Epic Epix?

Recently, Netflix announced streaming deals with Relativity Media and Epix (the Paramount, Lionsgate, MGM distribution consortium). When we read the press we sort of nodded our head and moved on, slightly rolling our eyes at the purported “$1 billion” value of the five-year deal.

Dismissing this as "just another" expansion of the Netflix library, we got it wrong. We should have paid more attention and stopped to think, as today’s Tom Lowry piece in Variety reminded us.

The Epix deal in particular is significant, not so much for its size, but because it marks a clear, unambiguous definition of a large-scale deal for an entirely new streaming window, 90-days post-Pay TV, as Lowry points out:

The deals of the past few weeks have grabbed the attention of film and TV execs on the distribution side because it establishes a clear market rate for the value of streaming rights for fresh theatrical product. ... the Epix deal is a direct transaction with Par, Lionsgate and MGM for streaming, which sets a market precedent for separating out Web streaming from pay TV rights for a traditional linear channel.

That seems exactly the right way of netting out why these deals are important. In our on-and-off anecdotal conversations with entertainment lawyers (admittedly more about TV and less about theatrical releases) we were left shaking our heads. While we’re hardly insiders in the mix of rights deals, we remained surprised how little attention (still) was being paid by content owners to establishing new, clearly-separated rights classes and windows for web distribution.

Netflix is clearly leading the charge to change this.

Foursquare TV? "We don't need no stinkin' badges..."

Spinning through the TechCrunch RSS feed the other day we discovered that:

Starting on August 1, when you use GetGlue to check-in watching one of HBO’s hit shows, you’ll earn exclusive stickers designed by HBO.

And later that day, while trying to compare Hulu Plus with NBC's own website, we stumbled across:

Now you can be as proud as a Peacock with historic NBC logos! Collect all seven. NBC's 'N' logo got its start in 1975 and was used through 1979. With two brightly colored trapezoids making the 'N', the design was very much of its time.

We're all in favor of rewards which promote and retain viewer engagement, still we’re skeptical that a badge, mayorship, or other electronic social doodad is going to accomplish much here. Two ideas on how to do better:

• rewards have to be integrated into a cycle. TV has for all practical purposes turned into an application with six parts, of which rewarding is a final (and an important) step
• instead of badges, give viewers more of what they want – programs. Build points towards a la carte premium viewing (Hulu Plus credits, whatever). This is an opportunity to build and reinforce the six-part cycle above. And it’s also a much more meaningful way to keep viewers connected. To quote one of our favorite parts of the Hoffman|Lewis credo:

"We don’t get them to try our product by convincing them to love our brand. We get them to love our brand by convincing them to try our product."  (via The Ad Contrarian)

The Other Long Tail: When Technology Gets MagicJacked

We noticed the other day that one of our earliest clients, VocalTec Communications, merged with YMAX Communications – purveyor of "MagicJack" via late night infomercials and shopping channels.

With a founding team including Israeli entrepreneurs Alon Cohen, Lior Haramaty, Opher Kahane, and Elon Ganor, by the mid-'90s, VocalTec played a central role as both Voice-over-IP (VoIP) innovator as well as developer of  the surrounding "ecosystem" (to use a consulting babble term). VocalTec had a lot to do with creating ITXC, a  wholesale VoIP carrier and traffic exchange and was one of its largest shareholders.

Back in 2005, a struggling VocalTec did a reverse merger with Tdsoft, an Israeli softswitch company, and now with the YMAX merger combines softswitches (and their underlying intellectual property), carrier operations, and direct-to-consumer telecom services under an aggregated, but modest-sized (~$100M revenues) umbrella.

It's hard to remember the era before the dotcom/telecom implosion of 2001, but back then, at its peak, chatter about VoIP and its ominously disruptive force took up nearly as much oxygen in the pre-blogosphere of conferences and trade press as, say, iPhone/Android talk does today.

That era was also the beginning of "personal brand"-making, internet sloganeering ("information wants to be free", "Telecosm", etc.), internet personalities, and light futurism-as-entertainment now familiar to any TED-goer. As if to legitimize VoIP's role in the carnival, The Economist's trendspotter Frances Cairncross added gravitas to the topic through various pronouncements about "The Death of Distance."

The expectation was that VoIP would unleash a telecom revolution. Well, it certainly changed telecom, but rather gradually and in a comparatively humdrum way. Hardly the equivalent of the advent of electricity or television, VoIP did greatly accelerate the relentless downward pressure on long-distance pricing, and it enabled "trunking", or bundling together of long-haul traffic, much more economically, often bypassing traditional telecom carriers altogether.

These were the sorts of pressures that, once AT&T was separated from its (original) wireless business, shrank the company to the point the leftovers were remaindered to SBC Communications, ostensibly for the brand value.  So perhaps it wasn’t quite as much the Death of Distance as it was simply the withering away of IXCs (inter-exchange carriers), which were a regulatory artifact anyway.

The fact that VoIP is everywhere – a cheap, banal, infomercial-sold commodity – is a good thing: a triumph of packet switching for the masses. It’s simply worth remembering if you’re a purveyor of anything from, say, cloud storage to video streaming, that this other “long tail” – the increasingly rapid, continuous descent into mass commoditization (being “MagicJacked”) – is what awaits many, many innovations.

Hollywood (Cautiously) Tries Internet "Syndication"

Hollywood is continuing its cautious experiment with establishing cable-independent or at least "complementary" (to quote Hulu CEO Jason Kilar's diplomatic language) distribution deals.

Earlier this week Warners and Netflix announced  a quasi-syndication deal for "Nip/Tuck" via Netflix. Though a modest deal in the grand scheme of things, it's potentially an interesting benchmark:

1. Warner Home Video came to the conclusion that Netflix distribution is a reasonable consolation alternative given their prior struggles trying to syndicate Nip/Tuck’s racy near R-rated, FX-level fare.
2. The show will still be syndicated on MTV Network's niche, gay-oriented Logo channel, helping avoid too much of an industry precedent in "internet-only" syndication just yet.

• If the Variety report is correct, the Netflix dollars/episode are well within a respectable range for second-tier cable syndication
• The industry's overall window structure has been preserved, saving precedent-setting confrontations with legacy distributors for another day.

Hulu Plus: the battle is joined

Launched around two and a half years ago, Hollywood's internet TV consortium, Hulu, has progressively garnered a growing viewer base and is now profitable.

Earlier today, Hulu announced Hulu Plus,  its long-awaited next step: a simple, subscription-based, internet-delivered television service which complements the original, free offer.

While it's way too early to tell how well Hulu Plus might do, the explosion of internet-capable mobile devices (triggered by the launch of the original iPhone, nine months before Hulu) is now converging with the first rudiments of a Hollywood-backed alternative distribution model for commercial television.

Hulu Plus sounds like a big step forward in starting to clean up original Hulu's content windowing chaos. Consortium members have agreed to simplify and standardize what have often been confusing policies, while broadening the range of available full-length episodes. And so it's likely that Hulu Plus will please viewers who were often frustrated trying to do more than snack on show clips and highlights or watch shows from a very spotty and unpredictably changing content inventory.

Even more importantly, Hulu Plus is aiming squarely at the "iWorld" of iPhone, iPod Touch, and now iPad devices, not to mention laptops. This will come at an awkward time for the lumbering and clumsy "Television Everywhere" initiatives from television's "frenemy" distributors: cable and to a lesser degree, satellite.

US cable, largely unimpeded by Hollywood so far, has been progressively drifting into new strategic territory with a deeper video-on-demand library, increasing amounts of quasi-VoD "replay/start-over" functionality and, of course, attempts to extend their distribution from the set top box to the laptop and beyond. (see Television Everywhere: strategic view) 

Hulu Plus is a next strategic step forward for Hollywood . The 'Plus' makes the potential audience bigger by adding more places (mobile devices) and more shows. And as we've said before, the myth of internet TV delivering "digital dimes" instead of dollars, is just that - a myth. Over time, as the audience gets big enough, there will be plenty of dollars because, as it scales up, internet TV is potentially more profitable than linear TV, not less.

In the long run it's quite possible instead of Television Everywhere as promoted by the cable industry and its suppliers, we can have "Hollywood Everywhere" - a scenario which is great for viewer choice and even better for Hollywood itself (see Hollywood Everywhere: migration and endgame).

The primary ingredients of this strategy are: (1) patience and staying power (something Hulu has already demonstrated), (2) continued control over content (which Hollywood, by definition, has), and (3) completely reinventing how the internet helps viewers find what they want (the so-called "discovery" problem), something no one has yet come remotely close to solving, but which Hollywood could solve better than just about anyone else.

Stay tuned...

Hollywood Meets the "Third Place"

Can Starbucks replace your cable box?

Starbucks CEO Howard Schultz describes their 10,000 or so US retail stores as "a third place between the office and home." Their purpose: synthetically recreate what used to be (and in other countries, still is) the role of independent coffee shops and pubs. Part community hangout, part momentary oasis in a busy day, these spots are ideal places to go for something more than refreshments, like brief interludes of music and entertainment when winding down and socializing.

With this in mind, Schultz took to the stage next to Steve Jobs in September 2007 at Moscone Center and announced a partnership enabling free access to the iTunes Wi-Fi music store at Starbucks locations. Starbucks subsequently hit a series of operational potholes. The partnership went largely radio silent, Schultz returned to his role as CEO to stem a major decline in sales and, evidently, re-evaluated what to do about music.

A couple of weeks ago he announced another try:  Starbucks Digital Network ("in partnership with Yahoo!") arriving in Fall 2010. Speaking about the Starbucks brand and the new portal:

"... [the Starbucks brand was] built quintessentially by the experience, and comes to light every day because of the sense of community and the trust in the physical environment, the coffee, and our people. Free Wi-Fi is, in our view, just the price of admission. What we want to do is create a proprietary way in which we're going to give access and new sources of proprietary information and content that you can only get at Starbucks."

Starbucks Digital Network could help solve a nagging and worsening problem: discovery of and engagement with media and entertainment. Thanks in part to the internet, music and television are massively fragmented markets. There's more content than ever and, Google notwithstanding, it's arguably harder than ever for consumers to make sense of it. Many simply don't bother. Plus there's the "Is Google Making Us Stupid?" problem of fidgety impatience and shortened attention spans, whereby people rapidly give up if they can't instantly find, access and consume media and information.

Starbucks can potentially create an important out-of-home setting which helps consumers in three ways:

(1) right time, place, and duration: at Starbucks, consumers will often be at a time and place in their day, mentally and physically, in which they'd be open to investing a few minutes browsing and sampling a convenient, non-overwhelming list of pre-selected media fare

(2) merchandising: less is actually more. Whether it's browsing hundreds of television channels, or a massive, cluttered iTunes catalog, sometimes consumers want guidance, opinion and fewer, better choices. This is analogous to the way a boutique or even department store pre-selects merchandise with a brand-related point of view. (More pretentiously, this is often known these days as "curating")

(3) simplicity and convenience: a button or app on an iPhone is an even more convenient way of consuming, say, Starbucks "Pick of the Week" music offer
than a small, physical coupon card and is likely to have much higher redemption rates.

Imagine this notion projected to television programming.

• A relaxed, out-of-home setting in which a consumer is in the mood to explore and, often, buy.
• A trusted, simplified set of current "trend-setting" offers, spanning an array of channels and shows.
• The ability to conveniently store, link to, bookmark or even watch a show which, under other circumstances, wouldn't come to the viewers attention or is easily forgotten and ignored.
• A setting in which viewers’ undistracted (or at least less-distracted) interest in new media discovery is made available, often more than once a day, and can set the stage for more in-depth media consumption later that day/evening.

Which cable box does this, again?

 

Technorati Tags: Television,Media,Starbucks,Yahoo,iTunes,iPhone

While Hollywood Slept?

The FCC wants US television to give up almost half its over-the-air spectrum. Doing so may end up prying away strategic options that are an important part of Hollywood's as-yet-undefined future. The television industry should take a closer look before it's too late, reframing the debate away from technical matters and "broadband strategy" and towards TV's own future. 

Somewhat buried in the Federal Communication Commission's National Broadband Plan  is a step to "reclaim" about 120MHZ of the 300MHz broadcasters use to distribute television signals over the air.

Positioned as a technical initiative, the government rationale is to make more efficient use of scarce wireless spectrum in the aftermath of the national transition to digital television. The FCC asserts that, after assorted transmission inefficiencies and spectrum housekeeping are taken care of (station "repacking", antenna reconfiguration, selective spectrum sharing, etc.), broadcasters will be left with more than enough spectrum to deliver their signals.

Even with HD broadcasts, goes the story, with a little left over for adjustments to avoid signal interference, broadcasters won't notice the difference and will be compensated by sharing in the proceeds of a national spectrum auction in which their excess and voluntarily-relinquished spectrum is resold. The reclaimed spectrum would then contribute to overall national broadband goodness by significantly increasing wireless broadband capacity.

In a recently released technical paper, the FCC envisions an aggressive schedule in which rulemaking is concluded next year, spectrum is reclaimed and auctioned to new operators in 2012, and the spectrum is cleared for new use in 2015.

To its credit, one of Hollywood's trade associations - the National Association of Broadcasters - has taken a very skeptical view of this agenda. While politically astute enough to praise the overall National Broadband Plan, the NAB has warily questioned the offer-to-good-to-refuse voluntarism of the proposed spectrum measures. The NAB has raised legitimate, albeit vague-sounding concerns about backward-looking government intervention potentially ill-suited to rapidly changing technology.

There are two major premises underlying the government's position that
broadcasters wouldn't really be giving up anything they needed anyway:

1. it's not like over-the-air TV is going to grow: multi-channel TV is widely available from cable and satellite and (implicitly) will be increasingly accessible via the internet
2. Mobile TV isn’t your department: you win by letting others have the spectrum and developing those services

If we were sitting in, say, Bob Iger's or Rupert Murdoch's office, we'd make the following counter-argument:

• irreversible? Keep in mind that once you give up/sell-off that spectrum, the chances of getting it back aren't very good. So how about we take the time to think through some potentially valuable uses before being railroaded into relinquishing these un-/underused assets?
• who says OTA won’t grow? Maybe. Admittedly it’s late,  but why completely rule out Freeview-style initiatives in the US?
• what’s the rush? You're in the still-early stages of figuring out how TV and the internet fit together - it's quite possible spectrum in your station groups currently being used for unwatched digital subchannels could be
  be used to redefine what a "channel" means and, when combined with simple interactive technologies, become a major means for viewers to discover and engage with an increasingly complex and overwhelming array of programming, both “linear” and internet-delivered
• phone guys? you’re kidding, right? Why assume "others" should/would be better at implementing mobile TV with your spectrum than you? Maybe if we were talking about Apple, but phone companies? Cable companies? Qualcomm? Cisco? Their sorry multi-decade track record of technology-centric TV futurism is unlikely to produce meaningful advances that viewers and advertisers will value. Why not have people who actually know and run the television business in charge and contract out technology work instead of vice-versa?

Let's not be in such a rush to "reclaim" spectrum before Hollywood has a chance to stake its own strategic claim to television's future.

 

Technorati Tags: mobile,tv,broadcast