The state of digital media in 2008

While mainstream media devotes most of its column inches to wrap-ups of the year that was, it falls to Kara Swisher to provide perhaps the most insightful piece, in this interview with former NewsCorp. new media deal-marker Ross Levinsohn, the man credited with getting Murdoch to buy MySpace.

Hulu: thin on content, high on usability

Online Video Watch gives its verdict on the Hulu private beta over in this post. The service scores highly for ease-of-use and discoverability of content, but poorly for the extent of the content offer itself.

However, that may be about to change, says the Hollywood Reporter, revealing that Warner Brothers Television is in discussions with Hulu, which will likely see a selection of its catalogue added alongside that from Sony and MGM, as well as Hulu co-founders NewsCorp. (Fox) and NBC Universal.

In related news, paidContent offers a pretty blunt assessment of NBCDirect.com, a new TV downloads service which offers content for seven days from broadcast and viewing for 48 hours once first played.

Targeted TV ads ‘three years away’

When Abe Peled, the brains behind News Corp.-owned set-top box software and conditional access specialist NDS, speaks some of us sit up and take note.

In an interview with the Financial Time, Peled claims that technology which allows advertisers to target viewers according to their viewing habits is about three to five years off deployment on pay TV platforms. As he’s in the business of selling such solutions, it’s no surprise that he’s beginning to talk up their potential. From a man who’s driven much of the technical innovation underlying some of the world’s most successful pay TV platforms, he probably knows what he’s talking about.

For anyone interested in how this is playing out so far, head over to Israel, the report states, which Jerusalem-based NDS is using as a test bed for next gen STBs, just as it did with the Sky platform in the U.K. for 1st gen interactive TV and DVR rollout.

On a related note, could it be mere coincidence that on the same day this interview appeared, Virgin Media, the cable platform arch-rivals of Sky, chose to release the news that it is to offer targeted advertising from next year. But wait for it, the killer quote, by self admission from the company’s content division CEO Malcolm Wall: “There is an issue of measurement. TV is very measured, but for VoD it isn’t there right now.” The technology isn’t there, or Virgin Media hasn’t yet committed to implementing it? Go figure…

Hulu bows today

One of the most eagerly-anticipated online video launches Hulu, the tie-up between NBC Universal and NewsCorp., launches in private beta later today, following a week of preview access for journalists and analysts.

The service rolls out with most of the trailed features, reports Variety, including the ability for users to share entire shows or just clips of them with eachother.

Hulu has also inked a deal with Sony Pictures Television for 40 TV series, and Metro-Goldwyn-Mayer Studios for an undisclosed number of series and movies.

All featured series will run with two minutes of commercials per hour, in the form of unskippable 15 and 30-second spots.

TV nets face up to growing online competition

Variety reports on the latest online video forecasts produced by market analysts Screen Digest: the U.K. market for online TV will be worth £181 million (US $362 million) by 2011, but growth of the online movies segment is predicted to be slower.

There’s no doubting that across the Pond, the competitive environment is really gaining traction, as observed by the Financial Times: in the two years since that watershed moment when iTunes first started offering download-to-own TV shows from Disney, all of the major networks have scrambled to not only beef up their own sites, but also to broker those all-important third party syndication deals.

In the last week alone, Walt Disney-owned ABC has agreed a deal to syndicate its shows, for free, via AOL. The net joins CBS, which has been aggressively pursuing its own syndication strategy for the past few months, while Hulu.com, the online video aggregator site JV between NBC Universal and NewsCorp. is due to bow next month.

Hopping back over the Pond to the U.K., the BBC, ITV, Channel Four and five all have online catch-up TV services: the BBC offers the broadest range and volume of hours, while ITV and Channel Four are increasingly bolstering their catch-up offers with back catalogue shows. Satellite broadcaster BSkyB is broadening its Anytime service, with different flavours of the catch-up service available both via broadband and Sky+ DVRs; the company’s recent pact with Sony will also see an extension of the service for Playstation PSPs.

The Screen Digest research referenced at the top of this post acknowledges that established players such as TV networks also face competition from non-traditional market entrants, such as Joost and iTunes. Significantly, it may be players such as Apple and Microsoft, which stand to gain the most if they can finesse their strategies to leverage consumer relationships through ownership of devices, such as iPods, or the world’s most uniquitous operating system.

Four predictions of my own:

1. The last year or so has merely been about positioning and trying to establish which online video offers work, and which don’t. Note CBS is moving beyond merely offering full-length TV shows online and gradually ramping up 2.0 functionality: conversational content. 2008 will see the space grow up considerably. 
2. Whether it’s aggregators or TV networks’ own sites, online video offers are principally restricted to ‘walled gardens’ of content, usually from the operating network or a select few content partners. This is wholly alien to the TV viewing experience: consumers don’t watch shows from a single network or producer. The walled garden approach smacks of protectionism and, over the fuller term, it won’t last for all but the smallest handful of players. The creation of Hulu.com is the first acknowledgement by two major players that hybrid partnerships such as thes, which broaden out the available content offer, are the way to go. YouTube is further evidence of a successful broad-brush aggregation model – albeit with some copyright complications.
3. The market is already overcrowded: come further shocks to the world’s stock markets (an inevitability), watch the venture capital evaporate. Incumbent players looking to second or third round financing, against a backdrop of unproven business models (let alone profit) will shutter or consolidate. Viacom had better be hoping that it can pick up the assets of Joost for a song.
4. Apple TV and Microsoft Media Center are the first two examples of mainstream PC/TV convergence: but neither has yet created a compelling enough content offer nor low enough price points to give the products a reasonable run at setting the market alight, beyond early adopters. Next gen games consoles from Sony and Microsoft will up the ante by gradually bolstering their IP-delivered VOD offers, but even these may struggle to break through beyond gaming loyalists. Either some boffin will come up with the cheapest and most elegant plug-and-play convergence-enabler – witness what Freeview set-tops did for the U.K. market – or new product categories, such as networked DVD player / recorders or DVRs will hit that magic tipping point of attractive pricing and mainline retail distribution.

NewsCorp.: TV shows to stay on iTunes

Following last month’s decision by NBC Universal to end supplying iTunes with download-to-own TV shows, speculation had grown over the future of other contracts coming up for renewal.

NewsCorp. prez Peter Chernin yesterday confirmed that the company has no plans to take its shows off iTunes, but has called on Apple to be more flexible about its approach to pricing.

“Right now we have a perfectly good relationship with Apple,” Chernin told Reuters. “But let me say this, we’re the ones who should determine what the fair price for our product is, not Apple.”

Apple to halve cost of iTunes TV downloads; supplier rebellion brewing?

Apple is planning to cut the cost of TV downloads via its iTunes service from US $1.99 to just 99 cents, reports Variety.

The move would create a single price point for both audio and TV downloads, which Apple believes will drive consumption for the latter category, which remains completely dwarfed by equivalent music track downloads. Given Apple’s success in dominating the digital downloads sector, any changes to pricing could prove an adrenalin shot to sales of TV downloads.

It’s reported that pricing for movie downloads will likely remain unchanged and there hasn’t been any comment on price points for the recently-launched TV downloads offer via the iTunes U.K storefront, where shows sell for double the existing equivalent price across the Pond.

Reuters builds on Variety’s coverage, suggesting that other TV networks may be emboldened by NBCU’s move, with a Gartner analyst even speculating that video content may all but disappear from the iTunes service.

News Corp., Time Warner, Viacom and Walt Disney Co. all have contracts with iTunes. One of them is due to expire by the end of this year, and another by next year, according to industry sources, the report adds.

In related news, Apple and partner record labels are to go before the European Commission on 19 and 20 September, to defend accusations of price-fixing across the Eurozone.

Newsite has a name

Newsite, the ‘YouTube killer’ online video JV between NewsCorp. and NBC Universal has taken the wraps off its official name: Hulu.com.

A holding page has gone live, trailing a by-invitation beta launch in October (anyone can sign up, when the account gets activated will presumably be determined by capacity).

“We just wanted a name that is short and easy to spell. We like the idea that it rhymes with itself. We wanted a fun name. It captures the spirit of what the team and the service is like,” Hulu spokeswoman Christina Lee told Reuters. “It doesn’t have a definition in the dictionary.”

With a name like that it’s clear that the site is going after a younger-skewing demographic, concurring with these findings from advertising.com that the largest market for online catch-up TV is 18 to 34s.

TiVo’s prospects down under

Following its misadventure in the U.K. in the early 1990s (due, no doubt, to its decision to get in to bed with NewsCorp.-owned BSkyB), TiVo spent the following few years focusing on its key U.S. business.

It’s only in the last couple of years that TiVo has, once again, spread its tenticles further afield: to China and, more recently, Australia.

Not much has been heard of the China (or was it just Taiwan) deal since 2005 which, for a company which has so effectively timed press announcements of any kind to coincide with results reporting, likely means no news is… no news.

But the Oz deal is generating an increasing amount of press, not least this spoiler piece, coincidentally from a paper owned by NewsCorp., which also happens to own the majority interest in pay TV platform Foxtel and offer its own DVR product.

Perhaps a reaction to other reports last week that TiVo has bagged charter advertising partnerships with 20 companies, each paying AU $1 million (US $792,517) each to learn more about what makes ad-skippers tick.

Australian TV and its liberal sprinkling of ads (most usually with very low production values) throughout programmes makes it ripe for DVRs.

Yet, paradoxically, many of its free-to-air broadcasters have actively suppressed the emergence of DVRs through some strange anomaly which allows them to retain copyright over listings information and, thus, strangling EPGs which are the lifeblood of DVRs.

The copyright ruling was successfully challenged in an Australian court earlier this month

But it’s already an overcrowded market: TiVo will be launching against Foxtel’s already-established DVR, domestic company ICE TV – which, like TiVo, offers a platform-agnostic product — and, according to other speculation, possibly a DVR-enabled Sony PlayStation 3 too. 

One to watch…

‘YouTube killer’ gets cash injection

Ramping up to the mooted autumn launch of NBC Universal / NewsCorp. online video joint-venture codenamed ‘Newsite’, the companies yesterday disclosed that they have swapped 10% of equity for the venture in return for US $100 million from Providence Equity Partners. The deal values the new service at $1 billion and, say paidContent, is the strongest hint yet that the partners may be looking to float the company.

NDS buys online video specialist

In a development which demonstrates that a growing number of broadcast pay TV platforms will be adding online video services, NewsCorp.-controlled interactive TV and conditional access specialist NDS is to acquire the rich media distribution technology company CastUp for US $11.3 million.

Founded in 1999, the Israeli developer of IP streaming media products counts HP, IBM, Microsoft and Orange among its customers

What’s holding online video advertising back?

Wave, after wave, after wave of research suggesting that consumers (especially younger ones) are spending more time watching video online; tet the ad $ have been slow to move in. Why?

Take Procter & Gamble – the biggest advertiser in the world – which over recent years has accelerated the amount of spend away from traditional media and towards online. What aren’t the rest getting?

Well there’s the small problem of measurement, for starters: Nielsen/NetRatings may have made a bold announcement about standardisation, yet implementation is still some way off.

Meanwhile, eMarketer claims 2007 is the year where ad spend on online video will rise by 89% . What are we waiting for?

In a word (or several): the big trucks rolling into town.

It’s unlikely the effects of new launches from the NBC Universal / NewsCorp. ‘newsite’ launch, Comast’s major web drive, Joost out of beta and the BBC’s non-public service iPlayer launches will be fully felt at least until next year. Which is why next year the figures for ad spend suddenly start to leap. Advertisers need proof-of-concept, not stuff for shareholders.

Then there’s honing understanding of the type and duration of advertising which will work with online users.

The same eMarketer study, suggests existing approaches remain fragmented and confusing. The one thing that’s overwhelmingly clear, the ad-funded model is here with us for good, as only a tiny minority of users are prepared to pay for online video:

More granularity still when it comes to exploring consumer attitudes towards the context of accompanying ads:

And then re-posing questions concerning ad durations:

The cost of online video-on-demand

4oD: not explicitly reported, but new media division – spanning other activity too – spent £34.6 million, up £11.5m on 2005. (Source: C4’s 2006 annual report).

60frames: the JV between Hollywood power brokers United Talent Agency and online ad agency Spot Runner. Start-up capital of US $3.5 million. (Source: Globe & Mail, 31 Jul 07)

Babelgum: €220 million [US$288m] (source: C21 Media [by subscription], 19 April 2007). Other sources suggest seed capital of €10 million [£6.78 million] from founder Silvio Scaglia, with a further €70 million pledged during the next three years.

BBC iPlayer: £4.5 million (source: The Sunday Herald [UK], 2 December 2007). Funded by licence fee.

BitTorrent: backed by US $20 million from  Accel Parners and DCM.

Break.com: Lionsgate has invested US $21million for a 42% stake.

Brightcove: US $81 million so far… Launched 2005 with $5.5 million funding from General Catalyst Partners and Accel Partners (source: company press release, 1 March 2005). Raised a further $16 million the same year, attracting investment from AOL, IAC/InterActiveCorp, The Hearst Corporation, and Allen & Company LLC (source: company press release, 22 November 2005). A further $59.5 million was sunk by a syndicate led by AllianceBernstein L.P., Brookside Capital LLC, Maverick Capital, Ltd.; the funding round also included investments from The New York Times Company, Transcosmos Investments & Business Development, Inc., as well as all of the company’s existing strategic and financial investors: Accel Partners, Allen & Company LLC, AOL, General Catalyst Partners, The Hearst Corporation, and IAC/InterActiveCorp. (Source: company press release, 17 January 2007).

Bud.tv: backed by parent company Anheuser-Busch to the tune of US $30 to 40 million.

Dave.tv: Provider of video distribution and social networking platforms to content providers, founded in 2003. The company is currently backed by angel investors, including Applied Semantics co-founder Rex Wong, who is believed to have sunk at least half of the company’s initial $7 million funding (source: MarketWatch, 1 Aug 2006). Potential investors take note: the company’s site says ”We are in the midst of seeking strategic or venture capital to facilitate our growth.”

ITV Broadband: £20 million (source: Digital Spy, 8 June 2007).

Hulu.com: NBC Universal / NewsCorp.’s JV, originally dubbed ’Newco’: US $131 million (source: LA Times, 29 June 2007).

Joost: seed capital of US $45 million (source: Wikipedia, 29 June 2007). Backers include Sequioa Capital, Index Ventures – an early investor in Skype – CBS, the US media group, and Li Ka-Shing, the Hong Kong tycoon. Viacom, the US media giant, also has a minority stake.

Vmix: seed capital of US $5 million in 2005 (source: Marketwatch, 1 Aug 2006), plus further funding of $16.5 million in October 2007 (source: Vmix press release, 31 Oct 2007). Founded by former execs from Universal Music Group, Fox Studios, Apple and mp3.com. JK&B Capital and ATA Ventures joined existing investors Mission Ventures and Enterprise Partners in the latest funding round.

Vudu: founded 2004, launching summer 2007. Backed by US $21 million from Benchmark Capital and Greylock Partners.

Vuze: backed by US $13.5 million raised from Redpoint Ventures, BV Capital, Greycroft Partners.

Update 17 Dec 07

Recommended reading: Media and entertainment freelance writer Daisy Whitney has produced this excellent summary of going rates for online video advertising rates on some of the best-known sites.

Online video: nota bene

The-still-to-be-named online video tie-up between NBC Universal and NewsCorp has hired former Amazon exec Jason Kilar to head up the new venture, slated for launch this September, or possibly later still. According to the LA Times, TV industry heavy-hitters weren’t interested in the role, “in part because of Hollywood’s pockmarked history with partnerships and the inherent difficulty of keeping the interests of the two giant media owners aligned.” Kilar’s 10 years at Amazon saw him forge strong relationships with the studios and beef up the e-tailer’s bottom line for physical (DVD) and online sales of TV and movie product. He also moved on to take overal responsibility for “facets of the online customer experience”, with a direct reporting line in to Amazon CEO Jeff Bezos.

Who’d sniff at a job which links two of the US’s biggest content owners, and sews up up 90% of online distribution? Good luck, Jason.