Sunday, 18 March 2012

Potential for growth of the online video market

Arguments for the Viability of a Market in Internet Video

                Given the problems outlined above, for online video to emerge as a viable business there must be powerful drivers for growth in the sector. It has been noted above that there is empirical evidence that services such as BBC iPlayer and Netflix are experiencing very impressive growth and the establishment of a wide variety of competing services indicate that businesses are seeking to exploit an improving market. Developments within the last few years do provide evidence that there are reasons why there should be a healthy increase in both provision and usage of a wide range of video content online. Some drivers are purely pragmatic – principally the need for major film studios to locate new revenue stream to replace declining DVD sales – but some are intrinsic to the nature of the medium itself.


                A number of online video sites specialise in documentary film. In the UK sites such as joiningthedocs, Insight News TV and Brightwide provide access to short and feature-length documentaries through a mixture of free, individual payment and subscription models. The sites share a common aim – providing access to filmmakers who may find difficulty in getting their work seen through traditional channels:
The films are made by a passionate, international group of socially committed people who have a mission to try and make sense of the world. They illuminate our times and help to support a fully-functioning society. But they are hard to see. Although some are shown by public service and public-minded TV broadcasters, they tend to be on specialist channels, in the corners of schedules and rarely repeated.
Many films play at international festivals, and on occasion are theatrically released. But how often have you read a great review of a film and then not had the chance to watch it? We know that audiences expect to find what they want, when they want, at a time and price that suits them. That’s where comes in.[1]

Sites such as these seek to exploit the geographical and social reach of the internet to bring niche content to audiences who may be too small, dispersed and difficult to market to for traditional theatrical, broadcast and packaged home media businesses. They provide the same function as film festivals in that they bring together viewers with a particular interest, but do so without the time and place limitations. However, this does mean that they miss out on the marketing push that generally accompanies a physical festival and – perhaps as a result – many of these partner with established film festivals to provide access to individual films and series screening at a festival, while gaining some much needed exposure. In this way joiningthedocs has screened films from the Sheffield Documentary Film Festival, whilst Mubi screens films in conjuntion with major film festivals such as Cannes.
                While such ventures are ultimately commercial, the stated aims of broadening the range of voices available to film viewers is recognised in a number of partnerships and grants which allow these businesses to operate in challenging commercial environments. Joiningthedocs, Mubi, Curzon and Brightwide are supported by the EU's MEDIA Programme – a funding body which operates across the full spectrum of the media industry in Europe to encourage and support the production and distribution of audio/visual arts. The Programme's "Video on Demand and Digital Cinema Distribution" stream
... [is] one of the ways in which the MEDIA 2007 programme ensures that the latest technologies and trends are incorporated into the business practices of beneficiaries of the programme. Digital technologies have made European audiovisual works more easily accessible outside their country of origin thanks to new ways of transporting audiovisual content. The competitiveness of the audiovisual content industry in Europe will strongly depend on the use of these new technologies at the distribution stage. [2]

The Programme has provided grants of up to 50% and £1 million to UK projects operating in the digital screening and distribution sphere, for European works deemed to have a social or artistic merit. This illustrates that governments are beginning to support online video businesses as a cost effective means of promoting local and independently-produced video works, which may otherwise struggle for distribution in an industry dominated by Hollywood narrative feature-length works.
                Despite this, it should be noted that mainstream online video businesses also carry a substantial amount of documentary content. Both Lovefilm and Blinkbox are mainstream, commercial online video businesses in the UK market, who provide access to dozens of documentary works from around the world. This reflects the recent resurgance of popularity in documentary film, primarily through the work of Morgan Spurlock, Nick Broomfield and Michael Moore, each of whose work is found in their catalogues. However, they also exhibit a series of low-budget, locally produced documentaries. Though it could be argued that some of these works are an example of cheap library content which is used to bulk up the numbers of titles offered, online video businesses are at least providing access to documentary filmmakers who may struggle to have works discovered on television or packaged media.

Niche Content

                Compared to the traditional retail market for packaged media, the internet presents multiple opportunities to target marketing to specific groups. This kind of direct marketing is not new – Odeon Entertainment is one several UK companies who rely on distribution of traditional mail order catalogues to appeal directly to the mature customer who may not use the internet or who would not normally shop in traditional DVD outlets such as HMV. In this way, Odeon can target the kind of customer to whom its catalogue – largely classic British film from the post-war years – directly appeals.
                Though the recent decline in the retail market for packaged media (and decline in retail in general) is a regrettable reduction in sales opportunity for film companies, internet marketing does provide opportunity to push titles who may have previously struggled on shop shelves. To walk into a store such as HMV on Oxford Street, the consumer may be overwhelmed by the range of titles on offer. Even in more modest high street outlets, the traditional alphabetical ordering of titles and shelf-stacking may mean that niche titles from small companies get lost in preference to free-standing displays and other premium marketing tools exploited by Hollywood studios. Small UK companies have had some success in this market by exploiting branding and packaging to stand out on the crowded shelves. Salvation is a small distributor who sells a small catalogue of obscure 60s and 70s European horror films. Nigel Wingrove, the company’s CEO and a former art director, used a single, stark black-and-white sleeve design for his titles – alongside striking photographic cover images – and instructed retailers to place them together on shelves. He also numbered the titles and included full catalogues in each VHS box to encourage purchasers to collect other titles[3]. This strategy worked brilliantly, allowing a small start-up distributor to become one of the independent stars of the late 90s sell through industry.
                The ability to develop a brand identity and to present it as close to the retail point as possible is one of the positive features of internet marketing. Salvation has carried its unique design through VHS and DVD box art into its website and associated online ventures. It has also provided imagery which has been used in special promotions by online DVD retailers such as Consumers are alerted to titles which may interest them through the use of recommendation algorithms used by online retailers. Using metadata extracted from titles which consumers have previously purchased – principally information such as genre, stars, directors, etc – retailers recommend titles within the webpage when consumers log on, or via email.        Film distributors also utilise the internet to market titles by engaging with message boards which are relevant to the type of content they supply. is a message board set up by a small group of UK-based distributors of niche art house and exploitation film features. By directly engaging with customers and – in some cases, even directly involving them in production – these companies encourage brand loyalty and build-in a support base which allows them to securely release titles major companies would view as a financial risk. Shameless Screen Entertainment – one of the companies operating under the Cult Labs banner – has released several “Fan edition” titles, which contain text and audio commentaries from fans that have expert knowledge of a film and its production history[4].

The Online Market for “Library Content”

                Titles from Salvation, Shameless and Arrow Video are released on physical formats such as DVD, but over the last few years almost all titles have been licensed for streaming or download on online video sites. In the UK, the most lucrative sources of online licensing revenue for film distributors have been Lovefilm and iTunes. Titles have also been licensed for other territories, with the US market proving most mature to date. A number of different licensing models have been used[5]:

  1. Single payment. A single fee is paid by the licensor for the rights to stream or serve downloads to viewers
  2. Single payment plus royalties. A single, upfront payment is made for online rights. In addition, should the content prove lucrative beyond an agreed figure (for example, number of views); a further payment – often a percentage of expected revenue – will be made.
  3. Royalty only. The licensor does not make any upfront payment for the online rights. Instead, payments are made dependent on performance.
  4. Royalty with minimum reserve fee. This is similar to 3, with the protection that the licensor will agree to make a minimum payment, regardless of the performance of the content.

Each licensing payment model can be applied to these further categories:

  1. Per-title license. The licensor deals with the distributor on a title-by-title basis, agreeing differing terms dependent on expected revenue, or differences in how a title will be made available (i.e. streaming or download, part of free promotion, etc.)
  2. Packaged. A number of titles from an individual distributor are sold as a group. This is the most common arrangement for niche, library and non-mainstream content.
  3. Exclusive. The content (single title or package) is licensed on an exclusive basis to the licensor. The distributor is prevented from licensing the content to another online video provider for the duration of the agreement.
  4. Non-exclusive. The inverse of 3 – the licensee retains the right to make deals with other online video providers.
  5. Time-limited. The content is licensed for a specific period – with rights expiring at the end. This is often used in conjunction with exclusive rights deals – giving a licensor the sole rights to provide the content for a defined period.
  6. Perpetual. Rights are granted to make video content available in perpetuity. This is rare and will usually only be granted under special circumstances – i.e. with low-value content, or for charitable use, etc.

So, we see a number of titles from the above companies available in different formats – streaming and download – on different online video sites, in cases where rights have been negotiated on a non-exclusive basis. Less well-established services attempt to negotiate royalty-only licensing deals with distributors, while – in most cases, at the current time – rights holders have been keen to gain some form of guaranteed payment up front. Distributors tend to view such royalty only deals as giving away product to what are, in effect, internet start-up companies. This does tend to lead to a situation where small internet video companies – such as Channel Films – concentrate, at least in the short term, on a small library of niche content. The alternative is to try and obtain funding to pay for a mainstream catalogue, something which is proving extremely difficult in the current economic climate. Competing with mainstream players for Hollywood film content requires “very deep pockets”[6].
                In some cases, an initial licensing offer from an online video business has been viewed as an unforeseen windfall for small distributors. Some distributors have been unaware of the opportunities presented by online video business and have not considered actively pursuing licensing deals. This may be so for a number of reasons – from a lack of understanding of current market trends or a concern over the potential costs of preparing content for online distribution. While many companies have already prepared digital masters of titles for DVD distribution, online distribution requires a number of different digital file formats be made available – a process which can be costly. A number of companies – including ContentFilm and The Associates – act as Film Aggregators in the online video sphere. This means that they operate as enablers between small, independent distributors and producers and major online businesses such as Lovefilm. Aggregators will generally offer a small company a one-off license fee for a package of titles for an agreed number of years. They will often take care of remasters the titles and formatting them for digital distribution. They will then package these titles in a way which is attractive for online video retailers.           Companies such as ContentFilm have developed considerable experience in the market for online feature-length video and will be able to maximise the value inherent in independently-produced titles.

Distribution of Independent and Low-Budget Film

                Online video has matured to the point where it represents not just a platform for redistributing and exhibiting features made for theatrical and DVD release, but is a viable primary release target for film content. In addition to working in the film aggregation sphere, ContentFilm develops original film and television productions for exhibition on the internet. The company's Fireworks International division produces a number of titles in dual-format for exhibition either as a series of short-form episodes (or webisodes, as they are sometimes referred to) or as feature-length. It has produced content which has been shown on websites run by major US television networks and by The Horror Channel cable channel in the UK. Titles are often subsequently issued on DVD, but they are targeted and tailored for the online market. Companies like this are developing a new market for low-budget, digital film content which will allow a new breed of filmmakers a viable commercial opportunity to make work which will be sold and seen. While film school graduates have been torn between the extremes of non-commercial short films for exhibition at festivals and non-narrative work in advertising, short-form content production for the internet marketplace presents a real opportunity to develop new filmmaking voices from the current generation.
                In addition to the opportunities presented by such companies as ContentFilm, the internet and digital filmmaking in general have allowed costs in all areas of film production to be lowered. This enables independent film makers and producers to take advantage of low barriers to entry to get low-budget features made and seen. A large number of websites offer support services to independent film makers, allowing them to recruit production staff, obtain equipment and identify locations by taking advantage of like-minded individuals across the country. The wider fan network across forums and film sites allows film makers to build word of mouth and maintain interest in forthcoming productions – whether they are being made available for free streaming, release on self-produced DVD or appearing at a film festival. The immediacy of feedback from promotional tools such as Youtube trailers also allows filmmakers to gauge potential audience reaction before an expensive and irreversible final release takes place. The internet has also broadened opportunity for filmmakers to seek finance, with a number of crowd-sourcing funding services emerging.

Social Media

                One of the primary internet resources for marketing is Facebook and films of all budgets are increasingly exploiting the opportunities provided by social networking services to generate exposure for forthcoming productions. Most productions will set up a Facebook page (in addition to a generic web page) before filming takes place, often before a film has even secured its budget. This page can then be used a central point to publish information about the film, to interested users who have “liked” the page – and in turn contributed to promoting the film, as all “likes” are displayed on user's own Facebook pages. The pages can be used to issue calls for funding, equipment, locations and extras. They can be used to publish promotional videos and images. Interested users can post messages of support or critiques of the film. The pages can be linked with other pages to form networks of support and mutual promotion for other films and filmmakers.
                Social media tools are also becoming increasingly embedded in online video viewing platforms. These allow viewers to easily tag which videos they are watching, allowing them to comment on films as they watch them and participate in a global conversation – in real-time – with others viewing the same content. Such activities, while fun and potentially rewarding for the user, have real value for online video businesses as it allows them to build a profile of their viewers – their likes and dislikes, the way that the watch content (for example, whether viewing is regularly interrupted, whether content is watched in groups) , etc. Social media services such as Facebook and Twitter, who are collating such data, are becoming valuable resources for business. They allow information about a user to be utilised to more carefully target advertising and other service offerings[7]. Though there are real concerns around issues of data protection and invasion of privacy, the opportunities to more accurately market goods and services to consumers should be a positive thing for viewers of online video, who may be forced to view a number of adverts pre- and during some ad-supported film content. For companies such as Netflix, Lovefilm and Blinkbox, convincing advertisers of the efficiency of their advertising model can only increase revenue, and allow them to secure better content and improve service levels for viewers. In an ideal world, such activity can only benefit all stakeholders in online video.

Connected Devices

                As was outlined above, one of the main impediments to the widespread adoption of online video is the perceived and real usability issues. However, as households have gained access to increased broadband speeds, a new breed of devices have come to market which seek to bring internet services – and online video in particular – closer to the family screen. These devices – connected TV, bluray players, media players and hybrid set-top boxes – seek to shift the public perception of online video from something which is free, low-quality and short-form, to that which is of value, pleasing to the eye and feature-length. Though a number of these devices provide access to Youtube, the kinds of experiences they aspire to offer are closer to pay-per-view cable, DVD or a theatrical screening. Connected Television – sets which can be plugged into a home internet router to access online services – are seen by many as the killer application for online video. However, some have pointed out that “there's precious little research that proves that connected TV buyers are actually using those sets to access significant amounts of content online.”[8] Despite this, all major television manufacturers are releasing connected sets[9]. In short, the audio-visual electronics industry is invested in making online video something worth paying for.
                The clearest example of this phenomenon is the development of a number of televisions and bluray players in the US with remote controls containing a “Netflix” button. It seems incredible that a single company could gain such levels of free exposure and access from hardware manufacturers without entering into an expensive commercial agreement, but this initiative has been led by the electronics companies. In adding the Netflix button they are acknowledging, not just the considerable success that the company has had in building a large subscriber base and the attractiveness of its offering, but the importance of online video to TV viewing in the future. In much the same way that manufacturers built hybrids TV/VHS remotes in the past, these companies are modifying devices to reflect an emerging reality, that their customers will be spending a considerable portion of their time with such devices online. The majority of all new televisions has an Ethernet connection and contains electronics capable of displaying a simple series of menus allowing remote control access to online services. These services extend from simple applications displaying weather and local news to social media applications such as Twitter, but a large proportion are front-ends for the growing number of online video services.
                It’s worth examining whether such video offerings simply allow the viewer to cancel their cable subscription (so-called “cable-cutting”, a nightmare for the pay TV industry), or whether the nature of the medium offers something more for viewers, distributors and filmmakers. Connected devices do have the potential to offer a greater range of content than traditional cable and satellite offerings. To begin with, as the devices are built by consumer electronics companies, they operate as portals to an online marketplace, rather than the box-office for a media company's film and television offering. Though a company such as Sky obviously has to share revenue with rights holders, it controls every aspect of the delivery of film content to viewers and collects all revenue directly at source (through subscription and on demand payments). Companies such as Samsung, who offer a multitude of video services through its Smart TV series of connected televisions, do not actually have any involvement in the provisioning or billing for film content. When a customer pays for a film from the Acetrax service, he or she has their credit card debiting by Acetrax, who then stream the film to the Smart TV through the open internet. The device simply enables the transaction; it does not mediate it in any way. In many respects, despite the sofa-friendly interface, the model of video provisioning used by connected media devices for the lounge, is the same as that for services used on personal computers. Video services operating in this way are said to be “Over-the-top” or OTT – they reach over or bypass the networks and services which traditional broadcasters have developed to supply media content. 

Catch-up Services

                One of the major factors which has normalised the viewing of online video in the UK has been so-called “catch-up” video services from traditional broadcasters. Each of the UK’s terrestrial broadcasters – the BBC, ITV, Channel 4 and Channel 5 – maintains web- and application- based services allowing viewers to watch content recently broadcast, including feature films. The first broadcaster to launch such a service was the BBC, who has used their public service mandate to justify substantial investment in the service. Initially only available on personal computers, the service proved an immediate hit with viewers – allowing them to download a range of programmes broadcast on the corporation’s channels within the previous seven days. The BBC has heavily promoted the service on its channels, with most adverts for upcoming programmes and series also stating that they are “also available on BBC iPlayer”. The service has been continuously enhanced since release and now offers an incredibly rich range of programmes and has a very useable interface. The service has also been available on a plethora of connected devices – everything from tablet computers, mobile phones, bluray players, set-top boxes to connected TVs are now to be found with the iPlayer app either pre-installed or readily available from the device’s relevant application marketplace. The BBC has agreed to only implement the standard iPlayer across each device, to ensure that their public-service brief is not impacted by any perception of providing an enhanced service to any commercial device.
                Initially operating as a download-only service for PC, iPlayer is now primarily a streaming service. This works, in conjunction with a user-interface which mimics a standard TV Electronic Programme Guide (EPG), to bring the viewing of online video into line with the user experience of broadcast television. The fact that the content is being streamed from remote servers, over the open internet, is abstracted from the user by the interface. [MENTION IPLAYER DESKTOP PVR]. Services from the other broadcasters have mimicked iPlayer (ITV’s service is even called ITV Player and Sky’s catch-up service was initially called Sky Player), arranging the user interface along the same EPG-like lines. Manufacturers of connected TVs and hybrid set-top boxes (cable, satellite or digital terrestrial receivers with internet connections) have incorporated catch-up services into the standard EPG, allowing users to move back through the schedule and view identify which programmes they may have missed which are available on catch-up services. Advanced search functionality has also been developed – with Virgin Media's TiVo system “viewers can search across TV listings, seven-day catch-up, on-demand, favourite actors, future shows and online content all with one simple search.”[10] Such functionality obviates the need for PVR/DVR technology as viewers no longer need to record programmes – such content is stored by broadcasters for playback over connected devices in the home. Though the range of film content carried on such services was initially limited – films, as with other content which is produced by external companies, must be separately licensed for online delivery – services such as the iPlayer now carry up to 10 films from its recent schedule for playback at any time. Broadcasters are, in this way, maintaining their own on-demand film library.

Cloud Services

                Another technological development which is driving the adoption of online video is cloud storage. The cloud refers to an abstracted collection of remote servers which store and serve physical files to client devices, across the internet. A number of services have been recently established which allow users to store a multitude of different file types on remote storage, from which it can be accessed from a different machine, potentially in a different location. This kind of technology is very useful in business where it can enable groups of geographically-dispersed employees to work concurrently on single pieces of work.
In the media space this kind of technology is being leveraged to enable the delivery of paid-for content to multiple client devices in the home and on the move.
                Film studios and other media organisations have been waking up to the fact that consumers are averse to DRM - in particular, they hate the way that it restricts the portability of legally-purchased content. Persuading consumers that they should shun piracy has been made very difficult by the sorts of restrictions which mean that a film, ordered and paid for on one device, is restricted to playback on that device alone, or can only be moved a fixed amount of times under extremely prescriptive circumstances. In a shared or family home, where use of a TV and STB or bluray player in the lounge might be restricted to certain times of the day, content purchased on these machines should be playable on any device in any room in the home. This has not been the case with traditional on demand entertainment platforms, where a film is requested and played-back on a single host device (a set-top box), usually connected to a single display.
                Expanding this concept, it would be an even more enticing proposition if the content was viewable outside the home - so that, for example, a children's film purchased on a net TV could be taken to a relative’s home. Where content is purchased for rental, there will still be time restrictions on viewing. Where the cloud storage and delivery proposition is more compelling is in cases of outright purchase. Content owners have struggled to convince consumers on outright purchase of digital content - especially film. Rental of such content currently outweighs purchase by a margin of 4-to-1. The issues holding back purchase have included these very issues - the restrictions of DRM, the intangibility of the product itself, poor perception of price value compared to physical media, concerns over storage. It is these issues which cloud storage and delivery is designed to resolve. Services which are emerging which utilise cloud storage and delivery of video media include "TV Everywhere", "Ultra Violet" and "Studio All Access" - branded solutions offered by Comcast, the Digital Entertainment Content Ecosystem and Disney, respectively. Each of these offer the kind of remote hosting and access described above.
                Comcast's solution allows cable TV subscribers the ability to access programs from their package online through a web portal, with plans to spread access to other devices, allowing access throughout the home and beyond. Ultraviolet offers a solution for purchased content from a number of sources - from VoD services to packaged DVDs purchased at retail. Such content comes with a code which allows the content to be accessed remotely from a number of registered devices. Content purchased outright is stored remotely in a kind of "digital locker" or "shelf" where the user can build his own library of content, freeing up shelf space at home. This is also the kind of service being developed by a number of traditional VoD and PPV download services. Acetrax, who run movie portals on a number of connected TVs and bluray players in the UK and Europe, allow users to register their home devices and access the same content on any of them. DivX also use this model - allowing downloaded content to be played via an access code entered into any DivX registered device. The concern has to be that the number of services being offered have limited or no interoperability - that your DivX-enabled DVD player may not be Ultra Violet capable and vice versa. It seems that content owners are still reluctant to embrace a true, open model - although Ultra Violet has a large number of members and the potential to succeed as a model for the controlled, managed method of access for hosted video content in the multi-screen home.
                In any case, such developments are in their early stages and are proceeding with an evolving sense of what television – or home viewing in general – actually is:
… this reshaping involves not only our relationship with the TV set as a standalone device, but also the ways in which it can interact with other devices and various content sources to engage us in new and innovative ways, and the reality that a TV experience need no longer actually involve the TV set, or may include the TV set in combination with other devices.[11]

The primacy of the television in home viewing is being challenged, but still maintains for many households a central role. For families especially, the main set in the family room remains important in the function it plays in enabling the family to experience entertainment together in one place. Despite the spread of devices and services which enable us to experience content wherever we are, content providers remain as focused on ensuring that there are ways they can gain access to the primary family screen.

[3]    Information from interview with Nigel Wingrove.
[4]    The full Shamless collection on Cult Labs website -
[5]    Details of licensing deals for online content taken from interviews with Alex Agran, Tom Swanston, Nigel Wingrove and Jonathan Ford.
[6]    "Will streaming Tv online lead to the death of the big media players", Jemima Kiss, The Guardian, 18 April 2011.
[7]    "Private Facebook data becomes big business", Tony Bradley, PC World, 30 Jul 2010.
[8]    "The Television will not be revolutionised", Eric Schumacher-Rasmussen in Streaming Media Magazine European Edition, Autumn 2011, p. 8
[9]    "More customers than not are connecting their television to their internet connection." Interview with Edd Uzzell.
[10]  "Power to the People", Graham Pomphrey, in Digital TV Europe, September/October 2011, p.17
[11]  "IPTV – the future", Yun Chao Hu in Connect-World Europe, 2001, p. 13

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