VideoNuze Posts

Blockbuster and TiVo have announced that Blockbuster OnDemand movies will be available on TiVo devices. Though I'm all for creating more choice for viewers to gain access to the content they seek, in this case I don't see the deal creating a ton of new value in the market, as it comes 6 months after Netflix and TiVo announced that Netflix's Watch Instantly service would be available on TiVo devices and nearly 2 years after Amazon and TiVo made Amazon's Unbox titles available for purchase and download to TiVo users. It looks like the main differentiator here is that Blockbuster will begin selling TiVos in their network of physical stores.

The deal underscores the flurry of partnership activity now underway (which I think will accelerate) between aggregators/content providers and companies with some kind of device enabling broadband access to TVs. I believe the key to these deals actually succeeding rests on 2 main factors: the content offering some new consumer value (selection, price, convenience, exclusivity, etc.) and the access device gaining a sufficiently large footprint. Absent both of these, the new deals will likely find only limited success.

Consumers now have no shortage of options to download or stream movies, meaning that announcements along the lines of Blockbuster-TiVo break little new ground. To me, a far more fertile area to create new consumer value is offering online access to cable networks' full-length programs. As I survey the landscape of how premium quality video content has or has not moved online, this is the category that has made the least progress so far. That's one of the reasons I think the recent Comcast/Time Warner Cable plans are so exciting.

With these plans in the works, but no timetables yet announced, non-cable operators need to be thinking about how they too can gain select distribution rights. There's still a lot of new consumer value to be created in this space. Given lucrative existing affiliate deals between cable networks and cable/satellite/telco operators, I admit this won't be easy. However, Hulu's access to Comedy Central's "Daily Show" and "Colbert Report" does prove it's possible.

We're well into the phase where premium video content is delivered to TVs via broadband. Those that bring distinctive content to large numbers of consumers as easily as possible will be the winners.

What do you think? Post a comment now.

Everywhere I look there are companies doing innovative, clever things to bring broadband video to the TV and to mobile devices.

Yesterday brought another great example, from Vuze, a company with roots as a BitTorrent client that has evolved to an aggregator of hi-def niche broadband video using its desktop application for discovery, download and playback. Vuze announced an update that enables users to drag-and-drop downloaded videos for playback on non-PC devices such as Xbox, PS3 and - via an integration with iTunes - to the iPhone, Apple TV and iPods. It's a pretty cool extension of the Vuze client experience and I spoke with Vuze's CEO Gilles BianRosa and Sr. Director of Marketing Chris Thun to learn more.

Without getting too far into the technical details, what Vuze has done is capitalized on hooks that have existed in these various devices, making videos downloaded via Vuze visible in these devices' interfaces. As Gilles explained it, these hooks have been available for a while, but only the super-technical would have invested the time and effort to benefit from them.

The connections to Xbox (installed base of 30M) and PS3 (installed base of 23M) are quite complimentary to Vuze, which has 10M unique visitors/mo and about 50M downloads to date, because its content library is heavily skewed toward SciFi, animation, games and comedy (all HD btw) along with its user base. In other words, there's an affinity audience who will immediately benefit from being able to watch Vuze's content on their big screens and on-the-go. In fact, in a recent survey of its users for how they'd want to connect their PCs to TV and mobile, Vuze got 30K responses with a strong emphasis on gaming and Apple devices.

In prior conversations with Gilles I've raised a concern about the viability of Vuze's (or anyone's) client download model given the ever-increasing quality of browser-based streaming. But these integrations do shed new light on the value proposition of having a desktop presence. With its update, Vuze actually goes one step further by automatically transcoding downloaded videos into the format appropriate for the target device, often in real-time, thus eliminating playback issues.

Gilles noted that this is a beta release however, and that one current limitation is that ads cannot be passed through. This is a not insignificant gap for an ad-supported site. Vuze hopes to have ads up and running within a month or so. It also has its eye on integrating with additional devices. My bet is that TiVo is next up given that TiVo founder Mike Ramsey sits on Vuze's board.

For now Vuze's content is relatively nichey and Gilles concedes that despite ongoing negotiations with major studios and TV networks, they're still getting comfortable with Vuze's P2P platform. Given the crowded video aggregator space, Vuze's ongoing challenge is to bolster its content library to broaden its appeal.

But Vuze's new update, sure to mimicked by others, which comes on top of Netflix reporting 1M Watch Instantly users connecting to their Xboxes and consuming 1.5 billion in the first 2 months of its availability, Boxee's multiple integrations and other PC-to-TV convergence initiatives underway, shows the huge pent-up interest users have in watching broadband video on their TVs. The genie is way out of the bottle and content providers need to begin adapting to the coming landscape where video flows between PC, TV and mobile, offering unprecedented convenience to users.

What do you think? Post a comment now.

Watching President Obama's appearance on "The Tonight Show with Jay Leno" on NBC.com over the weekend was a classic reminder of how so many sites miss out on so much of their total broadband video advertising opportunity.

The interview, which lasts over 24 minutes, carried just one 15 second pre-roll ad, (for Subway, when I watched it) along with a companion banner. Twice during the interview, Leno interrupted the President to pause for a TV commercial break, but when he did so, there was no mid-roll ad inserted by NBC.com. There was also no post-roll ad appended, just a promo graphic for the show itself.

If you figure there were at least 4 potential 15 second avails (1 pre-roll, 1 post-roll and 2 mid-rolls), but only the pre-roll was filled, it means that NBC.com missed out on 75% of the potential ad revenue that each full stream viewer would have generated. In reality the percentage is probably even higher because the mid-rolls could likely be 30 seconds or more.

That degree of under-monetization is pretty disappointing. Don't get me wrong, I'm not advocating that broadband video streams become overwhelmed with ads, which would surely cause a consumer backlash. But I do believe that providers of premium content like NBC.com (and there are few videos more premium than the first time ever a U.S. President has appeared on the "Tonight Show") must recognize and monetize their opportunities effectively. There are at least three reasons why:

First, and most obviously, broadcast networks' poor recent financial performance demands that they seize every available money-making opportunity. Not doing so is just bad business. How many businesses succeed long-term when they don't execute on all chances to generate revenue?

Second, NBC.com and other premium video providers are setting a bad precedent for consumers' expectations. If I can watch 24 minutes of Leno with just one 15 second ad, then if and when NBC.com tries to increase the ad load, I'm inevitably going to be displeased. In short, NBC is devaluing its own content by not serving notice to broadband viewers NOW, that a "price" - in the form of watching ads - must be paid for access.

Third, and tying together the first two reasons, is that it is urgent that networks learn how to achieve economic parity between programs viewed via broadband delivery vs. on-air delivery.

That's because the era of broadband-connected TVs has already begun, and is poised to gain further steam as new devices and connected TVs proliferate.

As this happens, online viewing will no longer be merely supplemental for many viewers to on-air, as it often (thought not exclusively) is today. Rather it will be substitutive. That means viewers will watch Leno via broadband on their TVs, instead of via cable/satellite/telco or over-the-air delivery. Just as "Tonight" would never go 24 minutes on-air without an ad pod (which consists of more than one just 15 second ad btw); NBC.com should never let this happen online. Doing so will cause major damage to its future P&L.

In his Media Summit interview last week, NBCU's Jeff Zucker said the company has already evolved from "digital pennies" to "digital dimes." Yet Hulu's recent stiff-arming of Boxee underscores the reality that networks are nowhere close to economic parity between online and on-air delivery of their programs today. Neither consumers nor technology are standing still waiting for them to catch up. Behaviors, expectations and future economics are being formed right now.

NBC.com - and others - need to be mindful of this and ensure that when they put their premium video online they're fully capitalizing on their ad opportunities. If they don't, then 5 years from now Mr. Zucker will wind up like so many of today's newspaper CEOs - lamenting, not praising, his company's "digital dimes," long after his "analog dollars" have evaporated.

What do you think? Post a comment now.

Below is the 11th edition of the VideoNuze Report podcast, for March 20, 2009.

This past week Daisy Whitney and I were both on the road, with me hosting VideoNuze's Broadband Video Leadership Evening in NYC, and Daisy attending the annual South by Southwest (SXSW) conference in Austin, TX. We each provide our observations and takeaways from these respective events. (Note I have more detail in yesterday's post)

A highlight of the this past Tuesday's Broadband Video Leadership Evening was our panel discussion with Albert Cheng (Disney-ABC Television), Daina Middleton (Moxie Interactive/Publicis Groupe), Greg Clayman (MTV Networks), Karin Gilford (Comcast) and Dan Beldy (Steamboat Ventures) sitting in for John Edwards.

As moderator, I was trying to listen to panelists' answers, formulate the next question, and scribble down notes. We'll be posting a video of the discussion soon, but in the mean time, here are a few of my key takeaways (also pictures are here):

For ABC, no economic parity for broadband-delivered shows vs. traditional on-air delivery yet, but progress is happening - Albert opened the discussion with an update on ABC.com's profitability. He said that broadband-delivered programs are profitable on a gross margin basis, but that they are not yet as profitable as when viewed on-air. He resisted using the "analog dollars, digital pennies" reference, instead saying it's like comparing "a teenager to a full-grown adult." (I'm still trying to decode that as well)

Albert noted that ABC thinks of itself as a multiplatform entertainment company, with numerous distribution avenues, not simply a traditional broadcaster any longer. That's a distinction that it believes will keep it from facing the dire situation newspapers are now in. Albert said that newspapers trouble began because they didn't pay sufficient attention to changing consumer behaviors and respond effectively, whereas broadcast networks are proactively trying to stay out in front. One example he provided is that in the U.S. where ABC's programs are available online, it has measured file-sharing at just 4% of overall views. Preempting the file-sharing alternative is big win for preserving its ad model.

Cord-cutting not happening, cable's subscription value proposition to grow - "Cord-cutting" or dropping your cable/satellite/telco service in favor of online-only viewing, has become part of the market's mythology. Even some cable CEOs have propagated it. Yet Karin echoed recent Comcast statements that cord-cutting is not yet happening in any significant way. Comcast (and others) will build more value into the subscription by offering online access to cable programming. That's a "natural extension to their business," which was a key theme I heard from all panelists. Cable networks should be excited about this plan, and Greg reminded us there's a strong "culture of collaboration" in the cable industry.

2009 will be a tough year for standalone aggregators - There was strong consensus on the panel that online-only aggregators will struggle in '09 (this was one of my year-end predictions as well). The reasons for this included not getting a big enough share of the ad pie, not having an existing business to grow from, not being able to differentiate, etc. This was a very hot space for investors just a year ago, now it looks like it's going cold.

The "democratization of video" only goes so far - The panel cautioned that the appeal of broadband's openness allowing everyone to be video producer and reach their audiences only goes so far. The realities are that it's difficult to build audience and generate ad dollars. A goal for many independent broadband producers will still be to get on TV, where most consumption happens. A side conversation I had with someone who's very involved with various indies confirmed much of this and predicted a shakeout in this space will be coming as well.

Broadband ad model has a lot of maturing to do - While the broadband ad model has come a long way, it has a lot further to go. Daina provided lots of insights on the challenges of shifting TV ad dollars to broadband. She noted that many agencies still split their online and TV media buying and research teams, making integrated pitches and pricing difficult. Greg described the "happy place" everyone is striving for where broadband ad revenues become large enough to really augment traditional ad revenues, but quickly reminded us that day is a long ways off. He and Albert agreed there needs to be more collaboration among content providers to demonstrate the value of the broadband medium.

There was lots more, but I'll leave it at this for now. If you attended and have other observations, please leave a comment!

NBCU CEO Jeff Zucker provided the opening keynote interview at the Media Summit in NYC this morning with Businessweek Executive Editor Ellen Pollock. I've seen him speak a number of times and true to form he was pragmatic, quite candid and humorous. Highlights below:

"We're at digital dimes now" - Zucker of course famously worried aloud about the risk of "exchanging analog dollars for digital pennies," the notion that half-baked online delivery models would only serve to cannibalize traditional profitability. Zucker sees progress, saying Hulu is "well ahead of plan" and is yes, is now making money. Zucker repeatedly praised the success of the company's wide-ranging digital initiatives, but also noted often there is still a lot of work to do. He also wondered aloud whether digital would ever be a 1 to 1 revenue substitute for traditional revenue streams, but that further cost rationalization would help drive profitability.

"We're in process of finding new economic models" - On the above point, Zucker was candid in saying that the work to be done on new economic models is still experimental and that "a lot of success is often accidental." He readily concedes that nobody has all the answers, and that a key challenge is bridging from the traditional business models to new ones, balancing the interests of older audiences comfortable with the status quo with younger ones that are aggressively embracing the new. Describing his own kids' media activity, which focuses on Hulu, generating their own content and being interactive must give Zucker ample perspective.

"Technology is unbelievably exciting" - Zucker has always emphasized the importance of technology on NBCU's various businesses and today was no exception. He noted that technology is increasing access to TV programs and movies in unprecedented ways, which is a good thing. However he also candidly observed that it has fundamentally changed the broadcast business, primarily through consumers' use of DVRs and online delivery. All of that, plus NBC's lagging primetime performance, has caused it to completely re-think the broadcast model. He observed that newspapers' current woes can be traced to them not being willing to quetion the fundamentals of their model and the role of technology. Like other video providers, he seems determined to confront realities and avoid repeating this mistake.

"NBCU is first and foremost a cable programming company" - Zucker has often highlighted the benefits of the two revenue stream cable programming model (affiliate fees and advertising), but this was the first time I've heard him so clearly position the company as being mainly in the cable business. NBCU's stable of channels, USA, SciFi, Oxygen, MSNBC, Bravo, etc. contributed 60% of NBCU's operating profit last year. The networks' ability to "outperform the market, especially in women's programming and news" is key to NBCU's overall success. Zucker noted that USA is increasingly a "must buy" for advertisers, and with its mass appeal, should justifiably be considered the 5th broadcast network.

"We're hopeful we'll resolve TV.com-Hulu issues soon" - Zucker only briefly touched on Hulu's recent decision to pull its programming from TV.com, which is fast emerging as a Hulu competitor. As has been previously reported, Hulu's attorneys obviously believe TV.com compromised its Hulu distribution agreement as part of its new configuration subsequent to CBS's acquisition of CNET. With a battle looming between aggregators especially in the down economy, I think it remains to be seen whether a settlement can be found.

Over 250 people came out last night for VideoNuze's Broadband Video Leadership Evening in NYC, with a great cross-section of media and technology companies in attendance. For me it was great to actually meet people in person who I've only known from email and phone exchanges.

A highlight of the evening was our panel discussion with Albert Cheng (Disney-ABC Television), Daina Middleton (Moxie Interactive/Publicis Groupe), Greg Clayman (MTV Networks), Karin Gilford (Comcast) and Dan Beldy (Steamboat Ventures) sitting in for John Edwards.

The panel covered a lot of ground including how broadcast networks are trying to achieve economic parity for online viewing vs. on-air viewing of their programs, if/how/when more cable networks' programming will find its way online, what changes must occur for advertisers to shift more of their spending to broadband video, why it's hard and getting harder for independent video producers to succeed online and why '09 is going to bring a shakeout to video aggregators.

Today I'm at the Media Summit (waiting now for the Jeff Zucker keynote interview), so I'll hold off until later summarizing my conclusions from the panel. I also have plenty of pictures, and we'll try to get the video posted shortly as well.

I'm looking forward to seeing many of you tonight at VideoNuze's Broadband Video Leadership Evening at the Hudson Theater in NYC.

We'll kickoff at 6pm with our "VideoSchmooze" networking reception, and then at 7:30pm we'll begin our panel discussion with Albert Cheng (Disney-ABC Television), Daina Middleton (Moxie Interactive/Publicis Groupe), Greg Clayman (MTV Networks), John Edwards (Move Networks) and Karin Gilford (Comcast) and me moderating.

The session is titled "Broadband Video '09: Building the Road to Profitability" and we have tons of topics to discuss. I'm looking forward to hearing all of the panelists weigh in with their insights and experience. There will be ample time for audience Q&A as well.

If you're planning to attend, I encourage you to come early, as there are over 290 people now registered, and it's going to be a bit chaotic. For those of you unable to come, we'll be recording the entire event and will post the video as soon as possible. I'll also try to share some key takeaways and pictures in tomorrow's VideoNuze email.