Continue reading Paul McCartney: ‘You can keep free streaming for the birds and bees, now give me money’

Paul McCartney: ‘You can keep free streaming for the birds and bees, now give me money’ originally appeared on Engadget on Wed, 08 Feb 2012 19:57:00 EDT. Please see our terms for use of feeds.

Permalink   |  TUAW, CNET  | Email this | Comments
Engadget

Verizon and Redbox are creating a joint venture to provide movies on demand using the web as well as Redbox’s physical DVD rental kiosks around the country. The deal is seen as a blow against Netflix, which offers a DVD-by-mail and a streaming service, but it’s also a chance for Verizon to make money from streaming content and show off how awesome its fiber network is.

Details around the deal are limited, but here is what we know.

1. Verizon will own 65 percent of the joint venture while Coinstar, Redbox’s parent company, will own 35 percent.
2. The service will offer something Netflix currently doesn’t — a download option, which makes it more competitive with Amazon’s video offerings.
3. The offering will be available nationwide, not merely to Verizon customers.
4. Using Redbox helps the joint venture get access to new releases as content companies are trying to add more “windows” to the movie release process. Windowing is what content companies use to spread out the time between a movie released in theaters, when it hits rentals stores and when it makes its way to other services such as premium TV channels. The general thinking is this increases profits for each movie, but opinion is divided on that, and consumers hate it.
5. Verizon is counting on its existing relationship as a pay TV provider to get more content to the joint venture.
6. Whatever the end product looks like, it will launch in the second half of this year.

Given these facts, as scant as they are, it’s easy to see the threat to Netflix, as people could view the two offerings as fairly interchangeable as long as the pricing is competitive and the content is relatively equal. But without knowing about pricing or the content, the deal still has the potential to be a win for Verizon, given video is huge bandwidth suck on wireline and wireless networks. Netflix traffic was estimated to take up 20 percent of U.S. broadband traffic during peak hours according to Sandvine in the fall of 2010.

For Verizon, a streaming joint venture has three benefits. One, if it makes money from the service, that’s an additional revenue stream as well as a way to capture some value from its customers who cut the cord. Two, if the service can really deliver a video product that consumers love and will use, it will help drive traffic across Verizon’s networks. Customers in the FiOS areas will have a reason to sign up for the service if they haven’t already, while the joint venture will help drive traffic to mobile devices and other areas of the country. Verizon has a business selling bandwidth on 100 gigabit per second backbone pipes as well as leasing its fiber to cell phone providers to use as mobile backhaul.

Finally the joint venture gives Verizon a seat at the table with content companies as the industry tries to find new economic models based on the reality of an IP infrastructure that can deliver any content to anyone, anywhere. Sure, content companies are fighting the future with windowing and complicated rights agreements, while ISPs are trying to protect their business with broadband caps, but the future is coming, and Verizon is trying to get in on the ground floor rather than watch it pass it by.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Q4 Wrap-up: SOPA and the future of digital content
• Connected Consumer 2012: A year of consolidation and integration
• Connected world: the consumer technology revolution

alt=''
border='0'
/>

GigaOM

CBS CEO Les Moonves is known to occasionally drop pieces of information that he’s not supposed to on his company’s earnings calls, and this quarter was no exception. When asked about CBS’s appetite for striking deals with new streaming providers that might not have the money to pay cash upfront to license its content, Moonves said that CBS had decided against joining an Apple TV service because it was based on an ad split.

Apple had long been rumored to be working on a subscription streaming service that would aggregate content from multiple TV networks and compete against more traditional cable and satellite services. That product ended up never coming to market, as Apple was apparently unable to convince enough content providers to join. But no one had publicly confirmed that such an offering was actually in the works until today.

The decision not to join the effort follows CBS’s philosophy of getting paid upfront licensing fees for syndication of its content online, as opposed to partnering on revenue-sharing agreements. It’s one reason, for instance, why CBS never followed ABC, Fox and NBC in joining Hulu, and why it seems unlikely to do so in the future.

Now that decision seems to be paying off, as CBS and The CW, its joint venture with Time Warner, are striking big-money licensing deals with streaming providers that are contributing heavily to its top line. Earlier this year, CBS struck deals with both Netflix and Amazon to make classic library content like Cheers and The Wonder Years available on their streaming services. More recently, The CW has licensed its shows out to Netflix and Hulu in deals that Moonves said today would turn the network from a “money loser for CBS to a profitable venture.”

In both cases, CBS received lots of guaranteed money for streaming rights. In his prepared statements today, Moonves said CBS was receiving “hundreds of millions of dollars” from streaming providers like Netflix, Amazon and Hulu, and that there were potentially more deals in the works. As consumer demand for streaming content continues, Moonves said he feels good about being able to make significant money from online viewership year in and year out, regardless of which online distributor wins.

Moonves’ Apple comment isn’t the first big gaffe he’s had over the past year. On CBS’s first-quarter earnings call, Moonves mentioned working on a deal with Netflix to license CBS shows for distribution in Latin America, a full month before Netflix officially announced its streaming service would be expanding to that region.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Connected Consumer Q2: Digital music meets the cloud; e-book growth explodes
• Flash analysis: the future of Yahoo
• Managing infinite choice: the new era of TV user interfaces

alt=''
border='0'
/>

GigaOM

Netflix has spent the past few years trying to get its streaming service on as many devices as possible, including TVs, Blu-ray players, game consoles, streaming set-top boxes, mobile phones and tablets. It’s a monumental undertaking, given the large number of different operating systems and development tools needed across a number of different CE manufacturers.

In a post on the Netflix Tech Blog, device UI engineers Matt McCarthy and Kim Trott shared a presentation that gives a peek behind the curtain in how it’s able to do so. The key is standards-based development using WebKit, JavaScript, HTML5 and CSS3.

Cutting-edge features, dynamic updates and A/B testing

Standardizing on WebKit enables Netflix to deliver to all the major browsers — including Firefox, Internet Explorer, Opera and Safari — without worrying about cross-platform development. By basing its software development kit (SDK) for consumer electronics manufacturers on WebKit, it can also use “cutting‐edge features like querySelector API, CSS transforms, CSS transitions & animations, localStorage, CORS, getters and setters, etc.”

More importantly, by relying on common web technologies, Netflix doesn’t have to develop individual applications for each device framework it comes across. It also can improve development cycles for user interfaces on connected devices. According to the presentation, Netflix typically updates its connected apps every two weeks. By using web standards, it doesn’t need to rely on CE manufacturers to push firmware updates to fix bugs or change the UI — it can do dynamic updates by itself.

Netflix also can dynamically test user interfaces, to see how users interact with them. With web standards they can redirect different customers to different web pages, feeding them different experiences. By doing so, they can figure out which interfaces are most effective.

Different classes of devices

There’s a wide range of available processing speed and memory, from CPUs that have 600 MHz to those with 3.2 GHz of processing power, and 88 MB of available memory to 512 MB. As a result, Netflix builds in flexibility to ensure that it doesn’t overload lower-powered devices with more advanced features.

Netflix currently has three tiers of devices based on their configurations, with the lowest tier having zero animation and small cache sizes. On the top end, devices have animations, large cache sizes and frequent pre-fetching of data. According to the presentation, all devices start in the middle tier and are then throttled up or down based on performance.

Paving the way for other app makers

Netflix’s focus on standards has allowed it to provide dynamically updated user interfaces on devices like the Sony PlayStation 3 and Sony Internet TVs, Nintendo Wii, Logitech Revue and the Boxee Box from D-Link. As more streaming video app makers try to tackle the issue of device fragmentation, Netflix’s approach could provide one way to streamline app creation and maintenance.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Connected Consumer Tuned In to TVs in Q4
• A field guide to cloud computing: current trends, future opportunities
• Connected Consumer Q1: The Over-the-Top vs. Pay TV Battle Heats Up

alt=''
border='0'
/>

GigaOM

Online video rental store Vudu has seen massive growth lately, driven mostly by getting embedded on an ever-growing number of connected TVs and other devices. But the streaming video on demand service is about to get a big boost, as it’s being integrated with the website of parent company Walmart, potentially introducing millions of shoppers to the joy of online video.

It’s been about 18 months since Walmart bought Vudu, but as demand for physical media declines, the big box retailer is finally marrying the online video service with its website. By doing so, it’s hoping to introduce its customers to a new way of watching movies and getting them to spend money on digital copies instead of buying the DVD.

Steve Nave, SVP and general manager of Walmart.com, said the decision to buy Vudu was made as the retailer realized that there was a rapid shift in consumer behavior from purchasing physical media to streaming content online. The acquisition was made to help better position Walmart and its web property as this shift occurred.

The result of that purchase can now be seen at Walmart.com. Users shopping online for DVDs and Blu-ray discs on the site will now also have the option of buying or renting digital copies of titles that are available as part of the Vudu streaming library. Once purchased, those movies can then be accessed either through the Walmart website, Vudu.com or on any of the 300-plus connected devices that the Vudu streaming service is available on.

The move to add the service to Walmart.com comes just a few months after Vudu introduced its own browser-based streaming option. But it’s not just the Vudu service on a Walmart URL: The integration keeps the same look and feel of the retailer’s website, while introducing a wide new range of streaming content. Existing Walmart.com customers will be able to link their accounts with the Vudu service and seamlessly purchase movie titles without having to switch logins or change sites.

Now for the bad news: For those that want to stream videos in HD, they’ll have to watch the movie on one of Vudu’s supported devices. The Walmart.com site, along with Vudu.com, only stream videos in standard definition. While many purists will only want the highest quality video, for many Walmart shoppers new to streaming movies online, that might not be a big deal.

Adding the Vudu service to its website also comes as the retailer is experimenting with new ways to get its users to try out the service. That includes the introduction of new digital movie cards that users can purchase from Walmart stores and use to redeem streaming movies later. The company has also been working with Hollywood studios to enable customers to buy a physical copy of a DVD and be able to stream it from Vudu on supported devices.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• TV Apps: Evolution from Novelty to Mainstream
• Connected Consumer Q1: The Over-the-Top vs. Pay TV Battle Heats Up
• Putting Big Data to Work: Opportunities for Enterprises

alt=''
border='0'
/>

GigaOM — Tech News, Analysis and Trends

In its letter to shareholders, (PDF) Netflix gave some expectations for how its pricing change and expansion into new markets will effect its growth over the coming quarters. The good news? It expects growth in international markets to ramp up in the second half. The bad news? Growth in the U.S. will largely be flat this quarter as it works through the impact of its pricing change.

Impact of the pricing change

About 75 percent of all new subscribers sign up for the streaming-only plan, which is likely one reason why Netflix felt comfortable changing its pricing plans to begin with. At the same time, the company acknowledged that many subscribers — especially those who used both streaming and DVD, were unhappy with the change.

“We hate making our subscribers upset with us, but we feel like we provide a fantastic service and we’re working hard to further improve the quality and range of our streaming content in Q4 and beyond,” it said in its note to shareholders.

Which plans will subscribers join?

Netflix therefore expects total net additions in the third quarter to be lower due to the pricing change, with revenues only growing slightly during the quarter. Those revenues will once again begin to ramp up in the fourth quarter, as the typically strong holiday season helps drive new net additions during the quarter. As a result, Netflix expects the fourth quarter could be its first-ever billion quarter.

Netflix expects to have about 25 million subscribers by the end of the third quarter, with approximately 12 million subscribing to both the DVD and the streaming service services at the higher .98 price plan. It expects 10 million subscribers to go streaming only and just 3 million to rely solely on DVDs.

Breaking out financials

As we expected, the fourth quarter will also finally bring a separation in the costs of operations and revenue benefit of both its DVD and streaming services in the domestic market. That will give financial analysts a better view into how each part of the business — domestic DVD, domestic streaming and international — are performing. The company is also adding the “contribution profit” metric to its financial results to help analysts understand how each segment is contributing to overall company growth.

Beyond Latin America

While Netflix still had few details to share over exactly when its Latin America expansion would happen, it did give some insight into its plans for a third international market. That expansion will happen in the first quarter and Netflix acknowledged that it could even mean launching in multiple markets. That fits with rumors that have it launching in the U.K. and Spain early next year. As a result, it’s also increasing its forecast for operating losses in its international business, which will grow from million in the second half to million and include pre-launch expenses for the “one or more countries” it may launch in in the first quarter of next year.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• A field guide to cloud computing: current trends, future opportunities
• Connected Consumer Q1: The Over-the-Top vs. Pay TV Battle Heats Up
• Infrastructure Q1: IaaS Comes Down to Earth; Big Data Takes Flight

alt=''
border='0'
/>

GigaOM — Tech News, Analysis and Trends