Sander Saar, founder of AgentCDN, making videos work inside AI

Transcript

1. 0:00

   Hi, I'm Sander. I'm really excited to explore with you who are the companies controlling the rails in this world, or who are the new cable operators? Because we moved on from the cable world where a content owner, an IP owner, produced a piece of content with a studio that was sold to a channel who then sold it to a cable operator who bundled it up and offered it to consumers. The cord cutting has been accelerated faster than ever, and now almost 40% of the US households do not have broadband, with broadband connection don't have cable subscriptions anymore, and that's accelerating faster than ever.

2. 0:33

   The new streaming world, the value chain looks a little bit different where the studio still produces the content, they put it on a streaming service who then puts it on a streaming platform who then owns the consumer experience. So the streaming world has changed quite a bit and there's a lot of focus on the streaming wars and the streaming services space like who the studios sell the content to. But what I think is much more interesting in that space is the platform wars, the ones who control the consumer experience and where do they capture the value.

3. 1:02

   So those, this is incredibly important because there's so many connected homes now. 76% of the homes have connected TV devices at their house or streaming devices. And what do they do on these devices? Of course, they stream Netflix, Hulu, YouTube, and all the other streaming services over the top that we know that are growing so fast anyway. While on Netflix, they might only get 20% of their signups on their connected TV devices, they actually get 70% of the viewing happening on connected TV devices.

4. 1:33

   For YouTube, it's their fastest growing platform, 80% growth year over year, faster than mobile platform, for example. And the session times and the video lengths are actually multiple times longer on their YouTube connected TV apps than on their mobile apps, for example. So who are these players who are competing for that award? Obviously, there's Apple with Apple TV and their Apple TV apps and platform. There's Android TV.

5. 1:58

   Fire TV from Amazon and Roku, who are the big contenders. Roku is the biggest market leader for now. Every 3rd or 4th TV, depending on the year, that is sold is using Roku operating system. Fire TV is the close second from Amazon, followed by Android TV using the Chromecast and Android TV devices, and Apple TV. That's the US-focused market share. So why is it so critical for them to own that relationship?

6. 2:24

   Number one, they want to build an audience. They want to control that experience, and then they need to monetize that audience. And we're gonna dig into each one of them, why they're so important. Number 1, how do these platforms build an audience? Apple TV is just selling their direct-to-consumer devices, and each one of them has their own direct-to-consumer devices. Roku has several boxes and dongles and sticks, and Fire TV similarly has the 4K and HD sticks available.

7. 2:50

   And Android TV has got Chromecast devices, and they're also launching their own dongles this year. But more importantly and more interestingly, actually, they're building a whole ecosystem with service providers and other device manufacturers. So Roku has got a Roku Powered program where they have other device manufacturers making Roku operating system TVs, or Fire TVs doing the same thing with Fire TV Editions that launched in the UK a couple of years ago, and now they're sold all around the world.

8. 3:18

   Android TV is similarly used by many, many TV manufacturers. Android TV in fact has got 50 TV manufacturers including Sony, Philips, Xiaomi, and Hisense who are running Android TV operating system. And then there's 36 operators including in the US AT&T TV who's using Android TV or powered by Android TV. Fire TV has got 20 TV partners as well with Toshiba and Insignia, but they also have operator partners with Verizon and Tata Sky in India.

9. 3:50

   Roku has also been doing that for a while and finding a lot of growth in the area of selling TVs with Hisense and Philips. And TCL powered by the Roku operating system. So this is really key. They're not just selling the direct-to-consumer devices, but they're also partnering with many, many industry leaders or other manufacturers to extend their reach and have more and more of their control in front of people. And that has caused something super interesting.

10. 4:17

    The TV prices have come down so significantly over the last several years. So now you only pay for a 55-inch 4K TV about $300, and the streaming sticks themselves are costing only $29. So that's the second way they're reaching their audience or building their audience is selling them super, super low. And it doesn't necessarily mean that the production costs have come down, but the margins on the selling the device itself have almost gone away.

11. 4:43

    And oftentimes they're selling it below their cost price as well. And that's why for consumers it's so accessible, because those TV manufacturers and operating systems have found a new way to make money. Does Amazon price the Echo device below cost?

12. 5:00

    Not its list price, but it's often on promotion, and sometimes when it's on promotion, it may be below cost.

13. 5:06

    Yes, that is very interesting. So sometimes when it is on promotion, it may be sold below cost. As far as I've been on Amazon, most of the time those devices, not just Echo devices but Fire TV devices, are on sale. Or at least some kind of bundle sale. So those are sold below cost for sure. Number 2, controlling the experience. So moving on from how they integrate with all of the manufacturers and how they sell below cost, now what happens next?

14. 5:34

    How, where do they capture the value instead of selling the devices themselves? They control the experience. So if you launch the Fire TV today, what are you gonna see on the first screen is controlled by Amazon, of course. And if you look at some of the tiles here, Of course, the biggest carousel with a lot of the pieces of content that I've highlighted here, these are all Amazon productions, Amazon content, or Amazon apps. So about 60% of what you see in the front screen is fully Amazon branded.

15. 5:59

    So this is the first way how they're capturing the experience. The other way is when you use your voice search on your Android TV, for example, and I say, hey, watch Planet Earth or look for Planet Earth, then the first thing that pops up, of course, is going to be the Google Play Memories Google Play Movies, I'm sorry, where you can rent or buy those movies. And if you do a Google search for Bounty Hunter, for example, the first thing where you can watch the content now is going to be a YouTube link, of course, with a direct link to buy and purchase that show or start watching on their own platform.

16. 6:31

    If you go to IMDb, the first link, of course, is going to be the Amazon Prime Video link, which takes you straight to Amazon Prime Video, and so you can start streaming straight away. Same thing with Roku. Like, on Roku, they control a lot of the real estate, and Roku Channel, their own service marketplace selling other services as well as their own streaming service, are both available on the front screen as soon as you launch the Roku service.

17. 6:56

    One of the ways that we can help with that is promoting content to our customers. So, you know, we have a lot of different areas in our user interface that we can use to make customers aware that a new TV season is about to start, their favorite show is about to start. And that's something that keeps them engaged with the channel and helps reduce churn. It also helps them come back.

18. 7:20

    That is very, very interesting. We have a lot of areas in the user interface where we can make customers aware a new TV show is about to start. So that clearly shows that this is their goal, is to have that control, create that real estate within the app where they control the experience and they are in charge. Rather than the streaming service themselves. So how do they monetize that audience? What do they do with that control, that audience that they built, the control that they have on the experience?

19. 7:46

    How do they monetize it? If you look at Roku's revenue over the last couple of years, then you can clearly see that they moved away from this player sales revenue, which was 50, for about half of the revenue, to now only being 30% of the revenue. And their platform is the one that is actually driving their revenue. And their platform means selling ads, selling the marketplace, and selling the licensing their platform to others.

20. 8:14

    And if you look at the earnings themselves, that gets even more interesting. Like, as we spoke about, those devices are often sold below cost. So if you look at like Q4 in 2019, Roku player actually made loss in that year, but it was overly compensated by the platform, meaning selling ads and controlling the experience and the marketplace on their own platform. So the earnings have increased from 80% to now almost 95% of Roku's earnings coming from the platform business, meaning owning the relationship and building a large audience by licensing it to others.

21. 8:47

    And our business basically is connecting end users that are watching television with the streaming services that want to reach those users. And so yes, we get paid when we help sign up customers. So when our partners win, we win. We help them sign up customers and we get a percent of revenue for that.

22. 9:04

    So he's literally, Roku CEO is explaining what the cable company is. We are the one between the content providers and the users, and we are the ones who are brokering those deals in between them. So we get paid when they help customers sign up to streaming services on Roku's platform. And of course, this is the reason when you sign up to Roku why they need your gender or why do they need a date of birth, because that's data for them.

23. 9:29

    Roku acquired recently, end of 2019, DataZoo, which is a demand-side platform to manage all of their ad sales as well as their data, so they, their advertising platform can be more competitive compared to Amazon, Google, and Facebook, which they are actually one of the fastest-growing advertising platforms today, is Roku. And Roku is doing that in 3 different ways, how they're monetizing their platform.

24. 9:55

    Number one, they have the OneView platform, which is the straight ads, the banners that are available in the Roku interface. And they're also putting those ads on the Roku Channel content. Then the marketplace, which they call the Roku Channel, where you can subscribe to Netflix and Prime Video and other services in their marketplace. And when they get people to sign up, that's where they get a percentage of revenue, as the CEO just explained.

25. 10:21

    And then Roku has got their own apps, which they fully control, which is called their Roku Channel. And that's where they license content directly and make it available as ad-free product. Those are live channels, but some of them are also streaming content, so on-demand movies. So the first thing that you do, of course, when you search for the content on Roku devices, the first thing that pops up when it's available on the Roku Channel, of course you're gonna click through to that.

26. 10:46

    So those are the 3 different ways: the real estate in the, in the operating system, the marketplace where they get a percentage of revenue, and then their own apps that they're pushing on their platforms. Of course, they're not alone in that game. Amazon is doing the same with Amazon Advertising, making that selling the inventory on the Amazon Prime interface. There I've got Amazon Channels where you can sign up to HBO, Starz, or Showtime in their own interface. And then they're pushing, of course, their own apps by offering Amazon Prime Video, IMDb TV, which is the advertiser-funded video-on-demand service, and Twitch in their own interface.

27. 11:20

    And both of those markets are exploding, including this advertiser video-on-demand, which is going to be an even larger market than it is today. A slightly smaller market in the subscription video-on-demand base because there's only so many subscriptions that we're gonna have as consumers. Interesting, in the marketplace side, Apple is also playing a big game there where they're obviously making the Apple tax similar to the Roku tax or Amazon Fire TV tax or Prime Video tax, where they're selling the channels or helping those channels to sign up or services sign up.

28. 11:52

    They will get a percentage of that revenue, of course. But you might ask, where's Samsung? Where's LG? Those are the biggest TV makers. And you're right, those are the biggest TV makers running some of the biggest TV operating systems in the world today. This is a worldwide look now compared to the US look that we had before. So what are they doing about it? So how do they win in this space? What's their strategy if they're not working so closely with those 3 big providers that we already spoke about?

29. 12:18

    Samsung is building their own. So that's number one strategy to win against those big players. And how they're building their own, they built their own complete operating system called Tizen. And the first thing that of course it comes with is the Samsung TV Plus service. And that's pre-installed as soon as you open the TV. That's the first thing that's gonna launch even before you're gonna switch to your cable input or any other input in your TV. That's the first thing you're gonna see.

30. 12:44

    And that's got a ton of channels of content including news and kids and everything that you might want to see. And they are fully in control of that experience. If you turn on the TV, Samsung TV Plus is the first thing that's gonna pop up. So the only way to get on Samsung platform is either you're gonna publish your app on the Tizen Store, or you're gonna integrate with Samsung TV Plus and make your content available there. So they're fully in control of their own destiny.

31. 13:10

    The other way you can win in this space is also what Apple is doing. They're partnering with every single TV operating system and manufacturer. So they made Apple TV app available on Samsung Tizen devices. They made Apple TV available on Roku devices, and they've also made Apple TV available on Fire TV devices. So this is very interesting on Apple is taking the other way where they're not just like pushing out and building their own, but they're also partnering to make sure that their reach is going to be as large as possible.

32. 13:37

    And of course, they're building their own as well with Apple TV+, their own streaming service, which they're selling to consumers or including in their bundles, and Apple TV Channels where they're reselling other people's services. So you can subscribe to other services on Apple TV, and that makes the experience so much more seamless and easier. And of course they're selling their own devices still as well. But it's interesting how they're not just focusing on their own, but they're extending it and integrating with as many service providers as possible to make it a no-brainer consumer experience as they're not necessarily making their own TVs as of yet, or don't have TVs that are necessarily powered by the Apple operating system, but they're building it in and working as closely and partnering as much as possible.

33. 14:17

    Then the third strategy to win is to be Netflix and say, we're gonna opt out. We're not gonna make our content available in the Apple TV app. We're not gonna be selling our subscription to your services because Netflix doesn't wanna muddle around and have someone else control the experience. So if you look at the Apple TV app on your phone or on your Apple TV devices, there is no Netflix there. If you search for it, you're only gonna be linked out to the Netflix app. There's no way to subscribe to Netflix on the Apple App Store services either 'cause they don't wanna be mixed up with HBO Max and CBS and Showtime and Starz and other services.

34. 14:51

    They wanna control their own destiny. And that's why they decided to opt out.

35. 14:56

    They,

36. 14:56

    when Apple came out with the Apple TV app, they said Apple is a great company, and they, but they want to have their service to have direct connection with their content on their own app. So they decided to opt out. So they tried to skip the streaming platform device by just making their app available there, but everything else is happening outside, the relationship, the billing, everything else, the search. As well as the recommendations are happening outside of their experience.

37. 15:23

    So yes, that is creating a lot of friction. So it's actually taking 19 clicks to watch something on Netflix on an iOS device when you go in the first time. It's much easier with Disney+ when it's integrated with Apple TV and you can just subscribe to the Apple TV app and discover content there. And of course, Apple TV+, their own service, which is just a couple of clicks away. So that friction is still there, but that's also a strategy if you strongly believe that your content is there to stay in the long run.

38. 15:50

    Do you think there's a problem with all of these different types of consolidation, and do you think that you will be, that you're being blocked out from any of it?

39. 15:58

    You know, if we have content that people, consumers, feel great about and really want to watch, then no one's going to block us. And we've never been blocked. It's fine. So no, it's a pretty background issue. The big issue for us is how do we develop amazing stories that you all haven't seen? That's,

40. 16:15

    so the biggest issue for them is focusing on the studio piece and the streaming service piece, making sure they've got incredible content, incredible streaming service, and try to circumvent the platform and device world by just making their app available there, but everything else, recommendations, search, discovery, as well as billing, happening outside of that experience. So that's another way to win in this space. Thank you so much for watching. I hope you enjoyed this platform wars video and who are the new cable operators.

41. 16:44

    If you did, please give it a thumbs up and let me know in the comments what do you think who are the winners gonna be in the platform war. And subscribe to the channel, hit the bell icon if you don't want to miss out on the new videos that are gonna come out soon. Thanks again for watching and I hope to see you next time.