VideoNuze Posts

Last fall, when the WSJ first broke the news that YouTube was negotiating with a number of Hollywood studios about launching a full-blown rental store, I thought the plan was intriguing, but dubious. I argued that YouTube needed to stay focused on getting its ad model right, that it would be hard to differentiate its film rentals from those of myriad competitors and that the revenue upside for YouTube was relatively small.

I continue to believe those things and hope YouTube isn't still pursuing Hollywood dreams. That said, I do like the idea of it offering a paid option for indie and other hard-to-find video. YouTube's massive audience brings real promotional value to these often-obscure, yet high-quality titles, potentially significant revenue to their producers and for YouTube, another meaningful step away from pure UGC content. Rentals won't generate significant revenue for YouTube, but with Google executives on the company's earnings call yesterday saying that "YouTube is monetizing well," so long as it doesn't divert too many resources away from advertising, that's ok.

2. Revenue models matter, just ask the newspaper industry - This week brought news that MediaNews Group, publisher of 54 U.S. newspapers, including the Denver Post and San Jose Mercury News, will file for bankruptcy. For those keeping count, it's at least the 13th bankruptcy filing by a major U.S. newspaper publisher in the last year.

While the newspaper industry has been racked by the recession and ad-spending slowdown, the larger issue is that 15 years since the Internet's popularity took off, newspapers still have not been able to define a sustainable online business model. Many simply lunged headlong into providing their full print editions online, only to find out that online advertising wasn't sufficient to support their overhead and that Google commoditized their headlines. Others, like the NYTimes tried (and will continue to try) to find a balance between advertising and reader payments.

I've touched on this before, but the havoc being wreaked in the newspaper is a red-letter warning to video industry participants to cautiously guard existing revenue models while transitioning to digital delivery. Some consumers and techies may consider a deliberate pace to be bureaucratic foot-dragging, but for video content producers and distributors to remain viable, a deliberate ready-aim-fire approach to digital delivery is essential.

I'm not a Prada patron, and I found the film dreary and odd, nonetheless, what intrigued me was how online video has given Prada a whole new outlet to build its brand's aura, a key to success for all luxury brands. Buying TV ads would be incredibly inefficient for Prada, and magazine spreads only go so far. With a short online film, Prada can target its audience well and engage them as long as it pleases. For creative and advertising types alike, that's a compelling opportunity.

4. Get ready for the week of the Apple tablet - In case you missed it, this week Apple sent invites to the press for a Jan. 27th event to "come see our latest creation" - widely believed to be the company's new tablet computer. The buzz behind the product, thought to be called the "iSlate," has been steadily building for weeks now. Next week it will reach a crescendo. We can expect Steve Jobs to bring his A game to the mother of all product demos as the stakes are high for Apple to deliver major wows.

Daisy Whitney and I are pleased to present the 46th edition of the VideoNuze Report podcast, for January 22, 2010.

Daisy gets us started today, discussing recent smartphone research from eMarketer. According to the research, in Q4 '09, the percentage of people saying they're interested in purchasing an Android phone jumped from 6% to 21%, while the iPhone's dropped from 32% to 28%, creating a narrow 7% gap. In addition, research on how the phones are actually used revealed extremely similar behavior, with usage skewed toward reading news on the Internet, using apps, social networking and IM.

Daisy's takeaway is that this could be early signals that the smartphone market may be getting commoditized. I add that with the proliferation of Android phones, and the disproportionate amount of retail shelf space they'll soon take up, Apple could well find itself in the familiar spot of competing against a large and growing ecosystem of well-aligned competitors (i.e. similar to competing against the Windows ecosystem). Time will tell.

We then switch gears and I add some more detail to Boxee's plan to offer a payment platform, which it unveiled this week. Boxee's move is yet another effort to shift the online video model from advertising, which has of course accounted for the dominant share of the online video industry's revenue to date. In addition to Boxee, this week we've also seen additional paid model initiatives: YouTube dipped its toe into rentals, rumors resurfaced of Hulu's subscription plans, and, outside the video space, the NYTimes.com's announced plans to erect a pay wall early next year. And that's all on top of TV Everywhere's rollout.

Click here to listen to the podcast (11 minutes, 47 seconds)

Click here for previous podcasts

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Fox.com has quietly switched from Move Networks' player to Flash for its online video, with Brightcove powering content management and publishing. Separately, a Disney-ABC spokesperson told me that ABC.com will also be transitioning from Move to Flash in the coming weeks, though both will be used temporarily.

Neither of the changes will surprise Move. Earlier this week I spoke with Move's Marcus Liassides, who explained that the company is continuing its own transition, evolving from a technology provider to content owners to an end-to-end broadband delivery platform for powering next-generation multichannel video services. Marcus said that Move has been working closely with its content customers to support their respective swap-outs.

Move was an early leader in adaptive bit rate streaming and gained a ton of visibility for raising close to $70 million, including a whopping $46 million round in April '08. Move gained notice for showing people that the Internet could indeed delivery crystal-clear, high-quality video that could credibly compete with TV viewing. For many, Move's player was very tangible evidence of how far the online video experience had changed since the pioneering days of RealNetworks' RealPlayer just 10+ years earlier.

Unfortunately the company encountered a perfect storm. First, as CDN prices fell, content providers considered Move an increasingly expensive-looking solution. Then, since Move's customers used a free, ad-supported model, as the recession crimped ad spending their ability to afford a luxury video player deteriorated. Meanwhile, both Microsoft (with Smooth Streaming) and Adobe (with FMS 3.5) both launched their own adaptive bit rate alternatives. Between their ultra-competitive pricing and large embedded customer bases, Move was squeezed from all sides. Compounding matters, Move also conveyed mixed messages about its strategy and rumors about its disjointed product development process were widespread.

Last June, Marcus provided me with an extensive overview of Move's revamped game plan, which blends Move's underlying delivery system with "virtual set-top box" technology acquired from Inuk Networks. The goal is to provide telcos, broadband ISPs and others with a platform to deliver an end-to-end multichannel linear, live, on-demand and DVR service, all through broadband.

More recently, Move hired Roxanne Austin, a former DirecTV president and COO as its new CEO, who in turn has brought in new executives to run operations, strategy and business affairs. Last September, Move announced that Cable & Wireless has partnered with it to roll out IP-based TV services. Marcus said that additional customer announcements are forthcoming soon.

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Boxee is announcing this morning that it plans to support paid options for premium video by the end of Q2. To date, Boxee has been delivering mostly free, often ad-supported, video, though users of subscription services like Netflix and MLB could also access these. The new initiative means that Boxee will process transactions itself, so Boxee will become a legitimate option for content providers who want to charge for their programming. Avner Ronen, Boxee's CEO and co-founder told me more about the plan yesterday.

Avner likened Boxee's approach to Apple's App Store, in that content providers will be able to set their own pricing and business model (e.g. rental, subscription, etc.). Boxee will work with a payment partner (not yet disclosed) which will provide the platform itself, with Boxee developing a 1-click UI for consumers as well as a content partner console. Avner said Boxee hasn't decided on the transaction percentage it aims to charge, but did say it will be less than the 30% or so that others like iTunes and Amazon ordinarily keep.

Boxee has attracted a strong early adopter following and has unveiled plans to launch its first convergence device, the Boxee Box, with partner D-Link. The move to support paid video is significant because as Boxee reaches into more mainstream homes, it could be yet another meaningful "over-the-top" alternative for consumers to pay for just the content they want, further pressuring the traditional multichannel subscription model. Microsoft's Xbox Live Marketplace with the Xbox 360 is probably the closest comparable set up, although it supports downloading, whereas Boxee is focused solely on streaming.

While digital delivery offers new convenience, an issue for both streaming and downloading is limited portability. Avner said that one way Boxee intends to address this is to offer authentication options to third-party web sites, so that if a user has rented an episode of "Mad Men" for example, through Boxee, they would subsequently be able to go to AMC's web site and watch it again without paying for it a second time. This is somewhat similar to what TV Everywhere providers are also thinking about doing in their second phase, extending user authentication to content providers' sites themselves.

From Avner's perspective, Boxee's ability to support multiple business models, in a content partner and user-friendly approach, is key to success. It is still very early days for over-the-top delivery, and with TV Everywhere now rolling out, incumbent video service providers are fighting hard to maintain their positions.

Still, news this week that Disney is negotiating with Microsoft to extend some of ESPN's programming to Xbox is a potent reminder that premium video providers are exploring (albeit gingerly) all their options for getting into the living room. If Boxee's new box becomes widely adopted, it could become an important player in the unfolding over-the-top drama.

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NATPE is offering a special discounted rate of $650 (a $200 discount) for its NATPE 2010 conference next week in Las Vegas. The conference offers an excellent array of speakers and information about the TV and video industries. With a range of panels on online and mobile delivery, it is a great event for anyone looking to exploit new digital delivery opportunities.

I'll be involved with 2 sessions this year. First, on Monday, Jan. 25th, from 2:45-3:30pm, I'll be moderating "Adopting and Adapting Online Advertising, an Interactive Debate" with Rob Norman, CEO, Group M North America (Group M is the world's largest media buyer) and Shishir Mehrotra, Director of Product Management for Google, who's responsible for Google's video monetization efforts, including YouTube and TV advertising. It promises to be a stimulating discussion of how online video advertising is shaping up.

Then on Tuesday, Jan 26th, from 10-10:30am I'll hosting "Online Video Syndication and Advertising: What's Working" with Brent Horowitz, VP of Business Development for FreeWheel, a leading provider of advertising solutions for content providers pursuing third-party syndication. Brent and I will discuss the pros and cons of online video syndication and how content providers can participate.

Ping me if you're planning to come to NATPE and let's try to meet up!

Making video ads more engaging has become a key initiative for many online video ad companies. They're responding to agencies and advertisers searching for additional ways to generate an ROI from their online video ad campaigns and further flexibility in how they deliver their messages. The moves come amid strong growth across the industry. Companies that have introduced enhanced interactivity include:

YuMe - introducing today the new "Triple Play" ad unit, which allows the advertiser to insert up to 3 calls to action (e.g. sign up for more info, watch more videos, etc.) after the video ends. YuMe's co-founder and president Jayant Kadambi told me that increasing choice for advertisers and agencies is a key goal. Separately, YuMe reported delivering 2.5 billion ads in Q4 '09, its strongest quarter to date, including an average of 30 million ads/day in Dec '09.

Jivox - introducing today custom interactivity allowing advertisers and agencies the ability to add their own Flash and HTML applets so users can interact within the player itself (example here, roll over the "Experience BMW" to see the interactive options). Diaz Nesamoney, Jivox's President, CEO and founder also explained to me last week that while the company continues operating its own ad network, its fastest-growing segment in '09 was licensing its platform to media companies (e.g. Gannett, McClatchy, Meredith, etc.) who want to sell their own video ads. Revenues were up 600% in '09 with 3,000 new advertisers.

Tremor Media - last week Tremor rolled out six new ad formats for enhanced interaction and engagement: Pre-roll Plus Overlay, vChoice Select, vChoice Rotator, Data Feed, Sequencer and In-Stream Live. The formats, which all use the company's Acudeo ad management platform, build on last June's introduction of its vChoice format. According to comScore's most recent Nov '09 numbers, Tremor was the largest video ad network with potential reach of 85 million viewers or 49.8% of the total U.S. viewing audience and actual reach of 20% of viewers.

Innovid - launched the iRoll, interactive pre-roll ad unit, in '09, which can embed a mini-web site in the video ad itself. Innovid originally pursued product placement through the insertion of Flash objects, but CEO and co-founder Zvika Netter told me recently that, based on agency feedback, it has decided to focus on enhancing interactivity. Innovid is still early stage, but its profile is growing. For example, Netter was recently selected as one of Time magazine's eight "Tech Pioneers Who Will Change Your Life."

ScanScout - Last but not least, in Oct '09 ScanScout unveiled its "Super Pre-Roll" unit, which also enhances interactivity within the ad itself (the Vaseline demo for a great example). Waikit Lau, ScanScout's co-founder and president told me that advertisers are drawn to the unit's superior click-through rates, which are up to 4.5 times higher than typical pre-roll ads.

All of these moves show that in-stream video ads are continuing to evolve to provide more value and a better ROI to advertisers, while also delivering an improved experience to users. No doubt this contributed to the strong '09 that many online video ad executives have reported to me. With the ad climate improving and further engagement opportunities inevitable, there is plenty of reason to believe that spending in the medium will continue to grow.

Note - if there are other initiatives you're aware of that I've missed, please leave a comment.

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Question: How much difference is there between Comcast offering its TV Everywhere service to its own multichannel video subscribers in its geographical footprint, who have chosen to get their broadband Internet service from another company (e.g. Verizon, AT&T, etc) vs. Comcast offering TV Everywhere services to consumers who similarly get their broadband Internet service from one of these companies (or another cable operator), but happen to also get their multichannel video service from another company (e.g. another cable operator operating in a non-Comcast geographical area)?

If you answered "not that much," then you'll likely have the same reaction that I did upon reading last week's Light Reading article, "Comcast to Expand 'Xfinity' to DSL Subs," which describes Comcast's plan to offer its Fancast Xfinity TV (which I call FXTV) TV Everywhere service to those of its video subscribers who use DSL or some other method to connect to the Internet instead of Comcast's own broadband service by the second or third quarter of 2010.

(As quick background, in December, Comcast launched the beta of its FXTV service, but it's only been available to homes that subscribe to both broadband and video, which is about 14 million out of the 24 million who subscribe to Comcast's video service. Of that 10 million difference, using the 70% national broadband penetration rate, I'd estimate there are about 3 million of Comcast's multichannel video subscribers who use Verizon, AT&T or someone else for their broadband access.)

When I read the article, my reaction was: if Comcast is going to target this group of users, wouldn't the next logical step in FXTV's rollout be to offer it to non-Comcast video subscribers? This is the concept I suggested back in September in, "How TV Everywhere Could Turn Cable Operators and Telcos Into Over-the-Top's Biggest Players." In that post I argued that with sizable revenue per subscriber gains largely behind it, Comcast' big growth opportunity is to expand into other cable operators' territories, by offering FXTV as a TV Everywhere 2.0 over-the-top service in those areas.

To be sure, I noted that this type of move would be a serious breach of protocol in the insular cable industry, and with today's incomplete FXTV offering it wouldn't be viable competitively just yet anyway. But given nationally-oriented competitors like DirecTV, DISH Network and newer OTT alternatives like Netflix mobilizing, it seems logical that somewhere down the road, Comcast, whose geographical reach today only encompasses about 25% of American homes, will have to go national to stay even.

When Comcast's executives have been asked about the possibility of FXTV as an OTT service they have denied any intentions. With their hands full making sure FXTV is working properly for its current subscribers, that's probably the case, at least for now. Plus, with the NBCU deal facing regulatory scrutiny and the net neutrality debate heating up again, Comcast certainly isn't going to hint at anything that would further expand its dominance. But still, given competitive issues, will limiting FXTV access to its own multichannel video subscribers remain the case? It will be interesting to see if and when this changes.

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1. Goodbye to RealNetworks' Rob Glaser - For broadband veterans like myself, this week's news that RealNetworks' founder and CEO Rob Glaser is stepping down from the CEO role after 16 years brought to mind how far the online video and audio worlds have come, in a relatively short time. Having done a fair amount of work with Real back in my Continental Cablevision days, some of my first memories of seeing video delivered through the Internet were with the RealPlayer.

There is no question Rob was one of the pioneers of the online video industry, and everyone working in the industry today owes him and Real a debt of gratitude. In the Internet's first wave, Real was out ahead of everyone in audio and video. Unfortunately for the company, Microsoft's decision to roll out its own media player (and to bundle WMP with Windows) scrambled Real's future and set off years of antitrust litigation. Over the years Real has tried many things, some of which worked and some of which were serious head-scratchers (Ryan Lawler recounts 5 of the company dumbest moves here).

Personally, it's been a while since any video I wanted to watch required the RealPlayer download. And the last time I did download it, I was so incessantly bombarded with offers that I uninstalled it and swore I'd never download it again. Nonetheless, Real remains one of the largest digital media and technology companies, with $140 million in Q3 '09 revenues and almost $400 million in cash and short term investments. The new CEO will inherit all this, plus the challenge of how to make Real a more significant player in a broadband-dominated world that Rob envisioned so many years ago.

2. ESPN: "Mobile will be bigger than the web" - I'm always on the lookout for insights from content executives charged with building their company's mobile initiatives (and mobile video more specifically) and so I found MocoNews.net's interview with John Zehr, ESPN's SVP and GM of Mobile a worthwhile read. ESPN has made a ton of progress in mobile since its MVNO was shut down and the post provides growth stats on some of ESPN mobile's most successful efforts.

Reflecting the key shift in mobile away from "on-deck" carrier-focused distribution deals to a more open Internet-like environment, Zehr said ESPN's mobile revenue model is built on payments from aggregators like FLO TV and MobiTV, advertising and app sales. That sounds a lot like the traditional cable model of affiliate fees, advertising and ancillary revenues like commerce. And just like in cable ad sales, ESPN sells all of its mobile ads itself, avoiding third-party ad networks that it believes would commoditize the ESPN brand. ESPN is clearly bullish on mobile, with Zehr saying "Not too far in the future, mobile will be bigger than the web." With the Apple vs. Google mobile war getting underway there's a lot of momentum building. Still, to keep things in perspective, we're a long way from mobile eclipsing the web.