VideoNuze Posts

A short interview in Multichannel News with Rouzbeh Yassini before the Thanksgiving break last week caught my eye.

Rouzbeh's name is likely unfamiliar to many of you. But for others who have been in and around the cable and broadband industries since the '90s, he is semi-famous. In those days Rouzbeh ran a company called LANCity, which was a pioneer in designing and manufacturing cable modems. These of course are the devices that now reside in tens of millions of homes around the world, enabling broadband Internet access and the high-quality video services like YouTube, Hulu, iTunes and others that run through them.

Though it's only been about 15 years, the early-to-mid '90s seem like another age entirely. Can you remember dial-up Internet access? Busying up your phone line if you wanted to be online? Listening to all those weird tones as your creaky 56K modem connected you to Prodigy, CompuServe, AOL, or eventually this thing everyone seemed to be talking about called the "World Wide Web?"

In my opinion, Rouzbeh deserves as much credit as anyone for the transformation of the dial-up Internet era to the broadband world we now enjoy. He played a crucial role in articulating broadband's business potential to scores of senior cable executives who barely knew what a computer was, much less this new-fangled thing called the Internet. Importantly, he was a key technical architect of modern cable networks, which today barely resemble the passive, one-way networks of old.

In short, I've learned to take notice of Rouzbeh's prognostications. Though he can be irrepressibly optimistic, he's directionally right more often than not.

All of that brings me to his Multichannel interview. Rouzbeh now envisions the era of gigabit or 1,000 megabit Internet access within a decade. To put this in perspective, today's cable modems typically deliver around 10 megabit service or 1% of a gigabit. Spurred by competitive pressures, Comcast has recently announced the rollout of 50 megabit service to certain regions, with expansion to its entire footprint by 2010. These new rollouts are part of the cable industry's "DOCSIS 3.0" standards, covering a new generation of modems and channel management techniques.

There's an axiom in the broadband industry that usage always rises to the level of bandwidth provided. Yet when we're talking 1 gigabit service, one has to rightly ask, "what in the world are people going to do with all that bandwidth?" Rouzbeh posits things like corporate networking, remote offices, medical services and the like, but only touches briefly on video delivery.

From my perspective, video is the killer application that will drive this bandwidth explosion. As I wrote recently in "Video Quality Keeps Improving - What's it All Mean?" we are on the front end of a shift toward dramatically higher video quality, with near HD delivery already becoming common (Hulu, Netflix and Vudu are among the most recent to announce HD initiatives). This shift will only accelerate going forward. And to accommodate it will require lots more bandwidth from network providers.

In reality, the trickiest part of bandwidth expansion is less the technology development and deployment and more the business models that support the investments and make the most strategic sense. Questions abound: Is the right model to charge $150/mo for 50 megabit access as Comcast plans? Or to build a content service available only to those high-powered users? Or act like a CDN and provide services so as to charge content providers themselves to deliver higher-quality video? Maybe some hybrid of these, or some other model? And of course, what impact do these models have on the incumbent multichannel subscription video offering?

While there's murkiness now, like Rouzbeh, I'm a big believer that these things will ultimately be worked out and that bandwidth expansion is inevitable. Just as we now look back on the dial-up era and wonder how we got by, eventually we'll look at the mid-to-late 2000s and wonder how we survived on so little bandwidth.

What do you think? Post a comment now.

Ever wonder if I actually have a real voice, in addition to the written "voice" you read each day on VideoNuze? The answer is yes, and for proof, check out a podcast interview I did with Phil Leigh of Inside Digital Media.

I discuss some of the ideas I've written about recently in "The Cable Industry Closes Ranks" and "Cutting the Cord" such as why full online episodes from cable networks aren't coming any time soon, what devices are likely to bridge broadband-to-the-TV and how important sports are to the current TV business model.

Do podcasts add value? Should I try to do more of them? Please let me know!

Welcome to December and to the home stretch of 2008. Following are 3 key themes from VideoNuze in November:

Cable programming's online distribution narrows - Last month I concluded that cable programmers (e.g. Discovery, MTV, Lifetime) are going to become much more sparing when it comes to distributing their full programs online. As noted in "The Cable Industry Closes Ranks," after hearing from industry executives at the CTAM Summit and on the Broadband Video Leadership Breakfast, it has become apparent that the industry is going to defend its traditional multichannel video subscription model from broadband and new "over-the-top" incursions.

Both programmers and operators have a lot vested in this successful model, and are surely wise to see it last as long as possible. Subscription and affiliate fees are particularly precious in this economy, as the WSJ wrote on Saturday. Still, many VideoNuze readers pointed out the music industry's folly in trying to maintain its business model, only to see it turned upside down. Many predicted the cable industry is doomed to follow suit. Truth-be-told though, as I wrote in "Comcast: A Company Transformed," major cable operators are already far more diversified than they used to be. Broadband, phone and digital TV (+ add-ons like DVR, HD and VOD) have created huge new revenue streams. Surging broadband video consumption only helps them, even as "cord-cutting" looms down the road.

Netflix moves to first ranks of cord-cutting catalysts - Three posts in November highlighted the significant role that Netflix is poised to play in moving premium programming to broadband distribution. Most recently, in "New Xbox Experience with Netflix Watch Instantly: A 'Wow' Moment," I shared early reactions from a VideoNuze reader (echoed by many others) to receiving a subset of Netflix's catalog through Xbox's recently upgraded interface. Netflix CEO Reed Hastings highlighted the increasing importance of game devices in bridging broadband to the TV in his keynote at NewTeeVee Live this month (recapped here).

Still, Netflix lacks the rights to deliver many movies online, a problem unlikely to be rectified any time soon given Hollywood's stringent windowing approach. As such, in "Netflix Should be Aggressively Pursuing Broadcast Networks for Watch Instantly Service," I offered my $.02 of advice to the company that it should build on its recent deal with CBS to blow out its online library of network programs. In this ad-challenged environment, I believe networks would welcome the opportunity. Hit TV programs would help drive device sales, which is crucial for building WI's adoption. While the Roku box is a modest $99, other alternatives are still pricey, though becoming cheaper (the Samsung BD-P2500 Blu-ray player is down $100, now available at $300, I spotted the LG BD300 over the weekend for $245). A robust Netflix online package would be poised to draw subscribers away from today's cable model.

Lousy economy still looms large - Wherever you go, there it is: the lousy economy. Though the market staged a nice little rebound over the last 5 days, things are still fragile. Across the industry broadband companies are doing layoffs. This is only the most obvious of the side effects of the economic downturn. Another, more subtle one could be downward price pressure. As I wrote in "Deflation's Risks to the Broadband Video Ecosystem," economists are now growing concerned that the credit crunch could lead to collapsing prices and profits across the economy. I noted that such an occurrence would be particularly damaging for the broadband industry, where business models are still nascent, so ROIs and spending are softer.

Here's to hoping for some good economic news in December...

What do you think? Post a comment now.

If ever there was a year for giving thanks - and for trying to keep perspective - this is surely it. For the last several months or more, all of us have been buffeted by the economic meltdown to one extent or another. It isn't fun for anyone, and regrettably, if you believe the experts, things aren't going to turn around anytime soon.

Still, as I mentioned in last week's "Deflation's Risks to the Broadband Video's Ecosystem," for those of us who make our living focused in one way or another on broadband video, there are reasons to remain optimistic. Consumers continue to shift their behavior toward on demand, broadband-delivered alternatives. Clever entrepreneurs are introducing ever-more innovative technology-based products and services. Large pools of existing revenues are shifting around, in search of better, higher ROI ways to be allocated. And investors recognize all of this, motivating them to continue funding companies throughout the broadband ecosystem.

These are all things to be thankful for, and hopefully allow us to keep a little perspective. For those of us old enough to remember past downturns, it is also important to keep in mind that there have been difficult times in the past, and fortunately, eventually, things do correct. That doesn't relieve the current pain, but at least gives us a measure of hope for better days ahead.

Speaking of giving thanks, I want to give a shout out to the 30 companies that sponsored VideoNuze or its events in 2008. VideoNuze is just over a year old now, and I've been truly gratified by the support its received from both sponsors and the community of readers and participants.

VideoNuze is not immune from the economic meltdown, so I'd like to also mention that we're offering some great sponsorship specials going into '09. If you're interested in reaching a highly-targeted, broadband-centric group of senior decision-makers, VideoNuze is an outstanding value. I welcome your calls or emails.

Thanks to our '08 sponsors below. Happy Thanksgiving and see you on Monday.

ActiveVideo Networks, Adap.tv, Adobe, Akamai, Atlas Venture, Anystream (Grab Networks), Brightcove, ChoiceStream, Critical Media (Syndicaster), Digitalsmiths, ExtendMedia, EyeWonder, FAST Search & Transfer, Flybridge Capital Partners, Goodwin Procter, Gotuit, Jambo Media, KickApps, Kiptronic, Macrovision, Move Networks, Multicast Media, PermissionTV, Signiant, Silicon Valley Bank, thePlatform, Tremor Media, VMIX, WorldNow and Yahoo

Two weeks ago when I first glanced at the pitch email I received from ATG's PR rep it looked like a ho-hummer. However, I gave it a slightly closer read and was intrigued enough to set up a call and demo. I'm glad I did. After talking to Shari Solis, VP of ATG's Media Business and giving Video Connect a spin, I think the product could add real value to broadband video advertising. Importantly, it could really improve the business cases being presented by broadband content providers to agencies and advertisers each day.

Here's how it works: the Video Connect player presents an icon or other message inviting the viewer take action. These actions can include clicking to call, IM, email, go to web site, etc. When the user clicks, the underlying video minimizes to a corner of the player and a simple pop-up appears. If you select "call us now", you then enter your phone #. Within seconds your phone rings, and within seconds after that another voice patches in from the advertiser.

In the demo a search was done in SuperPages.com for restaurants in Washington, DC which yielded a list of options. Many displayed a video camera, denoting video information was available. I selected the video for Ruths Chris Steak House and clicked to call. In a few moments I was on the line with the restaurant, asking for my reservation. The loop from search to more information to making a reservation was completed in minutes.

The applicability of Video Connect in the local ad space is obvious. Indeed, ATG is targeting local directories and online yellow pages as its initial market. These companies are in perpetual search of ways to add more value to their local clients. And of course, in this economy, local businesses gravitate to solutions that provide an improved ROI and clearly distinguish them from their competitors (more on this in my recent post "Citysearch Offering Local Merchants Video Enhancement").

Meanwhile, I'm also intrigued by the national opportunities. For example, one of the knocks on pre-roll ads is that they're just a branding opportunity, doing little more to directly drive actual sales than traditional TV ads. I can see how integrating Video Connect (which also has a full set of APIs, so that creative teams can incorporate it seamlessly) would allow pre-roll advertisers to derive a more measurable and higher ROI than they do currently, even when these ads also include a companion banner.

A great example would be creating a distinct offer in the pre-roll to "be one of the first 1,000 callers and receive...." that mimics traditional direct-response advertising. Wouldn't an auto company be interested in handing out a $500 coupon to the first 1,000 callers since they've self-identified themselves as higher-probability buyers? Or how about a consumer packaged goods company rolling out a "new and improved" version of a product. Wouldn't it be interested in having the first 5,000 loyal customers who called receive a complimentary box of the product, and then have them share the word with their friends? Given how inexpensive it is to outsource simple call center functions, the business case should be quite attractive.

I'm not suggesting that Video Connect is going to revolutionize video advertising, but it is a solid incremental feature that creates more value and will generate a higher ROI on advertisers' spending. These aren't trivial benefits, especially in a down economy where all ad spending is under close scrutiny.

What do you think? Post a comment now.

Wow.

That was the reaction that VideoNuze reader and digital media public relations executive Jeff Rutherford had after downloading the "New Xbox Experience" (or NXE) to his Xbox 360 and activating Netflix Watch Instantly. Jeff relayed the details to me in an email and phone call yesterday, adding that it felt comparable to his (and many others') first experience with TiVo.

Hyperbole? Maybe. I'm always mindful about how gadgeteers' early wows seem to melt away when new technology products reach the broader mass market. Still, the Xbox 360/Netflix Watch Instantly integration seems promising on at least three fronts.

First, Xbox 360 is a relatively mainstream device that has its own clear value propositions, thereby driving a sizable footprint that is only going to grow. Second, Netflix's Watch Instantly is a value-add to its subscription service, requiring no incremental fees, or special new add-on hardware to Xbox 360. And third, as Jeff reported, it was very easy to get going: he was given a code to input online and when he returned to his Xbox, his Watch Instantly queue was displayed there, awaiting his on-demand selections.

As I explained recently in "Netflix Should be Aggressively Pursuing Broadcast Networks for Watch Instantly Service," today's windowing model puts the company is in a serious bind with respect to getting top-flight Hollywood films. While Jeff reported seeing some strong titles like Disney's Ratatouille (and other films he noticed carrying the Starz watermark), the reality is that Watch Instantly's catalog is still a small sliver of Netflix's DVD-by-mail catalog and will remain so for some time to come.

Further portending the difficulties of what's ahead for Netflix as it navigates Hollywood's minefields is early word, courtesy of Joystiq and other blogs, that all of Sony's Columbia Pictures movies have been disabled for XBox 360 Netflix users, due to licensing issues. While we may all be rooting for Netflix to find deal terms with Sony and the others, the realist side of me says that Hollywood's overseers understand that the Xbox 360 integration (and others TBD) have real significance in the relentless push to digital delivery. So before the proverbial horse gets out of the barn, they want to ensure the right deals are in place for them to capture appropriate value.

While that drama plays itself out, Netflix would be wise to do everything else it can to bolster Watch Instantly content value and selection. As I wrote in the prior post, incorporating broadcast programs should be a top priority. Also high on the list should be well-branded, high-quality broadband-only content.

Netflix has a very interesting opportunity to accelerate the Watch Instantly adoption curve, leveraging the huge installed base of Xbox 360 users and Microsoft's UI improvements (more on NXE's new look at Engadget if you're interested). With proof of its success in hand, Netflix's negotiations with recalcitrant studios can only be helped along. Meantime, Xbox 360 is getting another strong (albeit likely temporary) value proposition to compete in the game console space. And consumers win - as Jeff pointed out - by gaining ever-better access to the content they want.

What do you think? Post a comment now.

Yesterday was one of those days that made my head hurt. I suspect you've all had days like this as well, as the economic crisis unfolds. One moment there's news that temporarily makes you feel better, the next moment, news that makes you feel worse than ever.

For example, yesterday morning I appeared on a panel with four market researchers at a conference focused on New England startups and technology. As I listened to the others talk glumly about the fundamentals of the sectors they cover, I was feeling a little more optimistic. As I explained when it was my turn to speak, "the fundamentals of the broadband video economy are relatively strong" (note: I always feel queasily like John McCain when I say that) and there's much reason to be optimistic going into '09.

It's true. Broadband video usage is growing each month. There's a vibrant ecosystem of early stage technology companies that continue to attract new investments. Many of these companies are hiring. The overall user experience is getting stronger and stronger, making the broadband medium a more appealing environment for consumers, advertisers and content providers. And importantly, there are large pots of existing spending that broadband can share-shift.

Add it all up and compare broadband to say auto manufacturing, retailing, financial services, home building and other industries that have been decimated by the economic slowdown and things look pretty decent.

That feeling of tempered optimism dissipated last night though, not just because the market dropped 400+ points yesterday to a level not seen since 2003, but because of an article I read on NYTimes.com ("Stocks Are Hurt by Latest Fear: Declining Prices") about an insidious new consequence of the meltdown called "deflation," which has economists deeply worried about what still lies ahead for the global economy.

Most of us have never experienced deflation, which is defined as a "general decline in prices." As one measure, the Consumer Price Index, which tracks how much we pay for groceries, entertainment, and other goods and services, dropped by 1% in October, the largest decline in the 61 years the index has been calculated.

Deflation is so scary because it basically forces all businesses to cut costs to meet the realities of lower prices. The contraction process feeds on itself, causing a downward spiral of economic activity and paralysis. This is bad enough even in established sectors, where inelasticity helps to buffer deflation's effects. My concern is that in a nascent ecosystem like broadband video, deflation's impact could be far worse.

Here's what I mean: say you're an early stage broadband technology provider selling to media companies. Your product meshes with the customer's own roadmap and has clear advantages. You've priced it in a way to be sensitive to market competitiveness and also internal profitability goals. You may have also developed business cases showing the customer benefits.

But now the media company says that its ad spending has slowed (itself driven by reduced consumer spending), in turn cutting its willingness to pay (the forces of deflation at work). So if you want the deal, you have to accept it at a lower-than-expected price. If too many of those situations arise, your business model gets blown. When too many business models get blown early stage investors say "freeze" and decide to hold off investing until the climate warms up again. When that happens, the cycle of innovation locks up.

Anyway, you get the picture of how the dominos can fall. Since the broadband ecosystem is still quite fragile, with value propositions often still works in progress, the specter of deflation is quite nerve-racking. Let's hope its full brunt isn't realized.

What do you think? Post a comment now.