Microsoft’s Blair Westlake on The Future of TV
Thursday, April 2nd, 2009
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.
Microsoft has officially
Microsoft 
As part of our Super Fan series, we interviewed Dean Carignan. Dean is Director, Advertising Business Strategy for
Dean was able to provide us with some excellent perspective on these new advertising opportunities. He is part of a group that looks at opportunities to advertise via the 
The folks at Google must be smiling tonight. Microsoft has been lured into putting a bid in for Yahoo. This is a waste of time, money and energy by Microsoft and that should make the Google folks more confident that they are on their way to overtaking Microsoft in the battle for leading technology company on the planet.
Combining two companies that DO NOT GET IT is NOT a recipe for competing with one that does. So let me get specific about what I mean by NOT GETTING IT as it relates to Microsoft and Yahoo. Anyone who has used Google Adwords as an advertiser and Google Adsense as a publisher and done the tests on the competitive products from Microsoft and Yahoo knows what I’m about to describe.
When I set up a campaign at Google Adwords, it is an automated process that is rich with interaction and feedback. I can test a campaign, keywords and ads in a very responsive manner that allows me to set it up, test it and optimize it quickly. Yahoo’s equivalent service was a captive to the belief that permeated Overture/Goto that only human editors could screen ads to make sure that they were relevant. It would take days under that process to do what Google did in minutes As a result, I advertise at Google and do so with Yahoo when I get around to it, if ever. (BTW I told this to the senior team at Yahoo’s search marketing group, but they either didn’t want to hear it or could not change the business process that had been set in place 4-5 years before) Since then, Yahoo has tried to reinvent its ad platform and Microsoft has launched their own version, but both still lag way, way behind Google.
I just checked Google analytics for the daily stats at Digital Podcast and I saw the biggest one time increase in daily visitors and page views. Digital Podcast’s traffic jumped up by 80% on Christmas day. I looked at the distribution of search terms for some anomaly, but it wasn’t there. Search terms remained consistent in their distribution.
I also think that Christmas day has probably become the biggest day ever for the music industry thanks to iTunes cards. I know for sure that’s the case in my home as my daughter spent her $30 iTunes gift cards before noon and my son spent his by 4pm. That’s the first time either of them has bought music online and it didn’t take long.



