Snapshots Of A Speeding Train: The Current State of Internet Video

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Notes on slide 1

1) Extremely important moment in time
2) Internet and TV are colliding
3) this is the transition point

very big decisions are being made - right now.

1) Conference that brings together Hollywood and Silicon Valley
2) SV has an unhealthy niavtie re: holly
3) entrepreneur -- all free all the time, records
4) google - viacom

1) hwood fully aware of what’s at stake
2) BOD level discussion
3) ready to act - make big, big decisions
4) what to do?

walk through five importnat perspectives that backdrops to my opinions
1) QUALITY IS WAY UP
2) So is user expectation
3) HD camera 199 , 1000 mini quentin taratinos

1) ABC - $2.0B, Viacom $1.5B
2) this makes them part of the establishment
3) boxx-hulu (comcast)

“hey dude, if you want to get to my customer in a different way, than lets discuss these fees i pay that they dont?”

1. First-sale doctrine or first use doctrine. NEBG v. Weinstein.
2. this does not apply with Internet VOD
2.5 digital release cycle has way more control, windows, etc
3. This is why Netflix only has end-of-life movies on their digital offering (with the exception of Starz deal).
4. Never see “all you can eat movies for $25”

1) transitional
2) Proved an insatiable demand for “control”. As does the DVD-rental market.
3) legitimized the move away from linear TV towards “infinite VOD”

BUT you won’t watch for free. Pay or watch ads.

more obvious
been-betamaxed without knowing who is VHS

1) first was the Hulu/Boxee block
a) were kept sepearte / no longer true
b) awoke giants
2) rumored discussion between ABC and Hulu
a) studios aligning as an aggregator
b) what about these fees?
3) Together they sent a message to the incumbents, and the incumbents are responding

1) leverage deals already in place (paying for that content)
2) already have the rights - launch with way more content
2) could put pressure on studios to collect fees from Hulu?
3) Could force Hulu into a subscription model (premium)

1) the ultimate and most obvious levaerge point for ISPS
2) Comcast and Verizon both covet video revenue (75% of comcast, FIOS dependent)
3) making headway already
4) have arguments for why their video “should be” cheaper

Another bash SV point
Bush administration really screwed up when they let the telco monopoly re-converge.

1) Netflix laid down the gauntlet with the Starz deal that they executed...
2) Hulu is basically agregated exclusive with big equity deals
3) google comes to teh table...
4) worst case [click] becomes sirrus xm

proven with directv deal of $4b!

these guys likely become loss leaders in bundles.

[T] startup opportunities (watch this space).
1) to date - bringing normal shows online hulu/theOffice
2) content will get more views from the web - long tail, nonfiction
3) more consistent with how we use web
4) easier to monetize
5) i dont think hulu solves this. i dont think Google solves this.

1) i dont know what it will be
2) it wont be this
3) come from a startup
4) post-platform

[home stretch]
all CE devices get Internet menus
may have seen recent panasonic ads
this is the Yahoo widget platform
Everyone wants in the game

to prove that point -- subset of the companies that want to compete in the TV deck
1) hugely crowded market ,Internet GUYS, TV guys, DVD players, SW, OS/PC companies, game companies, set top box guys, etc....
3) its like the beginning of the cell phone market in many ways - DECK PLACEMENT WILL MATTER, 2 layers down forget it
4) way more open, the cell network was never accessible
5) wouldnt be surprised to see an AppleTV

- i already said it once, but will repeat it

1) new problem - What do I watch now?
2) infinite selection requires a UI that drives conversion -- more internet than tv
3) examples Hulu, Vudu, iphone
*best example is iPhone - despite the huge lock down advantage cell providers have ont eh network, they couldnt produce a user product that came close to what apple did.
(leverage their application advantage)

iPhone is the perfect lesson for the incumbents...if you dont innovate fast enough, a insurmountable gap could emerge...

one caveat could be “metered pricing”

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Snapshots Of A Speeding Train: The Current State of Internet Video - Presentation Transcript

Snapshots of a Speeding Train Bill Gurley Benchmark Capital April 29, 2009
The tectonic plates are shifting.
Silicon Valley is presumptuous in its view of Hollywood.
Hollywood is well aware of what’s happening.
Great content is expensive.
Afﬁliate fees are a huge fucking deal.
The Netﬂix business model is heavily misunderstood.
The DVR was a speed bump.
Blu-ray is a smaller speed bump..
Two recent events were extremely important.
The incumbents will use their strength to compete with Hulu.
Metered Internet pricing is the single most important issue to watch.
Wireless services will not provide last mile Internet competition with regards to video.
Aggregation could dissolve into a ﬁnanciers game requiring very deep pockets.
Aggregation could dissolve into a ﬁnanciers game requiring very deep pockets.
Two incredibly well positioned companies.
I believe opportunities exists beyond traditional television.
What is true “interactive” TV?
Internet comes to the TV in 2009 and 2010.
The TV OS/deck becomes a new battleground.
Metered Internet pricing is the single most important issue to watch.
User interface will really matter.
Timing is everything...
Timing is everything... “...agree. its a race to see if cable can create a UI on tru2way fast enough to hold off the video boxes and internet.”
Snapshots of a Speeding Train Bill Gurley Benchmark Capital April 29, 2009