details: http://bit.ly/3akq9UB
• Charter Q4 2020 Earnings: Lost 66,000 residential pay TV customers; but ended the year up a total of 19,000 residential pay TV customers, totaling 15.6M residential pay TV customers at year’s end. More details: http://bit.ly/3oEJBAB
• YouTube is introducing clipping, the ability to make short clips of live streams or videos with a small group of creators. YouTube blog: http://bit.ly/2YtBwUE

If you have questions on earnings or news, and what the key takeaways are, I’m happy to chat at any time. 917-523-4562 or dan@danrayburn.com

[Updated with Q4 and full year revenue] Last month, IAC filed an S-4 detailing Vimeo’s business and their planned spin-off from IAC. Here’s the numbers which are all from the first 9 months of 2020 and some key takeaways on the business:

• *Updated: Q4 revenue of $83.8M, up 54% y/o/y
• *Updated: Total 2020 revenue of $283.2M, up from $196M the previous year
• Based on Q4 growth, total 2020 revenue should be $230M-$240M (my estimate)
• Revenue for first 9 months of $199.4M, with a net loss of $44.8M
• Vimeo has 1.5M subscribers who pay an average of $214 per year ($17.83 a month). 50% of revenue came from customers outside of the U.S. Vimeo has 200M free users one the platform, having added 25M free users in the first 9 months of 2020.
• Has over 3,300 enterprise customers who pay over $22,000 per year ($1,833 per month), on average. Vimeo defines “enterprise customers” as those who purchase plans through contact with their sales force. As a comparison, in Q3 2020, Brightcove’s average annual subscription revenue per “premium” customer was $87,200 ($7266 a month).
• Less than 1% of subscribers pay more than $10,000 per year
• While a majority of Vimeo subscribers began as free users, only a small percentage of free users become paying users over time
• Vimeo’s sales and marketing expenses were $77M, an increase of $12.1M, or 19% y/o/y, due to the growth in the sales force and increased commission expense resulting from growth in bookings and marketing costs. Accounted for 39% as a percentage of revenue.
• Research and development expense increased $14.7M, or 44% y/o/y, due primarily to increased investment in products, including Vimeo Create and accounted for 24% as a percentage of revenue.
• Cost of revenue primarily consisted of $48.9M in hosting fees, $9.4M in credit card processing fees and $4.2M in-app purchase fees paid to Apple and Google.
• 674 full-time employees, of whom 204 were based outside of the U.S.
• Vimeo uses Google’s Cloud Service (hosting/transcoding), AWS (S3) and multiple CDNs (Akamai/Fastly [my info added, CDNs not called out by name in the filing]) Vimeo does not have backup systems for GCS or Amazon S3.
• [Corrected]The $150M Vimeo raised in November of 2020 was by selling 8,655,510 shares at $17.33 per share (They have since raised another $150M in 2021, valuing Vimeo at $6B) Vimeo did a $200M raise at a $5.2B pre-money valuation and a second raise of $100M at a $5.7B pre-money valuation. [Updated] Raised $450M in total with another $150M raise in January 2021.
• Vimeo has $19.4M of a current payable due to IAC and $90.6M of long-term debt
• IAC financed the acquisition of Livestream in 2017 and Magisto in 2019 for Vimeo, but didn’t break out what they paid for the acquisitions, only calling them “small acquisitions”. But they did say the cost of revenue in 2018 increased from 2017, by $19M, “due primarily to the inclusion of Livestream”.
• Over 300,000 new videos are being uploaded to Vimeo’s platform each day
• Vimeo typically does not provide 100% uptime across its video services in any given month
• In its 16-year history, Vimeo did not decide to focus primarily on SaaS offerings until 2017. In addition, Vimeo has only operated an enterprise-focused sales operation since 2017, when it acquired Livestream.
• Based on Vimeo’s internal data, they estimate their total addressable market to be approximately $40B in 2021, growing to $70B in 2024. [I 100% DISAGREE with these TAM numbers, they are not realistic]
• Vimeo says the growth they experienced during the first nine months of 2020 may be partly or largely attributable due to the COVID-19 pandemic. If the COVID-19 pandemic ends and the level of demand for online video returns to pre-pandemic levels, then the growth rates Vimeo achieved in 2020 may not be indicative of growth rates in future periods.
• Vimeo has a few lawsuits currently on their hands, including one filed by British Telecommunications plc on March 18, 2018, regarding patent infringement. Another is a class action complaint in Illinois against Vimeo regarding “facial biometric information”.

The video platform market is crowded with many vendors offering services and I routinely heard Vimeo compared with the likes of Kaltura, Panopto, Zype, Resi, Brightcove, Microsoft Stream, MediaPlatform, Vidyard, Wistia, Qumu, Wowza, YouTube, Dacast, JW Player, ON24, Uscreen, Frame, Hive Streaming, VidGrid, Metacafe and a long list of others. Of course the majority of companies on that list are NOT comparable to Vimeo at all! Let me make that clear. Many vendors target a specific vertical only, or a specific video use case, go after only certain sized customers based on users or revenue, or only operate in regional locations.

You cannot compare Vimeo who has 1.5M customers, paying $17.83 a month, with an enterprise video platform that is on-prem, that ties into learning management systems (LMS), ingestion from video conferencing gear etc. and has customers signing six and seven figure contracts per year. The same goes for video platforms targeting edu institutions and lecture capture based solutions. There are a LOT of differences between video platforms in the market and it is very important to compare apples-to-apples across services and market targets.

If you have any questions on Vimeo’s business, the size of the market for video services, the competitive landscape, Vimeo’s strengths and weaknesses etc. I’m happy to chat more about it. Reach out anytime at 917-523-4562 or dan@danrayburn.com

[Updated Post Here: Vimeo’s Business Detailed In IAC’s S-4 Filing: All The Numbers and Key Takeaways You Need To Know]

I’m all for companies in the video space being valued by investors and Wall Street for the value they bring to the market, but I am also a firm believer that valuations needs to be realistic to set proper expectations with investors. Since November, Vimeo has raised $300M with a valuation of $6B. They had $199.4M in revenue for the first 9 months of 2020 and are expected to end the year with about $230M in total revenue. [Updated Feb 3rd] Vimeo ended the year with $283.2M in revenue. So even if they grow at a continued 40% y/o/y rate, they are valued at almost 19X projected 2021 revenue. Vimeo is competing in one of the most competitive and price sensitive markets around and they are not an enterprise platform. Their customers are SMBs with spends well under $100 a month and none of these video platforms for SMBs are sticky. Vimeo offers an easy to use and reliable video streaming service, but so do many other companies specifically targeting the SMB market.

Their parent company IAC keeps mentioning how Vimeo has “200 million users globally”, but those are not all paying customers and they don’t define what a “user” means. Vimeo doesn’t have any kind of proprietary service or platform and from the IAC investors and Wall Street people I have spoken to, many don’t really understand Vimeo’s business or the competitive landscape for their services. Yes, Vimeo has an easy to use service and it works well. But not to the tune of a valuation based on 19x revenue, which includes a 40% year-over-year growth assumption. Vimeo’s 2018 revenue was $147M, so assuming back-to-back years of 40% growth by itself is a big bet. IAC plans to spin Vimeo out and take the company public this year, so at some point in the next 3-6 months I would expect we’ll see them file an S-4 which will break down all their numbers. Updated: The S-4 has been filed. See my details on it here.

In 2020, over 80% of video streaming traffic still used the H.264 codec, which seems staggering when you consider we’ve had HEVC and VP9 around for quite a while and there are even more advanced options on the way (AV1, EVC, VVC, LCEVC). This isn’t news to anyone who is close to this stuff and has been widely discussed before, but we should be taking a frequent look at what continues to block progress in one of the most fundamental components of the streaming media stack.

I recently conducted a survey on behalf of compression experts V-Nova, and then moderated a webinar (which you can check out here) to discuss the results with Luis Vicente, CEO of sports OTT operator Eleven, and Karam Malhotra, Global VP Revenues for Asian top 10 video app SHAREit. The survey’s focus was on key barriers to improve the quality-of-experience operators are serving their customers. Over 200 senior business and technical decision makers responded from a broad range of industry verticals and the results provided some real food for thought. You can download all the results from the survey for free, at this link.

From the results of the data, it was enlightening to hear which components of their video delivery systems people think are most critical for QoE. CDN comes out top here and in my view that’s simply because it’s the easiest to measure and everyone’s first thing to look at. This is indicative in part of services tending to consider components like video codecs as a fixed constant because changing them is assumed to be a long-term project, which it doesn’t have to be. Interestingly, however, video codec came out close second in terms of relevance to QoE.

It stands to reason that deploying new compression tech and streaming equivalent quality at substantially lower bitrates improves QoE all round by accelerating start-up times, reducing buffering incidents, increasing the % of viewers that can receive higher quality ABR profiles and reducing the traffic load on those CDNs that appear to be taking most of the heat for QoE issues.

So, what are the barriers holding the industry back from moving video compression forward? As you can see below, the widely publicized royalty costs regarding uncertainties for codecs like HEVC have generated a lot of hesitancy.In addition, the increased operating costs of encoding and processing are an important barrier too. Furthermore, quite a few of the survey options on this one all point to the risk of incurring significant new costs from heavier compute requirements and the additional complexity that comes from duplicating workflows to serve different types of device. For many, royalty issues are so loud because in truth most people see unclear business benefits from deploying new video codecs and immediately incurring cost increases.

Despite these barriers to adopting new compression technologies, 33% of respondents reported that they are wanting to trial new options in the next 12 months, a clear acknowledgement of the need to find ways to progress somehow. This is possibly being driven by the clear need to differentiate in this evermore competitive entertainment space by launching more premium services like 4K and HDR, which 29% said they were intending to do in 2021.

All of these survey results brings us to the question that really prompted me to do this survey in the first place, which is what would actually convince companies to upgrade their video encoding and reap the available QoE benefits? What are the key factors and where do they need to be to tip the balance?

Respondents were asked to quantify what sort of compression efficiency benefit would be needed (most easily expressed as how much could you reduce the bitrate and maintain equivalent quality). The average came out at 31% which is pretty well aligned with the typical improvement between codec generations (e.g. AVC to HEVC or VP9 to AV1) and also the uplift typically provided by using LCEVC enhancement with AVC or HEVC.

Respondents were also asked what reduction of transcoding costs would be required to convince them to upgrade (that big barrier from earlier). That came out at a very similar average of about 30%. The combination of the two answers is interesting, suggesting that transcoding efficiency is considered roughly as important as compression quality.

I then explored what impact on operating profitability would be generated by an improvement in compression tech meeting these sort of criteria. More than half of respondents felt that optimizing compression technology in this way would provide more than a 25% improvement in profitability. This is surely material, especially if we consider that improved QoE should also produce a benefit to the top line from better user retention and engagement.

A key takeaway from all of this data is that 52% of respondents don’t know what the primary cause of losing viewers from their service is, a key point that warrants more discussion another time.

The general theme that emerged from this survey is one of hesitancy to upgrade video compression because of an array of perceived complexity and cost risks. At the same time, respondents do recognize that improved compression could produce material business benefits. It’s the first time I’ve seen such a clear picture of the criteria that must be met to enable significant progress and an acknowledgement that the benefits to profitability are substantial. It’s also the first time that I see such a clear highlight on the importance of transcoding efficiency, tightly connected to the processing requirements of video codecs.

Objectively it looks like MPEG-5 LCEVC is well positioned to tackle the barriers this survey highlighted. A blend of significant improvements in compression efficiency, simple licensing terms and crucial reductions in the operational processing cost of encoding and delivery seems to be what’s needed to unlock things. It’s going to be interesting to see how that all plays out.

If you want to see all the results from the survey, you can download them for free, at this link.

On Friday January 8th, Roku announced it had acquired Quibi Holdings LLC, the company that holds all of Quibi’s content distribution rights for their library of 75 original shows. All of Quibi’s content will be added to Roku’s free ad-supported channel and as part of the deal, Roku is not permitted to change the format of the shows and must keep all the episodes separate.

Normally for a deal like this we’d all be running calculations on how many ads Roku has to sell, at what CPMs, and with how many viewers, to see a positive return from the deal. But in this instance I would argue that we can value the deal for Quibi’s content with different metrics. The day Roku announced the deal their stock closed up $19.84 a share, adding $2.52B to Roku’s market cap – in one day. Roku’s stock might have gone up that day even without the news, so there is no way to know the exact impact, but Roku’s stock was clearly impacted in a positive way from the news.

The sale price for Quibi Holdings hasn’t been announced but I heard the deal size was “around” $50M, [not verified] while others are reporting the price was less than $100M. Even if Roku paid $100M for Quibi’s content, the return on their investment based on the increase in their market cap would be 25x what they spent. If Roku paid $50M for the content they got a 50x return for their investment, all for just making an announcement. Even if the rumors on wrong on what Roku paid for Quibi’s content and the price was higher, Roku still made back their investment many times over.

If you’ve followed Roku’s stock, you know just how much Wall Street is in love with it and how much it moves based on news. The stock saw positive benefits when they announced the deal with NBCU for support for PeacockTV and again with WarnerMedia for support of HBO Max. We don’t know exactly how much Roku’s stock may have already gone up without the news, but even if it simply doubled the raise that day, Roku sill got a 12x return on their investment. Whether they sell any ads across Quibi’s content and generate any ad revenue almost doesn’t even matter at this point.

If you were still on vacation last week to start the New Year, here’s a rundown of some of the interesting news that took place you might have missed:

• My hands-on review of Discovery+ launch: Massive content library, good streamlined UI, parental controls, downloads and additional smart TV support to come. 4K streams max out at 13.5Mbps, four concurrent streams per account. More details: https://www.streamingmediablog.com/2021/01/discovery-plus-launch.html
• Roku announced it has acquired Quibi Holdings, LLC, and will put that content in the free Roku Channel with advertising. I heard the deal size was “around” $50M, others are reporting the price was less than $100M. Roku’s stock closed up $19.84 on the news, adding $2.52B to Roku’s market cap, in one day. https://www.linkedin.com/posts/danrayburn_streamingmedia-rokutv-quibi-activity-6753338314524254208-d4ce
• fuboTV announced preliminary Q4 2020 revenue and subscriber growth with fuboTV Paid subs at year-end expected to exceed 545,000, an increase of more than 72% year-over-year. Prior guidance was 500,000-510,000 subs. https://ir.fubo.tv/news/news-details/2021/fuboTV-Announces-Preliminary-Fourth-Quarter-2020-Revenue-and-Subscriber-Growth/default.aspx
• In a first time experiment with CBS, Sunday’s NFL Wild Card game was broadcast on Nickelodeon with a format and interface that targeted kids. The adult announcers, which were joined by 14 and 15 year old Nick stars, were making less references to football and more to SpongeBob, Good Burger, homework and favorite ice cream flavors. More details: https://www.linkedin.com/posts/danrayburn_nflfootball-viacomcbs-nickelodeon-activity-6754158545140236288-zND_
• Netflix to raise pricing in the UK next month. Its standard monthly package will go up from £8.99 to £9.99 and its premium package will rise from £11.99 to £13.99. The basic plan will remain £5.99. https://www.bbc.com/news/technology-55563970
• Comscore announced a strategic investment by Charter Communications, Qurate Retail and Cerberus, which wipes out $204M in debt. As part of the deal Comscore gets a 10-year data license from Charter and becomes the preferred local measurement provider for Charter’s advertising business. More details on the deal here: https://www.linkedin.com/posts/danrayburn_comscore-announces-strategic-investment-by-activity-6753356616789184512-Ta2Z
• Some key takeaways from Discovery’s CEO interview on CNBC talking about the launch of Discovery+ in the US. He didn’t give out any subscriber projections but did highlight some other details here: https://www.linkedin.com/posts/danrayburn_discovery-ceo-on-2021-plans-for-discovery-activity-6751916742202671104-cTiv
• In 2019-20, Netflix invested $400M (£293M) in creating original programs and released more than 30 pieces of original Indian content. Amazon Prime now has customers in more than 4,300 towns and cities across India and has about 50 shows in development. More details: https://www.linkedin.com/posts/danrayburn_in-the-land-of-storytelling-netflix-and-activity-6751617896595644417-zeQX
• A behind-the-scenes look (video) at the workflow ESPN engineers implemented to enable the announcer to call the Sugar Bowl live from his home: https://twitter.com/ESPNPR/status/1345429498758639617?s=20
• Roku announced preliminary estimated data for Q4 ending Dec. 31, 2020: Roku ended the year with 51.2M active accounts, up by approximately 14M accounts in 2020. https://blog.roku.com/en-gb/50-million
• NBCUniversal and Charter Communications announced a renewal deal which includes Charter broadband and video customers getting an extended free trial of Peacock TV. The free deal hasn’t launched yet so we’ll know how long it lasts when it launches. https://ir.charter.com/news-releases/news-release-details/nbcuniversal-and-charter-communications-announce-full-portfolio

If you’re interested in working at Disney Streaming Services, they have an immediate opening for a Sr. Software Engineer – Solutions Architect. I can make a direct introduction to who your boss will be, so if you are qualified, contact me (dan@danrayburn.com) if interested. Full job details: https://jobs.disneycareers.com/job/new-york/sr-software-engineer-solutions-architect/391/17366699

Today, Discovery+ launched in the U.S. for $5 a month with “light” commercials, or $7 commercial free, allowing up to 4 concurrent streams per account and a 7-day free trial. The company is showing “up to 5 minutes” of commercials per one hour of content, hence the “light” branding. This is similar to what NBCU is doing with Peacock TV, with a lower ad load on streaming services when compared to cable TV, which averages 20 minutes of ads per hour of content. As expected, the company is doing a huge marketing push across all social platforms and on TV, promoting the service with their “stream what you love” branding.

Discovery+ is available on platforms and devices including Apple TV, Fire TV, Chromecast, Roku, iOS, Android TV, Xbox consoles One/X/S and Samsung smart TVs from 2017 and newer. It is not yet available on smart TVs from Vizio, Sony, LG or PlayStation consoles but support for other brands of smart TVs is expected this year. The biggest strength of Discovery+ is their massive content library of over 55,000 episodes, with 2,500 series, across brands including A&E, HGTV, Food Network, TLC, Lifetime, OWN, Travel Channel, Discovery Channel and Animal Planet. They also plan to offer more than 1,000 hours of Discovery+ original content this year. Discovery also announced today a multi-year carriage deal with Vodafone in which Discovery content will be made available to Vodafone mobile customers in 12 European markets. Discovery+ was already live in the UK on Sky and previously announced a deal with Verizon in the U.S., where some Verizon customers can get Discovery+ at no cost.

I’ve been hands on with the service for a short time and so far, have found the UI intuitive and easy to navigate. It has content categories as the top nav, but also breaks out channels, which then features content only from that one brand. Functionality like continue watching has worked flawlessly for me, along with starting back up in the right place when moving to a different device. The left side nav is where you go home, manage your account and search for content, along with making a favorites list. Browsing allows you to search by brand and under each brand you can see what’s trending. Not all content is offered in 4K, which isn’t surprising being there are some old shows in the catalog, but I found plenty of other shows had 4K quality. Discovery didn’t say what percentage of the entire catalog has 4K support, but for the content that is in 4K, the max bitrate is 13.5Mbps. None of the content at launch is available for download and they don’t yet have any parental controls you can enable, but both of those options are coming to the service this year.

Of course with any new OTT launch in the market you have those in the media and on Wall Street that are going to base the success of Discovery+ on the wrong metrics. We are already seeing Discovery+ compared to HBO Max, Netflix and Disney+, which makes no sense. Some are asking if Discovery+ can show similar success to Disney+ when it comes to subscriber numbers, but that’s the wrong metric to be using. Disney+ is very niche content, targeting mostly kids and family friendly content and had about 8,000 episodes and movies at launch. Discovery+ has much more breath of catalog and is targeting adults across a wide range of content. 90 Day Fiancé is the number one show on TV with the 15-49 demographic and that’s not the type of content you will see on Disney+.

On CNBC today, Discovery’s CEO said he expects Discovery+ to “be very very big” and will have “big scale”, but didn’t define what that means. The company is not giving out any initial projections on the number of subscribers they are anticipating, but did say that “over the next couple of quarters”, they will give out subscriber numbers and growth. I see some making the ridiculous statement that Discovery will need to hire firms to help Discovery “understand” the streaming market and to be able to compete with Disney+ and others. Streaming is a technology, it’s not a “service”. The service is content, which Discovery knows very well. The medium that’s delivering the content is simply streaming technology.

Discovery knows all about operating channels, producing and distributing content, creating original shows, doing integrated marketing across multiple channels and tracking viewership. Discovery has a 20% share of cable viewership and the company says “nearly 250 millions hours of Discovery content is watched on TV every day.” TLC, beat every one of the cable news nets in the third quarter, based on time watched and their portfolio is #1 for average time spent across all TV entertainment in the US. That’s a lot of viewership they can build on. Discovery is not new to the content game and doesn’t lack any expertise or strategy, with the company having hired execs from places like Hulu, Amazon, Microsoft and others. For some to suggest that Discovery is “late to the game”, doesn’t understand the D2C market, or lacks any kind of streaming expertise – that’s simply not accurate. I won’t make exact projections on the number of subs Discovery will sign up, we need to give the platform time to grow. But Discovery+ is a global service, with a deep catalog of content, big marketing tie-ups and we should expect them to have tens of millions of subs by the end of this year.

Here’s my presentation entitled, “Video CDN Trends: Latest Pricing, Customer Challenges and Growth Opportunities” from the Mile High Video workshop event this month.  Happy to answer any questions in the comments section or you can email me directly at dan@danrayburn.com. Apologies for the rough voice, had a cold. #mhv2020

Recently Cloudflare announced that their researchers have been working to improve internet privacy and security through a DNS protocol called Oblivious DNS over HTTPS, or ODoH. While the announcement suggests that it will improve internet privacy, their proposal can actually lead to significant privacy issues, if it’s adopted. In addition, as it is written today, ODoH is likely to seriously impact internet performance or force providers to invest in software and process changes because it strips information that ISPs and CDNs require to do effective and efficient mapping to ensure performance for their users.

The ​IETF​ is an internet standards body made up of ​an international community of network designers, operators, vendors, and researchers concerned with the evolution of the Internet architecture and the smooth operation of the internet.​ Community members bring proposals for internet standards to the IETF through published “drafts”, mailing lists, and typically through in-person meetings. Proposals are submitted, and require working groups to pick them up in order to progress them into standards.

At this point, ODoH is an early-stage draft proposal which has been discussed in the “dprive” (DNS Privacy) working group but not yet adopted there, meaning that it is in a formative stage. Common practices to encourage the IETF to adopt work in a working group include deploying production implementations of proposed technologies, and driving interest and support from vendors and businesses, which is what Cloudflare is doing with their announcement.

So why is there contention around the proposal? Cloudflare’s head of research Nick Sullivan has ​stated​ that ​”sweeping technical changes to the internet will inevitably also impact the technical community. Adopting these new protocols may have legal and policy implications.” Some of these legal and policy implications are detailed in a blog authored by Akamai Fellow Erik Nygren, back in 2018 on what​ ​encrypted DNS means for the Internet as a whole​.

ODoH is an extension of DoH, so let’s start with that. The protocol exists because DNS queries are sent in cleartext. This means anyone on the network path between a user’s device and the DNS resolver can see both the query that contains the website the user wants to visit, as well as the IP address that identifies their device. Both protocols are designed to increase user privacy by preventing queries from being intercepted, redirected, or modified between the client and resolver – something known as a middle (MiTM) attack. DoH encrypts communications from the client to its resolver, and ODoH takes this a step further to obscure the client from the resolver.

DoH itself is just a protocol for doing DNS lookups over HTTPS. Most of the contention comes from ways in which DoH resolvers might be discovered and configured. For example, when DoH is used at the application level, it can bypass name servers configured at the OS level. So a web browser can come with a list of DoH compatible resolvers already configured, and traffic from that client would then use those DNS settings.

In 2019 Mozilla ​turned on DoH by default for all Firefox users​, using Cloudflare as the server. This meant that the browser would prefer DoH via Cloudflare. This has been​ ​heavily criticized as an anti-privacy move,​ ​since Mozilla is essentially handing off all DNS resolutions to a single for-profit corporation. ISPs expressed concerns over their ability to perform lawful interception and content filtering (for example, legal requirements or parental controls), and many feel that since Cloudflare is an American company, this could not only be centralizing a large portion of the internet but also making it subject to law enforcement from a single government.

To explain this, switching from using an ISP’s local in-country DNS resolver to a DNS resolver that is out-of-country could make both privacy and performance worse rather than better, regardless of what communications transport is being used for the DNS. Consolidating DNS lookups to a few services also introduces new risks for enabling the correlation of user activity, and these services potentially become highly attractive targets for subpoenas and extra-legal attacks. This is all made substantially more challenging as many users lack a way to judge the level of trust they have with various DNS service providers, making it hard for them to make an informed choice.

So Cloudflare’s ODoH announcement is their way of asserting that they will provide users with an option not to send IP information to their DNS resolvers, which Cloudflare claims will ensure privacy​. ​But this introduces another challenge: that ​ODoH will impact performance because it introduces significant latency, and also strips information that is required to do effective and efficient CDN mapping. Cloudflare’s research​ paper about ODoH​ provides testing conditions that are not relevant to the real-world, and the performance impact numbers mask latency introduced by load times for real web applications.

There are a wide range of other options being explored by the IETF. Given the wide variety of use cases, there is not likely to be a single solution. Many of the leading proposals involve a mixture of sources for secure DNS resolver configuration, device policy, associated and designated resolvers, and user choice. Something like ODoH may fit into this for resolving names where performance may be traded off for possibly improving privacy, but at this point, the concerns and potential pitfalls seem to outweigh the benefits.

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/