Posts for 'Roku'

Against a backdrop of rapidly rising broadband video consumption, cable operators and networks are trying to strike a balance between preserving their traditional, and highly profitable business model, while still keeping pace with consumers' desire for more flexible and on-demand viewing options. A nagging question is whether full-length cable programs should be made available online for free, solely supported by advertising (the Hulu model), or if the cable industry's dual subscription/advertising model should be extended online (the TV Everywhere concept).

On the panel, Rebecca likely reflected many cable networks' current thoughts, saying, "We are in an ecosystem with our distribution partners that works....It (the free model) is going to kill all of our business; it's certainly going to kill our ability to produce high quality programming." These sentiments echo concerns I've raised about the viability of ad-supported long-form video. Even as Rebecca was critical of the free model, she noted that Discovery is taking a measured approach to TV Everywhere.

Chief among Rebecca's concerns regarding TV Everywhere is the need to accurately measure online viewership, crucial for ensuring that if viewership were to shift to online, that Discovery's ratings would not be hurt in the process. As Rebecca further pointed out, measurement issues have limited the appeal of cable operators' Video-on-Demand offerings.

Bruce went a step further to suggest that cable operators should learn from VOD's shortcomings when crafting their TV Everywhere plans. Bruce said that VOD rollouts "were led by engineers on a node-by-node basis" when they should have been led by marketers, and that "some operators introduced VOD only with trepidation." He believes that the problems that VOD had in the early days, "are still impacting consumers' perception of the on-demand platform."

Another VOD lesson I would add is that operators must also make TV Everywhere monetizable for their content partners. VOD has suffered significantly from operators not investing in dynamic ad-insertion capabilities, making VOD a marginal opportunity for ad-supported cable networks. A day earlier on another CTAM Summit panel, Steve Burke, Comcast's COO highlighted the fact that Comcast is now generating 300 million VOD sessions/month. But he also noted that Comcast has only just launched a dynamic ad-insertion capability, and in just one of its operations. It continues to bewilder me why Comcast wasn't investing in dynamic ad insertion when it was doing 10 million VOD sessions/month, years ago. How much further along might the VOD platform be, had robust advertising been possible?

As a result, it's fair to wonder whether operators will invest in TV Everywhere sufficiently to make it attractive as a new distribution platform, or alternatively will leave critical components unresolved as they've done with VOD. The answer could well determine whether TV Everywhere is a killer app (as I believe it has the potential to be) or if just becomes a half-baked nice-to-have for consumers and content providers alike. For Comcast at least, thePlatform and other technologies are important building blocks to success. As Ian pointed out, the key is being able to "quickly ascertain" the networks and programs that subscribers should have access to, a challenge that gets more complicated as content available through TV Everywhere-type offerings grows over time.

If cable doesn't get TV Everywhere quite right another implication is that certain gaps in consumers' experiences will persist - gaps that companies like Roku are seeking to fill with video they're bringing into the home solely over broadband connections. Today the $99 Roku device offers users the ability stream Netflix, Amazon and MLB video. It's tempting to see Roku as a potential cable competitor down the road, yet Chuck was quick to clarify that Roku sees itself as augmenting the cable experience, not supplanting it. In fact, he added that Roku is talking to cable operators about how it can partner with Roku to extend their viewer experiences.

Coming away from the session I'm reminded that while broadband is causing significant shifts in consumer behavior and expectations, fully capitalizing on them will take time as business requirements and technologies evolve.

What do you think? Post a comment now.

(Note: Steve Donohue contributed to this post.)

Convergence devices that bring broadband video and Internet applications to the TV (e.g. Roku, Xbox, Apple TV, Vudu, etc.) are a white-hot area of interest as many industry participants - including me - believe their eventual mass adoption will provide a major catalyst to broadband video usage and prompt further disruption in the value chain.

Intel has eyed a big role in this emerging market for a while, becoming a strong public proponent of the "digital home" concept. Building momentum over the past year, Intel has made announcements with Yahoo (for the "Widget Channel" framework), Adobe (to port and optimize Flash for TV viewing) and with a number of large content providers (demonstrating enhanced viewer experiences).

At the heart of Intel's early initiatives is the company's much-heralded Media Processor CE3100, the first in a family of "system on a chip" convergence-oriented processors. Next week the first CE3100-powered device, the "Mediaconnect TV" will be shown at the IBC show in Amsterdam. The box is a collaboration between a Dutch company, Metrological Media Innovations and a British interactive services provider, Miniweb (a spinoff of BSkyB). This has been previewed recently and is sure to gain more visibility next week. To learn more about Intel's convergence vision, yesterday I spoke to Wilfred Martis, the GM of Connected AV Products for Intel's Digital Home Group.

Intel sees 4 different types of home products that can be fitted with its media processor chips: set-top boxes, digital TVs, optical players (e.g. Blu-ray devices) and "connected AV" products, which are defined as standalone boxes that connect broadband to the TV, but without any guaranteed quality of service (QoS) for the video. This segmentation actually closely follows a slide I've been presenting lately which maps the various efforts for bringing broadband to the TV.

The connected AV devices are of course what "over-the-top" providers like Netflix, Amazon, iTunes, YouTube, etc. are counting on to deliver their services into the home over open broadband connections. On the one hand, Intel seems to be looking to empower these providers. As Wilfred says, Intel is trying to create a standard toolset and app environment akin to what we've seen on leading smartphones (mainly the iPhone) that helps drive creative new TV-based applications. Yet at the same time, as Wilfred notes, Intel wants to be a friend to incumbent video service providers, allowing them to deliver broadband content side-by-side with their walled-garden channels in their set-top boxes.

While Intel is clearly in this for the long haul, and has the resources to cultivate the market, other non-Intel devices continue to get a foothold. It's interesting to contrast, for example, the success that Roku is enjoying to date and ponder how the convergence device market will develop over the next several years. As I detailed a few weeks ago, Roku is successfully pursuing a classic "Crossing the Chasm" strategy, leveraging low pricing and loyalty to its content partners' brands to move lots of its product.

Still, integrating with Roku - and other current convergence devices - requires a one-off integration that assumes resources and prioritization (even when APIs exist). Some content providers will determine integrating is worthwhile, while others will not.

Intel's strategy is meant build on existing technologies and applications, making it more straightforward for content providers and applications developers to deploy on its devices (it's worth noting that Amazon, Blockbuster, Facebook and others plan to launch Widget Channel apps imminently). As Wilfred explains, when Intel's architecture is in convergence devices, incumbent software like browsers, plug-ins, drivers and the like are intended to work seamlessly. In addition, by providing abundant processing power, developers don't have to go through the arduous task of de-optimizing their apps for slower environments. And they get the performance headroom to continuously add updates.

Following are 4 news items worth noting from the week of August 17th:

CBS's Smith says authentication is a 5 year rollout - I had a number of people forward me the link to PaidContent's in-depth coverage of CBS Interactive CEO Quincy Smith's comments at the B&C/Multichannel News panel in which he asserted that TV Everywhere/authentication won't gain critical mass until 2014.

I was asked what I thought of that timeline, and my response is that I think Smith is probably in the right ballpark. However, these rollouts will happen on a company by company basis so timing will vary widely. Assuming Comcast's authentication trial works as planned, I think it's likely to expect that Comcast will have its "On Demand Online" version of TV Everywhere rolled out to its full sub base within 12 months or so. Time Warner Cable is likely to be the 2nd most aggressive in pursuing TV Everywhere. For other cable operators, telcos and satellite operators, it will almost certainly be a multi-year exercise.

NFL makes its own broadband moves - While MLB has been getting a lot of press for its recent broadband and mobile initiatives, I was intrigued by 2 NFL-related announcements this week that show the league deepening its interest in broadband distribution. First, as USA Today reported, DirecTV will offer broadband users standalone access to its popular "Sunday Ticket" NFL package. The caveat is that you have to live in an area where satellite coverage is unattainable. The offer, which is being positioned as a trial, runs $349 for the season. With convergence devices like Roku hooking up with MLB.TV, it has to be just a matter of time before the a la carte version of Sunday Ticket comes to TVs via broadband as well.

Following that, yesterday the NFL and NBC announced that for the 2nd season in a row, the full 17 game Sunday night schedule will be streamed live on NBCSports.com and NFL.com. Both will use an HD-quality video player and Microsoft's Silverlight. They will also use Microsoft's Smooth Streaming adaptive bit rate (ABR) technology. All of this should combine to deliver a very high-quality streaming experience. But with all these games available for free online, I have to wonder, are NBC and the NFL leaving money on the table here? It sure seems like there must have been some kind of premium they could have charged, but maybe I'm missing something.

Metacafe grows to 12 million unique viewers in July - More evidence that independent video aggregators are hanging in there, as Metacafe announced uniques were up 67% year-over-year and 10% over June (according to comScore). I've been a Metacafe fan for a while, and their recent redesign around premium "entertainment hubs" has made the site cleaner and far easier to use. Metacafe's news follows last week's announcement by Babelgum that it grew to almost 1.7 million uniques in July since its April launch. Combined, these results show that while the big whales like YouTube and Hulu continue to capture a lot of the headlines, the minnows are still making swimming ahead.

Kodak introduces contest to (re)name its new Zi8 video camera - It's not every day (or any day for that matter) that I get to write how a story in a struggling metro newspaper had the mojo to influence a sexy new consumer electronic product being brought to market by an industrial-era goliath, so I couldn't resist seizing this opportunity.

It turns out that a review Boston Globe columnist Hiawatha Bray wrote, praising Kodak's new Zi8 pocket video camera, but panning its dreadful name, prompted Kodak Chief Marketing Officer Jeffrey Hayzlett to launch an online contest for consumers to submit ideas for a new name for the device, which it intends to be a Flip killer. Good for Hayzlett for his willingness to change course at the last minute, and also try to build some grass roots pre-launch enthusiasm for the product. And good for the Globe for showing it's still relevant. Of course, a new name will not guarantee Kodak success, but it's certainly a good start.

Enjoy your weekend!

Following are 4 news items worth noting from the week of August 10th:

Discovery Channel signs onto Comcast On Demand Online trial - Comcast added yet another cable programmer this week to the roster of those participating in its TV Everywhere trial. Discovery will make available episodes of "Man vs. Wild," "Swords," "Stormchasers" and "Verminators" though with some delayed windows that take a little edge off their appeal. Comcast has made a ton of progress corralling networks for its trial, but 4 of the big 5 cable network owners - Disney, Fox, NBCU and Viacom - remain holdouts. No coincidence that the first 3 are Hulu's owners.

Swarmcast powers MLB.TV on Roku, introduces "Autobahn Live for CE" - Following on Roku's announcement this week that it is offering MLB.TV, Swarmcast announced it was powering the service through a new offering called "Autobahn Live for CE." Swarmcast's COO Chad Tippin explained to me that integrating with CE devices that drive broadband/TV convergence is a key company goal. Chad is confident that Swarmcast's high-quality, scalable HTTP streaming service will work on these various CE devices, and that as the number of them deployed swells, a new "long tail of live sports" will flourish. Live sports and events (e.g. concerts) could be a significant contributor to device adoption. For example, picture getting a coupon for $50 off the purchase of a Roku when you buy a pay-per-view of a streaming blockbuster concert.

Babelgum grows to nearly 1.7 million unique visitors in July, 2009 - I heard from Michael Rosen, EVP and Chief Revenue Officer at Babelgum this week, with news that the site has grown to nearly 1.7 million unique visitors in July (comScore), following its U.S. launch in April. I profiled Babelgum back in April and was cautiously optimistic about its approach to curate high-quality, independently-produced video into 5 channels (music, film, comedy, Our Earth and Metropolis). The site is fully ad-supported. Babelgum's growth comes on top of a slew of made-for-broadband video initiatives I detailed recently. The NY Times also had a great story this week on how independent filmmakers are taking distribution into their own hands. Despite the recession, this corner of the broadband market seems to be hanging in there.

Zune HD coming Sept 15th - Microsoft at last announced this week that the Zune HD digital media player will be in retail on Sept 15th, with pre-orders now being accepted. Zune HD introduces a touch-screen interface, 720p video playback, HD radio and other goodies. It is sure to raise the visibility of high-quality portable video another notch. But I find myself wondering: as the iPhone and other smartphones incorporate video playback (and recording) into one device, how large is the market for standalone high-end media players like Zune? Related, the iPhone's risk of cannibalizing the iPod has become a hot topic recently. Things to ponder: will users want to carry 2 devices? Or might they appreciate the ability to drain their battery watching video without risking the loss of their cell phone? Lots of different things in play.

Roku has announced this morning that MLB.TV Premium subscribers will now be able to access the service on their TVs via the $99 Roku video player. MLB.TV joins Netflix, Amazon, and blip.tv programs already accessible via Roku. According to Brian Jaquet, Roku's director of corporate communications, who I spoke to last week, dozens of other partners will be added to the service by the end of '09. The MLB.TV integration is obviously an exciting value proposition for its subscribers and for Roku adds live programming for the first time.

To go a level deeper than the headlines about the deal that you're likely reading elsewhere this morning, here are 3 key takeaways:

1. Roku's textbook "Crossing the Chasm" marketing strategy could make it a big-time winner - I've long said that as remarkable as the growth in broadband viewership has been over the past few years, what's more remarkable is that virtually all of this viewership has occurred not on consumers' primary viewing device - the TV - but rather on computers. As such, the last and most significant catalyst in broadband video's evolution and for its disruptive power to be realized is broadband connections bridging to the TV, for the masses.

The problem is that while avid market watchers and participants like you and me know what the above buzzword gobbledygook means, average consumers not only don't know, but they don't care. For technology marketers seeking to penetrate mainstream buyers, this is in fact the central challenge described in Geoffrey Moore's classic book, "Crossing the Chasm" (which I highly recommend if you want to understand the technology product marketing further). I have a lot of respect for Roku because it understands all of this and because it is following a textbook chasm-crossing marketing strategy tailored to the pragmatist mindset of its target market.

Roku's strategy reads right out of Moore's book: piggybacking off popular existing brands (Netflix, MLB, etc.), focusing on the "whole product," pursuing niche applications first and presenting its benefits "face-forward" as Moore says (e.g. see Roku's home page that blares "50,000+ videos to watch. INSTANTLY"). By doing all of the above and also pricing low ($99) and keeping the product radically simple, Roku is speaking strongly to its prospects and minimizing their purchase risk (a critical barrier in mainstream technology adoption). All of this means Roku could be a big-time winner in the convergence race.

2. Rapid technology changes are driving broadband video innovation - I asked Brian last week if Roku has any plans to add a hard drive to the box, which would allow both storage/downloading and possibly an ability to cache content for higher-quality delivery. His response, that "we believe streaming is robust enough to accomplish all of our objectives," dramatically illustrated for me how quick technology change is in the broadband market. I say this because just 6 short years ago, I consulted with Maven Networks, whose whole original value proposition was built around a desktop app for video downloading. The point of it was to work around streaming limitations to offer content providers and users a breakthrough experience. Streaming technology advances have quickly and completely eradicated Maven's whole initial reason for being.

This example illustrates how broadband market participants must never accept today's technologies as the defining parameters of future services (or as a wise CTO mentor of mine used to say, "Never fight technology progress. It's relentless and it will always win."). I try to constantly remind clients and other industry colleagues that it is crucial to understand the strands of technology progress - where key challenges lay, how quickly they might be resolved, what motivations are at work in fueling or stymying progress. What Roku is doing today would have been impossible just 5 years ago. The same goes for YouTube, the iPhone, etc, etc. To succeed in broadband it is crucial to acknowledge current technology limitations, but simultaneously look beyond them and stay aligned with technology's relentless progress.

3. A major video industry PR battle for consumers' hearts and minds is about to explode - As players like Roku bring well-loved brands like Netflix, Amazon and MLB to the TV, the degree of consumer awareness and interest in convergence or "over-the-top" services is going to grow considerably. It will be increasingly common to go to a cocktail party and hear 2 neighbors carry on about how cool it was to watch this show, or that game, or this movie, all without their incumbent video service provider involved. To be sure "cord-cutting" is not going to skyrocket any time soon, but what is going to happen is the kind of buzz-building that can lay the groundwork for major future change (e.g. remember when you first started hearing about how fast or accurate this new thing called "Google" was? Pretty soon everyone was using it for search).

Cable companies in particular know this, and are preparing an all-out response with TV Everywhere. I've been critical of Time Warner CEO Jeff Bewkes's hyping of TV Everywhere, though I'm beginning to appreciate more why he's doing it. The cable/satellite/telco ecosystem must not only stay relevant in the coming convergence era, they must remain consumers' preferred providers. The money at stake is in the tens of billions of dollars. All that means that as consumers we should anticipate a dramatic increase in the decibel level for promotion of various video alternatives. A pitched PR battle for our hearts and minds lies ahead.

What do you think? Post a comment now.

Broadband-only producers got a boost yesterday as blip.tv, which provides technology, ad sales and distribution for thousands of online shows, announced a variety of new deals as well as product improvements. The deals offer blip's producers new distribution, new monetization and new access to TVs. In order:

Distribution: blip's new deal with YouTube means that producers using blip can deliver their episodes directly to their YouTube accounts, eliminating the two step process. With YouTube's massive traffic, getting in front of this audience is critical to any independent producer. Since my first conversation with blip's co-founder Mike Hudack several years ago, the company's mantra has been widespread syndication. Blip already distributed its producers' shows to iTunes, AOL Video, MSN Video, Facebook, Twitter, and others. Vimeo is another new distribution partner announced yesterday.

Monetization: A new integration with FreeWheel means that ads blip sells can follow the programs it distributes wherever they may be viewed. I've written about FreeWheel in the past, which offers essential monetization capability for the Syndicated Video Economy. With the blip deal, FreeWheel delivered ads can be inserted on YouTube. This follows news earlier this week that YouTube and FreeWheel had struck an agreement which allows content providers that use FreeWheel and distribute their video on YouTube can have FreeWheel insert their ads on YouTube (slowly but surely YouTube is opening itself up to 3rd parties).

Access to TVs - Last but not least is blip's integration with the Roku player which will help bring blip's shows directly to TVs (adding to deals blip already had with TiVo, Sony Bravia, Verizon FiOS, Boxee and Apple TV). While Roku's footprint is still modest, it is positioned for major growth given current deals with Netflix and Amazon, and others no doubt pending. At $100, Roku is an inexpensive and easy-to-operate convergence device that is a great option for consumers trying to gain broadband access on their TVs. Gaining parity access to TV audiences for its broadband producers is a key value proposition for blip.

In addition to the above, blip also redesigned its dashboard and work flow, making it easier for producers to manage their shows along with their distribution and monetization. An additional deal with TubeMogul announced yesterday allows second by second viewer tracking, providing more insight on engagement.

Taken together the new deals help blip further realize its vision of being a "next generation TV network" and provide much-needed services to broadband-only producers. This group has taken a hit this year, given the tough ad sales and funding environments, so they need every advantage they can get.

What do you think? Post a comment now.

Netflix and its CEO Reed Hastings are profiled in today's WSJ ("Netflix Boss Plots Life After the DVD"). Hastings offers a frank assessment of the where the DVD business stands, suggesting that as soon as four years from now DVDs-by-mail will start to decline. He notes however that DVDs will still be around in 20 years.

The article underscores Netflix's challenges in obtaining Hollywood movies for its Watch Instantly service. This is no surprise given the strict "windowing" business model Hollywood employs, along with its desire to preserve its DVD revenues as long as possible. In fact, last November, in this post, I acknowledged this as an obstacle unlikely to be resolved any time soon, and instead recommended that Netflix beef up its network TV offerings. Doing so would have a lot of upside as a high-quality VOD service that would generate immediate revenues for broadcasters.

The article also explores Netflix's aborted effort to build its own set-top box for its subscribers to receive streaming video. Hastings admits that he "fell in love with building boxes" in an attempt to emulate Apple's hardware-content delivery model. Eventually logic prevailed and practically on the eve of the box's launch Netflix pulled the plug and spun the project off to Roku, in which it made a $6M investment. While it was confusing to outsiders, it was the right move. Going into the box business seems like it would have been an example of "undisciplined pursuit of more," the second stage of the framework Jim Collins outlines in his new book, "How the Mighty Fall."

Netflix has an interesting road ahead of it, as it tries to transform itself from a hugely successful DVD rent-by mail company to an online deliverer of digital media. Hastings sizes up Netflix's odds saying "Almost no companies succeed at what we're doing." Despite his sobering tone, it's encouraging that he understands the significance of the challenges ahead. The question I continue to have is whether Netflix will ultimately tackle these challenges independently or as part of a larger entity (VideoNuze readers will recall my final prediction for 2009 - that Microsoft will acquire Netflix). One way or another Netflix is going to be a key player for some time to come.

What do you think? Post a comment now.

Two highly related broadband video themes - HD delivery and convergence between broadband and TV - are both picking up steam at this week's NAB show. Among the key announcements are:

Adobe extending Flash into digital home devices

Move Networks acquiring Inuk Networks (announced just this morning)

Akamai detailing HD monetization opportunities in new white paper with IDC

Microsoft releasing "Smooth Streaming" HD delivery feature in its IIS Media Services

Limelight supporting Microsoft's IIS and Adobe Flash Media Server 3.5

Brightcove and Adobe expanding its partnership to enable delivery higher-quality long-form programming, among other things

CDNetworks commercially deploying first Adobe Flash Media Server 3.5 for first time

And separate from the show, TiVo and Roku supporting Amazon VOD HD titles

The entire broadband video ecosystem is getting more and more focused on both HD delivery and convergence. However, the former, which is primarily an infrastructure upgrade, is easier to execute on than the latter, which almost always requires users to buy and install some new device (either single or multi-purpose). Given the lousy economy and natural replacement cycles, this means that for many users, those gorgeous online HD experiences will be viewed on their computers for some time to come.

I think that's actually OK though. By proliferating online HD delivery, users will increasingly be getting a taste of what would be available to them if their broadband was connected to their TVs. Further, plenty of early adopters will become evangelists, showing off online HD experiences for their friends and families. Making things more tangible will help create the necessary promotional tailwind that convergence devices need to succeed.

Convergence has been a long time in coming, but the elements are now beginning to fall into place. I believe that the more HD content that's available online, the faster the convergence device market will develop.

What do you think? Post a comment now.

CES '09 is now behind us. As has become typical, this year's show saw numerous broadband video product and technology announcements. As I wrote often last week, the key theme was broadband-enabled TVs. Assuming TV manufacturers deliver on their promises, Christmas '09 should mark the start of real growth in the installed base of connected TVs.

Here are the noteworthy announcements that I caught, in no particular order (I'm sure I've missed some; if so please add a comment and include the appropriate link):

Intel and Adobe to Extend Flash Platform to TVs

Adobe and Broadcom Bring the Adobe Flash Platform to TVs

Samsung and Yahoo Bring the Best of the Web to Television

Yahoo Brings the Cinematic Internet to Life and Revolutionizes Internet-Connected Television

LG Electronics First to Unveil "Broadband HDTVs" That Instantly Stream Movies From Netflix

LG Electronics Launches Broadband HDTVs with "Netcast Entertainment Access"

Sony Debuts Integrated Networked Televisions

Vizio Announces New and Exciting "Connected HDTV" Platform with Wireless Connectivity

Netflix Announces Partnership with Vizio to Instantly Stream Movies to New High Definition TVs

MySpace Partnerships Bring Web Site to TV Set

Macrovision to Bring Instant Access to Digital Content Directly to Internet-Connected Televisions

Move Networks Improves Delivery of High Definition Internet Television to Intel-based Mobile Internet Devices and Netbooks

NETGEAR Unveils Two New Internet-Connected Set-Top Products to Enrich TV Entertainment for Internet Families and Serious Media Enthusiasts

Amazon Video on Demand Brings Customers New-Release Movies and TV Shows to the Roku Digital Video Player

Cisco Brings Manufacturers Together to Make Connected Home Products Simple to Set-up and Easy to Use

Sling Media Introduces SlingGuide: Redefining Search and Discovery for Satellite, Cable and Terrestrial Broadcast Programming

Amazon and Roku announced yesterday that Amazon's VOD service will soon be available on Roku's $99 Digital Video Player. The deal starts to make good on Roku CEO Anthony Woods's intentions about "opening up the platform to anyone who wants to put their video service on this box."

With Amazon VOD's 40,000+ TV programs and movies added to the 12,000 titles already available to Netflix subscribers via its Watch Instantly service (plus more content deals yet to come), little Roku is starting to look like a potentially important link in the evolving "over-the-top" video distribution value chain.

More interesting though, is that I think we're starting to see the battle lines drawn for supremacy in the download-to-own/download-to-rent premium video category between Amazon on one side and Apple on the other. Though Apple dominates this market today, having sold 200 million TV programs alone, there are ample reasons to believe competition is going to stiffen.

Apple is of course in the video download business for the same reasons it was in the music download business: to drive sales of the iPod and more recently - and to a lesser extent - the iPhone. According to the latest info I could find, iTunes now has 32,000+ TV programs and movies, including a growing number in HD. For now that's slightly less than Amazon VOD, but my guess is that over time the two libraries will be virtually identical.

While Apple has a near monopoly on portable viewing via the iPod and iPhone, it is a laggard in bridging broadband-to-the-TV. Its Apple TV device, introduced in January, 2007, and meant to give iTunes access on the TV, has been an underperformer. Certainly a detractor has been price, with the 40GB lower-end model still running $229. But more importantly, as an iTunes-only box, Apple TV perpetuates a closed, "walled-garden" paradigm that consumers are increasingly rejecting (as companies like Roku astutely understand).

For Amazon, the world's largest online retailer, video downloads are a rich growth market. The company brings significant advantages to the table, starting with tens of millions of existing customer relationships with credit cards or other payment options just waiting to be charged for video downloads. Amazon has strong brand name recognition and trust. And of course, it has a near-limitless ability to cross-promote downloads with DVDs and other products.

Determined not to be left behind in the great race to get broadband delivered video all the way to the TV, it has been integrating its VOD service with 3rd party devices like TiVo, Sony's Bravia Internet Video Link, Xbox 360 and Windows Media Center PCs. Its latest deal with Roku is far from its last.

Amazon VOD's adoption will benefit from the fact that there are many non-Amazon reasons that people will be buying these devices. For example, consider Roku, TiVo and Xbox 360. With Roku, Netflix is fueling sales. As Netflix subscribers realize that new releases are generally not available in Watch Instantly, but are through Amazon VOD on Roku, they'll be prone to give Amazon VOD a try (the Netflix limitation is course due to Hollywood's windowing, and another reason why I believe it's crucial for Netflix to make deals with broadcast networks for online distribution of their hit programs). For TiVo and Xbox 360, each has a well-defined value proposition for consumers to purchase. Amazon VOD's availability is a pure bonus for buyers.

Apple and Amazon hardly have the market to themselves though. Others like Microsoft Xbox LIVE, Vudu and Sezmi are vying for a place in the market. And then of course there are the VOD offerings from the cable/satellite/telco video service providers, who have big-time incumbency advantages. Not to be forgotten in all of this is consumer inertia around the robust DVD market, which to a large extent all of these video download options seek to supplant.

In the middle of all this are Joe and Jane Consumer - soon to be overwhelmed by a barrage of competing and confusing offers for how to get on-demand TV program and movie downloads in better, faster and cheaper ways. In this market, I believe simplicity, content choices, brand and especially price will determine the eventual winners and losers. These are front and center considerations for Amazon, Apple and all the others going forward.

What do you think? Post a comment now.

1. Advertising business model gains further momentum

I saw '08 as a year in which the broadband ad model continued growing in importance as the paid model remained in the back seat, at least for now. I think that's pretty much been borne out. We've seen countless new video-oriented sites launch in '08. To be sure many of them are now scrambling to stay afloat in the current ad-crunched environment, and there will no doubt be a shakeout among these sites in '09. However, the basic premise, that users mainly expect free video, and that this is the way to grow adoption, is mostly conventional wisdom now.

The exception on the paid front continues to be iTunes, which announced in October that it has sold 200 million TV episode downloads to date. At $1.99 apiece, that would imply iTunes TV program downloads exceed all ad-supported video sites to date. The problem of course is once you get past iTunes things fall off quickly. Other entrants like Xbox Live, Amazon and Netflix are all making progress with paid approaches, but still the market is held back by at least 3 challenges: lack of mass broadband-to-the-TV connectivity, a robust incumbent DVD model, and limited online delivery rights. That means advertising is likely to dominate again in '09.

2. Brand marketers jump on broadband bandwagon

I expected that '08 would see more brands pursue direct-to-consumer broadband-centric campaigns. Sure enough, the year brought a variety of initiatives from a diverse range of companies like Shell, Nike, Ritz-Carlton, Lifestyles Condoms, Hellman's and many others.

What I didn't foresee was the more important emphasis that many brands would place on user-generated video contests. In '08 there were such contests from Baby Ruth, Dove, McDonald's, Klondike and many others. Coming up in early '09 is Doritos' splashy $1 million UGV Super Bowl contest, certain to put even more emphasis on these contests. I see no letup in '09.

3. Beijing Summer Olympics are a broadband blowout

I was very bullish on the opportunity for the '08 Summer Games to redefine how broadband coverage can add value to live sporting events. Anyone who experienced any of the Olympics online can certainly attest to the convenience broadband enabled (especially given the huge time zone difference to the U.S.), but without sacrificing any video quality. The staggering numbers certainly attested to their popularity.

Still, some analysts were chagrined by how little revenue the Olympics likely brought in for NBC. While I'm always in favor of optimizing revenues, I tried to take the longer view as I wrote here and here. The Olympics were a breakthrough technical and operational accomplishment which exposed millions of users to broadband's benefits. For now, that's sufficient reward.

4. 2008 is the "Year of the broadband presidential election"

With the '08 election already in full swing last December (remember the heated primaries?), broadband was already making its presence known. It only continued as the year and the election drama wore on. As I recently summarized, broadband was felt in many ways in this election cycle. President-elect Obama seems committed to continuing broadband's role with his weekly YouTube updates and behind-the-scenes clips. Still, as important as video was in the election, more important was the Internet's social media capabilities being harnessed for organizing and fundraising. Obama has set a high bar for future candidates to meet.

5. WGA Strike fuels broadband video proliferation

Here's one I overstated. Last December, I thought the WGA strike would accelerate interest in broadband as an alternative to traditional outlets. While it's fair to include initiatives like Joss Wheedon's Dr. Horrible and Strike.TV as directly resulting from the strike, the reality is that I believe there was very little embrace of broadband that can be traced directly to the strike (if I'm missing something here, please correct me). To be sure, lots of talent is dipping its toes into the broadband waters, but I think that's more attributable to the larger climate of interest, not the WGA strike specifically.

6. Broadband consumption remains on computers, but HD delivery proliferates

I suggested that "99.9% of users who start the year watching broadband video on their computers will end the year no closer to watching broadband video on their TVs." My guess is that's turned out to be right. If you totaled up all the Rokus, AppleTVs, Vudus, Xbox's accessing video and other broadband-to-the-TV devices, that would equal less than .1% of the 147 million U.S. Internet users who comScore says watched video online in October.

However, there are some positive signs of progress for '09. I've been particularly bullish on Netflix's recent moves (particularly with Xbox) and expect some other good efforts coming as well. It's unlikely that '09 will end with even 5% of the addressable broadband universe watching on their TVs, but even that would be a good start.

OK, that's it for '08. On Monday the focus turns to what to expect in '09.

What do you think? Post a comment now.

Welcome to December and to the home stretch of 2008. Following are 3 key themes from VideoNuze in November:

Cable programming's online distribution narrows - Last month I concluded that cable programmers (e.g. Discovery, MTV, Lifetime) are going to become much more sparing when it comes to distributing their full programs online. As noted in "The Cable Industry Closes Ranks," after hearing from industry executives at the CTAM Summit and on the Broadband Video Leadership Breakfast, it has become apparent that the industry is going to defend its traditional multichannel video subscription model from broadband and new "over-the-top" incursions.

Both programmers and operators have a lot vested in this successful model, and are surely wise to see it last as long as possible. Subscription and affiliate fees are particularly precious in this economy, as the WSJ wrote on Saturday. Still, many VideoNuze readers pointed out the music industry's folly in trying to maintain its business model, only to see it turned upside down. Many predicted the cable industry is doomed to follow suit. Truth-be-told though, as I wrote in "Comcast: A Company Transformed," major cable operators are already far more diversified than they used to be. Broadband, phone and digital TV (+ add-ons like DVR, HD and VOD) have created huge new revenue streams. Surging broadband video consumption only helps them, even as "cord-cutting" looms down the road.

Netflix moves to first ranks of cord-cutting catalysts - Three posts in November highlighted the significant role that Netflix is poised to play in moving premium programming to broadband distribution. Most recently, in "New Xbox Experience with Netflix Watch Instantly: A 'Wow' Moment," I shared early reactions from a VideoNuze reader (echoed by many others) to receiving a subset of Netflix's catalog through Xbox's recently upgraded interface. Netflix CEO Reed Hastings highlighted the increasing importance of game devices in bridging broadband to the TV in his keynote at NewTeeVee Live this month (recapped here).

Still, Netflix lacks the rights to deliver many movies online, a problem unlikely to be rectified any time soon given Hollywood's stringent windowing approach. As such, in "Netflix Should be Aggressively Pursuing Broadcast Networks for Watch Instantly Service," I offered my $.02 of advice to the company that it should build on its recent deal with CBS to blow out its online library of network programs. In this ad-challenged environment, I believe networks would welcome the opportunity. Hit TV programs would help drive device sales, which is crucial for building WI's adoption. While the Roku box is a modest $99, other alternatives are still pricey, though becoming cheaper (the Samsung BD-P2500 Blu-ray player is down $100, now available at $300, I spotted the LG BD300 over the weekend for $245). A robust Netflix online package would be poised to draw subscribers away from today's cable model.

Lousy economy still looms large - Wherever you go, there it is: the lousy economy. Though the market staged a nice little rebound over the last 5 days, things are still fragile. Across the industry broadband companies are doing layoffs. This is only the most obvious of the side effects of the economic downturn. Another, more subtle one could be downward price pressure. As I wrote in "Deflation's Risks to the Broadband Video Ecosystem," economists are now growing concerned that the credit crunch could lead to collapsing prices and profits across the economy. I noted that such an occurrence would be particularly damaging for the broadband industry, where business models are still nascent, so ROIs and spending are softer.

Here's to hoping for some good economic news in December...

What do you think? Post a comment now.

Yesterday I had my own positive broadband video experience, remotely watching portions of the NewTeeVee Live conference held in SF from the comfort of my office. Om Malik and crew put together a packed agenda and I had wanted to go, but a personal conflict kept me in Boston.

I caught most of Netflix CEO Reed Hastings' keynote (until the UStream feed froze up, arghh...) and thought he offered some interesting tidbits about how he sees the broadband video market unfolding. VideoNuze readers know I've been avidly following Netflix's recent moves with Watch Instantly and I've come to think of the company as one of three key aggregators best-positioned to disrupt the cable model (the other two being YouTube and Apple).

Three noteworthy points that Hastings made:

Standards needed to interface broadband to the TV - Hastings catalogued the efforts Netflix is making to integrate with various devices like Roku, LG, TiVo, Xbox, etc, but concluded by saying that these one-off, ad hoc integrations are not scalable and are really slowing the market's evolution. Most of us would agree with this assessment. Still, he was quite pessimistic about a standards setting process's ability to move quickly enough - saying this could be a 10-30 year endeavor. Instead, if I understood him correctly, he thinks the TV approach should just be browser- based, and also that today's remotes should be scrapped in favor of pointer-driven (i.e. mouse-like) navigation.

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

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

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

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

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

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

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

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

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

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

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

What do you think? Post a comment now.

Two questions I like to ask when I speak to industry groups are, "Raise your hand if you'd be interested in 'cutting the cord' on your cable TV/satellite/telco video service and instead get your TV via broadband only?" and then, "Do you intend to actually cut your cord any time soon?" Invariably, lots of hands go up to the first question and virtually none to the second. (As an experiment, ask yourself these two questions.)

I thought of these questions over the weekend when I was catching up on some news items recently posted to VideoNuze. One, from the WSJ, "Turn On, Tune Out, Click Here" from Oct 3rd, offered a couple examples of individuals who have indeed cut the cord on cable and how their TV viewing has changed. My guess is that it wasn't easy to find actual cord-cutters to be profiled.

There are 2 key reasons for this. First it's very difficult to watch broadband video on your TV. There are special purpose boxes (e.g. AppleTV, Vudu, Roku, etc.), but these mainly give access to walled gardens of pre-selected content, that is always for pay. Other devices like Internet-enabled TVs, Xbox 360s and others offer more selection, but are not really mass adoption solutions. Some day most of us will have broadband to the TV; there are just too many companies, with far too much incentive, working on this. But in the short term, this number will remain small.

The second reason is programming availability. Potential cord-cutters must explicitly know that if they cut their cord they'll still be able to easily access their favorite programs. Broadcasters have wholeheartedly embraced online distribution, giving online access to nearly all their prime-time programs. While that's a positive step, the real issue is that cord-cutters would get only a smattering of their favorite cable programs. Since cable viewing is now at least 50% of all TV viewing (and becoming higher quality all the time, as evidenced by cable's recent Emmy success), this is a real problem.

To be sure, many of the biggest ad-supported cable networks (MTV, USA, Lifetime, Discovery) are now making full episodes of some of their programs available on their own web sites. But these sites are often a hodgepodge of programming, and there's no explanation offered for why some programs are available while others are not. For example, if you cut the cord and could no longer get Discovery Channel via cable/satellite/telco, you'd only find one program, "Smash Lab" available at Discovery.com. Not an appealing prospect for Discovery fans.

Then there's the problem of navigation and ease of access. Cutting the cord doesn't mean viewers don't want some type of aggregator to bring their favorite programming together in an easy-to-use experience. Yet full streaming episodes are almost never licensed to today's broadband aggregators. Cable networks are rightfully being cautious about offering full episodes online to aggregators not willing to pay standard carriage fees.

For example, even at Hulu, arguably the best aggregator of premium programming around, you can find Comedy Central's "The Daily Show" and "Colbert Report." But aside from a few current episodes from FX, SciFi and Fuel plus a couple delayed episodes from USA like "Monk" and "Psych," there's no top cable programming to be found.

As another data point, I checked the last few weeks of Nielsen's 20 top-rated cable programs and little of this programming is available online either. A key gap for cord-cutters would be sports. At a minimum, they'd be saying goodbye to the baseball playoffs (on TBS) and Monday Night football (on ESPN). In reality, sports is the strongest long-term firewall against broadband-only viewing as the economics of big league coverage all but mandate carriage fees from today's distributors to make sense.

Add it all up and while many may think it's attractive to go broadband only, I see this as a viable option for only a small percentage of mainstream viewers. Only when open broadband to the TV happens big time and if/when cable networks offer more selection will this change.

What do you think? Post a comment now.

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

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

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

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

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

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

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

3. Advertising's evolution fueled by innovation and resources

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

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

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

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

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

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

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

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

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

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