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June - 2009 - issue > Technology
The future of online video
Raghav Gupta
Thursday, June 18, 2009
“While online video has been around for a while (.rmv anyone?), it has only been coming into its own over the past few years.

As much as it is now a cultural institution, we must remember that YouTube is hardly five years old. So any article about “the future of online video” must therefore be taken with a healthy dose of salt. With that said, following are some key trends and battlegrounds concerning the future of the medium in the near to mid term:”

Consumer Adoption
First, we should establish and acknowledge that online video is a medium with broad consumer adoption, bolstered by falling bandwidth prices throughout the world.

I have seen no report that predicts this trend to reverse iteslf anytime soon and so we can safely assume that the medium has established itself as one that delivers significant value to the end-user.

Content: UGV vs. Professional

Online video content typically ranges from prosaic user-generated content to professional, household name TV shows and everything in between.

On the user-generated content side, the billion dollar question has been whether this type of content can be adequately monetized. So far, it is not proving to be the case. Recent analyst estimates have YouTube hemorrhaging nearly half a billion dollars this year. Advertisers continue to shy away from user-generated video, so most video sharing sites have been scrambling to license the professional content that can drive up their CPMs.

This is presumably how a lot of DailyMotion’s alleged 12.5 million Euros in ad revenue was generated. Still, there are many more video sharing sites out there and I think we will see more of them under financial duress as their funding dries up and they continue to burn cash on bandwidth and servers while being unable to properly monetize their audience.

From a commercial perspective, professional content has emerged as the clear leader to date. Screen Digest estimates that Hulu – the joint venture between Fox, NBC and, most recently, Disney – will drive $120 Million in revenues this year. This is an impressive feat for a two-year old company and shows the commercial power of high production value, quality content.

In fact, YouTube and other video sharing sites such as Daily Motion, Bebo, Metacafe, Veoh and sevenload are all aggressively courting professional content owners to syndicate content. (Disclosure: my company, Brightcove, works with many of these sites to help our customers syndicate video content into them).

Content Aggregators Duke It Out

Professional content represents another battle line in the U.S. between incumbent cable operators, such as Comcast and Time Warner, and upstart aggregators and distributors of Web video content, such as Hulu.

The cable operators earn billions via their cable subscribers and any threat to these cash-cow businesses will not be taken lightly. The threat here is that consumers will forego their $60 - $80 plus / month cable package in favor of getting their content directly from the Internet via sites like Hulu – something the operators are acutely aware of and which they will use their leverage with their licensors to battle.

Both Comcast and Time Warner have announced plans for a “TV Everywhere” program that would enable consumers to access premium content online but only if they were a paying cable subscriber and had been authenticated as such.

Even though their business model has not yet been proven, Hulu has no doubt been a success with end users inspiring players in other territories to consider doing the same.

Online video is a global phenomenon with different dynamics depending on the region. For instance, in the UK, a Hulu-like joint venture between the BBC Worldwide, ITV & Channel 4, nicknamed the Kangaroo Project, failed to pass muster with the Competition Commission. I have also heard rumblings of Hulu-like offerings in other parts of Western Europe, Eastern Europe and even Southeast Asia.

Regardless, many broadcasters in these regions have been making programming available online for some time, usually starting with short-form, promotional clips and then experimenting with advertising and subscription-based catch-up services.

Anyone Can Be An Online Video Publisher While it’s no surprise that traditional media companies were the first to adopt the new medium, the bigger news is that the medium is getting broad adoption from nearly every sector. We at Brightcove are seeing a lot of demand from brand marketers, educational institutions, governments, and corporations. Indeed when launching a professional site in 2009, the question getting increasingly asked is not “why video?” but, rather “why not video?” From e-commerce to communication, e-learning to classifieds, nearly every online activity can be enhanced with video. And so, this trend will continue to accelerate as more organizations discover the benefits of communicating their message using videos weighed against the decreasing costs to produce and publish video.

Mobile Video
Speaking of technology, I often get asked about mobile video. To date, while many companies have experimented with mobile video, it has not yet proven itself as a viable medium. The issues range from the lack of affordable unlimited data plans, to lack of standards on handsets, to the content on offer from the carriers. With the advent of smartphones, notably the iPhone and its support for H.264, this is now changing.

Most of the demand is for the iPhone platform but these are still early days for mobile video. And if the business model for online video is immature, then the model for mobile video is positively embryonic. I am skeptical that mobile video can be a huge business as the medium itself is best suited for audio – if I were watching videos on my Blackberry while walking the streets of London well, I probably wouldn’t be here to write this article. But mobile video is useful in certain environments (when traveling, during downtime) and so I do look for it to grow accordingly.

Live Streaming
Another burgeoning online video technology is live streaming. Companies have been streaming live events for years but those tended to be grainy, clunky affairs available only to deep-pocketed corporations that could afford webcasting production services.

These days, live streaming technology is available to the masses. A user can start publishing a live stream right away using a service like Ustream, Justin.tv or Livestream. The increasing “real-time-ness” of the Web, seen by the sudden rise of Twitter, only feeds the desire for live video content.

The mark of a pervasive media and communications platform – the written word, radio, television and, yes, the Internet – is when we take it for granted. This is already happening for online video in the more mature markets like the U.S. where news of yet another media company delving into the medium is greeted with a yawn.

Consumers will continue to consume video content online, generate and publish their own content and filter that of others. In the end, it will be the consumer that will drive the use of online video from being a novel, innovative format to a ubiquitous medium that we expect to see on nearly every website. It won’t be long.

Author is VP of Business Development at EMEA

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