VideoNuze Posts

Walking the halls of the NAB Show this week and talking to other attendees, I was constantly reminded that the TV industry - both networks and local stations - is in transition from "what was" to "what will be."

"What was" is well understood: an economic model built over a 50+ year period through a carefully managed, geographically-demarcated distribution network of local stations that until recently held a de facto exclusive right to distribute high-quality programming. This model worked extremely well for both broadcast networks and stations as they tapped into surging advertising budgets fed by Americans' insatiable consumption habits.

As the great consumptive bubble has burst, the broadcast industry's troubles have come into full view. In fact, with every single element of the traditional model now under attack, it is obvious that "what was" is fast-yielding to "what will be." The problem is that "what will be" is still incredibly ambiguous. Having informally taken the pulse of others at the NAB show this week, the picture that emerges is one of deep concern that "what will be" may be radically different and not necessarily very attractive.

I continue to return to the simple fact that as network program viewership shifts to online, maintaining revenue parity is essential to sustain the cost side (i.e. program development) of the business. If ad revenues come up short then the traditional Hollywood production system will be punished. And the program quality issue is all the more urgent since increasingly popular cable TV programs keep peeling eyeballs away.

For local stations the situation is far more complex, and I believe insoluble in the long run. That's because their monetization challenges are much deeper. Limited primarily to local advertising categories that have been hit disproportionately hard by the recession (e.g. autos, retail, real estate) and the shift to online advertising (e.g. classifieds), local stations must find new ad sources to survive. But where these will come from, in a size that matters, is unclear.

Then there's the fact that the news/sports/weather content that has been their bread and butter has been eaten away by online alternatives. And last but not least is the reality that the broadcast networks, which have embraced all manner of alternative program delivery options, have all but gutted stations' prime-time value.

Add it all up and I for one am stumped at where local stations go from here. Massive consolidation, including possible mergers with their local newspaper brethren, to radically rationalize the newsgathering process in local market, seems more and more likely to me.

The sobering reality that two of America's great industries - automobiles and newspapers - are on their way to oblivion should be a big-time wake up call to broadcasters that a sense of permanence can in fact be illusory. At the risk of sounding alarmist, I think the survival of the broadcast TV industry in its traditional form will soon enough be in question.

What do you think? Post a comment now.

Two highly related broadband video themes - HD delivery and convergence between broadband and TV - are both picking up steam at this week's NAB show. Among the key announcements are:

Adobe extending Flash into digital home devices

Move Networks acquiring Inuk Networks (announced just this morning)

Akamai detailing HD monetization opportunities in new white paper with IDC

Microsoft releasing "Smooth Streaming" HD delivery feature in its IIS Media Services

Limelight supporting Microsoft's IIS and Adobe Flash Media Server 3.5

Brightcove and Adobe expanding its partnership to enable delivery higher-quality long-form programming, among other things

CDNetworks commercially deploying first Adobe Flash Media Server 3.5 for first time

And separate from the show, TiVo and Roku supporting Amazon VOD HD titles

The entire broadband video ecosystem is getting more and more focused on both HD delivery and convergence. However, the former, which is primarily an infrastructure upgrade, is easier to execute on than the latter, which almost always requires users to buy and install some new device (either single or multi-purpose). Given the lousy economy and natural replacement cycles, this means that for many users, those gorgeous online HD experiences will be viewed on their computers for some time to come.

I think that's actually OK though. By proliferating online HD delivery, users will increasingly be getting a taste of what would be available to them if their broadband was connected to their TVs. Further, plenty of early adopters will become evangelists, showing off online HD experiences for their friends and families. Making things more tangible will help create the necessary promotional tailwind that convergence devices need to succeed.

Convergence has been a long time in coming, but the elements are now beginning to fall into place. I believe that the more HD content that's available online, the faster the convergence device market will develop.

What do you think? Post a comment now.

I'm en route to Las Vegas today for the annual NAB Show where I'll be moderating 2 panels tomorrow. There's lots of news coming out of the show. Probably the highest profile announcement yesterday was from Adobe, which plans a new press to get Flash onto TVs.

If you're at the show, or coming in for it, my 2 panels are:

11:15am (Wed) "How TV Broadcasters are Capitalizing on Broadband Video"

• Bill Bradford - SVP, Chief Product Officer, Fox Digital Media Broadband Channels Group
• Colin Dixon - Practice Manager, Broadband Media, The Diffusion Group
• Suzanne Johnson - Senior Industry Marketing Manager, M&E, Akamai Technologies
• Clayton Thomson - VP, Video Strategy and Development, WorldNow

3:30pm (Wed) "How Syndication is Powering the Broadband Video Era"

• Jeff Karnes - VP, Marketing, VoloMedia
• Doug Knopper - Co-CEO and Co-Founder, FreeWheel
• Steven Kydd - EVP, Demand Studios, Demand Media
• Chase Norlin, CEO, Pixsy
• Steve Rosenbaum - Founder and CEO, Magnify.net

Both panels will be in the "Content Theater" adjacent to the "Content/Commerce Pavilion" where many industry companies will be exhibiting (e.g. Brightcove, Limelight, Electronic Arts, Akamai, Kyte, MGM, etc.) Access is complimentary by clicking here, and entering code "X104" Hope to see you there!

Digitalsmiths has added to its executive team, hiring Bob Bryson as SVP of Sales and Business Development and Melissa Sargeant as VP of Marketing. Both are industry veterans; Bob was most recently in a similar role at Move Networks and Melissa was director of product marketing at CA.

Digitalsmiths has been expanding beyond its roots in indexing by also offering content management and publishing solutions. In Q4 '08 it raised a $10M round, and in Q1 '09 it received a strategic investment from Cisco. The hirings continue a trend I see throughout the industry - companies with traction are able to continue to raise money and bring on new talent. Other recent examples include Betawave, Brightcove, ExtendMedia and Tremor Media.

Last week, Time Warner Cable tried turning the page on a public relations debacle of its own making. Glenn Britt, TWC's CEO announced that it would postpone for now the company's Consumption Based Billing trials planned in 4 U.S. markets. The move came in response to a massive negative reaction in the blogosphere, at the grass-roots customer level, and in Congress.

On the one hand, it continues to astound me that the cable industry, which has invested billions of dollars of its own capital over the last 15 years to lead the deployment of broadband Internet access across America, receives virtually no credit for this. Instead it is the constant object of derision and conspiracy theories about its uncompetitive behavior. Unfortunately, TWC's Frick and Frack handling of its planned changes to its broadband billing practices explains why this is so.

Having observed the TWC billing melodrama play out over the last month or so, here are 5 lessons I think TWC and other broadband ISPs should learn:

1. A trial must be legitimate, with well-understood objectives that are communicated clearly

It may seem basic, but when a company runs a trial, it needs to have well-understood objectives that are communicated clearly to all constituencies. My sense is that TWC thought it was doing this, but in reality it wasn't. For example, were the trial's objectives to see how user behavior changes in response to the new billing practices? Or how TWC's network loads and costs are altered? Or maybe provide data to guide its strategy vis-a-vis new online video competitors? None of these things are cited. Rather TWC mentions "bandwidth consumption is growing exponentially," "increasing variable costs" and "Internet brownouts." OK, but what are the trial's objectives and how do they address these concerns?

By definition a trial also needs to be legitimately trying something new to see how it works. Instead TWC makes its "trial" look more like the kickoff of a new pricing plan. So why even bother calling this a "trial" when in fact there's no indication the company is seeking to learn something through some kind of testing? If TWC wants to change its pricing, then just call this step what it is - the first phase of rollout of new billing practices. Whiffs of disingenuousness are easily smelled.

2. Make changes in increments, targeting priority user segments first

A core part of the reason TWC and other broadband ISPs want to switch to consumption-based billing is because some users' online video viewing is surging and ISPs justifiably want to get compensated extra for this heavier network burden.

But if broadband ISPs are most worried about these heavy users, then they should address them first. TWC's mistake was to instead simultaneously also introduce lower price tiers and accompanying consumption caps and overage charges. As a result, instead of a contained minority of its users being affected by the new policy, everyone was. That type of comprehensive approach may have seemed smart in the planning process, but in the execution stage, it's very hard to pull off. Comprehensiveness dissipates the main issue - addressing heavy users - while drawing in outside advocacy groups and politicians to plead for everyone. That's a no-win position.

3. Be prepared to justify the billing changes with specific financial information

TWC argued vaguely that rising network costs were behind the need to change its billing practices. That may well be true, but by not disclosing more specifics, the company left itself vulnerable to naysayers. For example, in this NY Times interview, TWC COO Landel Hobbs was thrown some questions about whether in fact much of TWC's costs are fixed. He should have been prepared to respond in detail, citing specific capex or opex numbers that can be correlated with heavy video usage. Instead he ducked the questions, deferring them to a subsequent interview with an engineer. All of that leaves the reader suspicious about his arguments' legitimacy.

If a senior executive is going to be offered up for a NY Times interview, he should use the opportunity to make the strongest case possible for the planned change. In the wake of the Wall Street financial crisis, people increasingly expect accountability and transparency from senior executives. Poorly understood corporate decisions by fiat are prime for backlash.

4. If billing is to be metered, make sure customers have the ability to measure

Here again is PR 101 - if you're going to change to metered billing, customers need to know how they can measure and modify their usage. But TWC offered no specifics about the availability of a useful meter, or any demo of how it would work. Instead it said it would offer a grace period of 2 months on overage charges.

Talk about an impractical plan. I think most people understand and like the idea of variable pricing - paying just for what's used. But if they don't have to right tools to measure their usage, the model looks hollow. TWC ultimately acknowledged it is "working to make measurement tools available as quickly as possible." Hallelujah.

5. Billing changes need to be tied to online video policy

Simmering just below the surface of the billing change backlash is a suspicion that TWC is introducing these caps to constrain online video usage. You don't have to be a conspiracy theorist to understand that if an ISP like TWC charges more for access to 3rd party delivered video it will limit is use. TWC should have known it was prime for this allegation and been proactive about how it relates these 2 issues.

For example, what if TWC had acknowledged that some users prefer online program access, and that if they select its top capped rate of $150/mo now they will be forever grandfathered into that rate, even as their video usage grows further? Only a minority of users would have likely taken the plan, but it would have helped TWC demonstrate acceptance of 3rd party delivery.

Conclusion

What do you think? Post a comment now.

Late yesterday YouTube announced "a new destination for TV shows and an improved destination for movies," moves that continue the site's evolution from its UGC/video sharing roots to an aggregator of premium-quality video.

The reality is that this evolution has been underway for some time now, and I expect it will only continue. Two weeks ago in "6 Reasons Why the Disney-YouTube Deal Matters" I explained again why, as the 8,000 pound gorilla of the online video market, YouTube is in an excellent position to partner with premium content providers. In a media landscape marked by massive audience fragmentation, the online destination (YouTube) that accounts for 40-50% of all streams and is 15 times as big as the #2 destination (Hulu) is quite simply a must-have promotion and distribution partner.

The new destinations address what has been an ongoing Achilles' heel for the site - enabling users to easily find premium video "needles" in YouTube's user-generated "haystack." YouTube's UI weaknesses for premium video have been highlighted by the gold-plated user experience Hulu - and more recently TV.com and Sling.com - have brought to market. The sites have quickly gained passionate fans, and at least in the case of Hulu, significant viewership.

Possibly more important though, is that for content providers they show how YouTube is serious about addressing their needs for clean, well-lit spaces. Premium content providers want the benefits of being in the massive YouTube site, but without the risk of their brands showing up too close to scruffy UGC material. Being clustered with other premium content is a must.

YouTube's concurrent beta launch of Google TV Ads Online, which allows targeted instream ads, is another positive for premium content providers. Beyond YouTube's massive traffic, Google's potent monetization capabilities are the other reason I've been so bullish on YouTube's prospects for premium content. As I wrote on Monday, with increased DVR penetration driving rampant ad-skipping, broadcast and cable's traditional ad model is looking more and more defunct. Online video ads offer a lot of promise as an even higher value ad medium, but much of it is still unproven. Having large players like Google and YouTube involved is significant for showing online video advertising's true upside.

One last take on this is how YouTube continues to position itself in the "over-the-top" sweepstakes, where multiple competitors are vying to be viewed as bona fide substitutes for cable/satellite/telco subscribers itching to cut the cord. I remain skeptical that the trickle of cord-cutters is going to turn into a gusher any time soon, but I will say that with its move up the content ladder, YouTube continues to burnish its standing as a must-have partner for any convergence device-maker looking to make over-the-top inroads (e.g. Roku, Vudu, AppleTV, etc.). YouTube is the most-recognized online video brand, the most-heavily trafficked, and increasingly a credible alternative to premium aggregators like Hulu and others.

For everyone in the online video ecosystem, YouTube continues to be a key player to watch.

What do you think? Post a comment now.

To date most cable networks have put a lot of promotional clips online and a few have even put some full length programs up as well. But for the most part cable networks have been constrained in how much original content they distribute online due to their lucrative monthly affiliate deals with cable/telco/satellite operators (though this too may change with Comcast and TWC pursuing online distribution plans).

I've noticed these webisodes announced just in the last couple of months:

• Freshman Year (CNN) - follows the day-to-day lives of 2 first-year congressmen
• In Men We Trust (WETV) - 4 single women learn the rules of the dating game
• Great and Telling Tales by Timothy Dickinson (History) - animated shorts explaining unexpected moments in history
• Off Track with Tony Stewart (Turner Sports/NASCAR) - behind the scenes with star racing driver
• Special Report with Bret Baier (Fox News) - webcast continuation of on-air news discussion
• Walt's Warning (AMC) - first-person video featuring "Breaking Bad" cast
• FoxBusiness.com Live (FBC) - one hour weekday financial show

(No doubt there are others as well, so apologies to those I may have missed)

The webisode format breaks the traditional limitation of having a finite 24 hours/day of "shelf space" for networks to program. I think what's happening here is that cable networks are experimenting with the low-cost webisode format both to reach online users and also to see what might graduate to on-air. The webisodes allow them to bridge their brands between traditional TV and broadband to see what sticks. And some webisodes may even making money for their networks already. "Off Track" for example is showcased in an Armor All "Owner Center" sponsored environment.

CNN's Freshman Year is a good example of how one network is pushing the envelope. In the series, CNN has given Flip video cameras to 2 new congressmen, who use them to show what life is really like on and off Capitol Hill (it's not glamorous that's for sure). The concept is a natural extension for CNN's politically-interested audience, and capitalizes on the tailwind of the '08 election cycle. While the production values are well below what's typically seen on-air, there's something compellingly authentic (and yes voyeuristic) about the wobbly, poorly framed footage offered up by the congressmen. For sure you come away with a far better sense of what these guys' lives are like than you would from a slickly-produced 1 hour special.

All of the 7-13 minute episodes have pre and post rolls, from brands like IBM and Sprint. I've noticed CNN starting to promote the series through on-air spots as well, which is a key webisode audience-building all the networks have. However, CNN really needs to make the series more visible on the web site. Aside from a periodic ad, a site visitor wouldn't know the series existed or how to find it. This is a common problem with the other networks' sites as well.

It's way too early to know how sticky the webisode concept will be for cable TV networks, but on the surface I think it offers a lot of opportunity. Cable networks are not immune from audience fragmentation and consumers' changing expectations. Finding ways to reinforce viewer loyalty and generate additional revenues is a must.

What do you think? Post a comment now.

As more and more companies begin to exploit the power of video for promotion or product support, many individuals who have never managed the process of actually creating a high-quality video are getting a taste for how hard it is. Market7 is a new company that streamlines the collaboration process essential to producing high-quality video. Market7 was born from the frustrations that founder/CEO Seth Kenvin experienced trying to create company and product videos while VP of Strategic Marketing at Big Band Networks. Last week Seth explained to me how Market7 works.

As with other marketing or promotional collateral, at high level, the video production process starts with getting all stakeholders on board with the project, its goals and budget. But once approved, there are myriad production steps such as writing and finalizing the script, shooting and then managing the assets, editing, gathering comments on rough cuts, editing some more, and of course trying to keep the project on schedule. Often these steps are managed by a 3rd party video producer, but they still involve a lot of client interaction. While there are individual products for each of these process steps, Seth believes Market7 is the first all-in-one solution.

Market7 allows the project lead to manage process, including setting up tasks, timelines/deliverables and team member responsibilities. Producers upload video assets and other team members are able to annotate the video with their comments, including on the video itself at specific points. That allows feedback to be highly targeted ("the background is too dark in this scene") and thus more actionable by editors. Market7 is not meant to be an online editor, but rather a collaboration environment that moves a project from script development through to final cut as efficiently as possible. The full product suite is available as Software-as-a-Service (SaaS), with pricing based on storage, admin accounts, support level and branding flexibility.

While Seth believes there are lots of different potential customers, he sees the sweet spot in corporate video production, with the videos used for online promotion, trade show support, on-site product demos or internal use. That said, there are a number of agencies using the product, along with an animation studio, infomercial producer and a couple of broadcast and cable TV networks. Market7 is a little bit like Wistia, another early stage company I wrote about recently that's also enhancing collaboration around video production. I'm very intrigued by these kinds of companies that are sprouting up around the video ecosystem. Neither one is likely to become a direct substitute for big budget video productions, but with so many new companies now trying to tap the power of online video, cost-effective yet robust tools like Market7's address real pain points in the market today.

What do you think? Post a comment now.