The Netflix episode “Woooooo!” This week, we discuss Netflix’s record Q4 earnings, their free cash flow of $6.9 billion for 2023, their growing AVOD business and their off-the-top rope deal with the WWE as they continue to dominate the industry. We discuss how the WWE deal with “scripted entertainment” differs from sports content, how it will expand Netflix’s advertising business, and what it might mean for a more significant content deal with the WWE when Peacock’s domestic WWE Network deal expires in March 2026.

We highlight new data from Netflix showing that 40% of all Netflix sign-ups are for their AVOD plan in markets where it is offered and the reason why Netflix plans to retire their Basic plan in some of their ad countries. We debate the growth Netflix could have with AVOD in the short and long term, especially with T-Mobile having just converted Netflix’s users to the ads plan in their “Netflix On Us” bundle.

Finally, we discuss what Netflix said about their shift in the mix of content spend, their historical bias to build and not buy content assets, why they are not interested in some of the big linear assets being shopped and the work they are doing to improve ad targeting, relevance and measurement.

In the US, the TV OS market is highly competitive, and there’s little room for new entrants because many of the largest TV manufacturers, including Samsung, LG, and Vizio, operate their OS. On top of that, Roku, Google, and Amazon have established relationships with other brands like TCL, Sony and Hisense. But in Europe, the CTV market is different from the US, and this is where Titan, a new TV OS recently launched with Phillips as its main distribution partner, plans to concentrate their focus. In November, I had the chance to sit down with the Titan team in NYC and hear more about their product and their interest in the European market.

In Europe, Phillips has the third largest market share behind Samsung and LG. Connected TV penetration in Europe lags behind the US, and there is an opportunity to grow with many regional brands that don’t have their own OS. In addition to launching with Phillips, Titan also announced a partnership for branded TVs with Curry’s, the largest electronics retailer in the UK. The European advertising market differs substantially from the US since the continent has over three dozen countries and two dozen languages. Titan has built a network of local relationships with advertisers and agencies to create a new marketplace for CTV advertising built upon a robust data platform that complies with EU privacy laws.

Philips already has a partnership with Google TV but will deploy Titan on most of its models for 2024, including its upcoming entry-level Mini LED and LCD TVs, including the PML9009 Xtra Mini-LED and “The One” LCD (also known as the PUS8909). These TV models are expected to make up >60% of the overall volume of TV sales in 2024. Phillips will continue to use Google TV on the newly announced OLED+959 and OLED+909.

TV operating systems are important in the Connected TV ecosystem because they serve as a marketplace for streaming services, FAST channels, data and advertising. Operating systems build revenue off these lines of business and measure their success by growing ARPU. Growing revenue after the retail sale of a television is a trend over the last decade, pioneered by Roku, with many companies following a similar playbook. Margins in the highly competitive TV manufacturing business are shrinking, so having a recurring revenue stream to bolster profitability is necessary. In the case of Titan, they share recurring revenue with the TV manufacturers they partner with.

We have yet to see any company break out TV OS revenue from the rest of their finances, and almost no TV manufacturer breaks out revenue from their FAST offerings aside from Vizio. If I missed numbers from a manufacturer, please let me know in the comments. I don’t know if Titan plans to release any numbers over time, but it would be helpful for the industry to know the actual market size by region based on revenue.

Titan, based in Barcelona, has no plans to enter the US market anytime soon. Following the launch of Europe, the company plans to expand with Philips into Latin America.

Qwilt has announced a deal with Cirion Technologies to deploy Qwilt’s edge cache software and cloud services across Lumen’s former CDN footprint in LATAM. In 2022, Lumen sold its LATAM infrastructure (network, peering, hardware) to Cirion, one of the few Pan-Latin American networks operating one of Latin America’s most interconnected data center platforms, with 18 owned data centers. Their long haul and metro networks comprise 31,000 miles and over 22,000 miles of subsea network, with 13 Tbps of total CDN capacity.

With this partnership, Qwilt gets full LATAM CDN coverage through the Cirion infrastructure and peering in the region. Cirion gets Qwilt CDN tech and access to their SP-embedded edge deployments throughout LATAM. Qwilt will run this CDN service and jointly sell with Cirion, expanding Cirion’s footprint and CDN services in the region. Neither company is disclosing how much total capacity Qwilt will build across Cirion’s network, but we should expect to get more details as their edge services start to roll out this year.

Lumen has started shutting down their CDN. The company was one of the CDNs in the mix, along with Akamai, Amazon, Edgio, Fastly, and Qwilt, for delivering the NFL Wild Card game on Peacock, with the game being the last big event for Lumen’s CDN network.

Now that the game is over, multiple ISPs are reporting that Lumen has stopped sending traffic, and the de-provisioning of their CDN has started. Lumen had recently refreshed some of their CDN hardware, so some assets are expected to be redeployed for Lumen’s Edge Bare Metal product offering. At the peak of their CDN business, Lumen was generating about $200 million in revenue. Once they lost traffic from Apple and later on Disney, the business started to decline.

In August 2022, Lumen sold off their Latin American operations, including all of Lumen’s fiber assets and data centers in Latin America and their subsea assets. In October of last year, Lumen announced the sale of “select” contracts to Akamai, comprised of about 100 enterprise customers and the “end-of-sale of Lumen’s CDN services.”

For a little CDN history lesson (see www.cdnlist.com), in 1999, Sandpiper, one of the earliest CDNs on the internet, was acquired by Digital Island. In 2001, Digital Island was acquired by Cable & Wireless. In 2002, Cable & Wireless withdrew from the U.S. market and sold the U.S. company to SAVVIS. In 2006, SAVVIS excited the CDN business and sold the CDN assets to Level 3. In 2017, Level 3 was acquired by CenturyLink, and in 2020, CenturyLink changed its name to Lumen.

Thanks to Nick Meacham and Chris Stone at SportsPro for having me on their podcast to discuss the latest sports streaming restraints around technology, market drives for business models, viewership numbers, and the fragmentation and frustration of the current sports fan viewing experience. We discuss:

🏈 The impact of tech on the market, i.e., Amazon (TNF), Google (Sunday NFL Ticket), and Apple (Friday Night Baseball). With so many big tech companies involved, why does sports streaming still have many outages and technical problems?

📺 The reason sports content will never go streaming only due to the licensing deals tied to pay TV, which still accounts for around 90% of total viewing hours in the US for live sports.

👸 The challenges Disney will have in offering a second ESPN DTC service from a pricing, packaging, and bundling standpoint.

💲 The high price of sports licensing costs and its impact on any streaming service’s ability to become profitable from sports content alone.

📈 The importance of CDNs that make live sports events possible, their role in the market and why low/ultra-low latency is rarely used for live sports events.

🏎 Recent content licensing deals and the upcoming NBA, Formula 1, and Diamond Sports Group deals being discussed.

I had a great time discussing what’s happening in the sports streaming market. Note: The podcast was recorded three weeks before Peacock’s exclusive NFL Wild Card game, hence why that wasn’t discussed in detail. Listen here: https://www.sportspromedia.com/insights/podcasts/dan-rayburn-hard-truths-about-sports-streaming-media-technology-podcast/

NFL Wild Card game viewership numbers across NBC, FOX, ESPN, and Peacock are out and pay TV saw record viewership. For all the recent talk of NFL streaming, digital viewership makes up less than 10% of all viewers when the game isn’t exclusive to a streaming-only platform. Pay TV still generates the largest viewership for NFL games and sports.

• 🏈 FOX, 43.4 million (peak viewers) FOX Sports NFL Wild Card game on Sunday, January 14, between the Green Bay Packers and Dallas Cowboys peaked at 43.4 million viewers, making it the best Wild Card game for FOX since 2015. FOX does not break out pay TV versus digital viewership for any of their NFL games.
• 🏈 NBC, 38.3 million (peak viewers) NBC Sports NFL Wild Card game on Sunday, January 14, between the Detroit Lions and Los Angeles Rams peaked at 38.3 million viewers across NBC, Peacock, NBC Sports Digital, and NFL Digital platforms. Across Peacock, NBC Sports Digital platforms, and NFL Digital platforms, the AMA for the game was 3.9 million viewers.
• 🏈 ESPN, 28.6 million (viewers) ESPN’s NFL Wild Card game on Monday, January 15, between the Philadelphia Eagles and Tampa Bay Buccaneers generated more than 28.6 million viewers across ESPN, ABC, ESPN2, ESPN+ and NFL+, ESPN’s second most-watched NFL playoff game. ESPN does not break out pay TV versus digital viewership for any of their NFL games.
• 🏈 Peacock, 24.6 million (peak viewers) Peacock’s NFL Wild Card game on Saturday, January 13, between the Chiefs and Dolphins peaked at 24.6 million viewers across Peacock, NBC stations in Miami and Kansas City and on mobile with NFL+. Peacock had 16.3 million concurrent devices.

Some key takeaways from the NFL and Peacock media call from January 2024:

• The Wild Card game was not part of NBCU’s overall NFL package. NBC Sports executive said, “This is not something for NBC. We bid on it for Peacock separately.”
• NFL’s EVP of Media Distribution: “As it relates to the Wild Card game exclusively, we’re excited to continue the conversation. This is a deal for this year, but it’s an NFL Playoff game. I expect there will be a lot of interest in it.”
• Media question for NFL exec. How much will viewership determine whether you would continue going forward with a game to a streamer in the postseason? Answer: “Certainly, viewership will be one of them. That will be just one of the criteria we think about and look at the opportunities we have going forward.”

Big news from Diamond Sports Group. The company has entered into a Restructuring Support Agreement (RSA) with its largest creditor groups, enabling Diamond to emerge from bankruptcy. As part of the terms, Amazon has also committed to making a minority investment (no details were given, and the media is reporting different numbers ranging from $100M to $125M) in Diamond and entering into a commercial arrangement to provide access to Diamond’s services via Prime Video. Under this arrangement, Prime Video will become Diamond’s primary partner through which customers can purchase DTC access to stream local Diamond channels.

Diamond owns the streaming rights to 5 of the 9 MLB teams it is still broadcasting, including the Detroit Tigers, the Kansas City Royals, the Miami Marlins, the Milwaukee Brewers, and the Tampa Bay Rays. It is unclear if viewers in those markets would need to pay more than the Prime membership to access those games. Diamond said additional details regarding pricing and availability will be announced later.

Customers will be able to access all local DTC content, including live MLB, NBA, and NHL games, and pre-and post-game programming for the teams for which Diamond retains DTC rights through Prime Video Channels. However, there is no guarantee that MLB, NBA and the NHL will continue to work with Bally Sports past this year.

Diamond also announced that it has an agreement in principle with its parent, Sinclair, to settle the pending lawsuit between the companies and the other named defendants. Under the settlement, among other things, Sinclair will pay Diamond $495 million in cash and provide ongoing management and transition services to support Diamond’s reorganization and separation from Sinclair’s operations.

The court must approve any proposed deal since Diamond is in Chapter 11 bankruptcy.