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November 07, 2005

The Future of Video Distribution

Peter Burrows

Apple is winning plenty of headlines these days for its recent roll-out of video offerings via its iTunes Music Store. The company has announced that it sold one million videos in the first twenty days. Maybe more important, Apple is doing its usual masterful job of defining the conversation about the future of video delivery, to reflect its approach to this major emerging opportunity.

But it’s not the only view.

Another compelling one comes from Jeremy Allaire, CEO of BrightCove. He believes that in the future, most consumers won’t rely nearly as much on carriers such as Comcast or SBC or DirecTV. In fact, they may not even rely on aggregators, such as Yahoo, Google, MySpace, or even Apple. Instead, he’s betting that increasingly, they'll simply have a direct relationship with the owners of the content they want to see. Whether it’s the latest blockbuster movie, hot TV show or cult documentary, he’s betting that the more Net-savvy consumers of tomorrow will be able to use the more useful Internet of tomorrow to easily find what they’re looking for. “In the Interent model, you don’t need a Comcast to reach the consumer,” says Allaire.

It sounds far-fetched, and even Allaire says the transition would take ten years at least to get serious. A lot has to happen. For example, we’ll need true device convergence, so that video piped into a home could be viewed on either your PC, TV or any other screen-equipped devices that come into existence. And BrightWave is just moving out of beta on its software, which provides a host of tools to let content owners present and monetize their stuff. So far, the obvious appeal is to small-frye that don't have any other way to hit it big. But until the media giants can make more dough by selling their properties themselves than they do through their current distribution deals, this migration won't be a game-changer.

Still, there's lots of powerful logic behind Allaire's argument. For one, tomorrow’s consumers—with years of Tivoing and Googline under their belts—will demand to see what they want, when they want. If BrightCove and others come up with technologies that make that easy to do, consumers' willingness to pay a premium to a carrier to package up content is likely to decline.

What’s more, Allaire’s plan is built on the notion that content owners can make more money, by maintaining full control of their properties. If they can get consumers to come to their site, they can make it easy for them to find all of their content--not just current hits, but also old reruns or B-movies. You know, the stuff towards the tip of the long tail. If BrightCove’s plan pans out, they’ll be able to offer a variety of pricing options, such as pay-per-view, subscriptions or ad-supported models. Sure, cable companies and even phone companies are moving towards such an on-demand world. But why would a Disney want to let a Google or Yahoo sell ads against its movies and TV shows, if it could do it itself. BrightCove always want to make it simple to syndicate content around the Web – so, for example, the History Channel could sell its many shows on World War II to history-oriented web-sites.

I could certainly imagine having a closer relationship with certain content owners. Not all, mind you. For the most part, I could care less which studio made a given movie, or which label is behind my latest favorite band. On the other hand, is there any doubt that a company like Pixar could create a killer on-line destination for the kids--a safe, high-quality experience that parents would gladly pay for? I have no idea if this is even being considered, and in fact haven’t spoken to Pixar about it. But the company has created a rock-solid brand. Why not cash in on it more directly?

On a related note, is anyone else wondering why Steve Jobs didn’t insist that Pixar’s films be sold on iTunes, rather than just its short films? Maybe there’s a simple explanation—such as that Disney simply refused. Or maybe they just wanted to do a test case--essentially starting in the kiddie pool before diving into a full-scale change in the way its movies are distributed. If that’s the case, I’d imagine Pixar and Disney are feeling pretty positive about what they've learned. I was shocked to see how well Pixar's mini-flicks have been doing on iTunes—far better than Desparate Housewives episodes, according to “Today’s Top Videos” rankings. “For the Birds,” for example, was the No. 2 top seller today. Who is buying these--and why?)

But back to BrightCove. Allaire says his firm has been working with broadcast networks including A&E, Oxygen, and MTV, as well as a spate of indie production houses. And he hints that many of the bigger names in Hollywood are quietly showing interest as well. “Despite all the recent interest in downloading video content (via iTunes), there is huge interest in streaming content along with targeted advertising,” says Allaire. “There’s not even a chance it will have any cannibalistic impact [on existing video distributors] this year, but nearly every major broadcaster is excited about this.”

12:35 AM

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Tracked on November 8, 2005 10:48 AM

"On a related note, is anyone else wondering why Steve Jobs didn’t insist that Pixar’s films be sold on iTunes, rather than just its short films?"

Because the video iPod is not about movies, it's about TV.

The files are smaller, the 3:4 ratio fits the device better, and it's much easier to spend 20mins looking at little screen than 100.

Apple has a massive back catalog of music, expect them to do the same with old TV shows. Currently the studios can't make any money off these because there's just not the shelf space, but iTunes solves that.

Posted by: Bob at November 7, 2005 01:05 PM

This cockeyed idea is as old as the corner video store. In fact, one of the country's very first video rental shops, Video Shack in Times Square, sorted its movies by movie studio in the early 1980s. A customer was faced with walls of movie cassettes labeled Paramount, Warner, Fox, et al. Very helpful. "Honey, what are you in the mood for tonight, a Paramount or a Fox?" I don't think so. Apart from the rampant typos and grammatical gaffes in this BW blog, its credibility is further undercut by amateurish reporting. We're never exactly told up front what BrightCove is or does. This kind of half-baked commentary begs the question, "When is a blog more like a bog?"

Posted by: Bruce Apar at November 8, 2005 12:55 AM

Bruce -- I agree that the name of the studio is irrelevant to most consumers; it is to me, too, when I decide what film to watch. Brightcove's argument is that as technologies make it easier to find movies online, in some cases consumers will find it as convenient to get movies directly from the studio as it would via other channels. That creates the opportunity, which didn't really exist back in the old Video Shack days, for the studio to come up with compelling content and services that would keep consumers coming back.

As for your comments about the blog, I can assure you I'll be checking my grammar more assiduously.

Regards -- Peter

Posted by: Peter Burrows at November 8, 2005 03:52 PM

This is certainly an interesting theory. However, I think that, in a sense Jeremy Allaire is incorrect. The consumer would still need a Comcast to obtain content. After all, it's the Comcasts, SBCs, and Verizons who control "the last mile" into the home. These days, data communications equipment is becoming more and more sophisticated. Who's to say that if Disney were to try to cut Comcast out of the picture, Comcast wouldn't turn around and configure their equipment to slow down video traffic that emanates from Disney's network?

Posted by: Robert at November 11, 2005 07:25 PM


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