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.

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.

Sony to Do Video Downloads? ... Mike Shoots with the Red ... Studio Chief Job Security ... One Less Drive-In

If you, like me, are trying to fend off the start of fall with some good old-fashioned procrastination, here's some Tuesday reading for you...

- Sony may soon challenge Apple in selling video downloads, according to the Wall Street Journal. (Oddly, the Journal story goes on for a while before mentioning that just last week Sony exited the business of selling digital music through its Connect online store.) From the story:

People familiar with the situation say [Sony chairman Howard] Stringer is planning to use Sony's technology-packed PlayStation 3 and PlayStation Portable videogame machines, along with its Bravia high-definition televisions, to develop products and services to let users download television shows and movies, similar to the way they download music and videos using Apple's iTunes store and iPods. A Sony spokesman declined to comment on the company's strategy.

As Internet connections have become faster, analysts have expected the next big potential market to be in downloading movies and television shows. Some analysts believe it could be significantly larger than the digital music market.

The writer says that Sony's main advantage in getting into digital video could be that "Content companies like movie studios may be wary of the way Apple dominated the digital music market, and may be more encouraged to work with another company, especially one that owns a movie studio of its own and understands their concerns."

The story also contains a projection from Parks Associates that total video download revenues for 2007 will hit $2 billion. That's real money.

- Mike Curtis is in New York playing with some of Red Digital Cinema's first production cameras.

- From Sunday's NY Times: 'For Studio Chiefs, the End of the Revolving Door?' Michael Cieply observes that the job security of studio chairmen may actually be increasing. Here's the gist:

Over the last decade or so, managers of big companies like Sony, the owner of Columbia Pictures, and the News Corporation, owner of 20th Century Fox, came to realize that the film business is less about scoring the odd hit than keeping the pipeline full of something other than losers. That happened as the DVD explosion and growing sales abroad showed that even a modest success at the box office could bring home a substantial profit.

Stability trumped brilliance. The cool of a John Calley, the longtime producer who took charge of Sony Pictures Entertainment in the period, replaced the heat of a Peter Guber, whose stormy reign preceded him. High-tension types like Michael D. Eisner and Michael S. Ovitz left the stage.

For studio chairmen, an increasingly colorless lot, the shift in values brought with it a level of job security that was only occasionally achieved a generation ago.

- Also from the Sunday Times... this may make you sad: an obituary for a Buffalo drive-in.

CEO Hired for NBC/News Corp. 'YouTube Killer' ... and More on NBC's Future Plans

I hate to keep using the term 'YouTube Killer' to describe this venture, since it really sets it up to fail... but you probably know the project I'm talking about: the joint venture between News Corp. and NBC to create a new video site, in partnership with AOL, Comcast, MSN, and CNET.

They've just hired a CEO: Jason Kilar, a veteran of Amazon.com and Disney.

The upside: he is young (36). The potential downside: the venture will be based in LA, and it won't launch until "later this year," according to the release. That's sorta vague. (Update: the internal goal for launch is September.) And Kilar's experience is mostly in e-commerce: selling actual physical goods like DVDs and CDs. Clearly, though, he must know how to manage software developers after almost a decade at Amazon.

We'll see how this goes. I'm sure it will be, uh, fun to report to a board of directors that includes Peter Chernin of News Corp. and Jeff Zucker, CEO of NBC Universal.

More from PaidContent. Om Malik reported yesterday that the joint venture is trying to raise $100 million, and not having much luck so far.

From the release:

"As a team, we have a unique opportunity to create great customer experience through the combination of innovative technology and high quality content," commented Mr. Kilar. "In the process, I believe we can play a significant role influencing how consumers find, discover, and participate in premium content over the web. This is a big, inherently fun mission with which I'm proud and very excited to be associated."

Mr. Kilar began his career at the Walt Disney Company, where he spent two years with Disney Development Corporation (1993-95).

He received his M.B.A. from the Harvard Business School in 1997...

Update: Coincidentally, just after I posted this, I had a chance to sit down for a quick coffee with a PR exec from NBC Universal. She mentioned that NBC is getting ready to open a "product lab" out here in Silicon Valley, with the goal of developing relationships with interesting tech companies. It'll be staffed by just one person to start with. NBC also may take a minority stake in some companies through its Peacock Equity Fund; one early investment was the ad serving network Adify.

She noted that the NBC/News Corp. joint venture site, which is yet to be named, will eventually sell shows (a la iTunes), but probably not at the launch. Right now, iTunes is the only place where NBC sells its content.

Another interesting tidbit from our conversation: while NBC is the fourth-ranked network right now according to Nielsen, it occupies half of the spots on the iTunes list of top 100 TV shows. ('The Office,' and 'Heroes' are well represented.)

The site with no name: NBC and News Corp. announce new video joint venture

So NBC and News Corp. are getting together to develop a video site.

Here's the coverage from the Wall Street Journal, New York Times, and LA Times.

Listening now to the live conference call with Peter Chernin of News Corp. and Jeff Zucker from NBC Universal.

The joint venture, or the site that it will launch sometime this summer, has no name yet. They refer to it as "NewCo."

Why is that a big deal?

Because it hints at how difficult it is for two or more big companies to decide on anything (like a name), let alone actually build anything.

Chernin and Zucker make all the right noises: Web 2.0 functionality, consumer control, mash-ups are OK, embedding in personal pages, etc. Also, the site will protect copyright and help content owners earn money from advertising. They want to make it the "biggest video destination on the Web," Chernin says, and "we are in discussion with other content owners right now," who want to be "treated fairly" and have their content protection. There will also be movies for sale on this site, most as electronic sell-through (paid downloads), but perhaps some older titles studded with advertising. Some full episode TV shows may also be paid downloads, likely the same stuff you pay for on iTunes. Pricing will be similar to sites like Movielink, CinemaNow, and iTunes.

Importantly, there is some key content you won't see on this site -- like 'American Idol.' Fox doesn't control the Internet rights for its biggest hit.

Six factors that would make this venture successful:

1. Launching sooner rather than later
2. Lots of content
3. Inobtrusive advertising (IE, not the 15 second pre-roll ad that takes 30 seconds to start playing and then segue into the clip you want)
4. Copious promotion
5. More content partners (and that includes welcoming in independent content producers, not just the Viacoms, Time-Warners, or Disneys)
6. Really sharp software developers

Will this unnamed joint venture be able to hit all six of those marks? I'm skeptical, but we'll see in a few months.

Media Biggies Still Scheming Over YouTube ... Remembering Peter Ellenshaw ... Bob's Basement

- Richard Siklos has a piece in today's NY Times about the continuing discussions among the CEOs of NBC Universal, Viacom, and News Corp. about whether they ought to create a competitor to YouTube (or perhaps ally with Yahoo.) The opening:

JEFF ZUCKER, the newly minted chief executive of NBC Universal, ventured to the Times Square headquarters of Viacom two Wednesdays ago with Peter A. Chernin, president of the News Corporation. It was not a social call as much as a social-networking call, to see Philippe P. Dauman, Viacom’s chief executive. After all, Viacom had rather publicly ordered YouTube, the Internet’s most popular video-sharing site, to remove thousands of clips of MTV material.

A few weeks earlier, Viacom had also bowed out of a partnership with NBC and the News Corporation to set up their own alternative to YouTube, which was recently acquired by the search juggernaut Google. Not to be dissuaded, their idea is that a Web start-up featuring the broadcasters’ most Web-friendly fare (comedy clips and even whole episodes of their popular shows) could gather a crowd on its own and also be a powerful consortium for licensing content to other destinations around the Web — including, of course, “GoogTube.”

According to people briefed on the visit, Mr. Zucker and Mr. Chernin ran through a presentation on why they thought Viacom ought to rejoin their group. So far, Viacom has not rejoined the venture, and the project’s fate remains unclear. (No love is lost between Viacom and the News Corporation, since the latter snatched MySpace.com from under Viacom’s nose.)

- Peter Ellenshaw, a great matte painter who worked with Walt Disney on movies like 'Treasure Island' and '20,000 Leagues Under the Sea,' has died at age 93. He shared in the Oscar for visual effects awarded to 'Mary Poppins,' in 1965. Here is the AP obituary. The Wall Street Journal has a longer remembrance. Stephen Miller writes:

A master of a now-dying art called matte painting, he helped usher Walt Disney Corp. into live-action films by painting miniature scenery that was combined through technical wizardry with frames depicting actors. He reached his apogee with "Mary Poppins," which won the Oscar for special visual effects in 1965. Mr. Ellenshaw, who died Feb. 12 at age 93, was nominated three other times and worked on 30 Disney films.

"He helped define the Disney look," says Roy E. Disney, nephew of the founder and a former vice chairman. "He created a kind of faux-realism which you believed in. It didn't look like something pasted onto the frame. ...Walt loved him."

Mr. Ellenshaw's handiwork can be viewed in films from "Treasure Island" (1950) -- his first for Disney -- "20,000 Leagues Under the Sea" (1954) and "Bedknobs and Broomsticks" (1971). He also left his mark on several Disney television programs, including "Davy Crockett, King of the Wild Frontier," where actor Fess Parker as Crockett -- on his way to Washington to serve a spell in Congress -- journeyed down a dirt road that was an Ellenshaw painting.

Also a nice piece about Ellenshaw's work on Jim Hill Media, a Disney fan site.

- Fun piece in the NY Times about Bob's Basement, a collection of famous Hollywood props.