Phil Leigh

If you would like to learn just how rapidly consumers are gaining interest in obtaining unlimited Internet access on their TVs, this podcast is for you.

We have long predicted that consumers will ultimately want unlimited Internet access of their TVs. It enables them to watch any Internet video in a lean-back viewing experience from their living room sofa. Moreover, given a remote mouse and keyboard, it empowers them to use the TV as a giant window into the Internet for any purpose, including e-mail, online shopping, or Web surfing.

Since at least the start of this year we have repeatedly noted that consumers are discovering how to get such access by connecting their laptop computers to their TVs. It’s an “under the radar trend” not officially promoted by any of the computer makers, but appears to be getting exponentially more fashionable. In short, we believe the trend will become a “forcing factor” leading set manufacturers to offer either (1) browser-centric TVs, or (2) TVs with an abundance of free applications permitting users to watch videos from the associated Websites.

The growing popularity is partly inferred by way of proxy. Specifically, last March we posted an instructional video on YouTube describing “How to Connect PC-to-TV”. Initially we were getting less than 30 views per day, but in October the daily average was about 135. That translates to a 26% compounded monthly increase despite a summer slow-down.  Put another way, traffic was doubling about every three months. If the trend continues, daily viewership could rise to 270 by the end of January and to over 500 by the end of next April.

When new factors obtain a green-field opportunity, they tend to grow exponentially during the early periods. Examples include bacteria in a petri dish, influenza virus among people, members of a Ponzi scheme, and nuclear chain reactions. Technologies that eventually become mass market standards also exhibit exponential growth in early adopter phases. Examples include, radio, television, railroads, automobiles, portable phones, air travel, and many more.

In our analysis, the growth in consumers attaching laptops to their TVs is also likely to be exponential. Whether the function is 26%-per-month, or some other pace, remains to be seen. One possibility is illustrated by the chart below which projects the viewership of our instructional video based upon the best-fitting exponential equation provided by Microsoft Excel software.

Growth in Video Views: "How to Connect PC-to-TV"

The exponential trend-line is defined by: Y = 1,059e (exp.)0.1683x

where Y is the number of monthly views and X is the number of months since February, 2009.  The equation predicts that next March our instructional video will have 9,400 views as compared to 4,150 in October and 811 last March.

While the increasing viewership of our instructional video is only a proxy, the numbers are large enough for statistical inference. In short, consumer interest in getting unlimited Internet access on their TVs is rapidly increasing.

It is important to understand that others posted similar instructional videos at about the same time, meaning that ours is not the only proxy. For example, this one had traffic growth that was about 70% faster thereby implying that consumer interest in unrestricted Internet access at their TVs is increasing even more quickly than the above graph indicates.

Phil Leigh

During the first three decades of the twentieth century the most promising invention was radio.

Scientists could see a clear evolutionary path for the technology that would revolutionize everyday life. The trip from the dots-and-dashes of Morse code, to audio transmission, and eventually to television, was all a matter of learning how to manipulate the electromagnetic spectrum. Unlike a fanciful speculation like teleportation, such things were undeniably possible within the theory underlying Maxwell’s equations.

In 1912 the day following the rescue efforts prompted by Titanic’s SOS signals, American Marconi shares jumped in price on the stock exchange. From 1919 to 1929 revenues for RCA (Radio Corporation of America) rose from $2 million to $180 million, translating to a compound annual growth of nearly 60%. In 1928 RCA stock increased from $80 to $420 per share. It had formed the National Broadcasting Company in 1926. From a growth and stock perspective RCA was the Apple, or Google, of its time. But unlike (I trust) today’s Apple and Google it would compromise its innovative instincts in a Faustian bid to hold back the clock.

Entering 1929 everything looked rosy from both a business and technological viewpoint. Recorded music was at the threshold of major advances from the pending launch of high quality vinyl long-playing standards. Two young television companies, Jenkins Television Laboratories and Television Laboratories, Inc., issued public shares. Both were respectable, although Jenkins utilized a mechanical image scanning technique that was much inferior to the CRT methodology developed by Television Labs. Despite the promising vantage point, broadcast television would not become a reality for another 17 years.

Two developments strangled television in the cradle. One was the economic depression which also destroyed consumer demand for new recorded music formats. The second was RCA’s efforts to monopolize television. Companies like Jenkins and Television Labs found it hard to maintain funding as the financial markets collapsed. In 1932 RCA bought a nearly bankrupt Jenkins and put its technology on the shelf.

Essentially, RCA was making too much money from radio to welcome the advent of television. For example, despite the Great Depression radio advertising grew from $27 million in 1929 to $185 million in 1939, thereby recording a 21% compound annual growth rate. Simultaneously, NBC grew even faster as it increased its share of stations.

Since RCA controlled nearly all key wireless patents competitors could not introduce new products without licensing at least some RCA rights. In the matter of television, however, RCA faced a formidable rival at Television Labs where founder Philo Farnsworth pioneered CRT scanning. Ruthlessly, RCA attacked Farnsworth’s company with a multi-year barrage of legal patent challenges designed to bleed them white financially. When Television Labs gained temporary funding from Philadelphia Storage Battery (Philco), RCA threatened to deny renewal of key licenses for Philco radio products.

The Farnsworth-RCA struggle unmistakably echoes the David-and-Goliath drama. For example, as a boy Philo entered the Naval Academy with the second highest entrance examine score, but dropped out after a few months to focus on television.  Despite having no college degree he was funded by San Francisco businessmen who unwittingly became the first venture capitalists. To demonstrate the safety of air travel for advantageously speedy business trips he took his wife aloft only to have her shout, “If you don’t make (the pilot) land, I’ll jump!”

While the radio Goliath did not exactly win, its holding action combined with the Great Depression and the advent of World War II, delayed commercialization of television for nearly two decades. By that time Farnsworth was sadly alcoholic and worn out.

Today the situation is similar. Revolutionary media changes are predictable based upon Internet and semiconductor technologies.  Unfortunately, we have stupidly led our economy into great difficulties. We bought houses we could not afford based-upon the obvious folly that prices would always go up and we could sell for a profit to an even greater fool. Our bankers lent money to unmerited borrowers simply because the lenders could divert the risks to the taxpayer while keeping all the rewards. We let ourselves forget that things that can’t continue forever, won’t.

While the stock market recovery over the past year suggests that things might soon return to normal, rising unemployment and thinner consumer wallets cannot be ignored. No matter how promising our innovative products and services consumers need money to buy them. The new “normal” is not going to be so comfortable.

Simultaneously, much like RCA in the 1930s certain powerful companies today would welcome a delay of innovations. Again, like RCA, they typically only want to compete in the court room or in Washington. They don’t want any changes unless they make them.

Before he died in 1971, Farnsworth recovered from alcoholism and drug addition. Occasionally he was able to take on the role of obscure but venerated industry statesmen. When asked what he thought would be the future of television, he responded with a question:

“What do you want it to be?”

“If you can imagine something, sooner or later you may achieve it; conversely if you don’t imagine it, then there is no hope of it becoming a reality.”

The natural evolution of media is toward the Internet. The advantages of immediate access, collaborative contribution, and massive economical distribution are overwhelming.

Is that what we want media to be?

To learn more about how your business can exploit or adapt to such changes, feel welcome to contact us. You may also want to consider buying our research reports Third Generation Television and Future Developments in Video Advertising.

Phil Leigh

Will consumers pay to watch TV shows and movies at the hulu.com website?

Hulu.com’s website hosts popular TV shows and movies after they have been released normally. Owners include Disney, NBC-Universal, and News Corporation (Fox). Viewers can watch shows for free but in exchange must also watch commercials since the videos are streamed and not downloaded. Last month, Chase Carey who is the President of News Corporation said that Hulu should start charging fees sometime next year. Presumably he envisions a premium subscription service providing more content or viewing time in exchange for a monthly fee.

There are two reasons to be doubtful about the success of such a plan. First, as author Matt Ragas put it, “We all love the information highway, but we don’t want to pay a toll every five miles.” Second, incumbent media companies may be overvaluing their own content.

Matt’s remark led me to examine my own subscriptions which are summarized in the accompanying table. Already I pay over $220 monthly for telephone, Internet, and video entertainment. Other services under consideration would advance the total to about $265 monthly.  Such an analysis makes me look for ways to cut, instead of add, services.

Phil's Monthly Subscription Fees

Naturally, I’ll focus on the bigger numbers first which come from the cable and wireless providers. However, if The Wall Street Journal (owned by News Corp)   editorial viewpoint prevails, the carriers will likely increase ISP fees even higher. That leaves consumers with thinner wallets to buy additional services from Hulu or anyone else. Even if cable and wireless charges don’t go up, consumers may calculate that they’re already paying enough in service fees.

Readers of the Baltimore Sun seem to be strongly opposed to paying for hulu.com access. A polling button on the newspaper’s website reveals that they voted 20-to-1 against it. You can see the results and review reader comments here.

As for content value, the recent success of Paranormal Activity might serve as a reminder to media producers that we characteristically undervalue the works of people who are not like us. It’s reported that the movie was set in a single San Diego home and produced for $10,000. By the day after Halloween it had grossed over $80 million in box office receipts.

Much like Internet publishing demolished the value of the printing press, low cost video cameras combined with computer-based film editing and an abundance of people seeking stardom and film-crew careers, necessitates an introspective reassessment of Hollywood’s self worth. Paranormal Activity is more than an isolated echo of The Blair Witch Project. Years from now we’ll look back to see it as data point in a connect-the-dots trend line pointing toward a future of content abundance.

To learn more about how your business can exploit or adapt to thye future of media, feel welcome to contact us. You may also want to consider buying our research reports Third Generation Television and Future Developments in Video Advertising.

Download to iPhone or iPod

If you want to learn how to set-up a Google AdWords account and start placing ads to sell merchandise from your website, this video is for you.

Perhaps the best way to teach others how to use Google AdWords is by concrete example. Thus, today’s video shows how we set-up an AdWords campaign to sell copies of our market research report, Future Developments in Video Advertising.

First, we show you what the report for sale looks like.

Second, we illustrate the difference between Google AdWords links and Google Organic search results.

Third, we demonstrate how to set-up a “landing page” as an entry point at your website for those who click on ads deployed thorough AdWords. There are three features to the page. One is a video summarizing five major conclusions in the market research report offered for sale. Another is a link to a free prospectus requiring those clicking on it to first provide name, email address, and phone number information. This transforms them into sales leads. Finally, a text summary of the video is available for those who chose to read a synopsis of the report as opposed to watching a video summation.

Fourth, screen capture software provides step-by-step video instructions describing how to set-up an AdWords account and organize your first campaign. Factors covered include (1) geographic targeting, (2) network selection, (3) device inclusion, (4) key word selection, (5) pricing, (6) ad construction, (7) calls-to-action, (8) budgeting, (9) weekend exclusion, and (10) landing page targeting, among others.

Google’s third quarter financial results document that AdWords use is leading the way as a sign of overall economic recovery. In short, it appears that advertisers are first returning to the Internet before incumbent media channels such as TV, radio, newspapers, and magazines.

This could have profound implications for the future of advertising in general. Not only do sponsors seem to prefer the Internet per se, but they may also become conditioned to the AdWords practice of only paying for ads that users actively select. As applied to future video advertising, sponsors may come to demand that they only pay for video ads that actually get watched.

For example, they recognize DVR users often fast-forward through commercials. But if sponsors apply the AdWords convention to video commercials, they’ll only pay for commercials that get watched. This could be the subtle, but most significant, implication of the fact that AdWords advertising is leading the recovery of the entire advertising industry.

To learn more about how your business can exploit or adapt to such changes, feel welcome to contact us. You may also want to consider buying our research reports Third Generation Television and Future Developments in Video Advertising.

Phil Leigh

Inexorable expansion of the Internet results in a lockstep growth in anxiety about threatened obsolescence among incumbent media participants. Yet whatever the changes affecting media, storytelling remains the timeless value.

Even before humanity learned how to record them, the Greek Myths were passed down from generation-to-generation by oral repetition. Itinerate poets travelled around the Eastern Mediterranean retelling the stories of The Iliad and The Odyssey before Homer wrote them down about 3,000 years ago. While the media changed from spoken word to written text, the public appetite for stories was undiminished and may have even accelerated.

Sometimes new media tells a story better than the old way, sometimes just about as well, and sometimes worse. Many of the screenplays of popular movies are based on earlier novels. Almost by habit, those who had read the novels often advise us that the book is better than the movie.

A good example is Bonfire of the Vanities. Many consider it to be one of Tom Wolfe’s best novels and it was hugely popular. Yet as a movie it flopped at both the box office and by critical acclaim. Failure of the movie is odd considering the strength of the story and crew for the film.  The director had earlier hits such as Scarface and The Untouchables. The cast included Tom Hanks, Bruce Willis, Morgan Freeman, Kim Cattrall, Melanie Griffith, and Alan King.

However, sometimes new media tells the story just about as well as the prior method. For example the film version of Pat Conroy’s The Prince of Tides seemed to measure-up to the novel. Perhaps it was partly because it was the only time that Conroy wrote his own screenplay, but Nick Nolte and Barbra Streisand played the lead characters about as I had imagined them.

Finally, there are times when newer media tells the story better as in the 1960 film Home from the Hill. Based on a novel by a now nearly forgotten Texas author named William Humphrey, Vincent Minnelli used his actors with skill to draw the audience into the thoughts and emotions of the on-screen personalities. The screenplay added a character thereby changing the plot, but the changes seemed consistent with the author’s intent and augmented his message.

Veteran actors Robert Mitchum and Eleanor Parker seemed born for the roles. Like Ann Margaret in Bye Bye Birdie, George Hamilton provided a debut performance in Home from the Hill that he never came close to matching in his long subsequent career. Similarly, a youthful George Peppard’s acting was never better.

In short, from childhood onward we reflect an insatiable hunger when we request “tell me a story.” Whatever the medium, a narrative can be adapted to fit into it with greater or lesser results, depending upon how well the creator uses the capabilities of the medium.

Dr. Joseph Turow, University of Pennsylvania

If you would like to learn what the public says about their attitudes toward behaviorally-targeted advertising, this audio interview is for you.

A recent study conducted by the University of Pennsylvania and the University of California at Berkeley concludes that a two-to-one majority of Americans do not want marketers to tailor advertisements to their interests. The 1,000-person survey further indicates that nearly 90% of us particularly object to anonymous tracking of our Web-surfing for purposes of creating behaviorally-targeted ads.

Our interview today is with Dr. Joseph Turow of the University of Pennsylvania who was one of the authors.  

Despite the study’s conclusion it appears that consumers actually respond favorably to such ads. For example, both Amazon.com and Apple’s iTunes Store are hugely popular, yet both serve ads based upon our prior purchases and peregrinations within their websites. At Amazon.com the ads are presented as “suggestions”, but they are nonetheless advertisements. Such ads are thought to have some of the highest click-through rates on the Web. Similarly, the newspaper industry reports that the behaviorally targeted ads provided by Yahoo are among the most effective on newspaper websites.

Although we sense that Dr. Turow would disagree, we are inclined to believe that the survey results partly reflect a natural human tendency to reject changes that we ourselves do not initiate. For example, a dozen years ago many parents tried to deny, or restrict, Internet access to their children. Today they recognize that the Net is as indispensible as TV. Although concerns remain, parents are unlikely to totally preclude Web access to their kids.

Consider also that many terrestrial retailers have been tracking our behavior for years, but there seems to be little objection. For example, I get regular emails from Borders Books featuring special offers. Most of the time I simply delete them, but in a recent instance I was browsing at the store and recalled that I had received a 40% discount offer on any book of my choice. While at the store I read a few pages of Hallelujah Junction which is an autobiography of the contemporary classical composer, John Adams. When I got to the checkout desk, I merely showed the clerk the email discount offer on my iPhone. He said it was good enough, meaning that I did not have to print-out the coupon. In short, I saved 40% on the book.

Furthermore, while reading it at home I discovered that I could sample some of Adams’ operas (Nixon in China and Dr. Atomic) on YouTube. The YouTube samples led me to Amazon.com’s download store where I purchased the symphonic version of Dr. Atomic. Unfortunately it was only available as complete album, so I had to also buy a second composition that I really did not want.  The second selection turned out to be okay, but I resented the fact that the label forced me to buy the entire album. I feel confident that label executives would similarly resent being forced to buy a $10,000 dealer-applied rust-proofing job merely because the new car they are buying is in short supply.

In sum, everybody benefited from the behaviorally-targeted email from Borders Books. First, I got a 40% discount on a book that I would otherwise not have purchased at Borders. Second, YouTube got more traffic and a proselytizer for their Long Tail music videos. Third, John Adams connected with a potential buyer via the free YouTube samples. Fourth, the record label sold the music in the form of a $10 album instead of three individual tracks that would have generated only $3 in sales. (We may have more commentary on this in a later post).

In conclusion, the basic premise of behavioral-targeting is to place more value in what people do as compared to what they say. Thus, maybe Turow’s study is more about what people say than what they will do.

Download to iPhone and iPod.

If you want to learn one way that YouTube is extending its competitive lead, even against rivals like Hulu, this video is for you.

If you watched last week’s video podcast as a stream from our website, you may have noticed that we switched to the YouTube player from our previous Flash player. The change reflects the fact that iPhones and iPods will not display native Flash streams. However, given YouTube’s popularity, Apple developed a special application enabling the units to display YouTube Flash videos. Since Apple has sold about 40 – 50 million of the devices, we want to make it as easy as possible for users to watch Inside Digital Media on their iPhones and iPod Touches.

Prior to the change, Inside Digital Media videos were available on iPhones and iPod Touches as either downloads or free subscription podcasts. Now, you can merely visit our website from such devices via the Apple Safari browser and touch on the videos you want to watch. The rapid growth of iPhones and iPod Touches provides a market that we do not want to miss. This is especially so because the units can be attached to TVs with $50 cable assembles thereby providing users a way to watch our videos on their TVs.

The implication of YouTube’s privileged status on the Apple portable units extends well beyond Inside Digital Media. About 80% of websites with Internet Video rely primarily upon the Flash format, including such otherwise potentially powerful YouTube rivals as Hulu.com. Their videos also will not play on Apple’s portable units, unless the websites choose to use the YouTube player. But, the chances of competitors like Hulu adopting the YouTube player are about as slim as a Cherokee Indian getting elected Pope.

The situation creates a dilemma for the Hollywood studios when they choose to make their movies and shows available on the Internet as advertising-supported streams. If they stick with Hulu, then they forfeit a large part of the portable screen market. If instead they distribute the shows via YouTube, then they pick-up the iPhones and iPod Touches, but they also might find that users of the portable devices attach them to TVs so the videos can be watched in a lean-back viewing environment. Presumably, the studios have instructed Hulu to avoid such a scenario, because they don’t want their Internet-streamed shows to be viewable on the TV.

No doubt, the Cable and Satellite companies feel even more strongly about controlling Internet video streams to the TV. It’s the central reason they are trying to move forward with the TV Everywhere initiative. TV Everywhere is seeking to become an Internet platform containing nearly all of the popular TV programming available, but only permits viewers to watch the shows if they are already subscribers to conventional CATV, Telco, and Satellite video services. The plan is to permit viewers access only if they can be “authenticated” as conventional subscribers.

Unfortunately for TV Everywhere, authentication is going to be a hugely complex problem, largely because of the wide disparity of proprietary networks that have built-up over the years in the CATV industry. However, adding portable devices, such as the iPhone and the iPod Touch compounds the complexity.

As the video incumbents try to work some magic to hold back the clock, everyone else will increasingly post their videos to YouTube. In the end, even the Hollywood studios may find it in their best interests to make content available on YouTube simply because YouTube videos will play on more devices.

In short, you can’t have TV Everywhere unless is plays everywhere. Presently, against its prime rivals, YouTube has the singular advantage of playing the vigorously growing number of iPhones and iPond Touches.

To learn more about how your business can exploit or adapt to such changes, feel welcome to contact us. You may also want to consider buying our research reports Third Generation Television and Future Developments in Video Advertising.

Download to iPhone and iPod here.

Last week I was on a panel at a conference for the Entertainment Law Institute of the Texas Bar in Austin. Our panel topic was “The Future of Video Distribution”. This video podcast summarizes my presentation.

Andy Grove, who was the last of the three original Intel leaders to leave, liked to encourage employees to ask “What if?” questions. He felt they could lead to new discoveries about future change. Thus, we ponder, “What if all video were on the Internet instead of Cable TV?”

Consider the impact on three constituencies, (1) Consumers, (2) Sponsors, and (3) Copyright Holders.

Consumers will benefit in four ways. First, all programs will be available on demand. Broadcast schedules will be irrelevant and there will be no need to remember to TiVo anything. Second, shows will be viewable on any screen from mobile phone to TV. Third, content will be searchable. You’ll find what you want to watch by Googling it. Fourth, the Long-Tail will stretch to near infinity.

Sponsors gain a number of advantages. First, viewership will be measurable. Second, commercials can be held accountable. Sponsors might be able to choose to pay for only those that actually get watched. Third, ads can be interactive thereby generating sales nearly instantaneously from the viewers. Fourth, ads can be addressable in a variety of ways including demographic, geographic, and behavioral targeting.

Copyright Holders also stand to benefit. First, Internet distribution provides a Global market. Second, revenue opportunities for Long-Tail content become viable because there is no need for a minimum economic production run as would apply for DVDs. Hollywood studios will be able to sell downloads from their back catalog that are seldom available in the form of physical DVDs. Third, consumers will be able to make impulse purchases since the Internet is constantly available 24/7. Fourth, the Net provides opportunities for multiple revenue streams. Among them are (1) rentals, (2) downloads, (3) subscriptions, and (4) advertising.

Inevitability. For the past 30 years we’ve been gradually attaching an increasing number of appliances to our TVs. In the first half of that period the devices were not Internet-connected and included items like Cable Set-Top boxes, Video Tape Players, and Video Game Consoles. However, during the last 15 years most such appliances are Internet-connected. Examples are laptop computers, Apple TV, (modern) Video Game Consoles, and even the iPhone and iPod.

As a result, the TV is being transformed into a dual function device. In one context it remains a TV as we have always known it, but in a second it is becoming a giant window into the Internet Cloud. Thus, the question is not “What if all video were on the Internet?” but instead is “When will all video migrate to the Net.”

To learn more about how your business can exploit or adapt to such changes, feel welcome to contact us. You may also want to consider buying our research reports Third Generation Television and Future Developments in Video Advertising.

Phil Leigh

If you would like to learn how authoring will change in the next decade, this audio is for you.

Recently I encountered a newly published book about the future of business in the Internet Age. Looking at the hardcover I found myself figuratively scratching my head. I could not understand why an expert would choose an aging form factor to describe the capabilities of an emerging medium. I was asking myself, “Why does this guy fail to structure the ‘book’ in a way that uses the medium itself to demonstrate the new applications he wants to promote?” Put another way, “Doesn’t a conventional book on such a topic unintentionally message the reader to ‘do as I say; not as I do’?”

By contrast, authoring Third Generation Television and Future Developments in Video Advertising convinced us that our reports could much more effectively demonstrate future concepts by employing the multimedia characteristics of the Net itself. Thus, we sell them as PDFs, but each has embedded links to videos and animations illustrating the newer concepts. Sure, buyers can print-them-out and read them as paper documents, but they can also watch and see for themselves what we wrote about.

Furthermore, our experience leads us to reason that such is the future of authoring in general. Later in this Century observers will likely glance back at the second decade to conclude that authoring was transformed “during the teens”. Authors will routinely use three Internet characteristics that are unavailable with paper and ink.

First, is mixing media, including text, graphics, animation, video, and audio in whatever context is most appropriate. Second is ever-present access to the knowledge base of the infinite mind of the Internet Cloud. Third, is interactivity thereby permitting audience contribution to the narrative.

The trends are already in place, they’re just not yet obvious. Increasingly blogs are embedding YouTube videos. The most successful ones enjoy active communities of visitors posting comments. The same is true for the online versions of newspapers such as The Wall Street Journal and The New York Times.

The changes are exponential in the sense that they are happening at a steady rate. On a logarithmic chart, exponential change traces a straight line, but on an ordinary graph it traces a parabolic curve that rises ever-steeper with the passage of time. In the early periods exponential change is nearly imperceptible, but in the later stages it becomes overwhelming.

For example, consider a pond with a single Lilly pad. Introduce a growth function whereby the number of pads doubles everyday such that at the end of 30 days the entire pond is covered with pads. On the 27th day fully 85% of the pond remains open water, but in the final three day the exponential (doubling) growth function results in a completely pad-choked pond. Changes in “authoring in the teens” will be similar.

Such a transformation follows logically from the nearly forgotten wisdom of two Marshall McLuhan principles. First, “content follows form.” Second, “the medium is the message”.

If you would like to learn more about the future of media, consider our market research reports, Third Generation Television and Future Developments in Video Advertising.

Phil Leigh

What if sponsors paid for video ads only when they are actually watched?

As John Wanamaker put it long ago, “I know that half of my advertising is wasted, I just don’t know which half.”

For over half-a-Century Nielsen audience rating have supposedly addressed Wanamaker’s question for television ads. It’s the foundation supporting a $70 billion annual business. It’s supposed to tell advertisers which programs viewers are watching and for how long. Given present computer technology it’s downright stunning when one learns Nielsen’s techniques for collecting its data.

With so much money on the table there’s a lot at stake. Some industry constituents want to update the measurement technology while others want no changes at all. Any changes are likely to upset somebody’s apple cart. That’s probably why progress in measurement methodology has moved at the pace of continental drift. Nonetheless, sponsors pay the bills and ultimately they’re going to demand more for their money.

Nielsen’s flagship service tries to estimate the viewing habits of our entire nation from a polling process based upon imperfect diaries of 18,500 homes. Given the sample size, three-fourths of the 400 cable and broadcast networks are simply not watched enough to be accurately measured. Except for the top 20 markets, Nielsen mostly relies upon paper-logs that panel members (i.e. participating consumers) maintain on the honor system. Even in larger markets where Nielsen provides electronic log-entry, the company acknowledges that users sometimes press the wrong key resulting in a measurement error of up to eight-percentage-points.

Owing to the shortcomings of Nielsen data, a number of vendors sell supplemental information. TiVo is one example. With several million DVRs deployed across the nation they provide more granular and real-time data. For example, TiVo can tell how long a viewer watches a commercial.

Similarly, the CATV industry hopes to provide far more detailed and accurate data via its Project Canoe initiative. Unfortunately, Project Canoe faces a significant technical challenge. Data formats are inconsistent among different CATV systems. Some set-top boxes are incapable of capturing data and passing it back to the head-end. Each Multiple System Operator (e.g. Comcast, Time-Warner, etc) has proprietary elements in its networks. Proprietary inconsistencies are amplified to the nth degree considering that each MSO is by definition an amalgamation of independent systems typically acquired over decades.

In sum, the problem of getting universally accurate measurements out of the legacy CATV and Satellite platforms is going to be as convoluted as the Gordian Knot. Ultimately, the solution could well be to simply cut the knot by putting all video on the Internet. Standards on the Net are decades old, uniform, and well understood by an abundance of developers all over the planet. Measurements can be in real-time and sliced & diced nearly infinitely.

Most significantly, Internet sponsors are increasingly demanding Cost-Per-Action (CPA) advertising. Google AdWords conditioned them to expect that it is only necessary to pay when a visitor clicks on ads. Once video resides on the Net, sponsors may insist that they only pay for video ads that get watched.  The new paradigm will nearly eliminate the utility of audience measurement statistics as we have known them. We’ll want different data, but it will be more readily attained on the Net where the granularity and accuracy of measurement is infinitely better.

To advertising executives who don’t want to be accountable for the performance of their ads, such a paradigm shift is so horrible as to be unthinkable. So they may choose to simply avoid thinking about it. To them, it’s a creation of Satan anyway, more destructive to their business as the ability of the iPhone to display its Internet Videos on a television screen. Yet, when sponsors pay for video ads only when they actually get watched, the ghost of John Wannamaker will break into a happy grin.

Adrian Ludwig of Adobe Flash Marketing

If you would like to learn how Adobe plans to extend Flash Video’s market leadership on computers onto other Internet-connected devices such as mobile phones and consumer electronics appliances, this interview is for you.

About 80% of today’s Internet Video is streamed in Adobe’s Flash format. That’s because nearly all computer users installed a Flash player. Consumers also like that Flash provides an “instant-on” playback experience, thereby avoiding the wait for a download.

However, Apple’s iPhone does not support Flash. Even at YouTube, where Flash dominates, iPhone subscribers must use a special prepackaged application to watch the videos. When iPhone subscribers visit other websites streaming Flash, they simply cannot see the videos. As a concrete example, iPhone subscribers can watch Inside Digital Media video streams at our YouTube channel, but to get them directly from our website they must either subscribe to the podcast or click on the “download to iPod and iPhone” link.

Obviously, Adobe is worried about the iPhone’s avoidance of Flash. The situation creates a conflict that is, as Don Corleone might put it, forcing the two sides to “go to the mattresses”. Our guest today is Adrian Ludwig who is the Group Manager for marketing Flash. His objective is to get Flash as widely deployed on mobile phones and consumer electronics appliances as it is on computers.

In the marketplace, Adobe’s efforts are termed the “Open Screen Project” thereby stressing the fact that the Flash platform is open to independent developers. Thus, Adobe is giving developers more innovative freedom than enjoyed in the iPhone environment where applications can be rejected by Apple. Adobe hopes that the strategy will enable Flash to become a standard among the rapidly growing number of newer Internet-connected devices just as it did with computers.

Apparently there are two accepted explanations for why the iPhone fails to support Flash.  One is that the AT&T wireless network is already overtaxed and cannot hope to accommodate all of the video demand that a Flash phone would induce. AT&T has mixed feeling about this explanation. On one hand it puts them at blame, but on another it gives them an argument to justify high subscription fees to finance capital investment. Our reflex reaction is to doubt the validity since travelers to Asia are able to make video phone calls in a number of countries where wireless Internet charges are often less than in the States.

The second explanation is that Apple wants to insure a good video experience for iPhone subscribers.  Since Apple cannot know the bandwidth provided by each of the websites streaming Flash videos, they cannot predict how satisfactorily, or unsatisfactorily, they’ll work. Therefore, Apple prefers to have the video first downloaded to the iPhone and then played-back locally where bandwidth vagaries are eliminated.

In our interview, Adrian discusses how Flash has been deployed on a number of Internet-connected devices aside from computers. Among them is the HTC Hero cellular phone that uses Google’s Android operating system. Unfortunately, Adrian declines to discuss why the iPhone fails to support Flash. Thus we are left to connect the dots without the benefit of his perspective.

Recently The Wall Street Journal revealed that YouTube is in discussions with selected Hollywood Studios to offer movie rentals as streams. While a number of industry observers conclude there’s not much opportunity here, we disagree. The pessimists gravitate toward three arguments.

First, they suggest that few consumers will pay to watch rentals on a computer screen. Second, they conclude that the video quality of streamed-through-the-browser video will not be good enough. Third, they assume that few YouTube users will pay for content.

The first argument ignores that 10 million Americans have connected computers to their TVs in order to watch Internet Video on a large screen. In our analysis, YouTube movie rental availability will accelerate the growth of this “under the radar” trend.

In the typical configuration a laptop computer is attached to the TV thereby acting as the TV’s Internet Gateway over a WiFi home network. Given a wireless mouse and keyboard the user gets a lean-back viewing experience 15 – 20 feet distant from the screen. Generally, only the uninitiated assume the set-up is too geeky as documented by numerous  instructional videos.  Ultimately the laptop-as-Internet-Gateway becomes a forcing-factor leading to a new form factor such as browser centric televisions.

Upon examination the poor picture quality argument also falls flat. One reason is that YouTube recently started permitting users to upload high quality video formats. No doubt, the attraction of premium content was one motivation. More importantly, to a great many viewers the “instant on” characteristic of streamed-within-a-browser video trumps the marginally improved picture quality of a time consuming download. Once people decide they want to watch a movie, they want it “right now”. Unless they’re using a monstrously large screen there’s little video quality difference anyway.

The picture quality argument is echoes disparaging MP3 comments from the record labels. To their regret the labels learned that convenience trumps quality.

Finally the viewpoint that YouTube users won’t pay for rentals merely because they previously haven’t ignores the concept of the “latent market”. The analysis is much like the one that prominent consultants provided IBM in the 1950s when they advised the office equipment maker to avoid investing in Xerox.

Specifically, Arthur D. Little reasoned that since the entire office copying market at the time was about $200 million, Haloid-Xerox stock was overpriced even if they captured a 100% share. The consultants failed to realize that the market for copies on plain paper was gigantic by comparison to the chemically treated paper copies previously available. In his memoir, My Years With Xerox the R & D chief at the time explained that Xerox repeatedly faced such skepticism when it sought business partners. He characterized the company’s journey as “the billions nobody wanted” and employed the expression as a subtitle for his book.

About a decade later, Forbes Magazine listed Chester Carlson, who invented xerography, as one of the World’s wealthiest men. Years afterward Carlson’s widow corrected Forbes and explained that he anonymously gave away most of their money over the years.  But that’s another story, and a good one.

In short, a better measure for the potential dimensions of a YouTube movie rental market is the annual DVD rentals business which approximates $4 - $5 billion in the U.S. alone. The added convenience of getting movies “right now” from our living room sofa adds a considerable “latent market”. The YouTube community is huge and constantly hungers for new content. Google claims that search queries on YouTube make it the second largest search engine. Such points are obvious to those routinely watching YouTube videos on their TVs.

Download to iPod or iPhone

If you would like to learn how to watch movies on your TV that were downloaded to your iPhone, this video is for you.

Every iPod or iPhone owner knows they can buy digital music at Apple’s iTunes online store. Most also realize they can rent or purchase movies and TV shows there as well. Finally, many are aware that numerous free video and audio podcasts, some including popular TV shows, are also available. However, few understand that it is not difficult use iPods and iPhones to watch the movies stored on the portable units through a conventional flat panel TV.

Today’s video shows how to do it.

Apple sells two types of cable assemblies that can connect the iPhone and iPod to a TV. One is termed Component and the other Composite. The Component assembly provides a higher quality picture, but it also uses more jacks. Both assemblies retail for $50.

At first glance, the wiring looks complicated for two reasons. First, it is best to provide an external power supply to the portable devices so they don’t drain their batteries. Second, and more importantly, Apple does not support the HDMI standard which can transport video and audio over a single cable. Thus, while both audio and video exit the iPhone and iPod from a single socket the constituent signals must be delivered separately to the TV.

In the Composite assembly video is input to the TV via a single wire and audio enters as a stereo signal via two more wires. The Component assembly inputs the video to the TV with three wires (one for each primary color) and also uses two pins for stereo audio.

A textual description makes it seem more difficult that it actually is. That is why we urge you to watch the video.

The fact that consumers can easily play through a television the movies and TV shows they downloaded on their iPhones and iPods has further implications. The public is becoming increasingly aware that the flat panel TV can also readily function as a giant monitor for a variety of Internet-connected devices. In addition to iPods and iPhones, other popular examples are laptop computers, video games, and specialized appliances like Roku. Ultimately this has profound implications because it induces a trend toward more frequent viewing of Internet Video on the TV.

If you would like to learn more about the future of media, please inspect the commentary and videos for our market research reports, “Future Developments in Video Advertising” and “Third Generation Television”.

Phil Leigh

If you would like to learn one way the record labels might reinvigorate their business, this audio is for you.

Everybody recognizes that the Internet radically transformed the recorded music business. Apple’s iTunes online store sells more music than any retailer having displaced Wal-Mart and Target. As a consequence pre-recorded CD sales are down over 50% from ten years ago when Shawn Fanning’s Napster was set-loose, even though it was later jailed. 

Less well recognized is that the iPhone has similarly impacted Digital Music. For example, consider its affect on Internet Radio. A leading Internet Radio service called Pandora introduced an application for the iPhone a year ago. Within a single month it doubled the number of new users registering daily from 20,000 to 40,000.

No doubt the numbers are even higher now. The iPhone makes Internet Radio portable. Many Pandora users jack-in the iPhone to their car stereo system as they commute to-and-from work, or anywhere they might drive.

Typically Internet Radio permits users to personalize “stations” based upon individual tastes. For example, a listener who likes Bruce Springsteen can set-up a “Bruce Springsteen Station”. Pandora then steams that user music tracks from Springsteen and similar artists. Moreover, users can “train” stations to even better suit individual tastes by clicking on a thumbs-up or thumbs-down icon for each track. With repeated interaction the station’s repertoire gets increasingly personalized thereby providing a way to discover compatible new music.

Unfortunately, if its public statements are to be believed Pandora is not making money. They’ve tried non-disruptive advertising, but few users click on the ads partly because they don’t see them since the service is primarily auditory. The company also captures a commission for sales of MP3s when users click through to buy tracks on iTunes but the resulting fees are small. So, Pandora started charging $5 monthly to listeners exceeding 40 hours a month. Unfortunately, the great majority of consumers will not pay that much for Internet Radio per se.

However, if Pandora were permitted to offer an on-demand subscription service along with its customary Internet Radio, the value increases significantly. Rhapsody, prepared just such an application for the iPhone and is awaiting approval.  To be sure, Rhapsody has not yet been an important success. One reason is that it competes with lower-priced subscription services. But at least equally important is that it has never been available on a popular portable device.

The record labels have long been fans of on-demand services. They like the recurring income the monthly fees provide. If iPhone-enabled successful Internet Radio stations like Pandora are permitted to augment their offerings to include on-demand access to a large catalog of recorded music, consumers may well respond favorably. The labels, Apple, and the stations would each capture a portion of subscriber fees.

Confessedly, Steve Jobs has been hostile to the very concept of an on-demand music service. However, now that Apple is their largest retailer, the labels argue that Apple must do something to help improve the industry’s prospects. They feel they’ve been in the penalty box long enough. Accordingly, there are unconfirmed reports that Apple may have something to say about this next week. Whatever Apple might do, the labels would help themselves if they provided reasonable licensing terms for successful Internet Radio stations like Pandora to augment their offerings with an on-demand service.

Steve Lang

If you would like to learn why one expert thinks Apple will introduce a tablet computer and what it might look like, this interview is for you.

Our guest today is Steve Lang who blogs about the future of media at MadMaxMedia.com. Numerous observers speculate that Apple will introduce a tablet computer but Steve’s analysis seems cogent. Not only does he predict such a product, but he also believes that it will use an operating system much like the iPod Touch or iPhone, as opposed to the Mac-OS. As a result it will provide a bigger screen to experience the touch-sensitive icon-based interface that has reached close to 50 million users of the iPhone and iPod Touch.

Such a device would mostly be used for Internet-centric computing such as email, web browsing, and media consumption. The bigger screen would be attractive for such applications as downloading movies from iTunes or watching video streams from YouTube or Hulu. When limited interaction is required, such as quick email responses, a virtual keyboard will be adequate, especially since the tablet computer will provide a bigger one than the iPhone. It should also be adequate for interaction on social networks such as FaceBook.  Users who need to create bigger documents, like multipage reports or spreadsheets, could attach a separate physical keyboard when needed.

The success of the Apps Store is another factor that could benefit a tablet computer based on the Touch-OS. Presumably all the apps would also be available on the tablet computer. No doubt some will be even more useful with a bigger screen. One example is the Amazon application for downloading digital books. The experience of reading a digital book on a tablet computer would presumably be much better than trying to read it on the small screen of an iPod Touch or iPhone.  Those who are considering the purchase of a Kindle, might prefer the more versatile functionality of a tablet computer for which digital books is only one of many applications.

Steve envisions the Touch-OS tablet will be designed to provide near desktop computer functionality.  It will be a general purpose device intended to obviate the need for such specialized units as those designed for Internet Video, digital music, home media centers, and digital books, among others.  It might use a 3GS processor with an approximate 10-inch display and High Definition video capability. Since Apple has developed its own lifestyle/productivity software applications, it could run versions of iWork, and iLife. Finally, it would easily synchronize with conventional Mac computers.

Steve estimates that an Apple tablet would be priced at $500 - $1,000. He reasons that it would be under Apple’s low-end laptop, but above the iPod Touch or iPhone. He speculates a market entry this autumn or next winter.

Phil Leigh

If you would like to learn how my media usage changed during a recent period of enforced idleness, this audio program is for you.

Owing to medical leave during the past two-weeks I have been relatively inactive at the office. This led to an increase, as well as a change in the pattern of, media consumption. Today’s podcast explains how.

The equipment and services available in my home include CATV and broadband Internet access along with a flat panel TV that is connected to both a TiVo and a laptop computer. The laptop functions as an Internet Gateway for the TV. Thus the flat panel unit can function as either a conventional TV or a giant monitor for the Internet-connected laptop. The selection-of-function is done with a conventional TV remote unit merely by pushing one button. When used as a monitor for the laptop the Internet Explorer browser is controlled from the living room sofa with a LogiTech remote mouse and keyboard.

On a typical day I would first check the TiVo “Now Showing” selections that had been recorded. About half the time I was not interested in watching the recorded shows most of which were selected by the TiVo service as opposed to ones that I programmed. If there was nothing in the “Now Showing” inventory, I would start channel surfing live TV in hopes of finding something worthwhile. Generally I could not locate anything worth a grown man’s time.

However, when I did, I would let the show buffer while I went to my home office to check email and read articles. After TiVo buffered about 30 minutes of the desired show I would return to the living room to watch it. The buffering normally enabled me to watch the entire show without having to look at any commercials because I would fast forward through them.

When there was nothing on TiVo or live TV that I wanted to see, I would go to my home office and search imbd.com for interesting movie titles. For example, I browsed the top 250 movies as rated by imbd.com website visitors and found 8 – 10 that I wanted to see.

To find them I would first check to see if the movies were available for rental from Amazon-Video-on-Demand through my TiVo. Only a couple of them were available. One I bought and the other I rented. Both were downloaded directly to my TiVo. The first download did not work and I had to call both Amazon and TiVo to get it fixed. The second one worked okay.

Second, if the movie was not available at Amazon-Video-on-Demand, I would search for it on free websites such as YouTube. Surprisingly, I found a couple of the movies there. They had to be watched in ten-minute sequential segments, but there were no commercials and it was free. As noted, with the laptop as Internet Gateway I was able to watch them on the flat panel TV screen in my living room.

Third, if nothing was available on TiVo, live TV, Amazon-Video-on-Demand, or places like YouTube, I would visit Hulu.com. Generally, on Hulu I chose to watch old movies.  Selecting titles was aided by the helpful reviews of Hulu.com subscribers. Once again, I watched them on the flat panel TV by using the laptop computer as an Internet Gateway. Although they were free, I had to endure the commercials.

Fourth, sometimes in the process of searching for movies to watch from the home office PC, I would discover long-tail content that was only available at websites like YouTube. For example, I read a fair number of novels each year and was able to find video interviews with some of my favorite authors. Generally, I watched them on my desktop PC, but sometimes I would watch them on the flat panel TV in the living room.

The experience left me with three major inferences.

One: We channel surf because we don’t like what is on TV. It is not a cliché to say of cable television, “Hundreds of channels but nothing to watch”. Channel surfing is a habituated practice that points to a future characterized by a video-centric Internet where all content is searchable and immediately available.

Two: After only limited exposure to services such as Hulu.com and Apple TV and Amazon-Video-on-Demand rentals, consumers are going to abandon video rental stores like Blockbuster. Their frequency-of-visits to Blockbuster will tail-off sharply.

Three: The Long-Tail is going to be far more important than the established media companies would like to think. If consumers can’t find your stuff conveniently at YouTube, Hulu, iTunes, Netflix streams, or similar services, they’re going to discover other shows to like.

If you don’t believe me, experience it yourself. Searching videos on YouTube is like channel surfing on steroids. Guys who channel surf the TV are already telling you their not finding what they want. Once they get habituated to surfing for videos on the Web via the TV set, the time they spend on CATV networks will steadily decline.

Phil Leigh

If you would like to learn the latest research about the audience for online video, this audio program is for you.

Last week the Pew Internet and American Life Project released new research concluding that online video is growing at a rapid rate and that a leading edge of users are migrating Internet viewing to the TV screens.  The data is actually about four months olds, so we presume that market penetration has advanced even further.  Among the findings are the following:

First, the popularity of video streaming websites such as YouTube and Hulu outranks many other headline snatching Internet pastimes such as social networking and Twitter. Whereas 62% of adults watched online video, only 46% participated in social networks and an even smaller 11% used Twitter.

Second, audience growth for online video streams has been swift. Over the 28 months from December ’06 to April ’09 the number of adults watching Internet video streams nearly doubled from 33% to 62%. Furthermore, an increasing proportion became habituated to watching every day. About one-third of those watching online videos view them daily as compared to only one-fourth in December ‘06.

Third, the practice of watching TV shows and movies online is growing at about a 100% annual rate. In April 35% of Internet users had viewed a TV show or movie online as compared to only 16% just over a year earlier in February ’07.

Fourth, a significant number of us are watching online videos on our televisions. Among those who watch TV shows and movies online, nearly one-fourth connected their computer to a television screen so they could view Internet video on their TVs. Pew estimates that 8% of all Internet users had made such connections as of April ’09 which equates to about 7.5 million users. Moreover, about 30% of males watching online TV and movies were doing so via the television as compared to only about 15% of females. Since men are often leading indicators of Internet technology adoption the 100% gender differential implies continued expansion of the practice.

Fifth, about one-third of those who have cut back on cable TV have “re-routed” their online video to the television.

Phil Leigh

If you would like to learn how newspapers and TV affiliates can generate incremental ad revenue by selling behaviorally-targeted Internet ads to local businesses, this audio is for you.

Behavioral-targeting is one of the keys to success in online advertising.  For example, consider how online merchants such as iTunes and Amazon.com are among the most successful websites in terms of translating visits into sales. There are two reasons why their conversion performance is exceptionally good.

First, visitors are obviously pre-disposed to buying since they are visiting an online merchant. But the second reason is more interesting and significant in terms of implications for online advertising. Consider how both Amazon.com and iTunes do a good job of suggesting alternative titles for visitors who arrived looking for related books or recordings. It is not uncommon for visitors to purchase the suggested alternate titles. The banners and texts that suggest such titles are examples of behavioral-targeted ads.

Amazon and iTunes target such ads based upon the consumers’ prior purchasing experience at each site. Delivering behaviorally-targeted ads when the ad serving company does not have access to such proprietary information requires a different approach. Most identify visitors by assigning a unique id “cookie” to each visitor at a client site. Thereafter the cookie tracks visitors throughout their ensuing web journey.

The platform then makes a rules-based decision about what content to serve based upon the multiple websites that a cookie-enabled browser visits. Behavioral data can be combined with demographic and geographic information in order to produce a greater degree of targeting precision.

Last year Yahoo developed such a platform and is offering it to outsiders, including newspapers, and more recently AT&T Yellow Pages, among others.

Essentially, newspapers are discovering that their existing sales-force can be used to sell both newspaper and Internet ads to local businesses. Typically one of their strengths is a trusted prior relationship with local advertisers. Yahoo has partnered with a consortium of newspapers to which it provides its targeted advertising platform. There are two advantages that the Yahoo consortium provides to participating newspapers.

First, it enables them to sell Internet ads for local businesses that will be distributed on Yahoo web properties as well as the newspapers’ websites. Second, and more importantly, it enables newspapers to sell behaviorally-targeted ads on their own web pages. For example, assume the Yahoo cookie learns that I have been searching for information of BMW automobiles at a variety of websites. Should I next choose to visit my home town newspaper website merely to check on unrelated stories, the Yahoo platform is likely to place ads for local BMW dealers within the online pages of the newspaper that I see. You will see different ads on those same pages based upon your own prior browsing patterns.

While Yahoo has not yet made the platform available to local TV affiliates it may do so in the future. Alternately, a competing platform could offer similar services to TV affiliates thereby enabling them to also sell higher priced behaviorally-targeted Internet ads as well.

Phil Leigh

If you would like to consider the implications of a video-centric Wikipedia, this audio program is for you.

As reported in Technology Review, the Wikipedia Foundation will soon be launching an editable online video encyclopedia. According to Alexa, Wikipedia is the World’s seventh most popular website. Consider how often you visit the site and ponder your reaction if many of its articles provided relevant video.

In our analysis, the implications of a video-centric Wikipedia are profound. Perhaps the most important result will be transcendence in the public perception of media itself. The walls separating earlier silos of radio for sound, television for video, and newspapers for print, will collapse. In response, our culture will begin to routinely use the Internet as a mixed-media resource. This will lead to an expectation that users can access media on-demand in whatever form desired whether it be text, graphics, animation, video, or audio.

Consider the following.

First, the Wikipedia could become the-center-of-gravity for news. It could replace television, radio, and newspapers as the preferred destination.  Topics can be updated nearly instantaneously from a large number of self-policing “journalists”. Furthermore, the updates might include on-the-spot video and audio recordings. Finally, since most topics were prepared earlier as Wikipedia articles, each addition is automatically connected to an abundance of background and context along with branching links to sources and related material.

Second, after a critical threshold of Wikipedia articles contain video we’ll expect the website to be available on TV. If the set-makers and CATV operators don’t provide it then we’ll connect our TV to a computer. That way the TV can function as both a monitor for the (Internet-connected) computer as well as a conventional TV.

For example, consider someone with an intense interest in the history of World War II. Eventually, a video-centric Wikipedia will have an abundance of public domain video footage posted and indexed within the applicable article.  Moreover, the videos will be continually updated with new postings from archives from various nations.

Third, once a video-centric Wikipedia is accessible on our TVs, we’re going to require a user-friendly search device. For example, a Yahoo Widget that merely transports us to the Wikipedia home page is going to be all but useless. We must be able to navigate to the desired content easily and also to explore related articles without difficulty. Such needs may imply a consumer preference for (as yet unannounced) browser-centric TVs as opposed to a Widget platform.

Fourth, if Internet access to copyrighted TV shows and movies is too expensive, or limited, viewers are going to start watching other Internet videos. A video-centric Wikipedia is merely one example. But it is a potentially profound one since it is already such a popular website and has the potential to grow infinitely.

Patrick Barry, Vice President, Yahoo

If you would like to learn about Yahoo’s plans to bring Internet applications to the TV, this interview is for you.

Our guest today is Patrick Barry who is Vice President of Yahoo’s Connected TV initiative. Yahoo offers TV-set manufacturers a software platform enabling viewers to access Internet applications via a TV remote unit typically provided by the set maker. The on-screen interface is similar to the iPhone or iPod Touch experience. Readers may watch a Yahoo-prepared demonstration here.

Yahoo’s Connected TV could be an important innovation. In short, it is extending to the TV the icon-based approach for Internet applications that the iPhone and iPod Touch have popularized. Since there are over 40 million iPhones and iPod Touches in use, a sizeable body of consumers can relate intuitively to the Yahoo Connected TV interface.

To be sure, Yahoo does not merely duplicate Apple icons. However, the overall environment is similar and Yahoo also permits third parties to develop Widgets much like Apple permits third parties to develop applications for the iPhone.  Yahoo is making good progress in getting leading TV set manufacturers to enable the platform within certain models that are being marketed this year. In sum, Yahoo Connected TV Widgets has promise, but not without important qualifications.

Aside from a number of “devils in the details” which can be worked-out over time, Yahoo Widgets face three major challenges.

First, when Internet access is available at the TV consumers will demand an easy-to-use search capability. For example, Yahoo has a Widget for YouTube, but it is nearly useless without the ability to search for desired videos among the gigantic number available. It may be difficult to use a simple four-button remote to type-out a search string even with an on-screen virtual keyboard. One way might be to use a predictive keyboard like the one familiar to iPhone subscribers. While the approach might be satisfactory, it remains to be seen if consumers would prefer it over an ordinary wireless keyboard & mouse for use in combination with a familiar browser.

Second, some websites may not want to permit Yahoo Widgets. A case in point is Hulu.com where TV shows from ABC, Fox, NBC, and others are commonly available for streaming over the Net. Earlier this year Hulu disabled software from Boxee that permitted icon-based navigation for computers that are attached to televisions. Put briefly, Hulu wanted to restrict its video streams to computers that typically have smaller screens than the TV.

Since consumers can avoid both problems noted above merely by connecting a laptop computer to a flat panel TV, they may prefer that manufactures ultimately offer browser-centric TVs instead Widget-enabled units. Such sets would provide consumers with (1) a familiar interface, (2) a user-friendly wireless keyboard, and (3) unlimited Internet access, even to websites that don’t provide Widgets.

Third, Apple may become a serious competitor. For example, there is no technical reason why the Apple TV fails to offer a similar platform. Given Apple’s success with the icon environment on the iPhone, it’s easy to foresee a similar approach working to make Apple products popular the living room. Widgets for Apple TV would enable older sets to use the platform whereas so far Yahoo Widgets only work with some sets made this year. Additionally, as speculated elsewhere, Apple may even consider making TV sets themselves. If so they would likely incorporate iTunes and a Widget platform.

In point of fact, it is curious that Apple has not yet expanded the concept.  Presently it appears they are more interested in content sales and rentals via Apple TV. Perhaps they might also have concerns that a Widget platform would not be used by providers of popular content like Hulu. For example, Apple delayed the launch of the iTunes music store until it had content from all five major record labels. Similarly, they may not want to offer a Widget platform for Apple TV (or some future product) until major content providers like Hulu are “on board”.