Wednesday, January 17, 2007

Netflix and Brightcove Join in the Bidding to Take TV "Over The Top"

There's news yesterday that Netflix will add online distribution to their disc-by-mail rental program.

News today of Brightcove closing a new $59 million round of funding.

They're both joining a crowded field of hopefuls with competing strategies for using the internet to deliver TV and movies "over the top."

Backstory: Over the Top of What?

If you're a civilian you probably just call it video on the Internet. If you're dealing with the cable industry, you're calling it "over the top" Why? Because groups love to invent special jargon that separates insiders from outsiders. (Ask a parent of teenage children.)

In acting, going "over the top" means pushing a performance beyond the realm of credibility (see Jim Carrey in Batman Forever). In poker, it's re-raising after another player's raise (see Steve McQueen in The Cincinnati Kid). And in trench warfare it's coming out of your trenches to attack the enemy in their trenches (see Kirk Douglas in Paths of Glory).

And someday, you may be able to watch all three of these "over the top" movies by means of over-the-top video delivery, which oddly enough combines elements from all three movies: big gambles, trench warfare (corporate style), and an endless stream of riddles.

Flashback: Once upon a time, cable was only about TV. Cable operators accepted your money in return for access to a walled garden of television channels. Because space in the walled garden is scarce, and cable likes to say they "own the audience" (that would be us) content owners find Cable operators to be very tough negotiators. Of course, if you can bring the audience (i.e. if you are ESPN or HBO) Cable operators will find you to be very tough negotiators. If you are the audience, expect to be pwned.

Flashforward: The development of the cable modem enables the operator to add new lines of business over the top of the traditional TV channels. For example, high-speed internet access and telephone service. New product lines. New revenue streams.

Flashforward Again: Video over the internet gains traction. (Real Networks, Microsoft, Apple, and Adobe won Emmy awards this year for their contributions to streaming internet video. YouTube earned a Google award of $1.65 billion). Coming on strong, Joost, Brightcove, Akimbo, Vongo, and over a hundred others.

Suddenly the cable industry finds itself in a strange competition with itself. Inside their video walled garden they share in subscriptions fees for premium channels, and ad revenues for basic channels. The more channels you subscribe to, the more money they collect. But over the top of the walled garden, internet video makes cable into nothing more than a dumb pipe. If you download videos from iTunes or Xbox Live, it's Apple or Microsoft that takes your money and splits it with the content owner.

Over-the-top video has a long way to go before being truly competitive with Cable's walled Garden. There's not enough content, there are bandwidth issues, navigation is inconsistent from service to service. And, oh, yeah: there's no proven business model.

But the gap is closing and, even though DRM trolls live under the bridges, it's not hard to imagine a world where viewers can subscribe to only those services and on-demand libraries they care to pay for, lowering their bills and increasing their satisfaction. As with television, many of these services will be ad supported and may offer advertisers important advantages over the TV ad model. This isn't something that's going to flip over night, but over-the-top is already chipping away at conventional TV watching.

Mickeleh's Take: Utopians look at Internet-based TV as a way to overthrow the established content players. Don't count on that. If "over-the-top" does displace the current "walled garden," expect to be watching mainly the same shows from mainly the same studios on the same big screen TV. Except at the margins, the only thing that will change is how the money flows.

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Anonymous said...


After reviewing some of the articles left on my consumer reviews
website, I still cannot understand: Who is winning in online DVD Rental business?

Blockbuster Service Reviews

Here are some of the Blockbuster specific examples:
Blockbuster Books, Records, Videos and DVD rentals
Blockbuster Video Stores and Online service
Blockbuster Late fees

Netflix Service reviews

Here are some of the Netflix specific articles:
Netflix Complaints - 3 Movie at a time rental
Netflix Quality of Service
Netflix speed of service

Can someone help me understand, who will come out on top here?


Morley said...

It will be interesting to see how online emerges. Currently you can get lots of free Tv over Internet Services with desktop software and browser based. As more established players at these services with video, maybe free will not last..