Disney/ABC joins Hulu: What it Means

April 30, 2009

Today Disney and Hulu confirmed the long-running rumor that Disney would join News Corp. and NBC Universal as equity partners in the most successful professional video content site. According to the Wall Street Journal, Disney will take an equal share by ponying up a similar amount of cash that the prior equity investors put in. 

I applaud this move. It’s going to bring short-term and long-term benefits to the industry. This move:

  • Creates needed short-term online advertising efficiency. I’ve recently written a report for Forrester about the struggles of online TV shows, including Hulu, when advertisers are cutting back every expense. By joining forces and standardizing the ad buying process, ad formatting, pricing, and so many other friction-laden processes, these major networks are going to keep some portion of ad revenue that might otherwise have been lost.
  • Keeps YouTube on the professional video sidelines. YouTube had made a good effort to bolster its online TV show offerings with some CBS content and some links to ABC. But it hasn’t been enough to change what users expect from YouTube. (Tidbit: While YouTube accounts for nearly half of all video views, it only accounts for less than a fourth of video minutes because people go there for short clips.) With ABC clearly aligned with Hulu, it makes it less likely that any of these players will care to sustain YouTube’s online TV ambitions in the future.
  • Makes it nearly impossible for CBS not to join. CBS has invested millions in its own effort and it may not want to give that up. But so did ABC — in fact, ABC was really the boldest of the networks in terms of technology investment and strategic energy. With the other 3 networks heading down the yellow brick road arm in arm, it makes sense for CBS to benefit from the same market power Hulu will now command.
  • Sets up the cable industry for Hulu 2.0. If you’re paying attention, you have noticed that neither Hulu nor ABC have shown up on the Xbox, the Roku player, Blu-ray, Connected TV or any other over-the-top solution. This is because they are saving themselves for the cable industry. They don’t want to upset the cable industry, sure, but more importantly they want to position themselves to partner with cable to deliver Hulu 2.0 to the cable subscriber. Where Hulu 1.0 will remain free for online viewers, Hulu 2.0 will provide not just 4 episodes of a TV show, but all the seasons of the show to date, plus back seasons, and even new release movies. And all of this will be available online as well as on the TV. That experience will be available to premium cable subscribers and the revenue will be shared back to Hulu. 

What do you think it means? For content players, device makers, consumers?

DVRs threaten the 10pm primetime hour

April 16, 2009
Note: Sorry that posts have been so sparse the past two months. In the few posts I’ve offered during this time you’ll see I keep saying I’ve just gotten over a sickness and will be back to work on the blog. Alas, my never-ending cold turned out to be double-pneumonia so I dropped out for a few weeks to kill it once and for all. I really am back this time! I will do a few posts to catch up on things that happened while I was out, starting with this one.

Last week TiVo shared an analysis of its Stop||Watch ratings service that reveals a likely long-term impact of DVR use. They found that when people have a DVR, the majority of the primetime viewing they do is timeshifted in some way, whether started late to skip commercials or recorded for later viewing. No surprise there. But here’s the interesting tidbit: because people still want to watch the 11pm news in time to go to bed, if someone doesn’t start watching the 8pm and 9pm shows until 9pm, it means the 10pm show is just dumb out of luck. Even if it gets recorded, it is less likely to actually be viewed. 

Is the 10pm hour dead? (Note for Central and Mountain time people, for you, we’re talking about the 9pm hour. In fact, given that C/M shows run on an hour-earlier schedule, one wonders if this same effect is as true in those time zones. Since the urge to go to bed presumably doesn’t strike an hour earlier, maybe these people are more comfortable watching the 9pm show at 10pm in time to catch the evening news at 10:45, still making it to bed shortly after 11pm.)

The most disturbing thing about this whole analysis is it suggests that NBC Universal head Zucker has a crystal ball.

He’s the guy who cut the budget for 10pm programming as well as authorized increased reality programming (say, Deal or No Deal) which is cheaper to produce than ER, which recently had its farewell episode after an amazingly long but dwindling run. He’s also the force behind The Jay Leno Show, the 10pm primetime talkshow that hopes to cheaply fill the slot that — according to TiVo — fewer and fewer people will be watching. So is the Leno effort just a way to cut costs or is it also strategic? This is the hard part to swallow. Gulp. It may actually be a smart move. Yeah, it probably won’t be a ratings killer every night. That’s why NBC is happy it will be cheap to produce. However, once in a while, say, when a ship captain who was held hostage by Somali pirates is booked, the show will become current events, the kind of thing people will want to watch live, joining the few things in the pantheon of TV that are true DVR-busters like sports and news. 

It may turn out that the 10pm hour will become the new Today Show — a cheap way to fill time that periodically strikes it big. And that’s just the first long-term trend in TV that the DVR will force. A bigger question is hanging out there in the balance that remains to be answered, namely, in the future, how will we know which shows we should watch?

Sounds like a silly question, but I’m serious: today you rely on the networks to do all the filtering for you. If the idea is a good one, they’ll invest heavily in it, attract the right talent, promote it heavily, and schedule it in a winning spot. You probably don’t consciously think through all of that, but they certainly do. And we are the beneficiaries of all that sweat and effort. But in a world where we watch hours of TV shows on our PCs and can DVR all of the content coming off the air, how relevant is programming and scheduling? In an all on-demand world, there’s no scheduling at all, leaving you no way to know which shows are worth your time.

What do you think? How will the market signal to us which shows are hot and which are not?

One obvious answer is word of mouth, but what will that look like? One additional trend that will increase under these conditions: the rise of star producers like J.J. Abrams and Joss Whedon. In the old days, you didn’t need to know that Aaron Spelling created your favorite TV shows. That was clout Spelling used behind the scenes. But in the future, more producers will have to take their pitch directly to their fans in the audience, something Whedon has already said he wants to do, as soon as he can figure out a way to fund it.

We’re just at the beginning of a fundamental shift in the way we not only watch TV, but how we decide what we should watch in the first place. Your suggestions on how this will evolve are more than welcome.

Why Hulu’s Super Bowl ad is as smart as it is funny

February 4, 2009

I’ve been answering press questions about Super Bowl advertising for a decade or more, both as an analyst and as an academic (used to teach advertising management at Syracuse back in the good old 90s when your only way to watch Super Bowl ads was on TV or VCR). It seems that every year I’ve been involved the press stories say the same thing: Ads cost too much and aren’t as good as they used to be. 

Once in a while, an ad comes along that is brilliant. That brilliance is usually measured on the funny-meter, however. Rarely does it mean that a product has been properly promomted.

That’s what makes the “Huluwood” ad from Hulu featuring Alec Baldwin so brilliant. Not only is it funny, but it actually accomplishes a very subtle yet powerful marketing objective. Watch the commercial, have a few laughs, then read on.

Vodpod videos no longer available.

Why is this ad so good? Because it positions Hulu in exactly the right light. Instead of trying to say that Hulu is some kind of new service “unlike anything you’ve ever seen before,” this commercial makes it clear that Hulu is just TV, taken to the max. Which is exactly what people want. They don’t want Gemini Division, they don’t want LonelyGirl15. They want Lost and Family Guy and The Office. And they want it whenever and wherever they want. This is exactly what Hulu gives them and it’s the USP (unique selling proposition, sorry, I’m slipping back into professor mode, I can almost smell the classroom now) the ad delivers.

Personal riff: I absolutely love the new phase in Alec Baldwin’s career that this commercial epitomizes. From the guy who first interpreted Jack Ryan on the big screen in Hunt for Red October to this slightly hefty but immensely comedic persona that 30 Rock unleashed, I think he’s a million times more interesting now than he ever was in his movie star days. I don’t know how big a role Tina Fey had in bringing this out of him, but I assume she had a role because she is, after all, a genius.

Sezmi opens the door to a new kind of set top box

January 9, 2009

I have written a lot over the past two years about the future of the set top box, both on the cable and satellite side as well as on the consumer retail side. On the consumer retail side, there are boxes that are designed to simulate the cable DVR experience like those sold by TiVo (and as announced at CES this week, by Digeo). And there are those designed to provide over-the-top video experiences like the Roku Netflix player, the Apple TV, and the like. 

Though TiVo has tried to provide the best of both worlds — its DVRs can play a wide variety of over-the-top content from online streams to Amazon Unbox video on demand — because it requires a cable subscription, it ends up feeling like a more expensive version of cable.

So far, no one has seriously offered a DVR that doesn’t require cable or satellite service, even though 60% of what people watch is offered for free, over the air, via antenna. And in most major markets, it’s broadcast in HD.

Let’s do some thinking: imagine a DVR that pulls down CBS, ABC, NBC, FOX and PBS from the air, in HD quality, so you have continuous access to the vast majority of content you are interested in. You pay no subscription for this content. And because you’re one of the 62% of US households with broadband, you also have access to millions of online video experiences, some of which are free and others — like Blockbuster OnDemand and Amazon UnBox — are pay-per view experiences that are at least as good as what cable offers, with the extra advantage that they can be managed with a PC.

This DVR could be sold at retail for a few hundred bucks. It would carry no subscription fees and for at least 20% of the population, it could replace cable. Only the people who have to have Showtime and HBO would be left out in the cold, as long as ESPN, Discovery, and CNN keep putting so much of their content online.

Welcome to the world of Sezmi (as in “open Sezmi” — cute, eh?): an over-the-air DVR that adds online video. And if my estimations are correct, you’ll be seeing Sezmi sold by major retailers later this year.

sezmiThink about it — for those of us who spend $100 a month on cable, wouldn’t Sezmi’s value proposition be a great relief? That’s what Sezmi is banking on and the retail partners it’s in hushed conversations with here at CES. I sat down with Sezmi yesterday in their private suite at the Venetian (much nicer than my discount room at the Sahara, I’ll confess). This is a company I’ve been following since they were just a rumor in mid-2007 and were called Building B. They re-branded as Sezmi in 2008 and I last met them at NAB last year where they talked about offering their set top box to tier 2 telcos as a way to compete with cable without having to lay miles of fiber. At the time, I told them that the telco solution was nice, but that I thought they stood a chance of offering this box at retail and that 20% of the population would be interested. That’s 22 million households. That’s more people than have an iPhone. In other words, it’s a target worth pursuing.

Imagine how pleased I was yesterday to hear that they are pursuing both avenues aggressively — working with telcos as well as going straight to retail. I have no doubt we’ll see the boxes in retail later this year. And I’ll be one of the first customers in line. In my case, I won’t be replacing cable, I’ll be adding TV to another room of the house that currently doesn’t have it. That’s a use case I haven’t even modeled and would potentially open a much bigger target audience. Even those economics are attractive, because the additional DVR in my spare room would run me $14 a month — more than $150 a year. One Sezmi box, even if it were priced at $300 would pay for itself after two years of use.

This is Sezmi’s potential even without considering the very elegant consumer interface their box offers or the potential solution they have to solve the ESPN, Discovery, even Showtime problem over time.

Too bad Sezmi wasn’t in retail for this past holiday season. In the words of one retailer who is in talks with Sezmi: “If we had this thing in stores last October as the recession hit, we would probably have 5% market share right now.”


Interview with a TV addict

December 4, 2008

I’ve been posting about TV addiction lately and in my efforts to find people who are addicted to TV, I came across such a unique example that I had to dedicate an entire post to her story. Her name is Xochitl Garza, though her blog readers know her as Equis Buffy. Her daily posts about TV can be found at her blog, You Have No Messages: The Story of My Life. How I found Xochitl (Aztec for “flower,” her name is pronounced So-cheel) is its own story, but suffice it to say that this is one addict who is clearly not in denial. In a recent interview, she answered some of my questions about what it’s like to be an addict:

How many hours of video do you think you watch in a typical week? I usually watch about 30 hours of primetime TV. I have three daytime programs (“Martha”, “Oprah”, and “ General Hospital ”) that air 5 times a week but I do not necessarily watch each episode. So on top of the 30 hours of primetime I probably have an additional 10 hours of daytime TV that I watch.

How do you break down that viewing: live, DVR, online, anything else? I would say at least 95% of that viewing is DVR. I rarely watch live TV anymore but there are times when it can’t be avoided. Like when I’m home sick or on the weekends if there is really nothing else to do.

How important is it to you to share your watching with others? There are some programs that I watch that I never find myself discussing with others like “Samantha Who” or “The Mentalist”. These are the types of shows that any viewer can start watching mid season and never feel like they are missing any crucial portions of the plot. Then there are other programs such as “Heroes” or “Lost”. As soon as the credits roll I am bursting at the seams with anticipation. I can’t wait to discuss all the twists and turns, the questions that have been answered and the new theories the episode has spawned.

How important is that impulse to share in your choice to blog about your shows? I decided to start blogging about TV this past summer. When I noticed how many emails I was sending each week to my family, friends, and co-workers on the subject of TV. Everything from a weekly recap of specific shows to which programs may or may not have been canceled. I figured instead of generating a distribution list for all the fans of “Gossip Girl” and a separate one for “30 Rock” I might as well put all this information in one place.

What’s the best way to tell whether someone is addicted to TV? I would say the same way you would gauge any other addict. If it starts to interfere with other aspects of your life then it has become a full fledged addiction. If you find yourself spending the first hour of your workday online trying to get spoilers for next week’s episode of “Fringe”. Or if you’re skipping your niece’s birthday party because you want to watch the season finale of “Grey’s Anatomy” live then you are an addict.

Is it necessarily bad to be addicted to TV? The name of my blog is You Have No Messages. I always use to tell one of my sisters that if I ever wrote a book it would be called You Have No Messages: The story of my life. The same sister thinks that the vast amount of time I spend watching TV might be the reason for the lack of voicemail I receive. I think it has more to do with getting older and priorities shifting. Instead of going out every other weeknight and every weekend I like to spend more time at home these days. The more time I spent at home the more I learned to enjoy TV. TV has not completely annihilated my social life. All of my friends will tell you that not only am I a walking TV Guide but that I also throw the best parties this side of the Mississippi. I feel my life is well balanced. If TV consumes all of your life then I would say it is a bad thing.

What would someone have to pay you for you to watch no TV/video for a whole week? How much more would they have to pay you to get you to promise not to go back after the week is over and catch up on your shows via DVR or online?  I’ve thought long and hard about this one. There are a few different variables I have taken into consideration when determining my answer. If the week is during November or February (two out of three sweeps months) the amount would be $5,000. If the week takes place any other time with the exception of May, the amount would be lower, $1,000. It would take an additional $1,000 in both situations in order for me to not be able to go back and catch up. As for the month of May I’m going to have to say now way no how. Not with the possibility of missing an excellent season finale. I thought back on episodes that I could have possibly missed in years past such as  The Gift from “Buffy The Vampire Slayer,” The Telling from “Alias,” Everyone’s Waiting from “Six Feet Under,” or Leave It to Beaver from “Veronica Mars.” I would have never forgiven myself if I had only had a verbal recap of any of these episodes instead of getting to witness them myself. Who am I kidding for a cool million I would practically do anything.  

There are many gems in Xochitl’s story. One of the most telling tidbits is that she knows the names of the episodes she’s referring to. At a more intriguing level, what she says about balancing life and TV is particularly important. Contrary to the image of the couch potato sitting for hours on end in front of a flickering screen, today’s TV addict is an engaged, socially connected viewer who wants to talk about TV with others and engage them in the conversation. Xochitl is an example of a more empowered addict, a viewer who can veg with the best, yet hang with her peeps at the best parties “this side of the Mississippi.” One tool that helps her do this is the DVR, but the Web also plays a role in not only the viewing but in building the conversation. This may be one addiction that gets healthier as technology improves it.

Does Xochitl’s story resonate with yours? 

Why CBS pulled The Mentalist from CBS.com

November 20, 2008

NOTE: This post is more than 4 years old but continues to get traffic, enjoy the read, though I shut down comments years ago because of spam, sorry. In the meantime, please check out my book, Digital Disruption, published Feb 2013 at forr.com/DDbook.

Original Post:

I’m catching up a bit here because I was traveling when this news item happened, but Download Movies 101 reported last week that CBS had mysteriously pulled full-length episodes of its surprise hit shows The Mentalist and Eleventh Hour from CBS.com, which of course means all of CBS’s syndication partners like AOL and Fancast are unable to show the episodes as well.

It’s especially confusing when it’s clear CBS is committed to full-length episode streaming. The site is full of hit shows like How I Met Your Mother which air full episodes online. Plus, CBS has recently extended certain full-length shows to YouTube.

It turns out that the fault does not fall to CBS, but to Warner Brothers Television. Not only is WBT behind the pull-down of The Mentalist and Eleventh Hour, but it’s also the source behind the removal of full episodes of Big Bang Theory, a hit comedy produced by, you guessed it, Warner Brothers Television.

Why does Warner Brothers Television hate us so much?

Maybe a better question is, why do they hate themselves so much? Remember, this is one of the entities that was behind the removal of Gossip Girl from the CW web site at the end of last season. Says one commenter on the Big Bang Theory fan forum:

If Warner Bros is really the culprit then CBS should renegotiate. This show barely made it a second season, and without people like me being able to catch up online, this show is toast. I really like the show but since I missed last episode, it kind of turns me off from watching any more of them since I missed out on what happened last episode. … It is nice that they have a recap and some clips, but not being able to see the actual show online when I miss an episode may make me turn it off for good. I did the same thing to The Office on NBC last year when they weren’t showing the episodes online. Now I don’t watch The Office at all.

Note how the good-until date is prominently displayed. Smart.

Click to see full version and note how the good-until date is prominently displayed. 

I want to riff on The Office for a moment because this is one show that does it right. Because there are no rules yet for how many episodes a network should put online or for how long they should remain online. The Office resolves this dilemma for viewers by showing you exactly which episodes are available, when they aired and for how long they will remain available. Brilliant. You give the audience the rules of engagement and they can’t complain when the shows disappear because you gave fair warning.

Fair warning, of course, is exactly what CBS (and Warner) did not give viewers of The Mentalist or Eleventh Hour. So what’s going on?

I’m convinced it’s renegotiation time. And that’s not just between CBS and Warner (who are parnters on so many things that it’s unlikely they are suffering a relationship breakdown). It’s also renegotiation season for producers and the actors. Remember the writers’ strike? One of the issues that strike focused on was what share of online streaming revenues should go to writers. At the time I briefly consulted an entertainment law firm that represents producers and actors who were wondering the same question. I have a hunch much of this is being done to push Warner and CBS to realize they would rather renegotiate quickly than let their popular shows languish.

I could be way off on this, I’m not a Burbank insider so I can’t say what’s going on, but I will say this. Future TV deals are going to come with online rights completely sewn up. There will not be room for mid-season shenanigans in the future.

My interview with Albert Cheng: The Father of Online TV

November 10, 2008

To call Albert Cheng a TV industry insider is a supreme understatement. As the Executive Vice President over Digital Media at Disney’s ABC Television Group, Albert not only has a front row seat inside the industry, many would say he occupies the driver’s seat. Yeah, I’m mixing metaphors there, but you get what you get.

In fact, in my writings and in the speeches I give, I typically refer to Albert Cheng as the Father of Online TV. And though you can practically hear him blush when I say it to him over the phone for the first time, all hyperbole aside, it’s an accurate description of Cheng’s role in the dramatic changes sweeping over the television industry today.

It all started in April of 2006. It’s hard to believe it has only been that recently that ABC, in what seemed like an out-of-nowhere move, announced it would test streaming of two of it’s hottest shows, Lost, and Desperate Housewives, online, for free. Yes, free. The rest, as they say, is history. Today, ABC.com streams well over 50 million videos a month and is likely to cross the 100 million threshhold sometime next year. 

After Albert and I participated in the same conference on online video recently, I took the opportunity to interview him in more depth about his own experience with TV and his expectations of the future of the medium. The full-length interview I’m keeping to myself for a future project that shall remain nameless for now, but I’ll share three important things I learned from and about Albert Cheng here:


1. Cheng learned about TV technology from the VCR

One of my favorite images of Cheng’s childhood is of him watching the CBS soap opera As the World Turns alongside his mother each day. It became such an integral part of their lives that he admitted to following the show right up through high school. Unlike the soap opera itself, his relationship with it finally ended. “I lost track of it once I went to college.”

Buried in all of this soap opera goodness, however, were the seeds of the future. “In those days my mom’s schedule got busier. She couldn’t watch her soap operas during the day anymore. So she recorded them on the VCR, every day.” It was an early form of time-shifting, one that was rare elsewhere. But thanks to the Cheng household’s commitment to As the World Turns, the VCR was used as aggressively as most people use a DVR today. “My mom watched her daytime soap operas in primetime,” concluded Cheng.

This was a secret Cheng learned about new TV technology: it can make people watch more than they otherwise would. “Our media consumption started to go up, for sure.” 

2. How you watch depends on what you want to watch

Cheng lives a life of TV superabundance that he lives every day. “I have three televisions,” he begins, then with a pause, admits, “for a two-person household.” The largest television (65- or 70-inch, he can’t exactly recall) sits in the family room and is the center of their viewing life. There are two others in the home for specialized viewing – one in the home gym and one in the master bedroom. True to the lessons he learned at his mother’s side, he explains, “Our typical watching is predominantly time-shifted. It’s a combination of DVR and online.”

As I’m seeing more and more, where he watches depends on the show he wants to watch. “I choose shows for live viewing, then others that I record but prefer to watch on the TV.” He performs a kind of triage on potential shows. At the top are shows he has to watch on the big screen. “Even though Lost is available online [on his own network’s site, no less], I choose to watch it on TV.” For shows he wants to keep up with but doesn’t have to experience fully, he turns to the Web. “Online is a great way to keep up with shows I don’t have time to follow, but when I find a spare minute I can quickly catch up with.”

3. There’s a lot more to come in the future

In the long run Cheng proves he’s got what it takes to dream big. “I’m just going to put a flyer out there, this might be insane, but right now we see more and more 3D content for theaters and the TV.” I nod, thinking that I know where he’s heading with this. It’s the age-old maxim that in the end, all future predictions, when taken far enough, end up at the same place: Star Trek. With pervasive computers, matter replication, and clothing that doesn’t fit very well. I often end up there myself. In this case, I sense Cheng’s line of reasoning is headed straight to the holodeck made popular in the Star Trek: The Next Generation series.

“I’ll take it one step further and say there will be people who watch content in laser holographic 3D environments.” Bingo. “That would be the next theater level of entertainment, it eventually goes to the home, where you take virtual worlds and combine that with filmed entertainment. Then you get to 3D feel in a 3D world.”

I like that Cheng can think this big. I also like that someone with such unorthodox predilections is an insider with the power to lead us forward. Expect to see the mark of Albert Cheng on many a future video innovation.