Posts for 'CBS'

Daisy Whitney and I are pleased to present the 30th edition of the VideoNuze Report podcast, for September 4, 2009.

This week Daisy shares more detail from her most recent New Media Minute, concerning what broadcast networks are doing this Fall with online video extensions of their shows. For example, CW is launching an original series in conjunction with "Melrose Place." ABC is doing a 3rd season of an "Ugly Betty" web series and a tie-in for "Lost." CBS is launching its first web series, via TV.com, with Julie Alexandria, focused on recapping highlights from various shows. Daisy notes that these efforts are focused mainly on marquee shows and when advertisers are already on board.

In the 2nd part of the podcast we discuss my post from yesterday, "2009 is a Big Year for Sports and Broadband/Mobile Video." In that post I observed that many big-time sports, and the TV networks that have the rights to televise them have realized this year that broadband and mobile distribution are friend, not foe. As a result they've rolled out many different initiatives. We also touch on the various lessons other content providers can take away from what's happening with sports and broadband/mobile distribution.

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Following are 4 news items worth noting from the week of August 17th:

CBS's Smith says authentication is a 5 year rollout - I had a number of people forward me the link to PaidContent's in-depth coverage of CBS Interactive CEO Quincy Smith's comments at the B&C/Multichannel News panel in which he asserted that TV Everywhere/authentication won't gain critical mass until 2014.

I was asked what I thought of that timeline, and my response is that I think Smith is probably in the right ballpark. However, these rollouts will happen on a company by company basis so timing will vary widely. Assuming Comcast's authentication trial works as planned, I think it's likely to expect that Comcast will have its "On Demand Online" version of TV Everywhere rolled out to its full sub base within 12 months or so. Time Warner Cable is likely to be the 2nd most aggressive in pursuing TV Everywhere. For other cable operators, telcos and satellite operators, it will almost certainly be a multi-year exercise.

NFL makes its own broadband moves - While MLB has been getting a lot of press for its recent broadband and mobile initiatives, I was intrigued by 2 NFL-related announcements this week that show the league deepening its interest in broadband distribution. First, as USA Today reported, DirecTV will offer broadband users standalone access to its popular "Sunday Ticket" NFL package. The caveat is that you have to live in an area where satellite coverage is unattainable. The offer, which is being positioned as a trial, runs $349 for the season. With convergence devices like Roku hooking up with MLB.TV, it has to be just a matter of time before the a la carte version of Sunday Ticket comes to TVs via broadband as well.

Following that, yesterday the NFL and NBC announced that for the 2nd season in a row, the full 17 game Sunday night schedule will be streamed live on NBCSports.com and NFL.com. Both will use an HD-quality video player and Microsoft's Silverlight. They will also use Microsoft's Smooth Streaming adaptive bit rate (ABR) technology. All of this should combine to deliver a very high-quality streaming experience. But with all these games available for free online, I have to wonder, are NBC and the NFL leaving money on the table here? It sure seems like there must have been some kind of premium they could have charged, but maybe I'm missing something.

Metacafe grows to 12 million unique viewers in July - More evidence that independent video aggregators are hanging in there, as Metacafe announced uniques were up 67% year-over-year and 10% over June (according to comScore). I've been a Metacafe fan for a while, and their recent redesign around premium "entertainment hubs" has made the site cleaner and far easier to use. Metacafe's news follows last week's announcement by Babelgum that it grew to almost 1.7 million uniques in July since its April launch. Combined, these results show that while the big whales like YouTube and Hulu continue to capture a lot of the headlines, the minnows are still making swimming ahead.

Kodak introduces contest to (re)name its new Zi8 video camera - It's not every day (or any day for that matter) that I get to write how a story in a struggling metro newspaper had the mojo to influence a sexy new consumer electronic product being brought to market by an industrial-era goliath, so I couldn't resist seizing this opportunity.

It turns out that a review Boston Globe columnist Hiawatha Bray wrote, praising Kodak's new Zi8 pocket video camera, but panning its dreadful name, prompted Kodak Chief Marketing Officer Jeffrey Hayzlett to launch an online contest for consumers to submit ideas for a new name for the device, which it intends to be a Flip killer. Good for Hayzlett for his willingness to change course at the last minute, and also try to build some grass roots pre-launch enthusiasm for the product. And good for the Globe for showing it's still relevant. Of course, a new name will not guarantee Kodak success, but it's certainly a good start.

Enjoy your weekend!

Daisy Whitney and I are pleased to present the 28th edition of the VideoNuze Report podcast, for August 21, 2009.

In this week's podcast, Daisy and I first tackle the subject of the Southeastern Conference's new media policy fumble that I wrote about on Wednesday this week. For the upcoming football season, the SEC first banned all social media in the stadiums by game attendees, and later revised it to just exclude fan-generated video of game action.

I took the SEC to task, suggesting that the policy was wrongheaded because it limits the role that fan video could play in expanding the game experience and incorrectly assumes that fan video might actually compete with live game feeds from partners ESPN and CBS. Further, the policy is completely impractical to enforce, requiring security officers to frisk entering students and examine cell phones for video capability.

Daisy raises the example of when YouTube posted the infamous SNL "Lazy Sunday" clip, and NBC ordered it to take the clip down, foregoing tons of free promotion. That incident occurred almost 4 years ago, and since then major media companies have come a long way in adopting the role of user-generated video and video sharing as a promotional tool (see this week's Time Warner-YouTube clip deal as further evidence). On the other hand, the SEC still appears to be living in the stone ages. Somebody there needs to get their game on.

Shifting gears, Daisy explores the idea of how technology is helping video producers collaborate far more extensively than ever before. Producers and creators are now able to share images and raw footage to an unprecedented degree, which is making the creative process far more efficient. That in turn leads to more extensive creative output. Daisy identifies a slew of technology providers who are active in this emerging space.

Click here to listen to the podcast (13 minutes, 50 seconds)

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The college football season hasn't yet officially begun, but the Southeastern Conference (SEC) has already fumbled the ball a couple of times with its confusing new media policy which bans fan-generated videos at games.

The confusion began when the SEC told its member universities that "Ticketed fans can't produce or disseminate (or aid in producing or disseminating) any material or information about the Event, including, but not limited to, any account, description, picture, video, audio, reproduction or other information concerning the Event." As Mashable and others noted, the policy effectively - and bizarrely - barred all social media activity at games. The policy was widely translated to mean that Facebook updates, Tweets, photo uploads and of course YouTube clips would be verboten.

But, faced with a sharp backlash, the SEC softened its stance, allowing "personal messages and updates of scores or other brief descriptions of the competition throughout the Event." Further, it allowed photos to be taken, as long as their "distributed solely for personal use..." But while Twitter, Facebook and the like would be allowed under the new policy, fan-recorded game action videos would still be prohibited.

In an interview with The Buzz Manager Blog, Charles Bloom, the SEC's Associate Commissioner of Media Relations explained, "the intent of the policy....is trying to protect our video rights, as they pertain to our television and media partners. So, someone in the stadium can enter Twitter feeds or Facebook entries and photographs, but the game footage video is something that we will try to protect." He added further "We're in the new year, the first year of our television and digital rights agreement, so there was a feeling that we needed to push this through pretty quickly..."

The SEC indeed has two big money contracts - a $2 billion, 15 year deal with ESPN, and an $800M+, 15 year deal with CBS, which includes an assortment of wireless, VOD, and data rights. The SEC also recently announced a partnership with XOS Digital to launch the SEC Digital Network, intended to be the "largest online library of exclusive and comprehensive SEC sports content available anytime, anywhere." With so much on the line, the SEC pursued the hardline path - pre-emptively prohibiting fan-generated video.

Is this a smart policy? Does fan-generated video really "compete" with professionally-captured video? And is the policy even enforceable? I'd argue the answers are no, no and no, making the SEC look both paranoid and out of touch.

First off, fan video serves to enhance the overall event experience, a key goal of the sports-crazy SEC. One can imagine fans at various locations in the stadium capturing compelling new angles that the TV producers may have missed or edited out. A curated collection of these clips could be added to the SEC Digital Network, possibly in a well-marked, "Fan Zone." Note this would be free content the SEC would be getting, that could also be monetized.

Second, it's ridiculous to think fan-generated video "competes" with the networks' feed. The limited zoom and audio capabilities of an iPhone or Flip video camera mean the fan videos captured in a raucous 90,000+ seat stadium are going to be iffy at best. That's not to say these videos won't have value, but please - nobody is going to turn off their HDTV to watch some fan's live stream. At some point technology may evolve so that a fan's inexpensive video camera can produce comparable video to a professional's; but that point is still a ways off.

Third, the video policy is impossible to enforce. Is security at the stadiums going to frisk students before entering and then confiscate phones with video capabilites, while letting others pass through? All while it tries to hustle tens of thousands of rambunctious fans through the gates? Bedlam would result.

While the SEC rightfully wants to protect the value of its TV contracts, its lack of understanding for how its policy plays out in the real world is plainly obvious. If the SEC - and others - looked at social media and user-generated video as an opportunity rather than a threat then the policies they created would make a lot more sense.

What do you think? Post a comment now.

Last Monday, in "Netflix's ABC Deal Shows Streaming Progress and Importance of Broadcast TV Networks," I tried making the case that from Netflix's perspective, in order for its Watch Instantly streaming service to succeed, it would most likely need to strike more deals with the broadcast TV networks (as it announced with ABC).

Now how about the flip side of the question: how can broadcast TV networks make online video payments a significant revenue stream?

There is certainly no lack of interest by broadcasters in getting paid for online access to their content. For example, CBS has joined Comcast's TV Everywhere trial, and its CEO Leslie Moonves has been outlining his arguments for why cable's authentication plans should generated new revenue for the network. News Corp head (and Fox owner) lately Rupert Murdoch hasn't been shy about his interest in charging for content, though his first focus appears to be on newspapers. And Disney CEO Bob Iger (and ABC owner), recently told the WSJ, "People are going to pay for content. We are not worried about that." Meanwhile NBC's Jeff Zucker is trying to reposition NBCU as a cable network company (i.e. one that sells ads AND gets paid for its programs).

As I think through how broadcasters can succeed with getting paid, I keep returning to 3 core beliefs: first, broadcasters' efforts should not be undertaken individually, but rather through its joint initiative Hulu, second, the model needs to be subscription-based, not per program-based and third, the subscription service should be made in partnership with incumbent video service providers (cable, satellite, Netflix, etc.) and convergence device makers (Roku, Xbox, etc.).

Hulu has established a strong online brand, built a large audience and demonstrated online savvy. I have the most confidence in Hulu to be able to identify the differentiators needed to drive new value vs. free, including things like more timely access to hit programs, deeper libraries, higher quality streaming, options for downloading and mobile, etc. And assuming the federal government didn't step in and cry "collusion!" Hulu would provide the greatest negotiating leverage.

The key challenge for Hulu would be gaining the rights from the networks, producers, talent and others to launch such a comprehensive service. These stakeholders would be understandably wary, not knowing exactly how to value what they'd be providing.

Several months ago, I suggested a Hulu subscription service was in the offing, but so far Hulu has stayed on message, only emphasizing its free, ad-supported model. I hope it and its parents recognize that time is of the essence. With each passing day, as more people use Hulu ever more intensively, their expectations for free are being set, thereby raising the bar on their eventual willingness to pay. I do believe broadcast networks have any opportunity to evolve their business model and charge, but they must not dither. The online medium is still immature enough that they can influence its rules by acting now.

What do you think? Post a comment now.

Following are 4 items worth noting from the week of August 3rd:

1. Research, research, research - For some unknown reason, there was a flurry online video-related research and forecasts released this week. In no particular order:

eMarketer was out with a new forecast indicating 188 million online video viewers in the U.S. in 2013.

Veronis Suhler released its forecast of 2009-2013 communications industry spending, showing advertising shrinking as a percentage of total spending.

PWC's UK office released its 2009-2013 forecast, which also anticipates declines in advertising.

CBS's research head David Poltrack used detailed data to explain the company's online video strategy and buttress its argument that in a TV Everywhere world, it should be compensated for its content (slides are here, via PaidContent).

Ipsos found that Americans streamed a record amount of TV programs and movies, doubling their consumption from Sept '08 to July '09.

Yahoo and a group of research partners released data finding that 70% of online video consumption happens throughout the day and night, as opposed to traditional TV viewing which is concentrated in the prime-time window.

Last but not least, TDG released excerpts of its research on "over-the-top" video services, available for download at VideoNuze.

2. Unicorn Media launches, hires ex-Move Networks executive David Rice - It will be hard for some to believe there's room for yet another white label video publishing and management platform, but startup Unicorn Media is going to try elbowing its way into the crowded space, with a specific focus on large media companies. I spoke with Unicorn's executive team this week, led by Bill Rinehart, who was the founding CEO of Limelight.

Unicorn is positioning itself as the first "enterprise-grade" solution, staking out key differentiators such as enhanced analytics/reporting, faster/easier transcoding, improved APIs for content ingest/management and more flexible monetization/ad queuing. I have not yet seen a demo, but I'm intrigued by what I heard. The company has raised $5M to date from executives/angels and has a staff of 25. David Rice, formerly Move's VP of Marketing has come on board as Chief Strategy Officer. Given the team's industry expertise and relationships, this could be a company to watch.

3. Google acquires On2 Technologies and other encoding-related news - The blogosphere was in a flurry about Google's $106M acquisition of video compression provider On2 Technologies this week. Speculation flew about Google open-sourcing On2 new VP8 codec, which could potentially force a new standard to emerge as a challenge to H.264, today's leading codec. This is important stuff, though a little further down the stack than I usually focus, so I refer you to Dan Rayburn's analysis of the deal's implications, which is the best I've seen.

There was other news in the emerging cloud-based encoding/transcoding/delivery market this week, as Encoding.com announced a new premium service with tighter service level agreements (4 minute max wait time and 50 Gbyte/hour/customer throughput). Encoding.com's Gregg Heil and Jeff Malkin explained the company is using the new SLAs to move upmarket to service tier 1 and 2 media companies. Separate, Encoding.com's competitor mPoint's CEO Chiranjeev Bordoloi told me they're now on a $3M annualized revenue run rate as cloud-based alternatives continue to gain acceptance.

Yesterday's announcement by Netflix that it will be adding to its Watch Instantly library past seasons ABC's "Lost," "Desperate Housewives," "Grey's Anatomy" and "Legend of the Seeker" is another step forward for Netflix in strengthening its online competitiveness.

At a broader level though, I think it's also further evidence that the near-term success of Watch Instantly and other "over-the-top" broadband video services is going to be tied largely to deals with broadcast TV networks, rather than film studios, cable TV networks or independently-produced video sources.

Key fault lines are beginning to develop in how premium programming will be distributed in the broadband era. Content providers who have traditionally been paid by consumers or distributors in one way or another are redoubling their determination to preserve these models. Examples abound: the TV Everywhere initiative Comcast/Time Warner are espousing that now has 20+ other networks involved; Epix, the new premium movie service backed by Viacom, Lionsgate and MGM; new distribution deals by the premium online service ESPN360.com, bringing its reach to 41 million homes; MLB's MLB.TV and At Bat subscription offerings; and Disney's planned subscription services. As I wrote last week in "Subscription Overload is On the Horizon," I expect these trends will only accelerate (though whether they'll succeed is another question).

On the other hand, broadcast TV networks, who have traditionally relied on advertising, continue mainly to do so in the broadband world, whether through aggregators like Hulu, or through their own web sites. However, ABC's deal with Netflix, coming on top of its prior deals with CBS and NBC, shows that broadcast networks are both motivated and flexible to mine new opportunites with those willing to pay.

That's a good thing, because as Netflix tries to build out its Watch Instantly library beyond the current 12,000 titles, it is bumping up against two powerful forces. First, in the film business, well-defined "windows" significantly curtail distribution of new films to outlets trying to elbow their way in. And second, in the cable business, well-entrenched business relationships exist that disincent cable networks from offering programs outside the traditional linear channel affiliate model to new players like Netflix. These disincentives are poised to strengthen with the advent of TV Everywhere.

In this context, broadcast networks represent Netflix's best opportunity to grow and differentiate Watch Instantly. Last November in "Netflix Should be Aggressively Pursuing Broadcast Networks for Watch Instantly Service," I outlined all the reasons why. The ABC deal announced yesterday gives Netflix a library of past seasons' episodes, which is great. But it doesn't address where Netflix could create the most value for itself: as commercial-free subscription option for next-day (or even "next-hour") viewing of all prime-time broadcast programs. That is the end-state Netflix should be striving for.

I'm not suggesting for a moment that this will be easy to accomplish. But if it could, Netflix would really enhance the competitiveness of Watch Instantly and its underlying subscription services. It would obviate the need for Netflix subscribers to record broadcast programs, making their lives simpler and freeing up room on their DVRs. It would be jab at both traditional VOD services and new "network DVR" service from Cablevision. It would also be a strong competitor to sites like Hulu, where comparable broadcast programs are available, but only with commercial interruptions. And Hulu still has limited options for viewing on TVs, whereas Netflix's Watch Instantly options for viewing on TVs includes Roku, Xbox, Blu-ray players, etc. Last but not least, it would also be a powerful marketing hook for Netflix to use to bulk up its underlying subscription base that it intends to transition to online-only in the future.

Beyond next-day or next-hour availability, Netflix could also offer things like higher-quality full HD delivery or download options for offline consumption. Broadcasters, who continue to be pinched on the ad side, should be plenty open to all of the above, assuming Netflix is willing to pay.

I continue to believe Netflix is one of the strongest positions to create a compelling over-the-top service offering. But with numerous barriers in its way to gain online distribution rights to films and cable programs, broadcast networks remain its key source of premium content. So keep an eye for more deals like the one announced with ABC yesterday, hopefully including fast availability of current, in-season episodes.

What do you think? Post a comment now.

Another day, another flurry of announcements from Comcast with news of more networks participating in its On Demand Online technical trial. Newly on board are CBS (also the first broadcast network to participate) and 17 more cable networks such as A&E, AMC, BBC America, Food Network, History Channel, Sundance and others. Together with those already announced, there are now over 20 networks in the trial.

The cable networks' interest isn't surprising. I've been saying for a while that On Demand Online will be a real boon to them, providing a secure, scalable on-ramp to online distribution, new ad impressions and most important, significant enhanced value to their viewers. Still, despite all of Comcast's progress, most of the big cable network groups (e.g. NBCU, Fox, Disney, Viacom, Discovery) have not yet publicly signed on. I think that's just a matter of time.

There's no question Comcast is building real industry momentum for On Demand Online. But given the trial hasn't even begun yet, all of these announcements are really raising the visibility of the trial - and of course the pressure to make sure its "authentication" processes work as intended. No doubt each of these announcements is creating a lot of sweaty palms among Comcast's technical staff - the people who are responsible for proving authentication works. With all the PR buildup, if for some reason all does not go according to plan, Comcast will have lots of people looking for answers.

What do you think? Post a comment now.

YouTube mobile video uploads exploding; iPhones are a key contributor - The folks at YouTube revealed that in the last 6 months, uploads from mobile phones to YouTube have jumped 1,700%, while in the last week, since the new iPhone GS was released, uploads increased by 400% per day. I didn't have access to these stats when I wrote on Monday "iPhone 3GS Poised to Drive User-Generated Mobile Video," but I was glad to see some validation. The iPhone 3GS - and other smartphone devices - will further solidify YouTube as the world's central video hub. I stirred some controversy last week with my "Does It Actually Matter How Much Money YouTube is Losing?" post, yet I think the mobile video upload explosion reinforces the power of the YouTube franchise. Google will figure out how to monetize this over time; meanwhile YouTube's pervasiveness in society continues to grow.

Nielsen study debunks mythology around teens' media usage - Nielsen released a new report this week "How Teens Use Media" which tries to correct misperceptions about teens' use of online and offline media. The report is available here. On the one hand, the report underscores prior research from Nielsen, but on the other it reveals some surprising data. For example, more than a quarter of teens read a daily newspaper? Also, 77% of teens use just one form of media at one time (note, data from 2007)? I'm not questioning the Nielsen numbers, but they do seem out of synch with everything I hear from parents of teens.

Paid business models resurfacing - There's been a lot of talk from media executives about the revival of paid business models in the wake of the recession's ad spending slowdown and also the newspaper industry's financial calamity. For those who have been offering their content for free for so long, putting the genie back in the bottle is going to be tough. Conversely for others, like those in the cable TV industry, who have resisted releasing much content for free, their durable paid models now look even more attractive.

Broadcast TV networks diverge on strategy - Ad Age had a good piece this week on the divergence of strategy between NBC and CBS. The former is breaking industry norms by putting Leno on at 10pm, emphasizing cable and avidly pursuing new technologies. Meanwhile CBS is focused on traditional broadcast network objectives like launching hit shows and amassing audience (though to be fair it is pursuing online distribution as well with TV.com). Both strategies make sense in the context of their respective ratings' situations. Regardless, broadcasters need to eventually figure out how to successfully transition to online distribution, something that is still unproven (as I wrote here).

As the annual "upfronts" - the TV industry's program preview and ad sales extravaganza - kick off today, the recent financial performance of the network TV industry and the cable TV industry continue to diverge. The cable network model, powered by both ad sales and monthly affiliate fees, is proving very durable in the Great Recession, while the ad-only network TV model has been hammered. One conclusion from these numbers is that Hulu's owners must be pushing to figure out how the site can introduce a paid subscription model.

I pulled together financial information for a select group of companies comparing performance for the recently concluded March 31 quarter vs. a year ago.

As the chart shows, operating income increased for all the cable networks and revenue was up for all of them as well, except Scripps Networks, where it was flat. The press release commentary from these cable networks was the same: affiliate revenues are up, with ad sales soft, but not disastrous. Cable operators like Comcast and Time Warner Cable also fared well in the quarter with both revenue and operating income/cash flow increasing.

Contrast this with the broadcast TV numbers for Disney, Fox and CBS, all of which operate both TV networks and own local TV stations. Disney fared the best, with revenues down 2% and operating income down 38%. CBS followed with revenues down 12% and operating income down 49%. Fox was affected the worst, with revenues down 29% and operating income down 99%. As two examples of purely local station performance, Gannett's broadcasting segment revenues were down 16% and operating income down 24%, with Sinclair's revenues down 19% and operating income down 43% (before an impairment charge). The commentary from all the broadcasters was the same: the ad market is terrible, and they're doing their best to contain costs (meaning laying off staff).

As the TV industry gears up to sell billions of dollars of ad time this week, a clear lesson from the above financial performance is that it is essential to diversify into the paid subscription ecosystem instead of relying on advertising alone. Disney, Fox and NBCU have recognized this for a while and have strongly built up their portfolio of cable networks.

With ad sales in the doldrums, it's hard not to wonder what Disney, Fox and NBCU, the three major owners of Hulu, are thinking about with respect to Hulu's own business model, which is of course currently 100% reliant on ads. I mean, if your incumbent business model is frayed, wouldn't it make sense, when essentially "starting over" online, to aggressively pursue the one that is resilient even in the recession?

Hulu's exclusive online lock on high-quality programming from 3 of the 4 broadcast networks would seem to position the company perfectly for a subscription play. If its owners looked hard at the divergent fortunes of cable vs. broadcast, it seems inevitable we'll see some type of paid subscription offering from Hulu - either directly or through distributors - sometime in the near future.

What do you think? Post a comment now.

Below is the 16th edition of the VideoNuze Report podcast, for May 15, 2009.

This week I provide some further detail on a post I wrote earlier this week, "Comcast's Sam Schwartz Offers Some Insights into OnDemand Online Authentication Plans." Comcast's and Time Warner Cable's intention to make cable programs available online to their paying subscribers would be a big leap forward for the video and broadband industries. A key piece of how to bring this to life is "authentication" - how to ensure users are who they are, and that they gain access to programs they're supposed to. Sam explains how Comcast is approaching authentication and what we can expect later this year.

Meanwhile Daisy talks about her post on Beet.tv, "CBS Expanding Original Web Video for New Personal Finance Site," which explores how CBS is pulling video together from its online content group, news division and local stations to beef up the video available at its recently-launched financial destination site, CBSMoneyWatch.com. Also, with the demise of TV Week as a print publication, Daisy talks about the range of industry coverage she's providing at other online and print pubs.

Click here to listen to the podcast (14 minutes, 40 seconds)

Click here for previous podcasts

The VideoNuze Report is available in iTunes...subscribe today!

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.

The first round games of the NCAA's March Madness are a week from today and the hype surrounding the tournament is in full swing. But the tournament itself is no longer the only story; the broadband-delivered "March Madness on Demand" has become a big part of the 3 week experience as well. Since converting from a subscription service to a free, ad-supported format 4 years ago, CBS Sports and the NCAA have made MMOD a huge winner, providing plenty of lessons for others. These include:

1. Under the right circumstances, free with ads beats paid with subscriptions. It was big news back in '06 when CBS converted MMOD from subscription access to free, ad-supported. In retrospect, it looks like a stroke of genius. The $30M in ad revenue MMOD will generate for CBS this year would have required 1.5 million of the old $20 subscriptions. Hitting that subscription number would have been miraculous. With the free model, instead of allocating scarce marketing dollars and resources on acquiring temporary subs, CBS can focus on promoting the games, selling ads and striking high-quality distribution deals - 3 things that networks do very well. Free vs. paid will be a perpetual debate for premium video, but solid market research, well-thought out business cases and a willingness to experiment can lead to big payoffs, as MMOD has shown.

2. Well-executed online access burnishes the brand. Following the above, MMOD is a huge win for the CBS brand and for the NCAA. Fans love MMOD and appreciate the easy online access. Of course, anything for free is always well-received, especially in a down economy. Large audiences mean lots of cross-promotional opportunities for other CBS programs. Abundant media coverage means the brand gets tons of free promotion. And the list goes on.

3. Advertisers love being a part of engaging, high-quality online experiences. The increase in MMOD ad revenue from $4M in '06 to $30M this year speaks to advertisers' interest. It's no surprise that big brands are increasingly challenged to access large target audiences and have their messages heard (that's why the Super Bowl maintains its massive appeal). MMOD offers an exciting, immersive and interactive avenue to augment brands' on-air tournament spending. MMOD gives CBS ad sales teams a formidable differentiator. As AdAge notes, that helped CBS retain wounded GM as an advertiser, while the company dropped the Super Bowl and the Academy Awards from its media plan.

4. User experience matters, a lot. MMOD is a hugely complex undertaking for CBS, but delivering a positive experience that lives up to the hype is ultimately what matters. In the past, not knowing how many simultaneous users to expect or what bandwidth would be required, CBS cautiously proceeded with its so-called "waiting room" model. That's now been eliminated, and everyone can watch on-demand. This year CBS is also offering a high quality or "HQ" option, powered by Silverlight. Overall, CBS's player is clean and easy to use. My experience in the past has been that the ads are obvious, but not overwhelming. All of this registers with users and contributes to a positive experience.

5. The side dishes complement the main meal. There's no question that the games themselves are the primary attraction. But CBS has been clever in augmenting the games with lots of other stuff that contribute to the overall experience. For example, if you go to the site now, you can see highlights of past championship games. Then on Sunday will come the selection show. There's a Facebook integration, widgets and the "Selection Sunday Challenge." And this year CBS is also introducing mobile access, albeit for a fee. Add it all up and CBS has been able to build a far larger franchise around MMOD than just offering the games themselves.

What do you think? Post a comment now.

Microsoft's Silverlight notched another high-profile win with yesterday's announcement by CBS Sports and the NCAA that CBSSports.com's March Madness on Demand (MMOD) will offer a high definition option using powered by Silverlight.

Over the past few years MMOD has become the signature online video sports event, with CBSSports.com successfully converting it in 2006 from a paid, subscription based model to one fully supported by ads. The payoff has been evident: in '08 MMOD had 4.8 million unique visitors (a 164% increase over '07) who watched 5 million hours of live video (an 81% increase over '07).

CBSSports.com is building on its MMOD success by offering the higher quality option via Silverlight this year. Users who download the plug-in will get 1.5 mbps streams vs. the standard player's 550 kbps. Once again, all 63 games, from the first round through the championship game will be available. For office workers unable to watch on TV, online distribution continues to be a compelling value.

With MMOD, Microsoft is continuing to push Silverlight into high-profile sports events. Recall that Silverlight's inaugural run, supporting the 2008 Summer Olympics, was executed superbly. It showcased new features like multiple viewing windows and instant rewind/fast-forward. MMOD promises yet another premier opportunity for Silverlight to show its stuff.

What do you think? Post a comment now.

Want to get your head spinning? Try making sense of the various research data that keeps spilling out about current TV consumption, and how it is being impacted by broadband video's rising popularity.

For those who think TV is largely unaffected, consider this: Last month, Nielsen reported that the average person in the U.S. watched approximately 142 hours of TV a month, which was 5 hours more than last year. Though Nielsen also said that watching video online and watching video on a mobile phone also clocked in new records at 2 hours, 31 minutes per month and 3 hours, 37 minutes per month, respectively (though, more mobile video use than online video use? That seems odd to me...).

These positive TV numbers echo what Multichannel News reported CBS research head David Poltrack recently shared: that even though 75% of TV viewers have now watched some video online, TV viewing in all demographics have gone up 8% since 2000. So maybe TV viewing isn't being hurt much.

But on the flip side is evidence that, particularly among young people, TV has already been hurt by broadband and other alternatives. Just yesterday Adweek reported upcoming numbers from Deloitte showing that viewing among 14 to 25-year-olds is now down to 10.5 hours per week, while their time spent watching video on computers continues to rise. These numbers build on research from IBM released last month that among the 76% of people they surveyed, 15% said they watched "slightly less" TV and 36% watch "significantly less" TV (note this was a 6 country study). There are other reports which have showed similar trends.

What should one conclude? My take is that broadband and other outlets are certainly having an impact among younger people, where the digital lifestyle is most pervasive. However, there are still a whole lot of people living a mainly analog lifestyle. While that provides the TV industry some short-term comfort, the long-term trends almost certainly favor less TV viewing.

What do you think? Post a comment now.

Welcome to December and to the home stretch of 2008. Following are 3 key themes from VideoNuze in November:

Cable programming's online distribution narrows - Last month I concluded that cable programmers (e.g. Discovery, MTV, Lifetime) are going to become much more sparing when it comes to distributing their full programs online. As noted in "The Cable Industry Closes Ranks," after hearing from industry executives at the CTAM Summit and on the Broadband Video Leadership Breakfast, it has become apparent that the industry is going to defend its traditional multichannel video subscription model from broadband and new "over-the-top" incursions.

Both programmers and operators have a lot vested in this successful model, and are surely wise to see it last as long as possible. Subscription and affiliate fees are particularly precious in this economy, as the WSJ wrote on Saturday. Still, many VideoNuze readers pointed out the music industry's folly in trying to maintain its business model, only to see it turned upside down. Many predicted the cable industry is doomed to follow suit. Truth-be-told though, as I wrote in "Comcast: A Company Transformed," major cable operators are already far more diversified than they used to be. Broadband, phone and digital TV (+ add-ons like DVR, HD and VOD) have created huge new revenue streams. Surging broadband video consumption only helps them, even as "cord-cutting" looms down the road.

Netflix moves to first ranks of cord-cutting catalysts - Three posts in November highlighted the significant role that Netflix is poised to play in moving premium programming to broadband distribution. Most recently, in "New Xbox Experience with Netflix Watch Instantly: A 'Wow' Moment," I shared early reactions from a VideoNuze reader (echoed by many others) to receiving a subset of Netflix's catalog through Xbox's recently upgraded interface. Netflix CEO Reed Hastings highlighted the increasing importance of game devices in bridging broadband to the TV in his keynote at NewTeeVee Live this month (recapped here).

Still, Netflix lacks the rights to deliver many movies online, a problem unlikely to be rectified any time soon given Hollywood's stringent windowing approach. As such, in "Netflix Should be Aggressively Pursuing Broadcast Networks for Watch Instantly Service," I offered my $.02 of advice to the company that it should build on its recent deal with CBS to blow out its online library of network programs. In this ad-challenged environment, I believe networks would welcome the opportunity. Hit TV programs would help drive device sales, which is crucial for building WI's adoption. While the Roku box is a modest $99, other alternatives are still pricey, though becoming cheaper (the Samsung BD-P2500 Blu-ray player is down $100, now available at $300, I spotted the LG BD300 over the weekend for $245). A robust Netflix online package would be poised to draw subscribers away from today's cable model.

Lousy economy still looms large - Wherever you go, there it is: the lousy economy. Though the market staged a nice little rebound over the last 5 days, things are still fragile. Across the industry broadband companies are doing layoffs. This is only the most obvious of the side effects of the economic downturn. Another, more subtle one could be downward price pressure. As I wrote in "Deflation's Risks to the Broadband Video Ecosystem," economists are now growing concerned that the credit crunch could lead to collapsing prices and profits across the economy. I noted that such an occurrence would be particularly damaging for the broadband industry, where business models are still nascent, so ROIs and spending are softer.

Here's to hoping for some good economic news in December...

What do you think? Post a comment now.

Over the past several months Netflix has made a series of announcements related to its "Watch Instantly" feature. On the device side, there are new partnerships with TiVo (for Series 3, HD and HD XL models), Microsoft Silverlight (for Mac viewing), Samsung (for Blu-ray players), LG (for Blu-ray players), Xbox 360 and of course Roku. All allow Netflix Watch Instantly content to be delivered directly to users' TVs. Meanwhile on the content side, there have been deals with Starz, CBS and Disney Channel, with more no doubt yet to come.

Our household has been an enthusiastic subscriber to Netflix for years and I welcome the commitment that Netflix appears to be making to Watch Instantly. However, as I pointed out in May, in "Online Movie Delivery Advances, Big Hurdles Still Loom," Watch Instantly is hobbled by its limited catalog, now totaling around 12,000 titles, just 10% of Netflix's total catalog, even after including the recently added Starz titles.

The fundamental problem Netflix is bumping up against in building out Watch Instantly's film catalog is Hollywood's well-established windowing process. Studios have wisely and methodically maximized their films' lifetime financial value by doling out the rights to air them to a series of distribution outlets. These rights unfold in a carefully calibrated timeline and have become wrapped up in a thick layer of contractual agreements extending to all parties in the value chain. It is a system that has served all constituencies well, generating billions of dollars of value. It is also unlikely to change in any material way any time soon.

As such, Netflix, the "world's largest online movie rental service," as it calls itself, is increasingly discordant. On the one hand, growing the Watch Instantly service is crucial to Netflix's long term success in the digital/broadband era but on the other, it doesn't have the ability to offer a competitive catalog that meets consumers' online delivery expectations. So what to do?

My recommendation is for Netflix to incorporate the delivery of TV programming, via Watch Instantly, into its core value proposition. Specifically, Netflix should be making an all-out effort (if it is not already doing so) to secure next-day rights to deliver all prime-time broadcast network programs to its subscribers.

This strategy provides Netflix with many clear benefits and positions it well for long-term success. First, in these tight economic times, it dramatically expands the value of the Watch Instantly feature, turning it into both a bona fide subscriber retention tool to battle churn as well as a high-profile subscriber acquisition lever (not to mention an exciting pull-through offer big box retailers could use in their Sunday circulars to generate traffic).

Second, it is a clever competitive strike against four primary alternative ways whereby consumers can watch network programs on demand: cable-based VOD, a la carte paid downloads at iTunes/Amazon/others, free online aggregators like Hulu/Fancast/others and DVRs (though note the TiVo deal addresses this last option).

A comprehensive Netflix prime-time catalog compares well with each alternative. Against cable VOD it offers familiar, superior navigation plus a viable revenue stream for broadcasters while cable tries to get Canoe ready; against paid downloads, the obvious advantage of being a value-add service; against online aggregators, commercial free delivery; and against DVRs, the lack of consumer hardware purchases and persistent recording space limitations.

All of this should make Netflix a very appealing partner for the broadcast networks. They are getting hammered by ad-skipping, audience fragmentation, quality programming migrating to cable and an inferior single revenue source business model. The prospect of Netflix offering payments for their programs should be well-received. There may be concerns about programs' long term syndication value and also the potential enablement of a new gatekeeper. In better times these might be deal-killers; in this climate they shouldn't be.

Finally, there's the big potential long-term Netflix prize: if it can stitch together a large-scale network of compatible devices for Watch Instantly distribution, it could create a viable "over-the-top" alternative to today's multichannel subscription services (cable/telco/satellite). As I described in my recent "Cord Cutters" post, to really succeed, Netflix would have to eventually incorporate cable network programming. But if its reach is wide and its economics sound, that's within the realm of possibility as well.

But those are long-term issues. For now, while the recent CBS deal is a great start, Netflix should be working double-time to build out a full library of broadcast programs. It would dramatically improve Watch Instantly's appeal and value, while positioning Netflix well for the broadband era.

What do you think? Post a comment now.

Notwithstanding the countless times I've received emails with links to video clips or visited social networking pages where video is embedded, I've often had the sense that true social engagement around premium quality video has been lacking.

"Engagement" is one of those nebulous Internet words that can mean many things to different people. To me, the most appropriate online engagement opportunities should be modeled on how we have traditionally engaged with offline media. Some relevant offline examples that come to mind include recommending a movie to a friend, clipping a newspaper article to send to a colleague, chatting informally with friends and family during a TV show or sharing opinions about favorite actors and actresses over drinks.

As consumers shift their viewing to broadband, the key to engagement is to enable users to effortlessly and intuitively emulate some or all of these behaviors. I concede that's easier said than done. Yet in addition to existing efforts, I see new signs that premium video sites are starting to understand how strategic it is for them to incent user engagement. New steps are being taken to make deeper, more consistent engagement a reality, not just a goal.

For example, just yesterday CBS announced its "Social Viewing Rooms" which allow users to view programs together while commenting, interacting and finding each other (note this is something that Paltalk and others have pursued for a while). It wasn't clear from the announcement, but I think a critical success factor for CBS will be allowing users to bring existing friends (from Facebook, MySpace, etc.) into the rooms, rather than requiring new relationships to be built.

I found another example in a presentation I recently attended by Ian Blaine, thePlatform's CEO. In it, he made clear that his company is planning a big push into engagement-oriented features ranging from recommendations to ratings to social networking via sister company Plaxo. Still another initiative is "MediaFriends" a clever application that's coming soon from Integra5 which converges text messaging and social networking with viewing across multiple screens. Finally, another is from Volo Media, which is today announcing a plug-in for iTunes that allows one-touch sharing, bookmarking and more, helping open up a window from iTunes into the larger web environment.

All of these activities are in addition to other social media capabilities being brought to premium video from companies like KickApps, PermissionTV, Brightcove, Gotuit and Magnify.net. Then of course there's the steady migration of premium video into YouTube, which is the granddaddy of video sharing and social engagement.

Broadband is much more than an exciting new distribution outlet for video providers, it's also a whole new platform for extending social behaviors that are deeply valued and highly ingrained in all of us into the virtual world. Embracing opportunities for deeper engagement with and around premium video means thinking of viewers more as participants and less as passive audiences. When done right the payoffs in engagement, loyalty, viewing time and monetization will be substantial.

What do you think? Post a comment now!

In the two years since Google acquired YouTube, I've often wondered about two things: (1) was there really a strategic rationale behind the deal? and, (2) if there was indeed a strategic rationale, when might we see it borne out in actual business initiatives?

For sure YouTube's organic growth has continued unabated during these two years and from a traffic perspective, it is more dominant now than ever. Yet the dearth of initiatives that are tangibly strategic (or meaningfully revenue-producing for that matter) to Google, or that even minimally strengthen either company's underlying value proposition, has led me to conclude that the deal had more to do with the Google guys wanting to acquire YouTube for its "coolness" factor - simply because they could - than anything else.

I don't mean to sound unfair to the YouTubers who work diligently to make YouTube an incredible experience, which of course it truly is. Yet it is hard to deny the obvious: exactly what has YouTube done differently during the last two years that it couldn't have done had it remained independent (and saying "afforded its monthly CDN bills" doesn't count!), and how exactly have either YouTube or Google benefited from being together during this time?

However, I think things are finally changing. In fact, with little fanfare or proactive PR, Google at last seems to be strategically flexing YouTube's muscles. While some of what they're doing is experimental, other moves have significant market potential and could be highly disruptive to other broadband oriented media and technology companies.

At the top of my "highest potential" list is Google Content Network, especially as it's envisioned as "spokes" tied to YouTube's "hub." I wrote at length about GCN a month ago in "Google Content Network Has Lots of Potential, Implications" so I won't rehash my arguments here. But note yesterday's news about "Poptub" as the second video series to get the GCN/YouTube treatment; I expect a steady drumbeat of these types of deals in the months to come. GCN has the potential to become a key driver of the Syndicated Video Economy.

Another high-potential activity is YouTube's plan to start streaming full episodes. The first deal with CBS is no doubt a signal of many more to come. Full episode streaming is strategic on a number of levels. It enhances YouTube's and Google's access to big brands' ad dollars. While Google has thrived in the self-service, "long tail of advertising" world, it needs more cred among big brands, especially as it pursues its Google TV initiative (see latest deal with NBCU) and other eventual broadband-to-the-TV activities. Full episodes are also a winner from a user standpoint: a unified video experience across premium, indie, long tail and UGC video is very compelling and also squeezes competitors with narrower offerings.

Yet another high-potential activity is the implementation of search ads on YouTube. When the deal was originally done, my first reaction was to think it was a no-brainer to simply start displaying ads against every YouTube search (example - you search for "West Wing" in YouTube and the results page shows an ad to buy the DVD set). If there's one thing Google knows cold, it's the search ad business. YouTube searches represent billions of incremental opportunities each year to extend its core franchise.

Lastly - and this is admittedly more of a "Will Richmond thing" than anything Google or YouTube are yet pursuing: I think it's practically inevitable that the company will start investing in independent broadband video companies at some point. I touched on this in yesterday's piece about NBCU-60Frames and MSN-Stage 9. As time marches on and some of the above activities bear fruit, it's going to become very tempting for Google/YouTube to lever its strengths more directly into content ownership. I know what Google's always maintained about being a technology company, committed to neutrality in way that even Switzerland would appreciate. But as Google's ad business matures and it inevitably is pressured for growth, content is going to be a very alluring opportunity.

Regardless of what happens on this last point, YouTube now seems to have a full plate of strategic activities underway. It's great to finally see this happening.

What do you think? Post a comment now.

This past Wednesday, Starz, the Liberty Media-owned premium cable network, licensed its "Starz Play" broadband service to Netflix. The three year deal makes all of Starz's 2,500 movies, TV shows and concerts available to Netflix subscribers using its Watch Instantly streaming video feature. Very coincidentally I happened to be at Starz yesterday for an unrelated Liberty meeting, and had a chance to speak to Starz CEO Bob Clasen, who I've known for a while, to learn more.

On the surface the deal is an eye-opener as it gives a non-cable/telco/satellite operator access to Starz's trove of prime content. As I've written in the past, cable channels, which rely on their traditional distributors for monthly service fees, have been super-sensitive to not antagonizing their best customers when trying to take advantage of new distribution platforms. This deal, which uses broadband-only distribution to reach into the home, no doubt triggers "over-the-top" or "cable bypass" alarm bells with incumbent distributors.

Then there is the value-add/no extra cost nature of Netflix's Watch Instantly feature. That there is no extra charge to subscribers for Starz's premium content (as there typically is when subscribing to Starz through cable for example) raises the question of whether Starz might have given better pricing to Netflix to get this deal done than it has to its other distributors.

But Bob is quick to point out that in reality, the Netflix deal is a continuation of Starz's ongoing push into broadband delivery begun several years ago with its original RealNetworks deal and continued recently with Vongo. To Starz, Netflix is another "affiliate" or distributor, which, given its tiny current online footprint does not pose meaningful competition to incumbent distributors. With only about 17 million out of a total 100 million+ U.S. homes subscribing to Starz, broadband partnerships are seen as a sizable growth opportunity by the company.

Further, Starz has been aggressively pitching online deals to cable operators and telcos for a while now, though only the latter has bit so far (Verizon's FiOS is an announced customer). Cable operators seem interested in the online rights, but have been reluctant to pay extra for them as Starz requires.

Bob also noted that Starz's wholesale pricing was protected in its Netflix deal, and that for obvious reasons of not hurting its own profitability, Starz has strong incentives to preserve incumbent deal terms in all of its new platform deals.

To me, all of this adds up to at least a few things. First is that Netflix must be paying up in a big way to license Starz Play. I assume this is an obvious recognition by Netflix that it needed more content to make Watch Instantly more compelling (see also Netflix's recent Disney Channel and CBS deals). Since it's not charging subscribers extra, Netflix is making a bet that over time - and aided by its Roku and other broadband-to-the-TV devices - Watch Instantly will succeed and as a result, will drive down its costs by reducing the number of DVDs the company needs to buy and ship. That seems like a smart long-term bet as the broadband era unfolds.

And while I agree that Starz Play on Netflix doesn't represent real competition to cable, telco and satellite outlets today, it's hard not to see it as a signal that traditional distributors are losing their hegemony in premium video distribution. (for another example of this, see Comedy Central's licensing of Daily Show and Colbert to Hulu). As I've said for a while, over the long term, the inevitability of broadband all the way to the TV portends significant disruption to current distribution models. I see Netflix at the forefront of this disruptive process.

What do you think? Post a comment now.