The Potential of BroadbandTV to Create New Video Experiences
The Possibilities of BroadbandTV Go Far Beyond
"Any Content, Anytime, Anywhere"
Hervé Utheza, Director of IPTV Research

Download this TDG Opinion as a PDF

The past six months have seen an eruption in activity involving what TDG calls "BroadbandTV" - that is, video distribution over the open Internet1. Here are just a few examples of how widespread and important this eruption is:

• Among "new media" darlings, Google's aggressive video strategy was finally articulated and AOL launched In2TV - the "first broadband TV network" with TV programming available "online, anytime, and always free."
   
• Among "old media" players, News Corp. has made Internet video a strategic priority, and US cable leader Comcast stating that success is less about "triple" or "quadruple play" than the "integrated single play"2.

If judged by the amount of meaningful business activity in this space, 2006 will be remembered as the year BroadbandTV raised its head from the muck and took center stage in the media industry. It's as if the notion that broadband is capable of powering a new generation of robust video services is moving from "fringe delusion" to "conventional wisdom."

Business Spotlight on Delivery and Presentation

The main focus of attention to date has been on the (re)discovery of the technological capability of the Internet to deliver video, especially:

(1) The Delivery Technology - How Internet Video Gets to Consumers

a. Internet streams vs. downloads (DRM protected);
b. Peer-to-peer distribution of video (not only of recorded content but also live video feeds or what we call "BroadbandCast"); and
c. Mobile video (which needs another 3-4 years before it becomes relevant).

(2) Content Presentation - How Consumers Identify and Access Video Content

a. Based on content collection/aggregation (for example, Yahoo! and AOL In2TV); and
b. Based on search medium/paradigm (for example, Google Video, at least as we know it at this point in time, for rest assured it will change in the next five minutes).

Today's Video Consumption Models are Fairly Poor and Targeted at "Me Too" Models

Despite all the recent attention being paid to Internet video, the consumer experience is still pretty lousy. For example, unless I already know a site which is reasonably certain to have a title in which I may be interested, I have to find a video search tool, learn how to properly use the tool, search for the title, learn how to properly use the site that actually has the content, register as a user, pay for it (if required), wait to begin the download/stream, and then (hopefully) I can view the video. It's certainly not as simple as turning on my TV and flipping to my favorite channel (let's leave the elegance of today's IPGs for another opinion piece).

When we look at how new online video companies or product launches are constructed, they mostly fall into two categories:

(1) A "capture" model - a zero-sum game where emerging media companies are trying to "capture" an audience at the expense of mainstream TV programmers or other online sites; and

(2) An "experimentation" model - a trial by established mainstream media companies to see how audiences react to Internet-based video consumption.

The latter model is overwhelmingly based on advertising-supported consumption, with the exception of pay-per-view models for adult content and high value/small segment (or niche) models. If viewed through this lens, Internet video distribution is seen as just another distribution platform but one which instead of serving the TV serves the PC, "home media center," or maybe a mobile device.

Few models see the web as a differentiated video platform capable of supporting an entirely new type of video experience. It is neither merely an extension of the old video world, nor just another medium through which to push out old content. Very few see the Internet and broadband as capable of creating a true paradigm shift in how content is conceived, created, distributed, accessed, and consumed. We don't use the word "paradigm" for dramatic effect: we're talking about a new understanding of video entertainment, not just another distribution channel.

Imagining Creative New "Video Products" Which are not Replicable by Traditional PayTV

With this view in mind, the Internet evolves to create new video packaging, programming, presentment, and engagement models which will be differentiated from yet complimentary with traditional broadcast and PayTV models.

So the question shifts from "How do we steal viewers from traditional TV programmers?" or "How do we use the Internet to leverage old libraries of video content?" to "How do we grow both the online video market and traditional channels at the same time?" That, we surmise, is the right question to ask - and we recommend building business strategies and products/services that are positioned to do precisely this.

Such models would be more experience-centric than today's Internet viewing experience (that is, the creation and consumption of short sports, news, or adult video clips). For example:

• Mixing video streaming and blogging, for example, to create "viewers forums" around live events;
• Real-time polling/talk-back chat rooms centered around a live news commentary or sports event;
• "Virtual" betting and side-games around a live sports event, with contests and prizes;
• "Pick your movie end" where movies are streamed with viewers choosing the end;
• Advertising-based contests ("Find the six green Volkswagen bug in this movie") that leverage product placements within a video program;
• Letting users create highlights of a particular video moment, to share them virally with their friends and family;
• Editing and remixing portions of branded video segments (a feature currently being trailed by the BBC); and
• And so much more yet to be imagined.

These examples are meant to give you a sense of how different the BroadbandTV video experience can be. Innovations such as these will help grow the market for Internet video without necessarily cannibalizing traditional distribution.

Parting Thoughts

Interviewed recently about the simultaneous release of "Bubble" in movies theaters, DVD, and video-on-demand (VOD), Steven Soderbergh was asked if he thought movie theaters would disappear. "I don't believe that movies theaters will go away," he said. We concur, and even suspect that Steven is already thinking about which "video products experience catalog" he can build through those various mediums.

The same sentiment was echoed recently by CBS CEO Les Moonves, who pointed out at a recent Bear Stearns Media Conference that the revenue he expects to generate from "new media" deals with Internet, wireless, and video-on-demand entities "will be additive" not dilutive. As a content company, Moonves said it is important to look at how these new media outlets can add to the mainstream entertainment experience, not detract from it.

It is TDG's opinion that the true challenge (the "real game," if you will) is about imagining creative new ways that encourage consumers to engage content (versus simply consuming it) without requiring a level of activity that borders on "heavy lifting." Again, the opportunities associated with using broadbandTV to improve the aggregation, organization, and presentment of content to consumers is extraordinary. Companies that can remove the "heavy lifting" of dedicated interactivity and make the "interactive experience" a primarily passive and immersing experience that is augmented by a sufficient level of interactivity can look forward to a warm reception in the age of broadbandTV.

1 Distinguished from TelcoTV (traditional PayTV over DSL) or the more common "IPTV"
2 Gary Traver, SVP and COO, Comcast Media Center, quoted in [a CED OpEd piece]

About The Diffusion Group (TDG) -
The Diffusion Group is a strategic research and consulting firm focused on the new media and digital home markets. Using a unique blend of consumer insights, executive-level consultants, and hands-on technical experts, we produce more than just research - we create Intelligence in Action™.

TDG is committed to providing market research and strategic consulting services based on conservative, real-world analysis and forecasts grounded in consumer research.

For more information about The Diffusion Group, visit our website at www.thediffusiongroup.com.