The complicated world of online video – part 1

It’s complicated. Period.

Really great posts regarding online video and TV Everywhere over at TechCrunch lately.  I am passionate about BOTH of those subjects so I’m an OTT (over-the-top) fan (yes, that was an industry pun) of TC now!

Today, Andrew Keen wrote about how group paranoia has effected certain media organizations to influence their audiences against TV Everywhere, the cable consortium’s efforts to embrace the internet and provide their content to paying customers.

Ashkan Karbasfrooshan of posted today about 12 Surprising Things that are holding back online video advertising.  This is a follow-up to his post yesterday about the State of Online Video Content.

It’s fascinating to be in and also watch what is happening right now which is that we’re FINALLY seeing some real convergence of the TV, cable, and online video space.  Big movements come with big players.  And the big players come from big industries.

Where the big players are coming from.

  • Content Producers
  • Content Distributors – Cable
  • Content Distributors – Broadcast
  • Over-The-Top Content Distributors
  • Online Video Content Distributors
  • Advertisers

Big content players are all the major movie studios, whether they’ve wanted to be online or not.  On the TV/cable content producer’s side, ABC, NBC, CBS, Fox, Lifetime, MTV and many others are proactively making their moves online.   They’re distributing their shows through their own websites and licensing them to other general sites like Hulu and

On the cable distribution side, only Comcast and Time Warner count (sorry Cox).  There’s been so much consolidation on the distribution side, that the delta between the #1-2 players (Comcast and TW ) and #3 (Cox) is dizzying.  Even if #3 Cox merged with #4-25, they still would fall short of Comcast’s subscriber numbers.  See numbers here.

Then there’s the broadcast network of stations that have a sizeable impact on the Content Producers because of the Content Producers’ dependence on broadcast syndication revenues.

Over-the-top or OTT distribution is not necessarily new technology nor even a new name, but it’s being used more often now to describe a category of technology that takes internet content and feeds that directly to your TV set for viewing.  The problem is that cable TV and internet video use different digitization (or encoding) and streaming technologies.  Cable’s linear and on-demand shows are encoded for security and need a box to descramble the signals.  Online video is encoded to run on your laptop or monitor and your TV uses completely different technologies.  So to view online video or anything from your computer on your regular TV set, you need a separate or different Set-Top Box (or STB, that Box that sits on Top of your television Set) than your standard cable box.  Hence the name, Over-The-Top (OTT).

TVs today are literally morphing into computer monitors and are touted to be internet ready.  But they still need that translation to run your computer’s media. The purpose of the OTT box is to provide that interface so  you can redirect your computer’s media to your TV.  Online video however is limited to a few portals but is growing as deals get cut.  On the other hand, some of the newest monitors are so large, the cord cutters use those when they want to lean back on their living room sofas.

Consoles for gamers like the XBox 360, PS3 and Wii are developed from the get-go to play on your TV and already stream Netflix movies so it’s only a matter of time before other networks or content producers try out that distribution channel.  Consoles are another example of the OTT category.

Sling Media (owned by DISH) also has OTT products as well to go from online to your TV.  And they’re a really big player-owned product.  Smaller players include Boxee, Roku, and Vudu.

By the way, Slingbox is the first major product that took your TV feed and converted it to an online video format so you could watch your TV on your laptop – say, when you’re traveling.  It was innovative because there wasn’t anyone doing that at the time.  However, with the launch and eventual roll-out of the cable and satelllite’s TV Everywhere online on-demand products, the Slingbox will become obsolete soon.  Yes, it’s confusing, I know.  That’s why it’s so interesting!

Already, there are online video distributors who were born in this new world – but they have a lot of family history to fall back on. The pioneers are already here, figuring out the best features, business models, content development strategies, audience development, encoding formats, video players, size, aspect ratios (standard def 4:3; high definition 16:9); streaming vs downloads vs peer-to-peer, revenue models … and whether to create their own or build on someone else’s platform.  The biggest player here is YouTube – the one that started the online video explosion in the first place.

If you think about the entertainment business from the start of mankind, the rate of change in the online video industry is nuclear.  Thousands of years for live acting; a few hundred years for still photos; just as many for moving pictures, 85 years for television, 70 years for cable TV, 40 years for satellite TV (C-band), 14 years for DireTV, and essentially only 6 years for online video.  As an industry, it’s taken existing business models, service and distribution models, and moved them online.  Relatively speaking, the technologies for the viewing and distribution have been developed.  Now it’s stabilization of those technologies and growth.

The biggest hurdle in this whole piece is the monitization part and traditionally, that’s been through advertising.  The Advertisers are the last piece to this puzzle and we need some big players to jump in.  So far, they’ve been sitting on the sidelines and waiting until the dust settles.

The online video world obviously needs to show advertisers that their ads are trackable and that the viewing eyeballs convert into sales before they’ll put their dollars here.  While there are online video distribution and ad-servicing companies out there that are tracking where the videos and ads are being viewed,  it’s going to take a major game-changing technology to kick-start more widespread support by the advertising community.

The big fish syndrome.

Some context about these types of players.  The big players tend to act like the really big fish in a relatively small pond.   These big fish have really grown accustomed to how things work in their pond.

History has shown us that more often than not, big fish-small pond players don’t look beyond their pond much (e.g. from railroads, to telephones, to newspapers).  Because there’s one component that these big fish seem to forget about and that is ultimately, their businesses depend on customers, consumers, humans, people, eyeballs.  Whatever you want to call them, they need us.  People change all the time so they have to keep up or die.

Therefore, it’s important to acknowledge that at least these big fish have the wherewithal to embrace the net and get into the game.  Self-preservation is a mighty strong motivator but it can only kick-in if you understand that the universe is changing and you realize that you’re not even in the game.  As much as Gerald Levin gets trashed for mucking up the AOL-Time Warner merger, we forget that at least he saw beyond his traditional pond and like many early pioneers where some became heros, others got eaten by the wolves (albeit in sheep’s clothing).  Disclaimer:  I was a 15-year employee of Time Warner and lived through the merger and it’s aftermath.

Continuing on the small pond theme, then in this case, the internet is a new uncharted continent and it’s totally outside the realm of most industry executives’ conscious world.  Online video in particular is a newer part of Internet landscape than say, e-commerce and search.  Some early video companies have survived, some have died off, but new players land in this new world everyday.

So.  What happens when the big fish land in this new world?  The trouble – or fun in my case – starts when you have these really big fish-small pond players land and plant a pole in the online video territory.   We’re right at the part of the movie where the evil forces of the empire invade the new world and destroy all the good that was there before them…well actually, no, we’re not.

This is where it gets complicated and we need to think beyond our own little ponds.  Advertising, content production and distribution are very complex ecosystems and to understand what’s happening and to eventually work together, it’s important to understand each other.  I’ll continue that discussion in a follow-up post.

In my humble opinion, I agree with Ashkan in that, “if you build it, they will come.”  But given today’s plethora of media options (linear and on-demand TV, online video, console games, handhelds, smartphones, etc), it’s the finding that needle in a haystack syndrome that we’re in right now which I’ve touched upon briefly in prior posts about What the Online Video Space needs to be Successful and Channel Surfing and Discovery in an On-Demand World.

Follow-up post will be The Complicated World of Online Video – part 2.  Don’t leave your computer, I’ll be right back!  And now a word from our sponsor (I wish…..)

3 thoughts on “The complicated world of online video – part 1”

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