iHollywood

NetFlix Shares Up Nearly 20%

NetFlix shares were up nearly 20% today after the purveyor of videos over the Internet  said its   third-quarter profit doubled and subscribers rose 50%. That should help relieve concerns that the company is going to be overwhelmed by Blockbuster's  online push and new over-the-Net download services from Apple and Amazon.  See http://cdn.nflximg.com/us/pdf/3Q06_earnings_release.pdf for earnings results.

--Michael Stroud

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

G4, MSN, & HDNet set Arrested Development Free

MSN, HDNet, and G4 have acquired the rights to distribute the entire 53 episode library of Arrested Development. MSN will have rights to stream the content online for free, HDNet acquires rights to the HD edition, while G4 will offer the SD edition of the show. Is this a sign of the future of syndication rights?

Only a few years ago canceled television programs only had one outlet, syndication on a standard network. Today there is digital distribution, High Definition distribution, Standard Definition distribution, and DVD. This certainly presents the opportunity for a content owner to generate even greater revenue than in years past. This distribution agreement is one worth taking note of as it very well may and should be a path other content owners tread in the future.

What does the agreement mean for the networks? G4 acquires content that appeals to its core audience bolstering its line-up. HDNet acquires a quirky yet cult classic that will help enhance its offerings and potentially drive new viewers to the fledgling channel. Mark Cuban is committed to this strategy at HDNet, as more original programming and native HD content arrives on the network weekly. For MSN, it is a clear indication of the portals interest in becoming a video content aggregator. Taking a cue from AOL's in2TV service, the revamped Yahoo! service, or Google Video it is imperative that these outlets begin acquiring top tier content quickly in what may amount to an arms race for video. Additional top tier content enhances the portal's search engine, helps cross promote properties, and keeps users on the site longer.

All three of those goals are desired by the portals. While some content will be released on multiple portals, it is expected that exclusive deals will also emerge, such as the Arrested Development one to better differentiate services not just by user interface and brand name but by content. The MSN agreement will usher in a new era of the Internet as a syndication medium.

MTV Throws Social Networking into a State of Flux

MTV recently announced its intentions to enter the social networking world. Initially launching in the UK and Ireland, the initiative will occur on multiple fronts; online, broadcast, and mobile. At its core, Flux appears to be attempting a merger of YouTube and MySpace. The question is, will the nearly 100 million users of MySpace who spend lengthy periods of time crafting their online persona and social network want to start all over again?

This dilemma brings broadcasting into the equation. In addition to the social network, MTV will launch a television station September 1, also named Flux. The station will feature the most popular content from the website and programming will be influenced by users who spend the most time on the service. It is this component that is the most intriguing on two key levels. First, it appeals to Generation Y's interest in fame. To know that utilizing a site could get your video on television may be appealing enough to garner interest. Secondly, allowing users to influence network programming appeals to the group's desire to make their own decisions. This is already a major driver of branding on social networking sites. Users have the opportunity to say both good and bad things about a company or brand on a page developed by the company.

The question that MTV, like YouTube must face is what to do with uploaded content that is uploaded. Not only must MTV now prevent it from appearing on the web but it also must stop it from being broadcast. While studio content may be easy to prevent from being uploaded right away, it is homemade clips that feature music that may prove more problematic. However, with MTV's reputation in the space and the ability to generate revenue it may be able to satiate the RIAA by paying royalties on content played on TV or may be able to secure rights to some music that fans could then utilize in their home videos.

To date, social networking has not focused on generating revenue for the user who is uploading their own content. How will MTV handle the sharing of revenue? Will any revenue be shared? If not, MTV may miss out on higher quality homemade content as it is distributed through other means that offer revenue opportunity.

Overall, the question that must be answered is, is the TV component enough to pare users back from MySpace or have them develop a second online social network? While it will clearly appeal to some users, it may be difficult to let go of existing social networks or divide time between the two. Pulling users away from YouTube will also be a challenge. With MySpace and YouTube clearly entrenched in generation Y, MTV's prime audience, Flux may prove a difficult sell. But with a big brand name and history behind it, people may once again say "I want my TV".

It would be wise for other corporations to recognize that MTV's Flux is not a prime opportunity to enter social networking. Users want to enjoy the non corporate environment that MySpace offers and may lash out at companies trying to develop new social networking sites as revenue generators or as means to promote their company and products to users.

DirecTV says YES to Interactivity

YES Network fans in the New York area will be offered new interactive features under a new deal agreed to by YES and DirecTV. Similar to the offerings in its Sunday Ticket NFL package, DirecTV will offer fans an interactive application that can be loaded during the game that will offer information on the game being played as well as information and scores from around baseball.

In addition to the interactive option, DirecTV will offer a bonus cam viewing angle only available to DirecTV subscribers in the New York area which will offer footage not broadcast from the traditional cameras. For example, in lieu of a replay the camera could highlight the dugout after a called third strike.

While the interactivity will help to prevent the need for sports fans to switch channels or use the Internet to get score updates it is the DirecTV Cam that is most interesting. The camera offers a clearly unique view that other broadcasts cannot currently offer. Clearly, DirecTV is hoping to position itself as offering unique services to sports fans. DirecTV has already tried to differentiate itself with NFL Sunday Ticket, March Madness, and the Winter Olympics. Sports, with their built in fan base may be a prime market for DirecTV to continue to target as potential customers. By offering unique and innovative takes on the otherwise ordinary broadcast, DirecTV could find significant interest.

However, this deal is not exclusive to DirecTV and thus the advantage could quickly be washed away. If DirecTV continues to develop interactive applications including the Mosaic which offers 6 channels on screen at once and can find ways to incorporate other important stats, such as fantasy sports updates while bringing interactivity to other regional sports teams, it may be able to develop a longer term competitive advantage when courting sports fans.

Netflix offers subscribers NBC Fall Preview

According to a report from The Beta News, NBC has partnered with Netflix to allow subscribers to rent a DVD with the premier episodes of two NBC series, Studio 60 on the Sunset Strip and Kidnapped. This partnership reflects NBC's continued experimentation with varied distribution and promotional outlets.

For NBC this deal is a win-win as it attempts to convince the early adopters/influencers that the programming is worthwhile which could result in grass roots word of mouth promotion for the programming. This promotion could combat the audience erosion NBC has been facing by introducing new content to this targeted audience.

The only downside is that episodes could be ripped and illegally distributed over the Internet weeks before their actual broadcast date. However, even such an instance could build buzz and interest in the new programming continuing the grassroots effort NBC is hoping to mobilize.

For Netflix, a direct agreement with a studio achieves two goals.

1. It allows Netflix to offer unique value to its subscribers that its competition cannot match (assuming NBC doesn't partner with Blockbuster online as well).

2. Developing relationships directly with studios and building an audience for them may provide Netflix the ability to demonstrate its value. This could help Netflix argue that an on-demand STB service could also offer advantages. To date, its efforts to offer such a service have been hampered by legal issues and lack of studio support. This could be the start of addressing the latter of those issues.