VideoNuze Posts

OK, Hulu now has ABC in its corner for the next 2 years, along with a re-upped program exclusivity commitment from NBC and Fox. But the nagging question remains: even with all its premium content, fabulous user experience and surging traffic, when will Hulu prove its business model? How that question gets answered will be the real test of Hulu's ultimate success. And with 3 of the 4 broadcast networks now hitching themselves to the Hulu locomotive, the answer is also going to be pivotal to how the industry navigates the broadband video era.

To be clear, VideoNuze readers know that I've been a big fan of Hulu from Day 1. The site has only gotten better over time, not only with more content added, but by continued improvements in the user experience. All of this has no doubt contributed to Hulu's rapid rise up the usage rankings, landing it in the top 3 for the first time in March, with 380M views, according to comScore.

A source familiar with the Disney deal told me the deal was entirely predicated on Disney's desire to tap into Hulu's audience in order to increase ABC's online reach. Among other evidence indicating Hulu's upside potential, comScore data apparently showed that only 8% of the ABC.com audience visits Hulu and only 13% of the Hulu audience visits ABC.com.

To me, three indicators of how much the Hulu deal meant to ABC are the 2 year exclusivity commitment, the redistribution rights for ABC programs to 3rd parties Hulu gained (except for grandfathered ABC partners), and that ABC will allow its programs to be viewed outside of its much-celebrated video player for the first time.

Importantly, the former two terms effectively foreclose any full-length program distribution deal with YouTube and others. For now at least, ABC will limit its relationship with YouTube to clips only. That's a pretty big call; remember YouTube is the category leader that not only has a 40% share of the market, but is also currently over 15 times the size (in streams) of Hulu. There's also YouTube's relationship with Google, which of course has the most formidable online monetization engine (albeit one that hasn't been fully leveraged by YouTube as yet).

The YouTube decision underscores my ambivalence about the broadcast networks' singular embrace of Hulu because there's little evidence that Hulu has yet developed a profitable or sustainable business model. I've written previously about the paucity of ads in Hulu (and broadcasters' own sites for that matter) and how this is creating user expectations that are going to be hard to reset when more ads are inevitably loaded in. One of the reasons users love Hulu is because it is so light on ads. But will Hulu's traffic flatten or decline when the non-skipppable ad load is 2x, 3x or 4x what it is currently?

Further, there was no evidence of customized ad creative or formats meant to incent deeper engagement (unless you count the companion banners prompting users to click to learn more). Deeper engagement and interactivity are supposed to be the calling cards of broadband video advertising. But the ads on Hulu appear to be the same as seen on-air, suggesting Hulu hasn't been able to persuade its brand advertisers to invest in custom creative to leverage the Hulu environment.

Now I know we're in a recession, but still, over a year since Hulu's official launch, and with its tremendous traffic growth, I think all of this is cause for real concern. Hulu is being embraced by the broadcast industry as its main online video vehicle, yet it isn't close to proving it has a model that can actually make money. I don't have insight as to what's going on here, but I hope the networks that are exclusively entrusting their prized programs to Hulu - and consequently incenting huge real-time shifts in viewer behavior - do.

Longer term of course, the networks' bet on Hulu becomes even more profound. That's because as convergence devices of every stripe bring broadband viewing all the way to users' TVs, there's going to be inevitable cannibalization of viewing traditionally done through linear on-air/cable delivery. (Btw, despite much-heralded research to the contrary, anecdotal evidence suggests this is happening already. Just go ask any college student about their viewing behavior.)

Down the road, networks are going to be increasingly reliant on broadband-based ad revenue as their main meal ticket. And if all that's being served up are digital pennies, nickels or dimes - as I believe Hulu is delivering today - then even all the usage in the world will still leave the networks very hungry indeed.

Now that ABC has thrown in with Hulu, you have to believe CBS will as well. With all of the networks on board, they're increasingly betting the industry on the hope that Hulu can figure out its business model. For their sake, let's hope it can.

What do you think? Post a comment now.

After a couple weeks away from this podcast, Daisy Whitney and I are back. This week we discuss our observations from the recent NAB Show and also the larger issues affecting the broadcast TV industry. Both of us have been watching the trends closely and will continue to report on them.

Here I am at BWI airport getting ready to send today's VideoNuze email and in pops the news that Disney is taking an equity stake in Hulu, bringing lots of its prized programming along. The rumor mill has swirled for a while that a deal was forthcoming, now it's here. The press release is not yet up on the Disney site. I'll have more thoughts later.

I chatted with Sezmi director of product marketing Barbara Cassidy at the NAB Show last week and had a follow up call with co-founder/president Phil Wiser yesterday to get an update on the company's progress.

Sezmi is now aiming for a Fall '09 commercial rollout. Phil explained the launch was pushed back by roughly 6 months. The company is continuing to optimize the user experience. It is also being conservative with resources in the wake of staff reductions last Fall (and the economic slowdown), and is seeking to align with the '09 holiday season/its channel partners' goals. In the meantime the Seattle trial is continuing.

What do you think? Posta comment now.

The syndicated video ad management company FreeWheel has announced that it has raised a $12M Series C round led by new investor Foundation Capital and existing investor Battery Ventures (prior funding rounds have not been disclosed). The up round provides continued evidence of fundraising strength in the broadband video sector, coming on top of at least $80M raised by industry companies in Q4 '08 and Q1 '09. Doug Knopper, co-founder/co-CEO gave me some additional background this afternoon.

Funds will be used primarily for building headcount, integrating with broadband video ecosystem partners and continued product development. The company is up to 70 employees, spread between the U.S. (25 total between NYC and Silicon Valley) and China (45, all in development).

Doug echoed what industry CEOs have been telling me for months now - it's a brutal fundraising climate, but the video sector is very hot and companies with real traction are still highly sought-after. Investors recognize the shifts in consumer behavior and ad dollars and think we're still on the front end of these trends. While content investments have cooled, enabling technologies and services are still very attractive. At the NAB Show last week I got a heads up on additional financings to be unveiled soon.

FreeWheel has been very quiet about announcing customers, but Doug says there's plenty in the hopper and some news to come soon. No doubt there is given investors' continued confidence in the company.

What do you think? Post a comment now.

Last Friday, in "Broadcasters in Transition at NAB Show. But to What?" I painted a pretty downbeat picture of local broadcast TV stations' prospects in the broadband era. Coincidentally this week I had briefings with Syndicaster and Grab Networks, two companies offering technology solutions that could set local stations on the path to reinventing themselves and capitalizing on the Syndicated Video Economy.

Though quite different in the scale and scope of their product offerings, Syndicaster and Grab share a common starting point: local stations need to learn how to better leverage and distribute their video content into the broadband ecosystem. Doing so means local stations must have the right tools to ingest, prepare, distribute, track and monetize their content - all steps that go far beyond their traditional and well-understood broadcast work flows.

For its part, Syndicaster capitalizes on its parent company's (Critical Media) position of capturing and digitizing hundreds of local stations' broadcast signals. Syndicaster providers a web interface to transcripts of each on-air segment, which an editor is then able to easily edit into clips, generate metadata and distribute online. The process is very straightforward, and in the demo I saw, clips from various stations already using Syndicaster were being added in real-time.

More recently Syndicaster has added the ability to upload video directly from the field to further compress the time required to get video up online. It has also integrated with Brightcove, YouTube, Yahoo and others for one click 3rd party syndication. It plans for user-captured video to be incorporated into the video catalog and a widget distribution model. Yesterday the company announced Journal Interactive is using the platform, along with other customers Bloomberg Television, LIN TV and Bonneville.

Separately, Grab Networks, a company that was formed from the merger of Anystream and Voxant last Fall has in the last 60 days begun taking the wraps off its integrated solution, with plans for a formal announcement later this quarter.

Grab too, begins with multiple ingestion options. But a key difference is that Grab auto-generates clips from the video feeds, assigning metadata to them and indexing them for editorial review or straight publication. This process, which Anystream has been working on for a long while, uses its own algorithms to analyze 40 different "tracks" of information about the video (e.g. speech-to-text, scene detection, facial recognition, close captioning, etc.). It then statistically distills the information gathered to generate the clips, metadata and index.

Grab believes this core proprietary process is the heart of its value proposition and persuading broadcasters of its efficacy has been a key part of its early sales efforts. Grab executives explained that many customers are initially skeptical that all of this can be done by without human intervention, but upon seeing the results have become believers. (I only saw a limited demo, but it looked pretty darn good). Recognizing that some producers will want to refine clips further, Grab offers an editing module. It's important to understand this process doesn't just make publishing clips more efficient, it also creates more inherent value in each clip as the greater intelligence each clip now has enhances its discovery and monetization potential.

What do you think? Post a comment now.

Given the pervasiveness of gloomy economic news, I'm always on the lookout for evidence of growth, especially in the broadband video space. That's why news that TurnHere, the broadband video production and advertising company, shared with me last week caught my attention. The company will report later this morning that its business has doubled in '09 vs. '08. John McWeeny, TurnHere's COO briefed me last week on what's behind the improved numbers. Understanding TurnHere's model offers plenty of lessons for other broadband video market participants.

As background, TurnHere has developed a global network of 7,000+ independent filmmakers, which it taps into for soup-to-nuts creation of made-for-broadband content for its clients. TurnHere only accepts into the network well-credentialed professionals who are thoroughly vetted. The company's clients come from two sources. First, from channel resellers, who are primarily Internet Yellow Pages companies selling online ads to local businesses that increasingly want a video presence online. And second, through direct sales to brands who increasingly want to capitalize on video's impact on their web sites. '09 growth is coming in equal parts from both sides of the business.

Listening to John describe TurnHere's business, I was repeatedly struck by the fact that this is a pretty complicated business to run successfully. Clients are in multiple locations, necessitating multiple filmmakers to be involved in projects. Yet brand standards and formats must be adhered to for consistency across videos. And often there's a 3rd party agency or marketing/online consultant involved that must be pleased as well. Tight budgets and timelines are the norm. So making all this work is not trivial. In fact John remarked that one of the company's core competencies is "how to leverage a distributed network of creative people." That seemed like a spot-on assessment to me.

To succeed, TurnHere has developed strict internal policies and procedures to guide its work. Everything from recruiting filmmakers to selecting them for projects to scoping the project with clients to managing the video production process to reviewing filmmakers' work has some formal structure around it. John explained a key differentiator for TurnHere is its laser focus on video that is made-for-broadband. The company is not aiming to make commercials that run on-air and cost hundreds of thousands of dollars. Rather, it looks to produce high-quality, yet inexpensive shorts in a documentary-style, with real people, not actors.

The result is that for clients used to getting just one ad for their budget, they are now getting dozens or even hundreds of web-only videos. TurnHere's surging business is due to more marketing executives opting to allocate budget to the new broadband video medium to reach their target audience vs. following traditional TV advertising rules. When you read research about ad budgets shifting to online, TurnHere is right on the front lines of making this happen. The company has done work for brands like InterContinental Hotels, Williams-Sonoma, American Express and others.

Emphasizing attributes like process development, specialization, customization, flexibility, affordability, reach and quality are the reasons TurnHere is succeeding, despite the down economy. In fact, a lot of what John said echoed what Demand Studios' EVP Steven Kydd told me recently. Demand Studios too is focused on building processes to crank out large volumes of high-quality web-only video. Yesterday's post on how SundaySky is enabling automated video from web-based content is yet another example volume-based video production.

The common themes here are that broadband video is a different medium than TV. People who want to succeed in the broadband video medium - whether as content providers themselves or in service to content providers or brands - need to recognize the differences and engineer their businesses appropriately. Scale and cost-efficiency matter a lot more in broadband than they did in TV where expensive, hand-crafted video was the norm. In this context, learning how to blend technology with creative talent is going to be a real competitive differentiator.

What do you think? Post a comment now.

An occupational hazard of following the online video space as closely as I do is that it's rare when I see a technology that feels truly breakthrough. So when it happens, it's not only an "aha!" moment, but also a tangible reminder of how much running room the online video industry still has ahead of it. These were my reactions when SundaySky's CTO and founder, Yaniv Axen, showed me a private demo of the company's "DynamicVideo" platform and explained its model to me.

In a nutshell, DynamicVideo integrates with a web site's database or content management system, and then upon a user's request, it creates short videos out of specified pieces of web site content, completely on the fly. Yaniv explained that DynamicVideo does for building on-the-fly videos what ASP or JSP does for creating dynamic web pages. All of the generated videos are completely customized based on the specific pieces of site content being assembled.

The process of implementing DynamicVideo starts with an upfront creative step in which SundaySky works with the site's team to create "Videolet" templates. This step includes generating all the creative elements (graphics, voiceovers, music, etc.) that would conceivably be needed in any of the videos to be created, along with the shell templates for the videos. When a user request a video, what's happening is that the required content is pulled from the site's database/CMS, matched against the corresponding creative elements and assembled into the correct shell template. All of this happens instantaneously and the video begins playing as quickly as you'd expect a web page to load. SundaySky also provides full analytics so it's easy to test and optimize different pieces of the video.

All of that may feel a bit abstract for some of you. Yaniv showed me several different mock implementations (though the company isn't ready to show any publicly, Yaniv did supply this example of an Israeli ecommerce site, which really just scratches the surface). One of the mockups was for Expedia. Imagine clicking on a suggested hotel and instead of (or in addition to) scanning the page for the hotel's number of stars, proximity to attractions, pictures, reviews, rates and contact info, a 1+ minute video instead presented it all to you. I believe the video brings the hotel to life far better than even the best-designed page can.

The mockups showed a broad range of potential applications: MyYahoo (personalized video summary of recent updates), CNET (product comparisons), YellowPages search results (vendor profile information), MySpace (social media presentation) and NBA.com (6 degrees of separation game). Basically, any content that can be extracted from a database/CMS becomes fodder for a video, tailored to the site's particular goals.

What's most compelling to me about SundaySky are the financial implications for content providers. Implementing DynamicVideo allows site owners to generate not just a ton of new and highly targetable videos and but also a ton of associated ad inventory (the idea of a "this video brought to you by" brand slate is a natural). Site owners can also deliver a totally new consumer experience that helps them meet users' increasing expectations for video. This can only help drive higher engagement and desired actions.

And last but not least, by providing a low-cost and automated "manufacturing" process for creating an unlimited number of videos, SundaySky completely changes the video business case, thereby enabling more sites to profitably embrace the online video medium. As I wrote recently in "Inside Demand Media's Content Factory," sites that learn how to crank out large volumes of high-quality video will have real competitive advantages in the broadband era.

On the heels of an $8M first round it raised in January, SundaySky is just starting to share more details. Yaniv alluded to a couple of big media deals coming soon. But, for competitive reasons, it's still keeping things very close to the vest. If its platform scales as well as the demos suggest, this is going to be a very interesting company to watch.

What do you think? Post a comment now.