Wible's Weekly - Ultra HD, Second Screens, and IPTV Competition - Janney/MediaEntertainment

Ultra HD Updates – In another sign that UltraHD is gaining momentum, Japanese equipment vendor OKI said it successfully transmitted 4K definition content from Japan to Singapore and the Philippines using IPv6. This is important because it illustrates that IPTV networks could be part of an Ultra HD future, broadening the market, although we note that IPv6 has not seen very wide adoption yet in the market. 3net Studios is putting three native 4K TV series on its development slate, pointing to a faster than anticipated rollout of 4K. Some networks are not yet jumping on the UltraHD bandwagon, as they are cautious on the potential for consumer adoption, given the large screen size at which it becomes more effective, and the price of current TV sets

IPTV Competition – Intel believes its planned IPTV service will expand the market for pay TV, driven by its “smarter bundles,” aimed at younger connected consumers who have cord-cutting/shaving tendencies. Intel’s belief appears to be that they can be successful with a more flexible package that combines live and on-demand content with interactive apps to make it easier to discover and access content across multiple screens. Although UBB may become an obstacle over time, new compression technologies like HEVC may be helpful in offsetting its effects. In Canada, startup IPTV providers are showing potential by also offering a combination of traditional TV content with OTT services, including Netflix or Skype.

Second Screen – Studios are seeing increasing demand for content related to second screen apps and are trying to find ways to extend viewing into a more interactive, immersive experience. A DIS studio executive pointed out that they are seeing a direct positive relationship between the second-screen app and Blu-Ray sales, with 50% of respondents saying that the app impacted their purchasing decision. DIS is improving their apps as they collect more information on what consumers react to. Fox has been able to parlay second screen engagement into e-commerce opportunities for its Sons of Anarchy series through its synchronized app that shows related merchandise for viewers to purchase.

Home Entertainment – Disc sales continues their downward trend in 2012, with consumers switching to Blue-ray slower than with DVDs, while exploring digital options. Disc purchase and rental spending was down 7.8% to $12.9 billion, according to SNL Kagan. Sell-through is expected to decline from $8.5 billion in 2012 to $5.7 billion in 2022, despite Blu-Ray sales growth, as they are more than offset by DVD declines. SNL also predicted that the video rental industry would decline to $2.5 billion (from $4.4 billion in 2012) and be strictly served by kiosks and subscription rental, despite brick-and-mortar rental outlets generating $1.2 billion of revenue in 2012.

Display Advertising – US digital display advertising will grow at 18.2% to $17.7 billion in 2013, according to eMarketer. The leaders continue to be GOOG, who will grow 37.9% to $3.1 billion, and FB, who will grow at 26.0% to $2.8 billion. YHOO, MSFT, and AOL will grow as well, although not as fast and thus will cede share. Twitter continues to grow at a rapid clip and is expected to surpass AOL’s and MSFT’s marketshare by 2014. GOOG’s growth is driven improvements at YouTube, as it continues to benefit from its reach, increased professional content, and improved relations with advertisers. FB will benefit from the shift to mobile as well as the uptake of native ad formats such as newsfeed ads and Facebook Exchange.

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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