The U.K. VOD market – nascent but growing

Policy wonks, quango officials and broadcast executives met in central London last Thursday to debate the state of the U.K. VOD industry: offering perspectives on incumbent services, those soon to launch, rights management and pending regulatory changes.

Unsurprisingly, the first half dealing with audiences, programming and business models packed them in, while 90 minutes on regulation drove half the audience away, and left the other half in near coma.

Virgin Media’s charismatic Malcolm Wall, CEO of Content, hailed the success of VOD rollout on his platform, proclaiming that “the UK market is coming of age.” The service offers 3,700 of video content, including around 1,000 hours of catch-up TV from broadcasters such as the BBC and Channel 4. Just under half of Virgin customers use the service at least once a month (this compares with around 70% of Comcast subsribers stateside), with around 30% of views to catch-up TV. Some 270 million pieces of content viewed during 2007. His prediction that VOD viewing on the platform would soon outstrip linear viewing of terrestrial channel Five was built on with the further portent that 20% of UK viewing would be non-linear within the next five years. But most striking of all was his disclosure that subscription-based viewing is rapidly replacing pay-per-view.

Both Wall and BBC Future Media Group Controller Erik Huggers used their respective turns to plug the impending launch of a “10 foot” version of BBC iPlayer on the Virgin Media platform, due Q2 2008.

Channel 4’s Sarah Rose, Head of VOD and Channel Development, asserted that partnerships with TV platform partners Virgin, BT Vision and Tiscali TV were “fundamental” and responsible for generating the majority of views to the broadcaster’s 4oD umbrella brand. The biggest mindset change for C4, Rose said was developing approaches for customer relationship management, investing in software functionality and developing new approaches for compliance in an environment where the 9pm watershed is immaterial.

4oD online has an installed base of 1 million users (those who have installed the service software) and unsurprisingly the constituency is 60% male. More striking though was the suggestion that the most active of registered users skews female. Around two-thirds of online users are under 35. No surprises that comedy, drama (about a third of all viewing) and entertainment lead performance, but minority interest programming also does “disproportionately well”. The service is split between around 3,000 hours of (mostly free to view) archive – some of which can “engender loyalty to series” – 60 to 70 hours of new catch-up TV every week and around 300 films.

But there were two star turns at the event: Paddy Barwise, Emeritus Professor of Management and Marketing at the London Business School, and Roger Edmonds, a freelance journalist and one of the key figures behind UKNova, a BitTorrent site which specialises in British TV programmes.

“Calm down dears,” was Paddy Barwise’s opening remark, attempting to balance the boundless enthusiasm of incumbent providers with the reality check that for the overwhelming majority, linear TV rules. Barwise said that while announcements from major players were creating enormous developments on the supply side, but the demand side remained sluggish. Adding: “let’s have a bit of huimility about what will or won’t work, before throwing out too many babies with the bath water.”

John McVay of independent producer trade body Pact chipped in with the challenge that broadcasters may like to consider boosting spend on quality programme-making, before over-investing in technical platforms which were yet to prove themselves with mass audiences.

Roger Edmonds of UKNova threw down the gauntlet to U.K. broadcasters, promising that when they could fully meet the demand for British TV programmes that he sees from his users with a free service, he’d close his site down. With a nod to Project Kangaroo, the soon-to-launch on-demand joint venture between U.K. terrestrial broadcasters, he decried the scarceness of choice from traditional players.

Jeremy Olivier, Head of Convergent Media at regulator Ofcom issued the rallying call which cleared half the room, and devoted his piece to changes ushered in by the European Audiovisual Media Services Directive, which compels member states to move to more robust regulation of the VOD sector, including greater protection from content which may harm or offend vulnerable audiences. Ofcom has pulled together an industry panel to

Philips developing 3D VOD

Philips has demonstrated a 3D VOD system, according to this report, with no special glasses required! Clearly it’s only a matter of time before we have sensory VOD…

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…

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.

Sony / Sky JV brings go-anywhere TV to the PSP

Following news added yesterday that the European version of the PlayStation 3 is to get inbuilt TV receiver and DVR functions… 

Sony Computer Entertainment Europe (SCEE) and BSkyB have revealed further details of their joint-venture entertainment service for Playstation PSPs, first announced late last month.

Launching early next year, the Go! video download service will allow 2.3 million PSP owners in the U.K. and Ireland to watch Sky content on the move, reports the Financial Times. A collaboration with telco BT will also allow PSP users to make voice and video calls via their devices, as well as the ability to send and receive instant messages.

For the entertainment service, customers will be able to pick and choose from individual programmess offered by Sky, or subscribe to content packages like sports, entertainment, or animation, adds Wired.

Microsoft and BT to offer IPTV via Xbox in U.K.

BT Vision customers who also own a Xbox will be able to access the subscription IPTV service before the end of the year, report 360gamer.

Microsoft already provides the software powering the BT Vision service: a DVR-enabled Freeview set-top box with VOD delivered via IP.

The service launched at the end of 2006 and, despite a broadening content offer , has struggled to significantly grow its customer base, which stood at 20,000 households last month. The company hopes that last month’s launch of BT Vision Sport, a near-live catch service offering Premiership football, will accelerate take-up. In its coverage, The Independent states that BT is connecting new customers to the Vision service at the rate of 2,500 per week, a trend which, if maintained, will see the customer base grow to 80,000 households by the end of 2007.

The pairing of BT Vision with Microsoft Xbox is a filip for both companies: BT is able to extend the appeal of its service to game players, while Microsoft gets an off-the-shelf solution for video content on its consoles in the U.K., an area with which it has encountered difficulties, resulting in delays to the European VOD offer for Xbox Live Marketplace.

Sony, Matsushita launch VOD service; bridges computer/TV divide

Variety reports on yesterday’s announcement by Sony Corp and Matsushita Electric Industrial Co. Ltd. that they are to begin offering 2,000 VOD titles via their joint venture TV Portal Service, which can be accessed by internet-connected flat-screen TVs.

While the expansion of the service, initially launched in 2006 by a consortium of six Japanese consumer electronics manufacturers, consumers will be able to access a range of on-demand content, costing from Y200 (US $1.69) to Y300 ($2.54).

At first glance, the move promises to usher in true convergence and offer TV-type content, which just happens to be delivered via the internet, rather than broadcast. Yet, like Apple TV and, to a lesser extent, Windows Media Center, the enabling companies are applying 20th Century business models to a 21st Century distribution channel by limiting consumers to walled gardens of content.

Back to the drawing board… 

Aside from delivering what consumers want by making internet-delivered content available on a screen more conducive to the viewing experience unlocking the potential of the internet on TVs, it

Yet again we a move which promises to usher in true convergence, and yet again, the enabler clumsily insists on giving consumers choice only from a walled garden of content.  

What the studios say, what the studios are doing

Sometimes a job title catches your eye, and it was just that when I was at a recent industry event in Hollywood. The scheduled (but no-show) speaker from Sony Pictures Entertainment was purportedly VP of the mysteriously-named ‘Digital Media Initiative’.

I’ve watched with interest Microsoft’s convergent play with its Xbox Live Marketplace VOD service, so when’s Sony going to join the party? PS3 is, after all, a superior platform (technically speaking).

Perhaps further clues lie in this report from Broadcasting & Cable which suggests a strong contingent from SPE at next January’s consumer electronics bun fest, CES.

Let’s hope they get it right this time. Despite Sir Howard Stringer’s insistence that the company will be more joined-up, its squandering of opportunity across the digital media space, given its disparate interests across content and devices, is nothing short of scandalous.

Watch this space.

Update: 1 Aug 7

Mention and the internet delivers. The blogosphere is rife with rumours, centring on a tuner/DVR-enabled PS3 (predicted some years back). Can’t wait to see what the online VOD offer is like…

The end of TV (…just not quite yet)

When is the end of TV not the end of TV? When it “changes significantly over the next decade,” observes Ben Macklin, senior analyst with eMarketer and author of the new report US TV Trends: The Impact of DVRs, VOD and the Web.

TV ad revenues showed positive growth during 2006, states the report:

 

A forecast which is broadly mirrored by U.K. numbers published yesterday by Zenith Optimedia, which predicts modest growth of 2% for TV advertising during 2008 and slightly flatter growth of 1% to 2% from 2009-2012. Significantly, it asserts that growth across ITV’s portfolio of digital channels isn’t enough to shore up the decline in revenues for its primary ITV1 network. Unlike the U.S., however, U.K. TV airtime is the cheapest it has ever been since 1995 or the early 1980s.

Returning to the eMarketer forecast, it predicts that by 2011 as much as half of U.S. viewers will have access to timeshifting technologies, such as VOD and DVRs, combined with greater viewing of video online:

… Leading to more ad spend moving online:

In a related report, Media Post poses the question: will this year’s ad negotiations be the first digital upfront? No, according to the straw poll of one: MediaVest’s Christine Merrifield; though interest in VOD is on the rise.

The slow evolution of TV advertising

Product placement in US TV advertising was up 30% in 2006, according to numbers from research firm Nielsen, which has been tracking the category for the last three years. More interesting still, are the comments from John Zamoiski, CEO  of Norm Marshall & Associates, a firm which specialises in marrying brands with entertainment.

Mr Zamoiski asserts that it’s all about permanence: first ushered in with movies released to archival formats, such as VHS and DVD — stuff which consumers would watch over and over again, thereby exponentially increasing the value of any brands featured in such movies.

The explosive growth of TV programs on DVD and new distribution channels such as VOD and online video are only increasing the field of opportunity.

And how pervasive is product placement? Well this is the man whose firm got Dunkin’ Donuts into The Sopranos, Cadillac into Rescue Me, USA Today in The West Wing and Crown Royale in Desperate Housewives.

In related news from the Cable & Telecommunications Association for Marketing Summit, eMarketer reports more Nielsen numbers, suggesting that not only are more Americans interested in watching online video, but that such usage actually increases TV viewing time.

Euro Xbox VOD: update

Rollout of the Xbox Live Marketplace VOD service for European countries will be staggered, according to this report. “It’s going to be a country at a time. We’re going to have to get it right for each country; the rights, as well as the operation and localisation for each country,” said Xbox Live general manager JJ Richards.

“That will be our implementation rollout. So rather than hold everybody up we’d rather turn on France when we get enough French content and French rights, we’ll turn on the UK when we get UK, we’ll turn on Italy when we get Italy,” he added.

Joost: friend or foe to traditional interests?

It falls to Canada’s Globe and Mail to produce one of the more insightful pieces I’ve read about Joost in recent months. The main thrust is that Joost’s success is in offering traditional broadcasters and content owners (ie the ones with most stuff people want to [sometimes pay to] see) is that they are prepared to offer the kind of licensing terms and content security which is palatable to the aforementioned.

Although the piece is very enthusiastic about features such as geo-IP restriction (you can’t watch it unless you’re in a territory where the provider has license to make the content available), this is a basic must-have for any of these services.

So what drew my eye? A couple of quotes. First Stacey Seltzer of Joost’s acknowledgement that: “television is the greatest medium for mass communication that there’s ever been, [so] let’s start with that experience and then bring all the cool aspects of the Web to it.” Obvious, perhaps, but a basic fact many incumbents overlook: TV is the pre-eminent medium, certain audiences (the younger) are shunning it. But one step at a time for TV people (and the rest of the people they serve who don’t happen to be young); these businesses continue to enjoy a very healthy linear bottom-line with another eye on ‘the future’.

Liz Gannes, who writes about online media for the blog NewTeeVee.com, also has it spot on by saying Joost is in “a really nice position right now, because they are seen as someone that is respectful [of content owners’ rights] and so they have a leg up on competitors.” Know your market and which stage of the evolutionary cycle it’s at. A basic rule forgotten by Silicon Valley start-ups with hard-ons induced by latest VC injections (the V could as much stand for Viagra as venture).

Joost is awfully good at cosying up with the stalwarts of the traditional content industry by: A) appearing to know their business – or at least acknowledge its role; B) speak a language execs in the industry will recognise; C) be prepared to play the longer game for bigger stakes. The Viacom deal was merely opportunism (rightly capitalised on) in the immediate fallout of the latter’s decision to instruct YouTube to take the former’s content down, but these guys are serious about creating a service which is driven by major brands (and have intellectualised a little beyond the mere concept).

Joost also understands about content owners wanting integrity over the experience, albeit within a landscape which disintermediates them.

So far (from an industry perspective)… Joost 9/10 for its approach. Others 1-3/10 for theirs.

Mediaset launches online video service

The UK terrestrial broadcasters have generated a fair amount of press with their online video launches, but now comes the first major service from mainland Europe: Italy’s (or should that be Silvio Berlusconi’s) Mediaset.

The video portal will initially offer a selection of ‘best of’ TV series, news and entertainment content from Mediaset’s portfolio of terrestrial channels, with premium VOD to follow.

From September, three Serie A soccer matches will be offered each week, together with downloadable episodes of popular Italian and US TV series. 

There’ll be some web exclusive content as well as user-generated material related to the broadcaster’s programming.

Interestingly, given all of the hullaballoo about the extent of the BBC’s iPlayer offer, Mediaset’s interactive head Yves Confalonieri has ruled out the possibility of offering all its TV content via the portal: “the user doesn’t want all TV content on this medium,” he said.

The site currently attracts 6.5 million unique users per month, a figure Mediaset are banking on increasing with the new offer. The bulk of revenue is expected to be from advertising sales, rather than pay-per-view.

Mediaset is also looking at content syndication deals for third party sites, such as YouTube. Given the former’s recent acquisitions of Endemol and film distributor Medusa, it stands to have a significant edge over competitors.

Xbox Live Marketplace: content update

Disney is to offer movies on a download-to-rent basis via Microsoft’s Xbox Live Marketplace service (see also), including titles from its Walt Disney Pictures, Touchstone Pictures, Hollywood Pictures and Miramax Films studios.

“We’re always looking for more ways to let people experience our films,” said Dan Cohen, executive vice president of pay television and interactive media for Disney-ABC Domestic Television, in the announcement. “With the millions of Xbox 360 consoles in living rooms today with a direct, high-speed Internet connection, Xbox LIVE really has become a terrific device for the delivery of digital entertainment content.”

Microsoft has revealed that in the seven months since the service launched, nearly 10 million movies and TV shows have been downloaded via the service, which now features 2,350 hours of “premium entertainment content” from  15 partners.

The VOD service is currently exclusive to the US market, Xbox users in Europe and Canada can expect it to be introduced by the end of this year.

Evolution of the Joost/Viacom deal

More clues emerge on Viacom’s stake in Joost and whether the latest development is merely an expansion of that arrangement, or a sign that Viacom’s interest is in acquiring Joost outright .

Viacom’s VH-1 is to premiere the entire series of its new scripted comedy I Hate My 30s from next Monday, 10 days ahead of its first network airing. “We see this as Phase 2 in creating value with content owners,” gushed Alberdingk Thijm, executive vp content strategy and acquisition for Joost. What was phase 1? Putting more stuff up there than a few vids of girls in bikinis, boys on skateboards and black and white episodes of Lassie. 

Each episode will feature with pre-roll spots, together with cross-promotional for other Viacom interests on mobile and VOD.

The Viacom tie-up was opportunistic: Joost was desparate for big brand content partners and Viacom was looking at a way to put one in the eye of Google/YouTube following the great content take-down.

The key to the announcement is exclusivity in content before it can be watched anywhere else. Something which a handful of the major networks and MySpace are already wise to.

Prediction: irrespective of Viacom’s ulterior motives in the Joost deal, the relationship remains key for the latter. There are the beginnings of a “look what we did for Viacom” proposition in the making; handy to have up your sleeve at a time when the smart Madison Avenue / Charlotte Street money may be moving away from traditional media, yet many clients remain nervous about committing their buck to (in their view) such a nascent space.