Here’s more evidence that most smaller SVOD services are fighting for the attention of a tiny group of prospective subscribers. New research from Limelight Networks indicates that just 13% of SVOD subscribers in the U.S. and U.K. take more than 2 services. Of all respondents, 60% subscribe to SVOD, broken down as follows: 33% taking 1 service, 19% taking 2 services, and approximately 8% taking 3 or more services (which translates to 13% of overall SVOD subscribers).
Since Netflix, Amazon and Hulu have by far the biggest market share, they undoubtedly are among the first 2-3 services most people subscribe to. As a result, all other SVOD services, which in the U.S. exceeds 100, are vying for attention from the sliver of people who go beyond the big 3 to subscribe to others. The data highlights how difficult it’s going to be for the dozens of smaller SVOD services to achieve scale.
Yesterday was one of those days when meaningful broadband video-related news and announcements just kept spilling out. While I was writing up the 5Min-Scripps Networks deal, there was a lot of other stuff happening. Here's what hit my radar, in case you missed any of it:
Adobe launches Flash 10.1 with numerous video enhancements - Adobe kicked off its MAX developer conference with news that Flash 10.1 will be available for virtually all smartphones, in connection with the Open Screen Project initiative, will support HTTP streaming for the first time, and with Flash Professional CS5, will enable developers to build Flash-based apps for the iPhone and iPod Touch. All of this is part of the battle Adobe is waging to maintain Flash's lead position on the desktop and extend it to mobile devices. The HTTP streaming piece means CDNs will be able to leverage their HTTP infrastructure as an alternative to buying Flash Media Server 3.5. Meanwhile Apple is showing no hints yet of supporting Flash streaming on the iPhone, making it the lone smartphone holdout.
Hulu gets Mediavest multi-million dollar buy - Hulu got a shot in the arm as Mediaweek reported that the Publicis agency Mediavest has committed several million dollars from 6 clients to Hulu in an upfront buy. Hulu has been flogged recently by other media executives for its lightweight ad model, so the deal is a well-timed confidence booster, though it is still just a drop in the bucket in overall ad spending.
IAB ad spending research reports mixed results - Speaking of ad spending, the IAB and PriceWaterhouseCoopers released data yesterday showing overall Internet ad spending declined by 5.3% to $10.9B in 1H '09 vs. 1H '08. Some categories were actually up though, and online video advertising turned in a solid performance, up 38% from $345M in 1H '08 to $477M in 1H '09. Though still a small part of the overall pie, online video advertising's resiliency in the face of the recession is a real positive.
Yahoo ups its commitment to original video - Yahoo is one of the players relying on advertising to support its online video initiatives, and so Variety's report that Yahoo may as much as double its proportion of originally-produced video demonstrates how strategic video is becoming for the company. Yahoo has of course been all over the map with video in recent years including the short tenure of Lloyd Braun and then the Maven acquisition, which was closed down in short order. Now though, by focusing on short-form video that augments its core content areas, Yahoo seems to have hit on a winning formula. New CEO Carol Bartz is reported to be a big proponent of video.
AEG Acquires Incited Media, KIT Digital Acquires The FeedRoom and Nunet - AEG, the sports/venue operator, ramped up its production capabilities by creating AEG Digital Media and acquiring webcasting expert Incited Media. Company executives told me late last week that when combined with AEG's venues and live production expertise, the company will be able to offer the most comprehensive event management and broadcasting services. Elsewhere, KIT Digital, the acquisitive digital media technology provider picked up two of its competitors, Nunet, a German company focused on mobile devices, and The FeedRoom, an early player in video publishing/management solutions which has recently been focused on the enterprise. KIT has made a slew of deals recently and it will be interesting to watch how they knit all the pieces together.
Product news around video delivery from VBrick, Limelight and Kaltura - Last but not least, there were 3 noteworthy product announcements yesterday. Enterprise video provider VBrick launched "VEMS" - VBrick Enterprise Media System - a hardware/software system for distributing live and on-demand video throughout the enterprise. VEMS is targeted to companies with highly distributed operations looking to use video as a core part of their internal and external communications practices.
Separate, Limelight unveiled "XD" its updated network platform that emphasizes "Adaptive Intelligence," which I interpret as its implementation of adaptive bit rate (ABR) streaming (see Limelight comment below, my bad) that is becoming increasing popular for optimizing video delivery (Adobe, Apple, Microsoft, Apple, Akamai, Move Networks and others are all active in ABR too). And Kaltura, the open source video delivery company I wrote about here, launched a new offering to support diverse video use cases by educational institutions. Education has vast potential for video, yet I'm not aware of many dedicated services. I expect this will change.
I may have missed other important news; if so please post a comment.
Following are 4 news items worth noting from the week of July 27th:
New Pew research confirms online video's growth - Pew was the latest to offer statistics confirming that online video usage continues to soar. Among the noteworthy findings: Long-form consumption is growing as 35% of respondents say they have viewed a TV show or movie online (up from 16% in '07); watching video is widely popular, draw more people (62%) than social networking (46%), downloading a podcast (19%) or using Twitter (11%); usage is up across all age groups, but still skews young with 90% of 18-29 year olds reporting they watch online vs. 27% of 65+ year olds; and convergence is happening with 23% of people who have watched online reporting they have connected their computers to their TVs.
FreeWheel has a very good week - FreeWheel, the syndicated video ad management company I most recently wrote about here, had a very good week. On Monday, AdAge reported that YouTube has begun a test allowing select premium partners to bring their own ads into YouTube, served by FreeWheel. Then on Wednesday, blip.tv announced that it too had integrated with FreeWheel, so ads could be served for blip's producers across their entire syndication network. I caught up with FreeWheel's co-CEO Doug Knopper yesterday who added that more deals, especially with major content producers, are on the way. FreeWheel is riding the syndication wave in a big way.
Plenty of action with CDNs - CDNs were in the news this week, as Vusion (formerly Jittr Networks) bit the dust, after going through $11 million in VC money. Elsewhere CDN Velocix (formerly CacheLogic) was acquired by Alcatel-Lucent. ALU positioned the deal as fitting with its "Application Enablement" strategy, supporting customers' needs in a "video-centric world." Limelight announced its LimelightREACH and LimelightADS services for mobile media delivery and monetization (both are based on Kiptronic, which it acquired recently). Last but not least, bellwether Akamai reported Q2 '09 earnings, that while up 5% vs. year ago, were down sequentially from Q1. Coupled with a cautious Q3 outlook, the company's stock dropped 20%.
IAC is making big moves into online video - IAC is making no bones about its interest in online video. Last week the company unveiled Notional, a spin-out of CollegeHumor.com, to be headed by that site's former editor-in-chief Ricky Van Veen. Then this week it announced another new video venture, with NBCU's former co-entertainment head Ben Silverman. IAC chief Barry Diller seems determined to push the edge of the envelope, as IAC talks up things like multi-platform distribution and brand integration. With convergence and mobile consumption starting to take hold, the timing may finally be right for these sorts of plays. At a minimum IAC will keep things interesting for industry watchers like me.
Following are 3 key themes from VideoNuze in May:
1. Hulu Moves to Center Stage
Already on a roll, Hulu gained lots of mind share in May. After YouTube it is clearly the most-buzzed about video site - not a bad accomplishment for a site that just celebrated its one year anniversary.
The month began with the announcement that Disney would invest in Hulu, at last making available ABC and other programs in Hulu's ever-growing portal. Hulu gained stature during the month as the statistic from comScore released in late April - that Hulu was now the #3 most-popular video site, with 380 million video views in March - was repeatedly recirculated. (Hulu was separately disputing data released from Nielsen showing a far-smaller audience.)
In addition to the Disney content, Hulu also announced its first live event, tonight's concert from the Dave Matthews Band. Capping the month was last week's Hulu Labs announcement, showcasing the desktop app that moves Hulu one step closer to being TV-ready.
Hulu's growth and top-notch user experience continue to set the pace in the online video world. Still, as I noted in my post about the Disney deal, what's still unproven is the Hulu business model and how it plans to navigate the convergence of broadband and TV. The spin coming from its owners is that financial progress is being made, yet Hulu's per program viewed revenues continue to be a fraction of those derived from on-air viewership. Sooner than later, I predict the Hulu growth story is going to start to give way to the Hulu financial story, which may yet include subscriptions.
2. Susan Boyle Shows Power and Conundrum of Viral Video
It was hard to miss the Susan Boyle phenomenon in May. As of last Thursday (before the finale of "Britain's Got Talent" in which she placed second) her original video had generated over 235 million views, according to tracking firm Visible Measures. Ms. Boyle's sensational performance has mainstreamed the term "viral video." The idea that you can become a worldwide personality is truly a broadband-only invention.
Yet 3 1/2 years after SNL's "Lazy Sunday" video became the first bona fide big media YouTube hit (despite NBC's efforts), the process for copyright holders and distributors to monetize these viral wonders remains immature. The NY Times described the interplay over the Boyle viral videos between YouTube, Fremantle, ITV and others, and why those hundreds of millions of views are still under-monetized. But with broadband distribution's increasing importance, this won't last; viral monetization rights are inevitably going to become a key part of the upfront negotiating mix.
3. Mobile video growth
Mobile video continued to get a lot of attention from content providers, service providers and handset makers in May, with initiatives from NBC, NBA, E!, Samsung, Sling, among others (a full listing of mobile video news is here). The mobile video ecosystem is responding to data indicating surging consumer acceptance, primarily driven by the iPhone. In May Nielsen released a report indicating mobile user growth from Feb '07 to Feb '09 was 74%, and that iPhone users are 6 times more likely to consume mobile video. The crush of new smartphones coming in the 2nd half of '09 promises that mobile video usage is going to continue growing rapidly. Limelight's acquisition of mobile ad insertion company Kiptronic is likely the tip of the deal iceberg as companies position themselves for mobile.
What do you think? Post a comment now.
Below is the 17th edition of the VideoNuze Report podcast, for May 22, 2009.
This week Daisy takes on 2 topics: how book publishers are (finally!) embracing video to promote their authors and titles, and also what NBC's local media division is doing to roll out new web sites to support its ten owned stations. They're adding lots of original content (including from 3rd parties), video, social media features and more community emphasis. No surprise syndication is a real push. Local stations have been really hammered by the recession and also by the shift to broadband distribution, so it's good to see NBC being aggressive.
Separate but related NBC.com is my focus on this week's podcast. Specifically, I add more detail to my post this week about how NBC.com is leveraging its existing online/broadband infrastructure to support its mobile video efforts by using Kiptronic, a mobile video ad insertion company.
Coincidentally, Kiptronic was just acquired by Limelight, further validating that mobile video is a rising priority for many video providers. I've been digging into mobile video and though it's still well behind the broadband adoption curve, the iPhone and other video-ready mobile devices are creating a lot of momentum. (Recall that mobile video taking off was one of my 5 predictions for '09)
For those of you celebrating the long Memorial Day weekend, and the official start of summer, enjoy! I'll see you on Tuesday.
Click here to listen to the podcast (13 minutes, 21 seconds)
Click here for previous podcasts
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This morning Limelight announced it has acquired Kiptronic for cash and stock. Just yesterday I wrote about how Kiptronic is helping NBC.com insert ads into its mobile video streams by plugging into NBC.com's existing work flow and DART ad infrastructure.
While NBC.com is on the leading edge of blending its broadband and mobile video infrastructures, based on my conversations with other video content providers, I suggested this is going to be a significant future trend. David Hatfield, Limelight's SVP of Products, Marketing and Sales, who I spoke to earlier today about the Kiptronic deal, echoed that sentiment.
While mobile video is still in the early stages, David said that for "all of its customers, mobile and Internet-connected devices are top-of-mind" and that they are looking to partners like Limelight to cost-effectively address new 3 screen opportunities, as well as challenges like audience fragmentation.
David explained that having worked with Kiptronic for 3+ years, they shared a common vision of the importance of blending broadband/online infrastructure to support the mobile/Internet-connected device world. Both companies also emphasize open video ecosystems, and Limelight intends to continue supporting other CDNs that Kiptronic has been working with. As I said yesterday, the iPhone has been responsible for driving a lot of today's mobile video usage, but with other smartphones and devices coming on strong, mobile viewership is poised to broaden and intensify. With Kiptronic under its tent, Limelight will be better positioned to serve its customers' mobile needs, and augment its core CDN services.
Two highly related broadband video themes - HD delivery and convergence between broadband and TV - are both picking up steam at this week's NAB show. Among the key announcements are:
Move Networks acquiring Inuk Networks (announced just this morning)
And separate from the show, TiVo and Roku supporting Amazon VOD HD titles
The entire broadband video ecosystem is getting more and more focused on both HD delivery and convergence. However, the former, which is primarily an infrastructure upgrade, is easier to execute on than the latter, which almost always requires users to buy and install some new device (either single or multi-purpose). Given the lousy economy and natural replacement cycles, this means that for many users, those gorgeous online HD experiences will be viewed on their computers for some time to come.
I think that's actually OK though. By proliferating online HD delivery, users will increasingly be getting a taste of what would be available to them if their broadband was connected to their TVs. Further, plenty of early adopters will become evangelists, showing off online HD experiences for their friends and families. Making things more tangible will help create the necessary promotional tailwind that convergence devices need to succeed.
Convergence has been a long time in coming, but the elements are now beginning to fall into place. I believe that the more HD content that's available online, the faster the convergence device market will develop.
What do you think? Post a comment now.
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.
Last week's unveiling of HDWeb from Akamai (disclaimer: a VideoNuze sponsor), coupled with Limelight's recent announcement of its LimelightHD service offering, further raise the visibility and near-term prospect of higher-quality video streaming.
Underlining this was the impressive array of support in the two press releases from customers willing to be quoted expressing their interest in HD. I read all this as putting to rest any doubts about whether content providers are interested in offering HD. Supporting Akamai's release were MTV, NBA, Gannett, while supporting Limelight's release were Fox Interactive, Brightcove, Adobe, Silverlight and Rajshri.com (India's #1 broadband portal).
Content providers I talk to are enthusiastic about pushing the quality bar, though a key issue is cost of delivery and potential ROI. Obviously to push out HD-quality streams means higher bandwidth and storage needs, the 2 key drivers of CDN charges. To support higher costs, improved revenue potential is required. And this is why HD rollouts are dependent on broadband video advertising prospects.
With ad support the primary business model for broadband video, I think a chicken-and-egg dynamic between ads and HD is going to play out. The better the ad revenue prospects, the more willing content providers will be to invest in HD. This is a reminder of why further maturing of broadband video ad models and supporting technologies are so important. So while the paid download model will also continue to grow, if you really want to get a handle on HD's prospects, keep an eye on the broadband video ad business. Continued traction will govern how much HD we'll all be seeing.
In the mean time, HDWeb from Akamai provides an enticing glimpse of an online HD future. I had no problem accessing its content over my standard Comcast broadband connection. The video quality is unlike anything I've yet seen online. If you get a chance, take a look at the NBA highlights clip (screen shot below). The clarity is mind-boggling.
Can Akamai actually deliver this at scale? At the recent Akamai analyst day I attended, Chief Scientist/co-founder Tom Leighton said their network roadmap is to have 100TB of capacity by 2010, which could theoretically support 50 million concurrent 2MB streams. We're a long way from that usage level, but Akamai seems to be squarely focused on making HD a reality. And they're not alone, along with Limelight there are numerous other HD CDN initiatives underway. All this means that the video quality bar will inevitably rise.