Posts for 'Next New Networks'

With Monday's announcement that YouTube is acquiring independent video producer Next New Networks, plenty of people have concluded that Google and YouTube have officially become content providers themselves - something the companies swore they'd never become. While it's tempting to conclude this, my take is that YouTube is actually lifting a page from the cable industry's evolution - seeking to act less as content creator, and more as a "strategic catalyst" for the online video era. Let me explain.

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Yesterday I moderated a fun little panel at NATPE with Ben Relles, creator of the hugely popular "Obama Girl" site Barely Political and Obama girl herself, Amber Lee Ettinger. "Obama Girl" has been a huge success since launch (13 million + views of "I've Got a Crush on Obama" on YouTube alone). Obama Girl offers plenty of clues for aspiring broadband video producers.

Relles did "I've Got a Crush on Obama" for $2,500 and said he made back all of his money the second day of release through T-shirt sales. That's a lesson in being opportunistic about multiple revenue streams. He conceived and wrote the song and then found Amber through her web site. He signed her up on the spot at a local Starbucks. All of that of course shows that big budgets aren't necessarily required to make big hits (Hollywood, hint, hint). He advised that creating videos that fit into larger conversations already underway are key to success.

Now with Barely Political part of Next New Networks, Relles has cranked up video production and has NNN's ad sales team monetizing its streams alongside its other channels. To answer a question some of you may be wondering: Amber conceded she's never actually met Obama personally, but had cordial relations with his campaign staff. (Daisy has more here.)

My opening question to frame the discussion centered on broadband's eventual impact on the cable business model: does it ultimately upend the traditional affiliate fee-driven approach by enabling a raft of "over-the-top" competitors (e.g. Hulu, Netflix, Apple, YouTube, etc.) OR does it complement the model by creating new value and choice? As I said in my initial remarks, I believe that how this question is ultimately resolved will be the key determinant of success for many of the companies involved in today's broadband ecosystem and video industry.

I posed the question first to Peter Stern, who's in the middle of the action as Chief Strategy Officer of Time Warner Cable, the second largest cable company in the U.S. I thought his answer was intriguing: he said that it is cable networks themselves who will determine the sustainability of the model, depending on whether they choose to put their full-length programs online for free or not.

Later in the session, he put a finer point on his argument, saying that "a move to online distribution by cable networks would directly undermine the affiliate fees that are critical to creating great content" and that finding ways to offer these programs only to paying broadband Internet access subscribers was a far better model for today's cable networks and operators to pursue (for more see Todd Spangler's coverage at Multichannel News).

Peter's point echoes my recent "Cord-Cutters" post: to the extent that cable networks - which now attract over 50% of prime-time viewership, and derive a third or more of their total revenues from affiliate fees - withhold their most popular programs from online distribution, they provide a powerful firewall against cord-cutting. Speaking for myself for example, the prospect of missing AMC's "Mad Men" (not available online anywhere, at least not yet...) would be a powerful disincentive for me to yank out my Comcast boxes.

Still, our audience Q&A segment revealed some very basic cracks in the panelists' assertions that the transition to the broadband era can be orderly and managed (not to mention that afterwards, I was privately barraged by skeptical attendees). First and foremost these individuals argued the idea that the cable industry can maintain the value of its subscription service by using the control-oriented approach typified by the traditional windowing process flies in the face of valuable lessons learned by the music industry.

Of course most of us know that sorry story well by now: an assortment of entrenched, head-in-the-sand record labels forcing a margin rich, but speciously valued product (namely the full album or CD) on digitally empowered audiences, who decided to take matters into their own hands by stealing every song they could click their mouses on. Consequently, a white knight savior (Apple) offering a legitimate and consumer-friendly purchase alternative (iPod + iTunes), which would grew to be so popular that it has made the record labels beholden to it, while simultaneously hollowing out the last vestiges of the original album-oriented business model.

Does history repeat itself? Are Peter and the other brightest lights of the cable industry deluding themselves into thinking that a closed, high-margin, windowed platform like cable can ever possibly morph itself into a flexible, must-have service for today's YouTube/Facebook generation?

As Fred succinctly wrapped things up, "The reason I love capitalism is that it forces all of us to keep doing things better and better." To be sure, broadband and digital delivery are unleashing the most powerful capitalistic forces the video industry has yet seen. What impact these forces ultimately have on today's market participants is a question that only time will answer.

What do you think? Post a comment now!

It's been hard not to notice the recently growing roster of digital media/broadband video executives who are either leaving their jobs or jumping to other companies.

Among the many recent changes:

• Bill Day (moved to CEO, ScanScout from Chief Media Officer, Marchex)
• Ned Desmond (leaving as President, Time, Inc Interactive)
• Tony Fadell (leaving as SVP, iPod Division, Apple)
• Karin Gilford (moved to SVP, Fancast/Comcast from VP/GM, Yahoo Entertainment)
• Bob Greene (left as EVP, Advanced Services, Starz)
• Kevin Johnson (moved to CEO, Juniper Networks from President, Platforms & Services Division, Microsoft)
• George Kliavkoff (leaving as Chief Digital Officer, NBCU)
• Michael Mathieu (moved to CEO, YuMe from President, Freedom Communications Internet Division)
• Scott Moore (leaving as SVP, Media Group, Yahoo)
• Herb Scannell (moved from CEO to Executive Chairman, Next New Networks)
• David Verklin (moved to CEO, Canoe Ventures from CEO, Aegis Media Americas)

Of course there are many more as well.

There's no blanket explanation for all of this movement. Senior executives - particularly those with strong track records in unchartered territory like digital media and broadband video - are always in demand by competitors. And established companies who can't execute or who are losing altitude in their core businesses become fertile ground for executive recruiters. Then there are always personal reasons for causing executive change (family matters, geographic restrictions, etc.).

The whole digital media and broadband space is extremely dynamic. Major incumbents continue to struggle with defining their strategies and how to organize themselves properly to execute. The financial meltdown has caused huge profit pressure, prompting operational streamlining.

With the recent launch of the iPhone and other smartphones, mobile video delivery is receiving much greater attention. Though still lagging the widespread popularity of broadband-delivered video, mobile video is getting a boost today as MTV, Discovery, AccuWeather, Travel Channel and Next New Networks have all announced new initiatives, to be powered by Transpera, a mobile video services platform.

Mobile has long been an alluring opportunity, but to date most of the activity has been from wireless carriers or their partners' efforts. These so-called "on deck" video offerings were largely subscription-based (Verizon's VCast, MobiTV, etc.) and available on only a minority of all handsets. The limited, carrier-controlled nature of traditional mobile video has been a key differentiator from the open broadband video world.

Further, as Greg Clayman, MTV's EVP of Digital Business Development explained to me on Friday, neither the tools for content providers to manage, publish and monetize mobile video nor the network capacity for delivering mobile video have been in place until recently.

Transpera is one of a number of companies addressing the mobile video opportunity (see also my recent post on upstart Azuki Systems and also another player called Vantrix). I spoke to Transpera's CEO and co-founder Frank Barbieri a few weeks ago, and he noted that given how nascent the mobile video space is, the company is today providing both a full technology platform to content providers and ad sales capabilities. I pointed out that in broadband that integration of technology and ad sales had been tried (most notably by Brightcove), but largely been dropped. Today there is a clear bifurcation in the broadband ecosystem between technology platforms and ad sales networks.

Frank sees the same thing happening in mobile video (in fact, we agreed that comparisons to broadband's development are useful in thinking about how mobile video delivery will shape up). Transpera's longer-term goal is to be a full-fledged mobile ad sales network, so its management/publishing/delivery platform is more of a means to that end. Frank sees Transpera already providing real monetization value to many of its customers; the company has strong reach into media buyers and agencies and credibility in selling this new medium's benefits (it should be noted however that MTV, for one, continues to retain its mobile video ad inventory to sell itself).

With its focus on building out a mobile video ad network, my guess is that eventually Transpera will see competition from today's broadband ad networks, who are arguably well-positioned to play in the mobile space as consumption surges.

For now though, given how early it is in mobile video's evolution, the key is building trial and usage. For many content providers mobile video is brand new and the ROI unproven. Though they've likely maintained so-called WAP sites for mobile browsers, video is a whole new ball game. Driving video consumption and legitimizing the mobile medium - as has happened with broadband - is job #1 for all the players in this exciting new space.

What do you think? Post a comment now!

The broadband content provider Crackle is notching a win with its new comedy/interview series "The Jace Hall Show." I received a press release that it generated 500K visitors in the first two days following its launch on June 5th and a million to date. I'm always intrigued with what kinds of original broadband programs are working - and why - so I grabbed some time yesterday with Mary Ray, Crackle's VP of Marketing to learn what's behind Jace's success.

For those of you like me who are not gamers, Jason "Jace" Hall is probably unfamiliar. But Mary explained that if you're in the gaming community he's a fairly well-know producer who has a wide network of relationships in the industry. His show brings you into the world of his relationships, making you feel more connected to gamers' movers and shakers. And since he has his finger on the pulse of what the young male gamer audience is looking for, that gives him a real edge. Plus Mary believes that Hollywood still hasn't paid much attention to this market, despite gaming's huge following.

In the program's first episode Jace provided a sneak peek at a Duke Nukem Forever game that has reputedly been in development for 12 years. Gaining this type of access is practically like having exclusive content. Mary said that Crackle didn't do any advance paid marketing for the show; rather the audience was driven purely by word-of-mouth and buzz-building. I joked with Mary - spend no money but gain a big audience - the show sounds like a marketer's dream!

I asked Mary what she thinks the most important takeaway from Jace's early success is. Her feeling was that tapping into what the audience is hungry for is the key. While I agree, I'd go a step further. I think that trying to find talent that already has a following - whether in gaming, TV or some other medium - is a genuine way to improve a program's odds of success. I'm not necessarily talking about A-list talent per se, but rather talent that is at least known within some kind of niche (e.g. finance, comedy, woodworking, etc). That's not say "don't go with unknown talent looking to break out," but I do think it's important to recognize that doing so carries more risk.

The whole area of original broadband content is surging with players like Crackle, Next New Networks, 60Frames, ManiaTV, Break, Heavy, MyDamnChannel, FunnyorDie and lots of others pioneering the model. It's going to be very interesting to learn more about what works and why.

What do you think works in original broadband video? Share your comments now!

I'm just back from a couple days at Digital Hollywood Spring, one of the broadband industry's leading conferences. A key takeaway for me is that there are still many more outstanding questions about the broadband video industry's future - and their implications for other players in related industries - than there are concrete answers.

Here are 3 big ones worth considering:

What role will current video distributors play in an increasingly broadband-centric world?

The subscription video business, dominated by cable and satellite operators, generates approximately $80 billion/year, depending on whose data you use. The model is well-understood, and is a huge part of funding the value chain of cable networks, rights-holders and TV program producers. Bundling ever more channels (50,70,100+) into digital tiers and charging ever-higher prices for them has been a core industry revenue driver.

Yet data continues to show that out of all those channels, the average household still only watches 5-10 at the most. Couple that with the migration to broadband, DVR and on-demand consumption and one is left with the feeling that there is a significant disconnect between the way video is packaged and priced today with growing consumer expectations and behaviors. Is the current approach sustainable long term or are new players (e.g. Sezmi) going to successfully disrupt the formula? Any major disruption would have significant ripple effects.

Is the ad-supported business model for broadband video going to deliver for all the content providers relying on it?

I've been a big supporter of the ad-supported approach for a while and believe in it strongly in the long-term. Yet as I see more and more content providers, aggregators, social networks and others look to it as their primary business model, I'm growing concerned that in the short-term there isn't going to be enough money to go around to support everyone. To be sure, current growth rates are strong, yet at DH many of advertising's big hurdles to reach long-term success were mulled over: achieving scale, standardizing formats, understanding performance metrics, converting media buyers, targeting, proving interactivity's value and so on.

The efficacy of the broadband ad model online is particularly pressing for broadcasters. Though some research indicates on-air viewership is benefited from online program availability, long-term there can be no question that a substitution effect will take place as viewers decide "do I watch on-air OR online?"

Jeff Zucker, NBCU's CEO tersely captured the threat this poses in his now often-repeated question "are we trading analog dollars for digital pennies?" In other words, if someone watching an NBC show like The Office on Hulu currently brings NBC far less revenue than if they were watching it on-air, is the migration to broadband viewership actually causing a permanent down-sizing of broadcasters' ad revenue per minute viewed? A scary thought to contemplate.

What does all this mean for Hollywood?

Surely less subscription or ad revenue eventually means less money for everyone including the whole Hollywood apparatus that has been funded out of the traditional models. But how, when and to what extent does this play out?

Further, is the very nature of what's expected of Hollywood changing? Herb Scannell, CEO/founder of Next New Networks asserted in his panel that the current generation of 'auteurs' - multi-skilled and motivated people who can write, direct, produce, act and promote implies a far different role for how Hollywood creates value for itself in the future. In fact, Herb believes that technology-empowered talent is the biggest disruptive force to the traditional Hollywood equation.

The point was brought home to me in a offsite function I attended in which Bebo, the massive youth-oriented social network (recently sold to AOL for $850 million), outlined its big push into original entertainment (e.g. "KateModern," "Sofia's Diary," etc.). Their expectations of what they, creators and users will be doing to create value are starkly different from the Hollywood model.

 Do you have any answers? Post a comment and let everyone know!

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.

Readers of VideoNuze know that for a long time I've been a big proponent of syndication as a key building block for broadband video success. In last week's webinar I explained that I see this trend only accelerating as content providers increasingly shift from aggregating the most eyeballs to accessing the most eyeballs. That means syndicating video far and wide through social networks, portals, broadband aggregators and others is fast-becoming a key success factor.

Yet aggressive syndication presents a complex set of issues around how to control and optimize the advertising to all those dispersed viewers. Absent the right set of tools to administer each deal's terms, there's a bias toward simplicity and hence, under-optimization. For example, I continually hear that all the broadcasters' syndication deals are 90-10 ad revenue splits. In some cases a plain vanilla approach like this may be fine. More likely though, to have a biz dev person's hands tied to very limited deal terms because of a lack of technology solutions significantly constrains the ecosystem.

FreeWheel is a new company aimed at unlocking these constraints with its "Monetization Rights Management" or MRM technology platform. MRM is a full ASP platform that empowers content providers' biz dev teams to cut creative revenue/inventory sharing with syndication partners and then have ad sales teams follow through with far more intelligence about how to implement these deals and sell inventory. The result is revenue optimization for all parties. I caught up with CEO Doug Knopper, co-CEO and co-founder of FreeWheel last week to learn more.

FreeWheel sits on top of existing ad management systems, as a sort of cross between a digital traffic cop and a green eyeshade - dynamically managing and allocating ad inventory, while keeping track of all ads and revenue across the content provider's syndicated network. MRM interfaces to a content provider's and partner's content management system through FreeWheel's API, allowing MRM to implement its predetermined business rules alongside the content being sent to partners. Clearly there's a huge network affect opportunity for FreeWheel - the more partners its early content provider customers get to implement MRM, the easier FreeWheel's sale will be to subsequent content providers.

FreeWheel reminds me a lot of Signiant, which I wrote about recently. Signiant is more focused on content distribution in a syndicated economy, while FreeWheel is focused on ad management. But both companies share a common purpose of greasing the skids for both content providers and distributors to play ball with each other with the intention of driving more video views and advertising revenue.

FreeWheel has signed up Next New Networks, Joost and Jumpstart Automotive Media as initial clients. The company was founded by three former DoubleClick executives, has 40 employees and has raised 2 rounds from Battery Ventures, though the total is undisclosed.

Herb Scannell, who was on my CTAM panel yesterday pointed me to "Internet People" part of his firm's Channel Federator "Meth Minute 39" series (side note, it's actually quite clunky to try to adapt traditional TV lingo to describe broadband video properties...). If you haven't seen it, I highly recommend. It's like a stroll down the Internet's memory lane. All the famous and infamous characters over the years.

What's impressive about Internet People how it shows how fluid creative development and partnerships around broadband video (especially animation) is. Herb said that his partner at NNN was exposed to Dan Meth's "Hebrew Crunk" animation and that spurred them to work together. They had a similar philosophy and were able to figure out a relationship quickly. Also, I asked Herb how long he estimated it took to create Internet People..he thought less than 100 hours probably. And NNN coordinated to premier Internet People on YouTube, helping drive 800K views in the first week.

Pretty impressive, see for yourself.

Today I moderated a spirited discussion panel at CTAM NY’s annual Blue Ribbon Breakfast at Gotham Hall in NYC. The title was "Over the Top TV....Can Broadband Video Be Cable's Newest Opportunity?" We had an amazing group of panelists (click here to see list and listen to podcast) and with 450+ attendees a packed house as well.

A key question we dug into was whether and to what extent cable’s traditional (and highly successful) paid subscription model will be impaired by the rise of broadband video usage. Try as I did to see if any of the panelists believe that it will, none would admit to it. The reasons given included, "some form of a paid model will always exist but will never succumb entirely to a free, ad-supported model" to "cable networks won’t push broadband video distribution of their programs so hard as to upset the current model of receiving affiliate fees from cable operators", to "the low probability that inexpensive PC-to-TV bridge devices will proliferate any time soon" to "viewers have shown that they want a selection of channels to browse."

While I think each of these answers is quite legitimate, my point of view is that we are in the early days of an fundamental transformation in the video (and indeed the media more generally) business that will eventually (though of course who knows when and to what eventual degree) see most, if not all programming get unbundled into a fully on-demand paradigm.

I believe the ultimate answer to how cannibalistic broadband is toward cable ultimately turns on whether consumers believe it’s a "zero sum" game, meaning they choose between EITHER accessing programs via a VOD or DVR offering only available if they’ve bought into a monthly multi-channel video subscription (that’s to say the way the world works today) OR if they opt out of that subscription offering and INSTEAD choose to buy these programs a la carte, or receive them free, courtesy of a highly targeted ad model. The opt out option would of course be available through open broadband video distribution.

All trends point to the latter ultimately prevailing. While cable operators are well-positioned to shift their models to exploit this behavior if they act aggressively, they are also vulnerable to it if they don’t. The most important driver of the "opt out" scenario is that for an increasingly larger portion of our society, their behavior and expectations are formed by the Internet. And the ‘net is a completely personalizable and on demand medium. Especially for most online media, it is also mainly free, or paid on a fully a la carte basis (e.g. iTunes). Users’ expectations are through the roof and only getting higher. As broadband proliferates they will bring these same expectations to their decision-making.

Is it really realistic to believe that in 5 years when today’s MySpace/Facebook/YouTube/iTunes crazed 16 year old kid goes to set up his/her first apartment, s/he is going to embrace the notion of subscribing to a hundred channel package just so s/he can watch a handful of programs on demand? And of course, the ‘net’s behavior change isn’t confined to kids, it’s pervasive across all age groups.

Cable operators have an outstanding opportunity to capitalize on these macro behavioral trends. But doing so will require cable operators to make a significant and risky departure from their traditional subscription-based business models. It’s a classic incumbent’s dilemma. It will be interesting to see if they can do so.

Well, it seems to me that the same type of vast selection is coming to the world of video. For example, a number of recent broadband video-related announcements have further convinced me that we are on the cusp of experiencing an explosion in the quantity of high-quality video available and choices we’re all offered.