Learning about streaming, Part 2: ubiquitous streaming from the cloud

A few blog posts ago, I wrote about streaming and tried to clarify what this involves. One of the upcoming digital trends of 2011 is cloud-based streaming of music. Good examples of this new trend are Apple’s iCloud service and Amazon’s Cloud Drive, but also the likes of Spotify, Pandora and Google are now very active in this area (see overview below).

I’m sure that this field will further evolve in 2011 with existing providers solidifying this revenue stream and new providers jumping the bandwagon. These are some of the things that I have learned so far about music streaming:

  1. The service – On-demand streaming is all about delivering tracks and albums, providing users with easy access to online music across a number of platforms (web, mobile). With the cloud component, there’s also the option of user storing all their music. Apple’s iCloud for instance scans all of user’s music (including digital downloads not through iTunes) and matches it with the music catalogue in the iTunes Store and automatically stores it in iCloud.
  2. The business model – This kind service is either free (totally free or to an extent), supported by advertising or a paid-for model (with users subscribing to the service and providers offering basic and premium packages).
  3. Changed consumer behaviour? – I guess the long-term success of music streaming will very much  depend on whether consumers are happy to pay just for access to music (instead of downloading and owning the music). A recent US survey found that that more than half of respondents preferred to purchase music files online, the top way of consuming music.Only 13% of online music consumers preferred to pay for online streaming (see survey results below). Another recent survey indicated that streaming services discourages music purchasing, which is the kind behaviour that might well only apply to those converted to music streaming and access.

Main learning point: it will be interesting to see how providers of music streaming services will shape their business models to generate sustainable revenue from streaming. In terms of consumer uptake, will it be case of only select group of people willing to pay for streaming and the large majority of users to stick with free music (streaming)?

Profile of Select Cloud-Based Digital Music Services , 2011

Method of Purchasing or Listening to Music According to US Online Music Consumers, Sep 2011 (% of respondents)

Related links for further learning:

http://www.emarketer.com/Article.aspx?id=1fb008713&R=1008713

http://www.abiresearch.com/press/3640

http://www.digitalmusicnews.com/stories/091411ownership

http://en.wikipedia.org/wiki/List_of_online_music_databases

http://www.musicthinktank.com/blog/spotiwhy-are-subscription-music-services-a-sustainable-busin.html

http://www.guardian.co.uk/technology/2011/oct/07/online-music-streaming-we7-turnover

http://musicindustryblog.wordpress.com/2011/12/19/the-digital-music-year-that-was-2011-in-review-and-2012-predictions/

http://digitalmusicnews.com/permalink/2011/111222spotify

Fanhattan: cool name, but how does it work?

Intrigued by its cool sounding name, I wanted to find out more about Fanhattan. I then came across this demo by one of the founders of the service, which has been going for about a year now. In this demo, Gilles BianRosa (CEO) made it clear that Fanhattan is all about content and not about the individual apps that host films or TV shows.

As BianRosa explained, for the Fanhattan user it’s most and foremost about “what do I want to watch?” This means that as a user I will look for the content first and Fanhattan will subsequently present me with a range of services where I can access this content (think Netflix, iTunes and Amazon).

These are the main things that I learned about Fanhattan:

  1. It acts as a ‘content gateway’ – Rather than having to go into a specific app or service, Fanhattan enables you to look for the content you want to watch, after which it will let you know through which services you can access this content. The app is built in HTML5 which means it will fully support rich media like audio and video.
  2. It offers content in the broadest sense of the word – It’s a shame Fanhattan isn’t available in the UK yet, because I would love to have a closer look at all the features Fanhattan displays around a specific piece of content. Call me a geek but I would be very interested in seeing up close how Fanhattan display products or data related to “The Godfather” such as merchandising, the movie soundtrack, PG ratings, similar films recommendations and film info.
  3. It has a clear social element – As we know, digital content lends itself incredibly well to sharing with your friends and to friend recommendations. Fanhattan taps into this social discovery element by enabling its users to build a Taste Profile with the content they have watched, which they can easily share with friends. Similarly, if you like a film or TV show on Fanhattan this will automatically appear on your Facebook wall.
  4. It’s cross-platform – Being available on a number of platforms sounds like a no-brainer but Fanhattan has been following a (in my mind sensible) phased approach to rolling out on different platforms, with the iPhone being the latest addition. I understand that TV and game consoles are next on Fanhattan’s product roadmap.
  5. It’s cloud based – Because the content discovery element of Fanhattan is happening in the cloud, it should increase Fanhattan’s flexibility in displaying and storing (discovery) data and content.
  6. It has a flexible model – Users can either subscribe to Fanhattan (like you do for services like Spotify or Rdio) or pay Fanhattan for each transaction separately. It’s a shame no figures are publicly available on the uptake of Fanhattan as a subscription service vs. users paying for content on an ad-hoc basis.
Main learning point: I do see apps like Fanhattan playing an important role in the discovery of new content, acting as a user-friendly portal to a wide range of content-oriented services. At present, Fanhattan isn’t available in the UK; I’ll be keeping an eye out for Fanhattan or similar services rolling out on these shores. Will users warm up to the idea that you can use a single service to access the content? Will they move away from the likes of Lovefilm, Netflix or Amazon in favour of Fanhattan or a Spotify-like service focused on films/TV shows?

Related links for further learning: 

http://blog.fanhattan.com/2011/09/13/social-discovery-and-the-power-of-vudu/

http://techcrunch.com/2011/11/16/fanhattan-tv-discovery-app-migrates-to-the-iphone/

http://gigaom.com/video/fanhattan-takes-content-discovery-to-the-cloud/

http://news.cnet.com/8301-17938_105-20025825-1.html

Learning more about streaming, this time it’s about Netflix (again)

Over the past few months I’ve been learning more about streaming, trying to understand beter how it works and who operates in this market (think Spotify, Rdio and LoveFilm). A logical next step was trying to get a better grasp on the business side of things; what makes streaming so interesting from a business revenue point of view?

  1. Increase in number of streaming subscribers – In a recent webcast with TechCrunch Netflix’ CEO Reed Hastings made it clear where he sees the future of his business by stating that “We expect DVD Subscribers to decline every quarter … forever.” He illustrated this by stating that Netflix had lost 2.76m DVD rental subscribers in Q4 of 2011 whilst its streaming service gained 220k users.
  2. Low cost model – In the same webcast, Hastings explained that even though the margins on DVD rental are much higher compared to streaming (since prices of DVD rental are higher), the variable cost attributed to streaming are much lower.

This made me think about the following:

  1. Will streaming cost really be that low? – I can understand that the variable cost involved in streaming are likely to be significantly lower than DVD rental. The fixed cost of streaming are, however, much higher compared to other (subscription) models. I’m thinking of the fixed costs to set up a streaming infrastructure (e.g. enabling users to stream both in an online and offline mode) but particularly the cost of securing streaming content. With Netflix and LoveFilm battling it out to bolster their catalogues of streaming content in the UK I can imagine the big film studios and TV production companies rubbing their hands with glee and driving up the price of their content.
  2. Will streaming really take off? I guess this will very much depend on factors such as cost, consumers choosing between downloading and streaming (between access and ownership) etcStreaming is a relatively new model, so it will be interesting to see what its consumer adoption will be like.

Related links for further learning:

http://techcrunch.com/2012/01/25/reed-hastings-we-expect-dvd-subscribers-to-decline-every-quarter-forever/

http://news.cnet.com/8301-17938_105-20093587-1/netflix-vs-blockbuster-whats-the-best-service-for-streaming-and-dvds/

http://mashable.com/2011/12/06/verizon-netflix/

http://paidcontent.co.uk/article/419-interview-netflixs-hastings-aims-to-challenge-bskyb

http://paidcontent.co.uk/article/419-netflix-sees-overseas-losses-doubling-to-118-million-this-quarter/

http://paidcontent.co.uk/article/419-lovefilm-adding-abc-tv-show-archive-in-uk-netflix-fight/

Learning about streaming, with Klip as a first case study

I’m currently trying to learn more about streaming in its various forms. Streaming is all about the delivery method of media such as audio, film or TV. There are basically two forms of streaming: live streaming and archived streaming.

With live streaming, you take the content and broadcast it live over the internet. It involves having a camera to capture the content, an encoder to digitise the content, a media publisher where the streams are made available to users and a Content Delivery Network to distribute and deliver the content. This way, the user is able to view an event live. Good examples of live streaming are live coverage on YouTube of an Arcade Fire concert at Madison Square Garden or people being able to view the first match of the FA Cup live on Facebook.

Archived streaming is more about ‘on-demand’ streaming (think BBC’s iPlayer and Lovefilm’s Player) or Marks & Spencer broadcasting a vodcast on food you can order for Christmas. The technology used to deliver this is fairly similar to live content, apart from the fact that the ‘content source’ for archived streaming can be as varied as a tape or an audio file.

I don’t think one has to be a great visionary to predict a great future for streaming, with a multitude of devices to stream video content to. A good, recent example of these bright prospects is Klip, a mobile video app that lets you share video content with your friends. These are the reasons this service caught my attention:

  1. It’s the highest ranked social video app in the App store – Klip is an iOs (as in ‘Apple only’) app that lets users view, capture, share and discover video on their iPhone. Other examples of social video apps are Rounds, Vlix and Socialcam.
  2. High quality video streaming – A key aim for Klip is to provide the highest quality video streaming around for mobile device. You simply shoot a new ‘Klip’ or grab one from your Klip Camera Roll and share it with the Klip community, your friends on Facebook, Twitter, on your YouTube channel, or by email.
  3. Underlying technology – Even though I’m not a techie, it will be interesting to find out more about the underlying Klip technology that enables users to swipe a video for a preview. The video will then play at the accelerated speed at which you move your finger across the video. If you shake the phone, all the videos will begin playing on the page.
  4. Adaptive streaming – I learnt that because mobile bandwidth can be unreliable, Klip includes adaptive video streaming which means that it automatically adjusts the quality of the video streaming based on a user’s mobile network conditions.
  5. Cloud component – The sharing on Klip is done around hashtags so that users can easily surface and find content by topic or event. Big on Klip’s product roadmap is the cloud component in its technology, enabling users to search and index hashtags in realtime.

Main learning point: Good to learn more about streaming. The term is often used very loosely and distinguishing between live and archived streaming feels like a good starting point. There will be more examples to follow, but Klip is an interesting one since its aim is to achieve the highest quality streaming as well as encouraging its users to really interact with its content.


Related links for further learning:

http://techcrunch.com/2011/11/18/benchmark-leads-8m-round-in-mobile-video-sharing-app-klip/

http://youtube-global.blogspot.com/2011/04/youtube-is-going-live.html

http://www.wiliam.com.au/wiliam-blog/there-are-two-types-of-streaming-media-live-and-archived

http://www.iabuk.net/en/1/onlinevideoadvertisingcasestudies.html

http://blog.klip.com/

http://en.wikipedia.org/wiki/Adaptive_bitrate_streaming

How robust will Netflix’ business model turn out to be? – Part 3

Just as I thought that the Netflix saga had come to an end with my blog post a few weeks ago (in which I wrote about Nextflix’ CEO Reed Hastings’ announcement to split the business into two separate units), the story has taken another twist. Last week, Netflix reversed its decision to split its business into two parts, streaming (Netflix) and DVD rental (Qwikster) and became a single unit again.

In a very succinct blog post, CEO Reed Hastings wrote: “It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs” but he did not offer any further explanations as to his reasons why.

What could those reasons be? Let me just speculate for a minute:

  1. Reed Hastings is speaking the truth – Netflix users genuinely struggled to have to use two different sites. Call me cynical, but surely a problem of this nature would have come to light in early stage user testing or forum groups?
  2. Too much change in one go – Perhaps the pace with which Hastings wanted to introduce business change was simply too high for most Netflix users. An official Netflix statement read: “We underestimated the appeal of the single Web site and a single service.” Nevertheless, make no mistake, online streaming does remain Netflix’ core focus going forward, despite this retracted spin-off.
  3. Unexpected amount of “churn” – The number of people who terminated their Netflix subscription as a direct result of the announced split was simply too high and was putting the overall business revenue at risk. I’m not sure if this was the case, but Netflix users still got a shock when Netflix was unified again, whilst keeping two separate price schemes for DVD rental and streaming respectively.

Main learning point: even though Netflix and its CEO were halted in their tracks to split up the business, there’s no doubt that Netflix strategic focus will be on streaming in the years to come. I’m sure that when the time is right (and Netlix’ users are ready) Netflix will spin off its DVD rental business and concentrate solely on online content streaming.

Related links for further learning:

http://mediadecoder.blogs.nytimes.com/2011/10/10/netflix-abandons-plan-to-rent-dvds-on-qwikster/?scp=2&sq=netflix&st=cse

http://www.youtube.com/user/JeffreyHayzlett?feature=mhee

http://www.adweek.com/news/technology/netflix-reverses-its-qwikster-rebranding-135673

http://www.cnbc.com/id/44851424

http://mediadecoder.blogs.nytimes.com/2011/10/10/netflix-abandons-plan-to-rent-dvds-on-qwikster/ 

http://news.cnet.com/8301-31001_3-20118063-261/qwikster-nixed-netflix-catches-some-flak/

How robust will Netflix’ business model turn out to be? – Part 2

Back in February, I asked the question about the (long-term) sustainability of Netflix’ business model and I guess that some major events in Netflix’ life over the past week have provided some useful insights into answering that question:

  1. Splitting the company in two – On the Netflix blog, Netfox CEO Reed Hastings last week announced the split of the business into two separate parts. Netflix’ traditional DVD-by-mail business will be renamed Qwikster and the name Netflix will be retained for the company’s streaming activities.
  2. It’s not a spin-off – In his blog post, Hastings made it clear that both businesses remain part of the same company. However, Netflix has come to the realisation (albeit a bit slowly so it seems) that DVD-rental and streaming are two very different activities. Hastings explains: “So we realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently.”
  3. Different brands, charged separately – Netflix’ recent price hikes meaning that its customers now have to pay separately for streaming and DVD rental (as opposed to paying a ‘package price’) caused quite a massive uproar and a decrease in the number of Netflix subscribers (and a significant share price drop to boot). I guess Netflix execs must have felt that to fully justify this price increase it had to package up both products separately, each with their own website, mobile platform, etc.
  4. Streaming is the future – To me, this split clearly shows that Netflix sees online streaming of content as its future. In his blog post, Hastings acknowledges that the days of DVD rental are numbered: “DVD by mail may not last forever, but we want it to last as long as possible.” One can imagine that in the not so distant feature Netflix will sell its DVD rental business (or terminate, depending on customer demand) and concentrate solely on its streaming business instead.
  5. Will Lovefilm follow suit? – Lovefilm which recently got acquired by Amazon is increasingly focusing its efforts on streaming. The Lovefilm Player is a good example of this strategy, streaming video content directly to users’ TV sets or game consoles.
  6. Content streaming is the way to go – In the past few days the ‘new Netflix’ has been announcing a video-on-demand rights deal with major Hollywood studio DreamWorks to beef up its content portfolio. Not only is this a logical step in Netflix’ ongoing quest to stream content across multiple platforms, moves like this one are critical if Netflix wants to gain a strong foothold in the content streaming market.
Main learning point: when I wrote about Netflix a few months ago I couldn’t envisage that it was going to overhaul its business model and approach to market. Whether this move was made out of choice or forced upon Netflix following a massive PR disaster, the fact is that Netflix has made its strategic intentions very clear: the days of online DVD rental are numbered, streaming is the future!

 

Related links for further learning:

http://blog.netflix.com/2011/09/explanation-and-some-reflections.html

http://thenextweb.com/media/2011/09/16/netflix-its-not-about-the-price-its-about-the-lack-of-choice/

http://techcrunch.com/2011/09/18/netflix-qwikster/

http://www.engadget.com/2011/09/26/nyt-netflix-strikes-deal-with-dreamworks-will-begin-streaming/

http://www.businessinsider.com/netflix-splits-in-two-the-dvd-business-will-be-renamed-qwikster-2011-9

http://www.wallstreetdaily.com/2011/09/27/netflix-announces-deal-with-dreamworks/

http://multiplayerblog.mtv.com/2011/09/19/netflix-video-games-qwikster/