Netflix Tops Online Movie Services

With the cable crowd watching, Netflix has again opened industry eyes as new numbers show the company is now the largest online movie service in the nation. As far as dollars are concerned, no other company - not Apple, not Microsoft, not Vudu, nor Sony - generated as much revenue from online movies in 2011 as Netflix.

According to the latest data from iHS iSuppli, Netfilx roared past Apple late last year to take the top spot in revenue-generating online movie services. In terms of market share, the company went from .5% of all online movie dollars in 2010 to 44% last year. By comparison, Apple's market share has steadily decreased for the past three consecutive years, with 71% in 2009, 60% in 2010, and 32% in 2011.

"2011 marked a sea change in the online movies business that saw the balance of consumer spending shift from a DVD-like transactional model to more TV-like subscription approach," said Dan Cryan, research director for digital media at IHS. "The online movie business more than doubled in 2011 to reach $992 million and it is expected to double this year as well."

iHS says revenue from SVOD services reached $454M in 2011, a jaw-dropping 10,000% increase from $4.3M in 2010. As a result, SVOD is now the largest segment of the U.S. online movie business, surpassing other major parts of the market including TVOD and electronic sell-through. The research firm says the shift can be attributed to two factors: Netflix's decision to start charging directly for online access, and the major growth in the number of people using online SVOD.

TVOD experienced its own impressive growth last year, up 75% from 2010 to $273M in 2011. However, iHS says, in contrast to SVOD, transactional VOD services like iTunes require consumers to pay a separate fee to rent each individual movie. Electronic sell-through grew by just 2.4% to reach $236M, the firm says.

While Netflix "rules" the SVOD market, its closest competitor - Hulu - is less than 10% of its size. iHS says iTunes continues to dominate the transactional segment, accounting for 63% of revenue, down slightly from 64.6% in 2010. The firm's latest report says the big growth story of 2011 was Walmart's Vudu, which captured 8.2% of the growing transactional market, up from 2.8% last year. •

FCC: Pay-TV Complaints Increase

The FCC released its latest consumer complaints data showing the number of inquiries and complaints into pay-TV providers has again increased since last year. According to the agency, consumers filed formal "inquiries" about their cable or satellite TV service a total of 1,840 times during the first quarter of 2012, up 36% y/y.

The FCC said inquiries into billing and service rates constituted more than 32% of all complaints during the period.

The agency's quarterly report shows the number of inquiries about broadcast TV (and radio) increased 42% (from 4,326 to 6,157) during Q1, "primarily due to an increase in inquiries concerning Programming issues." The FCC report also said complaints about wireless and wireline services increased 11% and 24%, respectively.

As far as formal complaints, the FCC report says: bundled and VoIP service-related complaints increased more than 8%; cable & satellite complaints increased 28%; and broadcasting complaints jumped by more than 62%. Wireless complaints increased 41%, while wireline complaints grew by 21%. •

Investors Buy Wave - Cisco v. TiVo - Layoffs at Microsoft & Verizon

M&A: WaveDivision announced that private equity firms Oak Hill Capital Partners, GI Partners and a team of Wave management will purchase the company from its current owners for an undisclosed amount. New ownership will take over Wave's cable systems in Seattle, SF, Sacramento and Portland serving ~385K subscribers. Details here. RBC Daniels led the advice work for Wave. UPDATE: WSJ is reporting the deal to be worth $950M. --- DIRECTV's Mike White again said there is logic behind a merger with DISH, but any possible deal is basically a non-issue with President Obama in office.

In Court: Cisco filed a lawsuit against TiVo last week over four DVR patents. Details here.

Labor: Reports say Microsoft is planning to lay off as much as 30% of its TV ad sales team this month. AdWeek has details. --- Verizon said Monday it would eliminate ~1,700 employees from its customer service and call-center operations.

Strategy: Roku's HD STB sells for $60, but the company announced a deal where if consumers pay $80 they'll receive a 6-month subscription to Hulu Plus (including a $10 HDMI cable for installation). The company says the bundle would be about $128 separately.  --- The trademark sleuths at FierceCable noticed DISH filed an application to register the brand name "DISH Smart Home Services," indicating a possible entry into the home monitoring market.

Op/Ed: Well this is interesting... Business Insider's Henry Blodget says don't look now, but the TV business 'may be starting to collapse.' Why? 1) Networks are "meaningless,"; 2) cable programming is "wasted,"; and 3) TV ads are merely background noise. --- The Technology Policy Institute's Scott Wallsten says the FCC doesn't always produce the most relevant data. So, he says, policy-making agencies should get specialized data from other sources (e.g. the U.S. Census) that have no vested interest in any particular policy outcome. Read his take. --- CEA President & CEO Gary Shapiro has an interesting take on America's immigration problems: Stop focusing on illegals and start encouraging strategic immigrants that will strengthen the nation.

Programming: Verizon is launching 10 new Spanish-language HD channels on FiOS TV as part of its La Conexion package. Nine of the channels come from indie distributor Olympusat's ULTRA HDPlex suite plus Multimedios TV from Monterrey. Verizon also reached a new long-term carriage deal with Univision for the company's suite of networks and local affiliates. Financial terms were undisclosed.

$$$: Twitter says it could clear $1B in advertising income in 2014, a growth rate twice as much expected by analysts amid a boom in the online ad sector. The site had revenues of $139.5M last year. -Bloomberg --- Comcast shareholders voted in favor of a resolution that would require the company to seek their approval before reinstating a "poison-pill" anti-takeover plan set to expire in November. Company brass opposed the measure.

Tech: A big announcement for Xbox at the E3 show Monday, as Microsoft unveiled 'SmartGlass,' a new app that lets users share content across smartphones, tablets, and TVs. Reports also say Microsoft is beating Apple and Google for the living room, as the company has sold 67M Xbox 360 consoles with more than 40M subscriptions to Xbox Live.

Ratings: A&E continues to surprise with ratings, as another Western-style program "Longmire" recorded an audience of 4.1M viewers on Sunday night... the best showing for a 1st-year drama on cable so far this season.

Advertising: AdAge is running a cool piece about which cable network has the best slogan. Check it out.

Service: Comcast expanded its TVE options by adding MAX Go, in addition to CNN and HLN in the near future. --- PCMag has more details about Verizon's announced speed changes and prices for FiOS internet service we reported on last week. ---  Comcast also expanded Xfinity Voice in Virginia.

Over, Up, & Under: Cable Europe says caution is needed when distributing European public funds. The cable group urged lawmakers to allocate state aid for broadband services where citizens have no connectivity at all. "Scarce resources must be used as efficiently and effectively as possible - disincentives to private investment and market distortions must be avoided," the  association said. "Public funds shouldn't be diverted to an area where a private investor would otherwise be ready to invest." --- Televisió de Catalunya (TV3) is the first Spanish TV station to launch on Google TV. --- Russian cable op ER Telecom is launching an iTunes-like subscription music service with more than 1.5M songs. --- BCE, along with a group of fellow investors, has agreed to acquire Canadian data center operator Q9 Networks for C$1.1B.

Uh-Oh: Internet hacking group SwaggSec claims to have breached the security systems at Warner Bros. and China Telecom. CNET has the story.

--- Catch today's media market news in The Evening BRIDGE. •