by Tim Siglin
February 12, 2009

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"Stop hating, start monetizing” could be the media and entertainment mantra for 2008’s interaction between traditional broadcasters and streaming media.

With network broadcasters’ advertising slipping—due in some part to the economy but in larger part to the rapid stampede of key demographics away from broadcast television—broadcasters and content owners began moving to the web in earnest.

Early 2008 saw the launch of Hulu (www.hulu.com), a joint effort between NBC Universal and FOX’s parent company, News Corp. While the video-sharing site hosts content from multiple NBC and News Corp. properties, Hulu has also become an attractive web outlet for Sony and Time Warner content. So not only does it have full episodes and clips from hundreds of TV series, it also has more than 100 feature films.


Figure 1. NBC Universal and FOX’s joint venture was one of the year’s success stories, offering new content as well as archival movies and TV shows.

The move toward the web in 2008 revealed which media outlets understand the difference between the web and the broadcast world. Unlike a typical network or studio website, Hulu users can share content, edit it, and even republish it. As a way to take on YouTube, which accounts for about 35% of the viewership of all online video (at least as measured by comScore), Hulu puts advertising on all of its content. YouTube is slowly following suit, first introducing pop-ups that viewers added (think Pop-Up Videos from VH-1 a few years ago). It’s now unveiling pop-up advertisements that cover about 25% of the screen and must be closed to see the whole video.

The early part of the year also saw some of the traditional sites play around with preroll and interstitial advertising lengths. Sites such as ABC.com, which has chosen to keep its content on its own site rather than pushing it to Hulu, experimented with various ad lengths. So did NBC.com, which at one point showed the same two commercials at each interstitial break.

Thankfully those times are now past—for the most part—and while online episodes of popular TV shows have almost exclusively moved to advertising-based revenue models, the number of commercials in an online episode has fallen below that of network television.

Some shows, such as The Office, have also used webisodes—short 2–3 minute clips that drive the story line forward on fan-favorite secondary characters—that are sponsored with both a banner at the video’s selection point and a preroll 15-second clip. This dual-advertising strategy is beneficial for the advertiser and the content owner and appears to be sticking for content that’s less than 5 minutes in length.

Oprah Goes Online
The middle of 2008 saw two of the biggest online events in history: Oprah’s A New Earth series of webcasts, powered by Move Networks and Limelight Networks, and the Olympics, powered by Microsoft’s Silverlight and Limelight in the U.S. and Flash in the rest of the world.

Oprah’s first event was notable—as most live webcast events are—for the glitches as much as for the content and sheer number of participants. Immediately after the first event, Oprah positioned the hiccups as part of “pioneering” a new platform in the following statement:

Like you, I was deeply disappointed that so many dedicated webcast participants around the world were unable to view our first live webcast. Experts from both Limelight Networks and Move Networks, our partners in bringing this groundbreaking experience to the Internet, believe they have identified and addressed the programming problem that was unmasked by a historic number of simultaneous users. … It is clear that pioneering this new platform will always come with risks.

Oprah went on to say that the number of original viewers—noted at more than 500,000 simultaneous views, a new record—had been dwarfed by the number of viewers who watched the live event later. More than 1.5 million streams and downloads took place in the days following the live broadcast, and while Oprah said she continues to be assured that capacity was not the issue and that “the team believes we are good to go for another try,” she also slightly changed her tone to set expectations for potential future sessions.


Figure 2. The first episode of Oprah Winfrey’s A New Earth webcast logged more than a half-million viewers, according to the show.

“If you are willing to partner with me in exploring this new frontier,” Oprah wrote, “I’ll see you in class live on Monday. Otherwise, you can stream or download the class on Tuesday or whenever it’s convenient. I leave it to you to experience the class in whatever way works best.”

Classes continued for 9 weeks with an average of 180,000 simultaneous streams after the initial issue, a coding error, was resolved.

Webcasting the Olympics
Next up was another high-profile event, the Olympics. In China alone, it is estimated that 100 million streams were viewed over a 10-day period, with the BBC reporting 40 million stream views and the U.S. about 72 million stream views. All in all, the Olympics set both online viewing records and entrenched several nascent business models.

Even prior to the Olympics, the state-run Chinese television station CCTV was flexing its muscle in the online space, warning would-be online broadcasters of the consequences of going outside official channels to obtain the streams.

“CCTV was granted the exclusive rights to conduct live streaming of the August Olympics in the Chinese mainland and Macao over the internet and mobile phones,” said Hu Zhanfan, vice president of CCTV International. “Even local TV stations that have live streaming rights for TV are not entitled to transmit the Olympics on their websites or other mobile platforms.”

Zhanfan is also deputy director of the State Administration of Radio, Film, and Television (SARFT), the Chinese ministry responsible for program licensing, so his warning also carried an official announcement that SARFT would monitor local stations and commercial websites.

“Violators will be warned and punished,” Zhanfan said, “and their bad records will be linked to approval of future program licenses.”

In the U.S., NBC didn’t have quite the clout of a government official, but it successfully defended its turf by broadcasting almost two-thirds of the Olympic coverage. Viewers of some of the less-popular content took umbrage at NBC’s decision not to broadcast or stream everything—CCTV.com streamed more than 3,800 hours of live coverage, 1,600 more than NBCOlympics.com—and went looking for alternate streams from other countries. But overall, the concept of locking down a series of large, live events to a particular provider in a particular geography took hold during these two major events.

Microsoft also helped out, using the Olympics as a test for its Silverlight 2 beta rollout. Like the Oprah event, which was pitched in Flash but required the download of the Move Networks plug-in, many viewers were willing to download the Silverlight plug-in to be able to watch Olympics content.

Many thought that Move Networks was also involved with the NBCOlympics.com delivery of the Beijing 2008 Summer Games, but Move executives have repeatedly denied the rumor. Lessons learned from the two events, though, are still reverberating throughout the industry.

Microsoft’s end-of-year release of Smooth Streaming—an IIS 7 Media Pack technology based on Move’s 2-second “chunking” of content—was identified as an enhancement based on what Microsoft learned from the Olympics. The use of streams that start low-quality but snap to high-quality if bandwidth is available should help address massively scaling content needs.

In much the same way, Adobe’s beta release of Flash Media Server 3.5—which has dynamic (multiple bitrate) streaming and a live DVR functionality that can be used to pause a live stream and to mitigate the need for immediate onlining of servers during rapid viewership spikes—was based on lessons Adobe learned during the largest live event of 2008.

The recurring theme of Move, Flash, and Silverlight continued through the rest of the year, culminating in several big media and entertainment programming announcements.

MLB.com, the official website of Major League Baseball, moved from Flash to Silverlight and then back to Flash. Collegesports.com, a CBS property that hosts college football and basketball games, went with Silverlight and was one of the key partners at the time of the official Silverlight 2.0 release.

Several other key sports and entertainment properties fell one way or the other, helped in some part by undisclosed funding provided by Adobe and Microsoft as the streaming industry returned to the decade-old debate over the merits of tying down either technology or content. Clearly, for at least the majority of 2008 and the foreseeable future in 2009, content is king again.

Piracy Watch
Piracy and bootlegging also made their annual appearances, but in some ways their appearances in 2008 brought a pointed reminder that rights management can be as much of a detractor as a beneficiary of online viewing patterns.

In a clever stroke of marketing, Akamai Technologies used a study of online piracy as a clarion call for traditional media and entertainment companies to move their content online at a faster pace. The company also showed how its workflow could allow that move in a relatively painless fashion.

In partnership with Vobile, Inc., Akamai’s study showed just how fast premium broadcast content is pirated on the web. Stating a somewhat obvious fact—that popular U.S.-based prime-time television shows are available online within minutes of being broadcast—Akamai noted that “content owners need to distribute premium content through legitimate channels within a window of 12–18 hours.”

Recommending a twofold approach of syndication (such as Hulu) and direct posting to a site (as with ABC.com), Akamai suggested security measures such as fingerprinting and encouraged companies to register “their content with companies like Vobile to prevent the broad propagation of their copyrighted content across the Internet.”

The study’s main point, however, was that most viewers will attempt to find content legitimately before attempting to find it by other means. In interviews with viewers throughout the year, the logic of Akamai and Vobile’s model showed through.

“My DVR cut off the end of the American Idol finale,” one viewer told me, after watching the DVR'd content a day later. “So I went to the network site and it wasn’t there. I then went to YouTube and found it was posted there hours before it was posted on the official site.”

Akamai’s study was interesting on another front, as it showed a trend in uptake of unauthorized content. According to the study, the unauthorized consumption of a popular TV show is relatively low in the first 12 hours, but then it swings into high gear. Whether this is because of the water-cooler effect or just having a faster broadband connection the next morning at work, unauthorized consumption mushrooms dramatically within 24 hours. Akamai ends the study by noting “in 72 hours, unauthorized consumption can erode nearly 20 percent of the online audience for an average primetime TV show.”

“Speed of distribution matters to preserve revenue and audience,” said Vobile’s CEO, Yangbin Wang.

These numbers seem to hold well with a few experiments in programming that took place late in the year. At AdobeMAX, Disney.com’s VP of interactive, Bud Albers, noted that some of the content now on Disney.com is shown there prior to it being broadcast on television. He noted two examples: the Camp Rock movie and The Suite Life On Deck series. Camp Rock, which aired on June 23 using Flash technology, increased Disney.com traffic by 37%. The Suite Life On Deck, a spin-off of The Suite Life of Zack and Cody series, had its first episode shown on The Disney Channel, but then additional episodes were available online before the next week’s showing, raising viewership levels by an almost 3-1 ratio over previous weeks.

Eye on Content
On the content front, H.264 also had a sizeable encore, with Adobe’s use of H.264 in Flash being followed by Microsoft’s announcement midyear that it was supporting progressive download H.264 files via an IIS Media Pack, regardless of the format wrapper. This means FLV, F4V, and QuickTime H.264 files can be delivered by Windows Server 2008 with the IIS module, which also includes bitrate throttling to limit download speeds to a level just above that of the progressive video playback.

To add more fuel to the H.264 fire, Microsoft also announced in late 2008 that it would be supporting H.264 in an upcoming version of its Silverlight plug-in, guaranteeing a consistency of encoding and delivery across the major players and computing platforms.

Shortly after the Olympics, the democratic process kicked into high gear, with Silverlight and Flash being used to stream the political conventions to an increasingly engaged electorate. Beyond just the 3–4 night conventions, the use of online video in the political process grew dramatically: YouTube was used as a secondary PR arm for both the Republican and Democratic nominees, and third parties used streaming video as a primary marketing arm. YouTube went as far as to mimic CNN’s iReport user-generated-video content service offering with a YouTube election map of the U.S. tagged with a variety of filters for highly engaged participants, including voter intimidation, celebrity voting sightings, polling issues, and the like.

Some sites are still playing with timing, however, and FOX’s House experiment was one of those that raised as many questions as it answered. Episodes on FOX.com for the popular series starring Hugh Laurie are not available until 8 days after airing. Not only does this fly in the face of the direction other content owners are moving, but it also makes for a frustrating experience, since missing an episode means that a viewer can’t catch up on the previous episode before the next one airs.


Figure 3. Flying in the face of conventional wisdom, FOX didn’t offer episodes of House online until 8 days after they were broadcast on TV.

England’s Approach
On the other side of the pond, BBC Worldwide’s Claude London talked about the success of the iPlayer at Streaming Media Europe and hinted that 2009 holds the possibility of allowing the iPlayer to be viewed internationally.

After assuring the U.K. members of the audience at the London-based event that BBC Worldwide doesn’t use its licensing fees to put content on the web, London was asked by an expatriate whether he would ever be able to watch content via the iPlayer in another country. London said he could not speak for the BBC on the topic, but he mentioned the fact that BBC Worldwide bids at market price against other content aggregators. Therefore, it might not be out of the question to drive worldwide iPlayer viewership via carefully selected advertisements.

The BBC also provided some interesting insight into the impact of viewership for long-running programs. East Enders, a show that has aired for nearly 30 years, has some online viewership, but nothing to the proportion of the newer shows. As audiences build up around these newer shows, BBC statistics show a much higher total percentage of viewers. In essence, the video streams are also bringing viewership parity, as newer shows’ combined online and traditional viewership is now coming close to that of perennial favorites.

iTunes Update
Another technology back for its close-up this year is iTunes. Apple released the iPhone 3G, and in November it added the option of direct access to podcasts. Given the 3G AT&T Wireless network, these progressive downloads are fast enough to begin listening to immediately, eliminating the need to first download the podcast to an iTunes player and then sync the iPhone to the computer.

In addition, NBC and Apple broke up and then got back together, with NBC perhaps getting the better part of the deal, as it was allowed to vary the pricing for its more popular shows. Apple, however, emerged as the clear winner, as it cemented its online dominance in both paid audio and video content.

Learning to Love YouTube
Finally, in the same year that BitTorrent went legit, studios stopped hating the web. At least one embraced YouTube.

While Viacom continued forward with its copyright lawsuit against YouTube, which is owned by Google, MGM Worldwide Digital Media crafted a deal to make full-length movies and promotional clips from MGM’s library available on YouTube.

“We’re looking to mine the breadth and depth of the MGM library to build out and promote branded, multiplatform opportunities on demand, online, and wherever viewers consume their entertainment,” said Jim Packer, co-president of MGM Worldwide Television.

YouTube also got two other pieces of good news in late 2008, as it struck a deal with reality- and game-show company FremantleMedia to deliver exclusively produced shows on YouTube. The content will probably be protected by YouTube’s beta rights management tool, YouTube Video Identification, which provides digital fingerprinting for content that allows content owners to choose whether to kill or monetize content uploaded by fans.

Both the FremantleMedia and MGM deals include revenue splits, and YouTube’s announcement that it is getting into live streaming content as well sets the stage for a very interesting 2009.