Posts for 'Hulu'

Last Thursday comScore released July 2009 data from its Video Metrix service showing record online video usage for the month. I've been charting comScore's data for 2 1/2 years, making updates each month when comScore provides new data. Today I'm offering these charts as a complimentary download (if you incorporate them into your presentations please identify comScore as the source). Here's an example slide for total online videos viewed per month:

Not surprisingly, a number of content providers have informally told me that their internal data and what comScore reports for them doesn't neatly tie out (anyone who's ever tried to reconcile number from internal analytics, ad servers and external measurement sources can relate to these discrepancies). Nonetheless, comScore's data provides at least one consistently-measured data set on the industry, which is quite useful.

By virtually every measure the industry continues to experience rapid adoption. As I've noted before, in addition to continuing to grow viewership, the industry's key challenge is to further monetize all this video, either through advertising or paid models (subscriptions, pay-per-use or as a value add to other paid services).

What do you think? Post a comment now.

Last Monday, in "Netflix's ABC Deal Shows Streaming Progress and Importance of Broadcast TV Networks," I tried making the case that from Netflix's perspective, in order for its Watch Instantly streaming service to succeed, it would most likely need to strike more deals with the broadcast TV networks (as it announced with ABC).

Now how about the flip side of the question: how can broadcast TV networks make online video payments a significant revenue stream?

There is certainly no lack of interest by broadcasters in getting paid for online access to their content. For example, CBS has joined Comcast's TV Everywhere trial, and its CEO Leslie Moonves has been outlining his arguments for why cable's authentication plans should generated new revenue for the network. News Corp head (and Fox owner) lately Rupert Murdoch hasn't been shy about his interest in charging for content, though his first focus appears to be on newspapers. And Disney CEO Bob Iger (and ABC owner), recently told the WSJ, "People are going to pay for content. We are not worried about that." Meanwhile NBC's Jeff Zucker is trying to reposition NBCU as a cable network company (i.e. one that sells ads AND gets paid for its programs).

As I think through how broadcasters can succeed with getting paid, I keep returning to 3 core beliefs: first, broadcasters' efforts should not be undertaken individually, but rather through its joint initiative Hulu, second, the model needs to be subscription-based, not per program-based and third, the subscription service should be made in partnership with incumbent video service providers (cable, satellite, Netflix, etc.) and convergence device makers (Roku, Xbox, etc.).

Hulu has established a strong online brand, built a large audience and demonstrated online savvy. I have the most confidence in Hulu to be able to identify the differentiators needed to drive new value vs. free, including things like more timely access to hit programs, deeper libraries, higher quality streaming, options for downloading and mobile, etc. And assuming the federal government didn't step in and cry "collusion!" Hulu would provide the greatest negotiating leverage.

The key challenge for Hulu would be gaining the rights from the networks, producers, talent and others to launch such a comprehensive service. These stakeholders would be understandably wary, not knowing exactly how to value what they'd be providing.

Several months ago, I suggested a Hulu subscription service was in the offing, but so far Hulu has stayed on message, only emphasizing its free, ad-supported model. I hope it and its parents recognize that time is of the essence. With each passing day, as more people use Hulu ever more intensively, their expectations for free are being set, thereby raising the bar on their eventual willingness to pay. I do believe broadcast networks have any opportunity to evolve their business model and charge, but they must not dither. The online medium is still immature enough that they can influence its rules by acting now.

What do you think? Post a comment now.

I'm back in the saddle after an amazing 10 day trip to Israel with my family. On the assumption that I wasn't the only one who's been out of the office around the recent July 4th holiday, I've collected a batch of industry news links below so you can quickly get caught up (caveat, I'm sure I've missed some). Daily publication of VideoNuze begins again today.

Hulu plans September bow in U.K.

Rise of Web Video, Beyond 2-Minute Clips

Update on New Channels

ABC Content Now on Hulu

Nielsen Online: Kids Flocking to the Web

Amid Upfronts, Brands Experiment Online

Clippz Launches Mobile Channel for White House Videos

Prepare Yourself for iPod Video

Study: Web Video "Protail" As Entertaining As TV

In-Stat: 15% of Video Downloads are Legal

Kazaa still kicking, bringing HD video to the Pre?

Office Depot's Circuitous Route: Takes "Circular" Online, Launches "Specials" on Hulu

Upload Videos From Your iPhone to Facebook Right Now with VideoUp

Some Claims in YouTube lawsuit dismissed

Concurrent, Clearleap Team on VOD, Advanced Ads

Generating CG Video Submissions

MJ Funeral Drives Live Video Views Online

Qik Raises $5.5 Million

Why Hulu Succeeded as Other Video Sites Failed

YouTube's Pitch to Hollywood

Invodo Secures Series B Funding

Comcast, USOC Eye Dedicated Olympic Service in 2010

Consumer Groups Push FTC For Broader Broadband Oversight

Crackle to Roll Out "Peacock" Promotion

Earlier Tests Hot Trend with "Kideos" Launch

Mobile entertainment seeking players, payment

Netflix Streams Into Sony Bravia HDTVs

Akamai Announces First Quarter 2009 State of the Internet Report

Starz to Join Comcast's On-Demand Online Test

For ManiaTV, a Second Attempt to be the Next Viacom

Feeling Tweety in "Web Side Story"

Most Online Videos Found Via Blogs, Industry Report

Cox to Turn "MyPrimeTime" Dial to 100

How to Start a Company (and Kiss Like Angelina)

Below is the 19th edition of the VideoNuze Report podcast, for June 5, 2009.

Daisy was in New York this week for the "NewFronts," a day-long meeting that Digitas sponsored, mainly for independent online video creators and media buyers/agencies. The goals were to educate the market and fuel advertiser interest. Daisy reports that despite the mixed news coming out of the independent video world this year, it was an upbeat gathering.

I provide additional detail on Microsoft's announcement this year of new entertainment-oriented features for XBox 360. The gaming console continues to take on more of a convergence positioning, with new instant-on 1080p video, live streams, Zune integration, etc. With an installed base of 30 million users, Microsoft has a prime opportunity to drive convergence and get a video foothold. The new Xbox 360 features coincide with last week's Hulu Desktop announcement and this week's YouTube XL unveiling.

Click here to listen to the podcast (14 minutes, 47 seconds)

Click here for previous podcasts

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

YouTube's announcement this week of "YouTube XL," an optimized version of its site meant for viewing on larger screens caught my attention as it appeared to be another building block in broadband-to-the-TV convergence. I spoke with Chris Dale, a YouTube spokesman to learn more.

On the other hand, long-term, XL is a limited-appeal offering, because it reflects Google's browser-centric worldview. As Chris explained, from CEO Eric Schmidt on down, there's a conviction that the "browser as the platform" is going to dominate entertainment and information distribution. This is certainly the way the online world works today, as practically all of broadband-delivered video is consumed within a browser context. (In fact, this is one of the things that made last week's Hulu Desktop announcement so noteworthy, a large aggregator introducing an app that breaks the browser-only paradigm.)

The problem is that historically at least, the non-online, TV world hasn't been browser-based. Instead, various set top boxes (whether from cable/satellite/telco or from newer convergence players) rely on their own applications to present and manage video. Given this disconnect, new convergence devices and services will instead need to rely on YouTube APIs if they want to access YouTube's vast trove of content, unless they start building in browsers. This is how AppleTV, Sony Bravia, TiVo and others have worked with YouTube in the past. My concern is how much investment attention will convergence-oriented APIs be getting from YouTube when the company's emphasis is clearly on the browser.

Back in March '08, I wrote, "YouTube: Over-the-Top's Best Friend" in which I asserted that for emerging convergence devices and video service providers, YouTube would be the perfect partner. It has the best-known video brand, the largest catalog and the best promotional reach. I still believe that. YouTube could be a formidable disruptive force in over the top if it had a strategy to do so. With its browser focus though, it's hard to see that happening.

In these tough economic times, I don't blame YouTube, or others, from prioritizing. However, my sense is that by taking a more passive approach to convergence, YouTube is opening the door a little wider for others like Netflix who are more aggressively pursuing convergence opportunities, as well as incumbents like Comcast and Time Warner Cable who are just getting going on bridging broadband video to their set-top boxes. As the clear online video market share leader, YouTube has a pretty golden opportunity to aggressively chart new ground and cause likely market disruption. That it's choosing not to means others have a little less pressure on them.

What do you think? Post a comment now.

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.

Yesterday Hulu announced Hulu Labs - "a place to try out experimental projects from Hulu and share your feedback while they're still in development." Four current projects are listed, "Hulu Desktop," "Video Panel Designer," "Recommendations" and "Time-Based Browsing."

Hulu Desktop, a browser-less app for surfing videos with a Windows Media Center or Apple remote controls moves Hulu yet another step closer to the proverbial "10 foot" or TV-like experience. Yet as Peter Kafka at AllThingsD rightly notes, Hulu continues to draw a seemingly arbitrary distinction between screens. It's fine with the Hulu folks to use Desktop to watch on a large monitor connected to your computer. But if you want to watch on an actual TV (via Boxeee, for example) that's a no-no.

So even as Hulu admiringly pushes the bounds to improve its users' experiences, it is going to continue to find itself in wrapped around the axle trying to explain itself. What would change all this and make Hulu's owners agnostic to whether you watch Hulu's programs on PCs or TVs? Simple: Hulu demonstrating it can generate ad revenue at parity (or better) with traditional on-air delivery. Once it can do that, then these distinctions will melt away. Problem is, despite Jeff Zucker asserting that Hulu is ahead of plan, the reality is that Hulu is nowhere close to achieving parity (nor has it shared a roadmap for doing so).

Until this happens, things like Hulu Desktop are neat, but will only cause more head-scratching among Hulu's tech-savvy early-adopter audiences.

What do you think? Post a comment now.

I have to say, I chuckled a little when I read this morning's Online Media Daily story, "Opening a Pandora's Boxee" about a new report from Laura Martin at Soleil Securities titled "Content's $300B Gamble." I haven't read the report, but the article says that it expresses concern that ad revenues for programs watched online could be 60% lower than when watched on-air, "threatening TV's the TV platform's price umbrella."

The reason I chuckled is because I've been saying the same things for months now (for example, see "Broadcast Networks' Use of Broadband is Accelerating Demise of Their Business Model" and "OK, Hulu Now Has ABC. But When Will It Prove Its Business Model?") It's nice to see others starting to understand these important issues as well.

Recently I've had a number of conversations with TV and broadband executives who are similarly concerned about what role Hulu is going to play longer term for the broadcast industry, given the current absence of a proven business model for the site. There are some pretty strong feelings out there, ranging from "Hulu is totally misguided and will be the downfall of the broadcast industry" to "the Hulu team is so smart, they're bound to figure it out." One way or the other, with Hulu's growing popularity, I continue to believe that the broadcast industry's fortunes are increasingly tied to Hulu's financial success.

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.

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.

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.

In a surprising turn-of-events, VideoNuze has learned that Google will acquire Hulu and merge it with YouTube. The resulting entity will be named either 'YouLu' or 'HuTube.' The merger brings together the two most-trafficked video sites into a powerful new player.

In an interesting twist, the final acquisition price has not yet been determined. Instead, the price will be based on a new algorithm Google is creating to accurately measure just how effective Hulu is at turning its users' brains into 'creamy giggity-goo' as Seth MacFarlane asserts it will in the latest of Hulu's alien-inspired ads. The algorithm will actually be able to count how many more of users' brain cells die as a result of watching shows on Hulu beyond the cells that already died due to regular on-air network TV viewership.

It turns out that Hulu's positioning as an 'evil plot to destroy the world' was considered highly synergistic with Google's longstanding mantra to 'do no evil.' Google CEO Eric Schmidt revealed that the company decided some time ago to move beyond its good-guy image, saying, "Look, we got a lot of mileage out of that 'doing no evil' malarkey, but it's time to get real. We're an avaricious multi-billion company now, and all these wacky tree-hugging green initiatives our engineers keep dreaming up can't hide that." He added, "We really admire the traction Hulu is getting by turning 'evil' into a virtue and want to tap into that concept further. Those Hollywood guys beat us hands-down when it comes to creativity."

For its part, Hulu's owners' decision to merge with YouTube, for a price not yet quantifiable, can only be seen as waiving the white flag of surrender. In an email exchange between Jeff Zucker, NBCU's CEO and Peter Chernin, Fox's former CEO (who made the original Hulu deal), obtained by VideoNuze, Zucker's frustration with Hulu's distant second place status is palpable. Among other things he says, "I thought we had dumbed down our shows as much as possible, but YouTube has clearly tapped into audiences' insatiable appetite for the inane. Who would have thought that skateboard-riding cats crashing into walls would have more audience appeal than our $2 million/episode scripted dramas. There really is no accounting for taste."

In response Chernin is quoted as saying, "Rupert always thought Hulu was a small potatoes deal, not really capable of losing a large, exciting amount of money. On the other hand, YouTube has been a gigantic black hole for Google, so the opportunity to join forces and achieve scale at losing money together was just incredibly compelling." He added, "Plus, you have to remember, Rupert's heart is really in newspapers. He continues to think this whole Internet thing is a fad that will eventually blow over, with people returning to newspapers as their trusted source of news and propaganda. So the company is logically positioning itself to have sizable video losses to offset expected massive gains in newspaper profitability."

Meanwhile, in a meeting with employees, Hulu CEO Jason Kilar reportedly sought to put a positive spin on the merger. Employees who have Twittered the meeting say that to pump up employee enthusiasm he re-told stories of how much fun it was to originally come up with the name 'Hulu,' reportedly saying, "Look how much mileage we got of one ridiculous-sounding made-up name, just imagine the branding possibilities of the even more-ridiculous sounding names YouLu or HuTube..." Negotiations are already underway with the Chinese portal and domain parking company that own the respective URLs.

The merger left many industry analysts scratching their heads. Representative of their reaction, VideoNuze's Will Richmond said, "Geez, I never thought we'd see a more nonsensical media merger than the one between Time Warner and AOL, but I think this YouLu/HuTube thing might just be it. Let's hope it's not for real, and is just some kind of April Fool's Day joke cooked up by an industry analyst to provide some once-per-year, cheap laughs."

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.

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.

Summary:

What: Major cable operators Comcast and Time Warner intend to offer broadband access to cable programs for the first time, but they have provided few specifics to date, thereby creating a swirl of confusing interpretations. This post seeks to clarify their plans.

Important for whom: Cable networks, other content providers, cable operators, consumers

Potential benefits: Flexible access and first-time online availability of popular cable programs.

Background

Since the WSJ reported two weeks ago today that Comcast and Time Warner Cable plan to offer online access to cable TV programming to their subscribers, there has been a significant amount of confusion and misinterpretation about what these companies are actually planning to do. Absent official statements from either company, there has been an ongoing debate about whether cable operators, who want to defend their traditional model, were moving to choke off the largely open access to broadband video that users have grown accustomed to.

Things got more confusing this past Monday when AdAge ran an interview ("TV Everywhere -- As Long As You Pay For It") with Jeff Bewkes, CEO of Time Warner Inc. in which he elaborated on a company initiative dubbed "TV Everywhere" that major cable network owners such as Time Warner Inc. Viacom, NBCU, Discovery and others are said to be collaborating on. Bewkes outlined a broad online vision including the idea that cable programming could also be available on sites like Hulu, MySpace, Yahoo and YouTube as well, provided that users were paying a fee to some underlying service provider (cable/satellite/telco).

The NYTimes' technology reporter Saul Hansell then picked up on the interview and wrote a piece on the paper's widely-read "Bits" blog entitled "Time Warner Goes Over the Top," which provocatively began, "Just as soon as Time Warner has divested itself from the cable business, Jeff Bewkes, its chief executive, is preparing to stab the cable industry in the back. That's what I read in an interview with Mr. Bewkes in Advertising Age..."

Saul went on to describe his interpretation of one particular Bewkes comment as implying that Time Warner Inc. would offer its networks directly to consumers (or "over the top" of cable operators), thereby setting off a domino effect in which others' networks did the same, all of which would ultimately lead to the destruction of the cable industry business model.

The attention all of this received, particularly in the blogosphere, prompted a fair number of people to contact me and ask what's really going on here.

Time Warner's Plans

Yesterday I spoke with Keith Cocozza, TWI's spokesman, who said that Bewkes's comments do represent both TWI and TWC. Their mutual vision is to have cable programming offered not just at TWC's RoadRunner portal, but also at various third-party aggregators (Hulu, etc.) so long as they subscribe to any multichannel video service (whether from TWC, Verizon, DirectTV, etc.). They do envision offering a streaming-only service for those that don't want the traditional cable subscription, but it would only be available in their geographical footprint. All of that means that there's in fact no over-the-top threat involved here at all. TWI and TWC are "agnostic" about third-party aggregator access to the cable programs, because they recognize that people want to go to whatever sites make them most comfortable. And they do not plan to charge subscribers extra for online access.

From a consumer standpoint, all of this is quite enlightened. But from an operational standpoint, it feels incredibly complex. For example, I asked Keith about how a remote user, seeking to watch programs at a third party aggregator's site like Hulu, would be authenticated as an actual customer of a video service provider? While acknowledging it's too early to have all the answers, he said a test TWC has conducted in Wisconsin with HBO has shown this not to be a big technical problem. I don't agree. It's hard enough for companies to do a bilateral account integration (e.g. tying a user's Amazon account to a user's TiVo account); the idea of doing multilateral account integration (the numerous combinations of potential aggregators and service providers) is fraught with complexity and seems highly daunting.

Then there are financial issues to address. With no incremental subscriber payments, online program delivery needs to be sustained through ads alone. This would be quite workable if it were just cable operators and networks involved (they could split the ad avails proportionately as they've traditionally done with linear delivery), but by allowing third-party aggregators in too, a third mouth now needs to be fed. That will trigger a whole new negotiating dynamic, as each aggregator lobbies for a different share. And it's questionable whether there's even enough ad revenue for three parties to begin with, though Keith believes there is.

Comcast's Plans

Conversely, Kate Noel, Comcast's spokeswoman, told me yesterday that while it's still early to say anything definitive about Comcast's plans for distribution through third-party aggregators, their first priority is distribution of cable programs on their own sites (e.g. Fancast, Comcast.net) and the networks' own sites. Comcast seems to have more of a "walk, before you run" approach. It recognizes that protecting subscribers' privacy in any account integration is crucial so it plans to proceed carefully. I tried to pin Kate down on whether Comcast intends to charge for online access. Again she felt it was too early to be definitive, but it sounds like they're leaning toward a no-charge model as well. The timeline is to begin rolling out access in the 2nd half of '09.

Clearly there are a lot of moving pieces involved with these companies' plans. In general Time Warner has a more aggressive, yet I believe far less pragmatic, plan. They're trying to get all the way to the end zone right away, when just advancing the ball further downfield would be real progress for today's broadband users seeking improved access to premium content. Time Warner's "TV Everywhere" seems like a great vision, but it would take years to fully implement. Comcast's plan is probably achievable in a year or less. Either way, major cable operators finally seem to have the ball rolling toward broadband distribution of cable programming. As I pointed out last week, this can only be viewed as a positive.

What do you think? Post a comment now.

(btw, if you want to learn more about all this, come to the Broadband Video Leadership Evening on March 17th in NYC, where we'll dig deeply into these issues with our top-notch panel)

An article in Friday's WSJ "Cable Firms Look to Offer TV Programs Online" outlined a plan under which Comcast and Time Warner Cable, the nation's 2 largest cable operators, would give just their subscribers online access to cable networks' programming.

A Comcast spokesperson contacted me later Friday morning to explain that the plan, dubbed "OnDemand Online" is indeed in the works, though a release timeline is not yet set. The move is part of the company's "Project Infinity" a wide-ranging on-demand programming vision that was unveiled at CES '08, but oddly has not been messaged much since. Meanwhile, thePlatform, Comcast's broadband video management/publishing subsidiary also called me on Friday to confirm that - unsurprisingly - it would be powering the OnDemand Online initiative (thePlatform's CEO Ian Blaine explains more in this post).

The idea of cable operators setting up online walled gardens for their subscribers alone was first signaled by Peter Stern, Time Warner's EVP/Chief Strategy Officer on the panel I moderated at VideoNuze's Broadband Leadership Breakfast last November. As I wrote subsequently in "The Cable Industry Closes Ranks" my takeaway from his and other cable executives' recent comments was that the industry was poised to collaborate in order to defend cable's traditional - and highly profitable - business model. Under that model, cable operators currently pay somewhere between $20-25 billion per year in monthly "affiliate fees" to programmers whose networks are then packaged by operators into various consumer subscription tiers.

It should come as a surprise to nobody that both cable networks and operators are mightily incented to defend their model against the incursions of free "over the top" distribution alternatives. Indeed what's surprising to me is why it has taken the industry so long to act forcefully when the stakes are so high and the market's moving so fast? I mean cable operators themselves are the largest broadband Internet access providers in the country, and they have watched for years as their networks have been engorged by surging online viewing, courtesy of YouTube, Hulu, Netflix and others. While they've made some tepid moves to push programming online (though to be fair Comcast's Fancast portal has evolved quite a bit recently), overall their broadband video distribution activities have been underwhelming, evidence of broadband distribution's lower priority status vis-a-vis TV-based video-on-demand.

Meanwhile Friday's article triggered plenty of hackles from the blogosphere that those evil cable operators were up to their old monopolistic tricks, this time moving to control the broadband delivery market and choke off open access to premium video. While it's indeed tempting to see these plans that way, I think that would be the wrong conclusion.

Rather, I look at the Comcast/TWC moves as both welcome and likely to spur more, not less, consumer access to broadband-delivered programming. That's because, if the cable networks are smart in their negotiations, they will gain from operators the approval to push more of their programs onto both their own web sites, and even to distribute some through others' sites. With net neutrality agitators hopeful in the wake of Barack Obama's election, Comcast and TWC need to tread carefully in these negotiations. Yet another part of the model I foresee is archived programs, which have been locked up in vaults due to programmers' concerns over operator reprisals if they leaked out online, becoming much more openly accessible.

The Comcast/TWC hecklers need to remember one simple fact: to make quality programming requires solid business models. And in this economic climate, solid business models are far and few between. Despite having lost a total of over 500,000 video subscribers during the last 6 consecutive quarters, Comcast still owns one of those few sold models. And don't forget it is now investing to increase its broadband speeds, pledging 30 million, or 65% of its homes, will have 50 Mbps access by the end of '09 (a rollout which incidentally is all privately financed, without a dime of federal bailout money or other assistance).

Someday, when broadband video business models mature (as indeed they ultimately will), there will be lots of cable and other programming available for free online. For now though, getting Comcast and TWC to finally pursue an aggressive broadband distribution path is a welcome evolutionary step in unlocking this exciting new medium's ultimate potential.

What do you think? Post a comment now.

(Note: we'll be diving deep into this topic, and others, at VideoNuze's Broadband Video Leadership Evening on March 17th in NYC. More information and registration is here.)

This week's drama between Hulu and Boxee shines the strongest light yet on all of the disruptive forces broadband-delivered video has unleashed: the fight for how video content will reach your living room in the broadband era, and who exactly will control the process. It is a litmus test for major networks in how they intend to transition from the orderly and closed traditional distribution world to the new, open and messy one.

For those who haven't been paying close attention, this week Hulu's CEO Jason Kilar announced in a blog post that its content would no longer be available to users of Boxee, which is an open source media player that connects broadband delivered content to the TV with a friendly and social interface. Boxee has quickly become a darling of the early adopter and techie set (it's still in "Alpha" release, and only runs on Mac OSX and Ubuntu Linux).

Despite not having a formal agreement from Hulu, several months ago Boxee was able to extend its product to enable Hulu viewing. Hulu promptly became Boxee's #1 content source, and according to Boxee's CEO Avner Ronen, it was recently generating 100K streams per week (note that this amount is still chicken feed relative to Hulu's 240 million monthly streams). Boxee doesn't interrupt Hulu's business model; Hulu's content and ads are shown in their entirety. One would have thought the calculation for Hulu and its owners would be pretty simple: more streams = more ads = more success.

Yesterday I checked in with senior executives around the industry to see what's going on here. The picture that emerges is one of big media companies trying to reassert their control over how users access their content. In his blog post, Kilar says "our content providers requested that we turn off access to our content via the Boxee product, and we are respecting their wishes." According to everyone I spoke to, the unnamed content providers can only be Hulu's two owners, NBC and Fox.

Embracing broadband delivery by backing Hulu was progressive thinking by NBC and Fox. And as long as its skyrocketing usage was perceived as a net positive for on-air distribution (research has shown no cannibalization, higher sampling, more awareness, etc.) and its usage was mainly computer-based, all was fine.

But what Boxee did was extend the Hulu experience to sanctified ground: the TV itself. And that opened a real can of worms for the networks. Are they aiding and abetting "over the top" user behavior which could lead to "cord-cutting," in turn jeopardizing their highly profitable cable operator relationships? Are they undermining their own P&L's because Hulu usage on TV will cannibalize on-air delivery which carries higher revenues/viewer? Are they setting a dangerous precedent that any scruffy startup can distribute their prized programming without a formal relationship? And so on. These questions were too significant and Boxee's implications too profound to go unchecked. So Hulu's owners snapped its leash.

There's just one problem here: what's the impact of the decision on Hulu's users and by extension, the Hulu franchise? A quick perusal of the comments to Kilar's post says it all: people are ballistic and they are deeply confused. They don't get the arbitrary logic of why it's ok to watch Hulu in lots of other ways, but just not through Boxee. And they raise the nightmare scenario that this decision will only serve to fuel piracy, an outcome networks were expected to avoid given the devastating Napster precedent their music industry brethren experienced.

One can only imagine the anguish being felt by Kilar and the Hulu team. Having sweated every detail to create the best video experience out there, it is now watching that goodwill evaporate due to its owners' squeamishness. Better yet, one wonders what the folks at Providence Equity Partners, which invested $100 million in Hulu at a $1 billion valuation, are thinking? Did they sign up at this stratospheric valuation only to see NBC and Fox circumscribe Hulu's reach?

I've been saying for a while now that broadband's openness makes it the single greatest disruptive influence on the traditional video distribution value chain. The Hulu-Boxee situation illustrates this perfectly. Once content providers embrace broadband they inherently give up some of their traditional control. And there's no going back; once the proverbial genie is out of the bottle, it can't be put back in. Hulu, NBC and Fox are learning this first hand. With everyone now watching for their next move, I'm betting a change of heart is forthcoming. Hulu will be back on Boxee in one form or another soon enough. Resistance is futile.

What do you think? Post a comment now.

(Note: Hulu-Boxee is going to be outstanding grist for the Mar 17th Broadband Leadership Evening's panel discussion. Early bird discounted tickets are available through the end of today)

For those who weren't up for reading 700-1,000 words each day last week, today I offer a quick recap my 5 broadband video projections for 2009.

1. The Syndicated Video Economy Accelerates

This one is easily my least controversial prediction, since I've been writing about this trend for most of 2008. The "SVE" as I call it, is an ecosystem of video content providers, distributors and the technology companies who facilitate their relationships. In '08 video content providers increasingly realized that widespread distribution to the sites that users already frequent would improve on the "one central destination site" approach. That's a big change in the traditional media mentality. In '09 the SVE will only accelerate, as the technology building blocks for distributing, monetizing and measuring syndicated video continues to improve. To be sure, the SVE is still nascent, but many companies across the broadband landscape have begun embracing it in earnest.

2. Mobile Video Takes Off, Finally

In '08 VideoNuze has been mainly focused on wired broadband delivery of video to homes and businesses. But as the year has progressed, powerful new mobile devices have mutated the definition of broadband to also include wireless delivery. The huge success of the iPhone and other newer video-capable devices, coupled with 3G, and soon 4G networks, have contributed to mobile delivery finally realizing some of its long-held promise. Still, as some of you commented, obstacles remain. iPhones don't support Flash, the most popular video format. Wireless carriers are careful with doling out too much bandwidth for video apps. And so on. Still, '08 was a big year for video delivery to mobile devices, and I think '09 will be even bigger.

3. Net Neutrality Remains Dormant

Proponents of "net neutrality" legislation, which would codify the Internet's level playing field, expected that under an Obama administration they would finally be granted their wish, particularly since he supported the concept on the campaign trail. But I'm predicting that net neutrality will be dormant for yet another year. Mr. Obama has been emphatic about basing policy decisions on facts and data, and this is an area where net neutrality advocates continue to come up short as there's yet to be any sustained and proven ISP misbehavior. With Mr. Obama and his team having urgent fires to address all around them, there are only two scenarios I can see that move net neutrality up the prioritization list: a startling new pattern of ISP misbehavior or some kind of deal ISPs agree to in exchange for infrastructure buildout subsidies from the stimulus package.

4. Ad-Supported Premium Video Aggregators Shakeout

One of the best-funded categories of the broadband landscape has been aggregators of premium-quality video - TV programs, movies and other well-produced video. These companies have been thought of as potential long-term online competitors to today's video distributors (cable/satellite/telco). However, it's proving very difficult for these sites to differentiate themselves. Content is commonly available, user experience advantages are hard to maintain, user acquisition is not straightforward, audiences are fragmented and ad dollars are under pressure. All of this means that '09 will see a shakeout among the many players in this category, though it's hard to predict at this point who will be left standing (though at a minimum I expect Hulu and Fancast to be in this group).

5. Microsoft Will Acquire Netflix

My long-ball prediction was that at some point in '09 Microsoft will acquire Netflix. Though many of you emailed me offering kudos for boldness, not many are buying into my prediction. Fair enough, I'll either be flat-out wrong on this one or I'll get a gold star for prescience. I provided my rationale, which starts with the assumption that Apple and Google (Microsoft's two fiercest rivals in the consumer space) are best-positioned for success in the battle for the biggest consumer prize of the next 10 years: delivering broadband video services directly to the TV.

I think Microsoft needs to directly play in this space, and Netflix is a perfect vehicle. It has a great brand, a large and loyal subscriber base and excellent back-end fulfillment systems. In 2008 Netflix great strides in broadband, building out its "Watch Instantly" feature. Yet to grow WI's catalog from its current 12K titles to anything approaching the 100K+ available by DVD will require deep financial resources to deal with a recalcitrant Hollywood, and also shelter from quarter-to-quarter earnings pressures. Netflix's measured approach to broadband is consistent with its historical overall operating style. While that style has worked exceedingly well in the past, the broadband-to-the-TV service landscape is wide open right now, and Netflix should be pursuing in a thoughtful, yet ultra-aggressive way. Combined with Microsoft it would be poised to become the broadband video category leader over the next 10 years.

OK, there's the summary. I'll be checking back in on these as the year progresses.

What do you think? Post a comment now.