iHollywood

The Retail Nightmare Before Christmas

The next generation format war is in full swing, and Paramount has just realized every retailer's worst dream with the announced simultaneous release of Mission Impossible 3 on standard DVD, Blu-ray, and HD-DVD.

A few keys points can be gleaned from this

• Hybrid is not the saving grace. Before the format war became a reality, the HD-DVD group stated that three SKUs of content would become unnecessary because retailers were very interested in the hybrid disc with HD-DVD on on side and standard DVD on the other. It appears retailers have realized that only offering a hybrid disc, which would result in increased prices for consumers does little to help an already softening market. The three format release has and will continue to be a reality.
• Mass consumer confusion. If retailers choose to stock next gen DVDs with standard DVDs there will inevitably be mass consumer confusion. Movies may be purchased by buyers unware multiple formats even exist not allowing them to realize they made the wrong purchase. This could lead to frustration with retail stores and longer return lines come the beginning of next year. Additionally, with multiple formats on the market, gift buyers will probably stick with standard DVDs to ensure the gift getter can actually play the content. Needless to say, consumer will be confused and retailers will bear the brunt of that frustration.
• Lack of retail shelf space. With three formats on the market and multiple DVD sets of TV shows continuing to appeal to the public, retailers will inevitably experience shelf space constraints. Will this lead to retailers only offering one format before the year ends? Or will retailer have less of each title on the shelf which could lead to constant restocking during the busiest time of the year. Will separate sections be created for Blu-ray and HD-DVD. Placing the next gen DVDs with the standard DVD will certainly lead to the problems mentioned above.
• No winner yet. The decision to release a DVD in multiple formats indicates that Paramount is making good on its promise to deliver multiple formats of the same title while demonstrating that no format has pulled ahead yet.

The final question is, will consumers really be willing to spend the $500 or $1,000 for a new player and pay a significant premium on next gen titles? How will studios truly differentiate their offerings? For MI:3, Paramount is offering a 1080p version on both next gen titles, while the HD-DVD version will also offer an on screen commentary by those involved with the film. The feature will supplant audio commentary played over a movie and is possible because of iHD, the interactive HD-DVD element. However, is seeing JJ Abrams talk about the movie while watching it worth the upgrade from simply hearing him? Is this feature enough to convince consumers to buy HD-DVD over Blu-ray? Probably not yet, but it does bring into question of how studios will incorporate special features in their next generation titles to convince users to upgrade from standard titles, because watching JJ Abrams isn't enough.

TBS & TNT go Broadband

Turner properties TBS and TNT have entered broadband distribution with the launch of TNT's DramaVision and long term plans for a TBS broadband play. The move by Turner is an indication that digital distribution is quickly becoming an integral part of a station's distribution. Offering full length content from made from TV movies to series to unique Internet sub-brands are all necessary for a station to appeal to an audience and remain competitive in online distribution.

The announcement further embeds three key points necessary for success in digital distribution:

• Offering Full Length Content is where the market is headed. TNT, TBS, ABC, MTV, TVLand and others have all begun offering full length content streamed online. Offering full length content opens up endless revenue opportunities. Fans can watch favorite episodes online that are not currently in the broadcast rotation. Viewers may be exposed to a new series which they start watching on broadcast. Those who missed an episode in a series or mini series can catch up and continue to watch the broadcast program. Archived content may achieve the effects of the long tail. All these scenarios offer incremental revenue opportunities for the viewer. The technology is not yet in place for broadband to replace broadcast and thus will have minimal cannibalization effects on broadcast programming.
• Owning your Broadcast Content is Imperative. Without owning content, filling a broadband channel with recognizable broadcast content will prove difficult. Many stations are faced with this issue. It will be necessary for them to negotiate online distribution for future programs they do not own while working with content owners for existing programs to develop a business model that allows current day programming to be moved online.
• Utilize Existing Brands . Even though TNT will offer some exclusive content, such as a Ripped from the Headlines series, it will be positioned as an extension of the Law and Order brand, which can be used as a medium to promote it. Content must relate back to the broadcast programming to utilize the emotional connection fans have with a network or brand.

As more studios begin to offer their content online, those that have yet to do so will be forced to reevaluate their plans. Studios also must begin to understand the long term implications of their broadband strategies. Even though technology to move content the last ten feet from PC to TV is not widely adopted today, there may be a time when the multimedia networked home becomes a reality. At that time, broadband may be a threat to broadcast, but that threat remains a few years away.

Press Release: TNT Kicks Off DramaVision

White Paper: Viacom's Purchase sets off a change in the state of online video

Situation

On Wednesday, August 9 Viacom announced its intention to purchase Atom Entertainment for $200M. The announcement propels MTV ahead in the race to distribute content online while providing Atom Entertainment with the marketing muscle and brand name to add new viewers.

State of the Market

Viacom’s purchase of Atom Entertainment furthers its objective to offer greater cross promotional outlets while adding new distribution points for its content. Content owners are trailblazing on the web and as they evolve their current appeal and long term strategies become evident. A ranking of how each studio stacks up in the hierarchy of online video distribution is necessary to fully understand a studios appeal today, and where they are going today.

1. Walt Disney (ABC). While Viacom is attempting to become the top web property, Disney currently resides in that spot. Disney’s early partnership with iTunes in October 2005 indicated that new CEO Robert Iger was willing to experiment with digital distribution. iTunes was proceeded by the launch of a two month trial ABC Broadband video player in May 2006 which featured full length free streams of hit programming such as Lost, Desperate Housewives, Alias, and Commander in Chief . After evaluating the results of the trial which served over 16M streams, ABC announced intentions to move the broadband service out of trial in the fall and make it a part of its distribution plan. ABC.com appealed to the adult demographic. In order to appeal to youth, the company launched DisneyChannel.com featuring full length streams of popular children’s programming. The site immediately resonated with its audience and experienced over 11M streams its first weekend from June 2 to June 4. The streaming of youth content did not hurt broadcast as popular shows online remained popular in broadcast. The combination of offering a robust library of full length hit programming, high quality video, an intuitive and attractive user interface resonated with viewers. ABC represents the best in class. Disney’s strategy is fixed around offering full length content through various viewership opportunities such as broadcast and digital distribution including free streaming on broadband and download to own on broadband.
2. Viacom (MTV Networks). Viacom became a pioneer in digital distribution when it launched the broadband channel MTV Overdrive in April 2005. The channel initially offered full length programming but has since evolved to focus on exclusive content such as outtakes, reality show follow-ups, cast interviews, etc. Since its launch, MTV Networks has continued to incorporate broadband distribution into its other properties. New sites include Comedy Central’s Motherload, VH1’s VSpot, Nickelodeon’s TurboNick, TVLand.com, and others. The only drawback for Viacom is their decision to not offer more full length content on their broadband channels, instead focusing on additional content. However, Viacom benefits by having a wide range of demographics, from children to adults that it appeals to. Additionally, recent acquisitions give Viacom access to a library of user created content and the ability to create games based on popular series. Viacom’s current strategy is to develop through partnerships and acquisitions the most cross promotional opportunities to extend its brand. Doing do will help viewers develop a deeper relationship with their favorite programming while exposing them to new interesting content.
3. NewsCorp (Fox). The MySpace purchase is already proving to be a brilliant move for Fox’s parent NewsCorp which has nearly generated enough future revenue after a partnership with Google to offset the acquisition cost. Fox on the other hand may have a difficult time infiltrating MySpace to promote its programming and has not made significant strides in online distribution, being one of the last major studios to license content to iTunes. The network seemingly has no extra advantage over any other brand interested in putting up a branded page on MySpace. This could be troublesome for Fox but the nearly 100M users of MySpace will be too appealing for Fox to not make a MySpace play. Such a move could include MySpace offering virtual Fox goods that users could legally share including clips from a favorite program, premiers of an episode, wallpaper, music, etc. However, this approach could allow other studios to follow suit. Another option is recommendations. If MySpace gets into the business of recommendations based on user preferences Fox programming could top the list. The most realistic opportunity exists in the recently announced Google deal. If 100M users are using Google’s MySpace search engine, Google’s ad network could promote Fox programming. This is the least intrusive entry point for Fox and still offers significant eyeballs. Even if Fox cannot effectively integrate into MySpace much of Fox’s content such as The Simpsons, Family Guy, and others are ideally suited for repeat viewing. Thus, Fox should consider opening a broadband channel that features much of its available content.
4. NBC Universal. NBC has found great success with its partnership with Apple. Broadcast editions of The Office actually saw a ratings increase as viewers warmed to the show online. Since offering programming on iTunes, NBC has worked to develop interesting content for its site. Such content includes webisodes of The Office, an online interactive sub-program to Last Comic Standing titled Last Comic Downloaded, and partnering with YouTube to offer promotional content. These innovations are useful in keeping an audience interested in a program and even driving viewers to a site, but they are not enough. NBC’s biggest issue is it doesn’t own much of the content that is broadcast on the network, making digital distribution a murky proposition filled with contract renegotiations. This led to NBC becoming the first network to offer an NBC branded show, Scrubs, which it did not wholly own (it is produced by Disney’s Touchstone Pictures). Even if it proves painful NBC must continue to investigate its options in this arena to avoid falling farther behind its competition. Distribution has also been a problem for NBC even though the company has experimented with various options, including mobile. Ultimately the various distribution points seem to have little synergy evidenced by the purchase of iVillage and its difficult integration into the NBC community. For NBC to find success it must decide if it wants to digitally distribute its content and if so, how does it acquire the rights to do so. In the interim developing sub brands around popular programming may continue to drive traffic but as a long term play, NBC must evolve their strategy, find or acquire better cross promotional partners, and begin to offer some of its content online.
5. CBS. In an attempt to keep pace with ABC after it launched its broadband video trial last spring, CBS introduced its own broadband player, Innertube. With some content developed specifically for the service, Innertube lacks the ability to build off the popularity of CBS’s programming. In lieu of developing content completely devoid of a connection to CBS programming, the network should focus on offering better content and improving the channel. The interface is lacking ABC’s flair and the content is lackluster. Viacom’s broadband services, which often do not feature full length programming offer extras that are ideally suited to the many reality series that pervade MTV networks. CBS has a few reality shows but not nearly enough that offer extras from a show would provide an adequate library. Outside of Innertube, CBS has made key decisions over the last year when it comes to internet video. Popular shows such as How I met Your Mother and Two and a Half Men made two episodes available for free streaming on Yahoo! The partnership featured content directly related to CBS’s programming and was adequately timed to promote the shows. Innertube however is a patchwork of clips that would otherwise never have found the light of day. Even the popular CBS summer reality show Rock Star: Supernova calls MSN its home. It is this type of integration that CBS needs with its content. While clips of how Kevin James of The King of Queens lost 40 pounds in 2003 may interest some, little traffic will be intrigued enough leave other broadband properties to view that clip. As the top broadcast network, CBS clearly has focused on developing hit programming, which has aided its success. However, it must now begin to evaluate its online strategy or risk others utilizing the web to increase their network’s popularity and rival CBS for the top market spot.

Viacom’s Purchase of Atom Films

As outlines, every network is taking a slightly different approach to the market. The purchase of Atom Entertainment is an important next step for Viacom. Atom Entertainment which is one part video (Atomfilms.com) one part gaming (Shockwave.com) presents two excellent opportunities for Viacom to further its strategy.

◙       Cross Brand Advertising. MTV has the benefit of having specific core audiences that it can cater to. Nickelodeon appeals to the children, MTV to young adults and twenty somethings, and Nick at Nite to Adults. Amongst the activities that these groups enjoy include casual gaming, viral videos, and social networking. Purchasing Atom Entertainment helps MTV cater to two of the three aforementioned interests of its core demographic gaming and viral videos. Gaming appeals to those in every age group, assuming the appropriate type of casual game is targeted at the right demographic. Viral videos appeal more to the MTV generation.

◘       Shockwave – Atom’s gaming sites, Shockwave and AddictingGames will help MTV develop branded advergames based on various MTV properties. MTV can create games that appeal to the key demographic group they are seeking to attract. Doing so further extends the brand and allows players to interact with a property that is of interest to them. Owning the site will allow MTV to prevent Shockwave from developing advergames for its competition if it so chooses. This will remove a promotional outlet for others. Shockwaves other expertise revolves around an In-Game Network which adds advertisements into games that are not branded around a specific property. This allows MTV to promote properties more organically. If a user is playing a game sports game, MTV can place a billboard in the game’s stadium promoting upcoming programming.

◘       Atom Films – Viral videos are the ultimate niche audience content because they need not appeal to a wide swath of people to find success online. Owning Atom Films provides MTV another opportunity to target key demographics. If an Atom Films user watches a lot of a specific type of content, MTV can recommend a program that may be appealing to that user. This program can be on the many Viacom sites or broadcast. With viral videos often passed around amongst friends who share a similar interest or sense of humor, MTV can create a grassroots campaign for certain programming by advertising on viral videos.

◙       Multiple Platform Marketing Campaigns. The purchase of Atom Entertainment allows MTV to offer its advertising partners unique cross platform marketing packages. With CPMs for online video in the $25 range MTV could develop very profitable packages of marketing that include broadcast, user created content, and in game advertising. Or an advergame. Or commercials on Overdrive. In the short term, the advertising opportunities MTV can offer its partners will exceed its competition while offering very targeted marketing camapigns. Even ABC and its broadband player cannot match the distribution points MTV will offer and the focused demographic marketing campaigns it could offer.

◙       More Content. MTV has already innovated by bringing the show Web Junk 20 to television. The show, which features 20 interesting clips from around the web is just one example of how MTV can utilize the library of iFilm and Atom Films content. Since Atom Films has strong relationships with its content creators, and even runs its own Atom Studio, MTV could actually use the site as a breeding ground for new talent and ideas. MTV could alter the user agreement that would ensure MTV first look rights to content uploaded to Atom Films. This would allow MTV to develop popular ideas without worry about competitors using Atom Films to poach talent. MTV should also obtain rights to various platform distribution for uploaded content. This would allow MTV to develop new series for broadcast, Overdrive, and other properties based off the most popular, interesting, or innovative content uploaded to Atom Films.

◙       Promotional Tool. With Atom now a company property, MTV could provide development kits to content creators. Basically, MTV would provide specific clips, song rights, sounds, etc. to content creators to allow them to create legal mash-ups of MTV content. This legitimate use of copyrighted content could then be played on iFilm, Atom, or broadcast to build interest and promote MTV content. Initially, MTV could offer limited distribution of development kits to prevent piracy but could expand the offer if it is successful.

Atom Entertainment also stands to benefit greatly from the backing MTV offers.

◙       Marketing Power. Atom Entertainment has found success by word of mouth promotion and the viral nature of its games and videos. With MTV it can be expected that MTV will cross promote the site amongst its various services helping drive additional traffic. With a library of content at its disposal, Shockwave can begin developing more branded games which will find intereste1d niche audiences. MTV will also afford Atom a larger marketing budget outside of cross promotional opportunities.

◙       Additional Content Outlets. MTV has already proven it is willing to innovate with Web Junk 20. More recently, the company introduced Flux in

Europe

, a social networking/user created content site that will provide the backbone of content to a television station of the same name. Acquiring Atom will help build MTV’s library which can be added to its Flux service in Europe and to one if it launches in the

US

.

◙       Atom Filmmakers. MTV offers filmmakers distribution they could not have otherwise achieved, whether it be on a more promoted Atom Films, iFilm, MTV broadcast, MTV broadband, and Flux. Recognition will help users creating content generate more money for their content while providing greater exposure to

Hollywood

and MTV executives who could then provide an opportunity to break into the business of making studio content.

Guidance

As studios continue to develop their online strategies it is clear that there is ample opportunity for everyone to succeed in the eyes of the consumer. Those that act quickly may find greater success by finding additional distribution outlets for their content making them more appealing to advertisers. Moving forward studios should remember a few key points to ensure success:

◙       Move Your Content Online – This is easier said than done, as networks must secure digital distribution content rights. ABC, MTV, and others that move top tier content online and offer it for free may stand an advantage when it comes to a network of choice. Viewers may opt for new programming they know they can view even if they miss a broadcast episode. While broadband services haven’t been available for a full season in such a capacity, this season will demonstrate if consumers want flexibility when picking their shows. It is unlikely this will have a major impact this season but in future seasons it very well could prove a differentiator in the broadcast as well as the online space.

◙       Define Your Strategy – There will be divergent strategies for every studio. It is important to decide what strategy works best for the type of content a studio owns and the audience said content appeals to. CBS may not have content that is particularly appealing to the MySpace generation and thus may not want to invest in Social Networking regardless of the allure. Matching the type of content a studio has to its distribution outlets is imperative to find success.

◙       Develop Partnerships – A studio’s site will be useful in attracting viewers that are interested in new programming that is easily connected to the network. For older content, studios may have a harder time reminding users where a particular show aired making users search to find programming. This is where Yahoo!, Google, MSN, and AOL should be considered as content aggregators. Content owners will not run the risk of a consumer thinking Yahoo or AOL produced a show. The extra traffic driven by licensing content to an aggregator should help to offset the revenue lost because a studio will have to share with said aggregator. It will also provide a promotional outlet to drive traffic back to a studios site to watch current day programming.

◙       Don’t focus on unique content – While the allure of developing new brands for the online world is appealing, it should not be a primary focus. Studios have great brand equity in the content that is already available. While only providing clips is not an ideal broadband offering, it will resonate more with fans than having to involve themselves in an entire new series online. Unique content can be offered as long as it build on pre-existing brands and utilizes the relationship a viewer already has with a program or network.

Nokia Loudeye

Nokia announced its plans to purchase Loudeye for $60M. Loudeye served as the backbone for Coke, HMV, and Virgin music stores and continues to operate others. The purchase is an attempt by Nokia to build an ecosystem around digital music, viewing the phone, specifically the Nokia N series as a converged telephony and music device.

The move by Nokia will allow for the introduction of a Nokia branded music store. This is the first step for Nokia in truly attempting to rival Apple for dominance in the digital music space. However, the success of the store remains in doubt for the following reasons:

• Apple's iPhone - If the future of digital music is the converged device, Apple appears to already be moving in that direction. The long rumored iPhone and possible Apple MVNO service would likely appeal to the myriad Apple fans while offering converged functionality. Nokia's advantage is that it has phones that operate on multiple networks. The question for Nokia is, how will the carriers react to its decision?
• Carriers - The carriers are unlikely to welcome new competition to their value added services such as music downloads (which currently command a $1.99 per song price), ringtones, ringback tones, etc. The carriers want users to utilize on portal services they provide to access and buy content. Removing carriers as the middle man may create tension between Nokia and the carriers. This could lead to features on Nokia phones being disabled or certain phones not being offered by carriers at all. This would limit Nokia's distribution advantage over Apple.

If carriers chose not to carry Nokia phones which support Nokia music it would prove detrimental to Nokia's core handset business as well as any hopes to rival Apple. Additionally, if Apple launches and MVNO and is willing to buy out people's contracts and offer free calling to users on other networks (such as Alltel does) the company may capture marketshare while redefining the converged device providing a lead similar to the one it garnered in the music space.

MySpace to get at least $9 Per User

Google announced that it has been chosen to provide search functionality to MySpace for the sum of at least $900M over the next four years. That's nearly $9 for each of MySpace's current user base of almost 100M. MySpace currently utilizes Yahoo search. Moving forward, Google will incorporate its search functionality into the service and utilize its AdSense program to generate targeted ads to appear in search results initiated in MySpace. Google maintains the first rights to sell search result ads that NewsCorp (MySpace's parent company) does not.

MySpace has been faced with questions for months about its long term ability to drive revenue. This deal, which will generate nearly as much money as the $1.2B NewsCorp spent to purchase Myspace helps answer those questions. Today, the deal is clearly a win-win for those involved:

• MySpace - The most important part of this deal is that it keeps MySpace's non-commercial appeal intact. Instead of placing ads on a user's homepage it focuses on generating revenue from search, something Google has experience in. The allure of MySpace is that users can create unique personalized pages and choose to be exposed to brands if they want. A user can become a friend of Coke if they want, but if they don't they will not be exposed to advertisements for the brand. This will help MySpace continue to capture the hearts and minds of users while allowing the site to expand its user base. While growing, MySpace can generate revenue that it had not been able to by integrating a revenue generating web search.
• Google - May have positioned itself to be the defacto engine of the MySpace generation. The money that Google must pay MySpace may pale in comparison to the amount of revenue it can actually generate from selling ad space on its MySpace search results. MySpace's nearly 100M members and growing ensure Google a captive search audience. If AdSense ads prove successful and appealing to this group, Google may be able to make a financial windfall far greater than the fee paid to MySpace. Additionally, Google can help MySpace improve other features of its service, further embedding itself in the MySpace culture. These may not be Google branded services but could provide revenue opportunities to Google. The opportunities include legal ad-supported video distribution, instant messaging, collaborative content programs, and other opportunities that will present themselves.
• Fox - Taking more control of search will make it even easier for Fox to promote its own properties to MySpace users. Even though Fox promoted its own series 24 through the Burger King page, Fox had to be careful not to turn MySpace into a commercial site. This could offend existing members and potentially inhibit future growth. Utilizing search results, Fox will not have to walk as fine a line between unique content partnerships on MySpace and promoting its programming and services to MySpace users.

The only remaining issue is, will MySpace continue to grow at its prophetic pace and maintain its user base? If so, this partnership will help propel Google to even greater financial success. If MySpace loses momentum in the coming years, Google may lose some of the $1B it must pay MySpace without being able to recoup it. At the moment this seems an unlikely scenario as MySpace continues to grow and expand into new markets.

CNN: Google signs $900M MySpace deal

Podcasts on the Road

Alltel Wireless has partnered with Melodeo to offer a podcast download service to Alltel Wireless subscribers. The service will cost $3.99 per month for access to the robust Melodeo library of podcasts. An application pre-installed on Alltel phones provides the interface to search and stream or download podcasts. Users will also be able to subscribe to their favorite podcasts.

The partnership offers a unique value to Alltell subscribers and could help increase ARPU for Alltel. However, the offering will likely fall short in two important regards:

• Acquiring New Customers - Offering the ability to download podcasts is unlikely to convince users to leave their existing phone service and opt for Alltel. This is especially true since many podcasts are listened to on the PC and can be transferred for free to many existing portable devices. Even so, this is a necessary move for Alltel to compete with the multimedia offerings of other wireless carriers and gaining new customers is likely not the ultimate goal of this partnership.
• Convincing Users to Sign Up - Downloading podcasts to a phone is all about convenience by offering users the able to access and update their favorite podcasts without the need for PC access. This will be appealing for those often on the go and cannot update their content. The question is, will other users who have regular access to their PC and already manage their podcast subscriptions through another service invest the $3.99 to also have access on their cell phone? The answer is most likely no.

In order to build on this announcement, Alltel should consider adding more multimedia offerings. The issue again is cost to the consumer who may manage and get content for free elsewhere. Can Alltel convince consumers to pay for content they can regularly access for free?

Alltel's approach to the market crosses barriers other companies have been unwilling to break. This is evident by its offering "free" calling to phone number on other wireless service plans. Perhaps Alltel continues this approach by partnering with a company that could provide access to one's personal content stored on a PC or DVR may provide the value customers are looking for to pay an additional monthly service charge without the need for Alltel to become or partner with a content aggregator. This service would help differentiate Alltel with its customers and may be appealing enough to attract subscribers from other wireless carriers.

RIAA to juice Limewire

Fresh off its recent settlement with Kazaa requiring the service go legit and pay $115 million to the RIAA, the RIAA filed suit against Limewire's parent company Lime Group LLC. The RIAA claims that the service allows for the company to make money off illegal piracy.

It is reasonable to expect that the RIAA will again find victory and ensure the closure or legitimization of another P2P service currently being used for illicit means. What happens next remains to be seen. With many of the biggest file sharing services closed, will new ones appear to replace them or will the market scatter so much that users do not have one service to flock to? If so, will this effectively end P2P piracy?

Ultimately the closure of these services will help to thwart casual and moderate pirates. The hardcore who want to illegally obtain music will continue to find ways to do so. Instead, the RIAA needs to continue its anti-piracy education effort, policies against illegal physical format distribution in the US and abroad, and help the online music industry create flexible usage models that limit the perceived need for piracy. These efforts should help to further curb illegal file sharing and develop usage models that help propel the music industry into the future, assuming no further rootkit scandals emerge.

Primetime for ABC Broadband

ABC announced that its trial broadband video service which was available from May 1 through June 30 would become a permanent fixture this fall. Offering a year round service is necessary for ABC which has set the bar for video distribution. Competing stations have failed to meet its quality, library, and timeliness. The service will help accomplish strategic goals for ABC:

• Maintaining Audience Interest - As ABC continues to offer serialized programming such as Lost and Desperate Housewives it is necessary that fans watch every episode to follow the storyline. If one misses an episode or two and cannot catch-up they may lose interest in the programming. ABC broadband will offer viewers a free way to view missed episodes ensuring those fans continue to watch broadcast editions. The broadband service may also deliver audiences to other programs by offering instant access to episodes.
• Additional Advertising Opportunities - While broadcast advertisers, fearful a broadband player would reduce the broadcast audience they paid hefty sums to reach could have felt slighted by ABC's broadband launch last year this year they cannot. Offering another outlet for advertisers will allow ABC to get larger total audiences than broadcast alone could deliver. Offering robust Internet services will allow for the creation of cross platform advertising campaigns that are appealing to advertisers. This is especially true as the broadband service offered greater ad retention than broadcast. Broadband also offers another opportunity to reach broadcast viewers who may be re-watching episodes they had already viewed on television.
• Leg up on competition - While MTV helped usher in the age of currently broadcast content online, its offering does match ABC. MTV's Overdrive, VH1's VSpot, and others in the family focus mostly on outtakes, reality television follow-ups, behind the scenes, etc. This isn't to say the service doesn't serve an integral role in MTV's relationship with its viewers. However, ABC's offerings may force MTV to examine offering more broadcast content on its sites in addition to extras. Other services such as CBS's Innertube do not hold a candle to the ABC service, with a substandard UI and content library. To date, Fox and NBC are not offering free streaming of currently aired programming on their websites. The competitive landscape creates an opportunity for ABC in the short term as other broadcasters will revamp and launch enhanced broadband properties.

Heading into the fall season, the broadband service (which has yet to announce which shows will be available) will assure ABC viewers that they will have free access to their ABC programming even if they miss an episode. Having such an assurance will likely appeal to the millions of non-DVR households.

Not offering a full screen or download experience, ABC will limit cannibalization of DVD sales and broadcast viewership. In fact, ABC could contend that such a service will bolster other distribution methods. Apple continues to offer ABC content in iTunes, which is necessary as an additional retail outlet as well as a different business model focusing on portability, ownership, and no commercials. ABC would be wise to continue to offer content through iTunes even after the launch of the broadband service.

Reuters: ABC prime-time webcasts here to stay

Google turns down the volume on gTunes

On Friday August 4 at National Association of Recording Merchandisers (NARM), Google announced that it did not intend on getting into the digital music business. With Microsoft's Zune initiative underway, Google's decision may prove prudent.

The biggest obstacle the digital music market faces is the lack of a cohesive ecosystem outside of Apple's iTunes + iPod. Microsoft intend to address this problem with a Zune branded environment before the end of the year. If Google had opted to also launch a music store it too would have to offer a branded environment. Since Google is not a hardware company it would have forced Google to develop a campaign similar to Plays for Sure or build its own hardware.

With Microsoft about to spend hundreds of millions of dollars on the Zune, Google's entrance would have further muddied the waters and made it easier for Apple to continue to dominate. Instead of consumer's having to learn about the difference between the two new offerings and hoping they provided ease of use, consumer's likely would have opted for the known commodity, Apple. Only one offering and message may stand a better chance to resonate with consumers.

This is a good decision for Google who would have had to invest millions to begin to carve out a niche for itself in audio. Instead of the saturated audio market, Google should focus on improving its video offerings and consider opening a service similar to AOL's in2TV. As other portals acquire more video content, Google may find itself left behind if it is unable to secure top tier content soon. Without being perceived as a studio and offering lots of traffic will make it easier for Google to partner with studios to acquire content than a studio branded site. Google also has the capital necessary to outbid competitors if necessary.

Otherwise, Google can continue to function as the ad-support engine for text and now video as a means to generate revenue. Google recently announced a partnership that will have MTV utilizing the Google Advertising Network to generate revenue from its streamed video content.

Reuters: Google quashes talk of expansion into music sales

Can AOL Survive?

AOL's announcement today that it will cut 5,000 jobs, or a quarter of its workforce, underlines how much the online market has fundamentally changed. It's an open question whether AOL can adust to the new world.

Built on a paid subscription model, AOL must adjust to a world increasingly dominated by advertising-supported services such as Google and Yahoo. It lost a million subscribers in the second quarter, dropping to 17.7 million in the U.S.

This week, Time Warner confirmed the long-standing rumor that AOL will offer services such as  email, safety and parental controls for free. AOL opened up its portal and content to all last year.

But Google, Yahoo, and Windows are already offering and upgrading their free services.  Does the mass market really need another email client? AOL will need to effectively integrate AOL Mail and AOL Instant Messenger into its new portal to fully exploit the offerings.

AOL isn't dead by a longshot. Its online advertising revenue was strong in the second quarter, rising 40 percent to $449 million.

AOL Instant Messaging -- one of the world's leading IM clients -- is still the first thing millions of users see when they boot up. You can easily see how AOL might launch advertising-supported features like "IM this video to a friend", customized log-in pages and online identities.

Backed by Time Warner, AOL has the muscle to acquire  more top-tier content, just as MSN acquired the rights to Arrested Development. Adding new cult content to AOL's in2TV and other services will create a compelling user experience that will bring users back frequently, especially if content is updated regularly.

But MSN, Google, Yahoo! and Fox's MySpace are old hands in the free space. It remains to be seen whether Time Warner's aggressive moves are too little, too late.

--Josh Martin and Michael Stroud

See CNET's AOL to cut 5,000 jobs