VideoNuze Posts

Below is the 12th edition of the VideoNuze Report podcast, for April 3, 2009.

After a week off, Daisy Whitney and I are back. This week we discuss new comScore data Daisy learned about while attending the OMMA Video conference, which supports the idea of TV ad spending shifting from TV to broadband video. Then we dig deeper into the significance of Disney's deal to bring promotional clips to YouTube, which the companies announced earlier this week. More detail on the deal is also in this post I wrote on Tuesday.

Click the play button to listen to the podcast (13 minutes, 49 seconds):

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World Wrestling Entertainment (WWE) has created an innovative user-edited video application called "Smash-Ups" to engage its fans and drive excitement for this Sunday night's "WrestleMania 25th Anniversary" event. It's a great example of how long-form video can be segmented and made available to users to exercise their creativity in support of the brand. In this case, WWE is also offering a $5,000 prize to the user who creates the best clip.

I've been a fan of these kinds of mashup or re-mix apps, going back to a post I did in August '07 about the one that Universal Pictures and Metacafe created for "The Bourne Ultimatum." More recently, NFL has had success with its NFL "Replay Re-Cutter" launched last fall. I continue to believe they offer a clever way for fans to engage with the brand and potentially tapping into archive content that likely isn't creating any current value. The clips create new video views and incremental ad inventory. And as the clips are shared by users they also become a cheap source of viral marketing.

The Smash-Ups are powered by Gotuit, a company I've written about which has also recently announced it is powering Major League Soccer's "QuickKicks" video portal and remix and Lifetime's "Movie Mash-up" feature. As CEO Mark Pascarella and VP &GM Patrick Donovan, explained, a key Gotuit advantage for all these initiatives is that no new video clips are actually being created. Rather, by using Gotuit's metadata and indexing capabilities, the content provider can tag particular scenes and present them as clips. When users create their mixes, they're actually just combining a series of "virtual clips" - time-coded in and out points in the underlying long-form video files. This makes managing these activities a lot simpler and cost-effective. The Smash-Ups also showcase how the Gotuit UI can be fully customized and integrated with WWE's look-and-feel.

WWE is monetizing the clips through both sponsorships (THQ) and ads. A pre-roll or mid-roll is inserted up to a maximum frequency of 1 ad per 2 minutes of content (a Gotuit setting the content provider can adjust). Users can share their creations with embed code or via email. WWE has also done a great job promoting the Smash-Ups, enlisting its superstars to make their own videos which are posted on YouTube.

These user-edited applications (especially if they're part of contests with meaningful incentives) are a pretty compelling tactic for content providers to drive viewership and monetization. I expect we'll continue to see more of them launched.

What do you think? Post a comment now.

In a surprising turn-of-events, VideoNuze has learned that Google will acquire Hulu and merge it with YouTube. The resulting entity will be named either 'YouLu' or 'HuTube.' The merger brings together the two most-trafficked video sites into a powerful new player.

In an interesting twist, the final acquisition price has not yet been determined. Instead, the price will be based on a new algorithm Google is creating to accurately measure just how effective Hulu is at turning its users' brains into 'creamy giggity-goo' as Seth MacFarlane asserts it will in the latest of Hulu's alien-inspired ads. The algorithm will actually be able to count how many more of users' brain cells die as a result of watching shows on Hulu beyond the cells that already died due to regular on-air network TV viewership.

It turns out that Hulu's positioning as an 'evil plot to destroy the world' was considered highly synergistic with Google's longstanding mantra to 'do no evil.' Google CEO Eric Schmidt revealed that the company decided some time ago to move beyond its good-guy image, saying, "Look, we got a lot of mileage out of that 'doing no evil' malarkey, but it's time to get real. We're an avaricious multi-billion company now, and all these wacky tree-hugging green initiatives our engineers keep dreaming up can't hide that." He added, "We really admire the traction Hulu is getting by turning 'evil' into a virtue and want to tap into that concept further. Those Hollywood guys beat us hands-down when it comes to creativity."

For its part, Hulu's owners' decision to merge with YouTube, for a price not yet quantifiable, can only be seen as waiving the white flag of surrender. In an email exchange between Jeff Zucker, NBCU's CEO and Peter Chernin, Fox's former CEO (who made the original Hulu deal), obtained by VideoNuze, Zucker's frustration with Hulu's distant second place status is palpable. Among other things he says, "I thought we had dumbed down our shows as much as possible, but YouTube has clearly tapped into audiences' insatiable appetite for the inane. Who would have thought that skateboard-riding cats crashing into walls would have more audience appeal than our $2 million/episode scripted dramas. There really is no accounting for taste."

In response Chernin is quoted as saying, "Rupert always thought Hulu was a small potatoes deal, not really capable of losing a large, exciting amount of money. On the other hand, YouTube has been a gigantic black hole for Google, so the opportunity to join forces and achieve scale at losing money together was just incredibly compelling." He added, "Plus, you have to remember, Rupert's heart is really in newspapers. He continues to think this whole Internet thing is a fad that will eventually blow over, with people returning to newspapers as their trusted source of news and propaganda. So the company is logically positioning itself to have sizable video losses to offset expected massive gains in newspaper profitability."

Meanwhile, in a meeting with employees, Hulu CEO Jason Kilar reportedly sought to put a positive spin on the merger. Employees who have Twittered the meeting say that to pump up employee enthusiasm he re-told stories of how much fun it was to originally come up with the name 'Hulu,' reportedly saying, "Look how much mileage we got of one ridiculous-sounding made-up name, just imagine the branding possibilities of the even more-ridiculous sounding names YouLu or HuTube..." Negotiations are already underway with the Chinese portal and domain parking company that own the respective URLs.

The merger left many industry analysts scratching their heads. Representative of their reaction, VideoNuze's Will Richmond said, "Geez, I never thought we'd see a more nonsensical media merger than the one between Time Warner and AOL, but I think this YouLu/HuTube thing might just be it. Let's hope it's not for real, and is just some kind of April Fool's Day joke cooked up by an industry analyst to provide some once-per-year, cheap laughs."

Late yesterday's announcement that Disney-ABC and ESPN would launch a number of ad-supported channels focused on short-form content was yet another meaningful step in broadband video's maturation process. Here are 6 reasons why I think the deal matters:

1. It validates YouTube as a must-have promotional and distribution partner

For many content providers it's long since become standard practice to distribute clips, and often full-length content, on YouTube. Yet aside from CBS, no broadcast TV network has seriously leveraged YouTube. That's been a key missed opportunity, as YouTube is simply too big to ignore. It's not just that YouTube notched 100M unique viewers in Feb. '09 according to comScore, it's that the site has achieved dramatically more market share momentum over the past 2 years than anyone else, increasing from 16.2% of all streams to 41% of all streams.

Increasingly, YouTube is not the 800 pound gorilla of the broadband video market; it's the 8,000 pound gorilla. Disney has acknowledged what has long been tacitly understood - as a video content provider, it's impossible to succeed fully without a YouTube relationship.

2. It creates a path for full-length Disney-ABC programming to appear on YouTube and elsewhere

While this deal only contemplates short-form video, and more than likely, mostly promotional clips, it almost certainly creates a path for full-length episodes to appear as well, as the partners build trust in each other and learn how to monetize. Full-length content is most likely to come from ABC, not ESPN (the release pointedly states no long-form content from ESPN's linear networks is included) as part of a newly expanded distribution approach.

For YouTube, which has been aggressively evolving from its UGC roots in its quest to generate revenues, the current clip deal alone is a big win; gaining distribution rights to full-length programs would be an even more significant step. Underscoring YouTube's flexibility, the current deal allows ESPN's player to be embedded, and for Disney-ABC to retain ad sales. YouTube's reported redesign, which places more emphasis on premium content, is yet another way it is getting its house in order for premium content deals.

3. It opens up a new opportunity for original short-form video to flourish

When you think about broadcast TV networks and studios, you immediately think of conventional long-form content. Yet all of these companies have been producing short-form content that either augments their broadcast programs, or is originally produced for broadband, as Disney's own Stage 9 is pursuing. The levels of success of this content have been all over the board.

With YouTube as a formal partner, Disney can aggressively leverage it as its primary distribution platform, gaining more direct access to this vast audience. Facing unremitting market pressures on many fronts, broadcast TV networks themselves need to reinvent their business models. Short-form original content married to strong distribution from YouTube would be a whole new strategic opportunity.

4. It puts pressure on Hulu and other aggregators

It's hard not to see YouTube's gain as Hulu's - and other aggregators' - loss. For sure nothing's exclusive here, and as PaidContent has reported, discussions about Disney distributing full-length programs on Hulu (as well as YouTube) are also underway. But the Disney deal underscores something important that differentiates YouTube from Hulu: YouTube is both a massive promotional vehicle and a potential long-form distributor, while Hulu is really only the latter.

YouTube's benefit derives from its first-mover status. Hulu has done a tremendous job building traffic and credibility in its short life, but it is still distant to YouTube in terms of reach. I continue to believe it is far easier for YouTube to evolve from its UGC roots to become also become a premium outlet than it is for Hulu - or anyone else - to ever compete with YouTube's reach.

5. It raises threat warning to incumbent service providers by another notch

It's also hard not to see the Disney deal moving YouTube's threat level to incumbent video service providers (cable/satellite/telco) up another notch. We discussed YouTube's importance to these companies at the Broadband Video Leadership Evening 2 weeks ago (video here), and I thought the panelists generally did not give YouTube much credit as it deserves.

I continue to believe that of all the various "over-the-top" threats to the current world-order, YouTube is the most meaningful ad-supported one. It has massive audience, a potent monetization engine in Google's AdWords, and with the Disney deal, increased credibility with premium content providers. Especially for younger audiences, the YouTube brand means a lot more than any incumbent service provider's. If I were at Comcast, Verizon or DirecTV, I'd be keeping very close tabs on YouTube's evolution.

6. It exposes the absurdity of the ongoing Viacom-Google litigation

Two weeks ago at the Media Summit I listened to Viacom CEO Philippe Dauman describe the status of his company's $1 billion lawsuit against Google and YouTube. As he talked of mounds of data and reams of documentation being collected and reviewed, I found myself slumping in my chair, thinking about how well all the lawyers involved in the case must be doing, and yet how pointless it all seems.

The old adage "2 wrongs don't make a right" fits this situation perfectly. There is no question that in the past YouTube was lax about enforcing copyright protection on its site and cavalier about how it responded publicly to the concerns of rights-holders. But it has made much progress with its Content ID system and a good faith effort to become a trusted partner. All of this is evidenced by the fact that Disney wouldn't even be talking to YouTube, much less cutting a deal, if it didn't view YouTube as reformed. While the media world is moving on, adapting itself to the new rules of video creation, promotion and distribution, Viacom continues to waste resources and executive attention pursuing this case. To be sure, Viacom has been plenty active on the digital front, but it is long overdue that these companies figure out how to resolve their differences and instead focus on how to work together to generate profits for themselves, not their lawyers.

What do you think? Post a comment now.

This morning ExtendMedia is announcing that one of its board members, Tom MacIsaac has been named CEO. Tom is a long-time technology executive and venture capitalist. He and I got to know each other when he was running Lightningcast, one of the earliest broadband video advertising companies, which was sold to AOL in 2006. Tom went on to run strategy and M&A at AOL, where he led a $1B in acquisitions and more recently has been a venture partner at BlueRun Ventures and run Cove Street Partners, his own investment and advisory firm.

Tom's addition is a big step forward for the company, which has established a strong, yet relatively low-key position in the market. In my view that's been for two reasons: first, because Extend has emphasized pay media models, whereas a lot of the attention has been on ad-supported ones, and second, because while Extend has had a very strong team, the CEO role itself has been vacant for some time. For better or worse, one of the lessons I've learned over the years is that a high-profile, well-known CEO, who spends a significant portion of his/her time on externally-oriented visibility-building activities is a key success factor for young companies. I'm not a fan of the "rock star" CEO model, but I do believe in the "CEO as #1 company salesman" approach. Without such a person in place, a young company's whole team has to work that much harder to succeed.

Tom and I talked about his new role, ExtendMedia's opportunities and the broadband market in general. An edited transcript follows:

VN: Congratulations on joining ExtendMedia. What attracted you to the role?

TM: Extend is in an extremely exciting space as IP video changes the entire media and communications landscape. It has a great team with deep domain expertise, is very well-funded with great investors in Atlas Venture, Venrock and TVM Capital and has an enviable competitive position being the leading independent carrier-grade multi-screen video platform.

VN: Describe ExtendMedia's key product and technology differentiators and who its primary competitors are.

TM: We provide an enterprise class, multi-screen video platform that content owners and distributors use as a foundational asset in building video services. We manage video content across the lifecycle from ingest to monetization and across IPTV, web and mobile services in both ad-supported and pay media business models.

Our primary competitor is thePlatform, a division of Comcast. We don't really run into the Flash-based web video publishing companies like Brightcove, Ooyala, PermissionTV, etc. because we are usually deeper in the our customers' infrastructure trying to solve more complex problems that span the set-top box, PC and/or mobile devices, using multiple business models.

VN: ExtendMedia has always been strong with pay media business models, but has focused less on ad-supported ones. Given your background at Lightningcast, do you think that will change?

TM: Extend has always supported both ad-based streaming business models as well as pay media, but you're certainly right that we have been particularly strong in pay media. That said, we have new additional capabilities to help our customers in their ad-supported streaming media businesses in our next release and later this year will have yet another set of interesting enhancements targeted on maximizing video CPMs for our customers. We aren't going to get into the ad serving business but we are going to extend the boundaries of our product in that direction so that we can help the ad monetization engines we partner with leverage everything at our customers' and our disposal to maximize CPMs. We have some specific ideas on how we can really add value here.

VN: What kind of company is an ideal ExtendMedia customer?

TM: A telco, cable MSO or mobile carrier that is building a multi-screen video platform or a large diversified media company that has built several stove-piped digital video services over the last few years and is now trying to pull everything together on a single infrastructure.

VN: What areas of your background and experience do you think will be most valuable to the company?

TM: I've been in the technology business for 20 years, as a lawyer to tech companies, as a venture capitalist, as a board member, as a founder/entrepreneur and as an executive in large technology companies. I've sold three companies that I've run to public companies and acquired five venture-backed companies as an executive at AOL. That's a pretty good array of perspectives to bring to the table.

But my video advertising expertise in particular will definitely come into play at Extend. At Lightningcast we built the first advertising technology platform designed to monetize IP video and were at the table at the inception of some of the most successful video services out there - Comcast's Fancast and Hulu, for example. Despite all the activity and investment in the area, with possibly one or two exceptions, in the three years since I left Lightningcast no one's doing anything we didn't think of and do first.

VN: What do you think your top 2-3 priorities will be?

TM: We're on the right track, so it's all about execution.

VN: What's your perspective on the broadband video market today? And what would you say about incumbent service providers' evolving role in delivering broadband video services?

TM: I think the incumbent service providers are getting much smarter about IP video. They are leveraging their advantages much more effectively. When the web video phenomenon took off it was initially about user-generated content and giving the little guy content creator a direct-to-consumer path. The problem is that that hasn't paid off - the business model doesn't work yet - the dollars just aren't there.

The trend today is back to professional content and that plays to service providers' strengths. Initially it was all about advertising, and now the trend is toward dual offerings of both ad-supported and pay media business models, which is also good for incumbents. Many service providers, like our customers AT&T and Bell Canada for example, have set-top box, web and mobile sand boxes to play with and if folks like Extend can help them deliver video across and between those platforms and help manage the environments and entitlements from a single platform that will provide real value to their consumers and will drive loyalty. Comcast's On-Demand Online and Time Warner's TV Anywhere initiatives are good examples of service providers figuring out how to leverage their strengths in ways that benefit them, their content partners and consumers.

VN: You've been a venture capitalist, have raised venture financing and have successfully sold companies. What advice do you have for broadband video entrepreneurs given the state of the economy?

TM: The space is clearly overbuilt in many segments. There will be a lot of fallout. Investors are gun-shy. So do your research and make sure you have something unique. That said, it is going to be one of the most interesting and lucrative areas in all of technology over the next decade. So if you've got something truly innovative - go for it.

Yesterday's announcement by Visible Measures that it raised a $10M Series C round is further evidence that broadband video companies are still able to attract financing in this brutal economic climate. Here are other video sector investments I've tracked on VideoNuze in Q1 '09:

• RipCode ($12.5M) - 1/5/09
• SundaySky ($8M) - 1/6/09
• JibJab ($7.5M) - 1/08/09
• Motionbox ($6M) - 1/14/09
• Digitalsmiths (undisclosed from Cisco) - 1/26/09
• Fliqz ($6M) - 1/28/09
• Mixpo ($4M) - 2/2/09
• WhistleBox ($2.3M) - 2/9/09
• Tremor Media ($18M) - 2/19/09
• Auditude ($10.5M) - 3/11/09

Plus 7 others totaling over $80M in the Fall of '08, and no doubt others I've missed.

Since I initially profiled Visible Measures last June, and then followed-up with a post about their deal with MTV Networks last September, the company has continued to build momentum. Brian said that it's now powering video measurement and reporting for many of the largest web properties and dozens of advertisers. Revenue is about evenly split between the two categories.

Despite its progress, Brian explained the company has maintained a relatively low profile because neither it nor its customers have wanted to publicize their activities. Brian said there are a few competitors but none that he feels are that close to offering what Visible Measures has, and he'd like to keep it that way by being low-key about their wins. Skeptics might say "a publicity-shy early-stage company? Hmm...." but knowing Brian and his team as I do, I know that's been their approach since starting the company.

Brian added that the new round, led by Northgate Capital, a fund of funds that has also does some direct investing, "presented itself" without Visible Measures out looking for it. But Brian was quick to note that he considers the company extremely fortunate, given that he believes the current environment is even tougher than the post-bubble years in 2001-2003. Northgate is a limited partner in MDV-Mohr Davidow Ventures, one of the company's two original investors, along with General Catalyst. The company has raised a total of $29M to date.

Visible Measures plans to use the new funds to accelerate product development and grow faster. Brian and Matt made repeated references to the mountain of tracking data the company is sitting on, and that many people are interested in accessing it (which I can believe). The intent is to further productize the data, though no specifics were offered.

What do you think? Post a comment now.

Below is video of last Tuesday night's VideoNuze Broadband Video Leadership Evening. Many thanks to PermissionTV for shooting and editing....As a reminder, my takeaways from the discussion are here. Enjoy!

With the Broadband Video Leadership Evening now behind us, I'd like to turn your attention to three upcoming panels that offer lots of education value.

First, if you happen to be in Boston, or find yourself here next Monday night, March 30th, I'll be moderating a session for MassNetComms, entitled, "Is Convergence Finally Here? Web Video and TV Get Ready to Collide." We have a great group of local Boston-area companies and executives on the panel:

• Chris Gardner - Chief Marketing Officer, ExtendMedia
• Hilmi Ozguc - Former CEO and Co-Founder, Maven Networks
• Andy Roberts - VP of Advanced Technology, Azuki Systems
• Neil Sequeira - Managing Director, General Catalyst Partners

All of these guys are on the front lines of the broadband/mobile video evolution, and will provide tons of market insight. The event is from 5pm - 8pm including networking time. Registration is here.

Then on April 22nd, I'm pleased to be partnering with NAB to moderate 2 panels at the NABShow in Las Vegas. Access is complimentary by clicking here, and entering code "X104"

The first panel, at 11am is entitled, "How TV Broadcasters are Capitalizing on Broadband Video" with the following panelists:

• Bill Bradford - SVP, Chief Product Officer, Fox Digital Media Broadband Channels Group
• Colin Dixon - Practice Manager, Broadband Media, The Diffusion Group
• Suzanne Johnson - Senior Industry Marketing Manager, M&E, Akamai Technologies
• Clayton Thomson - VP, Video Strategy and Development, WorldNow

The second panel, at 3pm, is on one my favorite topics, "How Syndication is Powering the Broadband Video Era," with the following panelists:

• Doug Knopper - Co-CEO and Co-Founder, FreeWheel
• Steven Kydd - EVP, Demand Studios, Demand Media
• Chase Norlin, CEO, Pixsy
• Steve Rosenbaum - Founder and CEO, Magnify.net
• Brian Steel - President and CEO, VoloMedia

I hope you're able to join us, as both panels are sure to provide lots of great information. The panels will be in the "Content Theater" adjacent to the "Content/Commerce Pavilion" where many industry companies will be exhibiting (e.g. Brightcove, Limelight, Electronic Arts, Akamai, MGM, etc.) Exhibiting opportunities are still available, ping me if you're interested. Hope to see you there!

Access is complimentary by clicking here, and entering code "X104"