A Fistful of Smart Media Dollars

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Editor’s note: Jay Fulcher is CEO of video technology company Ooyala. This is a follow-up to his columns “Fear And Loathing In Online Video” and “One Screen To Rule Them All“. Follow him on Twitter @jbfulcher.

The rise of smart, multi-screen streaming media is fundamentally changing the TV experience. This year, for the first time ever, Americans will watch more movies over the Internet than on physical media like DVD and Blu-ray. Ooyala’s Video Index Report found that non-desktop video plays doubled in the fourth quarter of 2011. Tablet sales continue to explode. People now spend more time on Xbox Live streaming movies and TV shows than playing video games. And consumer electronics manufacturers are gearing up to ship 125 million Smart TVs in 2014. Simply put, TV is no longer constrained to a single box, a single screen, or a single UI.

Smart networks, broadcasters, studios and service providers recognize that there’s real money to be made as TV moves into the information age. People are not only watching more movies and TV shows online, they are paying for access to premium video content. Recent studies reveal that over half of American tablet owners paid to watch a movie in Q4 2011 and more than 40% paid for TV content. These are strong signs that we’ve come a long way from Jeff Zucker’s “digital pennies” remark back in 2008.

To make the most digital dollars, new TV technologies should securely deliver media to viewers on their terms. Audiences today have personal, portable ways to consume content. There are more screens, platforms and devices to display their favorite shows, and more ways than ever to rent, purchase, gift and download video content. It is an exciting time for both TV viewers and TV content providers.

Innovation is a tricky business, however, and change can be hard. There are bound to be a few missteps and failures as we invent the next generation of TV. This isn’t a new phenomenon. For every VHS recorder there is a Betamax; for every DVD, a Laserdisc. But there will also be key victories and new revenue streams as media and technology combine to create the TV experience of tomorrow.

Here’s how forward-thinking media companies will profit from the new TV.

Big Data & Analytics

More than a buzzword, Big Data is changing the way we look at information — and the world around us. The ability to quickly extract actionable insights from vast sets of data has already become a business imperative in some sectors. This trend can only grow. Corporations, governments, and non-governmental organizations will all leverage distributed computing to gain insights into their operations and their constituencies and maximize efficiencies.

Big Data and analytics will become mission critical for major media companies as TV moves to IP delivery. Firms that fail to invest in data-driven solutions will be at a severe disadvantage in the marketplace. Putting analytics tools in place to collect and analyze key metrics enables video publishers to see how people interact with their content — and understand where and why it’s underperforming (something that was impossible before). These insights will inform critical business decisions that impact audiences and drive revenue.

Intelligent Monetization

As we all know, the easiest way to make more money in media is to sell more advertising. But simply inserting more pre-roll ads into a video stream, for example, quickly falls prey to the law of diminishing marginal returns. An initial uptick in revenue is followed by a substantial dropoff in ad completion rates, as viewers quickly grow weary of the oversupply of irrelevant ad messages.

Smart monetization strategies go hand-in-hand with analytics. With the right tools in place, video publishers can analyze how variables like ad load (the number of ads served per video) and ad placement (where ads are inserted within the video) impact viewer engagement. It’s even possible to find the optimal rental price for, say, a feature-length movie. And soon it will be commonplace to match ads to viewers based on social graph interests, location, device type, and viewing history.

Smart video publishers will use analytics to simultaneously accomplish two somewhat conflicting goals: (1) maximize digital revenue, and (2) create and/or maintain an optimal viewing experience for their viewers.

Personalized Content

A streaming media strategy based on Big Data computing, powerful analytics and smart monetization results in a personalized viewing experience across all connected screens. Content producers and providers will attract and retain more viewers when they deliver highly relevant content to their viewers, and presented in a way the viewer prefers.

Insights derived from vast data collection ensures that the right content is delivered to the right viewer at the right time. The future of personalized television is geo-targeted, interactive content. Viewers who opt to share data will receive a better experience: location-specific ads, augmented reality media experiences, interactive games and content targeted for their viewing history, network and device. Content publishers will also tap into social networks to deliver meaningful content that is informed by viewer interests. As social media continues to evolve, expect video to play a bigger role in how we relate to one another online.

In Sum…

The TV of tomorrow will be smart. It will understand who is watching, where they are, and what shows they enjoy. The end result will be a more personal TV experience that spans multiple screens and locations.

TV is changing quickly. There is a real need for companies to recognize and get out ahead of this change. With the right tools (like those offered by my company Ooyala), fistfuls of digital dollars are there for the taking.