Hey, people are reading my blog. And not understanding it… oh great. One reader asked if I could explain the MIT Enterprise Forum discussion in plain English.
Sure… at least I can try. A lot of television content is going to be available on the internet (a lot already is). Companies that make money today by showing TV programs are predicting they won’t be able to keep making money when that happens. So every company that makes TV content, or that shows TV content, is trying to figure out what to do to save their business. At the same time, new companies (like Google) that don’t have traditional TV businesses are also trying to figure out how to make money showing TV content to people on the internet. And finally, viewers are starting to realize they don’t have to rely on broadcast TV or cable or satellite TV to see their favorite shows. The loss of viewers for traditional TV is reducing cable/satellite TV subscriber revenue, and is also causing advertisers to spend less on TV ads, and they aren’t shifting that money to internet sites showing TV programs. So the session was designed to highlight new ways companies can make money on internet TV.
And those new ways boil down to three basic strategies: 1) keep subscriber revenue coming in by allowing cable/satellite subscribers (and no one else) to also see programs on demand on a website; 2) create the same size audience for each program that used to watch it when it was broadcast or shown on cable, by making it available on lots of websites and charging advertisers for all the viewers no matter where/when they saw it; and 3) making it possible for anyone to pay directly for each show they want to watch. The future of TV will be a combination or coexistence of all three strategies.
And no one knows which of today’s companies will make the transition successfully to this new TV land. They’re all trying to navigate a treacherous path.
Last night I attended a panel session on internet video at the MIT Stata Center, sponsored by the MIT Enterprise Forum’s Digital Media & Telecommunications SIG (details below). There were 100+ attendees, and a good panel of local media execs and experts. Among the many bits of insight and data tossed out, I heard several that caught my ear.
– In the mobile world, even though feature phones are still selling at an 80/20 ratio over smartphones, Nielsen data shows about 50% of mobile users are accessing video today (with their underpowered phones and less-than-speedy network connections). As for the future of the mobile device, panelists agreed that, even if the iPad isn’t a smash in its 1.0 version, Apple won’t rest until the tablet is amazing. And there’s overwhelming evidence that some device between a pocket-sized phone and a 4-5 pound laptop with attached keyboard will emerge as a significant and hot-selling platform for communicating and consuming digital content and services.
– Joel Olicker, CEO of Powderhouse Productions in Somerville MA, said he’s observed over the past two years that many large content producers are slowing their rush to produce online digital content. Some of that’s attributable to the slowing economy, but it’s mostly because there’s been a glut of crappy online content that hasn’t delivered audiences as expected, and there’s utter confusion about the new definitions of ad value, impressions, and the appropriate cost per impression online. The metrics everyone has relied on in the broadcast ad world are still being transformed for the online world.
– Brian Partridge of Yankee Group identified a few under-served segments of the online video world (i.e., where opportunities lie): creating/promoting videoblogging sites for mobile users; providing consulting/strategy help to media companies on building an efficient multi-platform program delivery service; and finding ways to help Tier 2 carriers in the U.S. maximize their networks as video delivery services (by, for example, adding intelligent caching of content).
– Bob Mason, CTO and co-founder of Brightcove, painted a very optimistic picture of the future that Brightcove is working toward. In Bob’s view, media companies represent the early tip of the iceberg as far as business opportunity for online video. The hidden part of the iceberg are the millions of non-media companies, large and mid-sized, that will discover how online video on their existing or new websites will become critical to helping them compete for customers, partners, suppliers, and employees. Brightcove envisions opportunities for building platforms, delivered as an SaaS offering, that help companies in every business segment better serve specific audiences and operate more efficiently. Bob used Salesforce.com as an example. CEO Marc Benioff has been conferring with Brightcove about how to better use video within the Salesforce ecosystem. He also talked about how video is being adopted by retailers as a way to bridge their online and physical stores, and even how the U.S. State Department has adopted worldwide video distribution as the most efficient way to educate far-flung embassies and consulates on the latest policy and diplomatic information.
– Mason also talked about the huge opportunities in organizing and measuring data about online video. He compared this to what became a hot category of online service during the e-commerce boom years, when hundreds of search and recommendation sites sprang up to help consumers sort through thousands of potential places to buy stuff online. (My own take on this opportunity: two types of engines are emerging already. One type relies on algorithms to analyze what you do online and then recommends other video content you ought to be interested in. The other type relies on social networking data to track what your friends watch, and recommends similar stuff. A third engine is needed also — something that serves the same purpose as flipping through channels, for when you don’t know what you want to watch and just want to see what’s on. I don’t know if this is really an engine or if you’ll just browse through a bunch of familiar websites looking for whatever catches your eye, but there ought to be a way to make “grazing” video on the Internet easier.)
– Regarding revenue, Mason noted that TV Everywhere has really caught traction on the sites Brightcove’s platforms are managing. He noted, however, there will not be a one-to-one revenue replacement of ad revenue by subscriptions, or any other simple revenue model. Instead, the future revenue flows from online video will be multifaceted, complex, there will be a lot of them, and it will take years to evolve workable revenue models for each emerging segment of the market. (So, I wonder, what’s happening to the per-household revenue for digital media during this transition? I believe the average revenue per household, generated by selling ad impressions, subscriptions, and direct payments for content, will go down for a period of time, then will start to climb again. Would love to have someone fund a tracking study on that!)
– And someone asked if television networks would disappear in the foreseeable future. The panel agreed there will always be a need in the video entertainment world for aggregators of one kind or another. Right now, companies like Comcast are on the rise (while traditional broadcast networks are treading water) because they are expert at extracting a large amount of revenue for delivering aggregated content. Other sites and companies will get better at doing this too, especially selling on-demand content (by subscription or with non-skipable ads). Bob Mason gave an example of a Facebook “channel” providing high-quality pet-related programming (and Joel Olicker concurs that pet-related content is certainly popular with cable viewers today–Powderhouse produces shows for Animal Planet, after all).
I came away with a half dozen ideas for interesting research projects and questions to put to internet video executives. A great evening.
MIT Enterprise Forum:Digital Media & Telecommunications SIG
Internet Video Everywhere: Entrepreneurial Opportunities in Online and Mobile Video
Bob Mason, CTO, Brightcove
Joel Olicker, CEO, Powderhouse Productions
Brian Partridge, VP of Research, Yankee Group
John Puterbaugh, CEO, Nellymoser
Moderator: David Ryter
An insightful article from Keith Richman of Business Insider pointing out that video/entertainment content producers have new obligations to take on in ensuring their content is most effectively distributed to its intended audience. No longer enough to hand over both physical distribution AND building of the audience to a distribution partner.
Keith didn’t include examples, so it will take some work to uncover some best practices in this regard.
He mentioned many distribution companies are producing their own content. I’ve heard that the opposite is also true: low cost of “distribution” to certain audiences is leading content companies to do their own distribution in ways they’d never have dreamed even just three years ago. We’ve passed some kind of inflection point for non-traditional distribution of entertainment.
Also, the jargon in the digital media space is getting confusing to me. The web of interconnections between companies in this ecosystem is generally blurring what categories a particular company does business in. So it’s hard now to mention categories like “distribution” and know just who the heck you’re talking about.
UPDATE: And here’s an interesting tidbit from RampRate analyst Steve Lerner on MGM Studio’s impending bankruptcy. According to Steve, “distribution” was the ball game for MGM, because starting in 2000 it erroneously built business plans based on robust DVD sales projections that shouldn’t have been believed.