February 26th, 2010 by Michael
Two seemingly normal stories this week could quite possibly point back to a key catalyst of video content truly moving from the computer to the living room. First, iSuppli Corp announced that slightly more than 1 out of every 4 high-def televisions purchased in January were linked to the Internet – with nearly 42% being internally linked compared to external devices like game consoles (20%), Blu-ray players (14%), set-top boxes (12%) and PCs (12%). This news, in and of itself, is interesting as it suggests consumers are already seeing the future of content flowing into their TVs through the Internet. However, when combined with the news that Wal-Mart bought Vudu earlier this week, well, that changes things considerably.
Vudu is an on demand video rental service that started life as a hardware set-top box manufacturer, but has morphed more recently into an integrated platform that aggregates content across a wide variety of hardware. It’s service is embedded directly into HDTVs, Blu-ray players that offers consumers an elegant interface to finding content. At CES in January, Vudu announced they had expanded their platform and now support 50 products through which they will be able to stream 1080p HD video with Dolby Digital Plus 5.1 surround sound.
Why our industries aren’t making more of this acquisition news is befuddling? Perhaps its because Wal-Mart has already had a few failed attempts at beating the likes of Blockbuster, Netflix, but this time it’s different. This time, they will have more control over the customer relationship and it will come in the form of a trojan horse – internet enabled HDTVs.
Wal-Mart is already selling a lot of HDTVs. In fact, many of their stores have reoriented the consumer electronics areas to more prominently feature these sets, which is a strong indicator that they would like to keep on selling them. Wal-Mart has consistently shown its ability to influence downward pricing pressure on it’s manufacturers, and it will be no different with HDTVs (something they’ve already done with Blu-ray players). This will undoubtedly drive broader and faster consumer adoption. Now, with Vudu, this becomes a razor/razor-blade strategy without Wal-Mart needing to own physical production of the razor. The more televisions and Blu-ray players it can sell with Vudu integrated, the larger they grow their installed base of content buyers.
Wal-Mart has no interest in losing it’s dominance as a retailer of filmed entertainment. This acquisition will only strengthen their position, providing the means for them to distribute media both physically and electronically, creating significant challenges for companies like Redbox, Netflix and Hulu. Moreover, now Wal-Mart will have its own portal into consumers homes – something they can leverage to not only distribute content, but also to promote all its other products. Scary.
February 22nd, 2010 by Michael
… the more relevant question is if and how it can co-exist with streaming services. But, first, lets not yet throw in the towel on Blu-ray.
Towards the end of last year we did a study to gauge whether Blu-ray would reach a tipping point during the holiday season. Our hypothesis was that the introduction of sub $100 blu-ray players would spur demand and increase the installed base of players in the U.S. It appears the strategy worked as recently released data from our New Media Measure™ Survey would suggest. Today, 13% of consumers own a blu-ray player; this is up from 10% before the holidays. And, Blu-ray penetration should continue to increase – among all the household technologies consumers are considering purchasing, Blu-ray disc player is highest with 14% of consumers stating they plan to buy in the next 3 months, followed by HDTV at 13%, Laptop computer at 11%, Surround-sound stereo at 10% and E-readers (like the Kindle) at 9%. This should be good news for the studios.
Yet, the looming challenge is the rapid adoption of streaming media, through digital set top boxes, like Roku, Apple TV and Vudu; through internet enabled televisions from a wide variety of manufacturers, from Mitsubishi, Sanyo, Vizio, Samsung, many of which made strong showings at CES earlier this year; and through online distribution to personal computers from services like Hulu. According to our data, nearly half of US consumers report watching full length movies or TV shows on their laptop and 58M people in the US have streamed a movie that they have watched online. So what does this mean for the studios? An explosive combination that can’t be ignored, as consumers are showing comfort with this method of delivery and manufacturers are racing to capture opportunity with better and cheaper devices.
February 15th, 2010 by Michael
As a follow up to a post I made recently, I was curious to explore the potential for Apple’s iPad to disrupt the nascent e-reader marketplace. As I’ve posted before, I’m an early adopter of the Kindle, and despite the lack of bells and whistles, I’ve gotten a tremendous amount of use out of it. In fact, Amazon can look to me as one case study of how the Kindle changed my consumer behavior, but did it make a difference in terms of my customer lifetime value?
I can honestly (and quantitatively) say the Kindle increased the number of books I buy on a regular basis. In a normal year (prior to the Kindle), I read between 20-25 books, of which 5-7 were borrowed, 12-15 were bought in paperback and 3-5 were hardcover. Since owning the Kindle, I’ve averaged closer to 27-30 book purchases per year, all for a fee (I don’t trust the public domain titles as much).
Why the increase? Primary factor is the ease of downloading books on the fly. If I read a review, see a friend recommendation online, or hear mention on the radio of a book, as the Kindle is often with me I will go to the Kindle Store immediately, read the reviews and more often than not, buy the book. Previously, I would have read about a book, but forgotten the name of the book or author and wouldn’t have acquired it.
Not only has Amazon increased the number of books purchased, but I pay a monthly subscription to receive several blogs and newspapers. The blogs I can find online for free, but I like the convenience of having them all in one place and I barely notice the $0.99/month subscription.
Lets add it all up (less the $400 price tag for the Kindle)**
Amazon Spending – post Kindle
Books ~$250
Newspapers ~ $120
Blogs ~ $36
Total ~ $406
Amazon Spending -Pre-Kindle
Books
Paperback ~ $135
Hardcover ~ $120
Borrowed = $0
Blogs = $0
Newspapers = $0
Total ~ $255
It appears I’ve been spending more money at Amazon on a consistent basis, so they’ve accomplished their objective, at least as it relates to me. How will iPad potentially disrupt this symbiotic relationship I have with Amazon? Stay tuned for future posts.
** Assumed $10 average price for Kindle book, $30 for hardcover and $9 for paperback
February 8th, 2010 by Michael
I witnessed history last night – live! It was a great game with both teams in it to the near end, and the true and deserved champions were crowned. That was the action on the field, but what gets lost watching on television is the incredible camaraderie shared by all fans – Colts or Saints. Maybe it is the event, or the fact history was being made, or the general attitudes of the states represented by the two teams, but I was struck by how gracious the Saints fans were in triumph and the Colts fans were in defeat. While the Colts fans were filing out of the stadium, even though disappointed, they showed a remarkable ability to forget their woes and extend their hands of congratulations to the Saints fans. This is what I’ll remember most about attending my first Super Bowl.
January 30th, 2010 by Michael
…its me. You’ve been great; there when I needed you, always ready with something new, and with you in my hand, I always received a lot of attention. You opened my world to a whole new way, but I think we should start seeing other people.
Apple’s announcement about the iPad this week changes the game. Again. The blogosphere was lit up and the prognostications & criticisms were flying, but one of the most perceptive came from one of our own, Brenton Lyle (Integrated Casual Computing on the Apple iPad). I encourage you to read his entire comment as seen on Zak Kirchner’s new blog, www.thedigitalanalyst.com, but the gist is, don’t focus on what the technology is, focus on how the technology will be used.
As researchers and analysts, what intrigues us (at least me) the most are the unintended consequences of business strategies, technologies and content. Apple has shown us this before – when iTunes was launched to support the iPod, at the time, 1 out of 3 iTunes users did not own an iPod! With the launch of the iPhone and the App Store, we’ve seen a wave of development – some innovative, some not so much – that has expanded the way consumers approach and use their phone.
Apple changed the model by opening up the platform and welcomed both pro and non-pro developers – study any technology and you’ll see that when price and accessibility are such that the price of failure is minimal that is when true innovation happens. The only limitation to date has been the size of the screen. That won’t be the case with iPad.
This is what I’m anticipating most with iPad – the next wave of innovation – and why my Kindle and I may be rethinking our relationship. I’ll have more to say on the matter in future posts.
January 30th, 2010 by Michael
After a short hiatus due to several very time-consuming distractions, I’m back to my musings.
September 24th, 2009 by Michael
Today, we released a study that looks at purchase drivers behind smartphones (“Does This Handset Make Me Look Smart?”), which shows that despite the success of the iPhone, any phone that is perceived to be Smart (intelligent, adept), Cool (hip, trendy), and Productive (efficient, organized) has a chance with consumers. If you follow the link above or this one you’ll be able to see a copy of the study.
September 22nd, 2009 by Michael
Imagine if traditional tv advertising was held to the same exacting measurement standards as emerging media?
Television is for the most part evaluated using a rating metric delivered by the Nielsen Co. which measures the reach and frequency a particular show delivers to an advertiser. It is essentially the “opportunity to see” an ad that television offers, and that its associated metric quantifies. Reach metrics can be viewed in several ways – but boiled down to the basics, it defines the total audience or the ”share” of audience reached. Total audience is just that, how many of a particular demographic had the opportunity to see, or be exposed to, an ad. Share is a measure of “media weight” in that it represents the percentage of all households viewing television that are tuned into a program. Frequency measures the amount of times an ad is exposed. One other way television is measured is through what’s referred to as a GRP. GRP, or Gross Rating Point, is a neat little mathematical metric the industry created that contemplates the combination of frequency and effective (or wasted) reach. GRP is calculated by taking frequency multiplied by the percentage of the target audience reached by a particular program. So, an ad that is exposed 5 times and reaches 25% of the target audience (e.g. 18-34 year olds) would have a GRP of 125 (5 x 25). This metric assumes, of course, that reach and frequency should be weighted evenly, but that’s for another discussion.
The first “emerging” medium, cable television, didn’t face the same challenges confronting today’s emerging media types. Once a cable network secured carriage in a critical mass of households through MSOs (multiple system operators) and satellite providers, it was welcomed on to the playing field and measured through a tv rating. As most cable networks were not able to deliver the same level of reach as a broadcast network, they sold themselves as targeted media that could deliver key demographic segments. The pitch was that broadcast networks were “under-delivering” key consumer targets, while cable could “over-deliver” them, providing advertisers with a much more efficient media spend. The argument carried weight and many cable networks have seen tremendous success in justifying premium ad rates as a result (look no further than MTV or Lifetime as prime examples).
Today’s emerging media – mobile advertising, in-game advertising, online video – are being held to a different standard of measurement, due in part to the reach limitations of these emerging media and the intense competition for media dollars among an increasingly fragmented media landscape. If a medium can’t be measured in the usual fashion, i.e. through GRPs or similar rating metrics, it needs to be able to justify its uniqueness through other means. The result has been a more stringent set of measurement criteria.
It’s not often you’ll hear someone ask whether a television ad was “effective”. Effectiveness on television has largely been measured by a program’s ability to deliver a target audience. However, in today’s fragmented media environment, the definition of effectiveness has evolved to include a broader set of engagement and persusasion metrics. The hurdle for new media is much higher – requiring it to demonstrate tangible lifts against awarness, recall, persuasion and engagment metrics. New media can still leverage the value pitch of being able to “over-deliver” key audience segments, but it isn’t enough to compel media buyers to shift dollars away from traditional media. Instead, new media need to demonstrate an ability to not only reach, but also ”influence” consumers through the inherent uniqueness of the medium. Take online video as an example. According to a study conducted by the Online Video Engagment Consortium (a group of companies including us, Yahoo, Hulu, PHD, Havas Digital, formed to study the impact of online video), a third of online video viewers shared the last video they watched with others. Moreover, videos that were considered “engaging” were significantly more likely to impact consumer behavior. Or, take in-game advertising as another example, which offers a virtual environment in which a brand can be relevantly exposed and interacted with – having a gamer use a brand or product to further progress through the game environment has proven to be extraordinarily effective. So much so, that dollars are already beginning to shift away from other media.
With 8 minutes of advertising per a half hour show and 18 minutes per an hour show, television doesn’t want to be held to more stringent measurement. If it were, the results would undoubtedly show the negative effects of clutter. So, back to the question that started this post – imagine if advertisers demanded that television provide data on whether someone shared a show with a friend or whether the brand was considered relevant to the viewing experience or whether the show was viewed through to completion?
September 15th, 2009 by Michael
There has been a lot of discussion about business models for online video recently. What’s the right model – is it advertising, paid, a mix of both? Left out of the dialogue, however, is one key piece of information – no one gives enough credit to Hulu for figuring out the right consumer experience for advertiser-supported content. Without that, there is no debate about how much money can be made. Until Hulu came along with a fantastic technology, an elegant and easy to use interface and a growing slate of free advertiser-supported content, there was nothing that provided the consumer a quality choice for programming online. The debate seemed mired in technology – streamed or downloaded? Hulu blew right past that debate and gave the consumer what they wanted – who cared whether it was streamed or downloaded, as long as it worked.
No, there isn’t a ton of money to be made with advertising around online video today, but the reach is increasing as more and more people make it a part of their everyday lives. In fact, over the past year, the amount of people watching video online has increased by 50%. Hulu is delivering what consumers expect, all the while conditioning them to consider Hulu as their “go-to” for advertiser-supported online video. That puts Hulu in a strong position to rollout paid services at a pace consumers can easily digest.
Not to take anything away from iTunes – they have developed an amazing online marketplace for paid content. However, to my knowledge, they haven’t signaled any intention to provide content for free through an advertiser-supported model. This further positions Hulu as a multi-layered provider of content to consumers. It is still early and no one really knows who will win, but at this stage of the game, you have to admit, Hulu has played the game deftly.
September 14th, 2009 by Michael
Well, it’s a great idea for brands. Twitter recently decided to change its terms of service to allow advertising. It’s still unclear what model of advertising they will choose, but what is clear is that Twitter users are much more engaged consumers. According to our very own Zak Kirchner:
“the fastest growing social network of 2009, Twitter is giving customers a voice like they’ve never had on the Internet before. It’s time we started listening too, as Twitter users are twice as likely to review or rate products online, visit company profiles and click on advertisements or sponsors as those who only belong to traditional social networking websites like Facebook and MySpace.” – Interpret LLC Social Media OverView™ Report August 2009
Facebook and MySpace have been making serious efforts to develop a successful advertising model – it is debatable whether they have struck the right approach. What Zak’s analysis of our New Media Measure™ data shows is that given the real-time nature of thoughts being expressed, Twitter provides a unique opportunity for brands and advertisers to engage consumers in ways currently untapped by the leading social networks.
Social networks are very much about “me” and how I want to present myself to the world through my pictures, associations, likes/dislikes, etc. Twitter is also about “me” in that I’m able to express my thoughts and ideas, but there is a subtle difference that makes Twitter a better potential medium for ad exposure – Twitter is really about “what”. What am I doing, what am I seeing, what am I feeling, what am I thinking. For advertisers, this is extremely valuable insight into the consumer psyche. How Twitter helps brands tap that flow of information without alienating consumers is a big challenge, but one that could be very lucrative indeed.
