New Video Frontiers: Taking It Beyond the PC

Despite some success, mobile video has taken a backseat to online video, according to Kelly Egan, senior vice president of business development and sales at Swarmcast, an online streaming video provider. Mobile video is certainly the infant market of the three screens, but it will begin to mature in 2009.

Reimagining Advertising
An area of content that must evolve is advertising. As eyeballs shift from one viewing experience to the next, the relevancy of traditional broadcasting will diminish. The same ads cannot be place-shifted to a mobile device or PC. Designed for insertion into broadcast TV during certain times and shows and timed for people viewing relatively long-form content, these ads don’t translate. On mobile devices, consumers do not wish to spend valuable minutes watching long ads. And online, traditional ads tend to be too long for the content.

However, advertising is slowly evolving to match the media. Highly engaging, shorter ads, user-generated ads (such as the one Doritos did through a contest), overlays, opt-ins, prerolls, and product placements are all evolving. In fact, some advertisers are making advertising a value-add part of the experience, according to Troy Young, CMO of VideoEgg, a video ad network for online communities. For example, consumers might be able to find show times during a movie trailer or a map to the nearest McDonald’s.

While the experience might be innovative and engaging, advertising online is harder to buy, harder to plan, and harder to measure. Because of this, according to Young, 45% of brand dollars go to traditional TV advertising and only 5% go to online advertising. But the mix will change slowly over the next several years. And as long as the advertising models lag, so will content to different screens.

Scrambling for Influence
Assuming that more traditional content providers maintain their power and that consumer demand is increasing for the multiple-screen experience, who delivers the content to the consumer? How does power shift in other places in the video value chain? According to Thanasis Iatrou, CEO and president of transcoding company Media Excel, the video industry is in between the perfection of the technologies and the actual growth of the market. Several other industry experts echoed this sentiment, and the consensus is that the next 5 to 10 years will be pivotal in reshaping the video industry.

Power must shift among content delivery providers. Today, cable and satellite operators control the traditional broadcast network, and cable companies and telcos control the broadband pipeline to the house. However, none of these companies control the content creation or the content networks, a long-standing thorn in their sides. What these content deliverers are starting to see is the bypassing of their traditional profit-sharing agreements with the networks, which are simply using broadband pipes to reach the consumer directly. So for the first time, telcos actually can gain real value by offering IPTV. While networks can still choose to go around the telco, the telco’s position is strengthened by an IP delivery network and a business model unencumbered by historical norms. And without the bias of "how business is done" hanging over them, in theory, telcos should be able to roll out new services, such as interactivity.

Of course, traditional service providers are not going to sit back and watch their content-subscription revenue dry up. Fighting the Net Neutrality battle may ultimately lead to the providers being able to charge much more for high bandwidth utilization, although it is unclear who will get charged. Unfortunately, the satellite operators don’t have back-channel bandwidth play, and therefore, they have fewer options. A better alternative for the service providers is innovation. Just like the content providers must deliver quality, the service providers must deliver experience, and the same old sit-back-put-your-feet-up-and-watch-TV experience is over—it has been over since place-shifting was adopted by the mass market.

One interesting experiment we are seeing is DIRECTV's efforts to make some premium content available to its customers early. For example, Friday Night Lights is available on a special channel months ahead of its regular broadcast. From the cable companies, we’ve been seeing the popularization of video on demand and the rise of high definition and DVRs. We are also likely to see service providers attempting to become their own online networks (picture Comcast.com) and hosting content in competition with other online networks and traditional broadcasters.

The New Powerhouses
Of course, there are new entrants with wildly different approaches entering the market and changing the game. Companies such as Apple, Google, Amazon, Microsoft, Adobe, Sony, and Netflix all have major investments and major roles in the industry today; all of these companies are motivated enough to put the full-court press on the incumbents. Both Apple and Google are charging after the video ubiquity market in a big way, and Sling Media continues to influence the nature of the game.

Apple has been the most successful so far at creating a seamless user experience, with a unified content store and a host of devices that enable purchased content to be available on any screen at any time within the confines of a walled garden. If Apple does one thing right, it’s that the company brings the "three screens" together for the consumer, negating concerns over interoperability and unifying the experience in a way that makes ubiquity easy. So far, consumers have been willing to pay a premium for the content and devices Apple offers. The company continues to innovate, showing that, at least for some consumers, a premium experience works.