Ever more sophisticated means of driving ad revenues to Internet video are entering the Web publishing domain just as a new burst of over-the-top initiatives is opening more ways for such content to make it to the TV set.
In this new advertising environment, tools supporting addressable placements tied to user tastes and demographics are engendering advances in the over-the-top TV space that advertisers and programmers have long been searching for in traditional linear and on-demand TV programming. Advertising will be facilitated as well by new approaches to viral marketing of professionally produced video across social networking sites with mechanisms to assure advertisers that the content is being exposed in legitimate ways and is therefore safe for ad placements.
Just how worrisome such developments should be to entrenched service provider and media interests is a matter of dispute. "The biggest challenge for big media companies is the misconception that it's a zero sum game," says George Kliavkoff, chief digital officer at NBC Universal, which has been an aggressive proponent of programming distribution over the Web through its own site and Hulu, its joint venture with News Corp.
"It's just the opposite," Kliavkoff says. "The Internet drives viewership on TV. There is a long-term issue of whether there's going to be an adverse effect on the traditional syndication market, but, right now, Web distribution of our content is proving to be advantageous to viewership."
Peter Stern, executive vice president for strategy and product management at Time Warner Cable, isn't so sure. Over-the-top content replicating cable TV subscription content "absolutely does concern Time Warner Cable," Stern says. "Free is a good deal. If people can find a way to get content without paying for it, they will."
The barriers to getting access to such content through the TV will fall, Stern says, Consequently, the task for service provides and programmers is to come up with a mutually beneficial business model that protects subscription revenues while providing customers access to content when and where they want it.
"The answer lies with programmers," Stern says. "They're going through interesting internal debates. Should we put content on the Web for free or hold back in order to preserve our $25-$30 billion subscription business? The model where they put everything online for free and rely on advertising is going to be challenging."
Instead, he says, programmers should develop strategies that recognize the benefits of subscription models in the context of service providers' taking steps that deliver maximum value to subscribers. "We at Time Warner Cable think there's a solution," he says. Under TWC's model programmers would allow broadband users who are subscribers to their cable-delivered fare to see the programming on their PCs or other devices. Non-subscribers would only be able to see clips promoting the programming. "Consumers who pay for programming should have an opportunity to see it on any platform," he says.
The pace of developments, however, may be arguing for a less structured approach to sorting out the business models, leaving it to a vast array of players acting in their own best interests to create a new, mutually beneficial marketplace. This is how Scripps Networks, notwithstanding its considerable stake in TV subscription fees, is approaching the rapidly evolving scenario, says Deanna Brown, president of Scripps Networks Digital.
"I'm the disruptive girl," Brown says of the role she assumed at Scripps in 2007 after leaving Yahoo! as general manager of its Media Group Lifestyle unit. "I wasn't hired to protect any sacred cows."
But, she quickly adds, the natural course of self-interest and maintaining a high-profile brand in the cable TV world necessarily means her company is mindful of its priorities in cable. "We're sitting nicely, because we play in both worlds," she says. "We want to make sure the Comcasts and Time Warner Cables of the world do well. The affiliate fees they pay us afford us the ability to create great programs and brands and to leverage those brands across new platforms."
She advises against setting rigid demarcations as to who qualifies to watch a particular piece of Web content or to predict what people will watch on the Web versus what they want to see on TV. "A 22-year-old might not want to watch a 25-minute TV program on the Web," she says. "But she might sit and engage with content on a site for an hour and a half if the one-on-one experience she gets from the Web is compelling.
"It's not just about broadcasting content [on the Web]," she adds. "It's about sharing. Activity around video is the most robust experience for us to explore to encourage that engagement."
Smart exploitation of the potential can even lead to new TV shows, she notes. For example, when Scripps saw that visitors to one of its Web sites wanted to display photos of their homes and solicit comments from other visitors, the company incorporated the idea into programming on its HGTV cable network.
"The cable model won't go away," Brown concludes. But it may have to change dramatically in light of the growing push to drive Web viewing to the TV. One of the widely reported developments at the recent Consumer Electronics Show was the computerization of TVs and other devices to make Web surfing intrinsic to user experiences on multiple platforms. Taiwan manufacturer Asustek, for example, promoted a wall-hung flat screen TV that is also a touch screen computer, and it demonstrated a computerized keyboard that allows TV viewers to access the Internet.
As Jong Woo Park, president of Samsung's digital media business, told The New York Times, "In the next five years we are not only going to provide hardware but [also] content through our devices, in an easy, more convenient way. You will use the same TV and the remote control but have completely different functionality."
As reported elsewhere (p. 10), major consumer manufacturers have engaged with Macrovision to supply its Neon interactive programming guide technology to allow buyers of new TV sets to find and access content from all sources, including the Web and home media centers as well as regular TV programming. As these cross-platform capabilities emerge in the mass market, the perspective on how programming is sold to consumers and monetized through advertising is sure to shift dramatically.
Speaking at CES of the emerging content consumption experience and its implications for business models, Microsoft CEO Steve Ballmer, also quoted in The Times, said, "You ought to expect that to be more and more unified – three screens: TV, phone, PC – one cloud-based experience, live, essentially projecting through consistently, and appropriately, to the three screens."
NBC's Kliavkoff makes clear his company is well positioned to ride these trends while avoiding the "zero-sum" possibilities that haunt some players. As an example of the care NBC uses in avoiding cannibalization even as it liberally promotes viewing through distribution of popular TV programs, he notes that the network does not offer any episodes of "Seinfeld" on the Web, no matter how old, because of the continuing popularity of the show in syndication. At the same time, he adds, the only place NBC's old series "Lost in Space" can be found is on Hulu.
"The market is doing the right thing," he says. "At some point it will make sense for 'Seinfeld' to be available on line."
Ironically, no company has done more to put content suppliers in the business model driver's seat than Comcast, which through a series of acquisitions starting three years ago with its purchase of Web publisher thePlatform has been building a next-generation Web content support infrastructure that could pose significant challenges to the traditional cable TV business model. But Comcast executives have made clear they're evolving the cable model to fit the new market contours, and thePlatform is a big part of ensuring they're doing so from a position of strength at the vortex of market-shaping forces.
"thePlatform's mission is to be an open, central hub for managing, monetizing and syndicating video – and providing our customers with the versatility to support their video businesses on PCs, mobile and TV," says Ian Blaine, CEO of thePlatform and senior vice president at Comcast Interactive Media.
Now that Web publishing and syndication through services like those provided by thePlatform have become the norm, there's another sea change coming in the evolving Web video scenario, Blaine says.
"The basic building blocks are in place with the ability to deliver content at the right bit rates to create the right experience everywhere and the ability to wrap usage rights around the content and create a way to monetize through pay or advertising models," he says. "Now the goal is to support massively decentralized access to content, making sure content goes to users wherever they happen to congregate but with centralized control over monetization."
This is doable because the basic publishing and distribution capabilities, including on-the-fly bit rate management, rights management, interaction with established ad placement systems and much else, rely on distribution of player software that's embedded in the content stream. By adding new functionalities to the core platform and to associated plug-ins for content owners to include in the distributed player software, a Web publishing service provider like thePlatform can change the way things are done virtually overnight.
It's clear, Blaine says, that the kinds of capabilities thePlatform is bringing to content exposure and monetization will empower content owners at the expense of traditional modes of Web content aggregation and distribution. Content owners are now able to directly control content distribution channels, the modes of exposing content to end users and the processes to ensure that ad dollars are generated with content exposure wherever it occurs. "Distributors still matter, but their relative importance will shift as consumers flock to new destinations," Blaine says.
The driver behind this sea change will be the degree to which viral distribution of content through what Blaine calls "smart syndication" breaks the damn that's been holding back the flow of ad dollars into Web video. "If you look at the number-one issue keeping advertising dollars from flowing to video content, it's the lack of inventory," he says. "There's not enough content available in trusted environments to satisfy advertising demand.
The problem is the preponderance of situations where advertisers can safely place ads without worrying whether the content is being viewed legally consists of high-profile exposures of "short-tail" content. "There's so much viewing on the short tale, there aren't enough views per consumer," Blaine says. "People aren't going to keep watching 'Lost' over and over."
The solution to creating more inventory with more views per consumer is to increase the number of impressions around any given piece of content and to increase the variety of content that is getting exposed, he adds. "You want to allow consumers to generate viral distribution of the content while allowing content owners to retain the controls necessary to generating advertising revenues on those exposures," he says.
thePlatform is supporting this kind of syndication through introduction of advanced recommendation engines and enhanced viral marketing through social sharing of content across social network boundaries. This requires that when a user engages with a video feed, the managed connection "learns" in real time which other files in the content library might be of interest to that viewer and offers those as viewing options as well.
The recommendation engines include an advanced version of contextual recommendation, which traditionally involves peering into video file metadata to suggest video options related to what's being viewed. Blaine says thePlatform is leveraging the work of StreamSage, a company acquired by Comcast in 2005, to broaden the associative triggers by converting speech in the audio stream to text and performing contextual analysis on that as well.
Another category of recommendation engine thePlatform is using relies on "wisdom-of-the-crowd" analysis, a method made famous by Amazon and now used by video suppliers such as Netflix. Here the engine finds associations between content files that might have no contextual relationship but which usage patterns reveal to be appealing to a shared audience. Blaine says that by tracking how people respond to recommendations generated by this type of engine, thePlatform can continually refine the process to more accurately reflect what generates views and what doesn't.
With such recommendation capabilities built into the content flow, the key to maximizing viral marketing of content is to enable connectivity of users across social networking boundaries, which is being facilitated by the new OpenSocial standards promoted by Google (see story, p. 1) and by the Pulse service introduced by Plaxo, a pioneer in social networking acquired by Comcast last year (see p. 36). Pulse allows users to rate and share content with friends, no matter which social networks the affiliations reside in.
A content publisher can embed prompts implementing the Plaxo networking functionality in thePlatform's player software, thereby encouraging users who are signed up with Pulse to push links to that content out to all their affiliates. "Between the two organizations, our technologies and teams, we believe we are in a great position to execute against this vision," Blaine says.
While the advances associated with smart syndication with utilization of advanced advertising capabilities greatly expands content owners' control over monetization, these advances can also be leveraged by service providers or other content aggregators, including consumer electronics companies who want to drive device purchases by offering new content experiences to consumers. In other words, even as traditional service provider business models are threatened by these developments, there are new business opportunities to be exploited by adopting new models.
This is especially the case with video on demand, which Kliavokoff says the cable industry has failed to exploit to the fullest extent possible. "Cable has put together great assets for VOD," he says. "It's a business to build from."
One way to do that is to begin melding long tail content from the Web with traditional on-demand programming while building revenue opportunities, including advertising, around the unique user experience that results from sophisticated presentation of all this aggregated content. "There's a real opportunity here for service providers," Blaine says. "They're in a strong position to blend broadband and TV services together to deliver much greater value to their customers."