Content Discovery

For anyone who has foregone Cable TV for an extended period of time or have friends that have done this, you generally find they become quickly out of touch regarding "what" is on TV. Hulu & TV.com haven't solved this issue as to consume VOD you need to understand what is scheduled. While many doubt the future of linear, the fact is many consumers would not understand how to discover content sans network/ cable promos.

Enter Netflix. Reed Hasting's Netflix CEO stated that:

Hastings said the future of video watching is not linear channels, it’s “closer to Facebook and YouTube” than it is to a standard grid view (presumably he means the way you scroll through TV channels now), and it will cater to the Internet generation.

My thoughts started flying when I read this as at the highest level Netflix has already solved the "way to watch" problem present within the Movie Rental business with a strong recommendation algorhythym. It is entirely possible that in the future, we would see their ability to recommend content to users applied to more than just DVDs. Why couldn't Netflix work in a STB, Mobile Phone, etc?

Consider that a Netflix enabled STB could organize itself with recommendations in a very similar nature to way Netflix.com works today. This is a model that has been widely adopted by the younger generation Hasting's speaks of in his quote above, however even they have been trained to consume/ view 'linear television.' It will take years to change embedded consumer behaviors, but just as Netflix changed the DVD rental business a well placed disruptor could accelerate this time line.

Last Night's NY Video Meetup

I attended last night's NY Video Meetup where HD Cloud, Mogulus, Boxee, and KickApps were showcasing various innovations. Each in detail:

• Mogulus - Demoed a very impressive live streaming product that was able to mix both an external video source and elemnts on the PC (such as a game, PowerPoint, etc). The feaure that seemed to wow the crowd was when the CEO demonstrated the ability to zoom into elements on the screen such as a chart in a presentation. The downside: Mogulus appears to use Adobe FMS for live streams, and it shows (quality/buffering/stalls, etc)
• Boxee - CEO and Co-Founder Avner demonstrated the Boxee interface and new partners in their API/ App Store program. During the Q&A section a Time Warner executive gave Avner a brief lecture on the as-is state of the industry relative to content rights. Avner listened to the comments and responded with a witty off topic "but broadband caps are mean."
• KickApps - Really impressive demo here (didn't catch the name of the demonstrator). They have created a WYSIWYG editor for video players; cool stuff.

The 4th company that presented at the event was HD Cloud, an Amazon Web Services based transcoding provider. The service utilizes EC2 to split a file into many parts and transcode across many Ec2 intances. In theory it seems like a good idea, but the details:

• Cost is $2 per GB transcoded
• Doesn't appear there is any IP what-so-ever; in fact anyone that has developers on staff could use FFMPEG or similar to do the same
• Security? The HD Cloud team said they anticipate handling high value content but they'll need to prove that they can secure the content outside of Amazon's existing model.
• File transfer today is done via. FTP; no Aspera or Signiant to speed AND secure delivery.

Doesn't look too good for HD Cloud, and at the prices they are charging for many it will be cheaper just to have a local transcode solution in their data center.

MSO Authentication taking off

As if we needed more validation that the MSOs are asserting their power in the industry, NewTeeVee reports that NBCU will be tightening their authentication methods for the 2010 Olympics. This is not so much as interesting for the Olympics but for the industry at large. The big question I have:

Is someone/ some entity creating a middleware layer that will assert entitlement on behalf of all of the MSOs?

This entire business of entitlement is similar to what Microsoft Passport, Facebook Connect, OpenID and other global authentication systems have tried to achieve. There are technical challenges that cannot be ignored most importantly scale and security (ask anyone who has been involved with SSO projects). IF we assume that the MSOs are successful in building these systems we then must theorize how will the business models take shape. Consider the following:

• The NBC Olympics model is one where multiple MSOs work around one destination
• Comcast's On Demand Online is a 1:1 relationship with a Comcast consumer and a Comcast owned portal
• Time Warner Cable appears to be building a set of middleware that will allow for content companies to build/ maintain their own entitlement products (less work than Comcast, but what impact will this have to the end user experience? Did we learn nothing from Hulu?)

While the Comcast model is relatively straightforward, if we dive into the Time Warner model the scenario gets more interesting. If TWC can easily assert a users cable subscription/ rights, will this allow sites like BravoTV.com, Discovery.com, and others to unlock their long form content for these subscribers in an on site player? Will it then force other MSOs to pursue a similar model? Finally how do you track/ analyze behavior across such a diffuse set of properties?

Interesting to say the least...

Quick links...

Hello everyone happy Monday! For your reading enjoyment...

• Why MLB ditched Silverlight: http://www.flashcomguru.com/index.cfm/2009/4/6/why-mlb-dropped-silverlight (rumors)
• YouTube to lose projected $470 million: http://www.contentagenda.com/article/CA6649280.html?nid=3798 (what no news on Hulu's rumored losses?)
• On the Hulu note, I did see the new ad format and can't say I'm a fan, forcing me to chose between two products with a 15 second countdown ahead of video? Meh, not impressed.
• Convergence Consulting says TV networks made $1.63 billion online last year: http://newteevee.com/2009/04/06/tvs-web-revenues-163b-in-2008/

Enjoy!

Will FOX or NBC dot com ever just use the Hulu player?

I find it quite interesting that ever after the creation of Hulu, NBC Universal and News Corp continue to dump what are probably millions (product development, headcount, ad sales, streaming costs) into parallel broadband video products. I've heard the argument numerous times "consumers still want a brand focused experience" - sure, some do, a small percentage. What most consumers want is easy access to the content that is free of barriers. It's no surprise to me that NBC.com and Fox.com continue to thrive because they are still given the bulk of on air promotion (snipes, ads, etc). It goes without saying that as Hulu's media campaign becomes more robust, their traffic will increase (February numbers confirm this).

Yes, I acknowledge that those inside of each of these companies beleive the Media Brand is king, even though consumers TV patters don't support this. Who really sits down and JUST watches ABC, CBS, or Fox anymore without changing the channel to a show brand that they care about?

There are some large leadership changes taking place at News Corp, with Jon Miller to become the head of everything-and-anything-digital. Will he be the first to look at the digital P&Ls, and in a recession make the "wise" choice to shed products that mirror what News Corp/ NBC Universal are already invested in with Hulu? Fox could easily use the white label version of the Hulu player that sites such as Comcast's Fancast.com implement. They can still keep the brand - and ditch the headcount, product investment, vendor cost, etc. etc. Not a shocking strategy, but it would be a large endorsement of Hulu as the future both in terms of technology and setting the bar on monetization.

I might be off base with this theory as NewTeeVee ran an article this morning touting that "Big Media is getting ready to eat its young." Of course if this was the case then why would Disney be looking to get an equity stake in Hulu? It is very possible that Big Media will decide streaming at their dot coms is worth ditching in support of one global platform.

Netflix streaming woes are anything but

Neil Hunt, the Chief Product Officer at Netflix has been under attack for "streaming" problems that are affecting some Netflix users (Neil's response here). It's nearly impossible to determine what is affecting the users at the edge, but we can narrow it down to a few issues that reflect the state of streaming as is:

1. Limited CDN Capacity for streaming media servers for Adobe, Microsoft, Etc.
   
2. Regional/ Local/ In Home Network Congestion
3. Unicast streaming protocols (RTMP/ RTSP) don't deal well with congestion and/or latency at all.
   
4. Using highly unproven and beta products for streaming to the PC/ Mac (Silverlight)
   
5. The marketing risk of labeling any product as HD; consumers expect HD at all times, not realizing it is a qualifying statement (You can get HD, but if the following happens...)
6. Naive consumers who don't and won't understand the nature of open networks

There isn't a good way for Netflix to troubleshoot these issues - and frankly consumers who say they are "leaving Netflix" are doing so without any understanding of how the Internet works. It is also questionable how much Netflix cares about quality issues. Streaming problems only enhance the need for their core product of physical media distribution. Then there is the fact that most of the content available is of the B/C range (A to F scale); no "great" assets that create immediate demand outside of convenience.

We'll keep an eye on this one... but don't expect anything too drastic one way or the other.

Yes, It's been a while

I have no excuses for going ~90 days without a post only to say that everything has been very busy lately, the economy not excluded. I'll be getting back on the horse and updating more frequently starting today.

I have seen a lot of lip service lately paid to Hulu, Boxee, and others who are bringing content to TVs, usually by hooking a PC up via. an HDMI or DVI cable. *Yawn* - no one is focusing on Netflix, why? While Hulu was out aggregating content and basically doing what-every-single-dot-com-had-done-for-years (ABC.com, NBC.com, etc); Netflix brought streaming to devices. There is a brilliance in the Netflix strategy that is subtle, consider:

• They have created a working device ecosystem (Console, TVs, BluRay Players)
  
• They are actively bringing cable content (e.g., Discovery, History Channel, etc) to a 10ft experience
• It almost appears that Netflix has found a solution to domain DRM; I can register an Xbox, PC, an LG TV, etc. to receive Netflix streaming content. Take this statement lightly as I acknowledge it is not "true" domain DRM.
• The subscription model greatly expands the available content they can license and make available, avoiding contractual conflicts with ad supported sites such as Hulu
  

Indeed, Netflix is the biggest risk to both sites like Hulu and the Cable Companies alike. If Netflix is able to accelerate their content acquisition plans, they could easily build a lower cost competitor to the recently publicized Comcast On Demand Online. In the recession, lower cost will trump premium services as consumers trade down to control their personal budgets.