VideoNuze Posts

Please join me for VideoNuze's next "VideoSchmooze" Broadband Video Leadership Evening, on Tuesday evening, October 13th, 6pm-9pm in New York City. Save by registering now for the early bird rate of $60 which includes hors' d'oeuvres and a drink.

We'll start with a panel discussion I'll moderate, "Realizing Broadband Video's Potential" featuring a terrific group of industry executives:

• Dina Kaplan - COO and co-founder, blip.tv
• George Kliavkoff - EVP & Deputy Group Head, Hearst Entertainment & Syndication (and formerly Chief Digital Officer, NBCU)
• Perkins Miller - SVP, Digital Media and GM, NBCU Sports & Olympics
• Matt Strauss - SVP, New Media, Comcast

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

Included among topics we'll discuss are the status of TV Everywhere trials and future strategy, how the NFL and other sports leagues are succeeding with broadband distribution, whether independent video producers are getting traction online, if advertising can support TV programs online or if a paid/subscription augment is required, and lots more. We'll have plenty of time for audience Q&A as well!

Following the panel, we'll have networking and cocktails from 7:45-9:00pm. Chat with the panelists and expand your network...whether you're pursuing business or personal opportunities in the industry, the people who come to VideoSchmooze are the ones you want to know!

Once again VideoSchmooze will be held at the Hudson Theater, a gorgeous facility 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 Microsoft Silverlight and supporting sponsors Akamai Technologies, Digitalsmiths, FAST (a Microsoft subsidiary), FreeWheel, Horn Group and mPoint for making the evening possible.

Space is filling up fast for this must-attend event....at the last VideoSchmooze in March, we had 270+ attendees, so if you're interested in joining us, I encourage you to register early to secure a spot!

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

I look forward to seeing you on Oct. 13th!

Late yesterday Adobe surprised the market by unveiling a $1.8 billion cash acquisition of Omniture, the web analytics and optimization company. With Omniture's trailing 4 quarter revenues of $335 million, the deal was done at a little over 5x revenues and a 45% premium to Omniture's average stock price over the last 30 days - not ridiculous bubble-era terms by any stretch, but still plenty rich in this down economy.

I listened to yesterday's investor relations call explaining the rationale for the deal, talked to a number of industry executives for their reactions, and read some of the online coverage. My takeaway is that while the deal could work out, I'm somewhat skeptical until I see actual proof.

First, when I look at Adobe, I'm focused narrowly on its video-oriented products and strategy (Flash, Flash Media Server, Strobe its open player framework, etc). While a leader currently, Adobe has significant challenges ahead in the video space. It faces major competitive threats from Microsoft, which is ramping up a Silverlight and Smooth Streaming onslaught (we've seen this movie before and know how it ends) and Apple, which has frozen Flash out of its world-beating iPhones in an attempt to thwart the advance of Flash's desktop hegemony to mobile devices. From my perspective, an acquisition the size of Omniture must provide specific differentiated value to Flash, in order to help Adobe compete in the video space.

I hear the top-line rationale being provided for the acquisition: that integrating Omniture's measurement and analysis tools into the front-end creative process will help digital media executives more effectively monetize content and improve advertising ROIs. In Adobe CEO Shantanu Narayen's words, the deal "completes the loop of content creation, delivery and optimization." Omniture's CEO Josh James put the goal simply: "to drive ad dollars from offline to online."

That's an incredibly important goal; I have written many times that advertising, particularly for long-form online video, is not remotely close yet to supporting the high cost of creating premium-quality programs. To the extent that eyeballs shift from offline to online without a parity (or better) economic model, content providers will be in a death spiral - racking up profitless online viewership.

While the deal's high-level rational makes some sense, I have 3 concerns about whether it's robust enough to ultimately pay off for Adobe, and more specifically strengthen their hand in the video space: (1) Are there actually incremental product integration opportunities beyond those already being pursued through the companies' existing partnership? (2) Are there actually incremental sales to be gained (and for which products), by putting the companies together? (3) Is this the optimal use of Adobe's resources given current and future market conditions for video?

The product integration issue received a lot of attention in the analyst Q&A portion of the investor call. Yet, despite the number of times both CEOs answered it, few specifics were ever revealed, leaving what I perceived as a sense among the analysts and me (manifested by repeated similar questions), that the product benefits might not be well-understood, or worse, overblown.

In my mind optimal product integration requires that the same person or team in an organization gets value from the 2 products being put together. Yet today the creative people using Flash are different from the marketing people using Omniture. In the organizations I've worked with there's already significant interaction between these groups as they continually modify apps to enhance user engagement and monetization. Maybe more can be achieved here, but with different audiences for the respective products, I'd want to see evidence.

Incremental sales were another area of intense analyst interest. Typically in acquisitions a key deal driver is that one (or both) of the companies' products can be put through the others' sales channels to increase volume. Yet, per the above, Adobe's creative tools are typically purchased in the creative group, not the marketing organization (sometimes it's even more complicated as a whole different entity is the buyer, as with CDNs and Flash Media Server). However there is a case to be made that as digital revenues become more important to companies, marketing will exert more influence.

But still, is it likely that notoriously autonomous creative types are going to be swayed to use Adobe's tools because marketing types say that improved integration with Omniture makes analysis/tracking better? Conversely, is a marketing executive going to be persuaded to use Omniture because the creative group insists it must use Flash? Looming also is the question of whether one sales team and channel versed in selling packaged software (Adobe) can effectively help sell SaaS analytics (Omniture) and vice versa.

These questions ultimately raise the final one - is this the best use of Adobe's resources? On the one hand, Omniture helps diversify Adobe's revenue and product base, opening up new markets for it. Diversification isn't a bad thing per se, but if the acquired products don't help the core business, it can quickly turn into a distraction, changing the organization into cluster of silos. Plus, while Omniture's revenues have quadrupled in 3 years, it has already forecast slowing growth. Generally I'm very skeptical of big acquisitions. Evidence has shown they rarely deliver the intended results, and often (as in the case of Ebay-Skype) they can actually be a value destroyer.

My guess is that much of what Adobe will eventually achieve with Omniture could have likely been achieved through expanding its current partnership. But I stand ready to be proven wrong as it's quite possible I just don't get it. Both leadership teams are intelligent and savvy about the market. They obviously see the benefits of the deal. We'll eagerly await the proof.

What do you think? Post a comment now.

Have you noticed that live streaming video is getting more and more popular? Lately, sports in particular have been leading the charge, with live streams of PGA golf, US Open tennis, NFL football, Major League Baseball games and British soccer, among others. But sports are hardly the only area where live video streaming is taking off.

Two key catalysts for this part of the live streaming market have been mobile access (with the iPhone and other smartphones' video capture and playback driving the market) and social media/video sharing (with Twitter, Facebook, YouTube and others providing instant outlets). A lot of this activity is Flash-based. As both mobile and social trends gain ground, we can expect even more activity in this segment.

Aside from sports, live streaming is also gaining traction for high-profile events, with some companies moving to support this end of the market. For example, today Kyte, which positions itself as a full mobile and online video platform, is introducing "Kyte Live Pro," an add-on that allows HD live streaming from multiple sources and encoding using Adobe Flash Media Live Encoder.

I chatted with Gannon Hall, Kyte's COO yesterday, who explained that while "authentic" content - mainly short live clips - remain popular, Kyte's customers have also been asking for the ability to live stream longer-form events in HD. For example, TV Guide is using Kyte Live Pro this Sunday night to stream the Emmys red carpet pre-show online. Gannon expects other video platform companies, recognizing the opportunity, will start to offer live HD streaming as well. Swarmcast is one company I'm aware of that has made a name for itself broadcasting high-profile live events over the years. Microsoft is also putting a big push behind live, with its Smooth Streaming product.

Moving even further up-market, there's also a huge amount of live video streaming happening among enterprises, educational institutions and government agencies. These entities have much tighter requirements, often needing an on-premise, behind-the-firewall configuration for capture, broadcast and viewing, multi-location secure distribution, transcoding into various formats, integration with other network and other IT components, and mission-critical reliability.

The leader in this part of the market is a company called VBrick (according to research compiled by Frost & Sullivan), whose executives I've spoken to a couple of times recently. VBrick has over 6,000 customers in 56 countries, including 50 Fortune 500 companies, 100 Federal agencies and 900 schools, among others. The range of VBrick uses includes executive broadcasts, training and education, digital signage and surveillance and monitoring, to name a few.

VBrick deploys a hardware appliance that does video capture and transcoding into multiple formats, high-quality distribution over varied networks (LAN, WAN, Internet) and secure viewing at desktops or conference rooms. VBrick also offers "VBoss," which is a SaaS alternative for less frequent/more budget-minded users.

To date, most online video has been consumed on-demand. But this appears to be changing fast. With nearly infinite use cases and technology providers addressing all potential market segments, live video streaming appears poised for lots of growth ahead.

What do you think? Post a comment now.

I'll be participating in 2 complimentary upcoming webinars that will be of interest to VideoNuze readers.

First, on Thurs, Sept. 24th, Colin Dixon, Senior Partner at The Diffusion Group and I will present "The Terror of Terminology: Demystifying Broadband TV." Colin is one of the smartest broadband analysts around, and we periodically compare notes on the market. In an effort to clarify some of the confusion we continually hear around certain terminology in the market, we're going to discuss 5-6 different concepts and try to clear away the fog. Expect a fun and educational conversation, with plenty of time for audience Q&A. Learn more and register.

Then on Wed, Sept. 30th I'll be participating in a Brightcove-sponsored webinar, "New Video Distribution Strategies - Taking Video Beyond the PC." Other speakers include Chris Little, Technology Director at Brightcove and Rich Ezekial, Director of Strategic Partnerships, Connected TV, Yahoo. Accessing online video on other devices like TVs and smartphones is one of the hottest areas of the broadband video landscape, and we'll be digging in to key trends, best practices and monetization opportunities. In particular, we'll hear specifics about Yahoo's Connected TV strategy. Learn more and register.

I look forward to seeing you on one or both of these exciting webinars!

Though TV Everywhere ("TVE") is still in a nascent stage, with trials either underway or not even yet started, there has been no shortage of hype around it. I've been among those who have argued that if these trials work as intended and the rollouts ensue, TVE would be a big win for video service providers (cable, satellite, telco), content providers and consumers. But recently I've started to think there's another TVE angle that has not really been explored - the possibility that "TVE 2.0" could enable certain cable operators and telcos themselves to become the biggest players in "over-the-top" (OTT) video.

(For those not familiar with the term OTT, it refers to the idea of video being delivered to homes over a broadband network that isn't owned by the video provider itself. So for example, when you watch Hulu in your home over a Comcast broadband connection, Hulu is going "over-the-top" of Comcast. Hulu doesn't own the underlying network, it just rides on top of the one that's there, in effect competing with Comcast's own video service.)

To date TVE has been positioned by incumbent video service providers as an online adjunct solely available to their traditional, paying multichannel subscribers. While Comcast has been most emphatic on this point, no other operator that has announced TVE trials has deviated from this approach either.

But what if, at some point down the road, TVE was "unbundled," meaning that you could subscribe just to TVE, and not the traditional video service? Cable operators and telcos have little incentive to do this within their current service or "franchise" areas, but the lure to offer TVE 2.0 to households outside their franchises could prove irresistible. If pursued, this could actually turn cable and telcos into the biggest over-the-top players themselves, potentially dwarfing those typically thought of as key OTT competitors (e.g. CE companies like Sony or computing companies like Apple, or aggregators like Netflix or Hulu). In a TVE 2.0 world, the hunted could become the hunters.

The franchise concept is key to understanding how the cable and telco video distribution business work. In short, a cable or telco needs to win an agreement with the "franchising authority" - typically a municipal government - to offer video service in the municipality. Agreements are required because the video distributor needs legal access to rights-of-way to operate (to hang its wires on poles, dig up streets when necessary, etc.). Franchising may seem anachronistic in the digital age, but it remains the essential determinant of where cable companies or telcos operate (note that because satellite companies don't require rights-of-way, they operate nationally, outside the franchising domain).

Now put yourselves in the shoes of Comcast, for example. You've worked hard to wring every possible dollar out of subscribers who live in your franchise areas, by successfully introducing triple-play video/voice/Internet bundles, digital tiers, sports tiers, movie channels, HD, additional outlets, DVRs, etc. With all of these services, the average revenue per home serviced today is a multiple of what it was just 15 or 20 years ago.

But growth is slowing, and new competition from OTT providers looms. So where does the biggest new growth opportunity exist? Answer: outside traditional franchise areas. To get a sense of how big this opportunity is, even Comcast, the largest U.S. cable operator, serves only about 25% of the country, meaning almost three-quarters of American homes are currently out of its reach. To grow their addressable universes, Comcast and others traditionally bought other cable operators. In fact, fearful of the power any one cable company could gain, the FCC imposed a 30% ownership cap. Coincidentally that cap was just overturned by a U.S. Court of Appeals a few weeks ago.

In the traditional video distribution business, buying other operators was the only way to build an operator's footprint. But with TVE 2.0, a company like Comcast could use broadband so that, for the first time, it could operate everywhere. They key is being willing to unbundle TVE from core cable service so that a consumer can subscribe solely to TVE service.

Doing so would in effect pit Comcast, for example, against other cable operators, a major breach of cultural etiquette in the clubby cable industry. But faced with the choice of acquiring other operators for around $5,000 per sub, or just introducing a capital-efficient and high-quality linear/on-demand OTT service over broadband, powered by Move Networks (as one option) it wouldn't even be a close call. In fact, Comcast could cherry pick the incumbent's video customers, in turn driving that company's valuation down and thus opening up the option for it to eventually swoop in and acquire the incumbent operator for far less. Or it could decide not acquire, and instead just focus on rolling up OTT subs.

Will cable and telco go over the top? Who knows. They will surely have what it takes - TVE expertise, requisite technology, content relationships, private video delivery networks, customer care facilities and deep pockets. All that's really needed is the motivation to proceed. For now, operators are rightfully focused on getting TVE working right for their own subs. But I suspect the business cases for TVE 2.0 are already being run.

(Note - we'll explore this subject and others at both VideoSchmooze in NYC on Oct. 13th and at VideoNuze's CTAM Summit breakfast on Oct. 26th.)

What do you think? Post a comment now.

I was only able to catch a little bit of the Titans-Steelers came last night on NBCSports.com, but what I did see was pretty impressive. This was the first of the "Sunday Night Football Extra" games that NBC Sports and the NFL plan to stream live this season. NBC Sports is using Silverlight for the first time, and the live HD broadcast included 5 different camera angles to choose from. Akamai is providing CDN services and Microsoft's Smooth Streaming for delivery.

NBC has been a pioneer in the delivery of online sports content, and with the 2008 Beijing Olympics setting a new standard. The NFL is not alone in pushing into online delivery though. As I noted recently in "2009 is a Big Year for Sports and Broadband/Mobile Video," there have been a ton of new initiatives this year across baseball, basketball, football, golf, tennis, auto racing, etc.

I'm looking forward to having Perkins Miller, SVP, Digital Media and GM, Universal Sports, NBCU Sports and Olympics on my discussion panel at VideoSchmooze on Mon evening, Oct 13th in NYC. No doubt he'll have lots of great insights and data to share about how the season is progressing.

The next game on NBCSports.com is this Sun night, Bears vs. Packers, 8pm ET.

Following are 4 news items worth noting from the week of Sept. 7th:

1. Hulu's boss says it needs to charge for content - Bloomberg ran a story this week quoting Chase Carey, deputy chairman of News Corp (Fox's owner, and therefore a part-owner of Hulu) as saying at a BofA investor conference, "Ad-supported only is going to be a tough place in a fractured world....You want a mix of pay and free."

VideoNuze readers know that while I've admired Hulu's user experience from the start, I've long been critical of its thin ad model, which falls well short of generating revenue/program/viewer parity with traditional on-air program delivery. That lack of parity has caused Hulu's owners to cordon off access to Hulu on TVs for most viewers. But the networks' fear of cannibalizing their own P&Ls only frustrates loyal Hulu users, who neither understand nor care about such legacy concerns. All of this and more led me months ago to conclude a subscription offering is inevitable from Hulu. The impending TV Everywhere launches, which further marginalize ad-only business models, and now Carey's public remarks, solidify my thinking. We'll soon see some type of Hulu subscription tier.

2. Move Networks notches a win with Cable and Wireless deal - Score one for Move Networks, which this week announced Cable and its first tier 1 telco customer. Move enables C&W to deliver an HD, linear multichannel video service, plus on-demand and broadband content to its broadband customers, all through existing DSL connections. Move's repositioning, which I wrote about recently, obviates telcos' need to invest billions in upgrading their networks to get into the IPTV business. Indeed, Roxanne Austin, Move's CEO told me yesterday that C&W has for years considered all the various options for getting into video, but has never pulled the trigger until now. The deal covers up to 7 million homes and interestingly, rather than getting a license fee, Move will be paid a share of subscriber revenue. Roxanne says another big deal will be announced shortly.

3. iPod Nano gets video, battle with Cisco's Flip escalates - As you likely know, Steve Jobs unveiled the new iPod Nano this week, which incorporates an SD video camera. Following the iPhone 3GS adding video recording capability, I think it's pretty clear that Apple has decided video is the next big thing for its devices. As I suggested recently, Apple's embrace is going to drive user-generated video - and YouTube, as the undisputed home for it - to a whole new level.

But one wonders what this all means for Cisco's recently-acquired Flip video camera, and others from Creative, Sony, Kodak, etc? Cisco in particular has a lot on the line since it just shelled out almost $600M for Flip's parent Pure Digital. Granted Apple's devices are still SD, while Flip now emphasizes HD, but still, getting video recording "for free" as Jobs put it at the launch is pretty compelling for consumers. Even if the Flip deal doesn't work out as planned, Cisco will still be selling a whole lot more routers to handle all of this newly-generated broadband video, so it's a winner either way.

4. AT&T Wireless adding 3G capacity - In last Friday's "4 Items" post, I noted a great story the NY Times ran showcasing the frustrations that AT&T Wireless customers are experiencing due to the millions of data-intensive iPhones clogging up the network. AT&T has been hearing complaints from all sides, and this week announced 3G network upgrades in 6 cities this year, with plans to cover 25 of the top 30 U.S. cities by the end of next year, and 90% of its current 3G footprint by the end of 2011. These upgrades can't come soon enough for iPhone users. Meanwhile the company's YouTube video, featuring "Seth the blogger guy" explaining how AT&T is addressing network issues itself came under attack, as AdAge reported. There's no pleasing everyone.

Enjoy the weekend!

Daisy Whitney and I are pleased to present the 31st edition of the VideoNuze Report podcast, for September 11, 2009.

This week Daisy and I first discuss my post from yesterday, "StudioNow Begins March Into Video Platform Space with AMS Launch." For those not familiar with StudioNow, it has been operating a network that links geographically-dispersed video professionals with its clients' projects using a backend work flow/project management platform.

Yesterday the company launched its Video Asset Management & Syndication Platform ("AMS"), which its clients can use to manage, transcode and syndicate their videos. It's a clever move by StudioNow, and I believe paves the way for the company to compete more directly in the video management and publishing platform space. StudioNow will benefit by leveraging its position as a trusted partner to content providers and directories which it serves on the video creation/production side.

We then discuss the new Coalition for Innovative Media Measurement (CIMM) which was just announced yesterday. CIMM brings together 14 different broadcast and cable TV networks, media agencies and advertisers to create new audience measurement for TV and cross-platform media. CIMM intends to run pilot studies focusing on TV measurement through set-top box data and cross-platform media measurement. It's hard not to see CIMM as a "Nielsen-killer" though CIMM has asserted that it should not viewed as such.

With so many companies involved, Daisy is skeptical of the venture's likelihood of success and favors a more market-driven solution. I think it actually can succeed, but only if the partners are truly committed and invest accordingly. I haven't followed measurement that closely, but in my view the partners' commitment level will likely be correlated to the level of dissatisfaction they each have with Nielsen, and this will determine CIMM's eventual success. More detail in the podcast.

Click here to listen to the podcast (15 minutes, 1 second)

Click here for previous podcasts

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