Posts for 'Studios'

Last Monday's decision by the Second Circuit Court of Appeals, reversing a lower court's March 2007 ruling that Cablevision's plan to deploy a Network Digital Video Recorder (nDVR) violated copyright law has huge potential implications across the video landscape. DVR, Video on Demand and broadband video are all close cousins jockeying for position in the race to provide on-demand choice to consumers. So for those interested in broadband's deployment, it's important to understand ongoing developments in DVR and VOD as well.

Today, I'm pleased to have Mugs Buckley and Colin Dixon, analysts at The Diffusion Group weigh in with their thoughts on last week's ruling.

The Cablevision nDVR Decision: Winners, Losers and How it Relates to Broadband

by Mugs Buckley and Colin Dixon, The Diffusion Group

The August 4th Cablevision nDVR decision by the Second Circuit Court of Appeals opens up the possibility that the company will be able to move ahead with its original nDVR plan, much to the dismay of the plaintiffs, a group of major studios and TV broadcasters. For a primer on the significance of the decision, we offer the following thoughts:

WHAT'S AN nDVR vs. a DVR?

The root of the nDVR case is where a TV viewer's recorded show gets stored: on a hard drive in a DVR located in the home (as is the current model) or on a hard drive in a cable operator's network (as Cablevision and other network operators prefer).

WHY DOES IT MATTER?

To the viewer, it doesn't; since using either approach allows recording and playback of programs.

But since the correlation between digital recording and ad-skipping is well-documented, the studios' and networks' key concern is that nDVR could dramatically accelerate recording usage, thereby accelerating the ad-skipping trend. That would be a big blow to their economic model. For Cablevision and other operators, it's all about cost. Storage in the network is much cheaper than a truck roll to a customer's home and individual DVR box deployments. nDVR also allows the operator to leverage their huge investment in VOD systems.

WHERE DO THINGS GO FROM HERE?

While Cablevision won its appeal, the ruling is far from conclusive. The next step is for the lower court to revisit this ruling, so when Cablevision will actually be able to roll out the nDVR service is totally unknown. They must wait for the lower court to decide if they agree with the upper court's decision, which is not expected before the end of 2008. And of course we expect the studios and content providers to file subsequent appeals.

WHERE DO OTHER OPERATORS STAND?

If Cablevision wins, other cable and telco network operators will implement nDVR too. For example, Time Warner Cable's CEO Glenn Britt told Multichannel News on August 6th, "We've said for a long time that a centralized network DVR is a better engineering solution than having hard drives all over everybody's home. If this particular court case is upheld, we will deploy that."

AND THE BROADBAND IMPLICATIONS?

Should the ruling stand, a company like TiVo could possibly be able to capitalize on it by delivering the nDVR experience over broadband. Of course, TiVo's been shifting its model to work with service providers anyway, so this may not be a strategy it would pursue.

As for other broadband implications, this is where the interplay between nDVR, VOD and broadband video can get murky. For instance, sites like Hulu and ABC.com are already storing programs in the network (albeit in a way that they control) for on-demand consumption. This obviates the requirement that the consumer take the action to record say the latest episode of "The Office" in a DVR or nDVR environment.

And of course, the content providers control the ad insertion (although presumably they could do that for nDVR as well). Other than making ALL TV programs available vs. just the subset currently available for broadband delivery (and VOD) and the fact that nDVR can be viewed easily on TVs, which is not currently the case for broadband, the differences between nDVR and broadband start to feel quite blurry.

As you can see, nDVR has lots of implications for everyone in the video value chain.

Bottom line: Much more to come. Stay tuned.

Looking back over two dozen posts in May and countless industry news items, I have synthesized 3 key topics below. I'll have more on all of these in the coming months.

1. Broadband-delivered movies inch forward - breakthroughs still far out

In May there was incremental progress in the holy grail-like pursuit of broadband-delivered movies. Apple established day-and-date deals with the major studios for iTunes. Netlix and Roku announced a new lightweight box for delivering Netlix's "Watch Now" catalog of 10,000 titles to TVs. Bell Canada launched its Bell Video Store, complete with day-and-date Paramount releases, with others to come soon. And Starz announced a deal with Verizon to market "Starz Play" a newly branded version of its Vongo broadband subscription and video-on-demand service.

Taken together, these deals suggest that studios are warming to the broadband opportunity. This is certainly influenced by slowing DVD sales. Yet as I explained in "iTunes Film Deals Not a Game Changer" and "Online Move Delivery Advances, Big Hurdles Still Loom" broadband movies are still bedeviled by a lack of mass PC-TV connectivity, no real portability, well-defined consumer behavior around DVDs and the studios' well-entrenched, window-driven business model. Despite May's progress, major breakthroughs in the broadband movie business are still way out on the horizon.

2. Broadcast TV networks are embracing broadband delivery - but leading to what?

Unlike the film studios, the broadcast TV networks are plowing headlong into broadband delivery, yet it's not at all clear where this leads. In "Does Broadband Video Help or Hurt Broadcast TV Networks" and "Fox's 'Remote-Free TV': Broadband's First Adverse Impact on Networks?" I laid out an initial analysis about broadband's pluses and minuses for networks. I'll have more on this in the coming weeks, including more in-depth financial analysis.

On the plus side, in "2009 Super Bowl Ads to Hit $3 Million, Broadband's Role Must Grow," "Sunday Morning Talk Shows Need Broadband Refresh" and "Today Show Interview with McClellan Showcases Broadband's Power," I illustrated some opportunities broadband is creating. On the other hand, "Bebo Pursues Distinctive Original Programming Model" and "More Questions than Answers at Digital Hollywood" explained how exciting new programming approaches are taking hold, challenging traditional TV production models. Broadcasters are in the eye of the broadband storm.

3. Advertising's evolution fueled by innovation and resources

Last, but hardly least, I continued on one of my favorite topics: the impact broadband video is having on the advertising industry. Over the last 10 years the Internet, with its targetability, interactivity and measurability has caused major shifts in marketers' thinking. With broadband further extending these capabilities to video, the traditional TV ad business is now ripe for budget-shifting. We'll be exploring a lot of this at a panel I'm moderating at Advertising 2.0 this Thursday.

In "Tremor, Adap.tv Introduce New Ad Platforms" and "All Eyes on Cable Industry's 'Project Canoe'" (from Mugs Buckley), key players' innovations were described along with how the cable industry plans to compete. Content providers are being presented with more and more options for monetizing their video, a trend which will only accelerate. Yet as I wrote in "Key Themes from My 2 Panel Discussions Last Week," many issues remain, and with so many content start-ups reliant on ads, there may be some disappointment looming when people realize the ad market is not as mature as they had hoped.

That's it for May. Lots more coming in June. Please stay tuned.

Online movie delivery is back in the news, but dramatic change is still well down the road in this space as usability, rights issues and incumbent business models/consumer behaviors pose formidable hurdles.

Yesterday Netflix announced a $99 appliance with Roku, enabling the company's "Watch Instantly" streaming service on TVs. That news follows Apple's deals with a number of big studios in early May obtaining "day-and-date" access to current titles. And today brings news that Bell Canada, that country's largest telco, is formally launching its Bell Video Store, also providing day-and-date delivery, of Paramount titles to start (and soon others), plus portable viewing on Archos devices.

Netflix, which I last wrote about here, took a shot across the bow of Apple TV and Vudu by introducing the Roku box, the lowest-priced broadband movies appliance yet. Apples-to-apples comparisons aren't fair as the stripped-down Netflix/Roku box doesn't have a hard-drive or equivalent processing. That inevitably means lower quality delivery vs. locally-stored content with the others, plus uncertainty about HD-delivery. Netflix/Roku's big advantage is that it's a value-add service for current Netflix subscribers, meaning no new fees as with the Apple TV/Vudu approaches.

However, Watch Instantly has older titles and amounts to less than 10% of Netflix's total catalog. I don't see that changing much; Watch Instantly runs smack into studios' incumbent windowing approach and deals with HBO, Showtime and Starz for premium TV. Netflix's model is built on the home video window, so new online delivery rights must be obtained which will be a tough road. However, with Paramount, MGM, Lionsgate and others splintering from Showtime recently to set up their own premium channel, it's possible that some studios' rights may loosen up, but of course at a price.

Still, I don't see the Netflix/Roku box breaking 10% penetration of Netflix's sub base any time soon, barring a box giveaway. Enlarging the value proposition by licensing the Roku technology for inclusion in other devices (e.g. Blu-ray) could also help drive adoption.

Meanwhile, today Bell Canada is announcing the formal launch of its Bell Video Store. In beta since late '07, it offers 1,500 titles, now including day-and-date delivery from Paramount (and others soon according to Michael Freeman, Bell's director of product management who I spoke to yesterday). This is noteworthy, as it appears to be the first time a service provider has received day-and-date online access from any studio. If other providers follow suit we may finally witness some internal competition with sacrosanct-to-date Video on Demand initiatives.

By using ExtendMedia's platform, Bell is also enabling downloads-to-own directly to Archos portable devices. With a couple million satellite homes and fiber IPTV fiber-based deployments continuing, there are multiple three screen options looming for Bell. Yet for now these are limited. Michael confirmed Bell has no plans to offer a branded movie appliance a la Netflix/Roku, meaning it will dependent on XBoxes and other PC-TV bridge devices.

The news yesterday that Warner Bros Television Group plans to launch TheWB.com as an online outlet to offer its catalog of popular programs and KidsWB.com to house its animated favorites are further reminders that broadband's infinite shelf space creates all kinds of new opportunities for broadcasters and studios ready to experiment and be creative.

I regard these moves as the latest evidence that industry players are beginning to understand how programming in a broadband world differs from business-as-usual approaches. If there is one word that captures the essence of the traditional world it would be "scarcity." Scarcity of time slots, distributors, eyeballs, financing, brands, advertising dollars, ideas, etc. The whole broadcasting and studio paradigm is built on a zero sum - and legitimate - idea that only a very small handful of all creative pursuits can succeed at any one time.

Broadband explodes the scarcity model, introducing a world of abundance in which every scarcity constraint is alleviated or erased. Abundance thinking has guided online retailers for years: offering incremental inventory is dirt-cheap, and if made easily discoverable, it will find its buyers. In fact, as the incongruous popularity of "Arrested Development" on Hulu already shows, latent demand for catalog programming can actually be quite strong.

Evidence is growing that other video providers also understand the abundance concept. Recently other networks and studios have also launched their own efforts to monetize catalog programming. At my recent NAB panel, the head of CTV's 2012 Olympics coverage noted that ALL Olympic activity will be available for online viewing (their mantra is "Every Second Counts"). Also at NAB, I was introduced to a stealthy new initiative to make available high-quality archived video that has never been available online. I expect plenty more examples to come.

To be sure, broadband's abundance creates all kinds of new challenges: More audience fragmentation. New promotion and user navigation issues. More monetization complexity. New operational and management tasks. And so on.

Yet broadband's abundance should be viewed as a direct challenge to the historical scarcity model on which broadcasters' and studios' strategies have long been built. Industry participants who recognize the new world order and embrace it will be best-positioned to succeed.

What do you think of how broadband's abundance changes things? Post a comment and let everyone know!

In the last few days there's been a lot of attention paid to Apple's deals with Disney, Fox, Warner Bros, Paramount, Universal, Sony, Lionsgate, Imagine and First Look Studios giving iTunes day-and-date access to these studios' current films.

As an advocate of the broadband medium, naturally I'm delighted to see studios put broadband distribution on a par with DVD release. The deals should rightly be interpreted as another step in the maturation of the broadband medium.

However, these deals, in and of themselves, do not constitute a game-changing event for paid downloads of feature films. That's because until there's mass connectivity between PCs and TVs and much-improved portability, consumers' willingness to buy is going to be significantly muted. Consumers' inability to easily watch a feature film on their widescreen TV or easily grab-these- movies-to-go (as with DVDs) are a huge drag on the download value proposition, easily swamping its new convenience benefits.

I believe that lack of mass connectivity between PCs and TVs is the last major hurdle to unlocking broadband video's ultimate potential. It is also the firewall that's preserving a lot of incumbents' business models (cable operators, broadcasters, etc.). No question, Apple and iTunes are powerful marketing partners for the studios, and their download revenue will certainly increase from its current modest base. But not even Apple's mighty brand (and certainly not its anemic AppleTV device) is enough to compensate for broadband's current deficiency.

The stampede into broadband-only comedy shorts continued yesterday with Sony launching "C-Spot". The six short series will run on Sony's Crackle.com, YouTube, AOL Video, Hulu, Verizon Wireless' VCAST and others likely to come.

Comedy has been such a popular genre online because it is cheap to produce, easy to digest in short bursts and doesn't require story narratives to be compelling. What we've seen to date largely appeals to the young male demo which can't seem to get enough of the gross-out or sophomoric skits or hot ladies delivering goofy laugh lines.

I sampled a few of C-Spot's new programs and while I won't pretend to be a professional reviewer, I did find them to be a cut above some of the average comedic fare I've found elsewhere. Plus I think Sony's onto something by serializing these shorts and releasing new episodes on specific days of the week.

Though broadband is truly an on-demand medium, I continue to believe that audience-building requires habituation that is only driven by regularly-scheduled new releases. Prom Queen (though not a comedy) met with success by serializing, and I've been surprised there haven't been more imitators to date.

Regardless of format, I'm expecting comedy will remain the broadband medium's hottest genre, attracting indies and established players alike.