Overseas Media and Telecommunications Industry Trends 11/13-11/19
At our research institute, we conduct surveys and analysis of overseas trends in broadcasting, telecommunications, media, and more from the unique perspective of the cable industry. In this note, we introduce interesting information based primarily on news publicly released overseas and information disseminated by companies.
◆ Key Topics of the Week
John Malone's Liberty is withdrawing from the North American cable business. Such a shocking event has occurred. John Malone can be considered a grand master who, along with the Roberts family of Comcast, built the cable business from scratch. He directly or indirectly owns many cable operators and media companies. He is also famous for owning vast tracts of land in the United States, and because he has a ranch there, he was also called the "Cable cowboy." Now, the cable operators Charter and GCI owned by Liberty are being sold. While Mr. Malone will remain an individual shareholder, this series of moves is sparking various speculations.
◆ Industry Restructuring (M&A)
Charter acquires parent company Liberty Broadband to become independent
The acquisition will be carried out by exchanging one share of Liberty Broadband (LB) common stock for 0.236 shares of Charter common stock, and one share of LB preferred stock for one share of Charter preferred stock. LB also holds all shares of GCI, Alaska's largest cable operator, but this will be spun off in the form of a distribution to LB shareholders before the acquisition. Through the LB acquisition, 34 million shares of Charter will be issued to LB shareholders, but since the 45.6 million shares of Charter currently held by LB will be cancelled, the total number of Charter's outstanding shares will decrease by 11.5 million. The shares to be cancelled will be bought back by Charter at $100 million per month during the acquisition process. In addition, LB's debt of $2.6 billion is scheduled to be repaid before the acquisition or assumed by Charter. The entire acquisition process is expected to be completed by June 30, 2027.
Cable industry grand master John Malone mentions a merger between Comcast and Charter
These are remarks made at an international conference attended remotely by John Malone, Chairman of Liberty Media, and Mike Fries, CEO of Liberty Global. It seems he made comments suggesting that "a possibility has emerged" because it is predicted that the stance of the U.S. federal government, which has taken a strict stance on large-scale mergers and acquisitions, will change significantly. Comcast attempted to acquire Time Warner in 2014 but gave up after failing to obtain regulatory approval. Note that Time Warner was later acquired by Charter. The mention of a merger between Comcast and Charter this time is with an awareness of competition with Big Tech, such as Amazon, Google, and Apple. Big Tech companies are de facto monopolies, do not bear the cost of internet infrastructure when deploying services, and are moving to acquire sports broadcasting rights by leveraging their financial power. The idea seems to be that to counter this, it is necessary to become huge through mergers.
John Malone says Liberty's next move "might not be the media business"
He made these remarks in a live interview on CNBC. He said, "I think we can build the next generation of Liberty by adding some reforms. It might not be the media business." On the other hand, he also said, "The focus on F1 is the key." He suggested the possibility of becoming a buyer for other races in addition to MotoGP if opportunities arise. Regarding the future of broadcasting, which is a concern, he commented, "I think it will be a hybrid type (of broadcasting and streaming) at first, but eventually it will be streaming," and stated, "Investment in sports (including the motorsports Liberty invests in) is effective on both broadcasting and streaming platforms, and it is clear that it is currently the most suitable (for investment). Also, sports are essential for the survival of broadcasting. (In streaming, the distribution destination) becomes nationwide or global, and I am concerned that localism will be lost."
The reason Charter did not acquire GCI
Liberty Broadband (LB) owns 100% of the shares of GCI, Alaska's largest cable operator. Charter's acquisition of LB was announced, but at the same time, it was stated that "GCI will be spun off before the acquisition." We are analyzing why Charter did not acquire (absorb) GCI. The reasons cited are that the process of obtaining approval from regulatory authorities is difficult, Alaska is geographically distant and synergies cannot be obtained, and it is not a growth market in the first place. In addition, Charter indicated its intention not to actively participate in the BEAD program at its third-quarter earnings announcement. BEAD is a subsidy program for building broadband infrastructure in underserved areas in the U.S., and many areas in Alaska are also covered. Investors who have invested in Charter welcome this stance, and we analyze that this may have led to the decision not to acquire GCI.
U.S. cable operator Cox sells its recently acquired corporate FTTH business
Cox acquired Segra, which develops corporate FTTH business, in 2021, and Unite Private Networks in 2023. It is selling these to Ziply. The sale price has not been disclosed. The reason for selling a company that was just acquired in a short period of time is unknown, but Cox has recently been laying off staff. Note that Ziply is set to be acquired by Bell Canada.
Possibility that DirecTV's acquisition of Dish will fall through
The acquisition was conditional on Dish bondholders accepting a $1.5 billion reduction. It seems that some holders have rejected this. DirecTV has announced that if they do not comply by November 22, it will abandon the acquisition plan.
◆ Infrastructure
65 million households watched the live boxing broadcast at its peak, with video becoming unstable at times
This is the broadcast of the Jake Paul vs. Mike Tyson match held last weekend. It is said that 60 million households watched it around the world, and it recorded 65 million at its peak. Perhaps it could not withstand such a large number of simultaneous connections, as troubles occurred such as the video stopping or noise being displayed. Netflix is planning a live broadcast of the NFL on Christmas, and there are voices of concern because a huge number of viewers is expected.
Comcast shows confidence in handling traffic that surges during events and other times
In the U.S., traffic in the week of October 21 saw a record increase. It is said that this was due to the start of downloads for the game "Call of Duty" and Amazon's live broadcast of an NFL game, and these two alone accounted for 26% of total traffic. Comcast did not experience any failures even with such a sudden surge in traffic. The head of network architecture commented, "The fact that we were able to handle it relatively easily is proof that Comcast's network architecture was correct and proves that the direction we are heading is correct." Comcast is promoting the virtualization of its core network through a project called the "Janus Initiative," introducing open caching at the edge with the support of Qwilt, and improving network performance using AI.
◆ Industry Trends
GCI, Alaska's largest cable operator, to discontinue multichannel services
Although the discontinuation had been announced since 2020, the company submitted an application to Alaskan regulators on November 8 to terminate its television services. As a result, both broadcast services using existing RF (QAM) infrastructure and IP TV services using Apple TV and Fire TV will be terminated by mid-2025. The number of multichannel service subscribers has not been disclosed. Moving forward, GCI will recommend Xumo and focus on internet and mobile services. While the trend of small-scale cable operators discontinuing multichannel services in the U.S. began last year, the fact that this move has reached GCI—Alaska's largest operator and a board member of the cable industry's technical organization, CableLabs—suggests that the situation for multichannel services is quite severe.
Smart TV penetration in the U.S. reaches 68%
This is the result of a survey conducted by Parks Associates targeting 8,000 internet-using households. The figure was 54% in 2020. The penetration rate of external devices such as dongles for watching video on TV has also increased from 42% to 46%. In the U.S., people watch an average of 35.6 hours of video per week across viewing devices such as TVs, PCs, tablets, and smartphones, with more than half of that, 20.4 hours, being watched on TV.
Are smart TVs the exception even in inflationary U.S.? Cheaper than in Japan even at current exchange rates
In the U.S., the shift to smart TVs is progressing, perhaps leading to fierce price competition. This has intensified even further ahead of the Christmas shopping season. A 50-inch 4K-compatible Hisense TV with Roku OS is $138 (approx. 20,000 yen), and even a 75-inch TCL model is $378 (approx. 57,000 yen). For smaller personal sizes, a 32-inch model with Amazon's Fire TV OS is priced at a surprising $79.99 (approx. 12,000 yen). While these are among the cheaper models, even TVs equipped with Comcast's Xumo are priced at $249.99 (approx. 38,000 yen) for a 55-inch and $359.99 (approx. 54,000 yen) for a 65-inch, suggesting that smart TVs are immune to inflation.
◆ New Technology
Warner content appears on Anoki's FAST channels, where generative AI analyzes the dramas being watched
General recommendations use content metadata. In contrast, Anoki's "LiveTV" claims to be a FAST service equipped with generative AI, which analyzes and learns user preferences by having the AI analyze what is being shown in the programs the user watches and what the stories are about. With the addition of Warner-related content, 26 channels have now been launched. Since many FAST services have hundreds of channels, the key seems to be how well they can provide recommendations that align with viewer preferences.
◆ Media
Disney's DTC service subscribers increased by 3% from the previous quarter to 236.2 million as of the end of September
Q4 revenue for DTC (Direct to Consumer) was $6.296 billion, up 13% year-on-year, and profit turned to a positive $321 million from a loss of $387 million in the same period last year. For the full year, revenue increased 14% to $24.938 billion, and profit turned from a loss of $2.612 billion to a positive $134 million. In contrast to the growth trajectory of the DTC business, broadcast networks are on a downward trend. In Q4, revenue fell 6% to $2.46 billion, and profit fell 38% to $489 million.
Disney's "fiscal year" runs from October 1 to September 30. Fiscal year 2024 is from October 1, 2023, to September 30, 2024, and the period from July 1, 2024, to September 30, 2024, is the fourth quarter.
Netflix's ad-supported plan reaches 70 million monthly active users
This is a significant increase from 40 million in May. In countries where the ad-supported plan is offered, more than 50% of new subscribers are choosing the ad-supported option. In the third quarter, the company gained 5.1 million subscribers globally across all plans, bringing the total to 282.7 million. Netflix had been partnering with Microsoft for its advertising platform but terminated that in May and launched its own platform. This is currently operating in Canada, with plans to launch in the U.S. by the second quarter of 2025 and globally by the end of 2025.
Amazon Prime Video tops U.S. streaming service popularity rankings for the third consecutive year
Parks Associates determines the rankings based on estimated subscriber numbers up to September, as measured by its "Streaming Video Tracker." Netflix used to be at the top, but Prime Video has held the top spot since 2022. This year, there were changes in the rankings from third place onwards. Disney+ rose to third place, Hulu fell to fourth, and Peacock entered the top five for the first time, overtaking Max and Paramount+. According to the company's survey, 88% of U.S. households use streaming services, and 42% use ad-supported options.
Consumer spending on subscription streaming services in the U.S. increased 26.7% year-on-year to $11.9 billion
This is the result of a survey by the Digital Entertainment Group. Total spending on video (entertainment) related services, including cinema spending, was $13 billion, meaning subscription streaming services now account for 91% of the total.
Survey on how viewers perceive streaming services in the US
Hub Entertainment Research has released a research report titled "Conquering Content," which surveyed 1,602 broadband users in the US aged 16 to 74 who watch at least one hour of television per week. According to this report, viewers are aware that the number of original works on streaming services is on a downward trend and that content is often available on multiple streaming services rather than just one. Additionally, satisfaction with content has been increasing year by year, rising from 68% in 2020 to 79% in 2024. However, it is not necessarily the case that they are watching the latest programs; many people (60%) start watching shows that began some time ago. It seems that even if they find an episode that looks interesting, it often turns out to be one from a series that has already spanned multiple seasons.
Supervisors/Authors: J:COM Ashita e Tsunagu Research Institute Editorial Team Members
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