Happy New Year. If you're just back from a holiday vacation and have been partially or totally off the grid for the last week or two, here are 7 video-oriented items you may have missed:
1. Time Warner Cable and News Corp fight over fees, then settle - Two behemoths of the cable and broadcast TV ecosystem spatted publicly during the holidays over the size of "retransmission consent" fees that News Corp (owner of the Fox Broadcast Network and cable channels like Fox News) wanted TWC (the 2nd largest U.S. cable operator) to pay to carry its 14 local stations. While a last minute deal averted the channels going dark, broadcasters' interest in dipping into cable's monthly subscription revenues will only intensify as audience fragmentation accelerates and ad revenues are pressured.
For my part I wish Fox and other broadcasters were as focused on building new and profitable digital delivery models for their programs as they were on trying to redistribute cable's revenues. Even as Rupert Murdoch continues advocating the paid content model, the freely-available Hulu is seeing its traffic skyrocket (see below). But if Hulu's viewership isn't incrementally profitable, then all that growth is pointless. Urgency is mounting too; in '10 convergence devices that bridge broadband to the TV are going to get a lot of attention. In the wake of their adoption, consumers are going to want Hulu on their TVs. If Hulu doesn't allow this it will be marginalized. But if it does without first solidifying its business model, it could hurt broadcasters further.
2. Hulu has a big traffic year, but no further information provided on its business model - Hulu's CEO Jason Kilar pulled back the curtain a bit on the company's strong progress in 2009, citing 95% growth in monthly users, to 43 million, 307% growth in monthly streams, to 924 million (both as measured by comScore) and a doubling of available content, to 14,000 hours. While noting that its advertisers increased from 166 to 408 during the year, with respect to performance, Jason only said that "we are extremely excited about atypically strong results we have been able to drive for our marketing partners."
Though Hulu is under no obligation to disclose details of its business model, I think it would dramatically increase the company's credibility if it shared some metrics about how its lighter ad load model is working (e.g. improved awareness, click throughs, leads, conversions, etc.). Per the 1st item above, as Hulu grows, a lot of people have a lot at stake in understanding what effect it may have on broadcast economics. In addition, as I pointed out recently, it is important to understand whether Hulu thinks it may have already saturated its U.S. audience. After a jump in Q1 '09 from 24.6 million to 41.6 million users, traffic actually dipped below 40 million until October. What does Hulu do from here to gain significantly more users?
3. Cable networks' primetime audience is nearly double broadcasters' - Punctuating the ascendancy of cable over broadcast, this Multichannel News article pointed out that in 2009, ad-supported cable networks as a group captured 60.7% of primetime audience vs. 32% for the 4 broadcast networks. That's a major change from 2000 when the broadcasters had a 46.8% share vs. cable's 41.2%. Cable increased its share every single year of the last decade, powered by its innovative original programming. NBCU's USA Network in particular has become the real standout performer, winning its second consecutive ratings crown, with 3.2 million average primetime viewers, up 14% vs. 2008.
The surging popularity of cable programming is a crucial barrier to consumers cutting the cord on cable. Since cable networks are highly invested in the monthly multichannel subscription model, they are unlikely to disrupt themselves by offering their best shows to others under substantially different terms than how they're offered today. So to the extent cable programs are either unavailable to over-the-top alternatives or offered less attractively (e.g. less choice, higher cost, delayed availability), little cord-cutting can be expected. And if TV Everywhere achieves its online access goals, the cable ecosystem will only be further strengthened.
4. YouTube is working to drive higher viewership - Amidst the turmoil in the traditional ecosystem and Hulu's growth, YouTube, the 800 pound gorilla of the online video world, is working hard to deepen the site's viewership. As this insightful NYTimes article explains, a team of YouTube developers is analyzing viewing patterns and tweaking its recommendation practices to encourage more usage. YouTube says time on the site has increased by 50% in the last year, and comScore reports that the average number of clips viewed per user per month jumped to 83 in October, up from 53 a year earlier. Still, as comScore also reports, duration of an average session has yet to crack 4 minutes, meaning video snacking on YouTube is still the norm. YouTube's moves must be watched closely in '10.
5. Showtime's "Weeds" available online before on DVD - This WSJ article (reg req'd) pointed out that Lionsgate, producer of Showtime's hit "Weeds" series is offering episodes online before they're available on DVD. By putting the digital "window" ahead of DVD's, Lionsgate is further pressuring DVD's appeal. We've seen periodic experimentation in this regard, and I anticipate more to come, especially as the universe of convergence devices expands and consumers can watch on their TVs instead of just their computers. Until a tipping point occurs though, "Weeds" like initiatives will be the exception, not the rule.
6. Netflix goes shopping in Hollywood - And speaking of reversing distribution windows, this Bloomberg Businessweek piece was the latest to highlight Netflix's efforts to woo studios into giving it more recent releases. Netflix has of course made huge progress with its Watch Instantly streaming feature, but its appeal to heaviest users will slow at some point unless it can dramatically expand its current slate of 17K titles available online. Hollywood is understandably wary of Netflix given all the variables in play and a desire to avoid Netflix becoming master of Hollywood's post-DVD, digital future. Whether Netflix will spend heavily to obtain better rights is a major question.
7. Get ready for Google's Nexus One and Apple's "iSlate" - Unless you've really been off the grid, you're probably aware by now that two very significant mobile product releases are coming this month. Tomorrow (likely) Google will unveil the Nexus One, its own smartphone, powered by its Android 2.1 operating system. The Nexus One will be "unlocked," meaning it can operate on multiple providers using GSM networks. The device will further fuel the mobile Internet, and mobile video consumption along with it. Separately, Apple is widely rumored to introduce its tablet computer later in the month, which many believe will be called the "iSlate." The tablet market is completely virgin territory, and while it's early to make predictions, I believe Apple could have most of the ingredients needed to make the product another big hit. The prospect of watching high-quality video on a thin, light, user-friendly device is extremely compelling.