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?

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VUDU creates open development platform for TV

December 16, 2008

They say if you ask, you shall receive. Last week, I asked. I said:

So who is going to bring an open development platform to the TV in a commercially viable way? My money’s on Roku in the short run. Who else has the guts (or the financial imperative) to do this? One backdoor might be to create a TV set top that is truly DLNA compliant. Then people could create PC applications that feed DLNA content to the set top. I’ll keep my eyes on this for you. (For more on this, read my post called Joost’s iPhone App a Sign of Things to Come).

I asked and today I received. VUDU has debuted an open set-top-box development platform called VUDU RIA. At the same time, VUDU made sure to kickstart the application development process by building a bunch of apps to show how easy it is to provide Web-like experiences to their set top boxes. They have flickr, Picasa, YouTube, as well as many online video channels.

This is it, folks. This is what we all have been waiting for. Now if only VUDU could sell more boxes so that developers would have an incentive to fill the world with VUDU applications.

If you don’t understand why I’m so excited, may I direct your attention to the iPhone App Store. This is perhaps the most important decision Apple was ever dragged kicking and screaming to make. The iPhone App Store has created an environment where thousands of developers have innovated to provide consumers with experiences, content, and services that they value. All without having to cut deals with Apple (which would inhibit innovation). Yes, there are still issues with Apple’s random and arbitrary decisions about approving iPhone apps, but this genie is completely out of the bottle and flying high so Apple will have to cede more and more control.

VUDU wants to benefit from that scenario. They can imagine a world in which VUDU RIA becomes a default language for developing TV-based apps. Yes, they want other CE makers to adopt VUDU RIA. They’ve been smart about it — they have designed around a very limited set top box spec: 300 MHz processor with 128MB of RAM. That means a TV maker like VIZIO could design its first Web-ready TVs to that spec and immediately have content to offer buyers, without having to create a custom environment of their own and do content deals. They can simply plug into the dozens and hopefully hundreds of apps built in VUDU RIA.

Of course, they’re not the only ones with this vision. Intel and Yahoo demonstrated a TV widget language they want the world to adopt. But VUDU has a box and real apps, where the Yahtel approach is still an idea for now. And don’t forget Roku and Sling, both of whom I have written about who have a similar ambition.

This is the most important thing that will happen in TV in 2009. The battle of the development platforms. And notice that nary a single cable provider is on the list of combatants. Hmmm.


Five things I’m thankful for in the world of video

November 26, 2008

That’s right, it’s the end of the year which means it’s time to start generating lists of things. Top 10 this, top 5 that, yada, yada. I thought I’d get a jump on the end of the year lists by doing a Thanksgiving list. As we pass the potatoes around the table tomorrow, let us all remember to be thankful that:

1) Hulu for the Holidays has us covered. Sure,  Hulu.com is great because it helps us keep up with such heartwarming and touching family favorites as Fringe and The Sarah Connor Chronicles, but it has gone far beyond that with its new Hulu for the Holidays campaign that introduces us to [actually] heartwarming movies we may have forgotten. Last week it was Rudy, A League of Their Own, and Call of the Wild, today’s featured movie is A River Runs Through It (in which one-time heartthrob Robert Redford simultaneously directs and passes down the mantle of screen idol to Brad Pitt). I would embed the clip for your immediate enjoyment, but, alas, due to rights issues this one is not viewable outside of Hulu.com.

2) Netflix went off the matrix. When I say matrix, I don’t mean the movie, I just mean the PC-based Internet. With Netflix off the matrix and on my $99 Roku box, my family actually enjoys watching Netflix streaming movies. It used to be I had to lead the kids to the PC and say, “look what you can do with Netflix!” They would blink once or twice and then say, “Dad, if I wanted to use the PC, I would watch YouTube or play Webkins.” Not anymore. We now have a queue of about 50 movies ready to play in the living room at any time. All of them family friendly, except, whoa, hey, who put Risky Business in there? I’ll have to check with my wife on that one. What does Tom Cruise have that I don’t? [Don’t answer that…]

3) Tina Fey is alive. As I reported yesterday, Nielsen says we watched 4.5 hours of TV a day in Q3 of this year. While that was attributable to the Olympics and the election, I think about 10 minutes of every day was probably spent watching Tina Fey. If she wasn’t doing her dead-on Sarah Palin impression she was talking about it with David Letterman; if she wasn’t being delightfully nerdy on 30 Rock, she was joking about it with Rachel Ray (btw, Tina Fey and Rachael Ray makes for a great rhyme, try it). And notice that all of her shenanigans, including CNN’s coverage of said shenanigans, are online for us to see on demand, over and over again. Do you ever get enough of her Palin-Clinton skit? Too funny.    

4) You didn’t have to go to YouTube Live. What? a YouTube event that is live? You mean you have to sit there and experience it linearly? You can’t just jump to the next related video as soon as you’re bored with the current performance? Hmmm. Why was this a good idea? The best headline on this one goes to the San Francisco Chronicle, “YouTube Has Real Party for Self-Made Stars.” Don’t get me wrong, I’m a fan of YouTube. It’s enormous — it delivers 25% of all the online video minutes American experience each day. But the whole point of YouTube is that it’s a massive filter. You don’t have to watch what you don’t want to watch. YouTube Live was not that. Luckily, I was able to catch up later by watching the highlights on, you guessed it, YouTube.  

No, he doesnt always look this scary

5) We’re not this guy. By “this guy,” I’m referring to my friend, marketer and social web practitioner, John Johansen (pictured here in his Halloween costume), who accepted a challenge from me to live an entire week without any video at all. None. Zip. Nada. And he opted to take this challenge during Thanksgiving week. That means no movies, no catching up on episodes of shows while visiting family. No football on Thanksgiving Day! Could you do it? Bet you couldn’t. Be thankful I didn’t challenge YOU!


Om Malik tackles web video’s dirty secret: It doesn’t always work

November 19, 2008

Interesting post from Om Malik on GigaOm yesterday pointing out one of the problems with online video that people like me who believe online video is the game changer that VOD and iTunes could never be often gloss over. After trying too hard to find and finally watch a jerky, freezy 60 Minutes interview with Barak Obama, Om rightly says:

There are too many points of failure when it comes to web video. These problems are only going to increase in the near future as more and more of us are going to watch more and more video online.

He’s right, of course. You and I are watching an average of 56 minutes of online video a week. That’s only 3.5% of our total viewing minutes, but it’s rising. The longer you do it, the more likely you are to do it a lot. And once you start watching full-length TV shows online, forget it, you’ll blow right past 56 minutes into 2.5 hours-per-week land. 

People at Akamai have been warning me about this forever. They have their hands on 25% of all the web content in the world. And they see that more online video + more of it at HD (let’s admit, 720p) resolution will take network congestion to new depths. As rhapsodic as I wax about the potential of online video (and I need to confess, in our home we watch at least 10 hours of online video a week between Hulu, Netflix, YouTube, and a million viral videos my kids and my wife come across), it is true that it can be spectacularly bad.

Take last night, for example. I recently had been treated to an early preview of some movie trailers at a meeting with Paramount marketing execs. I came home to report to my family on the best of them, including the terribly tasteless but funny Dance Flick. So when the preview finally hit the web, they were eager to check it out. I wasn’t home to witness it, but I was told it was a disaster. The video stuttered and stopped so often that they didn’t come away thinking the movie was nearly as funny as I did, after watching it in large screen glory in a private conference room.

And that’s one of the issues hanging over us: when the video stops and starts, our brains don’t engage the content as fully. The benefits of the medium are lost on us. Advertisers don’t get the intended benefit, content producers suffer from the inability to reach us with their creative output. Oh, yeah, and it’s annoying.

What do you think? Are you generally satisfied with the quality of video you’re watching online? Does it work as well as you think it should?


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

November 3, 2008

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.


Google uses brain science to prove overlay ads work

October 27, 2008

Although this study was released last week in hopes of bolstering the case for video overlay ads, it actually comes across as a confession to the market: CPMs on overlay ads are not as good as Google/YouTube wants them to be. Now I’m not poking fun, because that’s generally the case with a new form of online advertising, especially one that’s competing with TV-like 30-second spots running on Hulu.com, which advertisers understand and are ready to spend big bucks on. But overlay ads are not popluar with advertisers yet. 

Google’s solution to this dilemma was to work with NeuroFocus, a recently acquired part of the Nielsen family, to measure how people respond to overlay advertising at the deepest level possible: in the brain. Or in the trail the brain leaves behind, namely the peripheral nervous system. It’s a topic I’m way into, but I’ll spare you the nerdy details. This is similar to work Innerscope Research is doing, which I blogged about before

If this is all too spacey for you, you better get used to it. You’re going to see a lot more of this going on as advertisers and content providers want to show that they are engaging people. Funny how we used to trust Nielsen audience numbers for that, and were comfortable assuming the rest. Not anymore.

The science is actually solid, in case you doubt that. It’s just not very scalable because each person involved has to be hooked up to a machine, so it will likely remain specialized and custom (don’t expect any NeuroFocus nightly ratings anytime soon). Innerscope reduces that burden a little bit with vests that make measurements relatively unobtrusive and communicate results wirelessly. But that still means there’s a cap on the likely number of participants that can be in a study.

What do you think about measuring the nervous system for engagement? Would you wire yourself up for a study like this? Have you?


Will online video ads hit $989 million this year?

October 14, 2008

In October 2007, my very smart colleague Shar VanBoskirk, a principal analyst serving Interactive Marketers, authored our 5-year interactive marketing forecast. For the first time, she was able to break out online video separately from display ads and other interactive marketing avenues.

I won’t give away her hard-earned insight here beyond saying that in 2007, our forecast pegged the online video advertising business at $471 million, at least half of which — in my estimation — came from the 2007 advertising upfronts, where the networks aggressively bundled in online advertising to keep the broadcast ad numbers from flattening.

This forecast for 2008 put the number at double that — $989 million, close to the magic threshhold of a billion. Throughout the year I have been asked whether we think the assumptions of the model have held up. My answer is no: some assumptions fell below expectations and others came in above, chiefly: 

  1. YouTube hasn’t monetized its traffic effectively enough yet. This magic vein of cash has yet to be properly tapped. We saw an interesting interim announcement on how YouTube can add some cash through click-to-buy, but it’s really advertising that can bring in the dough once YouTube figures out how to make money without Viacom asking for all of it in the form of damages. Result: online video ad revenue not as big as you would hope.
  2. Online TV is bigger than expected. Remember, watching TV online is something that in 2006, only 10% of online video viewers did. By the end of 2007, it was 24% (see the report “What It Really Means To Watch TV Online”), a number we did not have in time to feed Shar’s forecast. Looking at the increased supply of online video — most of it from Hulu.com which increased supply both in amount of content and the breadth of distribution — that 24% number should double this year.  

The point is that even though YouTube didn’t come through for us, online TV has certainly more than made up for it, largely because the CPM on those shows is so awesome, ranging from $30 – $60 on a CPM basis. 

As a result, we stand by this number. As part of the validation exercise, I went through the following logic (which is summarized in the context of other valuable online video statistics in my Online Video FAQs):

  • In a typical week, 109 million hours of online video are watched.
  • If every hour of video has an average of 10 ads in it (video or companion banner), that means that just over 1 billion video ads are served each week, a run-rate of nearly 57 billion ads a year.
  • To hit our forecast of $989 million, the average CPM on the 57 billion ads run has to be $17.45 

The big assumption here is the number of ads per hour. For long-form content, 10 seems a tad high as a 45-minute episode usually has 6 ads. But add in another 2 ads for the whole hour and the possibility of a few pause ads and companion banners and the 10 assumption is reasonable. 

The real question is the CPM. For long-form content, that’s easy. For short-form content, overlay and companion banner ad CPMs can fall below a buck if sold as remnant inventory on an ad network. What do you think? Will online video ads hit this mark? Why or why not? What evidence do you have or signs do you see? I’m interested in your comments.