Google’s Youtube is trying to take it’s game up a notch again. Most high production value content owners have fought hard to keep their programming off the site, although some TV shows and movies have begun to trickle in. Youtube isn’t satisfied with it’s current sparse selection of professionally produced programming. Rumors from usually reliable sources tell us that Google will be launching Youtube channels filled with original programming in the near future. While advertisers continue to be stubbornly resistant to invest in user generated content, they continue to buy an increasing number of spots on professionally produced programs.
In what may appear to be an unrelated event, Youtube is launching it Merch Store. It will be a directly linked marketplace for music artists promoting themselves on Youtube an outlet for downloads, tickets and merchandise. No doubt it will also generate some income for Google.
While the two seen unrelated, they do put into place a potential product placement for direct sell through marketplace. Pushing current technology could enable a viewer to click directly on a pair of shoes, handbag, etc that is in the moving picture and open a window for immediate purchase. The potential isn’t just limited to fashion. Imagine a home improvement show linking you to the local Garden center or Home Depot to directly buy products seen in use. Erasing the need to remember to purchase an item seen later online or in a store to a direct link could deliver a death blow to broadcast’s strangle hold on most of the advertising dollars.
Will Google try to build a walled garden store forcing advertisers to sell only in it’s space a la iTunes? I don’t think so. Managing lots of little orders vs selling advertising hasn’t been it its sweet spot. You can count of such a development accelerating the transition from cable and broadcast to TVoIP much faster than than the industry expects. In fact, this might be the catalyst to finally bring us a la carte channels.
Netflix is now responsible for 30% of the evening traffic, making it the top content source on the Internet. While I don;t have any data, I’m confident the percentage of total traffic used by streaming content from all sources is closer to double that number. While I won;t attempt to extrapolate how those numbers compare to current broadcast, cable and satellite viewership, I’m certain that it’s enough to scare the hell out of the people running those businesses. For them, the message is clear: adapt or die.
The adapt or die message should not come as a surprise. It’s been there for years. What is new is how rapidly the marketplace is changing. The future favors big dumb pipes with content delivered independently to any pipe on a stream. Like it or not the content and delivery businesses are diverging.
With the American broadband duopoly firmly in place, the change isn’t going to be pretty. After investing heavily in closed video delivery systems AT&T has imposed draconian usage caps ion its broadband customers. Those with an alternative will likely move. Comcast has done the same, but at considerably larger limit than AT&T’s. Verizon quit investing in fiber to home a couple of years ago and seems contented to sell underpowered DSL service to most of its customers.
Networks are likely to discover an exploding ad market on their own streaming content. The online world allows them to monetize up 100% percent of their libraries 100% of the time. Advertisers will come to like paying for an actual demographically targeted viewer by the view rather then the time slot. Local broadcasters will need to join the party or fade away. I think a good many will vanish, but we will see significantly more locally produced content that we have in the past from those who survive. In fact, it will be those local productions that will insure survival. A good many cable and satellite networks could have a bright future online, but those that were constructed to be filler in packages will finally be sent to the TV graveyard where they belong.
In the end we’ll finally get content a la carte. No FCC on Congressional actions required (I’m sure they’ll take credit, though). What is required is more competition to insure a more competitive market in the access business. Without it, the US could lose its lead in entertainment production and distribution. Maybe if we can get Hollywood on our side, we’ll finally be able to break the broadband duoply. After all, going forward Hollywood needs cheap open pipes too.
For a business that is seen as the devil by the big studios, streaming by subscription and other models is building dangerously close to the tipping point as the preferred delivery medium, well ahead of schedule. Accomplishing what an army of MPAA lawyers, and a the Hollywood lobby contorting copyright law couldn’t, Netflix is being credited with stemming the tide of Bittorrent traffic. This proves most consumers would rather pay a reasonable price to watch what they want when they want than to steal it – when given the choice.
Amazon has already entered the premium content stream business, with Direct TV and Dish Network expected to enter the arena any day now. It can’t be long before the cable guys will need to join the party in earnest.
This will create a new reality that the incumbent media has been fighting. $100 a month TV is no longer viable. A la carte has arrived. That means more than half of the cable channels that big media owners had bullied systems to offer as part of a package will need to start carrying their own weight or die. Superior premium channels can and will survive and thrive on their own merit as stand alone businesses. In fact,their subscriber bases could grow exponentially when access is available unencumbered by the threshold of a cable or satellite subscription. It also opens tremendous opportunity for upstart producers and distributors.
The future couldn’t be brighter for those who embrace the stream instead of fighting it.
Dish network is looking for a way to pump up revenues. It’s been losing subscribers, and simply raising prices guarantees more of the same. While the cable guys are finally discovering a bright future in the big dumb broadband pipe, Dish has no comparable service or the necessary infrastructure to offer one.
Dish could be the first company in its industry to recognize that the best way to deal with cable cutters is to offer them an alternative. With the sun setting on the closed pay TV business, Dish has already dipped its toes into the streaming waters. That service could easily be offered as a stand alone. If implemented on a level comparable to satellite, the online offering could make for a brighter future. Perhaps that’s the ultimate objective in making what looks to be a very bad purchase:
Dish Network Corp. said Wednesday that it won the auction for Blockbuster Inc. with a bid valued at $228 million in cash.
“Blockbuster will complement our existing video offerings while presenting cross-marketing and service extension opportunities for Dish Network,” said Tom Cullen, executive vice president of sales, marketing and programming for Dish Network, in a statement. (Yahoo)
The most valuable asset Dish could acquire are streaming rights. It will also get around 700 retail stores and an organization in complete disarray. Will the addition content be enough to build a competitive online subscription service? If Dish management has the fortitude to commit to the business even if it threatens its satellite service there’s a chance. Anything short of that will simply accelerate the company’s demise.
More subscribers means more revenue and more clout. The big movie studios have been very slow to release content to Netflix and others to distribute via stream. That’s created a great opening for indie film makers and given older content a second chance to wow audiences. It’s also created a competitor for distribution deals. While the major studios usually do finance and control big budget blockbuster productions, their bread and butter comes from the distribution of independently produced content. It looks like the studios lock on that content has ended.
That’s the message Netflix is sending content suppliers and consumers. Deadline.com reported that Netflix is in talks to acquire Media Rights Capital’s drama series “House of Cards,” produced and directed by David Fincher, who directed “Social Network.” The show also stars Kevin Spacey. According to Deadline, the talks are ongoing but Neflix has already outbid HBO and AMC with an offer in the area of $100 million. Read more: http://news.cnet.com/8301-31001_3-20043850-261.html#ixzz1Go4F4gXc
I doubt this will be the last deal Netflix does or that it will be alone. With Amazon entering the content subscription biz, look for it to follow suit. I think we’ll even see deals struck by the likes of Hulu and YouTube for content to stream in a free to view ad supported format soon.
Net video has reached the critical mass necessary to compete for the best content. That means big media and Hollywood may self destruct much faster than many of us expected. The alphabet networks could be next.
Netflix continues to buck the bad economy with it’s cheap online streaming service. Hulu continues to grow as more Americans change from appointment viewing via broadcast to on demand. With one or two companies dominating the market, there is certainly room for more. In fact if we had a good economy and start ups had an easier path to going public, I think we’d have a very crowded field of broad catalog streaming services. Lacking this, the field is still wide open for players with deep pockets. While it’s not the first company I would have expected to enter the arena, Amazon may have enough synergies and clout to pull it off. According to Cnet, the company is planning to add unlimited streaming service:
Rumors have been heating up over the last few weeks that Amazon was on the verge of offering “free,” unlimited video streaming to its Prime members, who pay $79.99 a year for free two-day shipping on many items sold on Amazon. Now a tipster has sent a few screenshots to Engadget allegedly showing an unlimited video streaming section to complement Amazon’s VOD (video-on-demand) offerings.
Whether someone at Amazon accidentally jumped the gun on the launch is unclear, but the section has now disappeared along with the “Watch now,” free unlimited streaming button (I have an Amazon Prime subscription and nothing like this showed up for me).
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