1. Alphabet Looking To Make YouTube Into A Bundler

Jessica Toonkel and Alex Heath are reporting that YouTube has been making overtures to subscription services, in an attempt to make YouTube a centerpiece of The Great Rebundling, that thing where everyone is going to start offering full year subscriptions to all sorts of streaming services as a way to stop the massive amount of churn that is bound to happen when you allow customers to drop your service at will.

Or at least at the end of the month.

Why It Matters

As the Flixcopalypse unfolds, one of the bigger issues, especially for the (partially) ad-supported Flixes—Hulu, Peacock, VCBS-Flix and HBO Max—is that that the likelihood of high churn rates is going to make it difficult for them to sell advertising at a premium. 

Because it’s hard to promise a set number of viewers if you don’t know how many subscribers you’ll have from month to month.

That math holds true some for SVOD services too, as outlined in this piece from a few weeks back—TL;DR is they need ratings and subscribers to sell product placement, lure top-name talent and sell syndication rights.

So there’s all that.

As for YouTube vs YouTube TV, while it’s unclear what the plan actually is (the article was not big on details), the latter seems more likely because a vMVPD is well, TV, while the YouTube app is still “video” in the minds of most viewers, and probably not the first place they’d turn to when they wanted to subscribe to Showtime because the final season of Homeland was out.

It also just makes sense for the MVPDs and vMVPDs to be one of the three major sources of The Great Rebundling (device manufacturers like Roku, Amazon and Apple and the actual Flixes themselves being the other two) because people like the notion of only paying one bill for all their TV-related expenses, and because it’s a way to both create stickiness and (maybe) give some of the lesser cable networks a way to hang on a bit longer.

Allow me to explain.

If there are any players at risk in this new universe it’s the hundreds of lesser known cable networks because the first thing people are going to do when they realize they’re paying an extra $40/month for Flixes is NOT (as some seem to be speculating) cut back on one of the Flixes, but rather, cut back on cable TV, especially once they realize that other than sports they never watch cable TV….

That gives the v/MVPDs two relatively complementary options: they can introduce “super skinny” bundles of just the major broadcast networks with bolt-ons for news, sports and non-fiction. 

And they can offer bundles based around one- or two-year subscriptions to a set number of Flixes

At which point they can combine the two offerings into a modern-day pay TV bundle that comes with an old school year long commitment as well as a slightly lower price tag.  (Don’t worry—they’ll make up the difference by charging users more for broadband.)

So why shouldn’t Google get in on some of that action? Especially if they can find a way to work their ad serving engine into some of those deals.

What You Need To Do About It

If you’re one of the various Flixes, you might as well work with YouTube TV on bundling, which is likely to start out as just letting them sell your service as the OG month-to-month subscription. It will help grow your audience and there’s a good chance they’ll forget about the subscription because it’s all part of a single bill and won’t unsubscribe when they’re not watching.

If you’re one of the other vMVPDs and MVPDs, start thinking about Super Skinny bundles, year long contracts and all the other facets of The Great Rebundling. That’s all going to be on you faster than you realize.

If you’re a consumer and you’re on top of all that unsubscribing and resubscribing, then don’t bother with bundles. But for the rest of us, it’s just going to be easier in the long run and really not any more expensive given how much time you’ll need to devote to tracking all those subscriptions, no matter how many articles get written about how it is.

If you’re an advertiser, The Great Rebundling is in your interest (greater stability means greater ease of planning) so do what you can to make sure this happens.

2. Roku Scores Again

Roku, TV’s Little Engine That Could, had another very good quarter, exceeding both subscriber and revenue goals, with revenue rising 49% in Q4 alone.

Why It Matters

Roku is now at 37 million “active accounts” which is an impressive number when you consider that Comcast only has around 21 million. 

It’s also 10 million more than they had the same time last year (a 36% YOY gain), so clearly they are gaining traction, along with the entire streaming ecosystem, which is not really much of a surprise. Still it’s an impressive confirmation of how quickly streaming is growing and reaching well beyond the “early adopter” cohort.

Roku’s ad business is also booming, (almost two-thirds of that 49% revenue boost is from advertising) with monetized video ad impressions more than doubling in 2019, as their FAST, the Roku Channel is now reaching 56 million viewers.

Average Revenue Per User (ARPU) is also up 29% year-over-year, which reflects both a rise in their ad business and in their services business, e.g., the part where they sell subscriptions to various Flixes and take a cut.

The rise in the number of streaming viewers is also likely good news for TV OEMSs like Vizio, LG and Samsung too, as they all have been working hard on their interfaces so that consumers don’t need to buy a streaming device and can just use the OG smart TV home screen for all their Flix and FAST needs.

Which, given that they’re also selling advertising now (Vizio just launched a whole division devoted to it) is the only asterisk we’d put next to Roku’s good news. The TV OEMs could cut into Roku’s profits (the company claims that its OS powers nearly one-third of all smart TVs sold in the US in 2019) and/or it could just be a “rising tide lifts all boats” scenario.

Probably a little of each.

What You Need To Do About It

If you work on Wall Street and you still don’t understand Roku and what they’re up to (and from the look of my inbox, that’s more common than not) hit us up. We’ll explain why they and other device manufacturers are well situated for the new streaming ecosystem and why selling advertising, subscriptions and actual physical devices is a strong move.

If you’re a consumer and you want to watch YouTube videos on your big screen TV, then expect more bad blood between Alphabet and Amazon and don’t count on Fire TV.

If you’re an advertiser, Roku’s audience is just one of the ways you can use CTV to gain incremental reach using addressable advertising. If only there was a report that explained how all that worked…

If you’re a Flix or a FAST and you want people to watch your programming, Roku should be in your top tier partner list. Just beware of getting into a Fox-like kerfuffle with them: Roku is starting to realize that with all those viewers, they kind of have the upper hand, and we’d be surprised if we don’t start to see more of these battles which are extremely reminiscent of the carriage fee kerfuffles that the cable industry is so very, very used to. 

Or, TL;DR, Streaming devices are the new MVPDs. (Tweet that one.)

02.19: UPDATED to reflect that the Google-Amazon beef I had originally noted actually dates back to 2018 (it has long been resolved) and I need to check on the date of articles that are surfaced to me in the "Related News" links on websites. Thanks to Delaney Simmons at Amazon for bringing this to my attention. Mea culpa.