Wible's Weekly: Disney, TV Leverage, Mobile Updates, and Ultra HD Momentum - Janney/MediaEntertainment

TV Everywhere - DISNEY may be looking to bolster ad sales and exert pressure on MVPDs during carriage/retrans deals. Starting January 6, DIS will restrict next-day online access of shows to MVPD subscribers that have TV Everywhere deals in place. This effectively blocks subscribers from some major MVPDs from watching until 8 days after airing (after the C7 measurement ends). We believe the TV Everywhere requirement is aimed at maximizing C3 and C7 ratings and are a way to put retrans pressure on MVPDs if subs have no online alternatives to find programs that may otherwise be blacked out during contentious renewals. FOXA is also restricting access to NFC postseason games to TV Everywhere subs, although the Super Bowl will be available for free to US Internet users. Some of this could undermine growth if it pushes subs to Aereo.

NFLX Dominates Again and Other Mobile Updates - Smartphones are increasingly being used to view long-form video content, according to research by Digitalsmiths. The survey indicates that 31% of North American Internet users watched full-length movies on their smartphones, while 27% watched reruns of TV shows. The most common video subscription was NFLX (42%), followed by AMZN (13%), and Hulu Plus (9%), although the majority (52%) did not have any OTT subscription. Separately, mobile (including tablets) is also growing its footprint in paid search, accounting for over 34% of global paid clicks during the holiday season, up from 20% in 2012. However, in terms of ad spend smartphones only captured 4%, while tablets attracted 8%, suggesting significant room for monetization/pricing improvement.

UltraHD - As CES kicks off, 4K UltraHD TV sets are likely to generate more buzz. Prices are expected to come down significantly in the near future, driven by Chinese manufacturers and strong demand in China, according the WSJ. NPD DisplaySearch predicts UltraHD TV shipments will rise to 12.7 million in 2014 (from 1.9 million in 2013), with 78% of the demand coming from China. Content providers are gearing up for UltraHD as well, including NFLX and Sony, who launched a video download service and media player with 4K content last year. GOOG is now also joining the fray, collaborating with manufacturers and electronics suppliers to get its 4K format supported and adding 4K support to YouTube. This tech will have major implications for UBB and the future of video games, which boast the largest file sizes for any home media.

In-App Purchasing - Free apps with in-app purchase account for the vast majority of non-advertising mobile revenues, according to data from app analytics platform Distimo. Free apps with in-app items accounted for 98% of Google Play and 92% of Apple App Store revenues. This is a significant increase from the 89% and 77% in January 2013. While there is no immediate read-through for ZNGA, the data does suggest that the freemium model continues to be the dominant model for gaming. eMarketer estimates that for mobile games in particular, in-app purchases will grow from 41.4% of revenues (including advertising) in 2013 to 47.5% by 2017.

Social Popularity - Social media is becoming ever more popular in the US, and moving towards saturation, according to a survey from Pew Research. Approximately 73% of adults use social networks to communicate, while 42% actually use more than one social network. Naturally, FB is the most popular service with 71% use, while Pinterest, TWTR, and Instagram all have very similar usage at 17%-21%. Niche business/career-oriented LNKD comes in slightly higher at 22%. The users of the smaller socials sites tend to use FB as well, which could point to compartmentalized use, although risk of cannibalization between services remains. In terms of frequency of use FB also wins (63% daily), but it is notable that TWTR (46%) trails Instagram (57%), while Pinterest (20%) and LNKD (13%) see less frequent use.

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 InvestmentResearch—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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