Posts for 'MGM'

Last week the WSJ broke the news that YouTube is in talks with Lionsgate, Sony, MGM and Warner Bros. about launching streaming movie rentals. On the surface this is an intriguing proposition: the 800 pound gorilla of the online video world tantalizing Hollywood with its massive audience and promotional reach. However, when you dig a little deeper, I believe it's a dubious distraction for YouTube, which is still trying to prove that it can make its ad model work.

I appreciate all the possible reasons YouTube is eyeing movie rentals. To evolve from its UGC roots, the company has been anxious for more premium content to monetize. But with Hulu locking up exclusive access to ABC, Fox and NBC shows for at least the next year and a half or longer, full-length broadcast TV shows are largely unavailable. And now TV Everywhere threatens to foreclose access to cable TV programs. All this makes movies even more attractive.

Then there's Google's uber mission to organize the world's information. YouTube executives are savvy enough to know that not all content can be delivered solely on an ad-supported basis - not yet nor possibly ever (for more about the challenges of effectively monetizing broadcast TV shows, let alone movies, see my prior posts on Hulu). To succeed in gaining access to certain content, offering a commerce model is ultimately essential. Since YouTube has already put in place some key commerce-oriented infrastructure pieces like download-to-own and click-to-buy, rolling out a rental option is less of a stretch. Lastly, YouTube can position itself to Hollywood as a more flexible partner and viable alternative to Apple's iTunes.

Regardless, YouTube movie rentals are still a dubious idea for at least 3 reasons: they're a distraction from YouTube's as yet unproven ad model, there are too many competitors and too little opportunity to differentiate itself and the revenue opportunity is relatively small.

Focus on getting the ad model working right - Given its market-leading 40% share of all online video streams, I've long believed that YouTube is the best-positioned company to make the online video ad model work. YouTube has made solid progress adding premium content to the site that it can monetize, but it still has a lot of work ahead to make its ads profitable. As I wrote in June, Google's own senior management cannot yet clearly articulate YouTube's financial performance, causing many in the industry to worry about YouTube's sustainability. Some might assert that YouTube can keep tweaking the ad model while also rolling out rentals but I disagree. With the ongoing ad spending depression, YouTube must stay laser-focused on making its ad model work, and also on communicating its success.

Too many competitors, too little differentiation - It's hard to believe the world really needs another online option for accessing movies, and mainly older ones at that. There's Hulu, iTunes, Netflix, Amazon, Xbox and soon cable, satellite and telcos rolling out movies on TV Everywhere, just to name a few. Maybe YouTube has some secret differentiator up its sleeve, but I doubt it. Rather, it will be just one more comparably-priced option for consumers. And in some ways it will actually be inferior. For example, unlike Netflix and Amazon, YouTube's browser-centric approach means watching movies on YouTube will remain a suboptimal, computer-based experience. Unless YouTube is willing to pay up big-time, there's also no reason to believe it will get Hollywood product any earlier than proven services like Netflix and iTunes.

Revenue upside is small - It's hard to estimate how many movie rentals YouTube could generate, but here's one swag, which shows how limited the revenue opportunity likely is. Let's say YouTube ramped up to .5% of its 120M+ monthly U.S. viewers (assuming it had U.S. rights only to start) renting 1 movie per week (not a trivial assumption considering virtually none of YouTube's users have ever spent a dime on the site and there are plenty of existing online movie alternatives). YouTube's revenue would be 600K rentals/week x $4/movie (assumed price) x 30% (YouTube's likely revenue share) = $720K/week. For the full year it would be $37.4M. With YouTube's 2009 revenue estimates in the $300M range, that's about 12% of revenue. Nothing to sneeze at, but not world-beating either, especially as compared to YouTube's massive advertising opportunity.

Given these considerations, I contend that YouTube would be far better off trying to become the dominant player in online video advertising, replicating Google's success in online advertising. Like all other companies, YouTube has finite resources and corporate attention - it should focus where it can become a true leader. There's enough quality content and brands willing to partner with YouTube on an ad-supported basis to keep the company plenty busy, and on the road to eventual financial success.

What do you think? Post a comment now.

Microsoft grabbed the early PR spotlight at the Consumer Electronics Show (CES), now underway in Las Vegas, announcing a variety of deals across the broadband video spectrum. The deals, announced by Bill Gates in his traditional night 1 keynote, reinforce Microsoft's intentions to play multiple roles in what Gates calls the "first true Digital Decade."

Here's a look at Microsoft's deals and why they matter:

NBCU 2008 Olympics on MSN, using Silverlight

Microsoft and NBC, which has the broadcast rights to the '08 Summer Games from Beijing, announced that MSN would be the exclusive partner for NBCOlympics.com including thousands of hours of live video coverage, and that Silverlight, which is Microsoft's "Flash-killer", would be used. As I mentioned in my "6 Predictions for 2008", the '08 games are going to be the biggest broadband video event yet. The deal gains MSN lots of traffic and Silverlight lots of exposure and downloads, not to mention serious validation as a live streaming platform if it executes well.

ABC/Disney and MGM content on XBox LIVE

In a further move to bolster the premium-quality content available in XBox LIVE (the content offering that accompanies XBox 360), Microsoft announced that both ABC/Disney and MGM would now be providing both SD and HD content. These moves bring XBox LIVE's catalog closer to parity with iTunes, while keeping up the competition with Amazon Unbox and other stores. Separately, Microsoft said that XBox racked up 17.7 million units sold during the '07 holiday season.(correction, Microsoft press release misstated this number. Holiday sales were actually 4.3 million units, bringing cumulative units sold to date to 17.7 million, thx Karl)

XBox users have been remarkable active purchasers and downloaders using XBox LIVE, and previous briefings I've conducted with XBox executives suggest that the initiative has been particularly successful with HD. Since Xbox is purchased primarily as a gaming platform, it serves as a great Trojan horse opportunity for Microsoft to gain broadband access to the TV. Meanwhile, XBox LIVE has served as the deal unit for Zune's library as well, so these moves are important to watch as they benefit Microsoft's efforts to dislodge iPod from its perch as the leading digital media player. Only disappointment here is no ad-supported counterpart was announced for ABC programs, leaving AOL as ABC's only announced broadband syndication partner, as best I can tell.

BT and XBox 360 Integration

Microsoft leveraged Xbox 360 for another convergence play, announcing with BT that the company's "BT Vision" IPTV service would be available for XBox 360 owners as an integrated service offering. This means that no separate set-top box would be required for BT Vision subs. Though the box won't roll out until mid '08, this concept has compelling upside for both sides and could be a nice blueprint for future IPTV deals. It eliminates set-top capex for BT, while providing strong marketing benefits to both parties, helping drive broadband/TV convergence on the back of the popular XBox gaming console.

Showtime, TNT and CNN with new apps on Mediaroom, Samsung supporting Extender

Elsewhere, Microsoft announced that Showtime, TNT and CNN would be creating new apps for Microsoft's Mediaroom IPTV platform, which it says is now installed on 1M set-tops globally. And lastly, that Samsung will support Extender for Windows Media Center, which means that HD content can be sent over wired or wireless-N networks from PC to TV. Extender hasn't caught on yet, but Microsoft is continuing to push it as a bridge device. I've yet to test it, but have that on my list of to-do's.

Taken together, these announcements from Microsoft show the company's vast resources allow it to play a role in all aspects of the broadband era - software, devices, services, content, gaming, etc. Less pronounced in these deals was the company's recently added online advertising prowess, which will soon be applied to broadband video as well. Stay tuned for news on this front as '08 unfolds.

Question: What do Frito-Lay, Unilever, Neiman Marcus, Heinz, Toyota, Smirnoff and MGM have in common?

Answer: In just the last month each of these companies has announced plans to launch some type of broadband video marketing program. Beginning of a trend? You betcha.

Premier brands from one industry to another are recognizing the importance of using video to reach out to and engage better with their customers. Yet I read with interest this piece in yesterday'sWSJ, discussing a big marketers' conference that sold out for the first time ever this year. Adapting to the digital world is a top concern. A Booz Allen survey found that most marketers allocate only 5-10% of their ad budgets to digital media, while online usage continues to soar.

So kudos to the companies mentioned above and the others which are taking their first steps into the broadband world, trying to figure out what tactics work in this new era. Their efforts are varied and reflect the sense of experimentation pervading the market. Consider - Frito, Heinz and MGM are all using some type of content to incent UGC activity. Unilever's Dove soap and Smirnoff are posting original video on YouTube, trying to catch a viral wave. Meanwhile Toyota has devised a new Xbox game called "Yaris" after one of its cars.

As the Super Bowl season approaches, we can expect a lot more broadband video activity from the marketers. Almost 2 years ago I wrote, "The $10 Million Super Bowl Ad". It's worth a peek, I think we're heading in that direction as marketers realize how broadband tie-ins can breathe huge additional life into 30 second Super Bowl spots.

MGM is the latest studio to reach out to fans to help promote one of its films, the upcoming "Lions for Lambs". In a deal with Google/YouTube, the studio is sponsoring a contest in which users can submit a 90 second video on a topic they're passionate about. Entries are being accepted until Oct. 17th and the winner, who will have $25,000 donated to a charity of his/her choice, will be selected on Nov 9th.

This promotion follows the mashup competition Metacafe and Universal conducted this past summer around the studio's "Bourne Ultimatum" release. At the time, I noted that broadband is introducing a whole new element into the film marketing equation, opening up huge opportunities for creativity and fan involvement. As the tools continue to improve I expect we're going to see a lot more of these "UGC-assisted" campaigns.

Studios (and others) are going to continue to experiment with just how much fans are willing to be a part of the marketing machinery. Of course nobody knows, but my guess is that if the incentives are right, the promotions are fun and the stars are compelling, it's going to be a pretty rich vein for film marketers to tap into.