VideoNuze Posts

Wow.

That was the reaction that VideoNuze reader and digital media public relations executive Jeff Rutherford had after downloading the "New Xbox Experience" (or NXE) to his Xbox 360 and activating Netflix Watch Instantly. Jeff relayed the details to me in an email and phone call yesterday, adding that it felt comparable to his (and many others') first experience with TiVo.

Hyperbole? Maybe. I'm always mindful about how gadgeteers' early wows seem to melt away when new technology products reach the broader mass market. Still, the Xbox 360/Netflix Watch Instantly integration seems promising on at least three fronts.

First, Xbox 360 is a relatively mainstream device that has its own clear value propositions, thereby driving a sizable footprint that is only going to grow. Second, Netflix's Watch Instantly is a value-add to its subscription service, requiring no incremental fees, or special new add-on hardware to Xbox 360. And third, as Jeff reported, it was very easy to get going: he was given a code to input online and when he returned to his Xbox, his Watch Instantly queue was displayed there, awaiting his on-demand selections.

As I explained recently in "Netflix Should be Aggressively Pursuing Broadcast Networks for Watch Instantly Service," today's windowing model puts the company is in a serious bind with respect to getting top-flight Hollywood films. While Jeff reported seeing some strong titles like Disney's Ratatouille (and other films he noticed carrying the Starz watermark), the reality is that Watch Instantly's catalog is still a small sliver of Netflix's DVD-by-mail catalog and will remain so for some time to come.

Further portending the difficulties of what's ahead for Netflix as it navigates Hollywood's minefields is early word, courtesy of Joystiq and other blogs, that all of Sony's Columbia Pictures movies have been disabled for XBox 360 Netflix users, due to licensing issues. While we may all be rooting for Netflix to find deal terms with Sony and the others, the realist side of me says that Hollywood's overseers understand that the Xbox 360 integration (and others TBD) have real significance in the relentless push to digital delivery. So before the proverbial horse gets out of the barn, they want to ensure the right deals are in place for them to capture appropriate value.

While that drama plays itself out, Netflix would be wise to do everything else it can to bolster Watch Instantly content value and selection. As I wrote in the prior post, incorporating broadcast programs should be a top priority. Also high on the list should be well-branded, high-quality broadband-only content.

Netflix has a very interesting opportunity to accelerate the Watch Instantly adoption curve, leveraging the huge installed base of Xbox 360 users and Microsoft's UI improvements (more on NXE's new look at Engadget if you're interested). With proof of its success in hand, Netflix's negotiations with recalcitrant studios can only be helped along. Meantime, Xbox 360 is getting another strong (albeit likely temporary) value proposition to compete in the game console space. And consumers win - as Jeff pointed out - by gaining ever-better access to the content they want.

What do you think? Post a comment now.

Yesterday was one of those days that made my head hurt. I suspect you've all had days like this as well, as the economic crisis unfolds. One moment there's news that temporarily makes you feel better, the next moment, news that makes you feel worse than ever.

For example, yesterday morning I appeared on a panel with four market researchers at a conference focused on New England startups and technology. As I listened to the others talk glumly about the fundamentals of the sectors they cover, I was feeling a little more optimistic. As I explained when it was my turn to speak, "the fundamentals of the broadband video economy are relatively strong" (note: I always feel queasily like John McCain when I say that) and there's much reason to be optimistic going into '09.

It's true. Broadband video usage is growing each month. There's a vibrant ecosystem of early stage technology companies that continue to attract new investments. Many of these companies are hiring. The overall user experience is getting stronger and stronger, making the broadband medium a more appealing environment for consumers, advertisers and content providers. And importantly, there are large pots of existing spending that broadband can share-shift.

Add it all up and compare broadband to say auto manufacturing, retailing, financial services, home building and other industries that have been decimated by the economic slowdown and things look pretty decent.

That feeling of tempered optimism dissipated last night though, not just because the market dropped 400+ points yesterday to a level not seen since 2003, but because of an article I read on NYTimes.com ("Stocks Are Hurt by Latest Fear: Declining Prices") about an insidious new consequence of the meltdown called "deflation," which has economists deeply worried about what still lies ahead for the global economy.

Most of us have never experienced deflation, which is defined as a "general decline in prices." As one measure, the Consumer Price Index, which tracks how much we pay for groceries, entertainment, and other goods and services, dropped by 1% in October, the largest decline in the 61 years the index has been calculated.

Deflation is so scary because it basically forces all businesses to cut costs to meet the realities of lower prices. The contraction process feeds on itself, causing a downward spiral of economic activity and paralysis. This is bad enough even in established sectors, where inelasticity helps to buffer deflation's effects. My concern is that in a nascent ecosystem like broadband video, deflation's impact could be far worse.

Here's what I mean: say you're an early stage broadband technology provider selling to media companies. Your product meshes with the customer's own roadmap and has clear advantages. You've priced it in a way to be sensitive to market competitiveness and also internal profitability goals. You may have also developed business cases showing the customer benefits.

But now the media company says that its ad spending has slowed (itself driven by reduced consumer spending), in turn cutting its willingness to pay (the forces of deflation at work). So if you want the deal, you have to accept it at a lower-than-expected price. If too many of those situations arise, your business model gets blown. When too many business models get blown early stage investors say "freeze" and decide to hold off investing until the climate warms up again. When that happens, the cycle of innovation locks up.

Anyway, you get the picture of how the dominos can fall. Since the broadband ecosystem is still quite fragile, with value propositions often still works in progress, the specter of deflation is quite nerve-racking. Let's hope its full brunt isn't realized.

What do you think? Post a comment now.

Once again I'm highlighting a few key industry items that I think are worth noting:

Move Networks and Permission TV Partner - The companies are announcing today a mutual reseller relationship and technology integration. I got an update from their marketing heads earlier this week; the goal here is to accelerate the deployment of HD-quality video to broader segments of the market.

The deal seems like a win for both companies. Move has concentrated on major networks, Permission has focused on strong mid-tail content and brands/agencies to enable deeper engagement and interactivity. The companies have already deployed with Metropolitan Opera and Fox on Demand. The deal fits with a theme I hit on a couple months ago in "Video Quality Keeps Improving." Of note for Permission, this is the first integration and reseller deal Move has struck with a third party content management/publishing platform.

1Cast Launches Beta Today - Over the summer I wrote about 1Cast, which aspires to be a legal heir to RedLasso, enabling personalized "micro-casts" of premium-quality video news clips. The company has made much progress, and today is launching its beta trial.

I gave it a spin the other day and got caught up with president Anthony Bontrager. 1Cast has three audiences in mind: business users, collegiate users and bloggers. The service works well, with a few noticeable rough edges to be addressed. Commercial launch is scheduled for early Q1. One of the keys here is getting the big content providers to play ball. On board so far are AFP, AP, CBC, CNBC and Reuters;1Cast expects top broadcasters to come on soon as well. Others in this space are Voxant (part of Grab Networks now), Syndicaster, ClipBlast and others. Still early days here.

Flash vs. Silverlight competition intensifies - Adobe was crowing earlier this week over its 2 year deal with MLB.com, displacing Microsoft Silverlight in the process. Still, on the same day, Scott Guthrie, the Microsoft Corporate Vice President overseeing Silverlight development (among other products), was sharing updates of Silverlight 2's progress, including recent deals with CBS College Sports, Blockbuster and Netflix's Watch Instantly. This story has many, many more chapters to be written...expect plenty of dueling announcements of customer wins coming up.

Order a Pizza on TV? It's 1995 again - I couldn't help but chuckle when I read yesterday about TiVo's promotion with Domino's, allowing broadband TiVo users to order a pizza through their TVs. Those of you who were around the much-hyped interactive television industry in the mid-90's will recall that "ordering a pizza through your TV" was the second-most cited benefit of ITV, just after "say you're watching 'Friends' and you like Jennifer Anniston's sweater, you just click your remote and buy..." Talk about a back to the future moment. As I thought back then, when it comes to ordering a pizza, most folks will be satisfied just picking up the phone.

Jonathan Leess to leave CBS Digital by end of year - After four years at the helm of CBS TV Stations' Digital Media Group, Leess said in a memo to staffers that he's moving on. I recently had Leess on a panel I moderated at NATPE's Digital Day and as I've gotten to know him over the years, have been impressed by how much he "gets it." Since 2004 CBS has increased monthly uniques from 2M to 15M, page views from 22M to 120M and streams from 1M to 25M. When I reached Leess last night he said he's proud of his CBS accomplishments and very optimistic about digital media in general, despite the economic downturn. I couldn't pry any future plans from him.

At the end of last week I happened upon a post at TechFlash, a blog about Seattle's technology scene, that resonated with several themes that I've been digging into recently at VideoNuze. The post, "Hunger for recipes lifts Seattle sites," showcased October traffic stats just released by comScore for the Food category.

The post's angle that a number of Seattle-based sites landed in the top 25 was less interesting to me than the composition of the list itself and what it may suggest about how things could unfold as broadband video makes its way all the way to the TV.

AllRecipes.com, a site owned by Reader's Digest, landed in the #1 spot (possibly for the first time, though I can't confirm), just ahead of the powerhouse cable channel Food Network's web site. In a recent interview TechFlash did with AllRecipes.com's president Lisa Sharples, she said that AllRecipes.com is "really a social media site" and also that it is "very much a user-generated content site." This focus on the site's users differs from the Food Network's on-air programming approach of creating and popularizing personalities (e.g. Emeril Lagasse, Rachel Ray, Bobby Flay, etc.) that has driven strong ratings and brand awareness. To be fair, the network's web site, FoodNetwork.com also has a heavy recipe orientation and a strong emphasis on community.

As the online food category has expanded, all of this has co-existed well. But last week I was asked a question a number of times in the wake of my "Cable Industry Closes Ranks" post: if cable networks bias toward their cable operator customers, thereby limiting their broadband activities, just how hard would it be for online competitors to replicate their video franchises as broadband makes its way all the way to the TV?

That's admittedly a tough one to answer. And to be sure Food Network is hardly a sitting duck; it is one of the most progressive of the cable networks in terms of how much it has embraced online and the amount of video it already puts on its site. Still, one does wonder how difficult it would be in reality, for an AllRecipes.com say, to simply set up a studio, audition some of its gazillions of users who aspire to be the next Rachel Ray, start its own serialized programs around them, and begin competing more directly with Food Network?

In fact, a post I did about back in September about the #21 site, TasteOfHome.com (also owned by Reader's Digest), described how the company has set up its own test kitchen and is shooting video of its chefs preparing user-submitted recipes. It also combines these videos with others into pre-programmed playlists. I'm guessing that, as broadband-to-the-TV crystallizes further, we'll see more of this kind of activity from others players in the food category.

Taken to the extreme, one further wonders if, at some point well down the road, cable operators like Comcast would weigh making a deal with Reader's Digest to carry these sites' "channels," in lieu of an incumbent like Food Network if the new alternative had a proven audience and importantly, would cost Comcast a lot less in monthly affiliate fees.

Meanwhile, one other thing that jumped out of the October traffic stats: a site called Delish.com, a JV between Hearst Magazines and MSN, rocketed to the #5 position, with 5.2 million monthly visitors, though it only launched on Sept. 23rd. Its ascendancy speaks to how dynamic the food category is, how quickly user loyalty can shift and how highly-trafficked sites like MSN can help create new online franchises.

What do you think? Post a comment now!

The answer to that question will start to come early next week when Sling.com, the latest entrant in this already crowded space, officially launches. Recently Jason Hirschhorn, president of Sling Media's entertainment group and Brian Jaquet, Sling's Director of Public Relations came through Boston and caught me up on their plans to launch commercially on Nov. 24th.

Many of you know that Sling is the maker of the Slingbox, which connects to your TV or DVR, allowing you to remotely watch programs on your computer. It's a very clever product, though I have to admit its use case has always been a little confounding to me. Nonetheless, just over a year ago, Sling was acquired by EchoStar in a $380 million deal. Shortly thereafter, EchoStar split itself into two parts, Dish Network, the satellite-delivered programming company, and EchoStar Corporation, which includes Sling and other technology-based businesses.

Sling.com, developed by Jason's entertainment group, is the first Sling offering not tethered to any of its devices and therefore open to all users. Acknowledging that Hulu has set a high bar on user experience, Jason explained that Sling.com is attempting to go one step further on usability, and will also differentiate itself with updated social networking capabilities and highly focused editorial content.

In particular, Sling.com offers a slew of Facebook-like features that allow users to subscribe to and favorite programs and networks, with users in turn able to follow these activities. As Jason aptly put it, the goal is to "digitize the water cooler conversation." The whole experience is geared toward engaging the user at a far deeper level than we're accustomed to in passive linear viewing, or even typical at other aggregators' sites.

The real differentiator for Sling long-term though is the integration of Sling.com with the remote viewing offered by Slingbox. Enabled by a new web-based player (instead of the prior downloadable client), users are able to seamlessly browse back and forth between watching live TV and cataloged programs, as shown below.

Taking this one step further, Sling's goal is to get its remote viewing technology embedded in others' set-top boxes as well. So for example, a Comcast STB with Sling inside would allow you to have live TV integrated into your Sling.com, without having to go buy another box.

That's an enticing prospect, but making it happen will be no small feat; the STB giants like Motorola and SA (now part of Cisco) will get on board only when their biggest customers - America's cable operators - ask for it. The prospect of these cable executives wanting to incorporate any technology controlled by Charlie Ergen, Echo's founder/CEO and the cable industry's arch-enemy, stretches my mind. However, stranger deals have been done, so who knows. In the meantime, there are a whole lot of other non-cable homes globally Sling can address first.

But much of that is down the road anyway. For now, Sling.com is going to compete head on with Hulu (which by my count supplies virtually the entire current movie catalog at Sling.com, in turn begging the question of how many different ways one relatively small ad revenue stream can get carved up?), Fancast, the portal sites, YouTube and so on. Jason readily admits that these sites will not compete on content exclusivity; ultimately they'll all have access to everything that's available.

So in this incredibly crowded space, is there room for a newcomer? On the surface, it's tempting to say "no." But history teaches us that "better mousetraps" can elbow their way into even the most crowded spaces. Remember how many search engines already existed when Google burst onto the scene? On a totally different level, I can relate to this challenge myself. A year ago I wondered whether there was room for a new broadband video-centric blog when so many others already existed; now here we are.

The reality is that newcomers succeed because they don't accept the status quo as final. Rather, they find smart ways of delivering new and better value to customers who didn't necessarily even know what they wanted, but when they got it, were delighted. That's Sling.com's challenge. Whether it can meet it remains to be seen. But in this crummy economy, their deep-pocketed backing certainly gives them a leg up on any VC-funded competitors when it comes to long-term staying power.

What do you think? Post a comment now!

Yesterday I had my own positive broadband video experience, remotely watching portions of the NewTeeVee Live conference held in SF from the comfort of my office. Om Malik and crew put together a packed agenda and I had wanted to go, but a personal conflict kept me in Boston.

I caught most of Netflix CEO Reed Hastings' keynote (until the UStream feed froze up, arghh...) and thought he offered some interesting tidbits about how he sees the broadband video market unfolding. VideoNuze readers know I've been avidly following Netflix's recent moves with Watch Instantly and I've come to think of the company as one of three key aggregators best-positioned to disrupt the cable model (the other two being YouTube and Apple).

Three noteworthy points that Hastings made:

Standards needed to interface broadband to the TV - Hastings catalogued the efforts Netflix is making to integrate with various devices like Roku, LG, TiVo, Xbox, etc, but concluded by saying that these one-off, ad hoc integrations are not scalable and are really slowing the market's evolution. Most of us would agree with this assessment. Still, he was quite pessimistic about a standards setting process's ability to move quickly enough - saying this could be a 10-30 year endeavor. Instead, if I understood him correctly, he thinks the TV approach should just be browser- based, and also that today's remotes should be scrapped in favor of pointer-driven (i.e. mouse-like) navigation.

Sezmi, a company I wrote about enthusiastically back in May as a big potential disruptor of cable/satellite multichannel services, is making steady progress toward commercial launch. Phil Wiser, the company's co-founder/president gave me an update this week.

Most important, the company has completed technical trials in Seattle with three local broadcasters (Fisher, Tribune and Daystar), to prove in its "FlexCast" distribution model. Sezmi uses a portion of over-the-air spectrum, along with broadband connectivity, to its set-top box to bypass traditional cable infrastructure. Phil explained that broadcasters are motivated to work with Sezmi for several reasons: incremental revenue from leasing spectrum, enhanced positioning in the Sezmi UI vs. current EPGs, and new ad-driven destination areas or "Zones," that broadcasters can use to create more customized and monetizable viewing experiences.

On the cable networks side, Sezmi pulls down signals to its operational center in Melbourne, FL, processes them and uplinks them. Then, with dishes and other equipment installed at its local broadcast partners' facilities, Sezmi combines all channels for distribution to the home. That gives the viewer three ways to access programming: through traditional linear feeds, through VOD and through DVR.

Phil's confident that these technical trials validate the Sezmi delivery model as well as the feasibility of a national rollout. The next step is a beta trial, with "hundreds" of consumer homes, with a limited, geographically-based commercial rollout intended for sometime in Q1 (no doubt driven by its partners' priorities). Phil confirmed several other broadcast deals, including ones where multiple cities are covered, have been signed, and that several distribution partners are on board, including one with a national footprint (hmm, AT&T? Verizon? Someone else?)

Importantly, I also extracted from Phil that the company has closed another round of financing - greater than the earlier round of $17.5M. Sezmi has a big vision and with 3 pieces of consumer premise hardware (antenna, set top and remote), plus backend equipment and national/local delivery infrastructure to fund, this is a big dollar project for sure.

I remain optimistic about Sezmi's opportunity. As I said in the May post, I haven't seen the whole thing work at scale yet, so there are significant technology unknowns. There's also a sizable customer education mountain to climb (though hopefully mitigated by large well-branded partners' assistance). Then there's the small matter of signing up the local broadcasters, as well as the cable networks.

Still, Sezmi's core value proposition - a better viewing experience at a lower cost than today's cable/satellite incumbents - is right on the mark. The old adage about execution mattering more than strategy has rarely been truer than with Sezmi. It's going to be interesting to watch its continued progress.

What do you think? Post a comment now!

Digitalsmiths is announcing a $12M Series B round this morning, led by .406 Ventures, with participation from existing investors The Aurora Funds and Chrysalis Ventures. The company started life focused on video search, but now appears well on its way to successfully morphing into a tier one video management/publishing platform with indexing and analytics serving as key differentiators. I caught up with Ben Weinberger, Digitalsmiths' CEO yesterday to learn more.

Ben explained that Digitalsmiths has been landing customers like TheWB.com, TMZ, Essence.com and others TBA by focusing heavily on helping these content providers monetize more effectively. Monetization is driven by Digitalsmiths' metadata creation and indexing technology that can transform high value content into easily navigable and searchable frame-by-frame segments (this can be seen at TheWB.com).

Improved monetization is the number one challenge for the entire broadband video industry as I've been saying for some time now, and the economic meltdown has only accelerated its importance. The simple fact is that the industry has to learn how to drive more consumption by moving users beyond simple linear playback, and then achieving an ever-higher ROI against each one of these streams with more inventive ad units.

Digitalsmiths is helping accomplish these objectives by first ingesting the whole video file, then running its indexing algorithms against it, and finally generating the individual segments. These segments are then more discoverable within the site's own search, but also, importantly, by the outside world, through improved SEO (note there are some relevant comparisons between Digitalsmiths and EveryZing and Gotuit, two other companies I've written about previously). As non-linear, user-friendly experience is the result.

Ben said that Digitalsmiths' market acceptance is also being fueled by an innovative, success-based business model that ties its customers' actual gains in video consumption and monetization effectiveness to the company's own compensation. This approach obviously helps instill customer confidence, all the more so in current difficult economic times.

I also spoke briefly yesterday with Maria Cirino, the partner at .406 Ventures who led the round. Of course, it's cliche that VCs think their portfolio companies are the be-all and end-all, but I thought a couple points Maria (who's a heavy hitter in the Boston technology scene due to her success as CEO/co-founder of Guardent, acquired by VeriSign in 2003) made were quite salient.

Specifically, when I asked her about concerns she had regarding the notoriously crowded field of video management/publishing companies that have been around for far longer, she recalled the once similarly crowded web search space, dominated by well-entrenched names (Yahoo, Lycos, Excite, AltaVista, etc.). Google entered late, but broke through by offering a demonstrably better product directly addressing users' key pain point (better search results and user experience). To be clear, Maria was not inferring Digitalsmiths is the next Google (!); rather her point was that "2.0 products" can gain significant traction by tightly focusing on the market's up-to-date needs, especially if they have game-changing technology.

For Maria, Digitalsmiths' proprietary metadata/indexing capabilities, tied directly to improved monetization, are its key ingredients. That's not to say there aren't other competitors bringing their own differentiators to the table, or that content providers' motivations are monolithic, or even that there won't sufficient business to go around for a while. However, in Maria's mind, the key to Digitalsmiths' current success has been to hone in on the market's most critical decision-making driver (i.e. better monetization) and deliver against it.

I'm practically a broken record on the video management/publishing space, as I continue to marvel at the sheer number of competitors and the amount of money invested in the space as indicators of the broadband video industry's ascendance. This space has a lot more room to run and chapters to be written. It's also inevitable that the big boys will eventually follow Comcast and Yahoo (which have acquired thePlatform and Maven, respectively) in, by making their own acquisitions.

What do you think? Post a comment now!

(Note: Digitalsmiths is a VideoNuze sponsor)