The cable industry continues to be hurt by the lack of a comprehensive ratings system that captures both online and mobile, and Nielsen's much-promised rollout of such a system in Q1 could mean a couple of years of spiking advertising revenue growth, SNL Kagan reported Monday. The researcher said ad revenue growth -- expected to be about 4.5 percent in 2016 -- could hit 9.3 percent this year and 7.1 percent in 2018 before returning to its normalized rate of under 5 percent in subsequent years. It said the most successful cable networks will be those that get carriage on the basic packages of such over-the-top services as Dish Network's Sling TV, Sony's PlayStation Vue and Hulu's forthcoming service, plus others expected in coming years. Those virtual service providers' subscriber bases will go from fewer than 1 million in 2015 to nearly 12 million by 2025, SNL Kagan said. The report, pointing to the closing of Al Jazeera America and Pivot last year, predicted "a bleak outlook" for smaller independent networks with low ratings: "Shuttering networks with 60 million and 50 million-plus subs, respectively, would have been a completely foreign concept just a year ago." The firm said cable industry revenue growth overall looks healthy, but the top networks get most of that, and there will be continued mergers and acquisitions among the middle and lower-end operators, and more cable networks shutting down.

Over-the-top services such as DirecTV Now that offer live linear TV are projected to grow to $7 billion worldwide revenue by 2021, up from $1 billion last year, ABI Research reported. Such services meet consumer demand for anytime, anywhere programming and mobile-centric viewing and target a larger national audience, said analyst Sam Rosen. The services align with carriers’ efforts to adopt “mobile-first mindsets” as mobile subscriber bases and revenue advance beyond fixed line revenue with per-consumer, vs. per-household, connections, said ABI. The new model “helps win the battle for exclusive content rights but poses strong technical challenges,” said Rosen, citing the need to develop robust content management systems, video transcoding and storage pipelines and application ecosystems. Cobbling together video distribution networks is “just the beginning,” said Rosen. Offering mobile OTT services requires quality of service assurance, network congestion management, business analytics and content protection including analytics-based protection, such as provisions to limit password sharing. As mobile video consumption increases, mobile operators are exploring policy-based approaches to meet customer expectations and manage the effects of video services on mobile data caps, said the firm. The formidable technical challenges have led operators to make investments in technology platforms, ABI noted, citing the AT&T's purchase of Quickplay Technologies (see 1605160025) and Disney’s stake in BAMTech (see 1609220053). "Despite the technical challenges, OTT services help pay-TV operators attract cord-cutters with a cheaper pay-TV alternative, as well as next-generation customers who never planned to subscribe to a traditional pay-TV service," said analyst Khin Sandi Lynn. Live OTT services, especially those with sports packages, are gaining the most traction, as they allow customers to watch the same live programs offered through pay-TV services “at a fraction of the cost," said Lynn.

Weakening U.S. net neutrality laws is unlikely to “materially affect” domestic margins or "service quality" at Netflix “because we are now popular enough with consumers to keep our relationships with ISPs stable,” the company said in a quarterly letter Wednesday to shareholders. But on a “public policy basis,” strong net neutrality “is important to support innovation and smaller firms,” it said. “No one wants ISPs to decide what new and potentially disruptive services can operate over their networks, or to favor one service over another.” The online video provider said it hopes the incoming Donald Trump administration and the new Congress “will recognize that keeping the network neutral drives job growth and innovation.”

The FCC Enforcement Bureau commended Comcast for its work on PlayStation device authentication. In a letter posted Tuesday to Senior Vice President-Regulatory and State Legislative Affairs Kathryn Zachem, bureau Chief Travis LeBlanc said Comcast had wrapped up the steps needed to authenticate its subscribers for access to HBO Go and WatchESPN TV Everywhere services on PlayStations. The bureau said that work came after multiple talks with Comcast and negotiations "with the relevant third parties." It urged Comcast "to continue to take steps towards" its goals of consumer choice and workplace innovation. Comcast didn't comment.

In the five weeks since AT&T's launch of DirecTV Now, the streaming service was holding up better than competing services in download trends, said a Tuesday UBS report. AT&T beefed up marketing efforts for DirecTV Now in mid-December, advertising that the $35-per-month promo rate would end Jan. 9, but extending the free trial to 30 days from seven. That allowed its iPad ranking to hold up “better than peers” -- including Verizon’s Go90, Sling TV and Showtime, the analysts said. They expect the DirecTV Now app and content to soon add DVR service and multistream capability. The primary issues facing DirecTV Now are user experience and quality as the service scales, said the report. DirecTV Now's success could have “far-reaching implications for the industry, potentially accelerating fixed/wireless convergence in the U.S.,” it said, as management uses the streaming product to gain wireless share in 2017 and unveils new bundles that could “change the trend in postpaid handsets.”

Pandora shares were up 6.5 percent in mid-day trading Friday to $12.78 after an announcement Thursday of a 7 percent workforce reduction and higher-than-forecast Q4 revenue projections. CEO Tim Westergren called the job cuts a “tough, but important” moment in evolving to a “large, enduring” business.” In a news release after markets closed Thursday, the company said it expects to exceed previously announced Q4 2016 revenue projections ($362 million to $374 million) and adjusted EBITDA loss guidance ($51 million to $39 million) ranges, crediting “strong advertising performance.” The company, due to launch its long-awaited on-demand music service this quarter, surpassed the 4.3 million paid subscriber mark in Q4, it said. Pandora launched its mid-tier Pandora Plus plan at the end of Q3 -- a remake of its Pandora One offering -- and said it generated more than 375,000 net new subscribers by year-end. It did so largely through homegrown marketing, saving on customer acquisition costs, said Westergren in a letter to shareholders. “More than 70 percent of our new subscribers came from in-app promotion,” said Westergren, saying that’s a competitive advantage that bodes well for Pandora being able to upsell existing customers to its upcoming premium subscription business. In the two months since the completion of direct agreements with music labels and publishers, the company saw a “dramatic increase” in partnership activity, with “thousands of artists” publishing more than 7,000 messages heard by Pandora listeners over 600 million times. Such artist engagement is driving listening session length, said Westergren. Dougherty & Co. analyst Steven Frankel maintained a “neutral” rating on Pandora in an investor note, citing stiff competition from Apple, Spotify and others as it rolls out its on-demand services. “Given the execution risk,” Dougherty will maintain its rating “until we have more confidence in management's ability to reach, maintain and scale profitability," Frankel said.

The transition to an on-demand video marketplace is probably seven or so years in and has seven or so to go, meaning there's substantial life left in the traditional video bundle, Credit Suisse analyst Omar Sheikh wrote investors Tuesday. He predicted Wall Street's bearish stance that traditional media companies are structurally challenged will face several headwinds this year, including growth of virtual multichannel video programming distributors slowing the pace of video bundle subscriber declines and disrupting the competition challenge for subscription VOD, the continual robustness of the TV advertising market and the scrapping of net neutrality rules. Virtual MVPDs are "critical to the long term health of the traditional video ecosystem" by serving as a competitive response to SVOD services like Netflix, he said. The forthcoming Hulu live-streaming service likely will outperform virtual MVPDs like Sling and DirecTV Now through its library content and cloud DVR, he said. He said the pending AT&T purchase of Time Warner and 21st Century Fox's pending acquisition of Sky will, if approved, lead peers to focus increasingly on the potential upsides of scale and of vertical integration. Disney and CBS, which don't have that scale and/or vertical integration, could be motivated to look into transactions, he said.

Live streams of CBS and sister channels CBS Sports and POP will become part of Hulu's lineup for a multichannel live-streaming service it plans to launch in the coming months, the company said in a news release Wednesday. Hulu said much of the networks' programming will also be available on demand through its deal with CBS. Hulu said other broadcast options on its live TV service will be ABC and Fox. CBS is likely in talks with other streaming services like Sling and DirecTV Now about similar deals, Wells Fargo analyst Marci Ryvicker wrote investors Wednesday, saying the Hulu deal probably won't cannibalize CBS' All Access streaming service since it retains in-season stacking rights and offers originals such as Star Trek.

Dish bowed its long-promised Dish Music service Tuesday, bringing Play-Fi multiroom audio capability to consumers with Hopper 2 and 3 DVRs and Joey clients, it announced. Play-Fi adds whole-home streaming of services including iHeartRadio, Pandora, Deezer, Napster, Tidal and Amazon Music, turning the Hopper into a household’s entertainment hub for music and video, said Dish. Hopper and Joey boxes deliver music to zones controllable by Android and iOS smartphones and tablets, plus apps on set-top boxes. Music can stream through TVs and can pair to speakers and components in the Play-Fi ecosystem from Aerix, Anthem, Arcam, Definitive Technology, Klipsch, MartinLogan, McIntosh, Paradigm, Phorus, Polk Audio, Rotel, Sonus Faber and Wren. Play-Fi products from Elite, Integra, Pioneer, Onkyo, SVS and Thiel are on the road map. DLNA (Digital Living Network Alliance)-compatible, Dish Music will play music files from media servers and personal libraries on mobile devices. Dish Music is rolling out to customers, and the app will be available on all Hopper 2 and Hopper 3 DVRs next month, Dish said.

Cable video subscriber numbers should continue growing this year, but competition also will grow with the launches of additional streaming services, UBS analyst John Hodulik wrote investors. AT&T's DirecTV Now virtual multichannel video programming distributor service (see 1612010025) by itself won't affect cable trends, but similar streaming services from Amazon, Hulu and Google's YouTube could, he said. An inflection point in cable video subscriber trends likely won't come until 2018 since connectivity and quality issues that come with initial product releases likely means a slow start for virtual MVPDs, he said. Hodulik said Comcast likely will launch a wireless service in the second half of the year in the $40 per month price range, though mobile virtual network operator agreement economics make it unlikely the service will be unlimited or zero-rated. For wireless carriers, he said, the result will be higher industry churn and increased promotional activity as smaller carriers try to keep their momentum. Hodulik Tuesday laid out implications of several possible deals, including Sprint/T-Mobile, Dish Network/T-Mobile, Charter Communications/T-Mobile and Verizon/Charter. He said it's not clear who would be the buyer in a Sprint and T-Mobile deal, and it would benefit AT&T and Verizon through reduced competition while complicating cable entry into wireless. He said Dish/T-Mobile would solve T-Mobile's spectrum needs and monetize Dish's spectrum, while Charter/T-Mobile could lead to further cable-wireless transactions. He said Verizon/Charter would likely face significant regulatory conditions.