VideoNuze Posts

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Yesterday Nielsen released the Q4 version of its A2/M2 Three Screen Report, which measures video usage across TV, online and mobile. The report is here, and Nielsen does a nice job of summarizing some of the key numbers and trends. In particular, for those concerned about traditional TV's potential demise, the new data should provide some comfort. Nielsen reports that TV viewership was at a record 151 hours per month per average viewer in Q4, up from 140 hours in Q3 (a jump that Nielsen doesn't explain, but which I can only ascribe to the growing ranks of the unemployed spending more time in front of the tube).

I looked at the data Nielsen released and there are additional key insights that I think are worth noting. I always find it most useful to focus on the changes in younger people's consumption habits. That's because younger people are generally more comfortable with technology and what they do today is often a leading indicator of what older cohorts will be doing tomorrow. For marketers in particular, younger people's behavior is crucial because it reveals the preferences of a greater and greater share of would-be buyers in the years to come.

With that context, I was interested in the consumption of three newer forms of video Nielsen is measuring (timeshifted/DVR-based video, Online video and Mobile video) as a ratio of traditional TV consumption. While not exact, I believe these respective ratios give us a glimpse into the emerging viewing preferences by age group, and what trends may lie ahead. When looked at this way, I found three interesting things.

First, the ratio of mobile video consumed to traditional TV consumed for the 12-17 age group is off the charts compared to all other age groups. For those in this age group that watch mobile video, they watch about 6:38 hours/minutes per month, compared to their average of 103.48 hours/minutes of traditional TV per month. That ratio of 6.2% far outpaces all other age groups; the next nearest one is 25-34 year olds which watch 2.4%. The youngest are clearly embracing mobile video and will no doubt expect more out-of-home options and value as they mature.

Second, the ratio of online video consumed to traditional TV consumed for the next youngest age group, 18-34 is significantly higher than for all other age groups. 18-34 year olds watch 5:03 hours/minutes of online video per month on average, compared with just 118:28 hours/minutes of traditional TV per month on average, for a ratio of 4.3%. No other age group exceeds a 3% ratio. Further, 18-34 years watch slightly more online video than time-shifted video. Clearly this group views online as a bona fide on-demand platform and is likely most primed for "cord-cutting." Cable operators' moves to offer programs online will likely resonate strongly.

Lastly, the ratios of timeshifted/DVR video consumed to traditional TV consumed for the 25-34 and 35-44 age groups are far higher than for all the other age groups. 25-34 year olds watch 10:50 hours/minutes of timeshifted TV per month on average, compared to 142:29 hours/minutes of traditional TV per month on average for a 7.4% ratio. For 35-44 year-olds its 9:44 hours/minutes of timeshifted compared to 147:21 hours/minutes of traditional TV for a 6.4% ratio. No other age group even reaches a ratio of 5%. Time-shifting and its ad-skipping - its frequent companion behavior - are becoming increasingly prevalent for these age groups.

On the surface the Nielsen data suggests that traditional TV consumption is quite durable even as newer viewing platforms are introduced. Yet when numbers like those above are factored in, it becomes apparent that for certain age groups, behavioral change is well underway. This is data that market participants need to pay close attention to and then plan accordingly.

What do you think? Post a comment now.

Here's a short video overview of the March 17th Broadband Video Leadership Evening (thanks to Permission TV for producing). Note that I misspoke and that the price for an individual ticket is actually $60. More information and registration is at http://www.nyc.videonuze.com/. Look forward to seeing you there!

An article in Friday's WSJ "Cable Firms Look to Offer TV Programs Online" outlined a plan under which Comcast and Time Warner Cable, the nation's 2 largest cable operators, would give just their subscribers online access to cable networks' programming.

A Comcast spokesperson contacted me later Friday morning to explain that the plan, dubbed "OnDemand Online" is indeed in the works, though a release timeline is not yet set. The move is part of the company's "Project Infinity" a wide-ranging on-demand programming vision that was unveiled at CES '08, but oddly has not been messaged much since. Meanwhile, thePlatform, Comcast's broadband video management/publishing subsidiary also called me on Friday to confirm that - unsurprisingly - it would be powering the OnDemand Online initiative (thePlatform's CEO Ian Blaine explains more in this post).

The idea of cable operators setting up online walled gardens for their subscribers alone was first signaled by Peter Stern, Time Warner's EVP/Chief Strategy Officer on the panel I moderated at VideoNuze's Broadband Leadership Breakfast last November. As I wrote subsequently in "The Cable Industry Closes Ranks" my takeaway from his and other cable executives' recent comments was that the industry was poised to collaborate in order to defend cable's traditional - and highly profitable - business model. Under that model, cable operators currently pay somewhere between $20-25 billion per year in monthly "affiliate fees" to programmers whose networks are then packaged by operators into various consumer subscription tiers.

It should come as a surprise to nobody that both cable networks and operators are mightily incented to defend their model against the incursions of free "over the top" distribution alternatives. Indeed what's surprising to me is why it has taken the industry so long to act forcefully when the stakes are so high and the market's moving so fast? I mean cable operators themselves are the largest broadband Internet access providers in the country, and they have watched for years as their networks have been engorged by surging online viewing, courtesy of YouTube, Hulu, Netflix and others. While they've made some tepid moves to push programming online (though to be fair Comcast's Fancast portal has evolved quite a bit recently), overall their broadband video distribution activities have been underwhelming, evidence of broadband distribution's lower priority status vis-a-vis TV-based video-on-demand.

Meanwhile Friday's article triggered plenty of hackles from the blogosphere that those evil cable operators were up to their old monopolistic tricks, this time moving to control the broadband delivery market and choke off open access to premium video. While it's indeed tempting to see these plans that way, I think that would be the wrong conclusion.

Rather, I look at the Comcast/TWC moves as both welcome and likely to spur more, not less, consumer access to broadband-delivered programming. That's because, if the cable networks are smart in their negotiations, they will gain from operators the approval to push more of their programs onto both their own web sites, and even to distribute some through others' sites. With net neutrality agitators hopeful in the wake of Barack Obama's election, Comcast and TWC need to tread carefully in these negotiations. Yet another part of the model I foresee is archived programs, which have been locked up in vaults due to programmers' concerns over operator reprisals if they leaked out online, becoming much more openly accessible.

The Comcast/TWC hecklers need to remember one simple fact: to make quality programming requires solid business models. And in this economic climate, solid business models are far and few between. Despite having lost a total of over 500,000 video subscribers during the last 6 consecutive quarters, Comcast still owns one of those few sold models. And don't forget it is now investing to increase its broadband speeds, pledging 30 million, or 65% of its homes, will have 50 Mbps access by the end of '09 (a rollout which incidentally is all privately financed, without a dime of federal bailout money or other assistance).

Someday, when broadband video business models mature (as indeed they ultimately will), there will be lots of cable and other programming available for free online. For now though, getting Comcast and TWC to finally pursue an aggressive broadband distribution path is a welcome evolutionary step in unlocking this exciting new medium's ultimate potential.

What do you think? Post a comment now.

(Note: we'll be diving deep into this topic, and others, at VideoNuze's Broadband Video Leadership Evening on March 17th in NYC. More information and registration is here.)

This week's drama between Hulu and Boxee shines the strongest light yet on all of the disruptive forces broadband-delivered video has unleashed: the fight for how video content will reach your living room in the broadband era, and who exactly will control the process. It is a litmus test for major networks in how they intend to transition from the orderly and closed traditional distribution world to the new, open and messy one.

For those who haven't been paying close attention, this week Hulu's CEO Jason Kilar announced in a blog post that its content would no longer be available to users of Boxee, which is an open source media player that connects broadband delivered content to the TV with a friendly and social interface. Boxee has quickly become a darling of the early adopter and techie set (it's still in "Alpha" release, and only runs on Mac OSX and Ubuntu Linux).

Despite not having a formal agreement from Hulu, several months ago Boxee was able to extend its product to enable Hulu viewing. Hulu promptly became Boxee's #1 content source, and according to Boxee's CEO Avner Ronen, it was recently generating 100K streams per week (note that this amount is still chicken feed relative to Hulu's 240 million monthly streams). Boxee doesn't interrupt Hulu's business model; Hulu's content and ads are shown in their entirety. One would have thought the calculation for Hulu and its owners would be pretty simple: more streams = more ads = more success.

Yesterday I checked in with senior executives around the industry to see what's going on here. The picture that emerges is one of big media companies trying to reassert their control over how users access their content. In his blog post, Kilar says "our content providers requested that we turn off access to our content via the Boxee product, and we are respecting their wishes." According to everyone I spoke to, the unnamed content providers can only be Hulu's two owners, NBC and Fox.

Embracing broadband delivery by backing Hulu was progressive thinking by NBC and Fox. And as long as its skyrocketing usage was perceived as a net positive for on-air distribution (research has shown no cannibalization, higher sampling, more awareness, etc.) and its usage was mainly computer-based, all was fine.

But what Boxee did was extend the Hulu experience to sanctified ground: the TV itself. And that opened a real can of worms for the networks. Are they aiding and abetting "over the top" user behavior which could lead to "cord-cutting," in turn jeopardizing their highly profitable cable operator relationships? Are they undermining their own P&L's because Hulu usage on TV will cannibalize on-air delivery which carries higher revenues/viewer? Are they setting a dangerous precedent that any scruffy startup can distribute their prized programming without a formal relationship? And so on. These questions were too significant and Boxee's implications too profound to go unchecked. So Hulu's owners snapped its leash.

There's just one problem here: what's the impact of the decision on Hulu's users and by extension, the Hulu franchise? A quick perusal of the comments to Kilar's post says it all: people are ballistic and they are deeply confused. They don't get the arbitrary logic of why it's ok to watch Hulu in lots of other ways, but just not through Boxee. And they raise the nightmare scenario that this decision will only serve to fuel piracy, an outcome networks were expected to avoid given the devastating Napster precedent their music industry brethren experienced.

One can only imagine the anguish being felt by Kilar and the Hulu team. Having sweated every detail to create the best video experience out there, it is now watching that goodwill evaporate due to its owners' squeamishness. Better yet, one wonders what the folks at Providence Equity Partners, which invested $100 million in Hulu at a $1 billion valuation, are thinking? Did they sign up at this stratospheric valuation only to see NBC and Fox circumscribe Hulu's reach?

I've been saying for a while now that broadband's openness makes it the single greatest disruptive influence on the traditional video distribution value chain. The Hulu-Boxee situation illustrates this perfectly. Once content providers embrace broadband they inherently give up some of their traditional control. And there's no going back; once the proverbial genie is out of the bottle, it can't be put back in. Hulu, NBC and Fox are learning this first hand. With everyone now watching for their next move, I'm betting a change of heart is forthcoming. Hulu will be back on Boxee in one form or another soon enough. Resistance is futile.

What do you think? Post a comment now.

(Note: Hulu-Boxee is going to be outstanding grist for the Mar 17th Broadband Leadership Evening's panel discussion. Early bird discounted tickets are available through the end of today)

Below is the 7th edition of the VideoNuze Report podcast, for Feb. 20, 2009.

This week Daisy Whitney discusses two recent articles she wrote about the profitability of various broadband video providers and what to expect in 2009. The articles are here and here.

Meanwhile, I provide more insight into the comScore video traffic numbers I compiled for the Jan '07 - Dec '08 period, including further analysis of YouTube's dominance of the market.

Click here for previous podcasts

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

A reminder that early bird discount tickets will expire tomorrow for VideoNuze's next event, the Broadband Video Leadership Evening, on Tuesday, March 17th in New York City. The event will be a premier opportunity to meet industry colleagues and learn from top-tier digital media executives on the front lines of the video revolution.

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
• Curt Hecht, President, VivaKi (Publicis Groupe)

Click here to learn more and register for the early bird discount

The event will be held at the Hudson Theater on West 44th Street just off Times Square. I'm pleased to have NATPE, VideoNuze's partner since launch, on board for the event. And I'm extremely grateful to lead sponsor Move Networks and supporting sponsors 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.

Note this event is on the evening before the start of the McGraw-Hill Media Summit in NYC; if you're coming into town for that, plan accordingly to join us as well!

Click here to learn more and register for the early bird discount

Tremor Media announced this morning that it has raised a Series C round of $18 million, led by Meritech Capital Partners, with participation from existing investors Canaan Partners, Masthead Venture Partners and European Founders Fund. Tremor has now raised nearly $40 million to date. Tremor's CEO Jason Glickman gave me a short update on the company yesterday and a little more background on the financing.

Tremor believes it is now the largest video ad network, with 1,400 publishing partners aggregating 137 million unique visitors per month. Tremor focuses exclusively on premium video (i.e. non user-generated) and Jason said the company has access to 1 billion "advertisable impressions" per month. According to Jason, this critical mass has been a big source of the company's recent success as it has been able to appeal to advertisers by segmenting its network to target certain types of users.

Jason explained that as Tremor has grown and usage of broadband video has surged, the company has increased its efforts to shift traditional TV ad dollars over. Though it's hard to know exactly what budgets ad dollars were originally earmarked for, based on the size of the RFPs Tremor's responding to, Jason thinks this shift is indeed underway. And as he correctly points out, you don't need a lot of the $70 billion that's spent on TV annually to move over to make a big impact in broadband advertising. To help compete more effectively with TV, Tremor also recently announced that it would use comScore's Post Buy and Ad Effectiveness reports to offer GRP (gross ratings points) campaign metrics.

While acknowledging the economic downturn has created new challenges, Jason said the company has met or beat all of its metrics, is still on track for profitability in '09 and had multiple financing offers. Meritech's media and advertising experience in other portfolio companies (e.g. Facebook, Quigo, Revenue Science, etc.) was a real draw. The funding will be used to build its network, enhance its Acudeo monetization platform and continue international expansion.

There's no denying the economic pain being felt these days, but Tremor's ability to raise, coupled with other market leaders' ability to do so, is solid evidence that the broadband video market is a rare bright spot in the media landscape today. I constantly remind people that the underlying fundamentals of broadband video consumption are only increasing each month. The companies that figure out how to capitalize on these trends will still be able to raise money.

What do you think? Post a comment now.

(Note: Tremor Media is a VideoNuze sponsor)