VideoNuze Posts

Daisy Whitney and I are pleased to present the 37th edition of the VideoNuze Report podcast, for October 23rd, 2009.

This week Daisy and I discuss my post from yesterday, "In the Digital Era, Disney is Walking to the Beat of its Own Drummer," which picks up on a WSJ article from Wednesday about the company's new DRM initiative dubbed "Keychest." Disney appears to be taking a lone-wolf approach since other Hollywood studios and technology companies have rallied around DECE, the Digital Entertainment Content Ecosystem. When combined with its ongoing resistance to TV Everywhere (while other cable networks jump on board), I argue in the post that Disney appears to be adopting a much more individualistic approach to how it envisions pricing and delivering its content in the digital era.

On the TV Everywhere topic, Daisy shares observations from a recent Beet.tv executive roundtable she covered, in which participants debated the concept's benefits to consumers. Daisy cites how the NYTimes.com isn't currently offering embeddable video as an example of how rights remain a key challenge for online video distribution. Online rights will be one of the factors determining how much content is made available in TV Everywhere at launch.

Click here to listen to the podcast (14 minutes, 59 seconds)

Click here for previous podcasts

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Yesterday's WSJ article about Disney's new DRM initiative, dubbed "Keychest" was another sign that in the digital era, Disney keeps walking to the beat of its own drummer. Combine Keychest with Disney CEO Bob Iger's repeated skepticism about TV Everywhere and the need for Disney to receive incremental payments for online distribution and it's not hard to conclude that Disney envisions retaining much more control over how its content is delivered and priced going forward. It's also not hard to conclude that Disney's largest individual shareholder Steve Jobs's influence is being felt in the company's decision-making.

The Keychest DRM initiative in particular shows a real streak of separatism by Disney given the critical mass that DECE (the Digital Entertainment Content Ecosystem) has gained. DECE counts among its members multiple studios (Sony, Warner Bros., NBCU, Lionsgate, Fox), technology providers (Microsoft, Intel, Dolby, Philips, HP, Cisco, etc.) and delivery outlets (Comcast, Best Buy). Granted, DECE hasn't shown a whole lot of progress yet, but that's pretty much to be expected when you have this many big players at the table. Still, even getting all these companies to join forces is a hopeful sign of inter-industry collaboration.

And as the WSJ article underscores, the need to introduce some form of standardized DRM for movies in particular is growing more urgent. DVD sales, the industry's cash cow for years, are off by 25% at certain studios, yet movie downloads don't yet come close to filling the gap. Downloading is not only still a new experience for many, but it introduces key limitations (lack of portability, non-ubiquitous playback and confusing usage rights) that are significant inhibitors for future growth. Let's face it, not a lot of people are going to invest in building downloaded movie libraries when it's difficult or impossible to do something basic like play a movie on 2 different TV sets in their home. Downloading's issues need to be solved quickly if it is going to take off.

Meanwhile, Disney's posture on TV Everywhere has created real questions about what the company's goals are in online content distribution. VideoNuze readers know that I've been bullish on TV Everywhere because it's a win for the 3 main constituencies - incumbent video providers (cable operators and telcos), cable TV networks and consumers. By forcefully advocating a plan to offer TV Everywhere as a value-add to existing subscribers, with no incremental fees, video providers laid the logical foundation for cable networks not to expect incremental distribution fees ("We're not charging anything extra, so you shouldn't expect to either.").

From my point of view, rationale cable network executives should be excited with the prospect of TV Everywhere, as it provides them an on-ramp to online distribution (which they've been shut out of to date, given the absence of a sound online business model and fearing a backlash from paying distributors if they offered their content for free streaming) while preserving their incumbent dual revenue-stream approach and expanding their advertising potential.

Nonetheless, Disney seems unsatisfied. CEO Iger continues to float the idea of incremental payments for online access, even suggesting it will launch its own subscription services. That could mean consumers face the prospect of paying twice for the same content, which is unrealistic even for ESPN's vaunted sports coverage. Disney has seen success with ESPN 360, its premium online service, but it offers distinct content (supplementary pro-sports coverage and niche sports coverage) from its flagship channels. And it should be noted that broadband ISPs pay for 360, not consumers directly.

I tend to believe we're seeing Steve Jobs's influence behind the scenes with both Keychest and Disney's posture on TV Everywhere. That's pure speculation on my part I'll admit. But "Think Different" is more than a slogan for Jobs and Apple. The company's ability to succeed by pursuing a non-conformist, innovative path (e.g. iPods, iTunes, iPhones, Macs, etc.) in the face of market norms is beyond dispute. Emboldened by Apple's success and understanding the strength of Disney's franchises as an insider suggests Jobs would encourage Disney not to be constrained by nascent industry-wide initiatives. At a minimum Apple provides Disney with a pretty compelling case study of how to succeed by zigging when others are zagging.

No question, Disney has incredible brands, and is probably in the best position among major content providers to influence how things will unfold in the digital era. And its investment in Hulu shows it is willing (albeit belatedly), to align with joint industry initiatives. Still, its Keychest project and resistance to TV Everywhere raise the possibility that in pursuing its own path it could not only miss out on or delay benefiting from the efforts of others in the industry, but could also be over-reaching with the result being consumer confusion and discontent. Disney holds strong cards, but it needs to be careful how it plays them.

What do you think? Post a comment now.

1Cast, an aggregator of short-form news-oriented video clips from premium content providers, is announcing its commercial launch today, joining others in the personalized video news category like Voxant, ClipSyndicate, RedLasso (for local news), plus other online news aggregators. Following its year-long private beta test, 1Cast is also announcing today a redesigned UI, distribution partnerships with boxee and Clearwire, the WiMax wireless provider, and a new entertainment category anchored by E! Entertainment and Style. Yesterday I caught up with Anthony Bontrager, 1Cast's CEO to learn more.

Anthony explained that 1Cast users are now consuming 3.5 million video clips/mo, contributing to average session lengths of 14 minutes on the desktop and 36 minutes on mobile devices. With average clips running 2-3 minutes apiece, that means users are watching a series of clips back-to-back when checking the site. 1Cast gives users the ability to set up their own "casts" selecting from preset categories and networks. The casts are automatically updated each time new content is added by 1Cast. I've played around with the site and have found it very straightforward to find and organize content. My only knock is that sometimes content is not that current. For example, even though the Red Sox played until Oct 11th when they lost the ALDS to the Angels, a search for "Boston Red Sox" on 1Cast listed the first video result from Aug 26th.

1Cast obtains clips from news providers like AFP, Barron's, BBC, MarketWatch and Reuters. For these providers 1Cast represents additional distribution and revenue. 1Cast is completely ad-supported, and Anthony said that it is selling 80% of its own ads, with YuMe selling the rest. CPMs are in the $25 range. Ads are primarily 15 second mid-rolls and post-rolls, with bumpers at the beginning of sessions. 1cast revenue shares with its content partners, but Anthony wouldn't disclose what percentage. He did point to a recent 6 figure campaign Infinity ran on the site as a major validation of 1Cast's model.

1Cast and the other personalized video aggregators play well to the short-form consumption behavior of online video users. This is even more so the case with mobile consumption. The distribution deals with boxee and Clearwire will help 1Cast gain more visibility and usage.

As I said when I first covered 1Cast in Aug '08, I think personalized video news is a very compelling concept, but my concern with 1Cast and the others specializing in this area is whether they can build sufficiently large audiences and scale their businesses.

Surely one of the most enduring questions I and others who watch the online video industry are asked (and in fact often ask ourselves) is: How can video management and publishing platform companies continue to launch, even as the space already seems so crowded?

Personally I've been hearing this question for at least 6 years, going back to when I consulted with Maven Networks, whose acquisition by Yahoo was one of the few industry exits (and likely the best from an investor ROI perspective, regardless of the fact that it was shut down little more than a year later as part of Yahoo's retrenching. With yesterday's launch of Episodic and the recent launch of Unicorn Media, plus last week's $10M Series C round by Ooyala, it's timely to once again try to make sense of all the activity in the platform space.

The best explanation I offer traces from my Econ 101 class: supply is expanding to meet demand. Over the past 10 years, there has been an enormous surge of interest in publishing online video by an incredible diversity of content providers. Importantly, interest by content providers has intensified in the last few years. I can vividly recall 2003 and 2004, trying to explain to leading content providers why online video was an important initiative to pursue. Still, their projects were often experimental and non-revenue producing. Contrast this with today, where every media company on earth now recognizes online video as a strategic priority.

But even as online video's prioritization has grown, many media companies don't have all the strategic technology building blocks in place. In fact, many continue to use home-brewed technology developed a while back. The range of video features needed continues to grow and evolve rapidly. Consider how requirements have expanded recently: live, as well as on-demand video; long-form programs as well as clips; paid, as well as ad-supported business models; mobile, as well broadband distribution; multiple bit rate, as well as single stream encoding; in-depth analytics as well as top-line metrics; widespread syndication as well as destination-site publishing; off-site, as well as on-site ad management. The list goes on and on.

As media company interest has grown, technology executives and investors have taken note. Venture capital firms continue to see online video as a high-growth industry (even if the revenue model for content providers is still developing, as are many of the platforms' own revenue models), with significant macro trends (e.g. changing consumer behavior, proliferation of devices, improved video quality, etc.) as fueling customer interest. Another important factor for platforms is rapidly declining development costs. As Noam Lovinsky, CEO of Episodic told me last week, open source and other development tools has made it cheaper than ever to enter the market with a solid product. With ever lower capital needs, a new video platform entrant that can grab its fair share of the market has the potential to produce an attractive ROI.

Of course all the noise in the platform space means media executives need to do their homework more rigorously than ever. I'm a strong believer that the only way to really understand how a video platform works, how well-supported it is and how well-matched it is to the content provider's needs is to vigorously test drive it. Hands-on use reveals how comprehensive a platform really is, or how comfortable its work flow is, or how well its APIs work. While I get a lot of exposure to the various platforms through the demos I experience and the questions I ask, I'll readily concede this is not the same as actually living with a platform day-in and day-out.

Another complicating factor is that while there are some companies purely focused on video management and publishing, there are many others who offer some of these features, while positioning themselves in adjacent or larger markets. When I add these companies in, then the list of participants that most often hits my radar would include thePlatform, Brightcove, Ooyala, Twistage, Digitalsmiths, Delve, KickApps, VMIX, Grab Networks, ExtendMedia, Cisco EOS, Irdeto, KIT Digital, Kaltura, blip.tv, Magnify.net, Fliqz, Gotuit, Move Networks, Multicast Media, WorldNow, Kyte, Endavo, Joost, Unicorn Media and Episodic (apologies to anyone I forgot). Again though, this list combines apples and oranges; some of these companies are direct competitors, some are partners with each other, some have a degree of overlap and so on.

There's a long list of platforms to choose from, yet I suspect the list will only get longer as online and mobile video continues to grow and mature. At the end of the day, who survives and succeeds will depend on having the best products, pricing the most attractively and actually winning profitable business.

What do you think? Post a comment now.

Please join me in Denver next week for 2 great discussion panels at the CTAM Summit.

First, VideoNuze will be hosting a breakfast on Monday, Oct. 26th from 7:30am-8:45am, where I'll be moderating a panel titled, "How Cable Succeeds in the Broadband Video Era." Panelists include:

• Ian Blaine - CEO, thePlatform
• Rebecca Glashow - SVP, Digital Media Distribution, Discovery Communications
• Bruce Leichtman - President & Principal Analyst, Leichtman Research Group, Inc.
• Chuck Seiber - VP, Marketing, Roku, Inc.

We'll be doing a deep dive on how the cable TV industry is navigating the shift to broadband video consumption, the key opportunities and challenges the industry faces, competitors to watch and important new technologies. If you're trying to understand the industry's broadband priorities or are trying to figure out how to partner with cable operators or programmers, this session is for you.

The breakfast's lead sponsor is thePlatform and supporting sponsors include ActiveVideo Networks, Akamai Technologies, ExtendMedia, Goodmail, KickApps and October Strategies.

Click here for more information about the VideoNuze breakfast and to register

Then on Tuesday, Oct. 27th, I'll be moderating the closing general session of the CTAM Summit itself from 1:00pm-2:15pm. Our topic is "Multi-Screen Access: Challenges & Opportunities." Panelists include:

• Paul Bascobert - Chief Marketing Officer, Dow Jones & Company
• Matt Bond - EVP, Content Acquisition, Comcast
• Andy Heller - Vice Chairman, Turner Broadcasting System, Inc.
• Jason Kilar - CEO, Hulu
• David Preschlack - EVP, Disney and ESPN Networks Affiliate U.S. Sales and Marketing
• Peter Stern - EVP & Chief Strategy Officer, Time Warner Cable

In this panel we'll be focus on exploring the opportunities and challenges each panelist's company faces working across screens, with a particular emphasis on the customer's experience. We'll examine how to create new value that meets consumers' shifting expectations, build successful business models (free, paid, hybrid), leverage new technologies, enhance existing revenue streams and deliver content in new ways. Each of these companies is a leader in their own right and the discussion promises to yield valuable lessons about how to succeed working across 3 screens.

Click here for more information about the CTAM Summit and to register

I look forward to seeing you in Denver!

Following are 4 items worth noting from the week of Oct 12th week:

1. Bell Canada is first to offer "TV Everywhere" type service - While U.S. operators have been busy with their TV Everywhere trials, Bell Canada, which has 1.8 million linear video subscribers, has jumped into the lead, announcing this week the launch of "TMN Online." The service, available through the Bell TV Online portal, allows subscribers to The Movie Network premium channel to gain online access to about 130 hours of content.

I spoke briefly with Peter Wilcox, Bell TV's director of product strategy, who explained that ExtendMedia's OpenCASE is being used for content management, in conjunction with Microsoft's Silverlight and PlayReady DRM. Users login with their Bell user name and password and are authenticated against the billing database as valid TMN subs. Only 1 simultaneous log-in is allowed, and Bell is also geo-blocking, so for example, there's no accessing TMN Online from outside Canada. The launch is part of what Bell calls "TV Anywhere" - a broader context for eventual distribution to its mobile subscribers, and further content being added. The deployment is the first milestone in what promises to be a busy 2010 on the TV Everywhere news front.

2. BlackArrow launches ad insertion for Comcast video-on-demand - BlackArrow, the multiplatform ad technology provider, announced its first customer deployment this week, with Comcast's Jacksonville, FL operation. I talked to company CEO Dean Denhart and President Nick Troiano, who gave me an update on how the company dynamically inserts ads in long-form premium content across TV, broadband and mobile. As I wrote 2 years ago, BlackArrow has bitten off the hardest challenge first: working with cable operators to get its system into their headends/data centers. Dean and Nick believe that if the company can succeed in this goal then it will have created formidable differentiation that can be leveraged for the other two platforms.

The key risk is that cable operators are famous for grinding down promising technology startups with their endless testing and brutal negotiating tactics (I say this from personal experience with a promising technology startup earlier this decade, Narad Networks). Robust VOD ad insertion is plenty strategic for the industry, but years since cable operators launched free VOD, the fact that it still isn't widely deployed is a telling sign, particularly while ad insertion technology in broadband is now fully mature. Comcast's role as an investor in BlackArrow should help its odds of success. I'm rooting for BlackArrow; their holistic approach to multiplatform advertising is right on. Whether they have the juice to fully succeed remains the big question.

3. Political battle over net neutrality is heating up - This week brought fresh complaints from Republican Senators who are coalescing to fend off new FCC chairman Julius Genachowski's plan to introduce net neutrality regulations for both broadband ISPs and wireless carriers. B&C reported that 18 Republican senators wrote to Mr. Genachowski concerned that the FCC's process is "outcome driven" and unsupported by data.

I rarely find my views aligning with Republicans, but net neutrality is an exception. As I wrote last month in "Why the FCC's Net Neutrality Plans Should Go Nowhere," Mr. Genachowski's plan is deeply flawed and completely illogical. The core premise of the new regulations - that they're needed to ensure continued broadband investment and innovation - misses the reality that the market is already functioning well. As one example, investment in broadband-related technology is continuing apace. By my calculations, over $180 million was raised in Q3 '09 by video-related companies whose very viability depends on open broadband and wireless networks. The sector's potential is amplified by the fact that venture capital fundraising itself is at its lowest level since 2003, with new capital raised by the industry in 2009 down 58% from 2008. Despite the VC industry's troubles, it continues to bet big on video. Why do we need new Internet regulations to sustain innovation?

4. Have you seen the 9 year-old hockey player's trick goal? On a lighter note, you have to love the serendipity of online video sharing. For example, though I don't consider myself a hockey fan, when a friend sent me this video clip of a 9 year-old hockey player pulling off this incredible trick shot, I was reminded just how much fun online video is and promptly passed the clip on to my circle (it's also now all over YouTube). See for yourself, it's just amazing. And nothing fake about it either.

Enjoy the weekend!

Daisy Whitney and I are pleased to present the 36th edition of the VideoNuze Report podcast, for October 16, 2009.

This week Daisy and I first discuss my post from yesterday, "Can Advertising Alone Support Premium Long-Form Online Video?" which picks up on the in-depth discussion panelists had at this week's VideoSchmooze event in NYC. As I said in the post, this is a crucial issue, particularly for broadcast TV networks who have aggressively pursued online distribution of their primetime programs, but have yet to demonstrate they can generate the same revenue per program per viewer online as they do on-air. In the podcast, Daisy explains why she thinks that something has to break, and that a "survival of the fittest," dynamic looms for broadcast networks.

Moving on, Daisy then discusses her New Media Minute episode this week, in which she describes the success that Univision, the Spanish-language network, is having with online-only shows. Univision is so bullish on the format that Kevin Conroy, a company executive, recently told Daisy that he is actively soliciting pitches. Details on the growth in Internet usage among the Hispanic audience underscore why Univision is hitting its stride online.

Click here to listen to the podcast (12 minutes, 44 seconds)

Click here for previous podcasts

The VideoNuze Report is available in iTunes...subscribe today!

This was the question I started our VideoSchmooze panel discussion off with this past Tuesday night. Yet 20 minutes of debate among our group of panelists yielded no real answers. This lack of consensus suggests an upcoming period of high anxiety in the industry: for even as viewers shift to online consumption, it is far from clear whether advertising alone will be sufficient to support the creative infrastructure needed to produce premium long-form video.

I continue to believe that broadcast TV networks are the companies most at risk from the unknowns around online video advertising. Lacking the additional revenue stream from distributors that their cable TV network brethren enjoy, broadcast networks must figure out how to make online video advertising work.

However, as I originally wrote over a year ago, and then again here, the fundamental problem the broadcast networks face with their current online implementations is that ad revenue per viewer per program is a fraction of what it is on-air (likely less than 25% by my calculations). In my mind, getting the two into balance is the minimum requirement for the networks to keep their top lines even with where they are today, assuming online viewership substitutes for on-air, as I expect it will over time.

As our panel explained though, the constraints to achieving this parity are significant. First is the issue of just how many ads can be inserted into an online episode. Today sites like Hulu, with their very light ad loads bias significantly in favor of the consumer experience rather than revenue optimization (for more on this see Chuck Salter's fine new article, "Can Hulu Save Traditional TV?" in this month's Fast Company). Just how many ads can be forced into an online episode given the DVR ad-skipping generation's expectations is an unknown. For sure it is fewer than the 16-18 minutes in a traditional one hour on-air program.

So if the quantity of ads must be lower, then each one needs to bring a higher price than their on-air counterparts. The traditional "CPM" metric (the cost per thousand viewers reached) is well-entrenched among ad agency media buyers. On the VideoSchmooze panel, George Kliavkoff, now a Hearst executive, but formerly the chief digital officer at NBCU and the first CEO of Hulu, lamented the CPM framework for online video advertising. He threw down the gauntlet, saying essentially that the whole broadband video industry is in for big trouble if it doesn't break out of selling ads on a CPM basis.

George's point was that it's foolish for a new medium like broadband, which offers content providers new technology-based ways to create value for advertisers, to allow itself to get locked in to the monetization techniques from the prior TV medium. That rationale is compelling enough, but for me another strong reason to get beyond CPM pricing is that not doing so means that media buyers will always be presented with a fundamental question: is it worth paying a 25%/50%/100% (take your pick) premium to reach online vs. on-air eyeballs watching the exact same show? This raises the bar for online ads; the research must show demonstrably higher engagement, recall, purchase intent, etc. to justify the premium. All of this may happen due to online's improved targeting, but even if it does, it won't happen overnight and the upside is likely not that large anyway.

If CPM-based pricing is challenged, then what's better? On the panel we discussed examples of interactive ads that can be quantifiably valued, such as by generating a specific lead or purchase for the advertiser, along with other formats. Of course these ideas have been floating around the TV world for years, but have gained little traction (although it is worth noting that in online, paid search marketing is a pure performance ad format that has worked spectacularly well). As several attendees remarked to me afterward though, these new ad formats face the additional challenge of needing to conform to ad agencies' buying processes, which are research-driven, dominated by younger staffers and not well-suited to understanding innovative ad formats.

Add it all up and significant questions remain about whether advertising alone is going to be able to support premium long-form online video and the creative infrastructure that produces it. Just as newspapers are struggling today to support traditional newsroom expenses on skimpier online ad revenues, broadcast networks accustomed to spending $2 million or more for a single episode of a scripted program could face a similar day of reckoning. This is the core issue, made all the more urgent by viewers' relentless shift to online consumption. Only time will tell whether there are any satisfactory answers to be had here.

What do you think? Post a comment now.