Posts for 'Disney'

Following are 4 news items worth noting from the week of July 20th:

Apple reports blowout iPhone sales in Q2, continuing to drive market - It was another record quarter, as Apple reported selling 5.2 million iPhones, bringing to 21.4 the total sold to date. This despite acknowledging temporary shortages during the quarter. The iPhone continues to revolutionize the mobile market, and from my standpoint is the key catalyst for both recording and consumption of mobile video. This market is poised for significant growth as new smartphones hit the market along with fixed monthly data plans. Apps like MLB.com At Bat 2009, which offers live streams of games, are certain to be hits and emulated widely.

8 minute video of Amazon's Jeff Bezos discussing lessons learned and Zappos acquisition - You couldn't miss news this week of Amazon acquiring Zappos for around $900M, its largest deal ever. Interestingly, Amazon posted a video on YouTube of Bezos discussing the deal, but not until he walked through several maxims of Amazon's success (obsess over customers, think long term, etc.). The video is extremely informal, with Bezos flipping hand-scrawled notes on an easel and improvising funny anecdotes. It has a slightly random feel (until he gets to the Zappos part, you start to wonder, what's the point of all this?), but I give Amazon and Bezos lots of credit for using video in a totally new way to communicate with stakeholders. I'd love to see more CEOs do the same.

Is Disney CEO Bob Iger serious about creating a subscription site for its online video? This week at Fortune's Brainstorm conference, Iger floated the idea that Disney will offer movies, TV shows and games for paying subscribers. The timing seems more than coincidental as Comcast gears up for its On Demand Online trial. Is Iger serious about this, or is it a head fake from Disney so it can try to negotiate incremental payments from Comcast and others seeking to distribute Disney content online? It's hard to tell, but I'd be curious to see what Disney has in mind for its possible subscription service. Consumers hate the idea of paying twice for anything (even paying once is not so popular), so if Disney is somehow going to create another window where they charge for access to content that's still on, or was recently on cable, that would be an awkward model.

"Mad Men" coming to Comcast's On Demand Online trial - Speaking of the Comcast trial, I was thrilled to hear from David Evans, SVP of Broadband at Rainbow Media (owners of AMC, the network behind Mad Men) at yesterday's CTAM Teleseminar that the show will be included in Comcast's trial and presumably in rollout. David is very bullish on online distribution and the larger TV Everywhere concept, though cautioned that there are many rights-related issues still hanging out there. I'm a huge Mad Men fan (whose new season starts on Aug 16th) and the idea that I don't have to worry about recording each episode or managing space on my DVR, and that I can watch remotely when I'm on the road, all underscore TV Everywhere's value.

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.

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.

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.

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.

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.

Yet when I read Mr. Bewkes's comments about TV Everywhere and its implementation, he inevitably points to what Time Warner Cable (btw, not the company he runs any longer with the spinoff now almost complete) is doing with HBO in Milwaukee. By continuing to do so, I believe he is trivializing how complicated implementing something like TV Everywhere would be across the industry and across the country.

Mr. Bewkes's sketchiness with the details of how TV Everywhere would work is obvious in his interview with PaidContent's Staci Kramer here and here. There are plenty of generalizations and descriptions of the end-state, but little offered about how this would all be accomplished. One example: "...all of the video providers would have a link in their software where they could be pinged to see if the person is a video subscriber. That's not a complicated thing. It's simply a software program that asks does anybody have Staci as a sub and then Charter says, yes, I've got her and bang."

Meanwhile because the details have been so sparse, the media has been left to come to its own confusing and often conspiratorial conclusions about what TV Everywhere really means to consumers. Here's a sample of the recent headlines: "TV Everywhere - As Long As You Pay for It," "Time Warner Goes Over the Top," "Some Online Shows Could Go Subscription-Only" and "Pay Cable Tests Online Delivery." Talk about message mismanagement...

Meanwhile cable networks are also being hurt by TV Everywhere's hype. They are being forced to respond in public (as Disney's Bob Iger did in his keynote yesterday) to these vague ideas. But it is a PR nightmare-in-the-making for them, as they need to defend why consumers will have to continue paying subscription fees to watch their programs online, while broadcast TV network programs are freely available. That's a thankless job for them, and reading through Mr. Iger's speech yesterday, you could almost sense his resentment at being forced into this position.

Why Mr. Bewkes isn't modulating his comments about TV Everywhere in light of all this eludes me. Anyone who's ever created a product knows about "roadmaps," where product features are added over time, and customers are methodically messaged about enhancements to come. With TV Everywhere, it's as if all that matters to Mr. Bewkes is talking about the glorious end state, thereby erasing meaningful online benefits that can be delivered along the way. Contrast this with Comcast's OnDemand Online plan that offers the simple, but still highly-valuable near-term proposition of online cable programs on its own sites, and possibly the networks' as well.

Below is the 12th edition of the VideoNuze Report podcast, for April 3, 2009.

After a week off, Daisy Whitney and I are back. This week we discuss new comScore data Daisy learned about while attending the OMMA Video conference, which supports the idea of TV ad spending shifting from TV to broadband video. Then we dig deeper into the significance of Disney's deal to bring promotional clips to YouTube, which the companies announced earlier this week. More detail on the deal is also in this post I wrote on Tuesday.

Click the play button to listen to the podcast (13 minutes, 49 seconds):

Click here for previous podcasts

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

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.

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

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

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

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

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

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

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

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

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

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

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

What do you think? Post a comment now.

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

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

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

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

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

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

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

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

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

What do you think? Post a comment now.

In case you missed the news, last Tuesday, NBCU and 60Frames, an independent broadband-only studio I've written about, announced a comprehensive content development and ad sales deal. Critically, NBCU will take original broadband-only shows from 60Frames to brands/agencies with which it has relationships to pursue both upfront sponsorships and possible brand integration.

Then this past Monday, Disney and Microsoft announced at MIPCOM that Stage 9, Disney's in-house broadband-only studio which I've also written about, would begin syndicating its shows to MSN Video for European viewers. While smaller in scope, the Disney-MS deal is no less noteworthy.

I see at least three underlying threads to these deals that suggest broader market implications. First, the deals are further evidence that the broadband-only video model is still nascent and in need of market validation and financial support. If these deals are in fact harbingers, this support will come from established players like NBCU and Microsoft who have significant reach and access to ad dollars. Somewhat ironically these are also companies that have financial stakes (either through direct ownership of or important customer/strategic relationships with) the very incumbent media properties that the broadband-only crowd is trying to grab eyeballs away from.

Second, the down economy is a catalyst for more of these types of deals. Last week, in "5 Conclusions About the Bad Economy's Effect on Broadband Video," I asserted that the broadband-only studios would tighten their belts a bit to conserve resources in this uncertain climate. One way to mitigate their financial risk and uncertainty is through these linkups with deep pocketed partners. NBCU's backing of the 60Frames slate appears to be the most extensive of these types of deals to date. That Stage 9 - owned by well-funded Disney - is also hunting down big distribution partners which have brand relationships is still further evidence that risk mitigation is a key priority.

Third, the deals point to an acceleration of the trend toward broadband video syndication. In a presentation I give periodically to industry executives, I have a slide titled "Syndicated Video Economy Accelerates" which lists the reasons as: (1) Ongoing video explosion causes heightened need to break through to audiences, (2) Device proliferation causes even more audience fragmentation, (3) Ad model firms up, improving ROI for free, widely distributed video and (4) Social media use means surging user-driven syndication. That slide needs to be updated for a new #1 reason motivating syndication: "In a down economy, syndication could mean the difference between success and failure for broadband-only studios and even big media backed broadband initiatives."

Here's something else to consider: what role might YouTube, the market's undisputed 800 pound gorilla, play as an emerging distributor and financial backer of broadband-only video? Despite its much-avowed disinterest in being a content provider, YouTube, with Google's abundant balance sheet, is in a Warren Buffet-like position to become the go-to resource for financial backing and key distribution. (Readers who are cable industry veterans will also see a potential parallel to the M.O. of TCI back in the 1980's and 90's.) Couple Google's billions with YouTube's massive reach, desire to move up the quality ladder from its UGC roots, pursuit of new ad models and commerce models and its budding GCN initiative, and the company really is superbly positioned to play a role in the development of broadband-only programming.

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

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

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

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

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

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

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

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

What do you think? Post a comment now.

More evidence this morning of the Syndicated Video Economy playing out, as Disney is announcing it will distribute both ABC and ESPN programming to Veoh, the broadband video aggregator. This follows ESPN's first and recent syndication deal with AOL.

Last week in "Disney/ABC's Cheng is Confident About Broadband Video Advertising," I explained how Disney places a huge emphasis on its video player, so that it can present a consistent user experience and also control advertising. The Veoh deal is aligned with that thinking. Veoh users are exposed to Disney programming, but once they want to view, the Disney video player launches.

In fact it's interesting, if you compare what's been implemented so far at Veoh vs. how ABC shows come up at Hulu (an aggregator that Disney does not have a deal with), there's not that much difference. Recall that Hulu is just taking a feed of Disney's program-related metadata, but again, if you actually want to view, you'll launch the Disney video player.

I'm guessing the major difference here, and why some money changes hands with Veoh, but not Hulu, is that Veoh must be making some kind of commitment to promote Disney programs. Though you never want to judge a deal by how it's implemented on day 1, for now Disney doesn't seem to getting much visibility. I noticed a Jimmy Kimmel thumbnail rotate through the Veoh home page, but when I drilled down through the "TV Shows" and "Channel" tabs, I didn't see any extra promotion of ABC programs. In fact the only ABC program even listed in Veoh's generic alphabetized directory was "Ugly Betty." I found a few full-length episodes when I drilled down through an "ABC" link I found with the Kimmel video, but couldn't find that link anywhere else.

All of this is a reminder that there's a very interesting minuet going on between established networks looking to broaden their online reach and the big video aggregators that have grown dramatically and raised lots of money, but are still unprofitable. The Disney-Veoh deal shows that aggregators may be willing to agree to networks' desires for online control in exchange for the potential to generate high-margin promotion-based revenue (remember they're not hosting or delivering the Disney video, so for Veoh in this case there's very little expense involved) and incremental on-page ad revenue. Of course too many of these kinds of implementations and the aggregator's user experience will look quite inconsistent.

No doubt there will be many more network-aggregator deals yet to be done, demonstrating how this market will eventually shape up.

Though broadcast TV networks have been aggressively pushing their shows online, there has been simmering angst about what impact this will ultimately have on their traditional economics.

I have explored this issue recently in "Does Broadband Video Help or Hurt Broadcast TV Networks?" and in two posts on Fox's "Remote-Free TV" initiative here and here. NBCU's CEO Jeff Zucker has helped to stoke this concern, publicly calling broadcasters' #1 challenge the risk of exchanging "analog dollars for digital pennies."

Thus I was both a bit surprised, but also encouraged, to hear Albert Cheng, Disney/ABC's EVP of Digital Media tell me in a recent briefing that despite the fact that online revenue per program per eyeball is currently less than it is for on-air, he's confident that online will eventually catch up and surpass on-air. I don't regard these comments as idle boasts. A thick PowerPoint deck covering its online video strategy, which Disney/ABC shared with me, reveals the meticulous thought and in-depth audience research that is guiding Disney's online video initiatives. Not to mention ABC.com is the most-used network web site.

Cheng is quick to point out that Disney/ABC has followed a careful and consistent strategy since it moved into online distribution a few years ago (note Disney/ABC was the first network to work with iTunes and first to offer programs for free. Other networks quickly followed). The focus has been on continued learning and refinement.

From a strategy standpoint, Disney/ABC's video player, powered by Move Networks, is the centerpiece. The focus is on delivering a high-quality, consistent user experience in which ads are engaging, but not intrusive. While other networks have received more ink for their syndication efforts Cheng is quick to point out that access to Disney/ABC's player has always been open, allowing other sites to refer their users, if not actually integrate the player.

By making an RSS feed available of its online programs' meta-data, Cheng believes Disney/ABC can achieve much of what others gain through syndication deals (see how Hulu displays results for a "Lost" search below, subtly noting "Watch at ABC" This is the same concept I noted in my recent Hulu vs. Comcast post), while avoiding the downsides of ad sales conflicts, business rules implementation and delivery overhead.

By controlling their own ad inventory, Disney/ABC avoids the sometimes one-sided revenue sharing deals widely-discussed in the industry (Hulu alone is rumored to keep 90%) and the channel conflict that inevitably results from having two sales teams calling on the same media buyers. Cheng does see a role for online aggregators, but mainly for library or off-network product, especially as a backstop for traditional syndication.

Cheng's rationale for broadband's eventual revenue superiority to on-air ultimately boils down to this: since broadband can offer both superior targeting and engagement vs. on-air, by definition it deserves higher pricing. But getting to that vision from today's reality is where Disney/ABC's hard work of evangelizing to advertisers and ongoing testing is key (and where the company's recently announced "Ad Lab" comes in).

What do you think? 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.

Last week I had a chance to sit down with Brent Weinstein, CEO/founder of 60Frames, which is among a new group of companies I refer to as "broadband studios." This is a category that has generated a healthy amount of funding and activity recently, including, among others, Next New Networks ($23 million to date), Generate ($6 million), Revision3 ($9 million), Stage 9 (Disney/ABC's in-house unit), Vuguru (Michael Eisner's shop) and a slew of comedy-focused initiatives. 60Frames itself has raised $3.5 million from Tudor, Pilot Group and others.

The impetus for 60Frames came when Brent was heading up digital entertainment at UTA and observed that many clients wanted to create digital/broadband fare but wanted a partner for the same roles they've come to expect studios to handle (e.g. financing, distribution, legal, creative, etc.). 60Frames aims to differentiate itself from the pack by being "artist-friendly" - allowing greater creative control and more significant ownership and by relying on strong relationships. With an existing staff of 11 and a goal of launching 50 programs by year end, the 60Frames team is no doubt going full tilt.

60Frames is following a traditional portfolio approach, working with great talent (Coen brothers, John August, Tom Fontana, others) but recognizing that results in this new medium will vary - there will be some winners and some losers. The goal is obviously to have the best ratio possible. Traditional studios improve their odds by using collective history and data about what types of projects succeed and which ones don't. But no such lengthy track record or data exists in broadband just yet, so it's a lot more speculative pursuit.

I asked Brent if there's any creative formula 60Frames is using to guide its decision-making. He was pretty emphatic that there's no "formula," but did concede 60Frames is focused on short-form (under 5 minutes), is biased toward comedy where episodes can stand alone more readily, and is mainly looking at niche audiences with a bulls-eye of 18-34 men, where consumption is highest.

Nurturing relationships and developing great content is only part of the equation for these budding studios' success. Distribution and monetization are also incredibly important, as broadband necessitates an entirely different model. Regarding distribution, I was encouraged to see 60Frames is solidly in the syndication camp to the point that it has not even set up destination sites for its 7 launched programs yet. 60Frames has a network of partners including Bebo, blip.tv, DailyMotion, iTunes, MySpace, YouTube and others. Gaining access to all the popular online destinations will accelerate success. Meanwhile advertising is being handled by partner SpotRunner, which has deep hooks in the space.

Broadband studios like 60Frames harken back to the original studio moguls in some ways - taking creative and financial risk to explore what works in a new medium. It's way too early to know if or to what extent they'll succeed, but if they do we can expect a gold rush of imitators.

I had 3 key takeaways from the 2008 Media Summit which just wrapped up in NYC. The event just keeps getting better - great keynotes, terrific informal hallway chit-chats/networking and tons of well-directed energy. Though the event's agenda is broad, I was focused on the video-related elements. Here are 3 takeaways:

1. Iger and Moonves Get Tech; Lots of Innovation/Growth Ahead

A clear highlight for all attendees was the 2 morning keynote interviews, day 1 with Disney CEO Bob Iger and day 2 with CBS CEO Leslie Moonves. Both were ably conducted by senior Businessweek editors. Until a couple years ago, big media was in a defensive crouch regarding technology's uninvited incursion into their businesses. No more. Iger and Moonves are obviously convinced that technology, the Internet and broadband video delivery are now their companies' friends. Iger in particular really pounded this theme home.

An example of how technology helps which Iger repeatedly touched on was how Disney will leverage the platform of Club Penguin, its recent acquisition, to build communities for other properties (e.g. "Cars", "Pirates," etc.). These moves are intended to engender ever-greater levels of engagement. By the way, if you're a parent of youngsters and you've ever bemoaned how Disney's gotten its hooks deeply into your kids, you ain't seen nothing yet!

Moonves was emphatic that the Internet extends the value of CBS properties. March Madness was an example he offered. Three years ago it generated $250K of broadband subscription revenue. Two years ago CBS converted to ad-support and generated $4M. Then last year it generated $10M and this year is projected for $23M. And as Moonves pointed out, other than bandwidth, it's all incremental profit for the company. Echoing another conference theme, he further added that "the Internet should not be used to just regurgitate TV," but rather for the medium's unique capabilities.

Iger's and Moonves's mantras are no doubt being sent down to the troops from the executive suite. That suggests we can all expect a whole lot of tech-based innovation springing from these media giants.

2. Engagement and Originality: Buzzwords or More?

Two touchstones in many sessions were "engagement" and "originality." Both reflect the evolving viewpoint that broadband video has its own unique capabilities and that breaking through requires going far beyond traditional, passive programming approaches. With respect to engagement, the concept of introducing "social media" opportunities was often cited as the key tactic. An amorphous term, social media refers to all manner of user participation: content sharing, interactivity, personalization, mashups, uploading, commenting, rating and so on. Basically it's anything that gets viewers to do more than just sit back and enjoy the show. (For those looking to learn more, note next week's webinar on social media, presented by VideoNuze sponsors KickApps and Akamai)

Regarding originality, this relates back to Moonves's comment about not using the medium for regurgitation of TV shows (though to be sure there's value to that). Many people echoed that theme, emphasizing broadband must be used for original programming. The proliferation of independent "broadband studios" is encouraging early evidence that the originality bar will keep rising, prompting established and startup players to harness broadband's limitless possibilities.

3. Missing in Action: Paid business models

It wasn't that long ago that discussions about broadband video business models focused evenly on paid and ad-supported. No more. The paid model was completely missing in action at the event. I think I can count on one hand the number of times the concept was raised in sessions. Also MIA was DRM, the paid model's enabler (or torturer, depending on your perspective).

I detect a broad consensus that the broadband video industry has hitched its wagon to free ad-supported video for the foreseeable future. Many of you know I've been a long-time and enthusiastic proponent of this approach and I'm extremely happy to see things unfold this way. Though the broadband video ad model is still immature, all macro trends point to a bright future. One in particular is video syndication, which I wrote about 2 days ago. Syndication was a dominant theme, as panel representatives from both large and small content providers enthusiastically embraced it. See my post earlier this week, "Welcome to the Syndicated Video Economy" for more on this.

Ok, there you have it. There's plenty more tidbits I took away from the summit, so feel free to ping me if you'd like. And if you attended, post a comment and share your takeaways as well!

Disney/ABC Television Group's official announcement this morning of Stage 9 Digital Media, an experimental new media content studio, is another key milestone in the fast-moving broadband video industry.

I got a short briefing about Stage 9 late yesterday from Disney/ABC because it asked me to provide some analyst context to the LA Times' Dawn Chmielewski, who's done a great piece here. Stage 9 is Disney/ABC's key initiative to reach the coveted 18-34 audience in synch with this audience's unique media consumption patterns. Programming will be short, funny, well-produced, episodic, and widely distributed through popular broadband sites, social networks, mobile and download services.

I interpret Disney/ABC's move, when coupled with recent initiatives by other big media companies into original broadband video production, as further evidence of two key trends: that broadband video has come of age as a key priority for the largest media companies and that it is impossible to appeal to today's younger audiences simply by hewing to the traditional rules of the media game.

Also of significance is that Disney/ABC announced that "Squeegees," which is Stage 9's first release, will be co-exclusively premiered on ABC.com and YouTube starting today and sponsored by Toyota. Yes, you read that right. YouTube! The scruffy user-generated phenom that big media was threatening to sue out existence not so long ago, and which of course is now owned by Google, big media's most anxiety-inducing "frenemy," has been elevated to launch partner status for Stage 9's first program.

The "Squeegees" co-premiere is quite an accomplishment for YouTube. It shows that YouTube's methodical efforts to gain legitimacy (and a business model!) by establishing partner channels with media companies are beginning to pay off. David Eun, Google's VP of Content Partnerships has repeatedly explained this game plan to me, and others over the last year. The Stage 9 launch partnership should certainly be regarded as a major win for the young company. It is also another data point I'd use to support my contention that in the broadband age, traditional conceptions about copyright monetization need to be radically re-thought (Viacom, are you listening?).

I'm enthusiastic about the Stage 9 initiative, as I believe it holds lots of potential for Disney/ABC. It gives the company inroads to the elusive 18-34 set, offers the prospect of innumerable and invaluable insights about how to effectively program in the broadband age, provides a whole new internal breeding ground for developing new on-air programming (a possible double win, as this might help fix the broken and expensive traditional pilot process, though my enthusiasm on this point is tempered by news today of Quarterlife's NBC ratings fiasco) and creates new and exciting multi-platform sponsorship opportunities.