Marc Sands of the Guardian on the future of the media

Marc Sands, Director of Marketing at the Guardian newspaper company in the UK spoke at our Forrester Research Consumer Marketing Forum in London on the 7th of November. He came to speak about how media companies have had to give up control of the media — the sources of media content, the analysis of the content they deliver, and the online communities that feed off them.

I introduced myself before Marc’s speech and mentioned that I would be posting a blog entry. In classic British modesty, he appeared uncomfortable with the attention. I misinterpreted this as concern about my blog and asked if he was okay with being blogged live. He responded very quickly and sincerely:

That’s the whole point, isn’t it? We media companies have to give up control over the content. So whether I like it or not doesn’t matter.

I couldn’t have said it better myself. Here’s what else I learned from Sands:

1. The newspaper isn’t dead, it’s just changing how it adds value. He’s not pretending that newspapers aren’t challenged and the question of where the money will come from looms very large in Sands’s view, but he showed some data about how newspapers are becoming more valuable as sources of analysis rather than daily information. See the clip below for his comments and data. His point isn’t just about newspapers. Rather, he’s emphasizing that all media have to find how they either pursue a niche, or use a multimedia strategy to meet their audience’s different needs. 
    
2. One potential side effect of media digitization is the rise of people who don’t consume news at all. Sands reported data on consumers who don’t engage the news at all. He mentioned that as many a tenth (didn’t catch the actual number, sorry) of Americans don’t consume news at all in a typical week. He wondered aloud whether they knew yet that their compatriots had elected a black president.
3. The people inclined to say “yes” are the ones who will shape the future. This was a particularly powerful point, especially coming from somone at a newspaper which Sands admits tends due to its political leanings to say “yes” to just about anything (including Ricky Gervais’s hilarious podcast). He said that people who are by nature inclined to say yes to new things will do the most valuable experimentation. As a result, they will end up having a disproportionate impact on the future (my words, his implication). To that I say: “Yes.”
4. The media have the luxury of having short development cycles. Media companies can launch new things, new stories, new ideas, quickly. They can also make mistakes quickly (he mentioned the role of citizen journalism to correct news organizations when they fail, such as in the case of Dan Rather vs. George Bush). But, responding to the speech before him from BMW in which the company spoke of 5-7 year development cycles, he added, “at least when we make a mistake, it doesn’t get built in to the body of a car. We can bury our mistakes more quickly and move on.” 

What do you want from the TV of the future: Internet? 3D?

Very interesting piece posted on Dealerscope this week authored by the Senior Director of Market Research for CEA, Tim Herbert. It’s based on a survey the CEA did about future TV tech. Very interesting results. Let’s start with the obvious first:

Click on image to see bigger version

We do surveys like this as well and I’m going to give you the benefit of years of experience on this one. Here’s what people really want from their next TV: bigger and louder. Yep, it’s that simple. When they say better picture quality, they don’t mean 1080p (though that’s what they’ll buy because it’s quickly dominating the shelves at Best Buy). They just mean big and bright and loud.

Top on the list was energy efficiency. Let’s be honest about what this means — people are supposed to say that. But they won’t pay extra for a TV that saves energy. Next. The really interesting things they asked about were connectivity related: wireless connectivity with DVD players, ability to connect family photos, and internet connectivity. 

Here’s the problem with asking about Internet connectivity (and I’m sure Tim knows this, I’m not implying he doesn’t). People don’t know what that means. Perhaps if you spell it out for them: “Hey, you could watch Hulu on your TV” the number would go up by 10 or 20 percentage points (which would put it in the top 3, I suspect).

Personally, my bet for the feature we’ll see most on the TV in the next 3-5 years is Internet connectivity. I’ll even predict that in 2012, 40% of all TVs sold will have connectivity built in. It will become so critical to TV makers that by then it will be standard equipment. Not only to deliver services but to upgrade firmware as needed. More on that later.

My favorite graph from this study was this one:

click on image to see bigger version

The question of 3D TV has been hovering over the market for a few years now. I saw 3D displays at CES this year and I think they are absolutely fun and enjoyable — to watch one or two movies a year. But as for buying one for the living room, the tech isn’t there yet. Overall, you can see that people don’t do a lot of thinking about what kind of technology should be in their TVs in the future. One that CEA missed was a mirrored screen so that a flatscreen TV can be an attractive mirror when not in use. That will be more important to people than they could say in a survey.

Economy watching: Comcast earnings waaaay up

Tracking the economy has been a thankless job lately. Things go down, you draw conclusions, things go up, you draw different conclusions, then things get all messy again and all bets are off.

But one thing will hold true in this recession: consumers love them some video, preferrably free video.

I wrote about this in a Forrester Report which I blogged about recently. Which is good for online video, and probably even good for cable generally. However, I did have some warnings to offer cable companies which are future oriented — that consumers will shy away from premium content packages and premium tech for the home (like multi-room DVR). Because of that, you won’t see the effect of the recession on this quarter’s earnings. So I may yet prove right in a way that affects cable’s financial performance. But for now, things couldn’t look shinier for one Comcast.

Betsy Schiffman captured this nicely at the Epicenter blog on Wired.com last week in what is definitely going down as one of the best titles ever:

Cockroaches and Comcast Will Inherit the Earth

Her clever reference to the fact that cockroaches are suspected of being able to withstand just about any devastation that we could wreak on the planet, may overstate the case for cable a tad, but only a tad if you consider that Comcast CEO Brian Roberts was able to report on beating earnings per share estimates by a full 4 cents, and seeing a 38% rise in profits over last year. 

The point here is that cable holds most of the right cards for surviving the digital video transition. As long as it plays them right. In the case of Comcast, one of those cards is very strong financing from their own operations. No need to go out to get cash in a credit-squeezed market. That’s a great hand to have right now as economic ups and downs continue their game of ping-pong.

Making money from user-uploaded video: Auditude, MySpace, and MTVNetworks

This is an important announcement, but it’s one that’s hard to understand if you don’t follow this business every day — I found that out last week when trying to speak to reporters who were having trouble with this. One reporter who gets it is Jessica Guynn of the LA Times. Her piece on Auditude, quoting me, ran today. 

The basic explanation goes like this: A viewer captures a clip of a Colbert Report segment and posts it to MySpace. Auditude’s system checks the clip against a massive database of clips and properly identifies the video as a Colbert Report segment from Thursday, October 30. Auditude checks that content against MTV Networks’ list of content that can be monetized, finds it is approved, then matches an ad to it based on who has paid to sponsor the Colbert Report. When that video gets viewed on MySpace after that, viewers see the clip, with an overlay from MTV Networks promoting the show’s website and airtimes, this is followed by a brief “sponsored by” overlay from the advertiser. MySpace gets to please its visitors, MTVNetworks gets promotion for its popular show, an advertiser gets an interested viewer, and some money greases everybody’s palms, from MySpace to MTV Networks to Auditude. Win, win, win and win.

The prior solution didn’t work. It involved trying to discourage posting of copyrighted materials by taking them down quickly but also by providing the same content in high quality directly from the content owner. For example, Tina Fey’s hilarious interview with David Letterman on October 17th to talk about Fey’s Sarah Palin impersonation, was posted by CBS the day after. It has since earned 156,339 views. But the presumably illegal posting from a random viewer of the same interview went up the night before (the same night as the interview) and has since generated 588,934 views, nearly four times as many (with a much lower quality clip).

Taking those successful videos down means they don’t do anyone any good. Making money from them is a better idea. 

This is really needed for the user-posted video market which up until now had no hope of every making real money. I say real money because advertisers don’t want to touch all the video genuinely created by average people, because: 1) it’s often inappropriate, and 2) no one knows how well it engages viewers. In contrast, professional content like the MTV Networks clips that often make their way onto MySpace are advertiser-friendly. Once we can monetize those millions of video views, there’s a chance that revenue will rush into that vacuum, helping the market hit its online video advertising goals. 

Long-term, this becomes a standard approach. More networks will sign on to work with MySpace, they do all their learning and experimentation. A few will also work with YouTube (probably CBS, which has always had a cozier relationship with YouTube than the rest) in the meantime. At some point, best practices evolve and YouTube lawsuits get resolved and this becomes a standard practice.

As Netflix rises, Roku drafts nicely behind

Every time I turn around, it seems Netflix is announcing something new. These past few weeks my little fingers have typed furiously to keep up with Netflix, which I will now refer as the company formerly known as the DVD-by-mail company. Two weeks ago, I wrote about Samsung adding Netflix to some of its Blu-ray players. Then there was the announcement that Netflix had finally enabled streaming on the Mac (okay, okay, Intel-based Macs, but still). Then there was the revelation that said company would provide HD streaming on the Xbox 360 and other devices. Finally, I posted just last Thursday that Netflix was partnering with TiVo to expand its streaming to yet another device. (Convenience note: you can mouseover these links to see the text of the page without actually clicking on them)

Just remembering typing it all inflames my carpal tunnel. Now that I’ve had some time to think this through, I’m still impressed with Netflix. But wait a minute. In all this, there’s one definite winner behind all the announcements: Roku.

btw, this is not an ad, this is just the most attractive picture I found on the website: I don't get paid anything if you click on this and order

Yes, I’m talking about the maker of the $99 streaming video box that in my back-of-the-envelope estimations has probably sold more than 50,000 units in the six months since its launch. This is the box that I proclaimed the winner in the over-the-top set-top-box shootout I wrote in July. But secretly, after writing that report, I started to fear for the box’s survival in a world where Netflix is off enabling every other device you’re thinking of buying this holiday season.

Then the recession hit. Follow my logic here: you hear that Microsoft Xbox 360 Live members can stream Netflix to their TV sets. That sounds cool enough to try, you are one of nearly 9 million Netflix subscribers aftera ll, but then you add up the additional costs — $199 for the low-end Xbox 360 Arcade plus a $7.99 a month subscription. Add that up for a year and you have $295. (Of course, the plan from Microsoft is that you already own an Xbox and this motivates you to sign up for the Xbox 360 Live Gold Membership, but just humor me.)

So you then hear that select Blu-ray players from Samsung and LG now allow for Netflix streaming. You were considering a Blu-ray player anyway, so you look into these and find they retail for $349 to $399. Then you hear that TiVo will offer Netflix, but you have to get the $299 TiVo HD at a minimum, not to mention the monthly service charges. You’re starting to feel daunted, so you go to Netflix.com and see all these options on one page so you can figure out which one is best for you.

You find the Netflix Ready Devices page, which shows you all of these options, and what do you see? Roku listed at the top, at a nice $99 price. Oh, and by the way, it’s the only one that comes with built-in wireless connectivity for those who don’t have ethernet in the living room. Especially in a recession, the Roku seems like a low-risk option.

I shared this line of logic with Tim Twerdahl, VP of Consumer Products at Roku, an ex-Netflix guy on Friday. I could practically hear the smile on his face over the phone as he agreed with my logic. Then he confirmed it: “Our sales are up dramatically in October.” And that in a recession.

Of course, the point of all the other boxes is that they do other things, not just Netflix. The Xbox does games, TiVo does DVR, the other guys do Blu-ray. When I shared this concern with Tim, he responded very confidently that I should stay tuned. What I have long been calling the Netflix/Roku box will soon shrug off the Netflix moniker by adding other premium content. This will only drive up sales on this box even more. Soon it will outsell the Roku Soundbridge home audio device that never really got past 100,000 users in four years of selling. There’s a business in this box; Roku is here to stay.