Editor’s note: Michael Chang is CEO of YesVideo, a video-transfer and sharing service. He was previously CEO and co-founder of Greystripe, a mobile ad network acquired in 2011 by ValueClick. Follow him on Twitter @michaelmchang.
The world of digital video has undergone a massive transformation in the past few years, thanks to the proliferation of smartphones and innovation in the field. As a result, personal video content creation has exploded; according to the NPD Group, we started 2012 with phones accounting for 25 percent of all photos and videos captured. That’s huge, but I expect that 2013 will see even more accelerated growth.
I see three huge trends in the world of personal video today, and they have one common theme: answering the call of the consumer. Companies like Apple and Google are looking to consumers to see what they want and building products and platforms that meet their needs.
Here’s how I think personal video tech is being affected by consumer demand and what the industry can do to meet these demands.
1. The Next Hardware Revolution Will Happen Underwater
How do you make a successful video camera in the age of smartphones? Go where phones can’t go: underwater.
That’s precisely what GoPro has focused on, with its set of video cameras built for the adventurist in all of us. And the device has proven its worth: one camera survived seven months in the Atlantic Ocean and was returned to its owner with video intact. Consumers and media saw the value of the product, and GoPro’s value proposition was clear – so clear, in fact, that they they recently took a $200 million round of funding from Foxconn, valuing the company at $2.25 billion.
How long will it be until smartphone makers take a cue from GoPro and create waterproof cameras with better low-light settings? Not long. I predict that Samsung, Sony and other legacy video hardware companies will try to acquire GoPro in 2013, which will prove pricey given Foxconn’s capital boost.
2. Video Cloud Storage Will Become Free
Consumers today have a real and urgent need for video-centric cloud storage, and I expect that cloud services will see a boom of video material in the coming year and react accordingly. Right now the major players in cloud storage – Google, Apple, Microsoft, and Amazon – provide deeper integration with their own services and devices. Dropbox and Box are the most device-agnostic. Yet none of these cloud services have been designed specifically for video storage.
Last year Google dropped the pricing of Google Cloud Storage twice — and both drops occurred in the same week. How will Google’s move affect the strategy of other big players in this highly competitive space? The Google threat to other players is significant because of Google’s massive and highly profitable search revenue, which can fund a long-term ‘subsidy’ intended to drive consumers toward their solution. Google is the best positioned at this point in time to fund a completely “free” play in the space that results in more customer engagement on its properties and further acquisition of customer data, both of which feed back into its advertising machine. To put the scale of their search business in perspective, if you were to start a new $1 billion business within Google this year, such a new business unit would only contribute to annual revenues by 2 percent.
In terms of using cloud storage as a loss leader, Amazon too has very significant alternative revenue streams, but the margins are slimmer than in search and it’s not as clear that consumer storage is a related, linear play vis-à-vis its offline e-commerce business. That said, the longer-term future of Amazon’s e-commerce shifts to digital goods and Kindle-related products — and, therefore, a popular consumer-facing storage business with a sophisticated application/content layer — fits right into that strategy. They already have a large and growing connected device customer base. Amazon may look to purchase Dropbox in order to quickly leap ahead in the consumer storage category — particularly around media (photos, videos, music).
With the core cloud storage business becoming commoditized and prices dropping, cloud providers are in danger of becoming “dumb clouds” à la telcos that over time became “dumb pipes.” The margins in core cloud storage will continue to decline similarly to what occurred with telco carriers serving broadband into the home. Carriers have been forced to play nicely with Apple while losing revenue on services they would have normally provided but can’t because of Apple’s disruptive lead with consumers and stringent models. So it’s still a business that competes on price; they were not able to move upstream or laterally to add more value.
The same will occur with cloud storage providers. But Dropbox and Box are executing on a great strategy of becoming not just storage, but platforms for data to be shared between the application layer and users. Once they are the default platform (think OS on a PC), more and more apps plug in and then customers (or the ‘OEMs’ of our time) are willing to pay – think “OS in the cloud” paradigm. The other play is to actually provide apps for specific categories, but the challenge there is finding customers willing to pay for one-off apps. Bottom line: being stuck in the middle is to be doomed.
3. Consumers Become Prosumers
It’s a tough economy, and entertainment companies are feeling the pinch just like other industries. This year, Hollywood, the music world and sports leagues have all taken steps to encourage prosumers to create their own content in an effort to connect with fans. In this case, the prosumers will be die-hard fans equipped with smartphones and cameras.
Cheap cloud storage, slick tools offered in high-tech sandboxes, and the desire to capture consumer attention are all driving a wave of fan-edit/co-creation opportunities. The pros are finally allowing consumers to lean forward and take part in their content. Just look at the recent moves of Netflix, Amazon Prime Instant Video, Hulu, and YouTube. These companies are now offering interactive contests, judging opportunities and the use of professional studios to give consumers a chance to be a part of creating content alongside celebrities.
Facebook, Twitter and Google+ create an added bonus for these companies, since prosumers will likely share their work with family and friends.
In 2013, we will see players in the video industry continue to answer the call of the consumer, and do all they can to make personal video easy to make and take – from the cloud to the ocean. What trends do you see happening in the personal video arena?