VideoNuze Posts

Some of you may have noticed the VideoNuze site was down intermittently this week, and also that you did not receive emails from me this past Monday or yesterday. That's because VideoNuze was the target of a persistent and vicious hacker. What a nightmare. If you've ever been on the receiving end of a hacker's onslaught, I know you'll be able to relate. If you haven't, consider yourself lucky.

Suffice to say it's been a week I'd like to forget. We've scrambled to make a series of fixes. VideoNuze isn't out of the woods yet, so you may still see some interruptions of service. But our blood pressure is returning to some semblance of normalcy and we're in a better position than we were a week ago. Thanks for your patience.

Many of you know that Google has recently begun distributing short animated videos from Seth MacFarlane (creator of TV's "Family Guy") to a wide network of sites that previously only received ads from Google, through their participation in AdSense. The company dubs this the "Google Content Network" (GCN for short), and from my vantage point, it has a lot of potential and implications for other players in the video distribution value chain. Yesterday, I spoke to Alexandra Levy, Google's Director of Branded Entertainment, and the point person for driving this initiative.

The first thing that resonates for me about GCN is that Google's vision for it harmonizes perfectly with my concept of the "Syndicated Video Economy." VideoNuze readers know that last March I introduced the SVE concept to capture a trend that I was noticing: an ecosystem was forming to distribute broadband video widely across the Internet, in contrast to the traditional, narrower distribution model.

Alex echoed the SVE, saying that in her many conversations with content producers, finding an audience is their top challenge. Great content, unwatched, is like the proverbial tree that falls in the forest when nobody is around to hear it.

So enter GCN, which Google rightly sees as a "media distribution platform." To understand its implications fully, you have to evaluate its potential to all relevant constituencies: Users get great updated content served to them at the sites they already visit. Those sites benefit from offering premium content, while also receiving a revenue share on the accompanying ads. The content provider benefits from leveraging Google's vast AdSense network to have video "pushed" to relevant audiences, increasing viewership and engagement. And advertisers' brands benefit from adjacency to premium content that is sought after and compelling.

Of course, last but not least, Google benefits from being the intermediary in this whole process. We all know from Google's massive success in web search that being the intermediary in a model where all constituent interests are neatly aligned creates near-infinite economic value. While Alex concedes the MacFarlane video (which is sponsored by Burger King and was brokered by Media Rights Capital) is still an "experiment," GCN sure does seem to bear a lot of resemblance to Google's traditional search model in the alignment of constituent interests.

Another twist here is that users who click for more video are driven back to MacFarlane's YouTube channel (already the 69th most subscribed channel, with almost 70K subscribers), which drives habituation, a key lever for ongoing video success as any network TV executive will admit. In this light, GCN gives Google a way of finally tying its powerful AdSense engine to YouTube. I'm not suggesting that Google is sweating the ROI on its $1.6 billion YouTube acquisition, but GCN surely looks like a way to move YouTube far beyond its roots as everyone's favorite UGC aggregator.

Alex is quick to point out that GCN does not budge Google from its often-stated position that it is not a content creator. Rather, it's using GCN to connect brands, content producers and users. If that connecting process drives audiences and generates revenues for content producers - and admittedly the proof is not yet in - that would give Google a lot of disruptive capital to help shape the video landscape. Just so nobody gets carried away, Google announced a similar experiment 2 years ago with MTV that fizzled out. So the company has yet to prove its experiment works and that it is fully committed to the GCN model.

ABC's Sarah Palin interview from late last week may have been a broadcast ratings success, but in my opinion ABCNews.com has missed out on many big broadband opportunities. ABC's broadband implementation shortfalls span the full gamut of navigation, usability and delivery quality, offering a further data point that many media companies have not yet recognized or capitalized on broadband's full potential.

The biggest interview of the political season was tailor made for on-demand consumption. No doubt millions of people flocked to ABC.com (the site most people would associate with ABC) to find the interview. However, ABC.com is the company's entertainment site, and there is currently no promotion of the interview at all. The visitor is required to guess that clicking on the "news" link in the main navigation will get them to the interview.

Oddly, clicking on the banner brings you to a 2,300 word text story about the interview, with a few thumbnail images sprinkled about. That's a key implementation error in my opinion. Instead of text, that page should be a well-laid out assortment of videos, beginning with the option to watch the full interview either by its 3 segments or as one long episode. A link to ABC's text story would be great to offer, but not be the main focus of the page when users were expecting video.

Clicking on one of the various thumbnails launches the ABCNews.com video player, which then displays the 3 segments' thumbnails at the bottom. Here the issue is that there are no bite-sized clips displayed with specific interview topics (e.g. earmarks, abortion, foreign policy) of likely interest. Plus there is no way to search on those topics specifically. You'd have to watch each of the full 6-8 minute segments the Q&A section to happen upon the part you're particularly interested in. (Note that creating topical clips from the full 22 minute interview using a metadata management tool like Gotuit's VideoMarker Pro would have probably taken ABC News just an hour or so.)

Meanwhile, there's also no way for the user to clip out custom segments, as Hulu and other sites currently allow. Enabling this would have been wildly popular among bloggers - and led to lots of viral distribution. The lack of topical clips creates another missed opportunity as ABC could have aggregated comments and video from other sites tightly related to these specific clips in order to create a really comprehensive user experience on a topic-by-topic basis.

Net, net, it's great that ABCNews.com is making the Palin interview available online. But taken as a whole, the user experience ends up being little more than a TiVo-like interview replay, leaving tons of engagement opportunity - and revenue - on the table. I recognize that doing the kinds of things I'm describing requires a robust content management system and staff. Many companies have not yet made these kinds of commitments to broadband - which just provides more evidence of how nascent the broadband medium still is.

What do you think? Post a comment.

Yesterday's post, "Broadcast Networks' Use of Broadband Video is Accelerating Demise of their Business Model" spurred some great comments on the site, and as usual, a flurry of private emails to me from folks who don't want to comment publicly (this is a recurring VideoNuze phenomenon I've mentioned before...).

Since there's substantial interest in this topic and I thought some of my comments from yesterday needed some clarification, I want to dig in a little further today.

First I want to address the numbers I outlined, especially the benchmark of $1 of ad revenue per viewer per episode that I asserted NBC derives from "Heroes" on-air. I've had some push back that this number is too high and that it more likely is 50-75 cents/viewer/episode. As I refined my assumptions further, I do think I was probably a bit too optimistic, particularly regarding the actual number of ad units NBC sells. I do think all of these numbers are somewhere in the ballpark, but what they actually are on a show-by-show basis is obviously only known only to NBC itself.

That all said, the gap between today's "analog dollars" and the revenue being derived from online distribution (the so-called "digital pennies") may still be pretty close to what I suggested yesterday. That's because I also had push back on my assumption that Hulu is generating an effective CPM of $60 (note, I had characterized that as "generous"). According to some folks, it's possible their eCPM could in fact be closer to $30 - or less. This is all private data, so again, it's really hard to pin this down.

One point I'd like to make again, so nobody's left with any misimpressions: I don't believe networks have been wrong in pursuing online distribution of their shows. I applaud their proactivity. Rather, my problem is that I think the way they've chose to monetize broadband delivery - with such a paucity of ads - is not only under-monetizing and undervaluing their product, but also creating a set of consumer expectations about the online medium that are going to be hard to reverse.

For Hulu to put the equivalent of 1 1/2 minutes of advertising against "Heroes," when NBC can command premium on-air rates for about 20 minutes of ads, strikes me as seriously out of whack. At the risk of sounding anti-consumer, I think Hulu is hurting its parent company's financial interests by over-emphasizing its user experience. The consequences of Hulu's "limited commercial interruptions" policy are really the thesis of yesterday's post: I believe the networks own use of broadband is accelerating the demise of their traditional ad model.

To be clear, I'm not suggesting Heroes on Hulu should carry 20 minutes of ads, but I do think it can carry more than 1 1/2 minutes. As important, its ad model needs to quickly evolve to include better targeting, more engagement, more creative units, etc, to break from a purely CPM-based paradigm. I know that many folks are hard at work on these items.

Net, net, these are incredibly complicated times for networks. As the Portfolio piece says, NBC's Zucker is "unsparingly harsh about the prospects for broadcast television..." And NBC's issues don't end with broadband; as commenters to yesterday's post noted, it's also being buffeted by the effects of DVRs, VOD and fragmentation driven by social networks, mobile and other shifting consumer behaviors.

I love Zucker's sense of honesty and urgency about the network business. I thought NBC's hardheaded approach to obtaining variable pricing from iTunes was terrific. And as many of you know, I think Hulu's site execution has been world-class. But Hulu, NBC, and the other networks must recognize that their current approach to ad-supported broadband delivery is undervaluing their own product and hastening the demise of their traditional P&L.

What do you think? Post a comment now!

Last weekend I finally got a chance to read "Zuckervision," the splashy cover page piece about NBCU's CEO and president Jeff Zucker in the September issue of Conde Nast's Portfolio magazine. It's a pretty candid expose of the challenges that Zucker faces turning around the flagship NBC brand. More broadly though, it describes the challenges that all network executives have in trying to profitably navigate the digital era.

Zucker says, "Predicting what the media world is gonna look like in eight years is incredibly daunting. I defy anybody to that." He's right, and I'm not going to take him up on his offer. What's more salient though is to focus on the here and now - on what networks are doing with ad-supported broadband distribution today. From this perspective I think it's fair to conclude that broadcast networks' current use of broadband is accelerating the demise of their business model.

That's right. For all of Zucker's and his compatriots' lament about "analog dollars being turned into digital pennies," as best I can tell, the networks themselves are actually the ones most responsible for turning this fear into a reality. I touched on this in a previous post, but here are the numbers explaining why.

When each of us, watches an episode of NBC's "Heroes," for example, on-air, NBC generates approximately $1.00 of advertising revenue (assuming NBC sells 75% of the 22 minutes of ads at a CPM of $30). That $1/viewer/episode figure obviously varies by program, but it's a good benchmark to use. (Note: per the following post, I think these assumptions are a little high, a more accurate range for NBC's revenue/viewer/episode is probably $.50 - $1.00.)

Now consider what happens when we watch "Heroes" on Hulu, NBC and Fox's well-respected aggregator. There are 5 ad breaks with just one 15 second ad in each break. There's also a 7 second "brand slate" at the beginning of each episode ("The following program is brought to you by....") and a display ad at the conclusion. Rounding up, let's say that totals three 30 second ads. Assuming Hulu sells all the ads at a generous $60 CPM (note that's 2x the on-air rate), the revenue/viewer/episode is 18 cents. That means that when you watch Heroes on Hulu, NBC is generating less than 20% of its customary revenue (hence the "digital pennies" fear).

Hulu's ad implementation is not unique - if you look at the other network sites, their ad models are roughly comparable. I don't know who came up with this ad approach, but I would contend that in their zeal to move prime time programs online, the networks have all gone too far in emphasizing a user-friendly experience over sound business discipline.

Of course, as consumers this new ad model is great. We get high-quality, free content at our fingertips, with minimal interruptions. For the vast majority of consumers, this value proposition beats buying and downloading an episode at iTunes any day (all the more so as popular shows like Heroes are bound to cost even more under NBC's new variable pricing relationship with Apple).

With the current model, NBC needs for Hulu to get more 5x its current CPM (which would be more than 10x NBC's current on-air CPM) just to stay even with its traditional ad model. That's a pipe dream. It doesn't matter how much interactivity or exclusivity Hulu can give an advertiser (and by the way Nissan already had full exclusivity in the Heroes episode I watched) no advertiser is going to pay 10x on-air rates. Simply put, Hulu's and others' minimal quantity of ads cannot be compensated for using higher prices.

Now that the genie is out of the bottle with the networks' online ad model, it's going to be awfully hard to make major modifications to it. As eyeballs inexorably shift from on-air to online, NBC and the other networks' top line ad revenues is going to get pinched. Also poised to bear the brunt is the whole Hollywood community accustomed to benefiting from on-air economics (Zucker's aggressive attempts to reduce expenses are also discussed in the Portfolio piece).

Bottom line: the way NBC and other networks have implemented broadband accelerates the vast change that is buffeting the broadcast business.

What do you think? Post a comment!

As I alluded a week ago, today I'm very pleased to share details of VideoNuze's first Broadband Video Leadership Breakfast Panel.

The session will be held on November 10th, in Boston, and is entitled, "How to Profit from Broadband Video's Disruptive Impact." It is being held on the first full day of the annual CTAM Summit, so if you're coming to town for that event, I hope you'll be able to carve out time to attend the leadership breakfast.

The panel features an A-list group of executives, whose companies are at the forefront of the broadband revolution:

• Deanna Brown - President, SN Digital, Scripps Networks
• Bill Carr - Vice President, Digital Media, Amazon
• David Eun - Vice President, Content Partnerships, Google/YouTube
• Herb Scannell - Chairman/Co-Founder, Next New Networks and former Vice Chairman, MTV Networks and President, Nickelodeon Networks
• Peter Stern - Executive Vice President, Strategy and Product Management, Time Warner Cable

Click here to register for the early bird special

I recruited this diverse group specifically to ensure a range of perspectives (established vs. early stage, content vs. distributor, ad supported vs. paid, etc.) are represented. It will be invaluable for attendees to hear the pros and cons of varying broadband video strategies, as well as the current data supporting these approaches. Having moderated dozens of panels over the years, I'm focused on bringing together best practices I've observed to ensure this is a well-structured, high-impact discussion.

Among other things, I expect attendees will learn about the tradeoffs of different business models, how consumers' video behaviors are changing, what these five companies' broadband priorities are and what roles upstart content providers and aggregators will play in the future. The most important takeaway will be what you, as participants in the broadband market, can be doing now to ensure your future success.

The breakfast panel is generously sponsored by ActiveVideo Networks, Akamai, Anystream, KickApps and Yahoo and is being run in association with CTAM's New England and New York chapters, on whose boards I serve.

Click here to register for the early bird special

I'm incredibly excited about the leadership breakfast, as it marks a continued push by VideoNuze into the events space, a key priority going into 2009. In fact, last night marked the kickoff of our events push, with the inaugural VideoSchmooze networking evening, which drew 200+ attendees on a rainy, Red Sox-at-home night (pictures are here). Look for more VideoSchmoozes in '09 as this networking event goes on the road.

Is it just me, or are you also noticing that the quality of your online video experience is getting consistently better and better? Even though I'm totally immersed in the space, periodically I will find myself watching something online and still think to myself, "This quality is just unreal!"

I've had the experience of watching some or all of the following recently: the Democratic convention on demconvention.com, the movie "Ordinary People" on Hulu, swimming on NBCOlympics.com, trailers on Fancast and "Eli Stone" on ABC.com, among others. In each case, the quality of the video is outstanding, even in full screen mode.

All of this is due to tremendous innovation in the content delivery world. This includes not only traditional CDNs such as Akamai, Limelight, Level 3, CDNetworks and others, but a raft of other players specifically focused on optimizing video delivery quality such as Move Networks, Swarmcast, Digital Fountain, Vusion, BitGravity and others. Further enhancing the experience are improvements in media players like Windows Media, Flash, QuickTime and more recently Silverlight.

The innovation and investment in this space shows no signs of abating. I was reminded of this just last week in a call with Perry Wu, CEO and co-founder of BitGravity, which yesterday announced a strategic relationship and investment from Tata Communications (part of Tata Group, the massive Indian conglomerate).

Perry explained that the underlying theme of the deal is to deliver video at consistently high quality on a global basis. That aspiration fits with the increasingly international-oriented distribution strategies I hear about from content providers. While fast-growing international markets have been core growth drivers for content companies, frictionless and cost-effective IP delivery is creating a whole new ball game. I expect international reach - and the ability to monetize with locally-appropriate advertising - to become more and more important.

Meanwhile, back in the U.S. surging video quality means the bar is getting higher for all video providers. Delivering video without a full-screen option, or where the audio and video aren't synched perfectly, or where rewind/instant play isn't available will soon be perceived as sub-par. For budget-minded broadband content startups this will require heavier investments in delivery services if they're to be taken seriously.

For traditional networks and the Hollywood community, higher quality broadband delivery means the shift from on-air to online consumption will only accelerate. As more consumers come to see broadband as a legitimate alternative, they'll continue modifying their behaviors. With these shifting eyeballs comes a slew of economic challenges (the "analog dollars to digital pennies" anxiety) that must be urgently addressed.

Lastly, for the owners of local broadband networks (cable operators, telcos, etc.) surging video quality increases the pressure on their networks' delivery capacity. When a handful of users are watching high-quality long-form video that's one thing. But what happens when it's the norm? Bandwidth management and net neutrality debates are sure to intensify.

While all of these uncertainties swirl, consumers are gleefully seeing a high-quality video Internet unfold that just a few years ago would have seemed unimaginable.

What do you think? Post a comment.

With the recent launch of the iPhone and other smartphones, mobile video delivery is receiving much greater attention. Though still lagging the widespread popularity of broadband-delivered video, mobile video is getting a boost today as MTV, Discovery, AccuWeather, Travel Channel and Next New Networks have all announced new initiatives, to be powered by Transpera, a mobile video services platform.

Mobile has long been an alluring opportunity, but to date most of the activity has been from wireless carriers or their partners' efforts. These so-called "on deck" video offerings were largely subscription-based (Verizon's VCast, MobiTV, etc.) and available on only a minority of all handsets. The limited, carrier-controlled nature of traditional mobile video has been a key differentiator from the open broadband video world.

Further, as Greg Clayman, MTV's EVP of Digital Business Development explained to me on Friday, neither the tools for content providers to manage, publish and monetize mobile video nor the network capacity for delivering mobile video have been in place until recently.

Transpera is one of a number of companies addressing the mobile video opportunity (see also my recent post on upstart Azuki Systems and also another player called Vantrix). I spoke to Transpera's CEO and co-founder Frank Barbieri a few weeks ago, and he noted that given how nascent the mobile video space is, the company is today providing both a full technology platform to content providers and ad sales capabilities. I pointed out that in broadband that integration of technology and ad sales had been tried (most notably by Brightcove), but largely been dropped. Today there is a clear bifurcation in the broadband ecosystem between technology platforms and ad sales networks.

Frank sees the same thing happening in mobile video (in fact, we agreed that comparisons to broadband's development are useful in thinking about how mobile video delivery will shape up). Transpera's longer-term goal is to be a full-fledged mobile ad sales network, so its management/publishing/delivery platform is more of a means to that end. Frank sees Transpera already providing real monetization value to many of its customers; the company has strong reach into media buyers and agencies and credibility in selling this new medium's benefits (it should be noted however that MTV, for one, continues to retain its mobile video ad inventory to sell itself).

With its focus on building out a mobile video ad network, my guess is that eventually Transpera will see competition from today's broadband ad networks, who are arguably well-positioned to play in the mobile space as consumption surges.

For now though, given how early it is in mobile video's evolution, the key is building trial and usage. For many content providers mobile video is brand new and the ROI unproven. Though they've likely maintained so-called WAP sites for mobile browsers, video is a whole new ball game. Driving video consumption and legitimizing the mobile medium - as has happened with broadband - is job #1 for all the players in this exciting new space.

What do you think? Post a comment now!