Portals Hot on Cable’s Heels

Apr 10, 2006  •  Post A Comment

Five online video portals are poised to leave cable operator behemoths like Comcast and Time Warner in a distant second place in the broadband video business.

That’s the conclusion of a new report Will Richmond, president of broadband research company Broadband Directions, plans to release at the National Cable show today. The report finds that Yahoo, AOL, Microsoft, Google and Apple are becoming the giants of online video distribution, in part because cable operators are missing the boat when it comes to distributing video on the Internet.

Mr. Richmond identified the five companies as broadband leaders that have already made significant inroads in the distribution of video online in the past year, and he detailed specific reasons they are positioned to dominate the arena down the line and what cable operators should do to best compete with them.

The key things the portals are doing right include meeting the needs of consumers, advertisers and content providers by offering interactive experiences, various pay and free models and a plethora of content.

“By not prioritizing broadband as a video delivery platform, the cable operators and satellite operators are further enhancing probability of success for the ‘broadband five,'” said Mr. Richmond, who does not count any of the five online leaders as his clients.

Cable operators should be doing everything the group of five is doing, which would include developing the capabilities to match up with the expectations of consumers, advertisers and content providers,” he said. “What cable operators should be doing with respect to broadband is focusing on how they can satisfy these three constituents so they will drive success.”

Cable executives are unfazed by the suggestion there is work to do, and they insist they are on the case.

“We’ve been distributing video for 30-some years, so we think we know a thing or two about what consumers want,” said Bob Wilson, senior VP of programming for Cox. “The cable industry is no slacker when it comes to harnessing new technologies to offer consumers even more choice, convenience and control. Video-on-demand is one great example. We think we’ll do well against the new competitors that are popping up in the broadband video space.”

Cox.net offers limited news clips and video, but Cox plans to strike more content deals going forward, said Mr. Wilson.

Comcast said video is an integral part of its broadband strategy and that it offers at Comcast.net video content from ABC News, USA Today, Fox Sports, the National Hockey League and others. Comcast has also struck cross-platform deals, such as offering promotional video for HBO’s “Rome” both on video-on-demand and Comcast.net.

Battle on Two Fronts

In their defense, cable operators are occupied with fighting a defensive war against the encroaching telcos, said T.S. Kelly, VP and director of research and insight for Media Contacts, the interactive arm of media agency MPG. “They are a little bit more distracted,” he said.

At first blush, the five companies cited appear well positioned simply because of traffic and volume. But their early success actually lies in how they are meeting consumer expectations for online video, Mr. Richmond said.

“[Consumers] are looking for the ability to do video search, the ability to personalize their experiences, and these companies excel at these areas,” he said.

For instance, Yahoo recently inked a deal with CBS to offer “60 Minutes” content on the site after the Sunday night broadcast. That includes news packages from the show, expanded segments and interactive elements such as maps, a reporter’s notebook, blogs and photo galleries.

To succeed online, a portal must meet the needs of advertisers too. Google and Yahoo possess those capabilities, Mr. Richmond said. In particular, Google has an opportunity to leverage its dominance in search advertising in its Google Video Store.

“One of their core competencies is this ad words engine. … Google has an enormous opportunity with video that’s ad-supported, and its consumer-paid approach is not the optimum one,” he said.

In other words, in the same way that Google sells sponsored links for certain searches today, it could do the same for Google Video-selling either video spots or text links related to that video.

Video search is also critical. That’s an area where AOL has taken a lead via its recent acquisition of Truveo, a best-in-class video search service, Mr. Richmond said.

At any given time AOL offers more than 20,000 licensed and originally produced video assets on its site, and its search engine draws from about 4 million video assets available on the Internet that are indexed through AOL’s Singingfish and Truveo search services, said Kevin Conroy, executive VP for AOL Media Networks.

Video aggregators must also take into account the content providers whose videos drive their offerings. Content providers expect to generate incremental revenue through advertising and pay-per-view models, Mr. Richmond said. That’s why he advises portals to include transaction processing capability for consumers, such as Google Video and iTunes have installed.

In July AOL will introduce video content to download for a fee, along with its existing ad-supported video service, Mr. Conroy said.

Content Providers’ Strategy

Content providers are capitalizing on broadband video via their own broadband channels and also by syndicating content to portals, as Scripps Networks has done with MSN and Comcast.net. Scripps also is talking with other broadband video distributors, said Ron Feinbaum, senior VP and general manager for Scripps Networks Interactive.

“We have content and we want to distribute it where users will find it,” Mr. Feinbaum said. “We want to put our content where we will drive eyeballs. You have to be in all these places. You can’t just put your chip on one number,” he said.

The key to success as a video portal comes with high-quality programming, video search, playback and availability to other devices, Mr. Conroy said. The site should also be easy to use. AOL, for instance, organizes video into categories and channels each day. AOL offers originally produced content, music videos, movie trailers, TV programming, including its In2TV service, and other content.

Incumbent cable operators should follow the practices of the group of five, Mr. Richmond said, such as making content more interactive.

“Cable operators should be asserting themselves much more aggressively in terms of developing these broadband video experiences they can call their own,” he said.

Despite being well positioned as the new networks of broadband, the group of five still has work to do. For instance, the ad breaks in In2TV aren’t totally clean yet, Mr. Kelly said. MPG client Hershey’s is an advertiser in In2TV. Google Video also needs to add more functionality to its service, he said. 

Suggestions for Cable Operators

Cable operators should put more focus on building their broadband video offerings on their online portals, according to a new report by Broadband Directions. Here are some initiatives operators should undertake, the report said.

  • Partner with any or all of the following: cable networks, broadcast networks, online publishers,

    offline publishers, new video aggregators.

  • Implement an ad-supported model for video as well as consumer-paid models.

  • Implement robust video search capabilities through their portals.

  • Integrate access to broadband video through their set-top boxes.

  • Incorporate navigation to broadband video offerings in their electronic program guides.

  • Provide a method for downloading broadband video from set-top box to portable video player,

    as EchoStar has begun doing with PocketDish.