Kevin Reilly - President of Entertainment, Fox Broadcasting Interviewed by David Wertheimer, Executive Director, The Entertainment Technology Center @ USC.

How is the business different today?

When Kevin started at NBC in 1988, he started to see articles being written about how network TV was a dinosaur. The articles we see today are similar. The death of TV is greatly exaggerated. Back then you could see that cable would grow and network TV would lose share to cable.

There was no discussion of how the business model would change back then. TV was the greatest advertising mechanism every invented. While the media mix will change, there is so much information coming out now that people actually miss ads when they get pulled out of shows. People want to know about products and ads play a useful role.

People will declare TV dead. While there is no turning back the clock, there will be TV networks in the future.

What are the fundamentals that will always apply?

Kevin says he’s really shocked to see how much sometimes nobody knows anything.

We can’t make declarations about what will work and what won’t. He tells the story of how everybody passed on the Sopranos, how Law & Order was not seen as the great show and the same thing applies to the media and the business model. There is massive change going on, but when people declare something to be the “way things will be” it’s more often wrong. He says the one constant is quality content.

If we were at this conference 2 years ago everybody would be saying long form video won’t work on the web. Now, we see it as one of the leading drivers of video on the web.

Where are you on UGC?

We all love a polished production, but great entertainment can be some 5 minutes of truly entertaining content. He’s all for it if we can make a living with it.

What experiments have worked and what haven’t?

This is not like trying to re-tool the auto industry. He says the media business is very responsive. It’s all about the risk takers. He points to Rupert Murdoch as someone who has challenged the status quo and its one of the traits of News Corp.

Talk about year round development

The more things stay the same, the more they stay the same. The old network model was a license to print money. The cycle worked. It wasn’t very efficient. Peaks and valleys in work were huge.

It seemed to outlive it’s usefulness, but people kept doing it. When we came out to the strike, it seemed like an opportunity to move to a year round basis. It’s a risk, but it creates opportunity to use highly viewed shows at the end of their season to promote new shows.

Talk about the Remote Free TV idea.

The idea is an experiment. Last year they were setting the schedule and they decided they needed to do something different. They had been stuffing more and more commercials into shows. Advertisers had come to view the commercial load as clutter. They decided to cut the ads in half and charge twice as much per ad. Fringe was the first experiment. It was really received well by the audience. The rub was that the advertisers who would pay the premium were few in number.

Not sure whether this will be the model for the future, but it may be the way to go. (My note: he should read the Innovators Dilemma. TV is in segment retreat to the high end. Higher quality ads at higher prices. Same move as the steel industry etc. Worth reading if you care about this stuff.)

What about the relationship with Cable Networks.

We are at a saturation point with cable. People have 118 networks and watch 16. It’s no longer good to add more networks. They are negotiating with cable networks to take cash for their network broadcasts, but it may mean a reduction in the number of cable networks that companies like Fox have.

When things are available online via Hulu, how does that change the relationship with cable companies?

We have to create legitimate models before illegitimate ones pop up, like they did in music industry. Fox makes high end content which need 10 minutes of premium advertising to support. When people watch 24 on Hulu we make less money. How we balance this is important. Windowing might help this. Cable companies have a 7 day delay before it goes online. It’s just one of many challenges we are dealing with.

For example, the way we finance these shows has changed as well. It used to be getting to re-run syndication. That market has seriously contracted. We need to figure out new revenue models.

What’s popped culture?

Pop culture and mass media had a symbiotic relationship. It was a great robust time for media. Now we’re living in the era of Moore’s law. Everything is moving much faster. Managing the relationship with pop culture is challenging when things are moving so fast. Media is not moving in lock step with pop culture. It’s the beginning of a really big transition. Even in a forest fire, there is rebirth after the fire.

Stan Rogow, Executive Producer/Director, Gemini Division and CEO of Electric Farm Entertainment.

Why is a successful producer even dealing with the Internet?

Stan says he has a son who was just not watching TV. He says his son asked him about CSI which he saw on YouTube. His son’s generation just doesn’t know about networks.

The Internet is just growing and growing.

What does it take to make a successful show on the internet?

Principally, it starts with a simple thing - a great idea that the audience will embrace. If you don’t have that nothing else matters, no matter what channel of distribution you use.

The difficulty of making a 3 minute episode with a beginning, middle and an end, with a cliff hanger to bring people back is very hard. Some writers figure that out, some don’t. It’s very challenging to make that short format work.

The other thing that is becoming very important is the social networks into account. They are different and they will evolve into places where different type of entertainment will migrate to different places.

The challenge is to stay ahead of the curve. It changes always.

One of Stan’s partners spent two years working on games. They see the game aspects of the core piece of entertainment is important and growing in importance.

How did you get Rosario to do the show?

One of the writers of Afterworld is a friend of hers. She did one of the voices on Afterglow and it turns out she’s a sci-fi fan. We asked if we could do something with her and she said yes. Finding an artist that thinks the internet is cool and wants to be there, is what it takes.

Where’s the money?

Gemini Division has different model. They are using product integration with 5 different brands that are very organic. Microsoft, Intel, Cisco, UPS. They talked to the brands to find what was really cool about their stuff. They then could integrate the product features into the show.

The show starts with Rosario talking into the PDA, they had her talking into the Windows Mobile software. They created a new interface which was not the traditional Windows Mobile interface. Microsoft let them go ahead and it got really good reviews. Now waiting to see what Microsoft does with the interface.

They have not done pre-rolls - but they are open to experimenting. They believe there is more value in product integration, but traditional media buyers still want the things they know.

What about distribution?

Phase 1 was tied to NBC for the first 50 episodes. Phase 2 will be opened up to much wider distribution. There are lots of people who love the show now, but it can be opened up to many more people with wider distribution.

What can be learned from Quarterlife?

Internet entertainment is internet entertainment and TV entertainment is TV entertainment. They will re-cut the web version to make a DVD, but the TV version is a different thing as is a game version of the show.

At the 2009 Future of Hollywood conference, held at the Roosevelt Hotel in Hollywood, California, Blair Westlake, Corporate Vice President of Microsoft’s Media & Entertainment Group was interviewed by Tom Adams, President of Adams Media Research.

Hulu has been a great consumer success. But it’s not clear how it plays out for the traditional distributors like cable and the content producers.

The traditional distributors are saying hold on, we’re paying to distribute this content and you are giving it away for free online.

The content producers are used to the TV load of advertising revenues which is much higher than the ad load at Hulu. We may not be talking about trading analog dollars for digital pennies, but it may be analog dollars for digital dimes.

If the cost per thousand impressions doesn’t change, it’s a hard to see how things progress quickly. It just doesn’t make economic sense for Madison Avenue.

One of the things that technology allows to do is to target ads much more effectively, which may be a way to increase the digital revenue without the same advertising load. There is some certainty that advertising will remain a major component of the revenue model.

There’s a tendency to lump music, TV and movies into an entertainment bucket. Movies have two primary sources of revenue. Renting a night at the movies which represent about 30% of revenues and then the sales of DVDs and the like representing the bulk of the revenue.

Cloud computing based movie distribution will begin to substitute for DVD’s as rental on demand grows. For example, while DVD sales may be down 30%, Xbox video on demand revenues have roughly doubled.

Looking at TV, before DVRs, TV viewers would watch about 2 out of 4 episodes of shows. With DVRs, that number has increased to the average viewer watching 3 out of 4 episodes. Cloud based access could play a role in further increasing the viewing ratio.

Is the next step the Netflix subscription model? Fewer and fewer movies are being distributed via the ad supported model. The Netflix model is not new. HBO has been around for a long time and is the premier movie channel. Netflix is a different time window than HBO. It’s offering access to the library. One in ten Netflix subscribers use the Xbox Live service to access movies to consume billions of minutes of media.

The two models that seem to make the most sense are subscription and ad supported distribution.

What’s been the impact on the rental market? The VOD market should see strong growth. The average consumer only watches a movie a couple of times which makes rental a sensible alternative.

However, the switch to online will take longer than people expect. It won’t be one model for everyone.

Westlake looks at the audience and see different segments. The older audiences will be stay wedded to the traditional channels. The younger generation will be different. Just like they prefer cell phones, they will be looking at it with a very different set of eyes. They will drive the change.

In the first session at the Future of Television Conference, held at the Roosevelt Hotel in Hollywood, California, was full of stats and data from analysts at SmithGeiger, Parks Associates and Magid Associates.

The bottom line - the internet has caught up with TV for entertainment use. TV viewing is down by about 2 hours from last year, with most of the increase being in watching online video.

The interesting thing is that there is lots of data to suggest that TV and Internet media reinforce each other. Much of the online activity revolves around catching up with what’s going on with TV shows. Watching shows you missed is a highly popular use of online video.

There appears to be a future for TV, but one quite different from that of the past. TV won’t be the single dominant entertainment channel. It’s going to have to share prime time with the Internet.

You can follow what’s going on via Twitter search.  Just search for #FOTV.

UPDATE:

# Mike Vorhaus (Magid Advisors) Presentation:
Nielsen versus Consumers - They Say Canabilization Happening
# Seth Geiger (SmithGeiger) Presentation:
Digital Media Trends and the Future of Television

I spent yesterday at NATPE’s LATV Festival enjoying some interesting discussions and presentations from the Digital Day. This report is a synopsis of one of those sessions. This session focused on social media and how digital media executives are using it to their advantage.

Ben Grossman, Editor in Chief, for Broadcasting & Cable led this panel discussion.

Danny Kastner is founder of Fan Rocket. Fan Rocket provides services to media companies that help promote media via viral videos.

Stephen Andrade is General Manager of NBC.com with a mission to promote TV shows, provide online advertising opportunities and create content for NBC.com. He shows a clip of what he calls creative social media that shows how The Office’s Dunder Mifflin Infinity website provides tools for fans to build content. The goal was to create a really deep community for fans of the show. The site presents creative tasks to “branches”( user groups) each week.

David Glover is CEO of Or Die Networks. The company is a online creative company that partners with celebrities to build new shows, such as Funny Or Die, and combines that with user generated content and social network tools to build community. He views it as a pyramid of content with the celebrity partner at the top, advanced users producing high quality content and then the mass user generated content.

EriK Flannigan, EVP of Digital Media at MTV Networks, runs Comedy Central and a few other sites. He says that consumers will form groups with or without you, so you need to decide if you want to participate. MTV is trying to embrace the social web using things like the Facebook activity feed.

How does an aspiring producer play in this? Stephen says that it’s important to understand the economics first. He says there are no barriers to entry so it doesn’t make a great area for investment. It doesn’t work to make things with TV type budgets. TV is a hit business where 1 hit can pay for 10 failures. On the web, there is a much lower cost of failure and therefore many more people trying.

Erik says that the industry has come a long way in the past few years understanding how users want to and will mash up content. The biggest stumbling block is letting go and letting users make their own choices. You don’t really have much choice because you can’t control what happens. He says you occasionally get into trouble with copyright issues, but you keep on going.

Dick says he met last week with one of the premier writer producers in comedy television. They were working on a concept and the writer said it would only work if there were no comments allowed. Dick says they walked away. You can’t fight reality.

Dick says they have less issue with copyright problems because their content is short and some what self contained.

Danny says this is really an area of opportunity as TV shows start hiring people dedicated to making extra content and making it viral. Stephen calls it a writer producer in training role, where when they go on to write/produce TV shows they will get the online side of this. Erik and Dick concur saying that new jobs are being created to re-purpose existing content for the digital space and new marketing jobs are requiring digital experience.

Does every new show need a social component as well as a digital component? Stephen says he’s not sure what “digital” means. He says it probably means both, but it really depends on the content.

Erik says that the social component depends upon the show. He describes the difference between The Daily Show and The Colbert Show. One is about presenting content, the other is really social.

The panel had some interesting advice to people in the audience who are interested in the space. In short, think beyond video. Erik pointed to an example on the Huffington Post that was an interactive view of how a conservative views the NY Times. Stephen concurred saying they want interactive ideas beyond video because they can really drive page views. Dick closes by saying think about what the technology can do, and video is just one of the things the technology can do.

I spent yesterday at NATPE’s LATV Festival enjoying some interesting discussions and presentations from the Digital Day.  This report is a synopsis of one of those sessions.  This session focused on how audiences and content are interacting like never before.

Moderator: Wayne Karfalt - Editor, Cynopsis: Digital

Panelists:
Eyal Hertzog Founder and Chief Creative Officer for Metacafe
Melanie Hall - COO Quarterlife
Kevin Chou - CEO Watercooler
Justin Cooper - Chief Innovation officer for Passenger

Crowdsourcing has it origins in things like WikiPedia where people can collaborate and develop content together.  How can crowdsourcing sourcing techniques be applied to entertainment?

Melanie discussed the social networking site for creative people and online show.  She says they have many opportunities for crowdsourcing at Quarterlife.  They use the audience to discuss characters and story lines.  The principles of the show were used to build out a social network so that the show and the site can play off each other.  They launched the show on Myspace, Youtube, Bebo and other sites which then referred people to the site resulting in a fast growing online community.

Eyal described how Metacafe now serves up over 300 million videos each month to over 35 million people.  He says the internet is introducing a new low cost of failure which means many more experiments and allowed many more people to participate in the creative process.  They have recently allowed people to edit the metadata about the videos. The members can edit the tags, titles, descriptions etc connected with the videos.

Kevin introduced Watercooler, a company that makes widgets for social networking sites.  Watercooler’s mission is to bring fans together online.  People have allows gone online to discuss entertainment.  They started online forums to discuss TV shows.  They launched in 2007, growing to 25 million registered users in 12 months.

Kevin says that their users are using the site to find out what others are thinking about when they watch a show. The communities can be very different.  Lost, for example has a community of 600,000 with very different involvement, while the online community for Jericho is 10,000, but very passionate about the show.

Justin described Passenger, a company that provides a crowdsourcing application for large corporations and media companies.  Major networks like ABC and Fox use the application for collaborate with their most passionate users.  These super fans can drive storylines and changes in shows using Passenger.  These audiences are built from either web sign ups or email lists that the clients have built up over the years.  Filtering tools are really important to allow people find the content they want and for the clients to sift through all the information provided by the users.  Justin says that Lost has been an active user of crowdsourcing to steer the show and for what content should be submitted for Emmys consideration.

The panel discussed the future of pilots.  Eyal says that the whole model for pilots is changing.  It used to be that because of distribution constraints there was a filter, then publish model for testing new content. The change of the distribution method has changed the model. We are moving from filter, then publish model to a publish, then filter model.

Eyal says that about 50% of videos are found via search for the first video you watch.  The second video is more likely to be the exploration of the related video.

In another example of crowdsourcing, Wayne described how Digg is building a recommendation engine based up your Diggs.  This will makes for more active recommendations based upon the collective input from the crowd.

A question from the audience - how to use input from the community when it conflicts with the creative direction of the show?  Melanie says that in any successful relationship there is compromise.  Justin describes how the creative commons process where other can build upon existing content and generate fresh content.

If you follow digital media, you’ve heard a lot about the importance of creating and measuring audience engagement (Forrester’s recent marketing conference centered on engagement - see our posts). After all, the difference between broadcast media and interactive media is the interaction part. But most engagement conversations focus on audience interaction with linear content – viewing, commenting, and sharing.

Imagine instead that as a member of the audience you were part of the action – you enter the video, talk to the characters, and they talk back to you. Or that the story was about you and your family members. Or that the characters in commercials cared about what you have to say instead of just shouting at you.

We’re not as far as you might think from this kind of convergence between media, video gaming, and artificial intelligence. At the most recent Digital Hollywood conference, Andrew interviewed Jonathan Strietzel, Founder of BigStage and Peter Hodge, CEO of Virsona, whose companies offer intriguing components of this future that have the potential to create big value for brands and media companies today.

BigStage’s technology allows users to create and integrate life-like 3-D avatars of themselves into movies, videogames, commercials, and other digital video content, using just three digital face photos. Virsona offers artificial intelligence technology that can recreate and automate any personality after just a couple of weeks of training – allowing characters to personally interact with an unlimited number of audience members.

If you are part of a brand, media, or other company with the vision to imagine what moving from linear to interactive content could do for your business, these interviews with BigStage and Virsona are must-listen conversations.

Technorati Tags: Interactive Media, Big Stage, Virsona, Advertising

In Digital Podcast 52, Andrew interviews Jonathan Strietzel, Co-founder and Chief Creative Officer of Big Stage, whose breakthrough technology allows users to create and integrate life-like 3-D avatars of themselves into movies, videogames, commercials and other digital video content using just three digital face photos.

Imagine if you and your friends could star in a music video, famous movie clip, or commercial as realistically as if you were around for the shoot. Jonathan describes the company and the potential that its technology has to transform advertising and the audience relationship with movies, television and videogames.

 

 Digital Podcast 52 [23:00m]: Play Now | Play in Popup | Download (7097)

In the interview, Jonathan describes his early start as a wunderkind discovered by SoCal VCs (0:00), his insight into the coming importance of personalization as he discovered the technology behind Big Stage (2:45), and how he helped move the technology to become consumer internet capable and fundable (7:05).

He talks about the current business, his monetization model through brands and content partners based on the technology’s dramatic impact on advertising effectiveness (11:35), and what the big media networks are seeing in terms of monetization and CPM rates (16:12). He also describes privacy considerations (17:40) and the other cool non-advertising stuff, like videogaming and short internet adventures, that Big Stage will be making possible (19:05).

Jonathan Strietzel is co-founder and chief creative officer of Big Stage. He brings 10 years of experience as an entrepreneur in the entertainment and technology industries, including founding Stritz Studios, a boutique special effects studio. He has also invented multiple systems for delivering digital advertising and currently holds a U.S. patent for his work in particle-based advertising. In addition, Jonathan has worked with numerous TV studios and Fortune 500 companies, including developing the highly publicized online clue delivery system for NBC’s “Treasure Hunters.” Jonathan graduated from Chapman University with a Bachelor of Science degree.

Technorati Tags: Digital Hollywood, Big Stage, Jonathan Strietzel, Virtual Reality, Avatar, 3D

In Digital Podcast 51, Andrew interviews Peter Hodge, CEO of Virsona, about Virsona’s new artificial intelligence technology that can bring any personality to life.

Imagine if anyone could have a personal conversation with Iron Man, the Michelin Man, or their great-great-great-great grandfather. Peter describes his new company and technology that is about to make these ‘holodeck’ scenarios a reality – at least the conversation part.

 

 Digital Podcast 51 [24:45m]: Play Now | Play in Popup | Download (7318)

In the interview, Peter shares how he founded Virsona after being inspired by his desire to continue conversing with a recently deceased friend (1:21), and why the internet will accelerate the development of artificial intelligence based on his meeting with David Levy, a foremost AI expert (4:10).

He describes how we’ll be able to interact with Virsona’s technology shortly (6:00), including re-creating our own personalities (11:05). Here are some screen shots of the site:

Perhaps most importantly, Peter describes how Virsona’s platform can be leveraged by Hollywood, brands, and others to deepen relationships with consumers and audience (11:55). He even gets into some of the complexity and norms that may evolve with virtual personalities, especially the need to keep some information and aspects of our personalities more private, as well as the future capabilities we might see from virsonas (19:05).

Peter Hodge is CEO of Virsona Inc. Peter has worked with and for some of the biggest names in the Technology, Telecoms and Media industries over the last 20 years both in the US as well as globally. He brings significant experience to Virsona with over 20 years in technology including development, sales and management experience. Peter holds a BSc in Computer Science from the University of Greenwich, London and lives in Boca Raton, FL.

Technorati Tags: Digital Hollywood, Peter Hodge, Virsona, Interactive Media, Artificial Intelligence

One of the key factors in turning podcasting into a real business is effective execution of best practices in content creation, marketing, distribution, monetization and user experience. Many publishers are not following best practices in these areas. The result often looks more like someone’s hobby than a real business endeavor.

Developing content, building audience and getting advertisers to buy in will take serious effort. Publishers who understand the huge opportunity for subscribable media and its capacity to shape the media industry’s winners and losers will step up and make the investment required.

Putting these elements into a framework allows for systematic evaluation of operating practices across publishers and for the identification of best practices for new media publishing.

The framework links the three key elements of Audience, Content and Advertisers with the critical activities of creative/production, marketing, distribution, monetization and user experience.

In each of these functional areas, there are best practices that need to be deployed to make the most of a new media business. Some of these factors are observable from the outside looking in and others require examining how things work from the inside out.

Creative and production encompass the all important aspects of conceiving the concept, translating it into a show and producing high quality content on a regular schedule.

Marketing involves many factors including the key factors like search engine optimization, iTunes/media directory optimization, syndication via RSS feeds and sharable players. Evidence of best practice marketing can be found in how well things like ID3 tags are populated, the quality of feeds, file naming practices and quality album art. These are all factors that impact how findable the media is.

Monetization can take many forms and best practice players will find the right mix that works for them. While we can’t determine how much a show makes from the outside, we can examine the presence of monetization mechanisms like advertising, premium content, sponsorships, commerce/merchandise and paid syndication.

Distribution is an important component. In this area we are specifically looking for cost effective high quality content delivery. New media files are quite large and how well the distribution infrastructure works can have a significant impact on the user experience. In many cases we can determine whether a content delivery network is being utilized and we can also observe the use of advanced file sharing technologies like BitTorrent.

Perhaps the most important and observable element of the best practice framework is the user experience. How well are the shows presented? Is the content available in a format compatible with the devices consumers want to use? Is it easy for the audience to interact with the show? What’s the online viewing experience like? The answers to these questions and the inputs of the other four elements of the framework all go into determining how effective the user experience is.

By examining these factors in detail, we can begin to identify specific changes that will improve business performance and help publishers get serious about building new media businesses.

In the weeks ahead, we will dive into each of these areas to examine best practices and to review how well different publishers are employing best practices.

Technorati Tags: podcasting, best practices, new media