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Prognosticating P2P's Possibilities and Pitfalls - May E-Newsletter
With Joost's launch upon us, BitTorrent going mainstream, Akamai buying Red Swoosh and a raft of other peer-to-peer (P2P) initiatives underway, it's time to consider legitimate P2P's possibilities and pitfalls.First a disclaimer: I don't pretend to know all of the technical ins-and-outs of P2P, but I think I know enough to be dangerous. Here's my current take: P2P has a ton of potential as a legitimate distribution platform, but has to navigate some significant challenges if it is to succeed.A P2P PrimerFor those of you new to the P2P game, in essence, P2P's big advantage is that it allows users themselves to become servers of content to other users. In doing so, the load for delivering content is shifted from central servers to the "nodes" or users on the P2P network. Until relatively recently, P2P was popularly associated with the illegal "file sharing" networks (Napster, KaZaa, etc.), most of which were (and still are) used by users to swap audio or video files without permission of the copyright holder. Users could look up where certain content resided and then download it accordingly.What's new about P2P is that many (e.g. Joost, BitTorrent, others) see it as an important, if not essential, way for video to be legitimately distributed. P2P companies argue that the Internet's current architecture cannot effectively scale to deliver large quantities of video (especially live streams) in an economic manner. Since P2P gives users the ability to directly share with other users, P2P also has a potentially disruptive effect on the overall value chain and how video aggregators continue to establish value for themselves. P2P requires users to install client software on their computers. These clients are then available on the P2P network, sending files to subsequent users requesting content that they have already stored. In the case of video or audio, files can be delivered for either download or streaming.All of this is intended to happen invisibly to the average broadband video user. Of course, to nobody's surprise, the average user couldn't care less how video actually gets to his or her computer, as long as it gets there quickly and in reasonably good shape.Potential AboundsP2P is a potentially big deal for the biggest broadband video content providers. That's because delivering large volumes of video in the traditional client-server paradigm is still pretty expensive, notwithstanding the significant declines in content delivery networks' (CDN) pricing. With everyone forecasting huge increases in broadband video consumption, together with larger video files (due to better encoding, High Definition, etc.), getting a handle on delivery costs is a key challenge for content providers.Compounding matters is that broadband video business models remain relatively immature, so expense containment is all the more important. P2P allows these content providers to shift all or some of the responsibility for video distribution to the users themselves, while establishing direct connections with users (i.e. no 3rd party distribution costs). The users' computers are leveraged for both storage and delivery, while the bandwidth is essentially free, since users upload content using the local broadband ISP's network, not the content provider's CDN service. If P2P succeeds, its potential to cut content providers' delivery costs, while delivering high-quality video, is obviously very significant.Important Challenges Lie AheadOf course, potential is one thing, reality is another. From my vantage point, consumers' willingness to become P2P nodes and ISPs' restraint in blocking P2P traffic represent the biggest obstacles to P2P's future success. First the consumer acceptance challenge. Getting the P2P client on millions of users' computers or into their living rooms is not trivial. In this era of spyware, malware, viruses and other technical nuisances, mainstream Internet users are becoming more reluctant than ever about loading anything onto their machines that doesn't come from a recognized and trusted brand. Since P2P's whole promise relies on files being propagated to many users, anything that limits this from happening is obviously very detrimental to P2P's success.Then there is the even thornier issue of how broadband ISPs are going to react to users clogging up precious upstream bandwidth by serving as nodes. Virtually all American broadband ISPs offer "asymmetric" Internet access, meaning that the amount of bandwidth offered in the upstream path is usually only a fraction of that provisioned for the downstream path (this is due to some fundamental limitations related to the way that ISPs' networks are allocated). Re-architecting these networks for potentially burgeoning upstream traffic flows would be cost-prohibitive and a non-starter.To date, broadband ISPs have used "traffic shaping" technology to identify and limit P2P traffic. They have also kicked customers off their networks who have used too much bandwidth (a little secret in the industry). All of this has been sort of OK to do when most P2P use was for illegitimate file sharing. But what happens when it's for legitimate use, such as Joost or the newly legitimate BitTorrent? Limiting users' access to their full broadband service is going to evoke howls of protest.And of course, remember that the net neutrality proponents are waiting to pounce on any sign of broadband ISPs de-prioritizing or worse, blocking, certain types of traffic. Net, net, a big wildcard in P2P's success is how ISPs are going to react.Planning for P2P SuccessP2P proponents need a game plan to overcome these looming issues. Here's what I think makes sense: Well-established branded content players will need to take on the primary role for P2P client distribution. Of course, this approach has been used for previous media players' distribution (i.e. Real, WMP, Flash, etc.) and for updates. We've all had the experience of being asked to download player software or an updated version of previously installed software. P2P client distribution could be no different.But what will incent major content providers to assume this responsibility on a mass scale? They'll have to see real (not theoretical) business cases for delivery cost reductions and quality improvement. Of course, getting paid to become P2P client distributors (either in cash, or as part of distribution deal discounts, or some hybrid of the two) would also clear the way. Companies like Joost and BitTorrent need to remember that while their brand awareness among the Internet's cognoscenti is high, among more mainstream users it is still low. So leveraging their content partners' brands to turbo- charge distribution is key.BitTorrent, for one, is already doing this with their BitTorrent DNA technology. Another opportunity for P2P client distribution is embedding it in various consumer devices. For example, BitTorrent also offers a software development kit (SDK) that consumer electronics and chip makers can use to embed the P2P client in devices. This removes P2P download complexities for users, and is intended to make P2P usage completely invisible. The ISP solution seems more complex.Some believe that ISPs should look at P2P as a business opportunity to deliver a quality-of-service (QOS)-guaranteed platform to the P2P application providers such as Joost and BitTorrent. This would be accomplished by installing caching servers in broadband ISPs' facilities. These would essentially allow ISPs to serve content locally, mainly relying on the P2P protocols to deliver from the caches when appropriate, instead of from the nodes. This approach would preserve upstream bandwidth and limit ISPs' need to increase their peering capabilities to handle video coming in from the Internet backbone, while also leveraging P2P's scalability.This "peer-assisted" approach may be the optimal migration path to P2P adoption from an ISP perspective. Though the economics still need to be fully fleshed out, I've heard a pretty persuasive argument for this model from a company named PeerApp (disclaimer, they're a client), which is worth understanding further if P2P affects your business. One way or another, ISPs need to be brought into the P2P fold. Simply ignoring them or relying on their reluctance to tempt the net neutrality gods is not a sound business approach.Wrapping UpP2P offers very exciting potential to enhance users' broadband video experiences. For content providers, it holds the promise of profitably scaling up their broadband video activities. It will be very interesting to see how key P2P players navigate impending challenges to their success.Categories: Broadband ISPs, Cable TV Operators, P2P, Telcos
Topics: BitTorrent, Joost, Net Neutrality, PeerApp
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My Cable IPTV Panel Today: Is Cable Bypass for Real?
I was in NYC today moderating the opening session at Cable IPTV, which is a new and very timely conference organized by Fred Dawson, editor of ScreenPlays magazine (kudos to Fred and his team for a very well run event).The panel was entitled, “The Cable Perspective on Trends in “Over-the-Top” and User-Generated Video” and the panelists were Sean Doherty, CEO, Channels.com, Keith Kocho, Founder, ExtendMedia,Jim Turner , VP, Interactive, A&E Networks and Bill Wheaton, VP, Digital Media, Akamai Technologies, Inc.We had a wide-ranging conversation, mostly focused around the theme of whether broadband video is going to shape up as a real “cable bypass” or “over-the-top” medium, or whether cable operators are going to maintain their dominant role as video packagers.I’ve said for a while that the broadband video aggregation role is cable’s to lose. With tens of millions of traditional video and broadband Internet access subscribers, cable is extremely well-positioned to bring together the best of broadband video with the best of traditional broadcast and cable programming. Yet I’ve been disappointed that cable operators have been slow on the uptake while other aggregators have aggressively ramped up (e.g. Apple, Google, Joost, Yahoo, etc.). Aided by new bypass devices like AppleTV, Xbox, Netgear, etc, these companies are all aiming to eventually steal cable’s video customers.Today’s panelists reinforced my thinking that these would-be bypassers are in for a tough fight. Bill pointed out that since operators own their own networks, they can deliver quality-of-service (QOS) that others can’t. This is especially important when it comes to delivering really big Blue-Ray or HD-DVD files. Meanwhile, Jim reminded all of us that “most favored nations” clauses in most cable networks’ carriage agreements with operators will be keeping plenty of lawyers busy just determining if networks can even make deals with the upstart broadband video aggregators.
And then of course our panel followedAndrew Olson ’s opening keynote (who is co-founder of thePlatform, and now SVP, Strategy and Development for Comcast Interactive Media), during which he highlighted all of Comcast’s new broadband video initiatives (Fancast, Ziddio, etc.). Plenty of messages that Comcast is hip to broadband video and is now moving fast to defend its turf.Lastly, cable operators are now being offered some interesting new technology that will bridge broadband video over to existing digital set-top boxes inexpensively and without truck rolls.I saw a demo of ICTV’s ActiveVideo platform at the Cable Show last week and it was pretty compelling. It is at least one viable alternative for operators to accelerate their own convergence initiatives.The broadband video aggregation area is going to be very interesting to watch…..
Categories: Cable Networks, Cable TV Operators, Events
Topics: A&E Networks, Akamai, Channels.com, ExtendMedia
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Forrester’s New Report on Paid Downloads: Right on TV Shows, Wrong on Movies
Forrester released a new report last week entitled, “Paid Video Downloads Give Way To Ad Models”. Since I’ve had some requests to comment on it (and the paid video market as a whole), I’m weighing in here.I was able to read the full report, but if you can’t, then their press release is here. It provides the gist. In short, I think Forrester’s conclusion that “The paid download market is, however, ultimately a dead end” is mostly right regarding TV shows, but completely wrong for movies. Lately broadcast and cable TV networks have ramped up deals with many aggregators to distribute streaming versions of their programs. And with advertisers falling all over themselves to support these, it is certainly likely that the concept of paying to download and own a TV program is heading for a decline.However, when it comes to movies, it’s a different story altogether. First off, at a minimum, today’s $15+ billion/year home video market (DVD sell through only) more than demonstrates that people want to own certain content (i.e. mainly movies). This provides a pretty rich pot of revenues for paid downloads to tap for growth. Paid downloads (or “electronic sell-through” as some call this activity), hold the potential to be a far more efficient and flexible way to get content into the hands of those willing to pay for it. Granted there are some current usability issues (namely broadband-to-TV connectivity) to overcome, but these will certainly be resolved in the near future. Ignoring this dynamic (as Forrester does by neglecting to mention, even once, how it expects home video market to evolve in the digital era) is a significant omission.It leaves me wondering how Forrester thinks this vital revenue stream fits into its conclusions. Piggy-backing on this omission, the report also concludes (absent an explanation that I can find) that “Movie studios whose content only makes up a fraction of today’s paid downloads, will put their weight behind subscription models that imitate premium cable channel services." I think this conclusion is way off base. Studios love home video revenues. For many movies, home video revenues ARE the business model, long since displacing theatrical revenues as the main source of profitability. It’s inconceivable to me that, in the digital age, studios are going to move away from emphasizing a la carte purchases to instead take a share of a 3rd party’s monthly subscription revenues, as Forrester believes.That’s not to say there won’t be a place for subscription services (e.g. Netflix). But studios have rich e-commerce-based business opportunities ahead (fueled by all the merchandising tricks folks like Amazon have mastered in other product categories). These have been limited to date by lack of instantaneous product fulfillment (i.e. broadband-delivered downloads). On the cusp of pursuing these opportunities, to suggest that, instead, studios will forsake them for subscriptions, just doesn’t make sense.Finally, Forrester’s prediction that because “only 9% of online users have ever paid to download a movie or TV show”, there is unlikely to be a mass market for paid downloads, is very tenuous, given that broadband video delivery itself has only burst into the public’s conscious in the last year or two. Scant adoption of any new technology in its early days is a pretty unreliable indicator of future potential. For example, consider how few people owned a cell phone in the early days when they were expensive and brick-like. Now cheap and sleek, they are ubiquitous.Paid downloads are not a “dead end” as Forrester asserts. Rather, they are an early-stage business opportunity evolving from an existing business model -- namely home video. While key catalysts are still needed to fuel paid downloads’ growth, these will inevitably come. Digital strategists at studios who dismiss paid downloads’ potential for movies in particular at this early juncture do so at their peril.Topics: Forrester
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Nisenholtz’s Streaming Media Keynote: Times Gets Broadband Video
I was at Streaming Media East today, moderating a session (“Broadband Video: What’s the Formula for Content Success?). First off, kudos to Dan Rayburn and the SM team – there was a ton of energy at the conference, lots of exhibitors and great sessions.
I got a chance to sit in on Martin Niesenholtz’s keynote. As many of you know, Martin’s the longtime SVP, Digital Operations, for the New York Times Company.
As many of you know, I’ve been very bullish on newspapers’ opportunity to use broadband to morph themselves from print-only outlets to multi-platform content providers. The Times has really been out in front on this. Some key stats Martin shared:-
5M streams/month – up 3x from a year ago
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20 people dedicated to video
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100 new video pieces created/month
Martin shared a back-of-the-envelope analysis he’s done to back into how many streams the Times needs to provide to generate $30M in annual revenue from video. His calculation: 60M streams per month, or 12X today’s rate. I didn’t agree with all of his assumptions (for example he assumed $60 CPMs, which is too high, yet only a 1:1 ratio of ads:streams, which I think is too low given the opportunity to surround an in-line video player with display ads), but I did think he was in the ballpark.
Importantly, he’s targeting to generate 5X the viewership of Times video via 3rd party distributors as will be generated at Times.com. Pretty strong endorsement of the syndication model.Categories: Advertising, Events, Newspapers
Topics: NY Times, Streaming Media
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ABC HD Streaming Coming Soon
News today that ABC is continuing to push the quality envelope, by releasing HD-quality streams of its programs this summer. ABC has been progressively increasing quality for some time now and this is the next logical step for them.
For some time I had thought that a potential firewall for local broadcasters was HD broadcasting. But I’m revising my opinion. With new encoding from companies like Move Networks, not to mention ad-supported download options which are inevitable and will have HD-quality, I think it’s clear that HD streaming is going to be widely available. This means ever more pressure on local broadcasters to wean themselves off of dependency on network programming to drive their businesses. I wrote extensively about this in last month's newsletter.
Categories: Broadcasters
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Revisiting the Long Tail on My Cable Show Panel Next Week
Next week I’ll be in Vegas for the annual Cable Show. This is the cable TV industry’s annual gathering of operators, programmers and vendors. I’ve been attending this show for years and it’s great fun to reconnect with lots of old colleagues and friends.Last year I moderated a session with video executives from AOL, Google, MSN and Yahoo, which, based on feedback I received afterwards, helped a lot of attendees understand how significant these companies are going to be in the video distribution business (and therefore, why they need to be on cable executives’ radar screens).Once again I’ll be moderating a discussion session, this year entitled, “Video’s Online Adventure: New Ideas for a New Generation of Television.” The session features Doug Hurst, SVP, Scripps Networks, Joe Gillespie, EVP, CNET, Ian Blaine, CEO, thePlatform, Bob Leverone, VP Video, Dow Jones Online and Karl Quist, President, TotalVid.As a former “cable guy”, one of my main goals with these sessions is to continue helping the industry recognize that the world of video is changing dramatically. Cable executives have been remarkably adaptive to change over the years. But with broadband’s openness now allowing scores of new video providers and distributors into the market, many of cable’s fundamental operating assumptions are going to be severely tested.For example, if the concept of the Long Tail (originally an article, and now a book by Chris Anderson), is applied to the cable industry it suggests that cable’s “walled-garden” content paradigm is going to be undermined by broadband’s infinite choice and personalization. I wrote an extensive piece about this way back in March, 2005 and I think it’s truer now than ever.All of the panelists have a great vantage point to comment on the Long Tail’s impact on cable. Bob and Joe come from publishers (print and online respectively) that haven’t done a lot with video previously, but are now aggressively pursuing it. Karl has started a specialty video distribution business that is only possible due to broadband. Doug’s company is leveraging broadband to create many new broadband experiences. Finally Ian’s company is powering many broadband video initiatives from established and startups.All in all, this group will bring an invaluable perspective to attendees trying to figure out how the video proliferation that broadband is causing will impact their corner of the cable business!Categories: Aggregators, Cable Networks, Events, Indie Video, Newspapers
Topics: CNET, Dow Jones Online, Long Tail, Scripps Networks, thePlatform, TotalVid
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Paltalk's
I had a chance to catch up with an old buddy, Lewis Rothkopf today, who's now VP, Biz Dev at Paltalk. Lewis and I go back to his days at Lightningcast, prior to its sale to AOL. Paltalk is an online video chat community that has about 4M active members. I confessed to Lewis that Paltalk hasn't been on my radar - I'm not the biggest IM'er in the world.
On May 1st, the company is going to be hosting "LateNet with Ray Ellin" in conjunction with DailyComedy.com, a live event from Comix in NYC. If you haven't seen Paltalk in action, this will be a pretty cool opportunity. "Paltalkers", as they're called, will have an opportunity not only to watch the live broadcast alongside others in the chat room, but also to interact with the host/guest in real time. More details here. I'm going to tune in, it seem like a very intriguing way to combine broadband video, social networking and interactivity...
Categories: Aggregators
Topics: Paltalk
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Change is Afoot in the TV Business - April E-Newsletter
Change is afoot in the TV business. The traditional world of networks’ hit programs being distributed exclusively through local broadcast TV affiliates is being challenged broadband delivery.
The challenge began modestly about a year and half ago, but more recently it has picked up significant steam. Back in October 2005 Disney/ABC made headlines with a deal to have select programs available for paid download via iTunes. Next up was a trial in the spring of 2006 to test consumer and advertiser interest in streaming full episodes of select programs at ABC.com. When ABC launched this officially in the fall of 2006, the other major networks joined in the action. By my recent count there are now over 40 progams available for ad-supported, free streaming.
All of this activity surely left broadcast affiliates wondering how they fit into this new direct-to-consumer landscape. Of course ABC allows its owned and operated (O&O) stations to also stream its programs, and FOX has shown a willingness to open up distribution further to all affiliates. Meanwhile, the other networks have not made concrete announcements about how their affiliates fit in.If local broadcasters accepted any of these assuagements, news from the past few weeks should have doused any cheery feeling they may have maintained. Recently, NBC and News Corp announced that they were setting up a new joint venture to manage the online distribution of their programs, simultaneously inking deals with four of the Internet’s biggest sites, AOL, MSN, MySpace and Yahoo (adding Comcast shortly thereafter). Next, CBS announced its “CBS Interactive Audience Network”, together with deals to have CBS programs distributed through at least ten large web sites, with more surely to follow.
Broadband’s Long Arm Reaches into the Broadcast IndustryIf I were a broadcaster keeping score over the past year-and-a-half, I would say things have gone from bad to worse to (as my 5 year-old would say) worser.Consider: in less than two years, broadcasters’ competitive position has shifted from a world where all viewers had to tune into their local channels to watch original episodes of “Heroes”, “24”, “CSI” and other hit network programs to a new reality where these programs are going to be dispersed to all the nooks and crannies of the Internet, ready for on-demand consumption by audiences everywhere.What does this mean for the broadcasters? For starters it means steadily declining audiences as viewers get siphoned off to these new distribution outlets. It also means rising competition just to maintain a parity “user experience” as these other distributors wrap all kinds of interactive and engaging features around these programs (e.g. online contests, blogs, clips, mashups, etc.). And finally, it suggests falling advertising revenues as marketers recognize not only broadcasters’ shrinking audience size, but also that the most desirable demos have moved on and are consuming and interacting around these programs through other outlets.Based on Broadband Directions’ recent market intelligence report, “The Broadcast Industry and Broadband Video: Confronting New Challenges, Embracing New Opportunities”, my conclusion is that these deals all signal the networks’ clear realization that consumers (particularly the younger, most desirable ones) are changing their behaviors and that if the networks don’t keep pace, they will become dinosaurs themselves.The networks understand that a broadcast affiliate system established to overcome the geographic limitations of retransmitting analog signals is fast becoming anachronistic in a world of high-quality, boundary-less digital distribution. So, to my mind, their recent initiatives represent nothing short of an attempt by the networks to eventually create a “digital replica” of the analog broadcast model, ensuring that network TV programs reach into the far corners of the Internet, easily accessible to consumers who increasingly live their lives online. The networks’ emphasis on a forward-looking approach, rather than stubborn complacency around the status quo, seems like a smart game plan to me.How Broadcasters Can Stay in the Game – A Blueprint for Surviving and ThrivingAs many of you know, I believe strongly that broadband’s open delivery platform challenges all incumbent distributors’ business models. The Internet puts entities that stand between producers and viewers in an increasingly perilous position. Their ability to survive and thrive will rely not on their traditional capabilities, but rather on new ones that add new value to viewers’ and advertisers’ expectations.Therefore, I think there are at least 5 key elements in any plan for local broadcasters to prosper in the broadband era:
1. Become online distributors of networks’ programsFirst, broadcast TV affiliates must aggressively press the networks for equal access in distributing TV programs through their web sites. Access to these programs is “table stakes” for anyone who wants to have equal footing for audience’s attention in the broadband era. I’m not privy to the behind-the-scenes dealings between the affiliate boards and the networks, but for the broadcasters’ sake, I hope they are being relentless in their pursuit of these rights.2. Invest in creating distinctive local contentAs network programs migrate to other venues, it is imperative that local broadcasters invest in creating content that will appeal to their audiences in their own right. For too long news, weather and traffic have been the broadcasters’ mainstays. Broadband opens up endless possibilities for broadcasters to exercise their creative muscles and boost the appeal of their home-grown programming.3. Distribute programming around the InternetAs the saying goes, “what’s good for the goose is good for the gander.” As the networks pursue new Internet outlets, so too must broadcasters tap into new ways of distributing their original content. Broadcasters must realize that audiences outside their traditional transmitting range will also have an interest in some of their original content. By using new online syndication tools and partnerships, broadcasters can extend their reach, and their revenue potential. Witness the recent deal between Yahoo and CBS’s O&Os, which has extended these broadcasters’ reach across Yahoo’s vast network.4. Harness the enthusiasm of local citizens to contribute video and other contentSpeaking of content, the user-generated variety is no longer a fad monopolized by YouTube. Media companies of all stripes are recognizing that users represent untapped potential as contributors to the creative process. This is particularly true in the local community where broadcasters’ economics cannot allow them to give equal coverage to all local events. The rallying cry should be “go forth carrying your video cameras.” See what the Washington Post, for example, is doing to cultivate local bloggers. Given the right training, incentives and integration, local citizens can make a huge contribution to local broadcasters’ broadband efforts.5. Create new value propositions for local advertisersLast but not least, it is essential that broadcasters create new value propositions for local advertisers. National advertising is seriously at risk with the Internet’s rise. However, local advertising is somewhat insulated by the big online players’ inability to reach into each and every community with a robust content offering. Broadcasters must develop new video ad formats beyond simple pre-rolls, which should include geo-targeting, interactivity and performance-based rates. None of these are easy -- they will all require creativity, persistence and re-training of local sales teams.ConclusionI believe the networks’ march into broadband distribution will be relentless. Just wait until there’s mass availability of consumer devices or other technical approaches that bridge the PC/broadband world with the TV world. This will allow network programming to be carried all the way into the living room, instead of being limited to wherever the computer currently resides. When this unfettered broadband access to the TV occurs, broadband distribution will take another giant, disruptive step forward.Change is afoot in the TV business. Broadband threatens to re-order the industry’s traditional participants into new winners and losers. Broadcasters need to run fast to stay in the first group. Let’s keep an eye on how they do.
Categories: Broadcasters
Topics: ABC, AOL, Disney, FOX, MSN, MySpace, NBC, News Corp, Yahoo
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