Cable vs. Online Video

wirerope.jpgVery interesting article in today’s Wall Street Journal that explores the battle between television, video sites, cable and even consumer-electronic companies. I hope writer Ellen Sheng doesn’t mind that I’ve included the article in its entirety (click “more” below).

First let me net out some “what’s this mean to us” points, then I’ll give you highlights:

  1. Don’t underestimate Cable (Comcast) as a player in consumer-generated media. They’ll buy or build their way there, and allow for much better quality streamed video if they succeed. So save your raw files because those compressed .mov files are going to remind you of Polaroid photos some time soon.
  2. Everyone seems to have a different view as to how big YouTube’s base is (34 million according to Nielsen) in the online video space. By contrast, the largest cable provider, Comcast, has 24 million subscribers (of course the exposure levels differ dramatically). So don’t ignore any of the emerging players as you market your stuff.
  3. Most importantly, we amateurs need to ensure that we participate in the ad revenue in a way that’s proportional to the views we garner. Yesterday I sold one of my clips (Scary Santa) to a television show for $150 (not an exclusive, obviously). In today’s world I’ll take it because I’m getting paid to let a video show promote me. But in the future, I’d like to participate in the upside potential of my stuff. You?

Some highlights of the WSJ piece:

  • With Internet video gaining popularity, pay-TV companies are pondering a future in which they will have to share the spotlight with online video providers.

  • Although people are still watching TV, it could be a different story if viewers start cutting back on their cable and satellite-TV subscriptions. In response, the cable companies are bulking up their video-on-demand offerings.

  • “Whether the Internet is a friend or foe depends on what we do,” Steve Burke, Comcast Corp. chief operating officer, said at an investor conference last week.

  • In the near term, sites such as MySpace, iTunes or Google Inc. won’t have a monetary impact on the cable or satellite companies, according to a recent study by Convergence Consulting Group Ltd., a Toronto media and technology advisory firm. But in the longer term, the online sites “do pose a threat,” the study said.

  • One area cable companies need to be vigilant, industry observers say, is with on-demand movies. Online distribution of movies could sidestep cable companies, which get a steady revenue stream from on-demand movie fees. Sony Corp., for instance, has mulled adding broadband capability onto its high-end high-definition TV sets, allowing consumers to download movies from Sony Pictures directly with their Sony sets. [WVFF note: Can you say disintermediation!?]

  • Cable operators are also looking into ways to put more content online. In late 2003, Comcast started working with a company called thePlatform to develop an online video product called theFan. The offering provides subscribers with numerous music video clips, interviews and other — sometimes exclusive — content. [WVFF: note to self. If theFan content manager calls, be sure to return call].

  • Over the summer, Comcast purchased thePlatform, which also works with other companies including ESPN, Starz and Verizon Wireless, for an undisclosed price estimated to be $100 million…. The company’s Mr. Burke, for one, imagines creating an extensive viewing guide that would aggregate Comcast’s TV schedule with online clips and video-on-demand options, giving people a mega portal for one-stop viewing shopping.

  • “We’re not alone in our aspiration to be that one place,” Mr. Burke said.

As Internet TV Gains Popularity, Cable Firms Bulk Up Offerings

By ELLEN SHENG
September 28, 2006; Page B4

With Internet video gaining popularity, pay-TV companies are pondering a future in which they will have to share the spotlight with online video providers.

Video in all forms including first-run movies and television shows as well as consumer-produced snippets are cropping up online at sites such as Apple Computer Inc.’s iTunes, YouTube and News Corp.‘s MySpace. Although people are still watching TV, it could be a different story if viewers start cutting back on their cable and satellite-TV subscriptions.

In response, the cable companies are bulking up their video-on-demand offerings, putting more content online themselves and providing ways for advertisers to better target audiences. “Whether the Internet is a friend or foe depends on what we do,” Steve Burke, Comcast Corp. chief operating officer, said at an investor conference last week.

In the near term, sites such as MySpace, iTunes or Google Inc. won’t have a monetary impact on the cable or satellite companies, according to a recent study by Convergence Consulting Group Ltd., a Toronto media and technology advisory firm. But in the longer term, the online sites “do pose a threat,” the study said.

Video Web sites now draw users in numbers that rival those of cable or satellite companies. YouTube, the country’s No. 1 online-video site, had more than 34 million unique visitors in August, according to Nielsen/NetRatings. MySpace was second with 17.9 million unique visitors. In comparison, Comcast, the country’s largest cable company, has 24 million subscribers, and DirecTV, the largest satellite-TV provider that is owned by News Corp., has 15.5 million U.S. subscribers.

The irony is that the Internet has been a growth driver for cable subscriptions, giving the cable industry an edge over satellite companies, which have yet to come up with an affordable broadband service of their own. Industry observers see the increased viewing of video on the Internet — helped by the growth of high-speed, broadband transmission that cable companies often provide — pressuring the core business of the cable companies.

Online video is slowly changing viewing patterns as younger people in particular increasingly watch TV while also surfing the Internet, instant-messaging or checking email. A recent study from BIGresearch, an Ohio market research firm, showed that 70% of Web users watch TV “occasionally to regularly” while they surf the Web.

Partly as a response to changing viewer habits, Comcast, Time Warner Inc.’s Time Warner Cable unit and others are adding to their video-on-demand offerings as appointment viewing bows to viewer-dictated schedules. Time Warner, for instance, has been experimenting with a service that lets customers watch programs they missed in the past 24 hours and says customers like the feature.

One area cable companies need to be vigilant, industry observers say, is with on-demand movies. Online distribution of movies could sidestep cable companies, which get a steady revenue stream from on-demand movie fees. Sony Corp., for instance, has mulled adding broadband capability onto its high-end high-definition TV sets, allowing consumers to download movies from Sony Pictures directly with their Sony sets.

Meanwhile TV networks, worried about erosion of the $60 billion a year TV advertising market, are seeking to get share in the increasing ad spending allocating to online sites. For the moment online video advertising represents a negligible segment of online advertising and isn’t tracked by Nielsen/NetRatings or Comscore. But the trend is clear: overall online ad spending was $3.8 billion in the first six months of the year, according to Nielsen/NetRatings AdRelevance, up 49% from the same period last year.

In response to Internet advertising, which gives advertisers a much clearer picture of where and when ads are viewed, cable companies are enabling more ad targeting. Comcast’s advertising unit, Comcast Spotlight, lets advertisers target commercials by ZIP Code in some markets.

Cable operators are also looking into ways to put more content online. In late 2003, Comcast started working with a company called thePlatform to develop an online video product called theFan. The offering provides subscribers with numerous music video clips, interviews and other — sometimes exclusive — content.

Over the summer, Comcast purchased thePlatform, which also works with other companies including ESPN, Starz and Verizon Wireless, for an undisclosed price estimated to be $100 million. Comcast won’t comment on the price.

Comcast officials have said they view online as a growing opportunity and are exploring various services. The company’s Mr. Burke, for one, imagines creating an extensive viewing guide that would aggregate Comcast’s TV schedule with online clips and video-on-demand options, giving people a mega portal for one-stop viewing shopping.

“We’re not alone in our aspiration to be that one place,” Mr. Burke said.

Author: Nalts

Hi. I'm Nalts.

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