Wible's Weekly: 3D Doubts; Mobile Ads Take Off - Janney/MediaEntertainment

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Broadband – DISH's intentions related to wireless are becoming clearer with its deal with regional wireless carrier nTelos to test a 50Mbps fixed wireless broadband service. DISH could use its spectrum along with that from CLWR (if successful in their acquisition bid) to develop a viable broadband platform. This would help DISH to remain competitive with other MVPDs that increasingly offer broadband packages that enable advanced services such as VOD, home monitoring, cloud storage, etc. This is in line with our belief that DISH will try to transition towards IPTV using its wireless infrastructure.

3D TV – ESPN is giving up on its 3D channel by the end of 2013, after running it for 3 years, saying it did not attract sufficient users. Ratings for ESPN 3D had dropped below the measurableTony+Wiblethreshold for Nielsen, indicative of the low demand for the service. The lack of demand could be driven by the lack of programming in 3D and the discomfort of having to wear special 3D glasses. TV manufacturers are now switching focus to Ultra HD, which does not require special glasses and allows people to sit closer to the screen without losing quality. In addition, production of Ultra HD content is easier than 3D content, which was likely limiting broader content development. We believe Ultra HD is more likely to succeed and that costs will start to come down soon, accelerating adoption.

Mobile Advertising – Mobile marketing is becoming part of the marketing mix for more and more companies. Of the top 100 advertisers, 94 implemented some form of mobile marketing in the past year, according to data from ad monitoring firm Competitrack. Smaller firms are also increasing mobile advertising, with 64% of the top 1000 advertisers using mobile. Marketers are also increasingly tailoring their creatives to the mobile medium, with 85% of the 20,000 creatives studied were specifically created for mobile, as opposed to repurposing from other media. Top advertisers categories using mobile are retail, entertainment & media, technology, travel & tourism, and automotive advertisers. This is impressive given that mobile ad platforms largely did not exist three years ago.

IPTV Updates – IPTV is the fastest growing form of pay TV globally, with YoY growth of 30% last year, according to SNL Kagan. In the US, however, one aspiring IPTV player, INTC, is having a difficult time to get content for a future service offering, according to a WSJ report. This is driven by the fact that INTC wants to offer live TV streams, in competition with media companies' largest customers, the MVPDs. In addition, measuring online viewership for ad sales is still in experimental stages, and media executives say that broadband infrastructure may not be sufficient to carry the TV channels. Some programmers also face contractual restrictions that make a deal with INTC more difficult. We remain skeptical that INTC will succeed.

Social Advertising – FB announced last week that it is consolidating its advertising offerings by eliminating approximately half of its 27 ad offerings. Starting in July, advertisers will no longer be able to buy sponsored results in search. FB said that most marketers were buying sponsored results to advertise their apps and games, and FB already offers mobile app install ads and Page post link ads on desktop to achieve the same goal. This change is typical, as FB's market is quickly evolving and as FB needs to cater to a diverse group of ad client needs.

Tony Wible joined Janney Montgomery Scott in 2008 and is a Managing Director covering the Media and Entertainment sector after spending the previous 10 years at Citigroup Investment Research—most recently covering the Broadcasting and Entertainment Services industries.
Tony can be reached at twible@janney.com.

Janney Montgomery Scott LLC, is a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the New York Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corp. Disclosures may be reviewed at Wible's Weekly.

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