Online Video Stats

Nielsen, as well as a number of other companies, measure the number of streams viewed on online video destinations every month.

October was no exception, although the figures were more interesting than usual. mainly because while the top two of YouTube and Hulu remained the same, there were some big changes after that. And it could be the start of a trend set to get stronger over the next few months/years.

YouTube Beats All-Comers

First, the non-surprise. YouTube topped the Nielsen chart for streams in the United States by a huge margin. The Google-owned site racked up 6,632,964,000 streams and 105,923,000 viewers.

Hulu ranked second as it has for a goods few months now. The site managed 632,662,000 streams and 13,472,000 viewers, which though impressive enough isn’t even a tenth of the numbers YouTube can boast.

Facebook Jumps To Third

Then the surprise hits. Facebook has jumped from number 10 to number three in the space of a single month. The social networking site racked up 217,765,000 streams and 31,594,000 viewers – the latter being more than double the number enjoyed by Hulu.

According to CNET, Nielsen Vice President of Media Analytics Jon Gibs, said in a statement:

“Facebook’s rapid growth in online video during the last year illustrates the site’s evolution from simply a communications focused tool to a media portal.”

“Social networking sites are evolving from a venue for catching up with friends to a platform for personal expression, allowing consumers to share their experiences in the full variety of content formats available online.”

Conclusions

This is a potentially pivotal moment for Facebook as it could (and only could) signal a new trend where YouTube is being abandoned in favor for the social networking site.

Facebook has millions of users worldwide who want to share videos with their friends and family and the system Facebook has built-in provides everything they need to do so.

While I can’t see Facebook ever catching YouTube for sheer number of streams every month, Hulu is certainly catchable.

Free Hulu

Hulu is currently the free home of premium online video content in the United States. The fact it’s only available in the U.S. is annoying for those of us outside the country but there is at least hope of an international roll-out to come.

The problem is that it doesn’t look as though Hulu will be completely free for much longer. In fact, if the people in charge have their way, which they undoubtedly will seeing as they are indeed in charge, Hulu could be charging by 2010, which is just over two months away.

Hulu To Charge?

There has been speculation about this move occurring for several months but it all came to a head during September. First, News Corps. chairman Rupert Murdoch suggested a paid Hulu was being looked at. And NBC Universal CEO Jeff Zucker backed him up.

Then a few days later it was suggested that Hulu was already running an internal beta test of how the system could work. No details were forthcoming but the process seemed to already be in motion.

Chase Carey Speaks

And now comes word from News Corp. Deputy Chairman Chase Carey who, according to Broadcasting & Cable, opened the OnScreen Summit with his views on the matter.

He said:

“It’s time to start getting paid for broadcast content online. I think a free model is a very difficult way to capture the value of our content. I think what we need to do is deliver that content to consumers in a way where they will appreciate the value. Hulu concurs with that, it needs to evolve to have a meaningful subscription model as part of its business.”

When questioned on a possible timeline Hulu to start charging, he stated that while one wasn’t yet in place, that he fully expected it to occur during 2010.

How Bad Will It Be?

What Carey isn’t saying is Hulu will disappear behind a paywall. In fact, he’s dead set against that idea. But it’s clear that everyone involved with Hulu is now looking at how to bring in more dollars than what they are already getting from advertising.

Whether Hulu users end up being asked to pay for specially-created content or whether certain sections of content will be hidden behind paywalls isn’t yet clear. But I’d suggest the fact that Hulu users will end up being asked to pay for content is now set in stone. Unfortunately.

The reason? Because a free Hulu is evil and is killing network television. Apparently.

Traditional TV Vs. Web TV

And there I was thinking that the TV industry was finally getting it. Thinking that it was managing to embrace the idea that there are alternative ways of consuming content than the traditional ones using the old-fashioned business models. But it would seem not.

There has been much talk recently from the people in charge of the companies which own Hulu, especially News Corps. chairman Rupert Murdoch, over the possibility of turning Hulu into a cash cow by either going all-out for a subscription-based model or at least running a paid option parallel to the free one.

And now CBS has got involved in the argument.

Execs Rip Into Hulu

This all started with a Contentinople story detailing the opinions on Hulu of various media executives who spoke at an Advertising Week panel at The Times Center.

Major League Baseball Advanced Media CEO Bob Bowman explained he doesn’t “understand the business model.” While Verizon Communications Inc. vice president of content strategy and acquisition Terry Denson and YES Network CEO Tracy Dolgin both threw the weight of their support behind a hybrid advertising/paid model for the service.

CBS’ Quincy Smith Pounces

CBS Interactive CEO Quincy Smith then passed the article around internally via email. Unfortunately for him, TechCrunch got hold of a leaked copy.

Smith packaged the copied article with his thoughts that, “We should think about how hard it would be to prove that some ratings declines are a result of reckless hulu [sic] streams and that Authentication [sic] is a nice option.

This is, of course, an important time of year for television networks thanks to the Fall premieres of new shows. Smith wants to somehow prove that poor ratings for shows on any network other than CBS are solely due to the show also being available to watch on Hulu.

Conclusions

Maybe Smith isn’t doing anything that bad in trying to find evidence that his, and his company’s, decision to avoid Hulu like the plague is the correct one.

But his stance on the issue shows a disregard for the idea of offering content for free without authentication, short hand for viewers proving they already subscribe to a cable service. Which is why CBS is fine with the new TV Everywhere offering which does exactly that.

There’s clearly a battle on its way and as viewers we have to hope the TV industry takes the longer term view and avoids the pitfalls the music industry has made and continues to make to this day.

Hulu As It Is

Hulu has been built on the tenet of providing free premium content over the Internet using an advertising based model to first cover costs and secondly generate revenue. And it’s been a pretty successful strategy, allowing Hulu to build a sizable audience.

However, the company is still expected to make a loss of around $33 million this year, despite revenue of $164 million. So naturally the thoughts of those at or near the top of the companies who own and control Hulu have turned to whether a different approach would prove to be better.

Hulu As It Could Be

There has been suggestions in the past that either instead of or as well as the current advertising-based Hulu there could be a subscription-based Hulu. In June, Jonathan Miller, News Corps’ man in charge of digital services, suggested this was a logical destination to be headed for.

Then just a few days ago, News Corps. chairman Rupert Murdoch and NBC Universal CEO Jeff Zucker stated that a subscription model and charging for content was being looked at. Although at that point it seemed to be more wishful thinking than anything, especially on the part of Murdoch who also wants to put his newspapers behind pay walls online.

Paid Hulu Already On Way?

Now, BusinessOfVideo claims to have it on good authority that far from being just an idea for the future, a subscription-based Hulu is already on the way. Sources report that internal beta testing of the system is happening now and the technical details are being worked out.

This is not imminent, with next year being mooted, but it looks like it’s definitely on the way, whether anyone wants it or not. The full details don’t seem to have been worked out yet so this could yet be a good move or a bad move for the company depending on how it chooses to play it.

Conclusions

While I personally prefer online video and television catch-up services to be free, I can see the advantages of a subscription-based model as well. And it’s the “as well” which is key because no one wants to see Hulu moved behind a pay wall lock, stock, and barrel.

However, were a paid-for Hulu (with a reasonable price tag) to be launched alongside the free one with new partners such as cable channels HBO and Showtime then that would tempt more companies online and help prop up the free version at the same time. Which means everyone would win. And even Rupert Murdoch would be happy.

Related Ad

Buy ‘Murdoch’ by William Shawcross on Amazon

Hulu – Hot and Getting Hotter

Being British, I’m jealous of Americans for one reason and one reason alone – Hulu. Yes, we get to watch BBC programming on the iPlayer, and there are a number of other online TV catch-up services either already present or about to launch in the U.K. But Hulu offers American television at its best.

Hulu is massively popular in the States, having around 40 million viewers at the last count, who between them watched nigh on 500 million video streams. Which is surely cause for celebration amongst the partners behind the project.

Viewing Figures Vs. Revenue

However, viewing figures will only get you so far, with it all coming down to revenue and profit in the end. And on this score Hulu is still failing to score big. It’s estimated that the company will make losses of around $33 million from expected revenue of $164 million in 2009.

And this clearly isn’t pleasing the head honchos at NBC, News Corps. or Disney, the last partner to join. In particular, and rather unsurprisingly, News Corps. chairman Rupert Murdoch doesn’t seem to enamored with the current situation. And NBC Universal CEO Jeff Zucker agrees.

Content Partners Speak

According to Multichannel News, both spoke at the Goldman Sachs Communacopia conference on Sept. 15. Murdoch started by suggesting that Hulu is being eyed with alternative forms of revenue channels in mind. He said:

“Are we looking at it with a view toward adding subscription services and pay per view? Yes we are. No decisions have been made yet.”

While Zucker seemed less sure pay models were the future but also didn’t rule them out, particularly in the long-term. He said:

“I don’t think anyone predicted we would be this far along after 18 months. We are ahead of plan and we have more than 200 advertisers at Hulu.”

“We are going to continue to be as innovative as anyone on monetization of the ad-supported model, that’s really where our focus is today.”

“Whether there are other ways to monetize Hulu down the road, it is something that we are open to, something we will explore, but there are no plans at this time.”

Could A Pay Hulu Work?

There are clearly people out there willing to pay for content over the Web, with streaming rentals and digital copies selling well across the Internet. However, that’s not how Hulu has been set up and I can see a lot of people dumping the service without a second thought if they were suddenly asked to pay for the privilege of using it.

It’s likely to be many years before online video advertising catches up with TV revenue, if ever. But does that mean the advertising-based model should be abandoned? Especially as top-rated shows such as The Simpsons and CSI can command higher CPM advertising rates on Hulu and the like than they can on traditional TV.

However, navigating the breadth of choice now out there and filtering the available content is getting harder as a result. Enter Magma, which acts like a Billboard Hot 100 for online video.

Online Video Growth

Online video has grown, and continues to grow, in popularity and breadth of content. The choice of sites, portals, content, and video clips now available is breathtaking.

There are the long-form video destinations such as Hulu and the BBC iPlayer, and short-form video factories such as YouTube and Dailymotion. Between all of them the range of content available to your average viewer is simply astonishing. It would take years to watch it all.

Online Video Filter

As it gets harder for the discerning Internet user to filter out the chaff and only watch the wheat, ways of doing the filtering are going to become more and more important.

There are already ways of doing this. Our sister site, Web TV Hub offers a daily dose of the most timely and viral videos doing the rounds. Then there is Digg, which shows which videos are creating enough of a buzz to get featured on the site. Then there is, of course, word of mouth.

Magma – Online Video Charts

Magma is a new video portal that has been in private beta for the last few months. But this week has seen it opened up to the public for the first time.

Magma acts as a filter for online video from all across the Web. It organizes videos into charts based on the number of views, comments, related videos, and social media activity each receives.

You can see a Billboard-style Hot 100 from all corners of the Web or view the top videos on a number of different sites, including YouTube, Hulu, Facebook, and Twitter.

Magma – Other Features

If you sign up for a user account then there are additional features. Everyone has their own channel which they can add videos to, and you can see what other people are adding to theirs, adding a good sense of community.social networking to the whole thing.

Magma uses video embeds to enable you to watch the videos right from the site itself. Meaning you haven’t got to follow links to watch recommended content as you do with other social networking sites.

Conclusions

Magma is a brilliant yet simple idea which should aid most people’s video viewing habits. The one word of warning is how addictive it is – you’re suddenly faced with a mountain of content you know other people are enjoying. And that begs you to want to watch it too.

And then news broke that Hulu was coming to the U.K. before being rolled out elsewhere. Unfortunately, due to a lack of content partners, the waiting game continues.

Hulu Beyond The U.S.

Hulu has been an outstanding success in the United States. It has brought premium television content in catch-up form to the masses over the Internet for free. Americans have adopted the service in their droves and despite the occasional hiccup, the American Hulu is doing a fine job.

But why does it have to be limited to the States? The obvious answer is it doesn’t. While those pesky (and much talked about on Web TV Wire) international copyright restrictions prevent Hulu US from being viewable in other countries, there is no reason why there can’t be a version of Hulu built for other countries and full of local content.

Hulu UK On Way

Which is exactly what Hulu is proposing happen. In March it hired someone to oversee its international operations. While May brought news of Hulu starting negotiations with several British broadcasters and content providers.

July then saw Hulu spelling out its intentions to use the U.K. as a test bed for the international version of its product before rolling out further. At that time a September launch for Hulu UK was mentioned although that seemed to be wishful thinking rather than a set-in-stone proposal from the company itself.

Mixed Fortunes

Today brought mixed news. The Telegraph first reported that Hulu was just weeks away from finalizing a content deal with ITV, one of the main British broadcasters. The deal is thought to include programming made by ITV Productions, which includes Coronation Street and Dancing On Ice.

However, less than 30 minutes later The Telegraph reported that Hulu UK wouldn’t be launched until 2010. The newspaper claimed this was a delay but it looks as though that time-line was merely speculative anyway.

Regardless of the details, it’s clear Hulu has had some trouble signing British content partners. An ITV deal looks close, and negotiations with BBC Worldwide continue, but Channel 4 looks set to concentrate on its own 4oD as well as a deal with YouTube which could see full episodes of its shows coming to the online video market leader.

Conclusions

Maybe a September launch was over-optimistic but it does seem to be taking a long time for these deals to be done. Could it be that the British broadcasters being courted by Hulu already have their online strategies in place and are resisting the lure of this American giant?

While I’m confident a Hulu UK will happen, I’m not sure it’ll either arrive soon or have anywhere near the quality of content we were hoping for. Which would be a crying shame.

Early Days Experimentation

Despite now being a few years old, the online video sector is still in its infancy, especially in terms of premium content provided by the traditional TV networks. But these companies face a problem – making money from the venture. They aren’t in it for any other reason than profit and where that profit comes from is a huge dilemma.

There’s a feeling at the moment that the big American television networks are really only experimenting with online video. They know there’s a demand there, one that’s growing as quickly as Broadband speeds increase, and they don’t want to miss out on being a part of what will likely take over from traditional TV one day.

Free Ads Or Paid For?

However, the experiment will only continue if these companies can figure out a way of making money from having their shows available to watch online. If it’s unprofitable then no matter what the demand is, most will likely cease to provide for it.

There are currently two options open to the providers of premium content: a free service supported by advertising, or a paid-for service with either a one-off fee, a monthly fee, or a per-item charge. In the States both Hulu and CBS currently operate a free, ad-supported model, as does the BBC iPlayer and similar services right across the Web.

CBS Vs. Hulu

The approaches to advertising are very different across the sector. As Business Week reports, Hulu and CBS are both trying to find the right strategy to achieve profitability without annoying viewers too much.

CBS is taking a similar approach to the one it uses on traditional TV, inserting as many adverts and advertising breaks as viewers will put up with before switching off. The network is apparently using infrared beams fired into testers eyes which can detect when each individual zones out from being bombarded with too much advertising.

Hulu, meanwhile, is taking a different approach, aiming to show fewer ads than traditional TV but charging advertisers more per slot in order to turn a profit. Execs use Twitter to gage whether its strategy is being welcomed or not, reading Tweets for an indication of viewer annoyance.

Conclusions

There’s no guarantee either of these strategies will work because finding that line between making money from advertising without bombarding viewers so much they turn off is obviously a tricky task. If advertising-based models fail then in the same way online newspapers are starting to talk about keeping content behind a pay wall, then so will TV networks and content creators. Needs must.

If that happens then the number of viewers using online video sources such as Hulu and the CBS Web site is likely to drop massively, so timing is probably key. At this relatively early stage of proceedings the networks have a chance to form the relationship they want with their viewers. If they push things too much, either by going over the top on advertising or charging for content then I fear a viewer backlash.

Related Ad

Buy ‘The Online Advertising Playbook’ on Amazon.

Illegal File-Sharing

The music, television, movie, gaming, and software industries pretty much see illegal file-sharing and peer-to-peer networks as the devil’s own work. Those who download these media files are the devil’s spawn, while those who make the files available to others are akin to Beelzebub himself. Which is understandable seeing as these activities do undermine each of the industries mentioned.

However, what those same industries and the content owners who operate in them need to realize is that most people only partake in illegal file-sharing due to a lack of other options. Give consumers what they want, which is affordable access to the content they desire, and the problem of illegal file-sharing goes away.

Free Music Streaming

A recent survey of 1,000 teenagers by MusicAlly revealed that the number of youngsters illegally downloading music over the Internet has dropped substantially over the last two years. It’s not the teenagers are listening to less music, it’s just that instead of turning to file-sharing networks first they are now streaming tracks and albums from services such as Spotify, Last.fm, and We7.

These services mainly operate with a free, ad-supported business model, sometimes with a premium paid option also present which gives those willing to subscribe additional benefits. Consumers are happy because they have immediate access to the music they like, the record labels and artists are happy because they are getting paid, and the middle men are happy because they have a legal business out of the deal.

Free TV Streaming

Obviously, the television industry is slowly starting to embrace services which work in a similar way. In the U.K., the BBC has the iPlayer, Channel 4 has recently opened up its archives with 4oD, and there’s the ITV Player. While in the States, Hulu continues to build an audience by offering premium shows streaming online for free. Even Hollywood is getting involved with Epix and the like.

However, in the same way that the music streaming service are being controlled by overzealous content owners, so are Hulu and the like, with restrictions being placed on content at every turn. Then there is the obvious problem of territorial rights licensing which means people in the UK can’t watch Hulu and people in America can’t watch the iPlayer.

A Business Model That Works!

Now just imagine a Spotify/Last.fm inspired TV streaming service! Consumers would eat it up and it would be a far more powerful weapon against piracy than futile DRM. To top it off the service could also embrace user-targeted advertising and less intrusive (but engaging & effective) internet ads as a highly effective monetization model.

A service like Last.fm doesn’t give an on-demand service but allows users to skip and ban tracks, and generally presents them with music they will like – put simply it’s personalized radio. A TV service working in the same way would give users the TV they wanted and introduce them to new TV shows they’ll probably like while not giving away a whole series. This would encourage DVD sales, rentals etc. and introduce audiences to new shows.

Ultimately this is a business model that could work.

Conclusions

The television and movie industries could severely cut the use of file-sharing networks for illegal downloads by embracing streaming services in a big way. If the correct strategy was put in place then content could be made available without harming the content owners bottom line. In fact, the right free TV streaming strategy could help promote shows and increase viewer numbers and DVD sales.

Hulu – Almost Perfect

Hulu has done many things right since launching early in 2008. It’s a free service which operates by using non-obtrusive advertising to pay the bills. The content partners are many and varied, and include three of the four major U.S. TV networks.

The only things preventing Hulu from being the best thing ever created are the fact it’s limited to viewers in the United States only (a situation likely to change soon), and the bizarre restrictions being placed on big-name shows by content owners.

As TechCrunch rightly points out, this latter issue is actually the content providers kicking themselves fairly and squarely in the ass. They are missing out on a golden opportunity to promote their shows, both the successful ones with a huge audience on traditional TV and the ones which could build a loyal fan base on the Internet.

The Big Issue

What’s happening is that content owners are placing very varied restrictions on how many episodes of shows it will allow on Hulu. They also dictate which series these episodes can come from, and where in the series they’ll come from.

Typical examples are five episodes being available from the end of series five, or three episodes from the middle of series one being available to watch. Which is fine for those people using Hulu to catch up on those episodes they’ve missed. But little use for anyone else.

Missed Opportunity

The TV networks and content providers probably think they’re doing the sensible thing by kind of embracing online video but not giving away the whole farm. And they’re obviously right to a certain extent because by making every episode ever made of a particular series available to watch on Hulu or the like, DVD sales and syndication deals are going to suffer.

But wouldn’t it be better to follow a strategy which is likely to grab new viewers? Show the first half of the current series of a TV show and you’re likely to grab extra devoted fans who’ll then seek out older series on DVD. Or if a show is still airing on traditional TV, show the whole of the first season and draw new viewers in who’ll then watch the current and future series on TV.

Conclusions

Hulu is obviously blameless here, but the TV networks and smaller content owners are following a strategy that is doing no one any favors. Embrace online video, give Hulu users what they want, when they want and gain new viewers for life. And as an added bonus help prevent people from turning to file-sharing networks when they fail to find what they want on more legitimate services.