Parks Associates Blog

Tuesday, January 22, 2008

Hollywood: "All our remaining 2007 inventory has to go, go, go!"

Today's USA TODAY provides commentary on the rise of Web video, particularly premium material such as primetime television episodes. The embracing of Web delivery of primtetime television episodes has been a distinct success story to date in electronic delivery, certainly compared to the struggles that movie-based services have had. So far, the networks have reported no discernable cannibalization from their primetime audiences, and viewers are reacting well to the advertisements, showing a willingness to watch a few ads in exchange for free programming and indicating high retention rates for the ads and the brands. We recently recapped some of the major trends in broadband video in this blog.

Consumers are certainly flocking to the Web in greater numbers to consume video, as the USA TODAY article notes. Our recent Digital Media Habits II survey in Q3 2007 finds that 48% of broadband Internet users are watching Web video on at least a monthly basis. In a sign that these viewing experiences are going well beyond short ("snackable") clips, 20% indicate that they are downloading longer episodes (longer than ten minutes in length). The USA TODAY article indicates that consumers are flocking to the Web for video as a way to catch up on programming that they may have missed. We'd agree with that assessment. Despite the rise in popularity of the DVR, there are still only 27 million households with such a device today (that's about a quarter of U.S. households), and the DVR is only as capable as the person programming it to record. So, shows can fall through the crack, and the Web is offering them the opportunity to catch up and still allow the networks to do what they do best - attach advertising to them. I recently visited Hulu to catch up on a couple of episodes of My Name is Earl that I had missed.

The recent news from the technology industry indicates that we are only going to see expansion in the Web video space. Comcast Interactive Media, for example, recently launched Fancast.com, a site dedicated to helping consumers find and watch different types of video. The service also ties back into Comcast's core television business by allowing consumers (in later versions) to remotely manage their DVRs or set video-on-demand preferences. Also, The Wall Street Journal reported yesterday that HBO is testing a service called HBO Broadband that would let its subscribers watch the pay-cable network's shows on their computers - or download them to watch on the road.

The Web as a video delivery mechanism is only going to help today's service providers and content owners. Instead of being an "either-or" scenario, in which some argue that Web video leads to precipitice declines of television audiences, the near-term results indicate otherwise. And, it's just one more example of how the Web can provide a complement to today's existing television offerings by providing more programming at lower cost to suit the tastes of an obviously widely fragmented audience. Today's USA TODAY article indicates that the writer's strike, which has depleted much of the new programming available for the networks, will help to drive traffic to Web properties. I'd agree, but that's not necessarily a bad thing. We'd argue that today's television market is characterized by challenges not foreign to a car dealer - high inventory. If you consider the annual glut of new television programs that make their way to the television every fall, I don't care if you just quit your job, have five DVRs, and want to make a career of couch lounging and TV watching. The average viewer just doesn't have the energy to make a full commitment to that many television programs. As I tell my wife regularly, I just don't have the bandwidth to become emotionally invested beyond the 4-5 programs I may watch with regularity.

But, if the glut of new content slows to a trickle, what an opportunity for Hollywood to experiment on an even grander scale with their Web properties and electronic delivery! As I slowly catch up on those 4-5 programs that I usually watch, I'm finding an extra hour or two per week to look for other programs to fill the void. Take a show like Chuck or Pushing Daisies. They're not currently part of my emotional investment, but since the critics have responded favorably, I might give them a try on Hulu or via ABC.com. And, when the new season starts next fall (and if these shows survive the cut), they may be added to my DVR series manager.

It's certainly a time of both great opportunity and trepidation in this space. We continue to watch with interest.

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