VideoNuze Posts

At long last YouTube has launched "Video Identification" in beta, its answer to copyright owners who feel YouTube has built its business on the back of their copyrighted content.

Having not seen the system in actual use, it's impossible for me to judge how well it works. But having read how YouTube describes its approach in developing the system, considering how it allocates responsibilities for copyright protection with the rights-holders themselves and thinking about the bigger picture challenges all media companies face in the broadband era, my initial reaction is that Video ID is a pretty good first step.

YouTube's approach - As the Video ID page says, YouTube was guided by 3 motivations in creating the system: accurate identification, choice for copyright holders and a great user experience. While there will be plenty of debate about how much emphasis each of these should have received relative to the others, my guess is that the DMCA's requirements and the health of YouTube's business drove the final balance. While YouTube has an image problem with major media which it would like to improve, nobody can expect that the company's SOLE motivation in developing a copyright protection scheme should be the concerns of copyright holders. Whenever I read a copyright holder complaining about YouTube or other piracy issues, I wonder, would these people only be happy if we returned to the pre-Internet age? Since that's not going to happen, less complaining and more adjusting is what's required of media companies now.

Allocating responsibilities - The most controversial part of Video ID will likely be the requirement that copyright holders provide their videos so YouTube can build its database against which to judge alleged pirated copies. The predictable reactions will be "it's too much work", "we don't trust that YouTube won't misuse it and "why should we?". There will be much second guessing whether other technical approaches not requiring submitting full video files would have been as effective. Of course nobody knows for certain, so at the end of the day either you trust that Google, with its pantheon of computer science experts, vetted the options well and selected the best choice, or you don't. It's ludicrous for lawyers and media executives who have never written a line of code in their life to suggest that Alternative A or Alternative B would have been better. I suggest that for now media companies give YouTube the benefit of the doubt. It is incumbent on YouTube to show it will be responsible with these video files and that having them really does make the Video ID system work well.

Bigger picture challenges - YouTube isn't going away, nor are the other video sharing sites. Broadband isn't going away either. And lastly, consumer behavior isn't going to change back what it was in the pre-Internet era. Media companies need to accept that the world is what it is, and learn to adapt themselves to it to succeed. My sense is that Video ID gives media companies all the options they should desire or expect: having the offending content removed, having it continue to run as promotional fodder, or making money off it through a revenue split (though these percentages are TBD). These tools, if they actually work, will give media companies lots of new flexibility to exploit their content with by far the largest audience of broadband video users. If media companies choose not to participate, shame on them for sticking their heads in the sand and wishing the world would return to a simpler time. YouTube has demonstrated for all of us what I believe and have said many times: that broadband is the single most disruptive influence on the traditional video industry. Companies that don't recognize this and don't work with the YouTubes of the world to adapt themselves will ultimately be rendered irrelevant or worse.

Maven Networks got a lot of ink today with 2 announcements, first the launch of a new broadband ad platform and the second, the launch of a new industry collaboration dubbed the "Internet TV Advertising Forum." These have been in the works for a while and Maven gave me a heads up on both over the summer.

The Ad Forum is noteworthy, as it appears to be a genuine "good guy" effort to move the whole industry forward in optimizing the ad model. Ten companies signed on for launch, including heavies like Scripps, Fox News, Oglivy, TV Guide, Microsoft, DoubleClick and 24/7.

I caught up by phone with Kristen Fergason, Maven's VP of Marketing to learn more. First, the Forum is completely open to everyone. Though initially underwritten by Maven, over time it will probably take on more of a "dues-paying" model. And to show that "open" really does mean open, I asked what happens if competitors like Brightcove for example, wanted in? Her reply: "we'd happily accept them".

The forum is mean to bring together agencies, content providers and vendors to build consensus about how to move past the market's current reliance on pre-rolls. Kristen said industry players have been "chomping at the bit" to get involved and Maven received 40 applications today alone. Importantly, the Forum is meant to augment IAB initiatives, not compete with them. The Forum will run focus groups and collect research based on ideas generated by Forum members to see what works and what doesn't. Results will be available to everyone.

Maven believes that a "rising tide lifts all ships", but because its ad platform is ready now, it will benefit disproportionately. That's where today's other announcement comes in. The demo I saw shows how new ad units (videos, overlays, banners, etc.) can be dynamically inserted, not just at the beginning of the video, but throughout. The result is that a lot of new inventory is available. The below graphic shows "cue points" for manual insertion, but an algorithm can also be used to insert based on what the system knows about things like clip length, average user session time, click-thru, etc. Note I didn't see this feature in action, so I can't say for sure how well it actually works.

Black Arrow has been around for a while but went under the radar for the past few months. Now it's re-emerging, with new CEO Dean Denhart installed about 6 months ago.

Dean briefed me last week on news the company announced today, which included closing a $12M B round from existing investors Comcast, Cisco, Intel, Mayfield and Polaris and officially launching their ad platform.

The company is trying to differentiate itself from many others serving ads in the broadband video space by tackling the thorny problem of also inserting in both the DVR and VOD environments. DVR insertion today is non-existent and for VOD it's not scalable. To succeed, the company will need to integrate its servers with the service providers, which is no easy feat. As many of you know, the rap on cable operators - and I've experienced this first-hand - is that selling into them wears out early-stage companies, using up precious time and capital in long drawn-out testing, selling and negotiation cycles.

If Black Arrow survives this process and proliferates its gear into headends, it will have a formidable competitive advantage against competitors. And on the encouraging side, in the cable world at least, a nascent set of standards dubbed "DVS 629" governing digital ad insertion is now being worked on. Black Arrow is following these closely. Dean explained that the company has proven in its technology and in 2008 it will be pursuing field trials and initial rollouts with major operators. Certainly having Comcast as a lead investor can't hurt its chances.

Black Arrow's real appeal to content companies will only begin when it has significant deployments. Dean explained that while the cable sell-in process continues to unfold, it will follow a parallel track of managing ads for broadband, with the longer-term value prop of multi-platform support. And it's taking a wait-and-see approach on which business model to use to fund the capex for proliferating its servers. An analogous and interesting approach is the one Akamai has mastered - i.e. not charging ISPs. Instead it positions its gear contributing to top-line growth and opex reductions. This strategy has been a massive success for Akamai, helping it achieve widespread deployments and a huge entry barrier for competitors.

I really like this company's vision; however achieving it in full is going to take tenacity, patient and deep-pocketed investors and a few good breaks.

Question: What do Frito-Lay, Unilever, Neiman Marcus, Heinz, Toyota, Smirnoff and MGM have in common?

Answer: In just the last month each of these companies has announced plans to launch some type of broadband video marketing program. Beginning of a trend? You betcha.

Premier brands from one industry to another are recognizing the importance of using video to reach out to and engage better with their customers. Yet I read with interest this piece in yesterday'sWSJ, discussing a big marketers' conference that sold out for the first time ever this year. Adapting to the digital world is a top concern. A Booz Allen survey found that most marketers allocate only 5-10% of their ad budgets to digital media, while online usage continues to soar.

So kudos to the companies mentioned above and the others which are taking their first steps into the broadband world, trying to figure out what tactics work in this new era. Their efforts are varied and reflect the sense of experimentation pervading the market. Consider - Frito, Heinz and MGM are all using some type of content to incent UGC activity. Unilever's Dove soap and Smirnoff are posting original video on YouTube, trying to catch a viral wave. Meanwhile Toyota has devised a new Xbox game called "Yaris" after one of its cars.

As the Super Bowl season approaches, we can expect a lot more broadband video activity from the marketers. Almost 2 years ago I wrote, "The $10 Million Super Bowl Ad". It's worth a peek, I think we're heading in that direction as marketers realize how broadband tie-ins can breathe huge additional life into 30 second Super Bowl spots.

The news that eBay was going to write a portion of its Skype purchase did not really surprise many people, although its magnitude, $1.4B out of $2.6B paid still felt shocking. At the time of the deal, it seemed the only

Not to take anything away from the potential of Joost, the pair's much-heralded broadband video aggregator, but if you were considering making an investment in the company or any other in the video space, wouldn't this whole eBay-Skype affair make you cautious? Seeing such a gigantic writedown, and now the admission that the projections has to make prospective investors just a little more cautious about Joost, and all other video players as well.

I'm asked frequently, is there a bubble in the video space? I think the answer is that yes, investors are getting too enthusiastic, as they always do when they smell a transformative opportunity. The Skype writedown is a reminder to all investors in the space that being optimistic about broadband's potential is right, but keeping their sanity regarding valuations is critical. eBay just reminded all of us of the cost of not doing so.

RBI is installing microwave links around NY, with plans to expand to Brooklyn and New Jersey soon and elsewhere in the U.S. eventually. They have at least 2 clear value propositions, first redundant connectivity to primary fiber connections, and second, broadband access to class B and C buildings, whose tenants might otherwise not be able to get anything better than a 1.5 mbps T1 service currently.

To put RBI in perspective, they're most popular service is a 10mbps connection that has a list price of $1,250/mo. 5mbps is $625/mo. While a lot of their business is still for data and voice applications, video is coming on strong. Consider all the broadband video companies located in downtown NYC alone, which must have reliable connectivity and it sure feels like RBI has a lot of room to grow.

Often lost in the hype of UGC, social networking, etc, is the undeniable fact that absent robust, economical broadband connectivity, the companies supplying these services wouldn't be viable nor would there be audiences in the first place who could gain access.

As video becomes an ever more important part of economic growth, especially in metro areas with creative communities, broadband infrastructure is vital. Isn't it great to know that bandwidth companies like RBI continue to flourish?

As I have written repeatedly, robust syndication is a crucial piece of the broadband video economy. That's because advertising is going to be the main business model for a long time to come. And the only way to make the ad business work is through massive traffic increases, and of course improved ad monetization methods.

There's no better way to scale up traffic than through turnkey syndication. Google's ability to harness AdSense as a combination video syndication engine and monetization platform for content providers (by eventually marrying video units to AdWords) is unmatchable by anyone else.

As Google expands this initiative, it will be simultaneously alluring and threatening to others. Trying to capture the same benefits without the same underlying technology infrastructure and far-reaching distribution network is going to be very challenging to replicate.

Take for example, Hulu, the News Corp/NBCU JV, meant to regain control over their broadcast TV programs. Hulu has been striking its own distribution deals and will no doubt monetize its traffic with a "feet-on-the-street" ad sales approach. While there are benefits to this approach to aggregate the biggest sites as partners, Google's one-stop syndication/monetization capability provides the turnkey, hands-off approach needed to gather up the all the rest of the market (i.e. the Long Tail).

Depending how Google chooses to split the revenues between AdSense partners and content providers, Google/YouTube could well become a dominant part of the broadband-centric video value chain that is now taking shape.

Two conversations I had last week, with executives at two separate independent video content companies, one based on a pay model, and the other on an ad-supported model, struck the same theme: the "grass must be greener" for other's model.

These conversations were illustrative of others going on across the video landscape today. Everyone's grappling with which model offers more profitability, stability and growth. At least for now, ad-supported appears to have the "greener grass".

Paid sites are struggling with the fact that so much video has come online in the past couple of years that the bar to get users to open their wallets moves higher each day. The question becomes, "what sorts of video are consumers truly willing to pay for when so much is now available for free?" Of course, the more free stuff there is, the less compelled users feel to pay, even to get something good. Thus a major struggle ensues for pay sites to generate sufficient volume to become profitable.

The rising supply of video makes life equally tough, if not tougher, on the ad-supported sites. Breaking through the noise with quality content is no simple trick. Great content is table stakes. I think the real differentiators are great marketing and distribution which leads to significant awareness, traffic and revenues. So skills like knowing how to create a viral wave, strike partnerships with portals that have real teeth, and syndicating to many smaller players, are all paramount. And that's all before the skills required to sell ads and actually generate revenue.

The grass will remain greener for ad-supported for some time to come. When broadband to the TV becomes widely adopted, Hollywood is willing to cannibalize DVD revenues, formats are further standardized and consumers are better acclimated to broadband delivery, the pay model is going to take off. The ad-supported model is no layup, but with the right ingredients, success is currently attainable.