« Is platform heterogeneity in the enterprise inevitable? | Main | Vishy's Possibly Useful Factoid: Closing multiple windows together in Windows »
September 11, 2006
Video on demand: perspectives and opportunities
Video on demand has seen a bit of action lately as broadband penetration continues to increase and old media roll out business models that take new realities into account. There is no dearth of players in the field, be they large companies or small, young companies or old. Sometimes, the players are not even those that one would expect. It is clear that this sector is quite immature and that early movers can do a lot to shape it in their image and grab a big slice of a multi-billion dollar market. This post will provide an overview of recent developments in video on demand (particularly in TV over IP), identify opportunities and speculate on future directions.
Video on demand players such as YouTube and Google Video are reaching stratospheric levels of user activity. When a startup that is little more than Flickr for video is valued at 600 million, it is safe to say that video on demand is hot. If the last presidential elections in the United States were powered by blogs, this one might well be powered by YouTube. At the moment, both these services are clearly in high demand, but they are both driven by a new media approach. Their continued success may well depend on how they integrate with other shades in the consumer media spectrum.
Integration with other types of media is what pre-Web 2.0 technology players in concert with old media can offer. Last week Amazon introduced Unbox, a movie and TV episode download service. The $9.99 movies and $1.99 TV episodes are owned by several traditional media houses. All videos come encoded with a Windows-only digital rights management system. Amazon is the least experienced player in this field and it almost seems they released a movie download service right now just to throw their hat into the ring and to steal some of Apple's thunder in the process. Apple, however, has always pulled off its media plays with remarkable finesse and timing. Their announcement of a movie download service and video-related enhancements to the iPod product line comes at a time when demand for consumer video is at a point of inflexion. The video iPod has enough of an installed base now that having the option of downloading movies from iTunes to them seems like a natural progression from downloading music and TV shows. Another key announcement among Apple's latest product releases is the one about a forthcoming set top box that will act as a media hub. This long awaited wireless device might well mark the convergence of PC and TV, a goal other players have tried to attain and failed.
Now for the more surprising aspects of this space. Netflix pioneered online video rentals and it was widely expected that it would tie up with somebody like TiVo to offer on-demand movie downloads to DVRs. For lack of will or execution, this partnership never materialized, and two companies that might have been uniquely positioned to move ahead of big players like Apple, Google and Microsoft just never capitalized on their advantages. As DVRs and movies on demand continue to be increasingly commoditized by basic cable providers, TiVo has probably lost the optimal window in which it could best reap the benefits of a collaboration with an online movie rental provider. Another surprise entrant in the video-on-demand arena is AT&T, with its Broadband TV service. Subscribers to this service can watch approximately 20 channels within the comfort of their browser. This service may not take off very well though because people want to watch TV content on a television rather than on a PC. Unless there is some way for downloaded content to be streamed to other media devices, AT&T's TV may well be just turn out to be the stunted arm in a triple-play offering. Another product line to watch is Microsoft's beachhead in the personal media space via its Zune media player. Although Microsoft is by no means early to the video on demand game, its existing relationships with content providers, relatively established content verticals and virtually limitless budget might portend a video on demand strategy that cannot be instantly dismissed.
In the context of cross-device integration, video on demand players might do well to evaluate their offerings with respect to the mobile and automotive segments as well. Media devices such as the PSP, mylo and iPods will continue to make steady inroads into the personal electronics segment. More and more cars come equipped with in-cabin video these days; having a plan to capture this portion of the market might yield large payoffs. Having coherent and interoperable Internet, mobile and automotive strategies might well prove to be the triple play of online video. The appointment of Google's Eric Schmidt to Apple's board might open up interesting ways in which the two companies can collaborate over video on demand. Even if Google's nationwide WiFi doesn't take off as expected, Google and Apple might be able to work out what to do with all the dark fiber the former has bought up.
Over all this potential for innovation hangs the specter of old media companies imposing excessively rigid digital rights restrictions on their content. Even after the realignment and introspection that old media is going through in response to challenges posed by new media, it is easy for them to revert to their content-is-king credo once video on demand has taken root sufficiently. One can only hope that their experiences collaborating with new media and technology players over video on demand will teach them that content alone is worthless without a good business model to accompany it.
| Strengths | Weaknesses |
|---|---|
| The increasing penetration of broadband and the coming of age of delivery technologies means video on demand is poised to take off. | Video on demand won't supplant existing delivery methods and become indispensable to consumers until they have the flexibility to stream content from and play content on any device they own. |
| Opportunities | Threats |
| The precise shape of a video on demand offering is still open to definition, and moving fast can still help shape the sector significantly. | Old media can stunt innovation in business models and delivery methods by drawing the old content-is-king canard. They can get away with it too because intellectual property laws currently work in their favor. If they don't adapt to the new ways of consuming content, they risk alienating users and failing to attain critical mass on their new media initiatives. |
Posted by Vishy at September 11, 2006 12:24 AM