Posts for 'Broadcasters'

NBC and MSNBC nicely executed their "Inside the Obama White House" minisite, built to accompany this week's exclusive 2 night special, which itself boosted NBC's ratings. The minisite offers all the broadcast programming, chunked into logical parts. There's also web-only video, searchable clips and playlist functionality. The minisite presents the video in a very digestible, clear manner, so if you forgot to TiVo the special like me, you don't miss anything.

When you begin playing the video there's a pre-roll for Applebee's, which appears to be the primary sponsor, though Sprint has some banners too. Mid-rolls run after most segments and then the next programming segment resumes. Applebee's awareness is very strong, though I think they could have benefited from varied creative (I certainly won't forget its Steakburgers and Carside service)

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 18th edition of the VideoNuze Report podcast, for May 29, 2009.

This week I review the Q1 '09 Nielsen A2/M2 Three Screen Report data recently released, comparing it to Q1 '08 data. My comments pick up on a post I wrote earlier this week, "Video Behavior Changes Suggest Evolution, Not Revolution For Now."

Don't get me wrong, video consumption on alternative platforms (i.e. broadband, mobile, DVR) is continuing to grow briskly. But the reality is that when you look at the numbers, they suggest steady rather than dramatic, overnight change is what's really happening in the market. This reality is sometimes missed in the ongoing hype.

Meanwhile Daisy adds more detail to a post she wrote, "Fox's Prison Break Finale Demonstrates the Power of Social Media," which describes how Fox cleverly used social media to promote a DVD with 2 additional episodes following the on-air finale. Fox used various social media sites to release a teaser picture from the new episodes and began promoting the DVD which will be available on July 21 on DVD and for purchase on iTunes. It's an intriguing way for the studio to migrate users beyond traditional TV consumption and generate additional revenue.

Click here to listen to the podcast (13 minutes, 37 seconds)

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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)

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

While broadband video consumption continues to surge, mobile video usage is also now showing strong signs of growth, mainly due to the iPhone's popularity. In fact Nielsen just reported last week that iPhone users are 6 times as likely to watch mobile video as are other mobile subscribers. And for Q4 '08, it reported that 11.2M people watched mobile video, with 51% stating they're new to the medium, viewing for less than 6 months. This is still small compared with the 150M or so people (U.S.) watching broadband video each month, but with an onslaught of new or upgraded video-capable smartphones hitting the market, mobile video is poised to grow rapidly.

All of this is very good news for content providers, for whom this "3rd screen" (after TV and PC) opens up all kinds of new opportunities. Many have been participating to date in carrier-provided (e.g. VCast, FLO TV) and other (e.g. MobiTV) subscription services that have achieved solid growth. But with still advertising the primary business model for many content providers, they've been eager make ad-supported video available to growing base of mobile video users as well.

NBC for example has been pursuing ad-supported mobile video, and last summer, made a big mobile push with its Summer Olympics coverage. Still, as Stephen Andrade, NBC.com's SVP and GM and Robert Angelo director web/mobile, told me recently, inserting ads in its mobile-distributed video has been painfully laborious and grossly underoptimized. To address these issues, NBC recently struck a deal with Kiptronic, an ad serving firm that specialized in non web-based content.

Stephen and Robert explained that their overarching goal with NBC.com video is to "publish once, distribute everywhere" - a goal I often hear from other video content providers as well. However mobile-distributed video was siloed and not fully incorporated into its online/broadband work flows. This was especially problematic on the ad side, where mobile inventory wasn't exposed in DART, on which NBC has standardized its ads. As a result a lot of mobile inventory was unsold, and even when it was sold, advertisers were required to jump through a bunch of new hoops to get their ads to NBC, which itself then "hand-stitched" the ads to its mobile-distributed video.

After looking at multiple solutions to address these issues, NBC chose Kiptronic's kipMobile. Stephen and Robert said the key was kipMobile's flexibility in plugging into NBC's existing content management system and work flow. Now when an NBC producer uploads video, upon preset instructions kipMobile transcodes the HD source file into relevant mobile formats and transfers them to Akamai (NBC's CDN). When a mobile user calls for a video, kipMobile determines which format is best-suited for that particular device, dynamically grabs appropriate ads from DART and combines the two into a file which Akamai then serves to the user.

Beyond dramatically simplifying NBC's work flow, Stephen and Robert are also excited about the new revenue potential, given NBC's booming mobile usage (Q1 '09 video streams jumped to 9.6M from 2.5M in Q1 '08 with mobile page views increasing from 32M to 96M in the same period). Looking deeper into the usage patterns, NBC sees more than half the mobile video usage occurring at home, as users increasingly look at their mobile device as an alternative screen when the TV isn't available. While 75% of NBC mobile usage is iPhone-based today, they're seeing strong adoption by non iPhone devices. Though still early, geo-identification is creating yet another ad opportunity unique to mobile.

NBC and many other content providers are going to be riding the wave of surging mobile video consumption. kipMobile and other monetization solutions will become increasingly important as these content providers seek to unify their online/broadband and mobile work flows and to fully monetize their views.

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)

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

Looking over last month's posts with an eye for 2-3 themes to extract for my recap post today, I was instead struck by one overarching theme: innovation is alive and well in the broadband video space. Other sectors of the economy may have ground to a halt in the current recession, but whether it's new technologies, new service models or new approaches by traditional media companies, the pace of innovation in all things related to broadband video seems only to be accelerating.

Here are some of the examples from last month's posts:

New technologies

• SundaySky - a new approach to dynamically generate videos out of web site content
• HD Cloud - cloud-based encoding and transcoding plus 3rd party syndication
• Market7 - web-based platform for collaboratively creating and producing video
• FreeWheel - ad management/distribution company raises another $12M

New service models

• Sezmi - next-gen video service provider aiming to replace cable/satellite/telco
• TurnHere - distributed video production services for the corporate market
• Babelgum - premium-quality content destination for independent producers
• YuMe Mindshare iGRP - new measurement unit to compare on-air and online ad performance
• YouTube-Disney - short-form promotional deal

New approaches by traditional media companies

• Disney-Hulu - Exclusive 3rd party online distribution for established broadcast network
• Cable networks launching webisodes - online initiatives to attract and retain new online audiences
• New York magazine video re-launch - emphasis on curating best-of-the web videos with brand
• WWE Smashup - fan-submitted video mashup content driving awareness of on-air special

Now granted I have an eye out for broadband innovations so this list is somewhat self-serving. But remember that for every item above I was probably pitched on 2-3 others that I didn't write about due to time limitations. Some of these other items may have been picked up by other news outlets and captured in the news aggregation side of VideoNuze, while plenty of them likely received little attention.

My point is that throughout the whole broadband video ecosystem there is a vibrant sense of entrepreneurialism that is slowly but surely remaking the traditional video landscape. To be sure, not all of this stuff is going to work out; either business models will be faulty, technologies won't deliver as promised or consumers will reject what they're being offered. Nonetheless, from my vantage point, the wheels of innovation continue to spin faster. That makes it a very exciting time to be part of the industry.

What do you think? Post a comment now.

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.

Here I am at BWI airport getting ready to send today's VideoNuze email and in pops the news that Disney is taking an equity stake in Hulu, bringing lots of its prized programming along. The rumor mill has swirled for a while that a deal was forthcoming, now it's here. The press release is not yet up on the Disney site. I'll have more thoughts later.

Last Friday, in "Broadcasters in Transition at NAB Show. But to What?" I painted a pretty downbeat picture of local broadcast TV stations' prospects in the broadband era. Coincidentally this week I had briefings with Syndicaster and Grab Networks, two companies offering technology solutions that could set local stations on the path to reinventing themselves and capitalizing on the Syndicated Video Economy.

Though quite different in the scale and scope of their product offerings, Syndicaster and Grab share a common starting point: local stations need to learn how to better leverage and distribute their video content into the broadband ecosystem. Doing so means local stations must have the right tools to ingest, prepare, distribute, track and monetize their content - all steps that go far beyond their traditional and well-understood broadcast work flows.

For its part, Syndicaster capitalizes on its parent company's (Critical Media) position of capturing and digitizing hundreds of local stations' broadcast signals. Syndicaster providers a web interface to transcripts of each on-air segment, which an editor is then able to easily edit into clips, generate metadata and distribute online. The process is very straightforward, and in the demo I saw, clips from various stations already using Syndicaster were being added in real-time.

More recently Syndicaster has added the ability to upload video directly from the field to further compress the time required to get video up online. It has also integrated with Brightcove, YouTube, Yahoo and others for one click 3rd party syndication. It plans for user-captured video to be incorporated into the video catalog and a widget distribution model. Yesterday the company announced Journal Interactive is using the platform, along with other customers Bloomberg Television, LIN TV and Bonneville.

Separately, Grab Networks, a company that was formed from the merger of Anystream and Voxant last Fall has in the last 60 days begun taking the wraps off its integrated solution, with plans for a formal announcement later this quarter.

Grab too, begins with multiple ingestion options. But a key difference is that Grab auto-generates clips from the video feeds, assigning metadata to them and indexing them for editorial review or straight publication. This process, which Anystream has been working on for a long while, uses its own algorithms to analyze 40 different "tracks" of information about the video (e.g. speech-to-text, scene detection, facial recognition, close captioning, etc.). It then statistically distills the information gathered to generate the clips, metadata and index.

Grab believes this core proprietary process is the heart of its value proposition and persuading broadcasters of its efficacy has been a key part of its early sales efforts. Grab executives explained that many customers are initially skeptical that all of this can be done by without human intervention, but upon seeing the results have become believers. (I only saw a limited demo, but it looked pretty darn good). Recognizing that some producers will want to refine clips further, Grab offers an editing module. It's important to understand this process doesn't just make publishing clips more efficient, it also creates more inherent value in each clip as the greater intelligence each clip now has enhances its discovery and monetization potential.

What do you think? Post a comment now.

Walking the halls of the NAB Show this week and talking to other attendees, I was constantly reminded that the TV industry - both networks and local stations - is in transition from "what was" to "what will be."

"What was" is well understood: an economic model built over a 50+ year period through a carefully managed, geographically-demarcated distribution network of local stations that until recently held a de facto exclusive right to distribute high-quality programming. This model worked extremely well for both broadcast networks and stations as they tapped into surging advertising budgets fed by Americans' insatiable consumption habits.

As the great consumptive bubble has burst, the broadcast industry's troubles have come into full view. In fact, with every single element of the traditional model now under attack, it is obvious that "what was" is fast-yielding to "what will be." The problem is that "what will be" is still incredibly ambiguous. Having informally taken the pulse of others at the NAB show this week, the picture that emerges is one of deep concern that "what will be" may be radically different and not necessarily very attractive.

I continue to return to the simple fact that as network program viewership shifts to online, maintaining revenue parity is essential to sustain the cost side (i.e. program development) of the business. If ad revenues come up short then the traditional Hollywood production system will be punished. And the program quality issue is all the more urgent since increasingly popular cable TV programs keep peeling eyeballs away.

For local stations the situation is far more complex, and I believe insoluble in the long run. That's because their monetization challenges are much deeper. Limited primarily to local advertising categories that have been hit disproportionately hard by the recession (e.g. autos, retail, real estate) and the shift to online advertising (e.g. classifieds), local stations must find new ad sources to survive. But where these will come from, in a size that matters, is unclear.

Then there's the fact that the news/sports/weather content that has been their bread and butter has been eaten away by online alternatives. And last but not least is the reality that the broadcast networks, which have embraced all manner of alternative program delivery options, have all but gutted stations' prime-time value.

Add it all up and I for one am stumped at where local stations go from here. Massive consolidation, including possible mergers with their local newspaper brethren, to radically rationalize the newsgathering process in local market, seems more and more likely to me.

The sobering reality that two of America's great industries - automobiles and newspapers - are on their way to oblivion should be a big-time wake up call to broadcasters that a sense of permanence can in fact be illusory. At the risk of sounding alarmist, I think the survival of the broadcast TV industry in its traditional form will soon enough be in question.

What do you think? Post a comment now.

Late yesterday YouTube announced "a new destination for TV shows and an improved destination for movies," moves that continue the site's evolution from its UGC/video sharing roots to an aggregator of premium-quality video.

The reality is that this evolution has been underway for some time now, and I expect it will only continue. Two weeks ago in "6 Reasons Why the Disney-YouTube Deal Matters" I explained again why, as the 8,000 pound gorilla of the online video market, YouTube is in an excellent position to partner with premium content providers. In a media landscape marked by massive audience fragmentation, the online destination (YouTube) that accounts for 40-50% of all streams and is 15 times as big as the #2 destination (Hulu) is quite simply a must-have promotion and distribution partner.

The new destinations address what has been an ongoing Achilles' heel for the site - enabling users to easily find premium video "needles" in YouTube's user-generated "haystack." YouTube's UI weaknesses for premium video have been highlighted by the gold-plated user experience Hulu - and more recently TV.com and Sling.com - have brought to market. The sites have quickly gained passionate fans, and at least in the case of Hulu, significant viewership.

Possibly more important though, is that for content providers they show how YouTube is serious about addressing their needs for clean, well-lit spaces. Premium content providers want the benefits of being in the massive YouTube site, but without the risk of their brands showing up too close to scruffy UGC material. Being clustered with other premium content is a must.

YouTube's concurrent beta launch of Google TV Ads Online, which allows targeted instream ads, is another positive for premium content providers. Beyond YouTube's massive traffic, Google's potent monetization capabilities are the other reason I've been so bullish on YouTube's prospects for premium content. As I wrote on Monday, with increased DVR penetration driving rampant ad-skipping, broadcast and cable's traditional ad model is looking more and more defunct. Online video ads offer a lot of promise as an even higher value ad medium, but much of it is still unproven. Having large players like Google and YouTube involved is significant for showing online video advertising's true upside.

One last take on this is how YouTube continues to position itself in the "over-the-top" sweepstakes, where multiple competitors are vying to be viewed as bona fide substitutes for cable/satellite/telco subscribers itching to cut the cord. I remain skeptical that the trickle of cord-cutters is going to turn into a gusher any time soon, but I will say that with its move up the content ladder, YouTube continues to burnish its standing as a must-have partner for any convergence device-maker looking to make over-the-top inroads (e.g. Roku, Vudu, AppleTV, etc.). YouTube is the most-recognized online video brand, the most-heavily trafficked, and increasingly a credible alternative to premium aggregators like Hulu and others.

For everyone in the online video ecosystem, YouTube continues to be a key player to watch.

What do you think? Post a comment now.

Data that TiVo released last week indicating that nearly 60% of broadcast TV programs in the 8pm and 9pm primetime slots are timeshifted for later viewing should be interpreted as another positive for broadband video advertising for two reasons.

First, because the high propensity of DVR users to skip ads means that broadband delivery can be increasingly considered the only way for big brands' ads to be guaranteed to be seen. And second, because all that ad-skipping is making the effective cost of each TV ad more expensive, thereby making broadband-delivered ads look like a better value.

In prior posts (here and here) I've outlined how a top network show drives around $.50-$.75 of ad revenue per on-air viewer. Said another way, advertisers are willing to pay $.50-$.75 to reach that show's audience. But now factor in that nearly 60% of the targeted viewers are watching via DVR, and that of this group maybe only 10% watch any ads at all. That means maybe only half or so of the intended audience actually see the ads. With half the audience, an advertiser is effectively paying 2x the CPM it thought it was.

Advertisers understand this as well, and as we know from newspapers' current plight, expecting they'll pay more to reach shrinking audiences is not a sustainable strategy. So, on the assumption that smaller and smaller targetable audiences long-term reduces the demand for on-air network ad inventory, CPMs should decline as well. On a relative basis that means that for broadcast networks, broadband video ads, which can't be skipped, have better targeting and more interactivity (all of which already drives higher broadband CPMs), start looking better and better. In short, DVRs' surging popularity is very good news for broadband video ads.

But as I explained in the posts cited above, the problem for networks today is that higher CPM broadband ads still result in lower total revenue per program for broadband vs. on-air. That's because networks are inserting a far smaller number of ad in a broadband-delivered program vs. an on-air delivered program (my estimate is somewhere around 3 minutes for broadband vs. 20 minutes for on-air). Hence the broadcasters' challenge - get total broadband ad revenue up while DVR usage acts to drive on-air revenue down.

Doing so requires better strategy and better execution. On the strategy side, I've said it before (and it always pains me to say it again), but broadcast networks have to increase ad avails in their broadband-delivered programs. That probably means more ads per pod, but could also mean other types of non-intrusive units like banners. On the execution side, it means more attention to each stream to ensure well-targeted ads that are actually delivered.

With broadband revenue still accounting for a miniscule amount of total broadcast network revenue, it's tempting to deprioritize addressing these issues. I think that would be a mistake. TiVo's stats on DVR usage in primetime (combined with other shifting consumer behaviors) should be a major wake-up call for networks about how their business models need to change. Fortunately for them, broadband offers an even-higher value delivery option if it is exploited properly.

What do you think? Post a comment now.

Those of us who live in New England and still actually subscribe to Boston Globe woke up Saturday morning to a banner headline on page 1: "Times Co. threatens to shut Globe, seeks $20m in cuts from unions." With newspapers around the country declaring bankruptcy or going out of print, the news really shouldn't have come as a surprise.

The Globe's and other newspapers' struggles have been widely reported. They are on the wrong end of a double-barreled shotgun: the years-long shift in consumer behavior toward the Internet and more recently, the devastating recession. To me there's a strong analogy here: the Internet (an "electronic printing press") is to newspapers what broadband (a new video delivery platform) is to broadcast TV networks. So what can the broadcast TV networks learn from the newspapers' travails so they avoid a similar fate? Here are 5 thoughts:

Keep the product in synch with the customer - it's cliche to say this, but at the root of every successful business is an ability to keep the product in synch with the customer's behavior. But as the world changes, staying in synch is often at odds with traditions, deeply-ingrained cultures and management's skills. The harsh reality is that there can be no sacred cows when it comes to the product. Just because something's always been done a certain way does not make it right.

For TV networks, I think the key lesson here is around program length. By tradition, programs have been 30 or 60 minutes. But online is about short-form content. Broadband delivery provides an opportunity to expand the networks' mission and capture new market share (as some are already doing). That doesn't mean giving up on 30 and 60 minute programs, but it does mean more actively diversifying their attention and resources.

Focus on monetization - If keeping the product right is job #1, then getting paid for it is certainly job #2. Newspapers have experimented widely with ad-supported and paid models, yet they've suffered their own "analog dollars, digital pennies" conundrum, with online users not generating comparable revenues per eyeball as the print edition. There are various explanations for why they've fallen short.

When I look at networks' current online efforts, I am increasingly concerned they're not going to succeed either. Their ad strategy for online programs is not aggressive enough (yes, as a viewer it hurts to say that) to make the online delivery model work. And on the execution side, as NBC.com recently showed, they're often not even capitalizing on what's readily available to them. Both need to change fast.

Restructure costs aggressively - There's simply no escaping the fact that businesses with troubled top lines need to restructure their costs aggressively to stay viable. The key is getting ahead of this process, rather than waiting until the last possible minute. This isn't easy with unions and guaranteed jobs and managements that are well-paid. Broadcast TV networks face similar issues: strong guilds rightfully protective of their members' interests and executives who are perceived as overly compensated. Many in the industry have called out the fact that all of Hollywood needs to focus more on aligning costs with market realities. The day of reckoning is at hand.

Prepare to be radical - Painful as it is, sometimes there's no avoiding doing the radical. The free market can be quite ruthless. If Craig Newmark chooses to run Craigslist as a virtual non-profit, then anyone looking to make money out of classifieds is going to get hit. If the Huffington Post can make a business out of repackaging others' content under its own headlines and excelling at SEO then original newsgathering is threatened. And if Google can support YouTube's operating losses, then it will be around to continue to take video market share and attention away from incumbents. These are game-changing forces; the responses to them need to be equally radical.

What do you think? Post a comment now.

Late yesterday's announcement that Disney-ABC and ESPN would launch a number of ad-supported channels focused on short-form content was yet another meaningful step in broadband video's maturation process. Here are 6 reasons why I think the deal matters:

1. It validates YouTube as a must-have promotional and distribution partner

For many content providers it's long since become standard practice to distribute clips, and often full-length content, on YouTube. Yet aside from CBS, no broadcast TV network has seriously leveraged YouTube. That's been a key missed opportunity, as YouTube is simply too big to ignore. It's not just that YouTube notched 100M unique viewers in Feb. '09 according to comScore, it's that the site has achieved dramatically more market share momentum over the past 2 years than anyone else, increasing from 16.2% of all streams to 41% of all streams.

Increasingly, YouTube is not the 800 pound gorilla of the broadband video market; it's the 8,000 pound gorilla. Disney has acknowledged what has long been tacitly understood - as a video content provider, it's impossible to succeed fully without a YouTube relationship.

2. It creates a path for full-length Disney-ABC programming to appear on YouTube and elsewhere

While this deal only contemplates short-form video, and more than likely, mostly promotional clips, it almost certainly creates a path for full-length episodes to appear as well, as the partners build trust in each other and learn how to monetize. Full-length content is most likely to come from ABC, not ESPN (the release pointedly states no long-form content from ESPN's linear networks is included) as part of a newly expanded distribution approach.

For YouTube, which has been aggressively evolving from its UGC roots in its quest to generate revenues, the current clip deal alone is a big win; gaining distribution rights to full-length programs would be an even more significant step. Underscoring YouTube's flexibility, the current deal allows ESPN's player to be embedded, and for Disney-ABC to retain ad sales. YouTube's reported redesign, which places more emphasis on premium content, is yet another way it is getting its house in order for premium content deals.

3. It opens up a new opportunity for original short-form video to flourish

When you think about broadcast TV networks and studios, you immediately think of conventional long-form content. Yet all of these companies have been producing short-form content that either augments their broadcast programs, or is originally produced for broadband, as Disney's own Stage 9 is pursuing. The levels of success of this content have been all over the board.

With YouTube as a formal partner, Disney can aggressively leverage it as its primary distribution platform, gaining more direct access to this vast audience. Facing unremitting market pressures on many fronts, broadcast TV networks themselves need to reinvent their business models. Short-form original content married to strong distribution from YouTube would be a whole new strategic opportunity.

4. It puts pressure on Hulu and other aggregators

It's hard not to see YouTube's gain as Hulu's - and other aggregators' - loss. For sure nothing's exclusive here, and as PaidContent has reported, discussions about Disney distributing full-length programs on Hulu (as well as YouTube) are also underway. But the Disney deal underscores something important that differentiates YouTube from Hulu: YouTube is both a massive promotional vehicle and a potential long-form distributor, while Hulu is really only the latter.

YouTube's benefit derives from its first-mover status. Hulu has done a tremendous job building traffic and credibility in its short life, but it is still distant to YouTube in terms of reach. I continue to believe it is far easier for YouTube to evolve from its UGC roots to become also become a premium outlet than it is for Hulu - or anyone else - to ever compete with YouTube's reach.

5. It raises threat warning to incumbent service providers by another notch

It's also hard not to see the Disney deal moving YouTube's threat level to incumbent video service providers (cable/satellite/telco) up another notch. We discussed YouTube's importance to these companies at the Broadband Video Leadership Evening 2 weeks ago (video here), and I thought the panelists generally did not give YouTube much credit as it deserves.

I continue to believe that of all the various "over-the-top" threats to the current world-order, YouTube is the most meaningful ad-supported one. It has massive audience, a potent monetization engine in Google's AdWords, and with the Disney deal, increased credibility with premium content providers. Especially for younger audiences, the YouTube brand means a lot more than any incumbent service provider's. If I were at Comcast, Verizon or DirecTV, I'd be keeping very close tabs on YouTube's evolution.

6. It exposes the absurdity of the ongoing Viacom-Google litigation

Two weeks ago at the Media Summit I listened to Viacom CEO Philippe Dauman describe the status of his company's $1 billion lawsuit against Google and YouTube. As he talked of mounds of data and reams of documentation being collected and reviewed, I found myself slumping in my chair, thinking about how well all the lawyers involved in the case must be doing, and yet how pointless it all seems.

The old adage "2 wrongs don't make a right" fits this situation perfectly. There is no question that in the past YouTube was lax about enforcing copyright protection on its site and cavalier about how it responded publicly to the concerns of rights-holders. But it has made much progress with its Content ID system and a good faith effort to become a trusted partner. All of this is evidenced by the fact that Disney wouldn't even be talking to YouTube, much less cutting a deal, if it didn't view YouTube as reformed. While the media world is moving on, adapting itself to the new rules of video creation, promotion and distribution, Viacom continues to waste resources and executive attention pursuing this case. To be sure, Viacom has been plenty active on the digital front, but it is long overdue that these companies figure out how to resolve their differences and instead focus on how to work together to generate profits for themselves, not their lawyers.

What do you think? Post a comment now.

Watching President Obama's appearance on "The Tonight Show with Jay Leno" on NBC.com over the weekend was a classic reminder of how so many sites miss out on so much of their total broadband video advertising opportunity.

The interview, which lasts over 24 minutes, carried just one 15 second pre-roll ad, (for Subway, when I watched it) along with a companion banner. Twice during the interview, Leno interrupted the President to pause for a TV commercial break, but when he did so, there was no mid-roll ad inserted by NBC.com. There was also no post-roll ad appended, just a promo graphic for the show itself.

If you figure there were at least 4 potential 15 second avails (1 pre-roll, 1 post-roll and 2 mid-rolls), but only the pre-roll was filled, it means that NBC.com missed out on 75% of the potential ad revenue that each full stream viewer would have generated. In reality the percentage is probably even higher because the mid-rolls could likely be 30 seconds or more.

That degree of under-monetization is pretty disappointing. Don't get me wrong, I'm not advocating that broadband video streams become overwhelmed with ads, which would surely cause a consumer backlash. But I do believe that providers of premium content like NBC.com (and there are few videos more premium than the first time ever a U.S. President has appeared on the "Tonight Show") must recognize and monetize their opportunities effectively. There are at least three reasons why:

First, and most obviously, broadcast networks' poor recent financial performance demands that they seize every available money-making opportunity. Not doing so is just bad business. How many businesses succeed long-term when they don't execute on all chances to generate revenue?

Second, NBC.com and other premium video providers are setting a bad precedent for consumers' expectations. If I can watch 24 minutes of Leno with just one 15 second ad, then if and when NBC.com tries to increase the ad load, I'm inevitably going to be displeased. In short, NBC is devaluing its own content by not serving notice to broadband viewers NOW, that a "price" - in the form of watching ads - must be paid for access.

Third, and tying together the first two reasons, is that it is urgent that networks learn how to achieve economic parity between programs viewed via broadband delivery vs. on-air delivery.

That's because the era of broadband-connected TVs has already begun, and is poised to gain further steam as new devices and connected TVs proliferate.

As this happens, online viewing will no longer be merely supplemental for many viewers to on-air, as it often (thought not exclusively) is today. Rather it will be substitutive. That means viewers will watch Leno via broadband on their TVs, instead of via cable/satellite/telco or over-the-air delivery. Just as "Tonight" would never go 24 minutes on-air without an ad pod (which consists of more than one just 15 second ad btw); NBC.com should never let this happen online. Doing so will cause major damage to its future P&L.

In his Media Summit interview last week, NBCU's Jeff Zucker said the company has already evolved from "digital pennies" to "digital dimes." Yet Hulu's recent stiff-arming of Boxee underscores the reality that networks are nowhere close to economic parity between online and on-air delivery of their programs today. Neither consumers nor technology are standing still waiting for them to catch up. Behaviors, expectations and future economics are being formed right now.

NBC.com - and others - need to be mindful of this and ensure that when they put their premium video online they're fully capitalizing on their ad opportunities. If they don't, then 5 years from now Mr. Zucker will wind up like so many of today's newspaper CEOs - lamenting, not praising, his company's "digital dimes," long after his "analog dollars" have evaporated.

What do you think? Post a comment now.

NBCU CEO Jeff Zucker provided the opening keynote interview at the Media Summit in NYC this morning with Businessweek Executive Editor Ellen Pollock. I've seen him speak a number of times and true to form he was pragmatic, quite candid and humorous. Highlights below:

"We're at digital dimes now" - Zucker of course famously worried aloud about the risk of "exchanging analog dollars for digital pennies," the notion that half-baked online delivery models would only serve to cannibalize traditional profitability. Zucker sees progress, saying Hulu is "well ahead of plan" and is yes, is now making money. Zucker repeatedly praised the success of the company's wide-ranging digital initiatives, but also noted often there is still a lot of work to do. He also wondered aloud whether digital would ever be a 1 to 1 revenue substitute for traditional revenue streams, but that further cost rationalization would help drive profitability.

"We're in process of finding new economic models" - On the above point, Zucker was candid in saying that the work to be done on new economic models is still experimental and that "a lot of success is often accidental." He readily concedes that nobody has all the answers, and that a key challenge is bridging from the traditional business models to new ones, balancing the interests of older audiences comfortable with the status quo with younger ones that are aggressively embracing the new. Describing his own kids' media activity, which focuses on Hulu, generating their own content and being interactive must give Zucker ample perspective.

"Technology is unbelievably exciting" - Zucker has always emphasized the importance of technology on NBCU's various businesses and today was no exception. He noted that technology is increasing access to TV programs and movies in unprecedented ways, which is a good thing. However he also candidly observed that it has fundamentally changed the broadcast business, primarily through consumers' use of DVRs and online delivery. All of that, plus NBC's lagging primetime performance, has caused it to completely re-think the broadcast model. He observed that newspapers' current woes can be traced to them not being willing to quetion the fundamentals of their model and the role of technology. Like other video providers, he seems determined to confront realities and avoid repeating this mistake.

"NBCU is first and foremost a cable programming company" - Zucker has often highlighted the benefits of the two revenue stream cable programming model (affiliate fees and advertising), but this was the first time I've heard him so clearly position the company as being mainly in the cable business. NBCU's stable of channels, USA, SciFi, Oxygen, MSNBC, Bravo, etc. contributed 60% of NBCU's operating profit last year. The networks' ability to "outperform the market, especially in women's programming and news" is key to NBCU's overall success. Zucker noted that USA is increasingly a "must buy" for advertisers, and with its mass appeal, should justifiably be considered the 5th broadcast network.

"We're hopeful we'll resolve TV.com-Hulu issues soon" - Zucker only briefly touched on Hulu's recent decision to pull its programming from TV.com, which is fast emerging as a Hulu competitor. As has been previously reported, Hulu's attorneys obviously believe TV.com compromised its Hulu distribution agreement as part of its new configuration subsequent to CBS's acquisition of CNET. With a battle looming between aggregators especially in the down economy, I think it remains to be seen whether a settlement can be found.

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.

Last week a publicly-traded communications-equipment company invited me to speak to a group of investment analysts it had assembled for its annual "investor day." In the Q&A session following my presentation I took a question that I'm not often asked, nor do I give much thought to: "10 years from now, who will be the video industry's winners and losers?"

It's a far-reaching question that doesn't lend itself well to an impromptu answer. Also, while it's great fun to prognosticate about the long run, I've found that it's also a complete crapshoot, which is why my focus is much shorter-term. I've long-believed there are just too many variables in play to predict with any sort of certainty what might unfold 10 years into the future.

Still, as I've thought more about the question, it seems to me that there are at least 5 main factors that will influence the video industry's winners and losers over the next 10 years:

1. Penetration rate of broadband-connected TVs -There's a lot of energy being directed to "convergence" technologies and devices which connect broadband to the TV. Broadband to the TV is a big opportunity for video providers outside the traditional video distribution value chain. It's also a minefield for those who have dominated the traditional model, such as broadcasters. The Hulu-Boxee spat demonstrates this. A high rate of adoption of broadband to the TV technologies will result in more openness and choice for consumers. That's a good or a bad thing depending on where you currently sit.

3. How well the broadcast industry adapts to broadband delivery - The broadcast TV industry generates about $70 billion of ad revenue annually. But both broadcast networks and local stations are on the front lines of broadband's change and disruption, putting a chunk of that ad revenue up for grabs. With broadband-to-the-TV coming, broadcast networks must figure out how to make broadband-only viewership of their programs profitable on a stand-alone basis (i.e. when the online viewing is the sole viewing proposition). Local stations face bigger challenges. As the Internet was to newspapers, broadband delivery is to local stations. They face a slew of new competitors for ad dollars and audiences, while losing their exclusive access to network programming. To what extent they're able to reinvent themselves will determine how much share they hold on to and how much others peel off.

4. How aggressively today's video providers (cable/telco/satellite) and new paid aggregators pursue broadband video delivery - While anecdotes about "cord-cutting" will no doubt only intensify, the reality is that if today's video providers adapt themselves to broadband realities, they are likely to be as strong or stronger 10 years from now. The recent moves from Comcast and Time Warner are encouraging signs that the cable industry gets that being ostriches about the importance of broadband delivery is a road to nowhere. Consumers expect more flexibility and value; incumbents are in a tremendous position to deliver. Ownership of local broadband access networks that serve consumers' unquenchable bandwidth demands is going to be a very good business to be in. That all said, new paid aggregators like Netflix, Amazon and Apple could well steal some share if they aggressively beef up their content, offer a competitive user experience and deliver a better value. They could have a major impact on online movie distribution in particular.

5. The level of investment in startups - The venture capital industry, crucial to the funding of early-stage innovative technology companies, is going through its own turmoil. The industry's limited partners have been wounded by the market's drop, causing VCs to raise smaller funds (if they're even able to do this), limit the number of investments they make, and shy away from betting on big transformational startups. Plenty of strong video technology companies are still successfully raising money, but it's harder than ever. Lots of potentially promising ideas are going begging. The length and severity of the economic slowdown will have a big effect on just how much funding new technologies that can potentially reshape the video landscape over the next 10 years.

So there are 5 factors to consider in how the video landscape shapes up over the next 10 years. Now back to the here and now..

What's your crystal ball say? Post a comment now.