Jonathan Weitz, Partner, IBB Consulting, LLC
January 16, 2012 – In this discussion from ScreenPlays’ Media Innovations Summit, key players involved in efforts to develop viable over-the-top consumer experiences for connected devices debate where the shortcomings are and what needs to be done to overcome them. Participants include:
Rex Harris, media innnovations supervisor, Video Innovations Group, SMGx, Starcom MediaVest Group
Bill Sheppard, chief digital media officer, Oracle Java Development Group
Matthew Scheybeler, CTO, blinkx
Moderator: Jonathan Weitz, partner, IBB Consulting, LLC
Jonathan Weitz – Let’s begin with each of you telling us where your roles fit in CE manufacturers’ pursuit of over-the-top strategies for their TVs and other devices.
Matthew Scheybeler – For those who don’t know, blinkx is the world’s largest video search engine, which was started seven years ago to fix a problem we saw with video and video search. Early approaches missed the most important point with video search, which was the video itself. They literally treated it like an opaque blob of data with some metadata attached. We thought that was wrong, so we developed some software that literally watches every frame and listens to every spoken word and transcribes that oral data. This approach throws up some fussy data, so you need some way to cut through the noise. We have cut and match techniques that allow you to cut away that noise and leave you with a saved concept of what that video is all about. So it’s a very powerful set of tools.
In terms of connected TV we define it as Internet TV, and we really think the promise of Internet TV is threefold – one is giving you access to the depth and breadth of video content that’s available on the Web; two, enabling social features so that everybody can share video’s ability to comment on videos and get a closed feedback loop for the content creators, and, thirdly, you have access to all the Web has to offer – you have audio, images, other services like Skype, all available to you. In the chaotic world of the Web you need a way for the user to navigate through that sort of scary world where there’s lots of noise. We believe our technology can help do that.
Bill Sheppard – Java is the least known but the most deployed technology in connected TV. We are part of every Blu-ray disc player and tens of millions of cable set-top boxes, satellite and over the air.
One of the nice things about having Java there is that it’s a fantastic way to provide the connection to other devices in the home. So today with Blu-ray disc players, many discs or many players themselves come with apps for controlling either the player or the app from your smartphone or your tablet. That’s one example of how the Java platform running in the player is opening up discovery to the tablet or the smartphone that’s on the home network.
At that point they’re connected through the Internet but also on the home network, and your second screen can be either a way to control the first screen or be a way to provide additional information through watching the movie. You want the trivia track, but your husband or wife doesn’t, so that stuff can show up on your second screen. Our technology is uniquely well suited to support synchronization.
Rex Harris – What my group is focused on is the huge consumer shift in the consumption of media, specifically video. Where I fall in with my expertise is the connected space, what we consider converged TV, which includes connected TVs, over-the-top boxes, gaming consoles, connected Blu-ray players and the like. What’s a big focus for us is the fact that consumers are changing their patterns and advertising needs to be a part of that.
It’s this idea of we have to shape it before it shapes us. If we’re not part of that conversation and educating our clients along the way, then we’re going to be behind by the time everybody has a connected TV in their house. That’s basically the shift, the numbers we’re seeing in the next five to ten years. We need to understand what that means for advertising and how we can continue to follow the consumer.
Weitz – Let’s start with a question around a challenge that’s facing the industry, which is that only 15-20 percent of connected TVs are actually connected. What are you finding the leaders in this space are doing to make it a compelling experience?
Harris – Netflix is probably the prime example of what this space can do. They’ve poured tons of resources, time and money to make sure their app works on every device and they profit from it. One of the things we see is there are also Facebook and Twitter apps, but right now they’re largely a copy experience, and the consumers aren’t taking to it. So the highest used apps right now are Netflix, and also Pandora and AccuWeather. So it’s a very feature weak kind of experience.
Obviously that’s going to get better over time. From an advertiser’s standpoint we’re looking for the next big bet. What we’d like to see is the next startup does a Netflix, but it’s ad supported. We want to put our gusto behind that, because that’s something that’s going to work out for the consumer, and it’s going to give us TV advertising with a digital footprint. When we talk about how over-the-top guys should be monetizing their space, it’s going to need to be looking at what we enjoy in digital advertising and bringing that to the TV – tracking, targeting, reporting on the backend. When we meet with guys in this space, the first thing that comes out of our mouths is you need to be out there to deliver on these specific metrics and these specific experiences.
Scheybeier – Netflix really nailed the user interface. It allows you to discover the content, does a lot of work on personalizing the feeds. They had that wonderful moment when you could either get the mailed DVD or get the content online. But there have been some problems there with going to the online model. It’s become less compelling. You end up not having the content you want or the window finishes. I lose the obscure British comedy that I particularly wanted to watch. The user experience becomes less compelling, and I’ve used it less.
Hulu tried to work with just ads, but they’ve now gone to the subscription model.
Harris – Hulu Plus was a pushback from the individual networks and the content owners themselves. When you think about it, it’s a dual model just like cable. To your point of Netflix having this wonderful user interface, it says a lot, because when you look at our own VOD experience, it’s terrible. It’s an awful experience. It’s because Netflix doesn’t have to deal with legacy set-top boxes. They were able to go online, build this wonderful interface and bypass VOD that’s been around for over a decade. So all of a sudden they’re getting more traction than VOD is because the experience of trying to find something to watch is so much better.
That says a lot. To some of the MSOs’ credit, specifically Comcast with what they’re doing with Excalibur, they’re trying to emulate that. I was sitting at the Google TV office last night and seeing the second version, the new iteration of Google TV and largely the discovery process is centered around trying to emulate what Netflix has done and build on that.
Sheppard – I think the data point you put out, the 15-20 percent of TVs being connected, is suspect. Maybe that’s the case if you just looked at TVs with integrated Internet, where the Internet isn’t necessarily a feature the TV is bought for, but it’s just coming with it. The data I’ve heard from the studios on the Blu-ray side, and I think this number is suspect on the high side, but I’ve heard as high as 80 percent of Blu-ray players are connected, according to one of the studios. That includes PS3s, which are probably at least 80 percent connected, because whenever you put in a disc, if there’s a network connection, it checks to see if there’s an update available for that disc. So the studios do have very good data in terms of what percentage of discs they’re selling are actually phoning home.
I think the 15-20 is a hard question to measure, because you’ve got TVs with built-in Internet, you’ve got Blu-ray players with Internet, you’ve got game consoles. Clearly game consoles would be on the high end. My guess is the integrated TVs would be on the low end and Blu-ray players would be somewhere in the middle. And, of course, you’ve got Roku and AppleTV, which by definition are all connected. So I think 15-20 is probably way low. My guess it would be somewhere in the middle.
But as for what that’s being used for, Netflix is probably driving a huge percentage of it. You called out Pandora and AccuWeather, too, and I’m sure YouTube is probably up there as well. How to get people to discover other content that’s available is a very good question. That’s something Samsung has tried with lots of investments around their Internet@TV portal. LG is doing the same thing. Google is potentially doing the same thing.
And we’ve seen little evidence of success that people actually want to explore new apps on their TV. If they have a Netflix app they want that. If they have Major League Baseball, that may be something they want. But you quickly fall off into where it’s not clear how compelling anything beyond that is.
Weitz – Does that mean you think the app ecosystem model that’s so predominant on iPhones and iPads does not lend itself to the TV experience? Or is there a way to make it work?
Harris – I don’t think so. I’m a cord cutter and have been for almost a decade. And I can tell you right off the bat that having to go into each individual app – a la carte television that people always talk about where every single channel has their own app – can you imagine how crappy a user experience that would be? That every time you wanted to see what’s on each individual app, you’d have to close the app, bring up another app, close that app, and bring up another one, instead of flipping through channels?
Scheybeier – And each app will have its own silo of content.
Harris – And look and feel, and loading time. So I think one of the things we really need to figure out in the OTT space is that people love flipping through channels. It’s a very powerful thing that linear TV has for us. We may not know what we want to watch, and by flipping through you can follow up on something; it catches our attention and we stay there. On the other side, the VOD and the choice-driven piece is also important to have. But we need to have both in the OTT space, or otherwise linear television is never going to come close to declining in a way that makes OTT viable.
Scheybeier – The discovery piece is interesting. Can’t we do better than the random flipping? There’s that kind of stumble upon it which people do on the Web. But personalized channels, social sharing and taking signals from your social network and the things you’ve watched before should all be easy to do once the TV is connected and has an address.
Harris – But you still need the linear. If I can go to a channel that’s curated based on my preferences or what I’ve watched in the past or what my friends watch connected through Facebook, I see a bunch of movies or shows, I see the DVD title page, but it’s not playing. We need to get to a place where it’s actually looping and it’s linear. It’s something I can just turn on and not think about.
Yes, maybe it’s personalized for me based on a bunch of those signals we talked about, but at the same time I don’t have to think about it. It’s just on, and I can just flip through other on channels. And so from a technical standpoint, you guys may or may not have a reason why this hasn’t taken off, but right now it’s one of those things we’d like to see as advertisers. We want to give the consumer an experience that’s as choice driven as they want or as passive as they want and then we want to be there for both.
Scheybeier – To lean back plus lean forward.
Harris – It’s a bit of both. It’s still TV. It’s on the wall. It’s different than watching it on your tablet or your PC.
Sheppard – I think the number of apps that lend themselves to the first screen – and having been in this business for 20 years in one form or another and most of the time pushing for that interactive TV experience on the first screen, it pains me to acknowledge today that probably most apps aren’t that well suited to the main screen, for social reasons, for UI reasons. There are a few that clearly are, but largely for those who want to interact with their TV that will happen on the second screen.
However, having the ability to have apps on the first screen will become increasingly important for monetizing, especially through advertising. You need the ability to build a call for action into an ad, and this is what cable has been working on for years with limited progress to show for it, but undoubtedly they will get there. It’s the ability to allow that ad to be targeted to the home where the ad makes sense, the dog food ad in the dog owner’s home, and the ability to hit a button and have a coupon applied to your loyalty card at Safeway or to have a sample sent out to you. Or it’s a car ad with a prompt to see the long-form video. There are many ways to create a call for action on the ad and to generate very real money, taking that $70 billion advertising pool today for broadcast and cable TV and doubling or even tripling it. You want to sell that ad for $10 to Ford to get into a home of someone who has a four- or five-year-old car rather than just the pennies they’ll pay for just a blast into everybody.
That doesn’t imply an app store; it implies a push model where something is running in the box that allows those ads just to work and to allow the viewer to interact. Now some of that interaction may happen on the second screen as well. It certainly could be that the dog food ad shows up there instead of on the first screen. But the first screen is a very powerful place to put it.
Harris – At Starcom MediaVest we actually have a legacy of addressable television innovation. At the beginning of 2012 we’re doing something with DirecTV in the addressable space. I don’t want to derail it too much because it’s not necessarily OTT, but I think OTT has a foothold in this addressable marketplace in kind of two places. One is the fact that automatic content recognition could be really powerful. So something like Bulldog United, Civolution or Zeitera, which are working on frame-by-frame content recognition that could actually do ad replacement based on addressable characteristics, household data.
The other piece is because these OTT services and applications are connected to the Internet, they have this digital footprint. Once scale is achieved, there’s that automatic targeting built in because it’s digital.
So it’s one of the things we’re trying to push in the legacy infrastructure. But looking at OTT and converged TV we’re looking for the providers who can come to us with the targeting, with behavioral targeting, granular as we can get online. Digital video is even still kind of nascent when it comes to behavioral advertising. But there are avenues that are addressable outside the legacy cable and broadcast infrastructure.
Weitz – I’d like to follow up on this area of tablets as they relate to connected TVs, because one of the things that’s a headline at CES is manufacturers’ releasing tablets that are designed to partner with connected TVs. What is it going to take for that to work? What are the killer apps from the monetization side for advertising as well as for the consumer that will make that use case take off?
Sheppard – Panasonic introduced a tablet to go with their TVs last year, and you didn’t hear a thing about that. I know someone who has the Vizio tablet – not inherently with the TV; it was just the cheapest thing he could find. But I fail to see how you can differentiate a tablet other than adding an IR port on it for allowing it to be a remote, which Vizio actually did. Is that enough to make that more useful than my iPad or my Galaxy tablet or other general purpose tablet? I don’t see how a TV manufacturer can make a more compelling tablet than the tablet manufacturers can make.
Scheybeier – I have an iPad that’s equivalent to my remote control to some extent. It controls my speaker; it controls my Netflix; it controls Comcast. In a way it’s a much simpler box to stream video, Internet and throw out to my big screen. I have to agree with you that I find it more compelling. It would be difficult to get all the things I can experience.
Harris – A specialized tablet has failure written all over it. There’s no way a tablet specifically for your television is going to take off like an iPad situation.
Going back to your question, what’s going to be the killer app in the second screen space, my answer is Zeebox, or maybe not Zeebox specifically, but what Zeebox represents. Zeebox is a project by Anthony Rose, who did BBC’s iPlayer, which is an amazing streaming app. Zeebox synchs to what you’re watching based on knowing what cable provider you have; what time of day it is and what channel you’re on. There’s obviously room for improvement there.
But it has multiple different app categories on the iPad. One is a social stream, showing you, based on hash tags, who’s talking about what you’re watching on Twitter, who’s talking about it on Facebook. And then it has curated experiences that can come from the content providers themselves so the people who actually produce the show can partner with Zeebox and say this is the kind of link we want to happen; there’s IMDb, that kind of stuff. And then what’s really interesting is they have a real-time feed of tags relevant to the show and what’s happening in the show. What you’ll see on the right hand side of the tablet if you’re watching, say, Saturday Night Live, as people who make cameos, they’ll show a tag for that actor or actress’s name. Click on it and you get more information.
From an advertising perspective, as the ads started happening, that would also be tags coming through that stream. You could click on that to get more information, go to our website, that kind of thing. So it provides that link that we don’t have and that we’ve been trying to do with interactive television for a really long time. And what’s great about Zeebox and any of these platforms – Miso, GetGlue, IntoNow – it’s a land grab area now – is it takes away from having to open each individual ad for each individual show for each individual network. It’s like Facebook. It’s one platform that works across all.
You’ve got to imagine consumers are going to get hold of one of these, let it get popular, scale it out and tell their friends about it. There will be one kind of social TV experience within the app space, and we want our advertisers to be there. That’s going to be the killer second screen app. And it could possibly take everything we’ve been trying to do with interactive television and throw it out the window, because it could be up to 20 years before all the legacy set-tops would be replaced.
Scheybeier – The key point about these apps is they automatically synch with what you’re watching, either fingerprinting through the audio track or watermarking, or maybe the set-top box is broadcasting in some way. It takes away the need to go and do that extra lookup, which somehow becomes all important.
Sheppard – If you ask consumers if they want to interact with their TV or with your TV content, the answer will be overwhelmingly no. But if you ask them do you want to be able to purchase this item by being able to hit a button, or do you want to play along with the game show, or do you want to track your fantasy football stats while you’re watching the game, the answer becomes yes. So a lot of it is a matter of education and how you frame the question.
Harris – The killer app we’re talking about doesn’t exist yet. So people don’t necessarily know they want to do that. Take the Steve Jobs approach. People don’t know what they actually want until we give it to them.
The other piece is you’re doing email and multitasking and getting away from what’s happening on the screen because, largely, you’re bored. This passive experience isn’t working for you anymore because you’re used to having interactivity in everything you do. And so now you’re going to see that idea of whether TV is a passive experience challenged; the lines are blurring. It’s what we said earlier, lean forward, lean back, a little bit of both. I think right now to answer that question it would be too early to put it on people who watch TV and say they don’t want to interact with it.
Weitz – And it depends on the genre as well. For things that are competitive, game shows or competitive reality TV, it works very well. Consumers respond very well to it, more than the average. For things like drama where the viewer wants to sit back and relax and has to spend some real attention time following the plot, interactive use cases seem not to work as well.
Harris – And that’s how you’ve been counting social, right? Look at Bluefin (Labs) which is a really good company that aggregates social activity around TV shows and looks at the spikes of activity – I think the biggest one was Beyoncé announcing she was pregnant. People are definitely using their second screen to chat, to update Twitter or Facebook. So if we go back to this whole idea of a killer app, that has it built in.
Scheybeier – All to react immediately as the event happens.
Harris – Absolutely. There are networks that are using Bluefin’s data to actually look at the performance of pilots and of shows in general. So going far beyond what Nielsen does, which we can argue is very flawed in itself, but taking this data measuring what people are doing on their second screens as a way to measure how well the programming is doing.
Weitz – Rex, when you talk to advertisers, what are they saying they really want? We’ve heard over the last couple of years that addressability is really important. So the cable companies have been working on that. We’ve also heard that interactivity is important, either on the social stream or on second screen apps. What’s really important to advertisers with these use cases?
Harris – Targeting is definitely a big part of that. But in reality there is still a lot of value in the mass market general messaging. Addressability isn’t going to be the end-all, be-all of advertising. When we’re talking to our clients we’re looking for a few different things. One is addressability. The other is what we consider participation media – this idea of people participating in the experience themselves. And the last piece is the social element of it and trying to help facilitate that and be a part of the conversation as an advertiser. At SMGx we’re doing a lot of consulting and education for clients across SMG to kind of show them what the space looks like right now, where we see the opportunity and who some of the next big bets are so we can start testing them and really seeing what works and what sticks with consumers.
Right now when we’re talking about the converged TV space, including gaming consoles and OTT boxes, we’re seeing about 19 million active households. That’s one in six. That’s a decent amount of scale. That’s a little bigger than DirecTV. That becomes scale.
Addressability is a good example of this. Right now we’re doing some trials with DirecTV. We’re trying to get Dish. That could probably happen next year at some point, and that would be 30 million. So then you start to see scale. So anything above the 15 to 20 million place is where you start to see some traction. The problem with the 19 million figure, other than Netflix, is there’s really no one kind of service that all 19 million people are using.
So we’re starting to partner with ad networks that are looking at this space. YuMe is a good example of somebody who is kind of platform agnostic in the connected TV and OTT box space. We’re looking for those partners that can provide us at least some form of scale for now. And then once we have some data behind us, we can start testing. They say 500 million connected TVs by 2015, it’s globally, but still you see there are some huge numbers there – then we’re set up. We know what to expect. We know what works, what doesn’t work.
Scheybeier – One of these guys is going to figure out the user experience that works and hopefully get to some scale that works.
Harris – Google TV would hope they’re the platform. It’s really funny. Google is kind of looking at this space just like they looked at the smartphone space somewhat hoping that Apple makes a play, so that they can pick up the rest of the market. You either go with Apple or you go with Google, so it becomes a two operating system race, and all these guys like Samsung and Sony kind of drop their ideas of their specific platforms, because right now the fragmentation across all the OEMs is crazy.
Even Blu-ray players are somewhat different. Samsung Blu-ray player isn’t necessarily going to be the same Smart Hub that one of their new TVs is going to be. We’re looking for the partners that solve that complexity for us and take our 30-second ad and try to hopefully dress it up a little bit. Because it’s digital we can do some interactivity, so interactive pre-roll, something we use online. Obviously it’s something we’d like to see on the television as well.
Weitz – Switching gears to the technical side. What are some of the key technical hurdles we need to get past before we can really enable some of these killer apps and business models?
Sheppard – I think synchronization is huge. You have all these solutions, fingerprinting, watermarking. They feel to me like hacks. To have your device listen to the audio stream and send it to a server somewhere else that has listened to every single audio stream there is for every possible TV show and figure out what show that is and send it back down, it feels like such a hack to simply figure out what I’m watching and where I am in the show.
It’s a non-trivial amount of expense, because you have a persistent upload connection for the audio stream; you have a massive amount of servers that can do all this, especially if it’s the Super Bowl and it could be 50 million people that could be hitting all this at once.
So synchronization, just the core ability to know what’s being watched and exactly where in the show you are shouldn’t be that hard to get, but it relies on some standards to do that. Setting aside OTT, the broadcast stream has all that data in it already. Whether it’s over the air or cable or satellite, it’s there in the stream every few milliseconds. So clearly the software stack in the box could be making that information available to other devices in the home.
It’s not inherently there in OTT, but it certainly could be if the providers could find a standard way to expose that. Once you know what you’re watching and where you are in the program, you don’t need a lot of other overhead to do all kinds of interesting things with that.
Scheybeier – You take that information and use it on the Web and plug it into all the other services that are already there. The key is that when the standards and protocols are sorted it becomes a lot easier.
Some of the other technical challenges are how are we going to interact with these connected TVs. We touched a little bit on the user experience and that Netflix has a great way of discovering content, and how the remote controls are fantastic. But when you talk to Apple TV, one of the questions about whether this new TV will come out is will Siri be part of that. Will it be able to speak to the TV and be the ultimate user interaction?
Harris – With Microsoft Kinect you can control your video with your voice and soon ads, new ads. They’re pretty damn neat actually. So, yeah, it’s going to be interesting.
Weitz – Can you give us maybe one prediction for 2012 either on a company that you think is going to do very interesting things or on a new business model or on a type of way of interacting with these devices that you think will really take off next year?
Sheppard – I think Facebook will wake up at some point and assert their dominance in this space. Today I’m sure most TV manufacturers would be thrilled to build Facebook inside, to put Facebook integrated into the TV such that what you’re watching, at least for those viewers who are okay with it, gets fed back.
It doesn’t even have to be about going back to Facebook. Facebook could use the social graph they have to enable the guide in the TV to make the shows that your friends like appear much more prominently than the ones that none of them like. There are so many ways to aggregate your social likes, your dislikes into what you want to watch and how you interact around that show. And so far Facebook seems to be content to leave that to the third-party community to do, but I think there are things that only they have the scale to pull off and at some point they will do that.
Harris – They’re waiting for scale in the connected space to do that. I would give credit to Comcast. As a cord cutter it’s not often I do that. But give credit to Comcast because Excalibur, their next-generation set-top box, has already rolled out in Augusta, Ga., and in 2012 you’ll see a few million and obviously over the next five years you’ll see a larger deployment.
But it’s exactly that idea. Facebook is completely integrated. You can see what your friends are watching. You can see the top shows. You can like programs. You can like ads. And you do all that within the set-top experience itself. Verizon did something vaguely similar with FiOS. I think largely Facebook is just waiting for scale and waiting for numbers they can grab onto to put some resources behind it.
Scheybeier – I’d like to see the problem of thousands of remote controls and the huge remote control for these connected TVs with the keyboard on them to be gone and someone to solve that problem.
Harris – I don’t think we’ll see a whole lot in 2012. I want to say we will, but I think we’re still a fair ways away from seeing some true innovation take hold in a scalable interesting way. I mentioned Zeebox before, but I do think 2012 is going to be an interesting year for them when they come to the States. I think they’re the best example of a second-screen app that I’ve seen.
The remote control comment is a good one. Microsoft Kinect is doing some really interesting stuff with voice control. Gesture is still a little clunky. But they’re rolling out the new version of their dashboard. They’re going to have Verizon; they’re going to have Comcast; they’re going to have YouTube. They’re going to open up to third-party providers for content. So you’re really going to see some interesting things come from Xbox, and Xbox has a pretty large installed base already.
But although the idea of the gesture-based and voice-based remote control sounds awesome in theory, a lot of viewing is happening with other people in the room. It’s kind of an awkward situation when you’re trying to control it by voice. I think Siri is a good example, Siri right now is powerful, but if you’re in a crowd of people you’re less likely to actually talk to your phone.
It’s hard to make some 2012 predictions. But in the future what you’re going to see is this idea of people not cutting their cords but people never really getting (pay TV). The younger generations are growing up seeing it’s not the necessity it once was.
Scheybeier – Who here has heard of the Yogscast? If you have an 11 year-old kid than maybe you may have. It’s a huge gaming channel. They’re playing one game called Minecraft. They’re the biggest thing on YouTube right now. They’re getting millions of subscribers. They’re doing so well they’ve left their old jobs and making a living out of this thing with just the ads on YouTube. And it brings up all the niche content channels we’re going to have in the future, that the connected TV will have. This is going to be a real problem.
Harris – Curation and discovery are going to be huge. Obviously for blinx that is something you guys specialize in. so we’ll see how well that ports over to television for sure.
