Saturday, April 15, 2006

Online Video - Big Business or just more Porn?

The premise that people will start up video production shops all over the place because of the new online distribution possibilities is not at all certain.
First, there is an analogous opening of the video channel from a few years ago: DVDs.
Anyone with $10,000 (less now) can produce their own DVDs.
Who did use DVDs for distribution of their video content?
At first, of course, porn companies did, and so far they are still the most successful of the non-movie-studio vendors.
TV shows also eventually (relatively recently) have found a successful channel in DVD sales.
Movies from major studios - mostly new releases - still dominate sales. There are lots of niche companies selling specialty videos (how to build a deck, history, performance, etc) that rely on the then-new DVD channel of video distribution.
So what has changed for a would-be vendor now that it is becoming plausible to distribute quality video content online?
First, what are the advantages of online distribution vs. broadcast, theaters, or DVDs?
1. Lower cost per unit (once you pass a certain threshold of a few thousand)
2. No middleman - or at least thinner middle-margins - like iTunes
3. rapid dissemination (content can be very new - like a news story. Also, shelf life for an expensive production has a heavy carrying cost. I often wonder if when studios delay a release for a month, if they're figuring the interest on the $100MM it borrowed to make the movie.
4. DRM. Content owners have more faith in the DRM they can concoct for online distribution than in the crappy DVD drm.
So, will online distribution really become a new full-blown channel? If it does, who will distribute what content?
Obviously porn will be big user of online distribution (it is already).
Companies that already have the content will be happy to experiment with online distribution, if they can protect it. So far, the tendency is to put lower value stuff out there (re-runs of last week's shows, crappy movies), plus a couple of flashy high profile movies and TV shows, just to get people looking.
I'm sure there will be tons of stuff that formerly had its big premiere on basic cable at 2AM.
Technical problems in the Short term:
I just don't understand how people are going to watch the stuff they download. On their computer? On an iPod?
I can't see how this is going to work yet. I don't believe iPod video is really going to be a big market.
I just don't see it happening yet. I still think this stuff has to be integrated in a mainstream way with the main home TV.
That doesn't exist - though many are trying. The closest approximation right now is On Demand movies on cable.
When downloading movies is that easy, and if movie companies don't charge rip-off prices, that may become a real channel.
(There have been stories that movie companies want $12/download. Good Luck)
I can't put my finger on who will benefit in even the short term because (other than porn),
I don't know who will be using online video on a large scale.
Fox is putting shows out and other networks are too. But how many networks are there?
I think most are likely to use the Flash/Adobe video server. It's efficient and idiot proof and supports some forms of DRM.
It's also codec agnostic more or less.
But how many are they going to sell? All the networks in the US would only be a few million in gross sales.
Maybe $20 Million.
Throw in all the cable channels, and you're getting bigger. But they may outsource the actual video distribution to some online hub.
Who is going to be a video distribution hub? Google and are the biggest video hubs so far (you tube doesn't charge)
MSN is sure to be in there. iTunes will be big (AAPL sticks to Quicktime and proprietary stuff. Windows will of course stick to windows video format).


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