For while now, we’ve been puzzled by the surprisingly large number of industry analysts operating under the assumption that “internet video” represents just another (albeit fast-growing) computer/web browser use case.  It  comes up most often during panel discussions and articles covering the seemingly intractable problem of how to monetize internet video - “how can we get internet video users tolerate a TV-like higher ad load?” is often the point at which shoulders start to shrug, hands get thrown up in the air, and the discussion grinds to a halt.

“By making the internet video user experience more like TV” is one obvious answer - and one that at least allows the discussion to continue…

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We’re fans of Will Richmond’s VideoNuze newsletter here at digitalmissive.   However, we have to take issue with a recent VideoNuze article on the future of long-form online video - like many such forward-looking articles we’ve come across lately, it’s tacitly assumed that since we view internet video on a computer and web browser today, the situation will remain unchanged  indefinitely.  It’s surprising how many articles attempt to predict the future of internet video while failing to consider the role a new generation of consumer electronics devices (i.e. televisions and set-top boxes) with network interfaces and baked-in internet video functionality might play.

First and foremost among the conclusions often drawn from this flawed premise is that “advertising alone will not be sufficient for profitable long-form program distribution online”.

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I recently attended my first conference by live webcast - Media Summit New York.  Streaming was handled by scribemedia, which did a very nice job of it.  I wasn’t able to sample every panel because they were only shooting in one of the two session rooms, but it turns out there was something about “tele-attending” this conference that almost made up for that…

First, I’ll admit it - while I find the technology to be valuable in certain situations,  I’m by no means out there on the evangelical front lines of social networking (in fact, it’s only recently that we’ve twitter-enabled ourselves here at digitalmissive.com).

As a bit of a skeptic to begin with, I’ve also been a little ambivalent towards the combination of social networking and long-form premium internet video.  I’ve just felt there wasn’t a huge value-add there; that lean-back television viewing is by its nature a primarily passive pastime, and that the average viewer would not care to chat and text while watching their favorite show form the couch - and to the extent internet video is all about the ability to view content non-synchronously, real-time chatting about a show in progress isn’t really possible anyway.

But that was before I had the  experience of chatting and streaming during that first Media Summit panel - compared to sitting there silently in a live audience with perhaps one chance to interact briefly during the Q&A, watching the stream while having the option to freely exchange thoughts and opinions with my fellow cyber-audience members was really exciting.  I almost felt myself wondering if I would actually prefer watching the live stream to being there in person - just for the chatting alone.

Overall,  though, of course the advantages to attending these events in person trumps the live chat advantage - but how ironic, that attendance at panel discussions on the potential disruptive nature of internet video could end up being affected by …internet video.

So, mea culpa.  I get it.  Social networking and video can be cool - especially for events such as conferences.  Back at home on the next generation of internet-enabled televisions, it could be great, too - for sports, politics, and maybe American Idol.

But great enough to make implementing a keyboard-like interface?  I’m still not sure…

I recently attended an event in New York presented by videonuze (a highly recommended resource for all things internet video, by the way).  The  evening’s panel discussion tended to focus primarily on three issues:

• Monetization
• Content aggregation
• Whether overall video consumption will continue to grow to accomodate increased internet video usage, or will terrestrial television (cable and broadcast) start to lose market share

Listening to the panelists, I found myself increasingly struck by fact that they all appeared to be laboring under the assumption that as a technology, internet video is necessarily a function of the personal computer and the web browser (and perhaps someday the smartphone).   It wasn’t until moderator Will Richmond explicitly addressed the issue in his final question that what I consider to be the elephant in the room was even mentioned: internet video on the television.

That the subject sat so low on the panelists’ collective radar screen was interesting, only because there happens to be such a major CE push underway right now: a slew of network-enabled hardware was just announced at CES, Adobe’s got Flash running a chip, and several noteworthy cross-industry partnerships have been struck between some pretty heavy hitters - I’ve commented previously on a few of them:

• zillion tv
• yahoo connected tv
• tivo search

The question was put to the panelists: “Do you see internet video coming to the television in two years?”  Answers ranged from a clear “no” to a hedged “it’s a ways off” to an interesting prediction (from a cable executive) that users will likely be frustrated attempting to connect such devices themselves without the high level of customer care they’re used to receiving from their cable company.

The consensus?  That ‘killer app’ internet television solution you’ve been waiting for is probably closer to five years away than two.  While I’m of the opinion that it will come sooner than that (and sooner than might be comfortable for many in the industry), the one thing everyone agrees on is that it is coming.  There are not ‘ifs’ in this conversation - only ‘whens’.  Here then is my take on how it will impact the three core issues listed above:

Monetization: Internet video on the television will mean the high-CPM targeted ads of the internet, and (due to the lean-back, social nature of the television viewing experience) an audience finally willing to tolerate a more traditional (i.e. heavier) ad load.  From the perspective of the advertising industry, this long-awaited combination represents the best of both worlds - and so in the long run, I’m optimistic that internet video on the television will more than solve the monetization issues many industry analysts and executives have struggled to address so far.

Content Aggregation: This is a very interesting topic.  The web (and the web browser) are arguably the killer apps of at least the last several decades (happy 20th birthday, btw), but a wide-open browser paradigm (with all the accompanying complexity, security, and instability issues) is not really an appropriate solution for a CE device such as a television or set-top box (nobody wants to have to worry about their television crashing).  In place of all that convenient web standardization, though, there will be some heavy lifting needed to create more appropriate dedicated solutions.  Unlike the web, the system architecture will be closed and centralized: in other words, the hardware will present the viewer with a user interface containing all necessary controls and content meta data, and upstream communication will be limited to a single service-providing host - even if the actual video data streams are then streamed from an assortment of asset-owning partners and their optimized CDNs.  The goal is an elegant and cohesive user experience that still solves the tricky problem of allowing content search, discovery, and delivery across multiple sources and multiple video formats (TiVo, for one, recognizes the challenge and is taking an interesting search-based approach to solving it).

The Size of the Pie: The prospect of a disruptively successful lean-back internet video experience eating into terrestrial broadcast and cable viewership (and the resulting impact on traditional advertising and cable/satellite subscription revenue models) is on a lot of people’s minds these days.  For example,  note how quickly (and how thoroughly) joint owners Fox and NBCU recently forced hulu to shut down access from the boxee application after it became clear the small startup had plans to release a set-top hardware device (and that people were already installing boxee on their Apple TVs).  To insulate the incumbents from such zero-sum viewership concerns, several recently-announced initiatives (Time Warner’s TV Everywhere and Zillion TV) have announced they plan to require customers maintain at least one concurrent cable or satellite television service contract.  Of course, there’s no technical reason for this policy - it’s just there to prevent viewers from canceling their cable subscription and going “over the top” with only their broadband internet connection.  Long term, such an arbitrary restriction will prove unsustainable in the marketplace, but in the short term it’s a smart move: in a nascent market such as internet-enabled CE, first-mover advantage is huge, and any insurgent internet television solution that makes the cable companies feel at least a little less threatened (even if only for the time being) is going to have an advantage gaining traction quickly.

All in all, aside from the realtively short shrift given to the CE industry’s recent discovery of the internet by the panelists, it was an excellent discussion - and once again, if you’re at all curious about the future of internet video, I highly recommend videonuze.

It’s time to talk about Zillion TV.  Announced a week or two ago and slated for a 2009 Q4 launch, this set-top box streaming initiative has already received quite a bit of coverage. Here’s our quick take:

What They Got Right

• Investors - One impressive thing about Zillion TV is the stature of the companies behind it:  Visa is a major investor (and will implement the back-end billing transactions for purchasing streams), and content providers Disney/ABC, Fox, NBC Universal, Sony Pictures and Warner Bros. Digital Distribution are all also investors/partners.  In fact, while I’ve read Zillion TV described as the “Hulu” of set-top boxes (due to the innovative cooperation between otherwise competing companies Fox and NBCU), Zillion TV goes Hulu one further, having Sony, Warner Brothers, and even long-time Hulu holdout and rival Disney/ABC on board as primary stakeholders as well.

• Revenue Model – Although television viewers and web browser users have consistently expressed a preference for “free” (ad-supported) content over paying subscription or per-view fees, Zillion TV itself will be agnostic as to which monetization model individual content owners choose, and will be able to support either.  One thing Zillion seems to understand, though, is the game-changing impact targeted advertising will have, given a lean-back audience willing to tolerate the heavier ad-loads typical of traditional TV.  I touched upon this a few weeks ago here - and as Zillion TV’s initial press release puts it: “Gone are the days of mass market, untargeted television commercials.  Through the ZillionTV Service, advertisers clearly will reach a more highly-targeted and engaged audience.  This is a major boon for the advertising industry.”

• User interface - We believe that in the absence of a keyboard on the coffee table (which studies show nobody really wants), the problem of the remote control and the user interface will have to be solved.  One way or another, the current remote paradigm (dozens of never-used dedicated buttons) is going to go away - to be replaced by either a touch-screen iPhone-like device or a Wii-like pointing remote (something I touched upon a few weeks ago here).  While Apple’s been quietly filing for patents on the laser-recognition pointing technology necessary for such remotes, Zillion TV will be the first internet video device to market that actually features one (which, come to think of it, is probably why the Zillion TV “box” has to hang over the top edge of the screen - see image).

• Zillion TV and the Service Provider - Easily the most noteworthy aspect of Zillion TV is that like Time Warner’s “TV Everywhere,” access will be limited to customers with current cable and/or ISP contracts from selected vendors already in place (more on TV Everywhere here).  Could this be an emerging trend - internet video services sharing monetization with carriers?  Possibly - in Zillion TV’s case, the device will be marketed as a hardware value-add available through (as yet unnamed) service provider partners.  The decision to Include the carrier in the revenue stream is huge, because instead of an insurgent over-the-top internet video service threatening to dramatically increase user bandwidth consumption while simultaneously making cable TV access less valuable, Zillion will instead be a business partner.  Of course, as the issue of monetizing internet video remains up for grabs, incumbent service providers remain (to put it mildly) “concerned” over what services running “over the top” could ultimately mean to the business models they’ve come to know and love – but from the service provider’s perspective, Zillion TV will likely be seen as the lessor of several evils, because at least some participation is better than none.  And the arrangement works for Zillion TV, too: the company plans to install caches of video content at your local ISP.  The technical innovation of expanding the content delivery network one step closer out to the user (from the edge of the internet onto the user’s local service provider) is potentially huge- and yet another step in one of our favorite topics, the privatization of the internet (something I touched upon a few weeks ago here).   Which brings us to…

What Could Be A Problem

• Net Neutrality - With Zillion TV content caches sitting out there in ISP data centers, look for this to come up when Zillion TV launches later this year - and look for the issue to be ongoing, because If I’m a Vudu, Roku, TiVo (or any other 4-letter box making company) - or if I’m a Yahoo Connected TV, Amazon VOD (or any other television/set-top streaming service), even if I lose a legal challenge to the Zillion TV business model, I’m going to be out there doing continuous comparative testing to see if there’s any hint of Zillion TV-partnered ISPs slowing down my packets - in other words, it’s going to be a good couple of years to be a media (or antitrust) lawyer.

Conclusions

In short, I’m impressed with Zillion TV - the big players are clearly onboard, I think including the service providers is a smart business move, and I like what little I know about the user interface.  A few things to watch:

• As the year progresses, which MSOs and ISPs will announce they’ll be partnering with Zillion TV?
• WIll the hyper-localized ISP/CDN model offer dramatically enhanced performance over competing solutions using CDNs external to the carrier?
• If so, will the net neutrality/anti-trust challenges be equally forceful?
• Will Zillion TV expand from television content into film as well?

We’ve been going on lately about how much sense netbooks make.  Evidently, some smart people out in Cupertino might think so too: within the last 2 days, the online rumor-mill about all things Apple has kicked into full gear again, this time started by reports that a Taiwanese firm has just signed an agreement to begin supplying large touchscreens to Apple later this year.

What we’re talking about here is essentially a large (9″ or 10″ screen) iPod Touch - physically, it could well end up looking very much like this mock-up concept imagined by gizmodo (at left) - but under the hood (or ‘glass’, rather), I wonder if it will run a stripped-down version of the Apple OS or follow the closed iPhone/iPod Touch “App Store” model - in other words, will it allow traditional fully-installed applications, or will it allow only the more limited (but easier and safer) widget-like software products (running one layer up on a virtual machine) available on the iPhone?

Either way, if unlike the iPhone and iTouch, this device will (finally) run Adobe Flash (the ubiquitous video streaming application behind Hulu and YouTube), then this will be a hee-uge hit..

I’ve written before on what an ill-suited viewing platform I feel the PC and web browser make for viewing internet video. Keeping that in mind, the big unknown about this sleek full-screen “net tablet” is whether it will run Flash. If so, it could make the whole web video experience a lot nicer - and a lot less tied to the workplace and/or deskop…

CeBIT, held each year in Hannover (Germany), is the biggest technology show in the world.  What makes it larger than CES is that rather than limit itself to consumer electronics, it includes both home and office technology - in other words, all things digital.  I’m not at the show, but having read a few of the articles starting to show up online (the show’s currently running until March 8th), one company stands out as having at least a few good ideas:  Asus.

I’ve already written about how the time is right for netbooks - Asus has a 60% share of the European market and a 30% share of the worldwide market - so they’ve been doing something right.  In addition, the company has some serious plans for bring the Google Android operation system to the netbook.  It’s worth noting that while Android has had the iPhone headwind to fight in the smartphone market, no such incumbant hands-down winner exists in the netbook operating system market.  In fact, with netbooks gaining traction, Android evolving, and a lightweight netbook version of Windows 7 on the horizon, the netbook OS market could prove to be a major front in the epic battle between you-know-who and you-know-who.

But I digress.  Let’s talk some gizmo. At left is an Asus “concept netbook.”   It starts with the tablet computer concept from a few years back and takes it a step or two further - a completely touch screen-based interface, and a second monitor.  Although not yet commercially available, a few thoughts do come to mind:

• The clamshell design nicely solves the problem of maximizing screen real estate while at the same time protecting the portable device’s touch screens.
• To the extent a touch screen Netbook interface becomes popular, XP Home becomes obsolete as a netbook OS, forcing Microsoft’s hand in getting a Windows 7 Netbook OS out there quickly.
• Is this the perfect Kindle platform, or what??



Speaking of touchscreens - here’s an interesting device, looking very much like the result of crossing a computer keyboard with an iPhone.  While adding a touchscreen to a keyboard is a cool enough idea in and of itself (and as the most cost-effective way to enjoy the next generation of touch-enabled operating systems, probably something we’ll see a lot of), there’s more here than meets the eye: this is actually a netbook running XP Home! With an 802.11g wireless interface and a wireless HDMI interface (that’s a new one on me), you’ve yourself got a cable-free internet streaming solution, as well as a computer for the coffee table and the couch.  It’s my feeling users would be more interested in the former than the latter, but either way, a pretty cool device - and another idea that’s hard to imagining not becoming popular.

The other day I wrote about the New York subway (my favorite impromptu research panel), and a few “hang outs”, still more comfortable reading a real book rather than their e-version.

Of course, despite some anachronistic readership, the world of e-books continues its expansion undeterred. 

The latest: Online retail giant Amazon.com announced, the library of books available for it’s Kindle branded e-reader will now also be available on Apple’s iPhone and iPod Touch.

Why is this big? 

If you hear yourself or anyone else equipped with either Apple-branded portable, we’ve all started asking what’s on it, as if asking what’s on television or on the radio.

Couple that with the by-now impressive depth and breadth of repertoire available for either device, Apple portables are anything but shy compared to, yet again, television or radio.

In other words, the iPhone / iPod combination of devices has become a media platform in its own right.

For Amazon to jump on board makes perfect sense.

More on the subject:

Amazon’s Apple Deal: Kindle Cannibal? (Business Week)

Amazon releases Kindle for iPhone, iPod Touch (LA Times)

Amazon launches Kindle application for the iPhone (TechCrunch / Washington Post)

First Look video: Kindle for iPhone (cnet)

Televisions and set-top boxes with embedded network interfaces are coming, that much is agreed upon.  What’s up for discussion, though, is just what the user interface is going to look like - an “internet video-only” implementation that places a premium on simplicity and system stability, or a full-featured “browser for the couch” allowing full unrestricted access to the internet.

Gordon Campbell, a 30+ year veteran of the semiconductor design and marketing industry with stints at Honeywell, Motorola, Intel, and several start-ups under his belt, calls the former approach “hogwash.”   According to a recent article, his current company Personal Web Systems (no web site yet)) plans to bring a device to market later this year allowing full unrestricted access to the web (the company also has plans to subsequently offer that same functionality to CE manufacturers on a single chip).

“This generation doesn’t want their hands tied behind their backs. They want the same experience as with a PC (on their TV)“, Campbell states.

I think he is precisely wrong.

Television web browsing has been tried many times before, with little or no success - and although today’s increased broadband penetration and (more text-friendly) HD screen resolutions suggest perhaps it’s time again to make yet another pass at it, the bottom line is that average folks just do not want a lean-forward PC experience on their TV, thank you very much.  And even if they did, there would be user input device issues to solve (keyboard on your coffee table, anyone?), challenging security issues to deal with,  and (in contrast with computer users), zero tolerance for crashes and restarts.

I could go on and on - but in short, I feel it’s a mistake to assume that internet access necessarily dictates a full PC/web browser paradigm - for example, consider twitter, skype, IM, even iTunes - all examples of succesful non-browser/non-PC dependent internet applications, none of which “this generation” would consider “hogwash”.

Once you explain to them what the word “hogwash” means, that is.  

To sum up, the consumer electronics industry has discovered the internet - and these new devices are not going to need (or look anything like) a PC or a web browser.

For better or worse, the TCP/IP protocol (and the internet it makes possible) will not remain the exclusive turf of the computer industry for very much longer - a point some in the industry are slow to see.

The trend is unmistakable: the consumer electronics industry has discovered the internet, and activities that have until now always involved a “computer” (such as internet video viewing and mobile internet access) will be increasingly done using a new generation of leaner and meaner dedicated CE devices instead.  This is all well and good: arguably, the modern home computer – more flexible and powerful but also more complicated and (let’s face it) maintenance-intensive than ever – is clearly overkill for such activities.  But as the computer justifiably loses the battle to convince us it’s also a CE device, CE devices are in turn left to grapple with an issue of their own: how much and how best to emulate the computer.

I’m talking software deployment.  You buy a computer, it includes a license for an operating system, and you’re free to go and install whatever software (or malware) you want - in other words, “you buy it, you break it” (in a way, an inversion of the “Pottery Barn rule ” invoked by Colin Powell over the war in Iraq).  But what about a smartphone, or that internet-enabled television you’ll be buying within the next year or two?  While the availability of a rich selection of high quality 3rd party applications is in the best interest of both the device maker and the user, a wide open ”no guard-rails” software deployment policy is in both parties’ worst interest: poorly written applications can harm both the user  as well as the brand, and (news flash) the average home user is a lot less interested in taking on that kind of responsibility than many companies in the computer industry have ever really understood.

For their upcoming line of internet-enabled televisions, Yahoo/Intel have addressed the issue by going with a “widget” rather than “application” model: lightweight software running on a JavaScript engine rather than the OS itself.  Taking another approach, Apple (which in terms of revenue has been a CE company with a side business in computers for a while now) has come up with the iTunes App Store: applications for the iPhone (and likely for the Apple TV in the near future) are installed on the OS itself, but must be first vetted by (and subsequently purchased through) Apple.  This offers the best of both worlds: the developer base for the device is virtually unlimited, but nothing’s going to break, and apps are guaranteed to be secure.  In fact, the “app store” model is currently being imitated by other smartphone makers such as Nokia because it’s been so successful and popular with users.

Well, 98% of us, that is – there’s also a growing geek subculture out there that believes they have the right to do whatever they want to with something they’ve purchased, thank you very much – and they’re dedicated to removing the iPhone’s software restrictions - “jailbreaking”, as it’s called.  Although the practice is in direct violation of the iPhone EULA (software license agreement), it’s gotten so widespread now that a Google search of “jailbreak” and “iPhone” currently yields 3.6 million results -and so the two sides (the Electronic Frontier Foundation and Apple) are set to face off this spring.

Apparently, this dispute is subject to the Digital Millennium Copyright Act , originally meant to fight piracy of copyrighted “works” such as film and music – therefore, it will ultimately fall upon those famously tech-savvy folks at the Library of Congress to decide the issue.  A case can be made for either side – but although I have to admit I’d love the ability to put my iPhone on a network that covers the NYC metro area better than AT&T , I tend to side with Apple on this one – not only because I feel the iPhone EULA puts them on a pretty strong legal footing, but also because I feel that it’s “good and right” to treat software for CE devices differently than software for computers.

One thing is for certain, though – just as developers will continue to write great App Store applications for Apple, others will continue to hack open the system.  What’s unknown is whether Apple go to the length of actually suing users – a tactic that didn’t work very well for the RIAA .