Wible's Weekly - HBO Direct, Foreign Affairs, and the 2nd Screen - Janney/MediaEntertainment

HBO Direct amp8211 We believe MVPDs are incrementally shifting focus to their broadband business as it stands to be more profitable than video longer term and as it serves as a core platform for delivering more services This is increasingly important as the traditional video business copes with Internet video alternatives and rising content costs We see the integration of NFLX into set tops and news of CMCSA looking to provide HBO through a broadband package as signs of this shift The new CMCSA product will provide access to local broadcasts and StreamPix The new bundle has the potential to broaden HBO39s market share The move could be seen as a threat to NFLX or could actually drive business if these cord shavers see NFLX as an attractive complement given its ability to provide access to programing that subs may lose by abandoning traditional plansChina Import amp8211 Chinese regulators have issued a decree that limits the import of nonfactual programming for TV Starting in 2014 satellite broadcasters will be limited to only one foreign format to be aired in nonprimetime hours and only one musical talent show will be approved every quarter China is forecast to be the largest pay TV market by the end of 2018 with 313 million households and this will put a damper on growth prospects for program developers However documentaries will not face these restrictions which could bode well for DISCA and FOXA39s Nat Geo and potentially for some of SNI39s properties In addition Chinese viewers consume a lot of TV over the Internet which does not appear impacted by these restrictions We believe companies such as DWA that are investing locally may have an advantage in accessing the Chinese marketTV Ratings amp8211 As viewers diversify how they consume content viewership metrics are evolving albeit slower than hoped Nielsen recently introduced Nielsen Twitter TV Ratings which incorporates social media buzz and measures the reach and impressions of tweets about TV programs However 53 of respondents find social media commentary onscreen distracting according to a survey by Horowitz Associates We believe cable networks are eager to tie social media to their broadcast as it will be a tool to gain share of ad spend given the heavy use of 2nd screens during commercials In a recent Deloitte survey of UK 2nd screen users 71 said they were likely to use the other device during ad breaks or program junctions while 70 uses the other device when the content is quotboringquotMedia Ownership amp8211 The FCC is considering softening its stance on foreign TV and radio station ownership currently capped at 25 ahead of a Nov14 vote While the rules are set in Federal law the FCC can make exemptions on a case by case basis The FCC believes their proposal clears the way for increased access to capital and potential new investors for the broadcast sector Immediate beneficiaries may be companies such as FOXA which has had to suspend certain foreign stockholder voting rights to comply with current rules and Univision which is already partowned by Mexicobased TelevisaAd Spend amp8211 US upfronts for the 20132014 season saw the shift toward cable continue Cable took in 102bn 41 YoY vs broadcast at 90bn 15 according to estimates by SNL Kagan Media companies commented on the upfronts in recent earnings calls with CMCSA confirming CPM increases of 78 and DISCA noting that the broadcast CPM premium of 30 was getting softer which may have helped demand Ad agency MediaVest announced its own quotupfrontquot deal with GOOG for display video and mobile inventory in the US for the upcoming year The deal gives their clients such as CCE Honda and WMT access to online content such as YouTube partner channels Google Display Network sites eg Peoplecom and AdMob mobile appdisplay networksTony 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 Researchamp8212most recently covering the Broadcasting and Entertainment Services industries Tony can be reached at twiblejanneycom Janney Montgomery Scott LLC is a US brokerdealer registered with the US 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 Wible39s WeeklyRead all Tony39s MediaBizBloggers commentaries at Wible39s Weekly JanneyMediaEntertainment Check us out on Facebook at MediaBizBloggerscomFollow our Twitter updates MediaBizBloggerThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaBizBloggerscom management or associated bloggers MediaBizBloggers is an open thought leadership platform and readers may share their comments and opinions in response to all commentaries

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Wible's Weekly - HBO Direct, Foreign Affairs, and the 2nd Screen - Janney/MediaEntertainment

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