A Video Business Model Ready to Move Beyond Beta
Steven P. Jobs, Apple’s chief executive, announced the company’s long-awaited online movie service last week and showed off a new device that will allow users to watch Web videos on TV.
VIDEO mania is in full swing. Amazon is finally doing movie downloads. Apple is touting a new wireless gizmo to beam movies from laptops to TV screens. NBC is introducing a video syndication service that might pit it against Google and Yahoo, and it’s joining the other big networks in putting its shows online for free with advertising. MTV is working with Google to populate its video content all over the Web.
It is wholly unclear which, if any, of these or any of the dozens of other recent efforts that have been announced will break away from the pack, which is why many of them are couched as “tests” and “experiments.” (Whoever thought up this idea of Web sites forever being in “beta” deserves a prize as the spinmeister of their generation.)
Still, a few things are clear from the recent news flow. First of all: yes, the world has gone batty over video. Thirty-second clips, three-minute spoofs, half-hour sitcoms, TV dramas that haven’t been shown in decades, rap videos, Hollywood blockbusters and feeds from TV news outlets big and small are flooding online. The term video itself is already starting to sound old — the equivalent of songs before the advent of MP3’s and downloads.
The good news — and my second point — is that there’s gold in them there hills. Video delivered over the Internet is clearly shaping up to be an actual business that advertisers are interested in. The broadcasting (netcasting?) of television programs and clips on the Web moves the debate away from Internet-versus-TV because if TV executives put their best material online and get paid for it, the proposition becomes Internet-cum-TV.
The research firm eMarketer estimates that video-related advertising will top $2.3 billion within four years. And let’s not forget that Google is on track to exceed $7 billion in revenue this year — and that is predominantly from old-fashioned, Yellow Pages-style text ads. Heck, they don’t even have pictures, let alone moving images.
Much attention has been focused on the economics of selling digital versions of Hollywood movies (like in Amazon’s new Unbox service) as an alternative to DVD sales and rentals and to stem piracy. But what has yet to be exploited — what Google, Yahoo and many other aggregators are vying for — are pieces of the $60 billion or so that will be spent on television advertising in the United States this year.
NBC’s new syndication business, dubbed NBBC, for National Broadband Company, promises to match up content creators with Web sites that might be interested in showing the video. All three parties will get to take a cut of the embedded advertising revenue. There is much to quibble with about the way NBBC came out of the gate; its executives dissed most blogs as unworthy of their content and sneered at the homemade content that is proliferating on YouTube.
On the other hand, any video service using NBBC is nonexclusive, so there is really no reason not to use it (which explains why little corners of NBC competitors like Fox and CBS are participating in the NBBC rollout, through their IGN.com and CSTV businesses, respectively).
Some aspects of the NBBC concept can lead to head-scratching. If I have a great piece of video on my Web site, for instance, is it more valuable to syndicate it through NBBC or to just have it spread virally across the Web? A simple link will take people to the video and any ad accompanying it for free. But that’s why it’s an experiment.
The clever thing about NBBC, though, is that it’s an entirely new business — to the extent it will distribute other companies’ programs — that is designed to bring in new money. Even if free advertiser-supported video on the Web takes off, it’s far from clear whether those ad dollars will be greater than the dollars NBC may lose from viewers who will no longer watch its show on regular TV, or download or DVD and so on.
Which brings us to Apple’s potential convergence-buster, dubbed iTV (the name is — you guessed it — beta). Betting against Steven P. Jobs has not been a sound proposition in recent years, but there are plenty of reasons to be skeptical about whether iTV, which doesn’t actually exist yet, will have the technological wherewithal or enough compelling content to matter. But it does draw people closer to a world where inexpensive liquid crystal displays will moot the long-running debate about convergence because people will just plug in their cable or Internet or Wi-Fi and do what they please.
“The real win here is in high-value, high-quality, high-definition content on your TV set,” said Josh Bernoff, a vice president at Forrester Research. “To do that is going to require more than what Amazon and frankly more than what Apple is doing. We’re still waiting for that device.”
Or maybe it’s here and we just can’t afford it. TiVo last week brought to market its Series 3 digital recording box, which appears to have the ability to do everything from record in high-definition to take video files through a broadband Internet connection either directly or wirelessly. At $799, however, it’s the most expensive TiVo toy yet.
And if you want to really — really — get your hands on as much video as one could possibly enjoy, may I recommend the new DirecTV Titanium service? Introduced recently as the ultimate luxury for anyone who calls their home a “crib” with a straight face, it’s basically everything the satellite provider has to give for a flat fee of $7,500 a year.
That means every regular, pay and high-definition channel, every sports package, pay-per-view movies (at no cost), and a whole bunch of tuners and digital video recorders to do with as you please. There is also 24-hour a day “concierge” service for technical help and anything else.
Best of all, none of it is in beta.
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