VideoNuze Posts

Back in February, 2011, when Amazon unveiled Prime Instant Video, I noted that the service's Achilles heel was its minimal content selection. And since the video service was embedded in the larger Prime free shipping offer - rather than getting its own standalone brand - I sensed  hesitancy that Amazon would spend big bucks to license lots of premium-quality video. That indeed seemed to be the case as Amazon didn't announce a single content licensing deal to support Prime Instant Video until July, 2011.

However, since then, things have changed markedly; Amazon has been on a content licensing blitz over the last 15 months, announcing at least 14 different deals, culminating in today's with EPIX (see below for links to all). Despite the slow start, Amazon's huge content investment shows the company is quite serious about achieving content parity, or better, with its closest rival, Netflix, while leaving others like Google, Apple, Wal-Mart/VUDU, Verizon/Redbox and others playing catch-up in user-friendly subscription OTT services. Including the EPIX content, Amazon says it now has 25,000 titles/episodes, up 5-fold from its February, 2011 launch.

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If you were trying to tune out last week, whether lying on a beach or on a family getaway, you didn't miss all that much exciting online video-related news. However there were some items worth noting and below I've highlighted five that caught my eye.

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Adobe has announced that its Adobe Pass technology notched a 10x increase during the first half of 2012 in the number of video streams it authenticated. Big contributors included NCAA March Madness, UEFA Euro 2012 soccer and the NBA playoffs, along with entertainment content from Disney and Turner cable networks. Adobe Pass also powered authentication for the London Olympics, which drove 88 million authenticated streams.

Adobe Pass is now used by 40+ sites and mobile apps from 25 content providers, and is integrated by 150 pay-TV operators covering 98% of U.S. homes. That's considerable progress for a technology which was only announced a year-and-a-half ago.

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mPortal, whose SPRINGBROARD Media platform allows pay-TV operators and content providers to create cloud-based TV Everywhere apps, is being enhanced with a new set of social TV APIs to build second screen companion apps for connected devices.

While the number of social TV startups abound, mPortal's VP, Products Fady Lamaa told me that mPortal believes its social TV APIs are the first to be integrated fully with TV Everywhere app building tools, meaning that pay-TV operators and content providers can present unified, branded TV Everywhere/social experience to their users. mPortal is seeking to capitalize on two of the biggest video trends today: connected device viewing and social.

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thePlatform is introducing new commerce capabilities as part of its mpx video management platform today. Marty Roberts, thePlatform's SVP, Sales and Marketing, told me last week that as online video continues to mature, customers are looking to monetize content through every release window, so transactions have gained importance.

thePlatform's commerce capability allows service providers and content owners to create business rules for pay-per-use, download-to-own, season passes, movie bundles and other special promotions in addition to ad-supported and subscription models. Marty noted that the new commerce system enables complimentary monetization to electronic sell-through already available for certain titles via iTunes, Amazon and other third-parties.

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I'm pleased to be joined once again by Colin Dixon, senior partner at The Diffusion Group, for the 145th edition of the VideoNuze-TDG Report podcast. In this week's podcast Colin and I talk about what resonates most for us about Aereo, based on my interview with its founder and CEO Chet Kanojia, earlier this week (Part 1 here and Part 2 here).

Foremost for both of us is Aereo's simplicity and ease of access. Aereo aligns with the expectations of digital natives, people who expect self-service offerings that have low entry barriers and commitment levels. Aereo capitalizes on key vulnerabilities of today's pay-TV services - not just that they are expensive, but that they are complicated, with various tiers, channels, fees, clunky set-top boxes and special offers tied to extended contracts, all of which are confusing and burdensome to many people, especially digital natives.

Embedded in Aereo's simplicity/convenience value proposition is its focus. Aereo is not trying to be all things to all people; rather it is starting by offering flexible broadcast TV reception, mainly for use on iPads, for a low daily cost. We were both struck by Chet's comparison of Aereo to the early days of cable TV. While their architectures are fundamentally different, their core initial offer of improving reception and access to broadcast TV programming, is similar.  In this respect, you gotta love the durability of broadcast TV as a value driver.

However, cable's early model of cleaning up broadcast signal delivery eventually gave way to retransmission consent fees. For both Colin and me, this is the area that remains murkiest for Aereo. While it won the first round in court, it faces a long journey of legal challenges ahead. In particular, Colin is not convinced of Chet's belief that should Aereo adversely impact retrans fees, cross ownership of broadcast assets would enable media conglomerates to remain whole by shifting around fees to cable assets.

Finally, we are both impressed with how Aereo is capitalizing on so many of today's key technology and consumer behavioral trends. These include the declining cost of IP video delivery, storage costs and processing power, along with the rise of cloud computing, mobile devices (namely the iPad) and the shift to on-demand viewing. Chet views Aereo as a "platform" that unites all of these into a compelling consumer offering. We agree. In particular, its low, "success-based" capex model means Aereo should be able to rollout quickly and inexpensively. I draw a contrast with Google's costly fiber buildout in Kansas City.

Chet downplays Aereo's disruptive impact, but Colin and I agree it's potentially significant. Time will tell.

Listen in to learn more!

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In the second part of my interview with Aereo's founder and CEO Chet Kanojia, we begin by discussing how the company relates to the pay-TV industry, and whether it is incenting cord-cutting and cord-nevering, or is simply benefiting from this activity. In fact, Chet believes Aereo is a retardant for cord-nevering, because it helps people inclined in this direction to get accustomed to paying for video. Down the road he envisions how that helps them to become pay-TV subscribers.

Chet sees cable as an inspiration for Aereo, in the sense that it too started off providing a simple convenience service, namely improved broadcast reception. Cable's model of layering on subsequent services is one that Aereo could follow as well.

Of course much has been made about how Aereo potentially relieves pay-TV operators from the burden of expensive retransmission consent fees. No surprise, it was hard to pin Chet down on this issue, but generally he believes that given the cross ownership between broadcast TV networks, cable TV networks and cable TV operators, any pressure on one revenue stream would simply get resolved by adjusting the others.

Other topics we talk about include Hulu, Netflix, net neutrality, bandwidth caps, Barry Diller's role, the composition of Aereo's team, expansion plans and its success-based capex model.

Watch Part 2 of the interview below. Part 1 is here.

Watch the interview

There's likely no online video startup that has created quite the stir this year that Aereo has. But what's been lost in the coverage of its legal wrangling with broadcasters and high-profile backing from Barry Diller is a clear understanding of Aereo's business strategy: Who are its target customers? What is its real value proposition? How will it compete in a crowded video landscape? What new business opportunities is it trying to create for the TV ecosystem? And how are things going so far?

These are among the questions that Aereo founder and CEO Chet Kanojia addresses in a 47-minute interview I did with him at the company's offices earlier this week. Chet looks at today's TV ecosystem and sees a world filled with inconvenience, irrational pricing/bundling and misalignments with emerging consumer expectations/behaviors. Like all can-do entrepreneurs, Chet's reaction is to see opportunity; in Aereo's case, that means delivering a "simple, rationally-priced, convenient" service to people who have become accustomed to these types of benefits in other areas of their lives.

As Chet explains, some of Aereo's prospects are "cord-nevers" - younger, Internet-centric users who place a huge value on convenience and are cost sensitive. And others are cord-cutters, who are ready to move on from taking myriad pay-TV channels they don't watch or value. Importantly, Chet doesn't see Aereo incenting these emerging behaviors, but rather benefiting from them.

In part 1 of our wide-ranging interview below, we also discuss Aereo's marketing approach and why sampling is so critical, the breakthrough antenna technology that enables Aereo's service and of course the dynamics with the broadcasters who are so determined to shut Aereo down.

Tomorrow I'll post Part 2.

Watch the interview