The growing market for video
I’ve been monitoring for a while all the new services coming up for video sharing. I have to confess that I’m a bit puzzled about the business model, ie. how all this initiatives are going to make money, since there are a number of issues to address.
1) content is king (still) and there are a number of issues surrounding them, in particular intellectual property rights to it. I believe you can segment the content market in 3 or 4 categories:
– motion pictures: for a while now, Movielink and CinemaNow have been offering VOD to customers. In France, MovieSystem (acquired by pay TV group Canal+) has been in this market for a while as well. Startups or new business units are being set up, for instance at glowria, TF1, France Telecom, T-Online, etc. Negotiation of rights is the name of the game, as everyone is finding out, including for instance the latest UK startup BoxOffice365.com or US firm Akimbo is experiencing.
– non-movies such as documentaries, sports, etc. Akimbo is now moving into this area; startups such as vodeo.tv also aim to capitalise on this new market.
– user produced content: search engines have moved fast into this area, including Google Video, Yahoo! Video, Blinkx.tv, Pooxi.com, Truveo, etc.
Update: more search engines or aggregators: mefeedia.com, blogtelevision.net, SingingFish…
They have started adding hosting services as have a plethora of other services: castpost.com, DailyMotion.com, youTube, vimeo, myveo, blip.tv, vobbo.com, ourmedia.org, The Internet archive, Multiply, Ripway, CommonFlix, VarsityTV…
Update on 24/8/05: add now audioblog.com, typepad.com, etc.
This last categorie has its own limitations, including the noise/signal ratio (only partly solved with tagging), piracy, porn mixing with business interviews, etc.
2) fulfilment: before iTunes 4.9 was released, only a few early adopters were listening to podcasts using tools such as iPodder to monitor RSS feeds for podcasts. Then the tipping point happened, with 2m downloads happening in just one week. Audio sharing went mainstream (I’m of course omitting P2P networks…).
Storing and streaming audio seems now to have found the right balance of tools to do so. Adam Curry was even complaining the other day about issues he had with distributing his show on Akamai. New companies such as FireAnt are helping video get distributed, and I guess iTunes 5.0 will bring vlogging (video blogging) to the masses as well.
Update: I guess I forgot to mention a couple of other fun initiatives, such as the OpenVision.TV network and the Broadcast machine (used by Current.tv)…
Video will bring additional issues, as size of files increase:
i. what format (codec) are you using? Luckily, tools such as videolan read just about anything. Google Video is using it. Freeplayer from French ISP Free is also using it. There are some doubts however concerning the IP on some of the reverse engineering done on the tool. Luckily tools such as ffmpeg or Sorenson Squeeze will help you translate about anything onto anything.
ii. what protection are you offering to content right owners. There are a myriad of tools, and the industry has still not settled on one format, although Microsoft DRM is guaranteed a good place on the market.
iii. storage: depending on encoding options (eg: mpeg-2 vs. mpeg-4), video files tend to be very big. Hosting sites will start piling up boxes of terabytes. In time, storage costs will go down, but if you look at picture sharing sites such as Flickr or Photoways who get anywhere between several hundred and several million pictures a DAY (and let’s assume each pix is 1Mb), you can imagine the size required for storage when short films start being between a few tens to a few hundred megabytes.
iv. bandwidth: the same issue of size applies. Of course there must be a distinction between downloads (where a user can wait) and streaming solutions (not much waiting, except for some buffering on progressive downloads). Some P2P technologies such as bittorrent can help bring costs down and increase distribution speeds (think Prodigem or 1–click here).
3) business model: lots of uncertainty here. Conferences such as vloggercon, or the upcoming European vlogger conference, will touch upon it.
Loot at revenues models: one-off sale (movies? documentaries…), subscription models (Netflix, Prodigem…) are not yet stabilised. They are heavily dependent on COGS (royalties to right-holders, encoding, DRM royalties) and fulfilment (hosting, streaming). I haven’t included of course SG&A here…
Remember that iTunes business model was heavily supported by sales of iPod, as Apple was making razor-thin margins and might be forced to raise prices in 2006 when some of its contracts with studios are up for renewal.
So… How so we make money in the video market: VOD for movies might follow the DVD rental business model. Akimbo is trying to bundle a hardware box with its service: it worked for Apple’s iPod, didn’t really for TiVo. Prodigem is trying out the marketplace model. Allocine (a leading French movie portal, 2nd only to imdb.com) is making great money from advertising on its site, and inserting 10 second commercials in all its trailers.
The thing is it’s pretty OK to put ads on a site for text, and start counting eyeballs. But that model has evolved from the 2000 icon of CPM to a price per lead, as championed by Google. Adding ads in podcasts might be OK, as people can carry their listening habits anywhere, and can concentrate on something else while listening to podcasts (think radio). But, watching a video is a static thing, asking for full concentration from the user.
The video market will undoubtly develop as broadband bandwidth keeps developing; as more and more devices such as photo cameras or phones ship with recording abilities; as users become more savvy with video edition as Apple’s FinalCut on Macs. It’s only a matter of when.
So which revenue model do you like?
– ads in video like TV ?
– pay per view like DVD sales ?
– subscription model like online DVD rental pioneer Netflix?
