Thursday, July 9, 2009

The Online Video Shakeout

Online video is a great service offering. That Google continues to plough money into YouTube is more than enough validation for many that online video is the way to go for the future. Club that with rising viewership online, and you have a potent combo of an online service. However, the troubling part is, online video is not a great business to be in, at least currently.

The recent demise of Joost should serve as a warning to the fledgling industry that all's not well. Despite having a top-notch starcast (started by Kazaa & Skype founders), and being pre-funded to the tune of $45 million, Joost has consistently struggled to make the cut, be it in terms of being a preferred destination for the viewer or for the advertiser. The company has now decided to shut down its consumer offering and offer 'white-label' services to other content providers (a fiercely competitive space where Yahoo! just ditched its $160 million acquisition of Maven Networks). So, what did it in? While there are a lot of reasons, in a nutshell, lack of compelling content. Hulu, on the other hand, has consistently ensured that content is something that it doesn't lack. Luring away Disney from a possible Joost deal was probably the last nail in the coffin for Joost. Likewise, Veoh, another video aggregator that topped $70 million in funding, recently cut its staff and changed its focus to a browser-based plug-in. Other aggregators such as Metacafe have moved on to focus on professionally-produced content, while Crackle cut off user-uploads a couple of months back. And Microsoft, of 'em all, has acknowledged that user-generated content might not really have a major role to play in the future. The Redmond giant has decided to re-focus Soapbox, its long-time also-ran in the online video space.

There appears to be a tangible shift away from user-generated content towards professionally produced content. The success that Hulu is seeing, it is estimated to now account for over 10% of all online video ad revenues, coupled with YouTube's losses, is encouraging video aggregators to move towards professionally produced content. It also helps that consumers are increasingly showing clear preference to consuming long-form video content on the Internet. Media companies are increasingly watching the action unfold with glee. Unlike the long-drawn battle that music labels have been having with online music streaming, large media houses are increasingly preparing for a future where they are the distributors themselves, or own portions of aggregators such as Hulu. And till the time that Google or anyone else can figure out an easy, and inexpensive way of monetizing user-generated content, and compelling content is made available by large media players at a fair revenue-share, online video sites will continue to flounder.

Tuesday, July 7, 2009


Chris Anderson, the popular editor of Wired, is back with his second book, Free. And despite all its recent controversy over sourcing/plagiarism, the "Long Tail" author remains a compelling read, if not for the theories that he espouses, but for the manner in which he does so. His current book is all the more relevant in the present context when certain content categories, such as music, are showing clear signs of movement to a zero-pricing model. And keeping in line with the theme of the book, the author and his publisher have made the digital book free.

Update: The free, as in free beer, offer for 'Free' is over, and you'll need to pay up to understand how giving free stuff away is great for businesses

Saturday, July 4, 2009

Functional Ecosystems: The Need of the Hour?

In recent times there has been a lot of noise around ecosystems, and how open ecosystems, given Google's flashy entry, are now here to stay. In the mobile space, the transition to open mobile ecosystems appears to be happening rapidly, with traditionally open Symbian, having had to re-position itself, and older consortiums such as LiMo trying hard to tell people that they've been around for a while. Android in particular is increasingly being touted as the platform of the future. With reports coming in of Android deployment not just on smartphones, but on netbooks/set-top-boxes and what not, the clamour around the potential of these open ecosystems appears all set to rise further.

However, amidst this cacophony, it will be pertinent to take a step back and see what lessons existing systems have for us. Arguably, one of the most successful ecosystems in recent years has been the iPod-iPhone-iTunes combo. Apple has successfully created a completely vertically integrated system that made the user-experience a stroll in the park. Consumers were offered a simple way of downloading content/apps with billing tightly integrated. On the supply side, Apple maintained a stranglehold on pricing, availability and distribution. It stood up to content majors in deciding the pricing of single tracks, and it made the app store proposition attractive to mobile developers by keeping only a flat 30% retainer. The results are out for everyone to see. The iPod has become one of the best selling portable devices of all time, while the iPhone has set the cat amongst the device manufacturers aflutter.

The other successful ecosystem example in recent times has been the Amazon Kindle. The Kindle, in both its iterations, has consistently been sold-out, with varying sales estimates. Again, the Kindle too offers a vertically integrated ecosystem with mobile connectivity built into the cost of the device, and content availability driven by Amazon. Despite the high price tag, the simplicity of the offering, is attracting customers in droves. And like the Apple ecosystem, Amazon too exercises tight control over what can and cannot be viewed. And it is to Amazon's credit that by limiting, rather inconveniencing, usage of the Kindle, they can even charge for pulling RSS feeds !

In both these cases, consumers have shown a clear preference towards a simplified usage-experience, and one that is devoid of roundabouts. Consumers do not want to be bothered about confusing options around content discovery or billing. And this is something that device vendors, telcos and content players alike need to imbibe in future offerings. While early adopters will always be willing to go through a couple of hoops, however, hitting the mainstream will require players to bring elegant integrated and transparent solutions. Players along the value chain will increasingly need to collaborate in driving uptake. Traditional models that have worked in the past will not work in the future. For instance, while telcos have been able to get away with high revenue share for any third-party service in the past, increasingly, they will have to come to terms with the changed reality and accordingly price their role in a ecosystem. A delay in doing so will hurt everyone involved in the process. Amazon's attempts at launching Kindle in Europe have apparently been stalled due to breakdown of talks with telcos on revenue-share and pricing of connectivity. Likewise, Nokia's attempts at easing consumer hassles by having integrated carrier billing are slowing up their rollout of Ovi Store, giving its competitors strong headway.

It is indeed true that advent of digital media has had a strong impact on existing business models, however, the true benefits of digital media can only be achieved if and when competency-based collaboration kicks in the industry. End of day, as the Kindle and iPod/iPhone examples have shown, consumers are least bothered with the question of an open or closed ecosystem, all they crave for is a functional ecosystem which meets their needs!