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Ad-supported video services are booming. Are free downloads next?

Even during shelter-in-place, interest in video downloads remains stable. Will free video services finally take notice?

NBCUniversal's Peacock on a laptop

Peacock, the streaming service from NBCUniversal, will restrict downloads to its ad-free tier.

Photo: Gabby Jones/Bloomberg via Getty Images

Penthera bills itself as the "download-to-go guys," the company that makes it possible for subscribers to Starz, Showtime and the like to download videos so they can watch them during flights and off-the-grid vacations.

So what happens when everyone stops flying and stays at home?

Penthera Chief Sales Office Dan Hurwitz says video downloads have actually gone up by 15% over the last few months as customers download content to their kids' phones and tablets so they can save their Wi-Fi for work-related Zoom calls. Eighty percent of those downloads are being watched while the device is online, suggesting that consumers are becoming more mindful about avoiding traffic peaks.

As a result, Penthera is now looking to reframe video downloads, moving away from the portability aspect and putting a bigger emphasis on network management. "Downloading to a mobile device has major benefits for a network operator," Hurwitz said. "We're just extending the edge."

Video subscription services like Netflix and Amazon Prime have been offering their customers mobile video downloads as an alternative to traditional streaming for years, and both Disney+ and Apple TV+ incorporated downloads at launch. But now Penthera is betting that its newfound success with stay-at-home downloads will help it to finally crack the code on free, ad-supported video downloads. "It used to be that download was this premium feature," said Hurwitz. Now, it's a must-have.

As consumers are defecting from pay TV to cut costs, free and ad-supported services like Pluto, Tubi and the Roku Channel have seen massive growth. Digital TV Research recently predicted that ad-supported video service revenue would grow 120% year-over-year, outpacing subscription video growth.

However, thus far, this crop of free services has shied away from downloads. That's in part because advertising has long been seen as incompatible with offline viewing. "Ad tracking is the issue," said former Viacom exec turned media analyst Andrew Rosen. "How do you verify if and when an ad ran and whether it ran without flaws? Who confirms that? It invites whole new levels of ad tech fraud."

Hurwitz argues that these challenges can be solved with technology; to track ad playback, Penthera uses beacons, which are cached locally in case a device is offline. What's more, ads for downloaded content are frequently refreshed. "We do that over and over again," he said.

There are some signs that ad-supported video services are starting to change their tune on downloading. Roku applied for a patent for downloadable ad-supported video content last year. (Asked about the patent, a Roku spokesperson declined to comment except to say: "We are always innovating.") And Hurwitz hinted at plans by a major media company to start testing ad-supported downloads this month, but he declined to comment further.

Still, some industry insiders expressed reservations in conversations with Protocol, wondering whether it was really worth the trouble. Rosen, for instance, pointed to licensing as another point of contention. Even Netflix, which first began offering downloads in 2016, still hasn't extended the feature to its entire catalog. Disney movies like "Mary Poppins" and "The Princess and the Frog" are among the titles that can only be streamed from Netflix.

Complications around licensing and ad tracking also seem to have turned off others. Hulu first announced two years ago that it would roll out "the industry's first ad-supported downloadable content experience," as ad sales executive Peter Naylor put it at the time. When Hulu finally added downloads to its mobile apps late last year, the feature was available only to subscribers to its ad-free tier. (A Hulu spokesperson declined to comment.) Peacock, the streaming service from NBCUniversal that's scheduled to launch on July 15, will also restrict downloads to its ad-free tier, Protocol has learned.

Still, Hurwitz believes that ad-supported video downloads are just around the corner: "You're going to see it happening in Q3."

People

Expensify CEO David Barrett: ‘Most CEOs are not bad people, they're just cowards’

"Remember that one time when we almost had civil war? What did you do about it?"

Expensify CEO David Barrett has thoughts on what it means for tech CEOs to claim they act apolitically.

Photo: Expensify

The Trump presidency ends tomorrow. It's a political change in which Expensify founder and CEO David Barrett played a brief, but explosive role.

Barrett became famous last fall — or infamous, depending on whom you ask — for sending an email to the fintech startup's clients, urging them to reject Trump and support President-elect Joe Biden.

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Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429.

Power

Roku is becoming the most powerful company in streaming

A growing user base will give it even more power in content negotiations.

Roku's emerging as one of the streaming war's biggest winners.

Photo: Luke Sharrett/Getty Images

Roku's bet on smart TVs is paying off: Seven years after the company first began licensing its operating system to TV manufacturers, it has become a market leader in North America. Roku and its hardware partners sold more smart TVs in the U.S. in 2020 than competitors like Samsung, LG and Vizio, according to data from the NPD Group released by Roku on Friday.

Roku TVs had a 38% market share in the U.S. and a 31% market share in Canada, according to NPD's data. Roku also announced earlier this week that it had ended 2020 with 51.2 million active accounts, adding around 14 million accounts over the past 12 months. Altogether, consumers streamed 58.7 billion hours of entertainment through their Roku devices in 2020, according to a news release.

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Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

Power

How Zoom won 2020 — and how 2020 changed Zoom forever

Zoom never imagined being the company the pandemic forced it to become. Now it has to grapple with what's next.

Zoom got so big in 2020 that even competitors like Facebook have embraced it.

Photo: Facebook

Zoom never wanted any of this. Coming into 2020, the company was in great shape: It was growing quickly, making money and becoming an essential tool for tech-forward businesses everywhere. It's not that nobody at Zoom had ever imagined being a home for happy hours, book clubs, yoga classes, elementary schools and doctor visits. It's just that Zoom had decided, fairly definitively, it never really wanted to be any of those things.

At the beginning of 2020, just before the pandemic upended the world and the rest of the year, Zoom Chief Product Officer Oded Gal told me that Zoom had no plans to become a consumer application. "We are still a business application," he said, "and we don't see ourselves moving away from that." There were some prosumers using Zoom outside of the 9-to-5, he said, and he certainly understood that there were compelling uses for consumer videochat. But he and Zoom were happy to leave those uses to FaceTime and Skype. "We don't want to be a consumer product," he said.

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David Pierce

David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

People

Inside tech’s efforts to invest in Black banks

Tech companies are facing escalating calls to go beyond deposits.

Yelp is the latest company to announce it will be depositing $10 million across three Black-owned banks, including Carver in New York.

Photo: Mark Kauzlarich/Getty Images

Aaron Mitchell, the director of HR for Netflix Animation Studio, had already been working for months on a proposal to address the racial wealth gap when the killing of George Floyd rocked the country in May. Suddenly, it seemed like every company was coming out of the woodwork with pledges to invest and diversify and do better.

On May 27, Mitchell sent an email to Netflix CEO Reed Hastings asking him what he thought of a plan to invest $100 million in Black banks, a unique strategy to funnel more capital back into Black communities struggling amid the COVID-19 pandemic. At that point, no other corporation had made a similar public commitment. Mitchell said the $100 million was an arbitrary amount of money with symbolic significance: It was the same amount that Netflix spent on "House of Cards," a flashpoint in the company's history.

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Emily Birnbaum

Emily Birnbaum ( @birnbaum_e) is a tech policy reporter with Protocol. Her coverage focuses on the U.S. government's attempts to regulate one of the most powerful industries in the world, with a focus on antitrust, privacy and politics. Previously, she worked as a tech policy reporter with The Hill after spending several months as a breaking news reporter. She is a Bethesda, Maryland native and proud Kenyon College alumna.

Power

Disney+ reaches 86.8 million paying subscribers

Disney is still committed to theatrical release windows, but execs signaled that could change.

Star will be available as part of Disney+ in Western Europe, Canada and New Zealand starting in February.

Image: Disney

Disney's streaming service continues to grow at a rapid pace: The streaming service now has 86.8 million paying subscribers, Disney CEO Bob Chapek announced at the company's annual investor day on Thursday. Disney also announced a new Star-branded streaming service that is being integrated into Disney+ in some territories, and a slight price increase: Disney+ will cost $7.99, up from $6.99, starting next March. Pricing in other territories will also increase.

Star will be available as part of Disney+ in Western Europe, Canada and New Zealand starting in February. Star will offer a number of Disney shows and movies currently available to U.S. audiences on Hulu; consumers will have to unlock the content because it includes R-rated titles and other content that stands out from the family-friendly Disney+ fare.

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Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

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