VideoNuze Posts

Last week a publicly-traded communications-equipment company invited me to speak to a group of investment analysts it had assembled for its annual "investor day." In the Q&A session following my presentation I took a question that I'm not often asked, nor do I give much thought to: "10 years from now, who will be the video industry's winners and losers?"

It's a far-reaching question that doesn't lend itself well to an impromptu answer. Also, while it's great fun to prognosticate about the long run, I've found that it's also a complete crapshoot, which is why my focus is much shorter-term. I've long-believed there are just too many variables in play to predict with any sort of certainty what might unfold 10 years into the future.

Still, as I've thought more about the question, it seems to me that there are at least 5 main factors that will influence the video industry's winners and losers over the next 10 years:

1. Penetration rate of broadband-connected TVs -There's a lot of energy being directed to "convergence" technologies and devices which connect broadband to the TV. Broadband to the TV is a big opportunity for video providers outside the traditional video distribution value chain. It's also a minefield for those who have dominated the traditional model, such as broadcasters. The Hulu-Boxee spat demonstrates this. A high rate of adoption of broadband to the TV technologies will result in more openness and choice for consumers. That's a good or a bad thing depending on where you currently sit.

3. How well the broadcast industry adapts to broadband delivery - The broadcast TV industry generates about $70 billion of ad revenue annually. But both broadcast networks and local stations are on the front lines of broadband's change and disruption, putting a chunk of that ad revenue up for grabs. With broadband-to-the-TV coming, broadcast networks must figure out how to make broadband-only viewership of their programs profitable on a stand-alone basis (i.e. when the online viewing is the sole viewing proposition). Local stations face bigger challenges. As the Internet was to newspapers, broadband delivery is to local stations. They face a slew of new competitors for ad dollars and audiences, while losing their exclusive access to network programming. To what extent they're able to reinvent themselves will determine how much share they hold on to and how much others peel off.

4. How aggressively today's video providers (cable/telco/satellite) and new paid aggregators pursue broadband video delivery - While anecdotes about "cord-cutting" will no doubt only intensify, the reality is that if today's video providers adapt themselves to broadband realities, they are likely to be as strong or stronger 10 years from now. The recent moves from Comcast and Time Warner are encouraging signs that the cable industry gets that being ostriches about the importance of broadband delivery is a road to nowhere. Consumers expect more flexibility and value; incumbents are in a tremendous position to deliver. Ownership of local broadband access networks that serve consumers' unquenchable bandwidth demands is going to be a very good business to be in. That all said, new paid aggregators like Netflix, Amazon and Apple could well steal some share if they aggressively beef up their content, offer a competitive user experience and deliver a better value. They could have a major impact on online movie distribution in particular.

5. The level of investment in startups - The venture capital industry, crucial to the funding of early-stage innovative technology companies, is going through its own turmoil. The industry's limited partners have been wounded by the market's drop, causing VCs to raise smaller funds (if they're even able to do this), limit the number of investments they make, and shy away from betting on big transformational startups. Plenty of strong video technology companies are still successfully raising money, but it's harder than ever. Lots of potentially promising ideas are going begging. The length and severity of the economic slowdown will have a big effect on just how much funding new technologies that can potentially reshape the video landscape over the next 10 years.

So there are 5 factors to consider in how the video landscape shapes up over the next 10 years. Now back to the here and now..

What's your crystal ball say? Post a comment now.

Adap.tv is announcing its upgraded OneSource 2.0 ad management platform this morning. The Adap team explained to me on Friday what's new in this release.

OneSource 2.0 builds on the product's initial vision of improving ad optimization while reducing complexity. Adap noted that the main pain point that its customers are expressing especially given the weak economy, is the need to spend more time focused on selling ads and less time on operationalizing the ad relationships. The need to improve their ROIs through both higher ad rates and higher fill rates is driving them to source ads from multiple sources and to want to refine those sources to find the optimal mix. All of this increases implementation and reporting complexity.

OneSource 2.0's new features are meant to address these issues. The video provider can now accept ad tags from virtually any source, and do so more efficiently. In addition, through a management dashboard, the provider's ad ops manager can specify and adjust the fill order for the ad sources on a per ad basis. That means that for a specific piece of content there can be one queue for pre-rolls and another for overlays or for two pieces of content there can be two different pre-roll queues, and so on.

By sequencing multiple sources, OneSource creates a failover system so that an ad is likely always served, thereby increasing fill rates. Adap pointed to one provider who has been able to increase their fill rate from 20% to 70%.

In addition, OneSource 2.0 allows reporting by revenue source, video positions and geographic regions, which, at least in the demo screens that I saw, looked quite powerful. The ad ops manager can track performance on a daily basis and re-order sources accordingly. Lastly, there are enhanced tools for managing ads when content is syndicated, along with performance reporting.

I continue to see OneSource in a competitive set with Tremor Media's Acudeo ad management system, and also to some extent with Panache and FreeWheel. All of these systems are, in one way or another trying to improve video content providers' monetization and/or syndication efforts. Adap notes that by not also operating an ad network, it can be more agnostic about ad sources and solely focused on its technology. It now has 300+ publishers on board, helping monetize "high 100s of millions" of impressions per month, which it said is a 10x increase from OneSource's launch in May '08.

What do you think? Post a comment now.

Summary:

What: Major cable operators Comcast and Time Warner intend to offer broadband access to cable programs for the first time, but they have provided few specifics to date, thereby creating a swirl of confusing interpretations. This post seeks to clarify their plans.

Important for whom: Cable networks, other content providers, cable operators, consumers

Potential benefits: Flexible access and first-time online availability of popular cable programs.

Background

Since the WSJ reported two weeks ago today that Comcast and Time Warner Cable plan to offer online access to cable TV programming to their subscribers, there has been a significant amount of confusion and misinterpretation about what these companies are actually planning to do. Absent official statements from either company, there has been an ongoing debate about whether cable operators, who want to defend their traditional model, were moving to choke off the largely open access to broadband video that users have grown accustomed to.

Things got more confusing this past Monday when AdAge ran an interview ("TV Everywhere -- As Long As You Pay For It") with Jeff Bewkes, CEO of Time Warner Inc. in which he elaborated on a company initiative dubbed "TV Everywhere" that major cable network owners such as Time Warner Inc. Viacom, NBCU, Discovery and others are said to be collaborating on. Bewkes outlined a broad online vision including the idea that cable programming could also be available on sites like Hulu, MySpace, Yahoo and YouTube as well, provided that users were paying a fee to some underlying service provider (cable/satellite/telco).

The NYTimes' technology reporter Saul Hansell then picked up on the interview and wrote a piece on the paper's widely-read "Bits" blog entitled "Time Warner Goes Over the Top," which provocatively began, "Just as soon as Time Warner has divested itself from the cable business, Jeff Bewkes, its chief executive, is preparing to stab the cable industry in the back. That's what I read in an interview with Mr. Bewkes in Advertising Age..."

Saul went on to describe his interpretation of one particular Bewkes comment as implying that Time Warner Inc. would offer its networks directly to consumers (or "over the top" of cable operators), thereby setting off a domino effect in which others' networks did the same, all of which would ultimately lead to the destruction of the cable industry business model.

The attention all of this received, particularly in the blogosphere, prompted a fair number of people to contact me and ask what's really going on here.

Time Warner's Plans

Yesterday I spoke with Keith Cocozza, TWI's spokesman, who said that Bewkes's comments do represent both TWI and TWC. Their mutual vision is to have cable programming offered not just at TWC's RoadRunner portal, but also at various third-party aggregators (Hulu, etc.) so long as they subscribe to any multichannel video service (whether from TWC, Verizon, DirectTV, etc.). They do envision offering a streaming-only service for those that don't want the traditional cable subscription, but it would only be available in their geographical footprint. All of that means that there's in fact no over-the-top threat involved here at all. TWI and TWC are "agnostic" about third-party aggregator access to the cable programs, because they recognize that people want to go to whatever sites make them most comfortable. And they do not plan to charge subscribers extra for online access.

From a consumer standpoint, all of this is quite enlightened. But from an operational standpoint, it feels incredibly complex. For example, I asked Keith about how a remote user, seeking to watch programs at a third party aggregator's site like Hulu, would be authenticated as an actual customer of a video service provider? While acknowledging it's too early to have all the answers, he said a test TWC has conducted in Wisconsin with HBO has shown this not to be a big technical problem. I don't agree. It's hard enough for companies to do a bilateral account integration (e.g. tying a user's Amazon account to a user's TiVo account); the idea of doing multilateral account integration (the numerous combinations of potential aggregators and service providers) is fraught with complexity and seems highly daunting.

Then there are financial issues to address. With no incremental subscriber payments, online program delivery needs to be sustained through ads alone. This would be quite workable if it were just cable operators and networks involved (they could split the ad avails proportionately as they've traditionally done with linear delivery), but by allowing third-party aggregators in too, a third mouth now needs to be fed. That will trigger a whole new negotiating dynamic, as each aggregator lobbies for a different share. And it's questionable whether there's even enough ad revenue for three parties to begin with, though Keith believes there is.

Comcast's Plans

Conversely, Kate Noel, Comcast's spokeswoman, told me yesterday that while it's still early to say anything definitive about Comcast's plans for distribution through third-party aggregators, their first priority is distribution of cable programs on their own sites (e.g. Fancast, Comcast.net) and the networks' own sites. Comcast seems to have more of a "walk, before you run" approach. It recognizes that protecting subscribers' privacy in any account integration is crucial so it plans to proceed carefully. I tried to pin Kate down on whether Comcast intends to charge for online access. Again she felt it was too early to be definitive, but it sounds like they're leaning toward a no-charge model as well. The timeline is to begin rolling out access in the 2nd half of '09.

Clearly there are a lot of moving pieces involved with these companies' plans. In general Time Warner has a more aggressive, yet I believe far less pragmatic, plan. They're trying to get all the way to the end zone right away, when just advancing the ball further downfield would be real progress for today's broadband users seeking improved access to premium content. Time Warner's "TV Everywhere" seems like a great vision, but it would take years to fully implement. Comcast's plan is probably achievable in a year or less. Either way, major cable operators finally seem to have the ball rolling toward broadband distribution of cable programming. As I pointed out last week, this can only be viewed as a positive.

What do you think? Post a comment now.

(btw, if you want to learn more about all this, come to the Broadband Video Leadership Evening on March 17th in NYC, where we'll dig deeply into these issues with our top-notch panel)

Below is the 9th edition of the VideoNuze Report podcast, for March 6, 2009.

This week Daisy Whitney and I discuss Daisy's 2 articles on the real or imagined phenomenon of "cord-cutting" where subscribers to multichannel video services drop them in favor of broadband access. Daisy's articles are here and here.

Also, Will provides some more insight on his post "Inside Demand Media's Content Factory" profiling the most prolific producer of broadband video.

Here's a question: without checking, who do you think is the largest supplier of videos to YouTube, by a factor of almost 10? If you said Demand Media, which has over 150K individual videos on YouTube that have generated a total of 442 million views to date, you'd be right. Most of the videos are supplied by Demand Media's knowledge-based Expert Village site, and are produced by Demand Studios, the company's content production arm. (For the record, CBS is a distant second supplier to YouTube with almost 16K videos and approximately 327 million total views.)

I learned this and a lot more in a recent and incredibly interesting discussion I had with Steven Kydd, EVP of Demand Studios. In case you've never heard of Demand Media, it's the latest act of former Intermix CEO and MySpace chairman Richard Rosenblatt (who conceived it as a "thinking person's MySpace" as Steven put it). Since its inception in 2006, the company has raised $355 million, made a string of acquisitions and dramatically built up traffic at its portfolio of web sites.

Most interesting for me though, is how Demand Studios has become a veritable "content factory" (my term), churning out 150K individual videos and 350K articles in 2 1/2 years. How it's done that, and better still, how it is monetizing this mountain of content, is the best example I've seen yet of how to effectively build scale at the intersection of social media, search and broadband video.

At the core of Demand Studios is a network of 10,000 freelance content creators that have passed through a rigorous screening process. Specific content is green-lighted through Demand's analysis of internal data. The potential value of a given piece of content is measured by internal algorithms estimating audience interest, advertiser interest and ability to generate traffic.

Once Demand has decided to produce a piece of content its editors tap into specific producers based on a match of their expertise. The producer follows Demand's guidelines, such as shooting exclusively in HD. But in general, the producer has a relatively free creative hand. If for example, the video involves children's nutrition, the producer can call upon a local health expert to appear (which as Steven notes, experts are often happy to do because the videos help raise their own profiles). Once the video is complete, it is edited for quality and has SEO-optimized metadata created and added.

This process is now refined to the point that 1,000 pieces of content are being created per day (30% video, 70% text), with plans to scale even further. Steven said Demand has paid out over $12M to its producers to date. Each producer's content is tracked over time to see how well it performs and is also peer-rated, allowing the cream of the producer network to rise to the top.

Once complete the content is posted on Demand's sites (e.g. Expert Village, eHow, LiveStrong.com, GolfLink, Trails.com, etc.) and in the case of video, on YouTube as well. As Steven notes, since YouTube has now surpassed Yahoo to be the 2nd largest search site, Demand's knowledge-based videos are a perfect fit for how many people increasingly use YouTube.

The two companies have developed a mutually beneficial relationship. YouTube now drives the majority of Demand's video traffic, and Steven says it is being monetized well through AdSense, overlays and companion ads. Conversely, with Demand now generating 2 million YouTube views per day, it has become an important supplier of quality video to YouTube, helping it bolster its value beyond its UGC roots and build its revenues. As well, YouTube has become a testing ground for new Demand sites, such as a Spanish language version of Expert Village.

Syndication beyond YouTube is a key part of Demand's ongoing success. Through its acquisition of Pluck, a white-label social media platform used by many media brands like USAToday.com, NPR, McGraw-Hill and others, Demand now has an opportunity to also syndicate its content to these publishers, who are increasingly resource-constrained and in need of high-quality third-party suppliers. In short, while Demand's "content factory" has already become a major supplier to YouTube, the world's largest video portal, it is now poised to do the same for lots of other sites as well, further growing its traffic.

There's no question that Demand's strict focus on knowledge-based, Long Tail videos has enabled it to create a unique formula that works well at the intersection of social media, search and broadband video. It's doubtful that all of this could be fully replicated in more creative genres like entertainment. Yet there are elements of Demand's content factory, such as leveraging YouTube's audience base, consistently creating high-quality metadata for SEO and applying rigorous criteria to what content gets produced, that are applicable to all video providers. Given Demand's ambitious plans, I suspect their factory will continue to evolve, providing still further lessons for how to create and monetize content in the broadband era.

What do you think? Post a comment now.

(Note: Steven Kydd will be on a panel I'm moderating at the NABShow on Wed, April 22nd, "How Syndication is Powering the Broadband Video Era." VideoNuze readers can register for complimentary access by using code X104)

We're less than 2 weeks away from VideoNuze's Broadband Video Leadership Evening, on Tuesday, March 17th in New York City. There are over 170 people registered and the event will be an outstanding opportunity to meet industry colleagues and hear from top-tier digital media executives on the front lines of the video revolution.

Lots of great media and technology companies will have people in attendance, including: A&E Television Networks, Atlas Media, Avail Media, Carat, Cisco, Comcast, Conde Nast, Fox, FreeWheel, HBO, Metacafe, NBCU, Ooyala, Panache, Rainbow Networks, Readers Digest, Showtime, Swarmcast, WorldNow, Yahoo and many others. We also have a strong contingent of media coming to cover the event.

We'll start with a "VideoSchmooze" cocktail/networking reception from 6pm - 7:30pm, followed by a panel discussion I'll moderate from 7:30pm - 9pm titled, "Broadband Video '09: Building the Road to Profitability." The panel includes:

• Albert Cheng, EVP, Digital Media, Disney/ABC Television Group
• Greg Clayman, EVP, Digital Distribution & Business Development, MTV Networks
• John Edwards, President and CEO, Move Networks
• Karin Gilford, SVP, Fancast and Online Entertainment, Comcast Interactive Media
• Daina Middleton, SVP, Moxie Interactive, Publicis Groupe

Click here to learn more and register now!

The event will be held at the magnificent Hudson Theater on West 44th Street just off Times Square. NATPE, VideoNuze's partner since launch, is on board for the event. And I'm extremely grateful to lead sponsor Move Networks and supporting sponsors AnySource Media, ExtendMedia, Horn Group, mPoint and PermissionTV who are making the evening possible.

I've set up a Facebook group so you can start meeting other attendees and also keep up to date on all the recent broadband news we'll discuss on the panel. I also created a short video with key highlights of the evening (thanks to PermissionTV for production assistance).

Click here to learn more and register now!

Hearst-Argyle Television will use KickApps' social media/video platform to power its stations' new "u local" initiative according to an announcement this morning.

Hearst-Argyle's goal is to allow local residents to discuss news topics important to their community and to upload their own photos and videos. The first u local area was launched in Dec '08 by WMUR in Manchester, New Hampshire and according to Hearst-Argyle generated tens of thousands of submissions in the first week alone. The other stations in Hearst-Argyle's portfolio will roll out u local in the coming months. For KickApps, the deal follows one with WorldNow, announced last year to drive social media into WorldNow-powered sites.

The question begs: can a local TV station become a social media hub for its local residents? In the Facebook-MySpace-Twitter-YouTube age, we seem to be on the cusp of social media saturation. Yet despite all these engagement opportunities, focused local social media initiatives could well find a place. People are extremely passionate about their local communities and the social bonds are very tight. Sharing common experiences, concerns and passions online with local neighbors seems like an updated version of what's been happening over backyard fences since the beginning of time.

The key is execution, not just in the user experience, but in the positioning of what the local broadcaster's brand will stand for. Striving to be a social media hub is a new positioning, and to incent viewer behavior, Hearst-Argyle will need to embrace the capability, heavily promote it and then manage it so it's a safe, well-lit area of its sites.

What do you think? Post a comment now.

Summary:

What: Clearleap has introduced a new technology platform for distributing broadband video content directly to TVs and an accompanying ad management system.

For whom: Incumbent service providers (cable/telco) and new over-the-top entrants (device makers, aggregators, etc.), content providers and advertisers

Benefits: For service providers, a flexible, cost-effective system for offering broadband content to their subscribers with minimal technology integration; for content providers a scalable system for distributing content across multiple providers and platforms; for advertisers a new method of targeting on-demand audiences.

More innovation is coming to the ongoing quest to bring broadband content to TVs as Clearleap, an Atlanta-based startup, pulled back the curtain yesterday on its ambitious technology platform. Last fall, CEO/founder Braxton Jarratt gave me a glimpse into what the company was working on and yesterday he explained it more fully.

Clearleap aims to do multiple things with its "clear|flow" and "clear|profit" products. For incumbent video service providers (cable and telco operators) and new "over-the-top" entrants (device makers, aggregators, etc.), Clearleap enables delivery of broadband and other video to the TV including integrating with existing Video-on-Demand infrastructure when present; for content providers, it improves the process of distributing of content across multiple providers and platforms; and for both service providers and content providers it offers an ad management solution that allows flexible ad insertion and business rules for ads running with Clearleap-delivered video.

That's a mouthful, so to break it down a bit, here's my interpretation. First the delivery side. Obviously there's been a lot of discussion, particularly just since CES in January, of new entrants delivering broadband content to TVs, thereby presenting potential alternatives for consumers to "cut the cord" on existing cable and telco providers. One way for incumbent to combat this is for them to offer the best of the web (like TiVo has been doing with TiVoCast for a while now) in one seamless package delivered through the existing set-top box.

To date incumbents haven't pursued this strategy much though. Braxton attributes this intransigence to lack of adequate technology, than to lack of interest. Braxton says Clearleap has a couple of small deployments active and other announcements pending. The key to success is allowing the incumbents to control the process of what content they acquire and to present it in context with other VOD offerings. clear|flow ingests video from content partners into Clearleap's data centers, transcodes it and properly formats it for target devices, adds metadata and business rules and then enables service providers to subscribe to whatever content they want. The video is either served from Clearleap's data centers or pushed to an incumbent's own hosting facility.

On the other side of the coin, another goal of clear|flow is to become the glue that allows content providers who want to distribute across all these emerging platforms to do so with minimal work. Just upload your content, specify business rules and the service providers take it from there. Of course, there's a "chicken and egg" challenge here that content providers will only take an interest when there's sufficient distribution. Braxton recognizes this issue as well and said they've been encouraged by the willingness of certain "friendlies" to get involved, which he hopes will provide validation for others to come on board soon.

Last, but not least, clear|profit allows ad avails to be created and properly divided between the content providers and service providers according to specified rules. Ad management and insertion has of course been the Achilles heel for existing VOD systems, rendering today's VOD a largely revenue-free pursuit for most service providers. Cost-effectively solving the ad insertion process for VOD alone would be a major win.