The future of Internet TV

Following aerial TV and cable TV, the next revolution is Internet TV or IPTV, which makes the cost of distributing TV programs even lower, allowing for much more targeted and specialized content. There are currently four types of actors that have a chance to play a major role in this exciting revolution:

1. The major TV broadcasters
2. The major telecom providers
3. The online merchants including iTunes
4. The video web sites including YouTube
5. The peer-to-peer newcomers including Joost and Babelgum

The following criteria will make the difference between the platforms and eventually specialize them:

1. Capacity to attract advertising dollars, which is a mix of size and segmentation of the audience
2. Capacity to attract paid subscriptions, which is related to the quality and exclusivity of the content and ultimately to the remuneration and protection of content producers
3. Capacity to display hi-res content, which is mainly a technical issue
4. Ease of use, especially to search for or subscribe to archived content

Let’s now review the various platforms and trends:

	Ad Dollars		Paid Subs.		Hi-Res		Search
Major TV Broadcasters	5	↓	5	↓	4	↑	0	↑
Major telecom providers	0	↑	5	↑	4	↑	2	↑
Online Merchants	0	↑	5	↑	5	↑	5	↑
Video web sites	2	↑	1	↑	1	↑	4	↑
P2P newcomers	1	↑	0	↑	3	↑	2	↑

	Weak point	Strong point	Best fit
Major TV Broadcasters	Transition to Internet	Quality content and revenue stream	News and other short-life content
Major telecom providers	Content	Infrastructure	Mobile phones
Online Merchants	Purchasing process	Hi-Res content	Films
Video web sites	Streaming bandwidth	Navigate and search	Short low-res content
P2P newcomers	Works on PC + Content	Hi-Res content	Documentary

As more platforms will become available, the split between content producers and broadcasters will become more obvious. In this respect, I do not think that the major telecom providers, online merchants, video web sites and P2P newcomers will ever produce content, but will rather enter into agreements to obtain content. In this respect, the major TV broadcasters which both produce and broadcast content will enter in “co-opetition” agreements, for example to broadcast their programs on mobile phones.

Telecom providers are probably the biggest threat to TV broadcasters as many content producers will see in them a new channel for their content. This is probably the main reason for Sky to offer broadband and telephone or for Microsoft to target MediaRoom at service providers.

Considering the purchasing process, online merchants will probably focus on music and films for quite some time and do not represent a significant threat for TV broadcasters and telecom providers.

I cannot imagine video web sites getting enough money from advertising to sustain their activity, they have to remain free for users and they will not be able to compete on high-quality content with TV broadcasters and telecom providers. In my opinion, their only option to survive is to get subscriptions from companies to get their own channel, for example:

• A BMW channel where BMW would present educative content regarding its range of cars;
• A L’OREAL channel where L’OREAL would give advice to women how to make the most of their makeup using its products;
• A DANONE channel where a chef would give recipes using DANONE products;
• A NIKE channel which would give training advice for running the marathon.

The video web site could even provide links to purchase the products demonstrated, competing with video shopping channels.

P2P newcomers will have to review their business model. They are currently in a vicious circle:

• they do not remunerate content producers because they are free and they do not have enough advertising;
• they do not have enough advertising because they do not have enough quality content attracting users;
• finally, they do not have enough quality content because they do not remunerate content producers.

P2P newcomers definitely need some free content to let users evaluate their technology and make the numbers, but they have a vocation at being a video encyclopedia capable of making available not only the blockbusters but more importantly confidential content like documentaries or TV archives and they won’t be able to achieve that without user subscriptions and retributions to content providers.

The ad war from a user perspective

The ad war between Google, Microsoft and Yahoo is on. This is a summary of what you have probably read in the press:

• Yahoo Search Marketing (formerly Overture) has only been losing market share for a couple of years and struggles to deploy its new advertising platform, code-named Panama.
• Microsoft’s advertising strategy has always been confused until recently. They have now decided to go into the advertising space and they want to make it big. See how much they have spent to recently acquire aQuantive. See the pace of upgrades made to AdCenter. See also Microsoft’s track record of turning a late arrival in a competitive market into a great success: Internet Explorer, Windows Mobile, Xbox.
• Google is the leader with a consistent strategy and a great advertising platform, which not only includes AdWords and its important counterpart AdSense, but also free services like Blogger or Gmail where advertising is leveraged. Finally they have two critical complementary tools which give them a competitive edge, Google Analytics and Google Checkout.

It is difficult to measure how much the advertising platform weighs in the success or failure of its owner. I like to believe that it is a large part of it. I am a user of Yahoo Search Marketing, Microsoft AdCenter and Google’s suite including AdWords, AdSense, Analytics, and Blogger and I report here my experience:

• Yahoo Search Marketing’s platform is simply a pain to use. Registering is overly complicated with issues regarding restrictions on billing address and currency in relation to the target market. Note that only Yahoo proposes a service fee to help you get started. Vocabulary is confusing but it has been corrected in the new platform. And the worst design issue is certainly the concept of binding an account to a national market, which remains in the new platform. In other words, if you advertise in the US and in 5 European countries, you need 6 different accounts and there is no way you can get a single view of your advertising spend with Yahoo. In my opinion, there is urgency for Yahoo to correct this if they want to survive in the advertising space.
• Microsoft AdCenter is fairly new and gets improved regularly. It is certainly more rigid than Google. For example, an Ad has a culture which is a combination of language and country. Accordingly, if you want the same Ad to be displayed in the US and in the UK, you need to duplicate it. Google is better in this respect but I think AdCenter is deemed do a reasonable Job after a few revisions. The challenge for Microsoft is to build synergies with other tools in a reasonable time: they definitely need the equivalent of Google AdSense and Google Analytics and they also need to offer users who contribute content on their platform, including Live Spaces , the ability to generate revenue using their AdSense equivalent.
• Google is I think two years ahead of the competition and their recent acquisition of DoubleClick has given them more comfort against Microsoft. I have very few complaints against their platform apart from the inability to change from credit card to bank account, the inability to get a bank account automatically debited and the incompatibility of AdSense with SSL. Google Analytics is absolutely a must have and I can’t wait for Google checkout to be available in continental Europe.