World in Transition

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Paul Graham, the legendary founder of Y-Combinator has written a post titled “Kill Hollywood”. The post made a lot of commotion in the industry due to its blunt text suggesting that start-ups should propose alternatives for Hollywood:

“What’s going to kill movies and TV is what’s already killing them: better ways to entertain people. So the best way to approach this problem is to ask yourself: what are people going to do for fun in 20 years instead of what they do now?”

Can we really kill Hollywood?

Of course, as Paul Graham suggested, Games, Apps, Exercise are great substitutes to video however, video is and will remain a great form of entertainment that we just love to consume.

The major point which was not mentioned in Mr. Graham’s thesis is the broken business model.

Here’s why: we’re already engaged with other video platforms which are not Hollywood – YouTube for example. The figures that they’ve provided a couple of weeks ago are truly dreamlike! YouTube streams 4 billion videos every day, up 25 percent on daily views from eight months earlier, with 60 hours of uploaded video every minute (The guys  even created a special website dedicated for these stats, called OneHourPerSecond.com - Check it out!)

So no doubt that we do consume non-Hollywood video content, but I believe that what Mr. Graham really means is probably a new form of even more addictive content.

And here’s where the model fails. To create new forms of content and to enable creativity, a single but cruital component is needed – money.

Every form of creativity needs a sponsor. Starting from the early days of the remarkable Sistine Chapel’s ceiling painted by Michelangelo for the Under the patronage of Pope Julius II to the Mona Lisa by Leonardo Da Vinci, commissioned  by Lisa del Giocondo,  the wife of wealthy Florentine silk merchant.

Michelangelo was also sponsored like any other artist

The huge problem with the internet (and YouTube demonstrates it pretty well) is that it does not provide any financial incentives for talents to leave their day jobs at the studios or ad agencies and start creating a new forms of entertainment.

Unlike technology, where a guy like Steve Jobs and his partner Steve Wozniak could created an amazing piece of hardware all by themselves and establish a state of the art company, video content is a differnt story by all means.

If you take a look at the credits at the end of a film you’ll know what I’m talking about. On average, 100 people work on every day of a Hollywood movie shooting. 100 people. Instagram has only 8 people on board. It costs tons of money and someone has to sponsor it.

What the world needs is new sponsors.

Netflix just launched this week its new exclusive series “Lilyhammer“, understanding that they need to untie the Gordian knot of Hollywood and video content. But Netflix is more of the same. So is Apple, Google and Amazon.

If we really want to make a change we need to monetize better the online video.

Online video is the free spirit that the world is craving for. It allows anyone to upload any type of content and make it accessible to more than a billion users.

But there’s a catch. In 2012,  according to eMarketer’s prediction, online video is expected to make “an aggressive” 4o% growth to 3.1 Billion USD. Now compare that with the 64.8 Billion on TV. And please keep in mind that this is only ad-based video content. Add to that the subscription based service which will account globally to 236 Billion USD (almost half of it is the US) and you can understand that there is a huge monetization problem. It doesn’t matter how much time we spend watching online video, the money is just not there.

15 Million views worth only $35,000 - Houston, we have a problem

Video is a huge industry circulating many hundreds billions of dollars. People like video and will probably will like it in 20 years from now. What we really need is better ways to make dollars out of these videos. If we’ll be able to do that, there will be no need in Hollywood and we will not have to kill it, it will die by itself.

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A new year is less than a week ahead and it’s time to make some predictions about 2012.

So without any prologues I’ll cut straight to the chase and share with you what I believe is going to happen in the year to follow:

1. YEAR OF THE OLED

After conquering the mobile world with the AMOLED screens (Almost any Samsung and HTC phone has an OLED screen), it’s the prime-time for the big screens. CES will be the place where all the big TV manufacturers will present their new OLED TV sets and it’s going to change the landscape, again.

So in a world where there are already Plasma, LCD and LED TVs, you might ask yourself why OLED? So first a short and simple explnation about OLED – OLED stands for Organic Light Emitting Diode. Organic light-emitting diodes follow the same basic structure as LED but they use organic products to form the light and that creates some major advantages:

1. More Light: Less Consumption: The organic materials used for OLED also mean a brighter display yet less power consumption.

2. Lower cost to produce: It uses organic componenets which costs less than metals

3. Flexible(!!!): the screen can be designed to be flexible as a fabric. Just think of all the implementations that could be introduced…

LG's 55-inch 'world's largest' OLED HDTV

2. INTRODUCING THE REMOTE KILLER

Following the phenomenal success of Kinect last year, and the fact that Microsoft is trying hard to make XBOX the ultimate entertainment device, it is only natural that Microsoft will introduce a TV navigation capability based on the Kinect. Add to that the fact that Steve Jobs told his biographer that he “finally cracked it” (referring to the new TV Set from Apple) and the endless rumors about Apple’s TV Plans, with the leading one that the new Apple TV is going to be voice activated and based on Siri and all of the sudden you start realize that the industry is looking for alternatives for the good old remote control.

Add to that all the supporting “Second Screen” apps for iPad, iPhone and Android devices, coming from almost any TV operators and you start to see that the good old remote control is about to disappear.

Typical coffee table with too many remote controls - Will they all be gone?

3. A VERY CLOUDY YEAR

There are two major factors which are changing the landscape of computing:

1. Start-Ups: More and more companies such as FourSquare and Netflix,  (so are we!) are putting aside the need to start and build up their own server foundation and instead they use a cloud environment such as Amazon AWS, or Salesforce’s infrastructure  (at VidMind we use both platforms).

2. Users: Services such as Dropbox or Spotify which gain enormous popularity over the passing year are generating more and more need (and infrastructure!) to provide the exploding demand.

This reality is in fact changing the IT and computing landscape  from both angles. The idea of buying a huge NAS for my music seems a bit out-of-date. Why not putting it all on my Dropbox account and have access to it wherever i go in and out of my house? Same for new start-ups – why should an entrepreneur spend 2 Million dollars for a global server-farm when he can hire it for practically nothing from Amazon and expand the capabilities with the popularity of the service.

IT is becoming a commodity like electricity and water. The only reason it was not the reality in 2010 is the IT managers who are afraid of the new concept. Since you cannot stop technology from evolving I believe this year will be the year where the critical mass of organizations will shift to cloud-based infrastructure and the biggest effect will be on media – with the onging demand to make it available everywhere.

Future looks cloudy than ever!

4. EXCLUSIVE CONTENT IS THE KING (AGAIN…)

One of the major reasons for the failure of Google TV was the fact that no major studio was willing to sign a deal with Google, another known battle was the Boxee Vs. HULU which ended up by removing all HULU content form Boxee’s service and last year we had the Albanian Allegory (of Netflix) by Warner Bros. CEO in one of the most aggressive trash-talks in the industry.

It all comes down to a very simple discernment – Content was, is and will be the king. Pipes are pipes are pipes.

Netflix has already declared in the past and it will start producing content with Kevin Spacey is attached to star and Social Network helmer, David Fincher, to direct. And it will be exclusively offered to Netflix’s subscribers. The industry understands that at the end of the day, the viewers care about one thing – content. I’m sure that more ground-shaking deals will be soon signed between content producers and platforms – Stay tuned!

Kevin Spacey & David Fincher on "House of Cards" exclusively on Netflix

5. OTT PLAYERS WILL ENTER THE RING

Walmart, the largest seller of DVDs in the US and has generated $3.5 billion in revenues for Hollywood in 2010 (according to IHS Screen Digest), is seeing the business going away as consumers are shifting to streaming solutions such as Netflix and iTunes.

Now with the accessibility to customers and with the acquisition of Vudu, Walmart is starting to gain more and more popularity in the digital rental business accounting for 5.3% of the market in the first half of 2011 and they plan to grow aggressively in 2012 taking more market share from Apple (with  65.8% of the market).

I am sure that Tesco and other huge retailers will follow Walmart’s strategy and will start offering “Netflix like” services at their countries in an attempt to protect the decline in revenues caused by the shift from physical media to streaming services.

Vudu by Walmart - OTT is here!

HAPPY NEW YEAR TO YOU ALL!

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My love affair with Apple has a lot to do with my Origin. When I reached the age of Bar-Mitzva (13), which is a major event for all Jewish people and a great opportunity to ask for a huge present, I asked my father to buy me an Apple IIC. That was my first Apple computer and I was absolutely in-love with it!

My First Computer - Apple IIC

As times went by, I moved to Windows, and although I was always stunned by the perfection of Apple’s products and its astonishing designs, Apple’s close-garden approach and its over-priced as well as its way over-hyped products just kept me away and did not join the Apple cult ever since.

Since Steve Jobs passed away, it seems like Apple is starting to slowly change.

It started with the announcement that Apple will be adopting a corporate policy for charitable contributions. A weird behavior which Jobs insisted on and no one understood why…

But this was probably just the beginning, Jobs insisted on having all the research and development of Apple to be in one place, that place was of course Cupertino, where he will be able to personally supervise the entire process. He have also presented just a couple of months before he died the new and ambitious campus that he planned for Apple naming it “Best Office Building in the World!”.

Apple's Suggestion for its New Campus in Cupertino

If the rumors are correct, Apple is about to change that as well and Open a first R&D Center in Israel!

It makes  me more optimistic about the new winds at Apple for two reasons:

First one is of course the fact that Apple has chosen Israel as the first base outside the US for its R&D efforts, joining Intel, Google, Microsoft, Qualcomm and many other great compnies who already established R&D centers here in Israel. No doubt that Apple’s intentions provide probably the strongest evidence to how powerful and talented the Israeli hi-tech industry is.

But moreover, the shift in Apple and their willingness to become a more open and global company gives me the hope that in one of these days they will allow me to access my MP3 files without having to install iTunes!

Maybe I got a bit carried away though…

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Last Friday, Guerrino De Luca, the CEO of Logitech, announced that Logitech will stop supporting Google TV after losing 100 Million USD!

Bye Bye Logitech Revue

At first, it sounds like a terrible news for Google. This is an a way, a conclusive evidence to the colossal failure of Google with its Google TV product.

Here’s what De Luca said:

“The second mistake we made is Logitech Revue and it’s not a mistake of intention, it’s not a mistake of strategy, it’s a mistake of implementation of a gigantic nature…  Google TV is a great concept, Google TV has the potential to completely disrupt living room, except that was not the case when we launched Logitech Revue.”  

That specific quotation was all over the internet. But if you’ll continue reading carefully what Mr. De Luca has said in that investor meeting – it was totally not about Google but about Logitech:

“I would do it again, I would definitely want to have Google establish Google TV, but with a significantly smaller and more prudent approach. It’s always the case people will tend to overestimate the short-term and underestimate the long-term.”

As the CEO declares for himself, Logitech is not a company with long term strategy. They prefer to focus on the short term where there is a true physical business for them:

I’ve always been a fan of going to something that already exists, I suppose to completely getting out into the stratosphere of what might happen… …We are willing to engage aggressively in making that platform richer once it’s there”

If you take a short travel in time (very short actually) to 2009, and to another disastrous launch of Google – the Android phone and read again the numbers of phones which were sold when Nexus One came out to the market, you’ll find a truly surprising similarity.

Nexus One - Lots of Similarity to the Revue Story

The sales were just terrible!  The reviews were horrible! And the company who took the risk in developing this phone – HTC was not in a good shape then. It was also not the first risk that HTC took with a wrong bet on the Windows Mobile phone.

However, it is a good timing to tell this story since earlier this month HTC took the lead in smartphone sales in the U.S!

So what’s the lesson for Logitech?

I assume it is about the DNA of a company – Apple would not release a product that was not refined enough. Siri and the reception issue are just examples for the rare exceptions of the Apple legacy. Google has no trouble in releasing products which are not “baked” enough, knowing they will improve it.

You can surly learn from this case that the Swiss DNA of Logitech just cannot allow such great loses in the short term with anticipation for a brighter future. I would advise them differently, that’s for sure, but the reason they were so successful up till now is because they were loyal to their own DNA.

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Israel is well known for being a start-up nation. Everyone in this country said at least once during their lifetime “I have an idea that is worthwhile opening a start-up!”.

Israel - The Ultimate Start-Up Nation

The reason for that is that there is a direct linkage in our minds between ideas and a company success. You have a good idea? Great! Now all you need to do is get it done and then you can surly start counting the money, as simple as that!

“Innovation distinguishes between a leader and a follower”, said once Steve Jobs (who ironically enough stole too many good ideas from other people).

Sadly enough Steve Jobs will not be able to answer my question, but I wonder what apple would have to say about the fact that both HTC and Samsung that did not invent anything in the smartphone industry sold more mobile phones than Apple – the leader and inventor of the smartphone?

How could it be that both Toyota & Hyundai sell more cars than Ford? What great innovations in the car industry came out of these companies?

What about Facebook? What exactly did they invent which was not there before? classmates.com was there almost 10 years before (it still looks today like a site from the 90s).

Well, the sad true is that innovation is just overrated.

Innovation is Overrated

There are many reasons why this is the situation, but I wish to point out a major one – one of the main reasons why innovation is overrated is that it is easy to measure!

When an entrepreneur approaches a VC (been there, done that too many times in my life), there are two slides in the presentation which draws most of the attention:

1. Feature-Set Comparison (to other companies with similar idea/product): this table provides a piece of mind to the investors and the entrepreneurs are doing everything to add more features which will outwardly would differentiate  the solution from the rest of the herd, but it is totally not clear (not to the founders and not to mention the VCs) if it generates more value to the users
2. Intellectual Property / Patents that the company has: one of the biggest frauds of our time (and I’m part of it sadly enough). Most of the companies I know, just write patents regardless of any innovation which was made. The founders know the game, they follow the rules and they just pay lawyers to make sure they will have the pending papers (it is never a patent, only a request for a patent) to show the VCs.

Patents are Overrated as well!

Never in my life was I asked to show the bug lists, the load-stress tests, the focus-group results, although these issues are the ones which will have a much bigger influence on the adoption of the end product.

If you would look at the companies I gave as an example for market leaders (Toyota and HTC for that matter), you’ll see that the values that they provide is not about innovation. It’s about “Value for Money”, “Reliability”, “Availability” etc.

Innovation is just another component in the mixture of a good product.

The biggest inventor of all-times, Thomas Edison said it much better than I just did: “Genius is one percent inspiration, and ninety-nine percent perspiration.”

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During the past 13 years, I am spending the second week of September visiting the IBC trade show in Amsterdam (ok, I was not there in 2010, but that’s it).

For those of you who are not familiar with the show, it is considered to be the biggest broadcast trade show in Europe, with more than 50,000 visitors from all over the world (a new record), and huge booths from various companies such as Sony, Adobe, Avid, Microsoft and thousands of others which propose everything from a dolly for a 3d Camera to a wire for a microphone, from a rocket to launch your own satellite to a  have a wooden table for your radio station.

Amsterdam

Every year there is  a huge buzz around a  technological breakthrough that was made this year, and many companies are trying to add this buzz term to the product they’re showing either by demo which doesn’t really work anywhere else, except for IBC itself (and only if you let the sales person make the demo in a very specific scenario), some companies even take it one step ahead by writing down the buzz word on the brochures even if they have no idea how to connect the buzz to the product they’re selling.

Last year it was OTT, the year before that it was 3D, in 2009 it was Mobile TV and so forth… And this year, the theme was “IBC connected world”.

If you think about it for a while, it makes a lot of sense to use it as a theme. Connected TVs are becoming a standard de facto (although no one uses it), Netflix with their “on any device” strategy are becoming a role model for the entire industry, not to mention the millions of tablets which are sold worldwide and becoming a great alternative/companion for viewing video on TV.

However, after spending 4 days walking though the isles of IBC, I cannot point even a single solution that kept me amazed. I’m not saying that there were no good products, there were… But there was no breakthrough.

Technology is usually running much faster than the pace of our adaptation. For some how, it seemed like all the companies understood it and focused on building a second or third generations of their current portfolio.

I assume that the ideas in different brainstorming meetings  ”let’s connect our CMS to a tablet as well” (“hey, cool idea!”) or “let’s run the service on a connected device!” (“that’s really awesome!”), and so it was. But comparing with previous years, this year’s exhibition really lacked the sense that a new revolution is on its way.

So what were the biggest trends after all? Well, from my perspective I can identify 3 major phenomenons:

1. Bigger Resolution: HD is now old news. Everyone has it, so a new format is being adopted – Ultra High Definition (aka Super Hi-Vision). It was announced by the BBC that the next Olympic Games in London will be shot using this technology. To understand better what we’re talking here about, take a look at the diagram below taken from Wikipedia, which demonstrates the unimaginable resolution comparing with the current one we see to day regularly (SD – Standard Definition) – that’s 80 times bigger than SD and 16 times bigger than HD!

UHD shown in comparison with other popular digital video formats

Now, in order to support this new resolution a whole new set of devices should be acquired, from a camera thorough the studio equipment to the TV at home, and you could find it all there.

2. More Personalized Service: Lots of companies presented either for the first time a new content discovery engine or an improved version from last year. In a nutshell, content discovery engine is an algorithm which provides personalized and relevant results for the viewers based on their viewing habits, their own personal taste in TV as well as collaborative filtering  done using rating mechanisms such as IMDB or social networks.  I saw various presentations from TV Genius,  Gravity, Think Analytics, Rovi and Orca (there were others though…). This segment is still evolving and its biggest problem as I see it is that it is very difficult for anyone who’s not really testing the solution in a lab to ditermine which  algorithm is better and why.

Orca's Compass - TV Recommendation Engine

3. OTT is Main Stream: I’ll start by telling a story. Two years ago, I presented GooMe’s (the former company I founded) OTT solution at IBC. At that time I believe it was the only solution for OTT at the exhibition. We were probably ahead of our times back then. I remember speaking with a senior marketing executive from NDS about OTT. He said in his own words: “OTT will never catch. It is a game for the big players and they will control it”. Two years later, at IBC 2011,  a quarter of NDS’s booth was dedicated to OTT, and everyone else at IBC who’s into Cable, Sattellite and IPTV was already a veteran supporter of OTT. Everyone now understands the solid strength of the internet and the fact that streaming either On-Demand or Live over an open infrastructure is a daily reality with more than 3 Billion video streams being played.

But that’s just the beginning,  last year revenues from OTT services were estimated at $1.9 billion (according to IMS Research). The annual growth rate of through 2016 is expected to grow at 32% per year (every year!) and reach $16.4 billion.

Nevertheless, the facts are that GooMe is no longer selling OTT, and NDS is. There’s a famous Jewish proverb saying that “No one could become an Orcale in his own Town”, I’m thinking of moving to Amsterdam.

GooMe's M-Cube - OTT's Solution (R.I.P.)

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In my previous post, I reviewed the major changes that the 21st viewer went through in the last decades which are in a nutshell:

1. We continue to consume content from their phones (or tablets) while watching TV

2.We especially like to be engaged in social activity while watching TV

3.We couldn’t care less about advertising

4. We are so addicted to media that we consume it more than we sleep

Now the big question is how do broadcasters and content providers deal with this distraction? How can broadcaster turn this Attention-Deficit Disorder into a more engaging experience? Here are the solutions of our industry:

1. Formats that encourage the viewers to use other screens

The ideal solution form the broadcaster’s perspective is to harness the viewers multitasking disorder into engaging activities that will be linked to the show that is running on the screen. So here are few examples of shows that trying to add additional  interest in other screens:

MTV VIP PASS: The MTV VIP Pass was a feed of a variety of behind-the-scenes cameras with a picture-in-picture of the actual broadcast. Above, you’re seeing an aerial view of Reese Witherspoon accepting her 2011 MTV Generation Award. Then over the top, you could layer a social chat, live polls, MTV’s Instagr.ram photos and my favorite — a “share this first” window. The solution was developed by the Israeli start-up AttractTV

MTV VIP PASS - Second Screen Experience

THE MILLION POUND DROP: a successful trivia game show format from Endemol that allows the viewers to answer trivia questions while the show is airing. The format is the most successful ‘interactive’ TV show the UK has seen since Test The Nation (an IQ game show with a real-time exam via interactive TV, IVR and PC). Almost 9% of the TV audience played along on its best day.

The Million Pound Drop Live Game - 2nd Screen Experience

Autumnwatch: it is quite usual to discover that the most interesting researches on media in general and TV is particular is done by the BBC. The concept was to develop a website where the viewer receives additional information on a laptop or iPad that is synchronized to the program that is being aired on TV. So while the TV show is showing footage of starlings flocking,  the laptop is simultaneously showing background information about swarming behaviour in nature. The project is still under evaluation and you can read more about it here, but in general, the idea is to bring more relevant information in a non-linear way to a synced TV show. I guess we will see more shows from this category in the following years.

The Autumnwatch TV Companion experiment

American Idol: the no.1 show in the US has decided to take the votes one step further and allow votes using the Facebook authentication mechanism and engage viewers with the TV show.  Moreover, for the first time, viewers were able to post auditions on Facebook, Twitter (?) and MySpace.

Facebook Voting App for American Idol

2. Encourage the viewers to use the network: there is a lot of fuss around Facebook and Twitter and other social networks, especially when it comes to enhancing the TV experience (I wrote a post about it in the past). Many start-ups are trying to create this engagement in various ways

The enormous success of FourSquare made several entrepreneurs to try and copy the amazing check-in success to the TV world. The concept is very straight forward – you checkin to a TV show and either discuss it with other viewers or just let anybody know that you’re watching this show. There are three companies that are giving more or less the same solution: Miso, GetGlue and IntoNow (which was lately acquired by Yahoo!). The main problem with this concept is that we usually watch TV at home. As oppose to FourSquare, where the biggest incentive of all is to become a mayor of Apple Store for example, here, there’s no real effort in becoming the mayor of your own living room.

Check-In to a TV Show and Earn yourself a Badge!

3. Care more about TV Ads: transferring the coupons from the “old world” into the new digital reality. Yidio is a San-Francisco based company that does that. you can either watch a video from one of the site’s advertising partners may get you 14 or so credits, or sign up with Netflix and earn 7000 credits. These credits can then be redeemed for TV episodes on Amazon, making it possible to watch current episodes of TV shows without any ads. This is not a huge success for the time being but no doubt that the concept is very interesting.

4. How can we face the media addiction? well, try to see if you can survive a day without consuming any type of media, not even your mobile phone. If the answer is no, then you can always try contacting this lady.

Good Luck with that!

Come and meet Dr. Kim Young

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HOW TO IDENTIFY THE 21st  CENTURY VIEWER

The average TV viewer of the 21st century is a totally different species than the one from the previous century. As we speak, dozens of different researches are trying to understand what have changed and why.

A Typical 20th Century Viewer

In the following post I will try to cover some of the latest findings about our new viewing habits and what could be the implications for the TV industry facing totally new challenges. So here we go:

THE CHARACTERISTICS OF THE 21st CENTURY VIEWER

1. Viewers just refuse to let go of their phones (or tablets): T he mobile phone is the most common distraction while watching anything. According to a new research by YuMe and IPG,  60% of the viewers distracted themselves with mobile phones while watching TV (that’s almost 2 out of 3!!!), and 46% did while watching online video (every second person). It gets even worse when we have a tablet in our hands.  According to Nielsen,  70 percent of tablet owners said they use their devices while watching television!

No TV without my iPad!

If we try to analyse what it means, and this is pretty much a straight forward conclusion - TV as a standalone medium is just not interesting us enough. You can call it multitasking, I think ADD is a much better definition.

2. The viewers like to be engaged in social activity while watching TV: not only that we simultaneously consume a mobile phone or tablet together with TV, we also produce our own tweets and statuses while watching TV. Thinkbox, the marketing body for commercial TV in the UK, recently conducted a survey of 3,000 consumers and found that 44% use social networks, like Facebook and Twitter, while watching TV, 37% have chatted online about TV content and 19% have shared TV content on a social network. I already wrote about the Twitter hysteria in the 2010 “MTV Video Music Awards” with 9,200 per minute about Lady Gaga.

We sure like Twitting about her

3. The viewers care even less about advertising: in the report from IPG and YuMe another astonishing fact came out – 63 percent of TV ad impressions are ignored, and just 25 percent of viewers studied were able to recall advertising they had seen during TV shows unaided, with 28 percent recalling TV ads with help. That means that the current advertising model is truly down the drain (and that’s without even mentioning the ad skipping which 86% of UK viewers using a digital video recorder to watch time-shifted shows skip through the ads!)

We couldn't care less about Nike (and other ads)

4. We are so addicted to media that we consume it more than we sleep: this is not just TV, but more a general media consumption issue. according to a recent study in the UK by Esure, the average person spends more time each day looking at their computer,television or mobile phone than they do sleeping. A grand total of 11 hours 48 minutes of screen time every day and 37% say it’s the last thing they do at night! and 42% of those surveyed said the first thing they do when they wake up in the morning is check their phone.

We Consume Media more than we Sleep!

So how do the broadcasters and advertisers plan to fight back? In my next post.