Disney's CEO, YouTube's Founder, and Wired's Editor Debate the Future of Monetizing Content

"The Digital Chiefs," a lunch panel earlier this week organized by the Hollywood Radio & Television Society, was one of the best conversations about digital media I've been to in a long while.

That was primarily due to the organizer's choice of a moderator: Disney chief executive Bob Iger. Having Iger asking the questions offered a really interesting window into what's on the mind of at least one major media CEO.

And that was mainly how Disney and other media companies will earn money from their content.

Iger's panelists were Wired editor Chris Anderson, YouTube co-founder Chad Hurley, Hulu CEO Jason Kilar, and Jonathan Miller, chief digital officer at News Corp.

I'm posting some audio (a little quiet, but listenable) below, along with a few rough notes from the discussion.

My notes:

Iger opened by mentioning that TV took thirteen years to reach 50 million people. It took Facebook nine months to get 100 million members. 400 million videos were streamed on Hulu last month. YouTube offers more than 100 million videos (there are 526,000 search results for "Disney.")

Chris Anderson noted that iTunes succeeds in getting people to pay for content by selling convenience. While you can get music for free, the iTunes version saves you time, and ensures you're getting something of good quality.

Iger said he was "mildly encouraged by that -- not giddy, but encouraged."

Chad Hurley said YouTube is introducing more ad formats to help the site's partners earn money, so they can continue to create high-quality content. Iger wanted to know if there will be ad messages online that can sell a product as well as a 30-second spot on television. Hurley didn't have a forceful answer, noting that online there are multiple formats, from text ads, graphical ads, and 5, 10, and 15-second video ads. What's important, though, is that these digital ads can be targeted and relevant, unlike typical broadcast ads.

Iger said that monetizing social networks remains a big question mark. He asked Jonathan Miller whether MySpace fell prey to a "next-best-thing" phenomenon (being supplanted by Facebook), or just didn't stay on top of its game. Miller conceded that MySpace forgot that there is a continual need for reinvention.

Picking up the theme of targeting, Miller suggested that advertisers will pay more for online ads as behavioral targeting increases (targeting ads based on what you do online and interests you express), though he admitted that online ads may never achieve the same prices that network television commands.

Miller touched on the idea that the costs of content creation may need to go down in this new world, if advertisers aren't paying the prices they once did. (That's a point we discuss pretty frequently here at CinemaTech.)

Jason Kilar said that Hulu has been finding that people remember brands in the ads on its site better than they do on TV, even when it's the very same ad placed in the very same program. People are simply more engaged online, he suggested. They've made a conscious choice to watch that piece of content. By virtue of placing fewer ads in a show on Hulu (relative to the same half-hour on television), Kilar said, they can charge more for them.

Kilar also said that when Hulu's team designed the site, they didn't want it to look like "Tokyo at night," with lots of features and buttons and teasers. They very deliberately focused visitors' attention on the shows and the ads.

Miller pointed out that on Hulu, 70 percent of the ad revenue goes to the content creators. Iger followed up by saying that 70 percent of much fewer ad dollars than television generates may not be enough money for media companies to continue to invest in high-quality content.

Talking about paid rentals and downloads, Hurley said that YouTube will begin experimenting with both with its content partners.

Diving into some of the topics covered in his book Free, Chris Anderson suggested that for digital products, free samples are becoming a replacement for advertising. "The products sell themselves," he said.

Jason Kilar said that the content that will do best in this new world is stuff that is unique, totally original, and can't be substituted with anything else. He offered NBC's "30 Rock" as an example.

Toward the end, Iger asked his panelists what new things they're following. Anderson said he was watching videogames, iPhone apps, and "more granular social networks" like Ning that bring together groups with narrow interests. Kilar said he was following changing consumer tastes using search.twitter.com, mostly related to Hulu. He said that Hulu makes changes to its site based on what people are saying on Twitter.

I left a bit before the panel was over to head to a meeting, but here's more coverage of the panel from the LA Times' "Company Town" blog and from Variety. (Seems like I didn't miss much...)

And here's a 30-minute audio segment from the panel (just click play below, or download the MP3 file.) Bob Iger is the first and last to speak in this clip.



Photo of Chad Hurley and Bob Iger, above, courtesy of Getty Images.

Thursday Goodies: Porn as a leading indicator, Netflix prize, Distribution roulette podcast, and more...

- It's always fun to debate whether porn is a "leading indicator" for the way other media will go.... and this NY Times story will get you thinking. Given that much of the porn industry is abandoning narrative for short, "chunkified" content, is that the wave of the future? From the piece:

Vivid, one of the most prominent pornography studios, makes 60 films a year. Three years ago, almost all of them were feature-length films with story lines. Today, more than half are a series of sex scenes, loosely connected by some thread — “vignettes” in the industry vernacular — that can be presented separately online. Other major studios are making similar shifts.

- Seems like a team of programmers has managed to improve Netflix's movie recommendation algorithm by more than 10 percent, potentially winning the $1 million Netflix prize.

- CineVegas just posted this great distribution podcast, where a panel of experts talk about how they'd handle distribution of several different kinds of indie films, like an "edgy, sexy film," a "subculture doc," or a "quirky character doc." (You can read IndieWire's summary of the panel, too.)

- Here's an interesting read on why Hulu succeeded in attracting an audience, while other sites like Veoh and Joost didn't. I'd note that Hulu still isn't a notable financial success, given the cost to produce all that network programming (nor is YouTube.)

- The LA Times is reporting from the annual Allen & Co. Sun Valley summer camp for media moguls, where at least some of the talk is about monetizing content.

- I did an interview to promote Fans, Friends & Followers with the music site zed equals zee, Their first question:

Q. So, one of the themes that I took from the book is the ‘let a thousand flowers bloom’ approach – that there is a diversity of ways to use the Internet to share your creative efforts. Anything that you think is an absolute necessity? Anything that you would recommend against?

A. One thing that’s a necessity: carving out the time and the energy to spend cultivating your fan base, and communicating with fans. There should definitely be a dedicated person in any band who’s responsible for audience-building (that’s a term I like better than “marketing”), or maybe someone you know who isn’t in the band but really understands the Web and social media well. I think in the 20th century, your label took care of all that stuff. In the 21st century, it’s your responsibility. One thing I recommend against is building a super-fancy, expensive, Flash-heavy Web site that no one can update except for the original designer. I can’t tell you how many bands do that — and the result is that fans visit your Web site once or twice, but never come back because it never changes. (And people assume that because your last gig listed is in 2007 that you must have broken up!) Even if you have a bare-bones MySpace page or blog, it’s better to have something you can continually add content to than something better-looking that stays static.

Disney Joins Hulu: What Does It Mean?

I don't think the news this week that Disney will contribute content to Hulu is any sort of death knell for iTunes.

Today, Hulu is there for viewing content when you've got a reliable Net connection (at home or in the dorm, for instance). But iTunes is there when you want to download content and watch it later on your laptop or iPod or iPhone -- usually when you're in motion.

One thing that Apple has succeeded at -- wildly -- is getting you to create an account, and hand over your credit card info. That enables you to make impulse buys of movies, apps, music, and TV shows. Even if Hulu had a long term plan to start selling downloads one day, in addition to streaming content with ads, getting viewers to cough up payment info is no small feat.

But Disney's link-up with Hulu signifies that clearly, media companies don't want to hand over control of their customers entirely to Apple.

Here's more analysis of the news, from the Wall Street Journal.

Hulu Passes Yahoo, Takes Aim at MySpace

Interesting change: Hulu is now the third-place video destination, surpassing Yahoo. YouTube and MySpace are #1 and #2. (But there's a huge gap between #1 and #2.)

According to the story:

Viewers watched 5.9 billion videos on YouTube and other Google Inc. sites [in March 2009], and News Corp.'s fully owned sites such as MySpace.com provided 437 million viewings in second place.

Hulu served up 380 million videos in March, and Yahoo 335 million.

Assuming Hulu's growth continues, and MySpace keeps fading, Hulu will soon be in the #2 spot.

New Umbrella Site for PBS Video

Check out PBS' new video portal, launched today.

Funny how Hulu has suddenly become the gold-standard for video sites. My initial impressions are that PBS' site is not as fluid to navigate... that the videos aren't as well-described in text as Hulu... and that it isn't as clip-oriented. You have to dive in to watching a half-hour or hour-long program.

But according to a post on the NY Times' Bits blog, it will soon have a participatory element that sounds pretty cool:

The site is built on new technology that will also allow users to upload video, make comments and otherwise interact with the site and one another. For example, in conjunction with the Ken Burns documentary series “The National Parks,” which will be introduced this fall, users will be invited to upload videos of parks.

What do you think?

Will YouTube Ever Be a Place for Long-Form Content?

There's news this week that YouTube and Sony are negotiating to bring more full-length films to YouTube. From CNET's coverage:

Founded in 2005, YouTube made a name for itself by showcasing amateur-made snippets as well as hosting scores of illegally posted clips from the best TV shows and films. YouTube has done much to rid the site of pirated content, but the flip side is that most of the hot shows and films that generated big viewership are gone. At the same time, a host of Web video services are offering full-length films and TV episodes online. To compete, YouTube is trying to get access to the same premium content but has so far only acquired a handful of films from the archives of Metro-Goldwyn-Mayer.

What do you think... will long-form viewing ever be part of the YouTube experience, or is this something that Hulu and Netflix and others will eventually own?

Talking 'X-Men' and Hulu, on the new show TechVi

Randall Bennett has a new online show (still in "soft launch mode") called TechVi. I joined him today, via Skype, to talk about some of today's news on the digital entertainment front.

What was amazing to me was that he had the show up, with some decent post-production, about a half-hour after we shot it. Cool!

Thursday Reading: 'Wolverine' piracy, Hulu, Star Salaries, ShoWest, and More

- An unfinished version of 'X Men Origins: Wolverine' seems to be available online, a month before its scheduled release. Brian Stelter of the New York Times writes:

Eric Garland, the chief executive of the file-sharing monitoring firm BigChampagne, called the widespread downloading of “Wolverine” a “one-of-a-kind case.” “We’ve never seen a high-profile film — a film of this budget, a tentpole movie with this box office potential — leak in any form this early,” he said.

The studio, a unit of the News Corporation, spent the day demanding that copies of the film be removed from the largely anonymous swath of Web sites that swap movie files. But the copies propagated at such a swift rate that the digital cops could not keep up. BigChampagne estimated the digital film copy had been downloaded in the low hundreds of thousands of times in its first 24 hours on the Internet.

The studio said the F.B.I. and the Motion Picture Association of America were both investigating the film’s premature distribution.

- Interesting piece in BusinessWeek about Hulu's success at attracting viewers... but its problems selling advertising.

- In the recession, Hollywood studios are changing the way they pay big stars, according to The Wall Street Journal. Lauren Schuker writes:

For years, top movie stars often landed deals paying them a percentage -- sometimes as much as 20% -- of a studio's take of box-office revenues from the first dollar the movie makes, even if it turned out to be a flop that cost the studio millions. As a result, the biggest celebrities broke the $20 million mark. Eddie Murphy got that kind of payday for the flop "Meet Dave," which cost Twentieth Century Fox about $70 million and took in only $11.8 million at the domestic box office.

These "first-dollar gross" deals are hitting the cutting-room floor as studios slash the number of movies they're making. For two new projects, Viacom Inc.'s Paramount Pictures has done away with such deals, even though it has landed top talent. In "Dinner for Schmucks," with Steve Carell, and "Morning Glory," starring Harrison Ford, the actors accepted "back-end" deals, in which they get a portion of the gross, but only after the studio and its financing partners have recouped their costs. The studio also cut a back-end deal with "Dinner" director Jay Roach.

- The NY Times reports that the annual ShoWest convention in Vegas, where studios present their forthcoming product to theater-owners, is smaller and lower-key than usual this year.

Variety has its ShoWest coverage here.

SpeedCine: Search Engine for Legal Movies Online

I really like the idea behind SpeedCine, which aims to catalogue all of the movies available legally online in streaming, downloadable, or rentable form. (Anne Thompson blogged about it yesterday.)

But when I started punching in the names of some movies that were listed on sites like Hulu or iTunes, and got a "no matches found" message, I e-mailed founder Reid Rosefelt to see what was up. Were they adding movie titles by hand, or finding all the movies automatically on various movie sites, the way Google finds Web pages for its search engine?

Rosefelt replied in an e-mail:

It’s a demo and yes, the data was put in by hand.

...[But] the real data input will be done one company at a time and will be automated. They’ll give us their data and it will flow in. The technology for transferring lots of data is easy; the only issue is getting the websites to agree. And I’ll be having meetings over the coming months to accomplish exactly that. When I’m convinced that enough data is in it, then the word DEMO goes down and BETA will go up.

I'm not sure you actually need permission from Hulu, say, to have your software go to this page and create links to all of the features the site currently offers. That's the sort of "spidering" that Google and many other search engines do every day.

But media sites can be strangely cranky about people creating more links and access to their content.

it'll be interesting to see how Rosefelt's plan plays out. A truly comprehensive index of all the movies available on various sites would be a great thing.

Some Big Questions for 2009

I wanted to post a few rough notes from Sunday's Sundance panel on distribution, focusing mainly on some of the challenges that filmmakers and distributors and exhibitors are grappling with in 2009. Your ideas and comments are certainly welcome, below.

- Should festivals be used as a launching pad for new films, making them available immediately afterward? How can filmmakers prepare not just their finished film in time for screening at the festival, but make sure that DVDs and digital downloads/rentals and marketing campaigns are ready to go, too?

- If indie filmmakers experiment with release windows, making films available on DVD and digitally while they are still playing in theaters, will they be frozen out by exhibitors? Will that sort of experimentation -- trying to address by piracy by making films available when audiences want to see them, in whatever format -- kill the art house circuit? Is there a way to ensure that both filmmakers and exhibitors benefit, perhaps by sharing profits?

- If the influence and impact of newspaper reviews is on the wane, in part because of the decline in the number of movie critics on staff at papers around the country, what will supplant that? Will new voices emerge to help viewers sort through the thousands of indie movies that are released every year, to find the gems? Will it be a handful of new influencers, or a thousand bloggers covering a thousand niches? Will "established media" like the New York Times ever start reviewing movies that go directly to DVD or the Internet, without the requisite theatrical run in Manhattan? ("Princess of Nebraska," by Wayne Wang, represented a tentative toe-dip-in-the-water by the paper last year; that film went straight to YouTube.)

- Blogs and Web sites and social networks seem like they work well when a filmmaker is trying to sell DVDs or downloads, or drive online views of a film on a site like SnagFilms or Hulu. But can online work well when it comes to putting butts in seats at a movie theater? That was once the role that newspaper ads and reviews played... but the sense is that we need some new strategies for getting ticket-buyers out of the house and into theaters.

Tinch on 2009

Roger Erik Tinch of CineVegas has a great post today on 'Distribution & Consumption in 2009.'

Here's a salient tidbit:

Short form content is online king

Duh, right? Then why are companies still trying to push for feature film distribution through widgets and the like? Who wants to watch a two hour movie on a 2-inch by 2-inch size player? Go to what’s this year’s success story, Hulu, and see what the top 20 viewed videos are. Most are between 10 - 20 minutes with a smattering of 44 minute episodes. The first feature film doesn’t show up until #27 with the THE FIFTH ELEMENT. The fact that a big Hollywood film on a popular video site that’s being shown for free can’t even break into the top 20 reveals a lot about our viewing habits.

How Will the Recession Impact Hollywood?

The LA Times has a great piece exploring the ways that an economic downturn will affect television and movies. Essentially, consumers seem to be shifting consumption online (where they often find the same content for free, on sites like Hulu and YouTube, that they'd have to pay for via cable or Netflix). For media companies, profits are much smaller (at least today) from those online delivery methods. That means that media companies are earning digital dimes instead of analog dollars (as many folks, including NBC's Jeff Zucker, have put it.)

From Dawn Chmielewski's piece:

The endless stream of free content, through legitimate services as well as pirate sites, appears to be shifting viewing habits more quickly than industry executives had anticipated -- or intended. That creates a dilemma for media companies because the Internet generates substantially lower revenue than established business models -- 30-second TV commercials and home video sales -- which have long supported the costly economics of TV shows and movies. That's not Hollywood's only problem.

When Midori Connolly's family business in San Diego, which supplies audiovisual equipment for conferences, began to feel the economic slowdown this summer, she and her husband trimmed expenses.

The monthly subscription to DVDs-via-mail service Netflix was the first to go. Now they rent movies for $1 a day from a kiosk at the supermarket. Next they saved the $10 to download George Strait's new "Troubadour" album on iTunes. Instead, they bought two tracks for 99 cents each. And they didn't rush out to spend $17 for the DVD of "Sex and the City." They checked out a free copy from the library.

"We started finding alternatives that we didn't have to spend money on," said the 31-year-old mother of two. "I don't feel that we've lost any quality."

YouTube Hearts TiVo ... Video Overload on the Net ... ShoWest Report ... And More

- YouTube and TiVo have gotten together to deliver YouTube videos to about 800,000 TiVo users who have the right box and the necessary broadband connection. TiVo has never shared any stats on how many of their users are getting content from the Internet this way (and likely won't, anytime soon). TiVo did an earlier deal with Brightcove; the new YouTube link won't be active until later this year, says the Wall Street Journal.

- Could video kill the Internet star? Here's a NY Times piece worth reading. Steve Lohr writes:

Moving images, far more than words or sounds, are hefty rivers of digital bits as they traverse the Internet’s pipes and gateways, requiring, in industry parlance, more bandwidth. Last year, by one estimate, the video site YouTube, owned by Google, consumed as much bandwidth as the entire Internet did in 2000.

- The LA Times offers a good overview piece of what has been happening at the ShoWest convention in Vegas this week... mostly excitement about digital 3D. Jeffrey Katzenberg was there plugging 'Monsters vs. Aliens,' the spring 20009 DreamWorks Animation release, and its first in 3D. Katzenberg says the extra cost is about $15 million; he hopes there will be 3000 to 5000 screens capable of showing 3D by the time it is released.

- Imax and Texas Instruments have apparently done a deal to use TI's DLP (digital light processing) chips in a new kind of projection system being designed by Imax. (It's not clear yet who will actually make the projectors.) The Hollywood Reporter writes:

Imax...has since its inception 40 years ago used 70mm film to distribute and exhibit movies. By converting to digital, it will dramatically change its business model as digital distribution removes print costs -- about $22,000 for a 2-D print and $45,000 for a 3-D print -- from the equation.

Imax's move to TI is a blow to Sony because Imax had been developing a digital system that employed two Sony 4K projectors and proprietary technology.

- I've been having a good time using Hulu in the beta test period. It helped introduce me to 'Arrested Development,' and I actually didn't mind going out to rent the DVDs of episodes that weren't available on the Hulu site. I also deepened my knowledge (and enjoyment) of '30 Rock,' a show I catch on TV only occasionally. I didn't mind the commercials; the one thing that occasionally bugged me was the fact that you can't store video on your laptop for later viewing (IE, put a show on pause, wait for the whole thing to stream, and then start playing). That makes Hulu tough to use with spotty Internet connections, or if you want to store a show while you're sitting in the airport and then watch it on the plane. (I tried.)

But on the whole, Hulu does a lot right... including allowing you to embed the videos anywhere.

Dan Carew, a blogger in Hong Kong, has a very different opinion, since users outside the US are barred from Hulu (likely because of NBC and Fox's distribution contracts in foreign territories.)

Here's the NY Times story on Hulu's launch.

Today is 'Say Something Nice About Hulu Day'

Though Hulu isn't yet open to the public, there are some easy ways to poke around the site (reported by NewTeeVee.)

Can I just say, I like the interface?

Here's an episode of 'The A Team' for your viewing pleasure...

U2's 3-D Concert Film Has a Release Date ... Hulu, Almost

- I'm looking forward to the release of U2's 3-D concert movie, just set for late January, according to Variety. National Geographic is handling the distribution. No word yet on the number of screens.

- This Wall Street Journal piece makes it sound like Hulu.com, the NBC/Fox joint venture, just launched. But the site is very obviously still in a limited beta. Rebecca Dana and Kevin Delaney write:

Late Friday, Hulu closed deals with Sony Corp.'s Sony Pictures Television and Metro-Goldwyn-Mayer Studios Inc. to distribute some of their content as well. The venture's flagship site, Hulu, will initially be open only to users who request an early glimpse of the site.

Some of these shows had been available already on network Web sites or via video-download services. Neither of NBC and Fox's two main network rivals, CBS Corp.'s CBS and Walt Disney Co.'s ABC, has gone as far in making their content available online. That could change, however, as CBS has held talks with Hulu about providing the network's TV shows to the venture, according to people familiar with the negotiations.

Monday News: Internet Video, High-Def Formats, Hulu Lawsuit, and More

The NY Times has a bunch of Internet video stories today...

- Warner Bros. is creating original Web video series, and hopes to sell advertising around them.

- A profile of the attorney who cut the lucrative new 'South Park' deal

- The self-publishing site Lulu.com is suing Hulu, the new Web video site created by News Corp. and NBC, because its name is too similar.

The LA Times says there's no end in sight to the HD DVD/Blu-ray format war, which some had predicted would be over by Christmas. From the piece:

The brinkmanship is intensifying. Another major studio, Warner Bros., is being courted by both camps and believed to be mulling over a lucrative offer that could bring such popular titles as "Harry Potter and the Order of the Phoenix" into the HD DVD camp, according to Hollywood insiders who requested anonymity because the talks were confidential.

"Any movement by one of the studios tilts the playing field in one direction or the other," said David Sanderson, head of the global media practice at consulting firm Bain & Co. "It's a bit of jump ball right now."

What's more, Wal-Mart Stores Inc., the dominant seller of DVDs, has been contemplating whether to boot stand-alone HD DVD players from its shelves in favor of Blu-ray. Wal-Mart executives would not talk about the company's conversations with suppliers, but said it would continue to carry hardware and software in both formats until consumers indicate a clear preference.

- IFC and a tech start-up called B Side are working together to get home video and online distribution for movies that garner good buzz at film festivals, but don't get distribution deals, according to Variety.

Attention iTunes Users: Please Visit Hulu

At the end of 2007, NBC will yank its TV shows off of iTunes, according to the NY Times. From Brooks Barnes' piece:

...The decision by NBC Universal highlights the escalating tension between Apple and media companies, which are unhappy that Apple will not give them more control over the pricing of songs and videos that are sold on iTunes.

NBC Universal is also seeking better piracy controls and wants Apple to allow it to bundle videos to increase revenue, the person familiar with the matter said.

NBC Universal is the second major iTunes supplier recently to have a rift with Apple over pricing and packaging matters. In July, the Universal Music Group of Vivendi, the world’s biggest music corporation, said it would not renew its long-term contract with iTunes. Instead, Universal Music said it would market music to Apple at will, which would allow it to remove its songs from iTunes on short notice.

Better piracy controls? You mean you want a tougher DRM than FairPlay? That's smart.

Of course, by December, we'll all have forgotten entirely about iTunes and will be slurping up digital content from Hulu.com, the NBC/Fox joint venture.

NBC and Fox take just ten months to come up with a name: Hulu

The Fox/NBC joint venture to create a video site that will rival YouTube may actually launch before everyone forgets what YouTube was.

They picked a name today -- Hulu -- only ten months after the joint venture talks began. A trial will begin in October, but you can sign up now.

I predict this will be every bit as successful as Movielink.com, the site we all download movies from.

I'll certainly remember the name Hulu, because it rhymes with Sulu, as in Lieutenant. (Unfortunately, Viacom, which owns 'Star Trek,' isn't participating in the joint venture.)