Monday, December 04, 2006

The Coming Online Video "Invasion" -- CEO Reed Hastings of Netflix on 60 Minutes

CEO Reed Hastings of Netflix was featured last night on CBS' venerable "60 Minutes" series, in a piece purportedly about Netflix but, at its core, was much more about the coming "invasion" of online video distribution and the threat it presents to Netflix and others. It was a fascinating piece and one which portends vast changes in media consumption in the years ahead.

Online music distribution and consumption already is mainstream of course -- most notably via iTunes and the iPod (with several significant challengers in particular this holiday season). Legitimate online music distribution has become a force in its own right, with numbers growing significantly.

But, online video distribution and consumption is no longer a distant cousin, as is evident by sites such as Google's YouTube (GooTube). Although today online video is mostly focused on user-generated content primarily due to the significant file sizes associated with more mainstream motion pictures and television, does anyone really believe that massive LEGITIMATE (i.e., monetizable by content owners) distribution of all forms of video (including movies and television) will soon follow and will create big winners and losers?

Look at just some of the recent announcements in this regard of players who believe that this is not a question of "if", but rather "when." Just last week BitTorrent announced that it is opening its legitimate online "retail" store for movies, television and music in early 2007. And, in the 60 Minutes piece, Reed Hastings announced that Netflix will open its own digital distribution "hub" in January 2007. Wal-Mart also recently announced its own online initiative and, of course, Google, Apple and several others already distribute videos online (and will only expand significantly in this regard in 2007 -- look for Apple's increased focus here early in the new year when it is poised to roll out its new larger screen iPods). Microsoft certainly doesn't want to be left out of this party -- and, although the Zune service does not yet feature video content, you can bet it will in 2007.

This is great news for consumers and content providers, as I have mentioned previously. More choice, more flexibility, more recommendations for consumers; more ways to monetize video content and programming of all types (including back catalog titles) for content providers and those associated with them.

2007 will be an interesting year for video over the Internet of all kinds ...

The Continued March of Online Advertising ... and Online Video Ads

As reported by today's The Wall Street Journal, in an article titled "Ad-Sales Woes Likely to Continue" by Brian Steinberg, online advertising is poised to continue its white hot growth next year after a banner 2006. Media buyers Zenith Optimedia expects online advertising to grow 29% over this year's online ad spend (which itself represented a 25% jump from the previous year). And, interestingly, Zenith Optimedia expects next year's jump in growth to be "fueled by online video advertising." Steinberg comments that Merrill Lynch analysts also note that "the pace of online video advertising," in part, could impact its slightly more conservative predictions.

Online video ads are on the march -- and they are on the march at the expense of "traditional" video ads on television. With the rise of YouTube and other video sharing sites -- as well as the rise of so-called social networking sites -- video ads will rapidly grow and capture an ever increasing share of ad spending (and will continue to much more effective and targeted in their approach than "traditional" video ads). Consumers and businesses are increasingly comfortable with, and dependent upon, video over the Internet.

While online ads still represent only 5.8% of the total global ad spend, Zenith expects this number to rise to over 10% in the U.S. and several other major markets by 2009.

And, the march won't stop there ....

[SINCE I POSTED THIS STORY EARLIER TODAY, I RECEIVED A VERY INTERESTING ANALYSIS ON ADVERTISING TRENDS (INCLUDING ONLINE) FROM THE UBS GLOBAL EQUITY RESEARCH GROUP -- IT IS WORTH A READ AND THANKS TO ARYEH BOURKOFF OF UBS FOR MAKING IT AVAILABLE TO ME AND MY READERS; IF YOU WOULD LIKE ME TO SEND YOU A COPY ELECTRONICALLY, PLEASE DROP ME A LINE AT PCSATHY@SIGHTSPEED.COM]


(on a separate and wholly unrelated note, stay tuned for the launch of SightSpeed's NEW "Enhanced 5.0" and web site this coming Thursday, December 7. More on that later ...)

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