The problem with unlimited on demand video

Apr 11th 2006 8:48AM

There is one certainty in the TV industry. That programmers are going to be wrong 95 pct of the time. Lost, Desperate Housewives, American Idol had all been passed on by networks. Other shows have been cancelled on one network, prospered on another. Shows that have done well in one time slot, have failed in another and vice versa.

So riddle me this batman. If creating a hit TV show can be so uncertain that it's success or failure can vary by timeslot and/or network, how difficult will it be to create a hit in a purely video on demand world ?

Cut to the movie industry.

The movie industry is non linear. Movies come out and essentially are available as PPV with the delivery mechanism being the theater or on DVD. But as with any non linear network, the user has to proactively choose the content rather than just turning to a channel and have it available to them.

On any given Friday, there may be 3 to 10 movies released nationally, many more with limited releases in mostly major markets. The curse of this system is that in order to get millions of people to choose your movie, enough to be considered a hit and to make money from the box office and down stream revenue opportunities, the distributor must often spend as much if not more on marketing and promotion than they did to make the movie. According to the MPAA , the average promotional spend was $36mm dollars.

$36mm dollars to hopefully get 10mm people to the box office who would generate around $80mm in box office. A good number for almost any movie.

Its difficult and expensive to get people to get out of the house to choose the one movie they are going to see that weekend.

Its going to be just as difficult and maybe very expensive in an all video on demand world, to get people to choose your program from online or cable/sat/telco provided video

If you have just spent 1mm or more per eps on the first 13 eps of a new TV show, how much is it going to cost to make sure enough people find it in a non linear VOD world to give it a chance to become a hit ?

Count viewers per episode in an hour. Count viewers in a day or week. Doesnt matter how you count viewers. Its going to be much harder to tell a potential viewer to find a show they have never seen before by searching the programming guide to find out where it is on your local video provider that it is to say, 8pm, this and every thursday on this channel.

We are so used to being blasted with promos for new shows on the networks we watch, that we take it for granted. Its called selling to the people in the church advertising. If you are already in the pews, you are predisposed to like the next sermon and you are certainly a qualified audience to promote the next sermon to. The same applies to TV shows. If you are watching FX, you have an idea of what to expect , and you are the perfect consumer to advertise to.

What if there are no linear channels ? With no linear channels, its a mess. Its an expensive mess to promote TV shows. ITs a mess to find them. Its a mess .

Right now networks and their production companies have the best of both worlds. The networks can program and promote and viewers can easily understand the choices and find the shows. And when there is a hit, the metrics are there so that everyone knows its a hit. The nets proclaim it, and the media talks about it. Which in turn helps drive more viewership.Which in turn helps drive complimentary revenues like ITunes, DVD, mobile, whatever.

Even the suprises, like DVD sales of Family Guy would not have happened had Family Guy not been a regularly scheduled show. Fox having to promote the Family Guy as the great show you have never seen or heard of, but need to watch would have made it prohibitively expensive and it would not have happened

On demand video. Unlimited choice. Sounds so good. Everything you always wanted , right at your fingertips. It doenst work.

I will giveyou 1 more example. music. every song ever made can be compressed on a hard drive that costs less than 1k dollars. Ondemand is incredibly easy. Yet radio, which is as linear as you can get for the play of music, thrives. When you combine sirius, XM , regular radio and internet radio stations, more people are listening to music from linear sources than ever before.

So when does on demand work ? When its limited. When we can trust the gatekeeper/distributor to go out and find things they know that I may like as a viewer . Create an area for my interests, and keep the choices every month limited, and you got me. I know where to look. I know i wont be so overwhelmed with choices i dont want to deal with it. Make it easy and breezy

TV is about getting away from hassles and relaxing. Its about choosing to be entertained, educated or informed. Its not about working to do any of these. Its lean back experiences.

The internet is about finding video for everything else. The internet is where the content that cost less than 100 dollars to create exists. Its where i dont expect a lean back experience, but if i look hard enough, i can find content that is in a very finite niche. Its the home of long tail video where I will lean forward and focus on finding something unique.

FOr distributors that dont understand their consumers, its going to get very, very expensive

Reader Comments

(Page 1)

1. With the ubiquity of CDs and MP3 players, I don't understand your saying that the "on demand" capacity for music is limited. When I was reading the first part of this post, I was thinking that the way the music industry blends the "on demand" capabilities with the linear programming available flies directly in the face of your argument. "On demand" music, through MP3 players, itunes, and CDs, proves that mediums can thrive in a duality of on demand and linear programming.

Posted at 11:05AM on Aug 28th 2006 by TCz

2. Jason Calacanis is right, you are great at blogging. This was another excellent post. Because of the difficulty in attracting and securing a demographic to media in an on demand world, do you think content, such as movies, may be marketed specifically to online communities? I could see an online movie being offered to MySpace users for a steep discount. They are a captive audience (like TV Network audiences) and it would attract new and increase usage by existing users. Keep writing and I'll keep reading. -Stefan

Posted at 11:05AM on Aug 28th 2006 by Stefan

3. Hey mark do you even really want a answer? doubt it, maybe testing the minds of your readers You want to know the reason why this roll out of tech is a mess? easy look at your competitors... Every big corp has people in charge that don't know the tech and release services prematurely.

Posted at 11:05AM on Aug 28th 2006 by Lebroz

4. Mark, it's rare, but I agree with you. The problem with the internet is quality control and portaling. Television's quality is in its inherently passive nature. You turn it on and it's there. You don't have to search - you know where to find the things you like. Too many choices for hte consumer is bad for the industry, the quality of programming, and for the consumer. I think that the film and television industry is organic though, in the sense, that - by and large, it exists this way because it's more or less the optimal paradigm. Television isn't going anywhere for a while. On another note, Lebroz - do you have a show on public access here in NY? I was baked the other night and caught some dude named Lebroz James freestyling into a bathroom mirror. Funny, dude. Good stuff. But then, I was wasted.

Posted at 11:05AM on Aug 28th 2006 by styx

5. There is a business on the verge of launching now that has a solution for many of the problems you outline. It has a methodology for increasing the odds of success for movies, TV shows, and entertainment projects in general while decreasing marketing costs by directly involving the audience in both the selection process and cutting them in on a piece of the revenues as well. In fact, its my understanding that your partner, Todd Wagner, already has some information on this. I say that the answer to all, or most, of the above is to start a process of dismantling the entertainment industry gatekeeper system and start allowing the people, the audience, to have far more control over what actually gets produced and allow them to profit from it as well. Begin doing that and the costs you mention will start to drop dramatically.

Posted at 11:05AM on Aug 28th 2006 by Joseph

6. Interesting post, Mark. I find it interesting to contrast your vision with Chris Anderson's. Chris makes the opposite argument http://www.thelongtail.com/the_long_tail/2005/01/long_tail_tv_pa_2.html when he says the future of TV is the long tail -- all the hidden, niche content that is hard to access now -- not hit shows. What do you think of Chris' argument? Do you think the goal has to be to have a hit show, the model of a popularity contest? Or is there the possibility of a different model, an economy of niches, where everyone finds more targeted, specialized content?

Posted at 11:05AM on Aug 28th 2006 by Greg Linden

7. Interesting post, but I still don't think it's a _huge_ problem. First off, the bandwidth to do this is still years away (as Mark has pointed out several times). In the mean time, you just need to look at YouTube or Google Video to see where things are going. I look at these sites as "long tail heavy" versions of what cable accessible VOD will look like. Almost everything that gets popular on these sites had ZERO marketing dollars spent on it. And since it seems everyone in the industry has noticed youTube, it's not long until there will be some serious paid promotion on that site (like iFilm). But look at the recent success on youtube of 'Lookwell' and 'Jack and Heat Vision'. Both were failed tv pilots. I can personally say that I had never even heard of Battlestar Gallatica until I saw the one free episode they put on their website. All of their marketing couldn't compete with poor quality web-based VOD. The next thing I did was throw the series on my Netflix queue. It will be interesting to see how ABC's online broadcasting will affect viewing habits. As soon as you have someone watching (or even looking) at just one video you can provide them both highly-accurate suggestions (like Amazon) and targeted paid promotion (like Google Adwords). This is how users will find content in the VOD world. This is how content can be promoted. This is how people find web content right now and I could line up people for miles who advocate how well AdWords work for their product. Just my 2 cents.

Posted at 11:05AM on Aug 28th 2006 by award tour

8. I mostly agree with "TCz" and "award tour" above. One other thing that came to my mind is another media industry: books. Of course there are lots of disparities between books and video content but boks have been kind of available on demand as long as they have been around (though most not instantly as in PDF - yet). There is literally millions and millions of them, old ones are still around so there is more and more all the time. but still some become huge hits, even without much or any advertising.

Posted at 11:05AM on Aug 28th 2006 by J�rgen Bonne

9. At the IPTV World Forum in London last month, a term commonly used by several presenters was the "serendipity factor" associated with broadcast television. That is to say that sometimes you run out of favorites to watch and so you start flipping channels and hope to be suprised by a show that wouldn't fall into your normal interest group. Their opinion is that broadcasted content (or linear programming as you put it) is here to stay. To your radio comment, I listen to my iPod when I'm cruising around in the car, but sometimes none of the 3500+ songs stored on it sound interesting, so I switch to Sirius satellite radio and browse the channels. Occasionally I hear something I really like and I buy it through iTunes when I get back to my computer (wouldn't it be cool if I could press a button on the Sirius remote to trigger an auto-buy?). I may prefer listening to purchased music most of the time, but I still need a way to discover new artists, preferably in the venue where I listen to the most music, my car. There is a place for on-demand and there is a place for linear programming. On-demand is not a threat to linear programming, but instead is a powerful compliment to it. It is also my belief that the main value proposition of the established broadcasters must shift as the Internet (or IP networks in general, which includes the Internet as well as private IP Networks) commoditizes the distribution aspect of content delivery. Perhaps the value they provide will be mostly in the advertising of media that they pick up under their label? Or perhaps they will focus on content from their own in-house studio, such as the news. Time will only tell.

Posted at 11:05AM on Aug 28th 2006 by Dave Siegel

10. We face the same problem with games as well (surprise, surprise - it's universal to all media) Another way of stating this is that consumers need (and thus value) editorial/programming/merchandising. Digital distribution and on-demand will just mean that decoupling *may* have the opportunity to be decoupled from the content, and perhaps be provided by a different source(s). For example, you are into cooking shows? Someone sees that niche, creates a cooking enthusiast blog/site/portal, and points you to the best shows on iTunes as well as other networks. Maybe they get a cut, maybe they sell ads until they have enough clout to demand a cut. who knows. While you've pointed out a problem, that's just another way of saying that you've pointed out an opportunity. Someone can step in and do a better job of providing consumers with the "lazy feed" they want.

Posted at 11:05AM on Aug 28th 2006 by Kim

11. A model that is closer to something like http://www.pandora.com would provide me the means to see what I want and provide the content delivery service the ability to expose me to other potential shows that I would be interested in based on my selections and feedback. Giving the user a framework to work within, rather than a free for all that true VOD would provide is very important. As design has repeated proven, limiting a user's choices is ultimately to their benefit as long as the choices you DO provide are relevant and significant to them.

Posted at 11:05AM on Aug 28th 2006 by David O'Hara

12. Jurgen: what you aren't accounting for is this: a great majority of those millions and millions of books are not produced by the book industry: in other words, writers write them on spec and submit for publication. It costs publishers to print, market, and distribute, etc - but not produce. This is not analogous in film/television. There is a significant outlay of investment, and the cost is usually directly correlational to what you see on screen. Second, publishers make no money. Most of them have severely minute profit margins (it's why many publishers are opposed to ebooks and ereaders; piracy would KILL the publishing industry. Good thing for them, no one likes ebooks apparently, except me). Third, while a shot in the dark book goes platinum every once in a while, there are ways to guarantee a best selling book. NYT book review for example. Or getting Oprah to read it and like it. It all comes back to the psychology of humans. My nephew is seven; we plays games together sometimes. He sometimes won't put forth his opinion about a game until I let it be known whether I like it or not. Then, most of the time, he'll like what I like. My point is that most adults are no different. Radio is important because if you listen to almost any song long enough, it starts to grow on you. You'll hum the tune on the way to school - you'll fuck your girlfriend to the beat, etc. Therefore, channels/networks/portals, serve as social shaping mechanisms, telling most people what to talk about, what to think, what to like. You might not like it, but it's true. The other thing that portals/networks/labels do is establish barrieres to entry. LEt's say you like Lost. A shitload of people on an island dealing with aliens or whatever the fuck they deal with (I don't watch - although Michelle Rodriguez is hot and I'd smash Evangeline Lilly too). It costs like $2 million an episode. You become conditioned to the quality of the show and will find cheaper shows with similar themes and locations subpar. It's like what happens if you ever dated a really hot chick; you date hot chicks after, but they don't compare. In your mind, you're like, man, that first chick was bananas. Hollywood is that first chick. You won't find better cgi elsewhere. you're hard pressed to find better acting (don't believe me, watch a lot of independnet films), and you won't find bigger spectacle. If you've been conditioned to like these things (like an addict) only hollywood can serve your addiction. Some wanker with an XL-1 in Omaha won't suffice.

Posted at 11:05AM on Aug 28th 2006 by styx

13. I was thinking you were really onto something until you made the radio analogy. I'd think that the last few years had proven pretty conclusively that buyer-affinity search (a la Amazon) and tagging or related approaches (a la iTunes playlists) and search (iTunes) are more useful and better-liked by customers than linear radio programming. I'm certainly buying far more music, and feeling happier with it, than I was back when I was buying CD's based on the one song that got radio airplay. Some of my satisfaction is long-tail based - radio would never be able to afford to play enough of the music I really like - and the long tail is definitely a huge advantage of the on-demand model. Family Guy failed in broadcast because there weren't enough people who wanted to watch it to justify its scarce time slot - but there were still enough people who liked it to make it a success on DVD. How many other shows like Family Guy/Arrested Development/Malcolm in the Middle do we miss out on every year because the time slots are too valuable to waste on something that doesn't have any cops or doctors in it? Actually, linear programming is already pretty badly broken, even without being able to get Rocketboom on my TV. If I'm trying to find something to watch, it can easily take ten,fifteen minutes to skim the local, standard, and premium channels in my HD cable service. Whups, I could have watched most of the Daily Show on the web in the time I spent looking for something to watch on cable TV! I guess I'm asking why you think that linear channels can't be replaced with something akin to web sites. A mundane argument, like bandwidth, set-top-box costs, or lack of keyboards on the vast majority of televisions, would make sense to me in the short run. Promotional expenses don't make sense to me- they're too tied up in the limitations of the current TV model to make sense in a hypothetical future where VOD is widely available.

Posted at 11:05AM on Aug 28th 2006 by Skott Klebe

14. I'm going to need to come to your blog more often... reading everyone brown nose is pretty amusing... Do people act like that all the time? On your TV, Movie, and streaming content points I have to disagree. While you could argue that Direct TV is linear the individual channels Comedy Central, Sci Fi, ESPN, etc are also very "On Demand" On demand Comedy, on demand Science Fiction, on demand sports, etc. As you are focusing on individual programs like Lost, Desperate Housewives, and American Idol you are losing the point that these programs fill niches too... think X-Files, Bay Watch, and Wheel of Fortune which map up pretty well to the first three shows. There is an expectation for an On-Demand Mystery Show, Drama, and game show.

Posted at 11:05AM on Aug 28th 2006 by Adam

15. This blog has a lota media fanz here, nice. Yeah I got a hip hop comedy news show in nyc I produce 'n' edit http://video.lebroz.com I'm on my 3rd year(not picked up by a major network yet, almost viacom) Keep the comments going, I produce the content ya'll b talkin bout sneak peak @ the future... (tivo thinking outside the box) http://techdirt.com/articles/20060412/0251259.shtml You choose what commercials you want to watch (shaq missing FT's)

Posted at 11:05AM on Aug 28th 2006 by Lebroz

16. I have to agree with David O'Hara above. The whole concept of user tagging and preferences transforms the concept of "on-demand" TV. I started using Yahoo Music Engine a few months back and I am convinced this type of service is the future of entertainment. Apart from building up your own list of personal preferences for music (translate to TV Shows or movies) it queues up other music that's relevant to your tastes based on your genre preferences and tagging from other users with similar tastes. I love this concept; it gives me the music I like PLUS the music that I _might_ like. So I get to hear new music and artists I have never heard of, and guess what, I end up liking it and buying the albums. If they could extend the model to news radio content I would never listen to the radio again. Give me a TV service where I can do the same; probably set up 5 / 6 of my own channels for different moods or time blocks, make it easy and I will never watch broadcast TV again. Allow me to do the same with advertisements (I am never ever going to decide what feminine hygeine products my wife needs. Let me turn those ads off.) It's not that hard. Oh, and please do it in Australia.

Posted at 11:05AM on Aug 28th 2006 by NicksMyName

17. A few comments ... (1) Mr. Cuban writes, "[I]n order to get millions of people to choose your movie, enough to be considered a hit and to make money from the box office and down stream revenue opportunities, the distributor must often spend as much if not more on marketing and promotion than they did to make the movie." Supportive of this assertion is the accuracy with which opening week ticket sales can be predicted with simple models comprised of just ad spending and # of theatres, not necessarily anything to do w/ the quality of the movie itself. (A couple academic studies have suggested the drop-off from opening sales can be predicted based on the quality of the movie as measured by ratings on Internet sites like IMDB. From "Hollywood Stock Exchange," IIRC opening weekend is generally something like 1/3 of total revenue for first 4 weeks cumulatively.) (2) Despite the different distribution models, the dispersion of both TV ratings and movie ticket sales follow a power law. ("Only 20 percent of major studio films will be hits. Same for TV shows, games, and mass-market books." http://www.wired.com/wired/archive/12.10/tail_pr.html Comment #6 references this article as well.) How many links blogs receive follows a power law as well and this pheonomena occurred w/o nearly the the expenditure on advertising that movies usually need to achive opening week visibilitiy. (See http://www.kottke.org/03/02/weblogs-and-power-laws) (3) Mr. Cuban mentions that "Lost" was among now-prominent shows passed on by networks. Consistent with that notion, even ABC's top executives almost didn't air "Lost." Both (then-Disney CEO) Michael Eisner and (current Disney CEO) Bob Iger apparently hated the show (source: http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2005/08/14/wlost14.xml)

Posted at 11:05AM on Aug 28th 2006 by JohnD

18. Mark, The future is a la carte cable TV. People do not want to pay for a bundled set of channels including QVC and Oxygen. This move will revolutionize TV. No more bundling.

Posted at 11:05AM on Aug 28th 2006 by Jordan Grimes

19. Mark, The future is a la carte cable TV. People do not want to pay for a bundled set of channels including QVC and Oxygen. This move will revolutionize TV. No more bundling.

Posted at 11:05AM on Aug 28th 2006 by Jordan Grimes

20. That's the main problem with long tail type content...the 'paradox of choice' when bombarded with a torrent of options. Thats why long-tails are of little value without being coupled to a very efficient type of filtering front-end. The hits that form the 'head' of the paretto curve right now are used as a starting point now and gradually push you downward towards the tail. If you get rid of this head (what Mark refers to as the linear programming), you lose your starting point and get lost in the sea of the tail. Thats why a PURE PLAY VOD wont work, you still need some linear programs...until some innovative filtering/recomendation system comes into play....thats where the game-changing value is going to come from.

Posted at 11:05AM on Aug 28th 2006 by haig s.

Next 20 Comments

Add your comments

Please keep your comments relevant to this blog entry: inappropriate or purely promotional comments may be removed. Email addresses are never displayed, but they are required to confirm your comments. To create a live link, simply type the URL (including http://) or email address and we will make it a live link for you. You can put up to 3 URLs in your comments. Line breaks and paragraphs are automatically converted — no need to use <p> or <br> tags.