With Roku’s announcement of their new Roku 3 box and new user interface, many were hoping to finally see an official YouTube channel for the device. Unfortunately, that didn’t happen and when asked, Roku said they would like to have a YouTube channel, but didn’t have any update on when/if one would be available. While the company isn’t giving any update, I think that based on the new A9 chip inside the Roku 3, an official YouTube channel could come to the Roku 3 shortly.

For those that don’t know the history of YouTube on Roku, or already have a YouTube channel on their device, he’s some background. In April of 2010, an independent developer launched a private YouTube channel that some Roku users added to their device. Roku liked the work of the developer so much they hired him. But Google took offense to the private channel and Roku was sent a takedown notice from YouTube’s legal team. About a year after the private channel was released, Roku was forced to disable it and no longer allows new customers to sign up for the channel. Since then, other developers have come out with a private channel to get YouTube content, like RateRix, but each time they do they don’t last long before YouTube makes some kind of change in their system to render the apps non-functional. Video Buzz was the latest private YouTube channel to come out and some users report it working for them, but last time I tried I couldn’t get it to work.

Clearly Google wasn’t happy with Roku for allowing the private channel to begin with and many suggest that’s the reason why Roku still had no official YouTube channel today, because Google won’t allow it. But I don’t believe that’s the case. Sources inside Google tell me that they aren’t keeping Roku from having a YouTube channel, rather that the outdated chip in Roku 2 models aren’t capable of supporting Google’s new requirements for any partner who wants to have a YouTube channel on their device.

Google requires partners to integrate their HTML based YouTube app on their device and Roku has previously said that performance of HTML based apps on their Roku 2 boxes didn’t perform to the levels they wanted. All Roku 2 models have an old ARM11 chip, first released in 2003, and the new Roku 3 models have a dual-core A9 chip, a big improvement over the legacy chips. The Arm 11 chip has never been powerful nor a very efficient processor and the dual-core A9 chip is exactly the opposite and is up to 5x faster than the ARM11. One thing I noticed during my hands-on time with the new Roku 3 is that apps and video open and play much faster over the Roku 2, by a noticeable difference. Part of that may be to the amount of memory in the new Roku 3, which allows for the caching of content, but Roku won’t comment on how exactly they setup the video to buffer, saying that’s part of their secret.

If Roku can get an official YouTube channel on their Roku 3 boxes going forward, many will upgrade. Roku would then be the only $99 box in the market to have YouTube, Netflix, Hulu Plus, MLB.TV, NBA, NHL, EPIX, HBO Go, Amazon, Vudu and UFC. The Xbox 360 has all of these channels, plus ESPN, but costs twice what the Roku does and is really targeting a different market and type of user. Whatever the exact reason(s) are for how the new Roku 3 box handles video, it’s a better experience. Consumers will benefit from the better UI and faster video playback and the new chip should also allow Roku to bring some better games to the box as well.

And if you want a shot at winning a free Roku 3, I’m giving one away to one lucky reader of my blog. You can enter the drawing here.

Popular streaming device maker Roku has announced a new $99 streaming box, named the Roku 3, based on a faster chip, better WiFi support, as well as a newly redesigned user interface, which will also roll out to some older Roku boxes. I had a chance to get some hands-on time with the Roku 3 last week and was impressed with this upgrade since channels load faster, video starts up with less buffering and WiFi has been improved, with dual-band support. Add in the new UI, the ability to listen to audio via some Roku branded purple headphones included in the box, plus the number of content channels available and the Roku is still the best streamer in the market. Roku expects to sell their 5 millionth box to date by then end of this month.

The new Roku 3 is a little smaller than the Roku 2 with but rounded corners and has built-in ethernet, HDMI, USB, MicroSD slotand support for dual-band Wi-Fi a/b/g/n and 1080p video. The Roku 3 also has a very cool new feature with a built-in headphone jack in the remote, which lets you plug in headphones for private listening. In addition, after a long wait, Roku has finally revamped their user interface (video of it here) and made using, searching and navigating all the content channels much faster and easier to use. For those that were hoping for an official YouTube channel, I’m afraid it’s still not available. But read my other post entitled, “A9 Chip Inside The Roku 3 May Finally Allow For An Official YouTube Channel“, to learn more about why I think a YouTube channel may be coming soon.

The Roku 3 is based on a new processor and sports a dual-core A9 chip, a big improvement over the legacy ARM11 chips in the older Roku 2. The Arm 11 chip has never been powerful nor a very efficient processor and the dual-core A9 chip is exactly the opposite and is up to 5x faster than the ARM11. One thing I noticed during my hands-on time with the new Roku 3 is that apps and video open and play much faster over the Roku 2, by a noticeable difference. Part of that may be to the amount of memory in the new Roku 3, which allows for the caching of content, but Roku won’t comment on how exactly they setup the video to buffer, saying it’s a secret.

In addition to the new chip, the Roku 3 can now take advantage of dual-band WiFI routers. This is a big improvement over the Roku 2 models as many users complained of WiFi connectivity issues with their Roku models. I had issues with the Roku 2 models where in some cases, the WiFi signal would be very weak when every other device sitting next to the Roku would be strong. It’s always hard to pinpoint the exact problem when it comes to WiFi issues as many factors affect the signal strength and reach of one’s WiFi signal in their home, but the new Roku 3 should eliminate most WiFi coverage issues for anyone with a dual-band router setup.

The Roku 3 ships with the same motion controlled remote as the Roku 2 XS except for the addition of the new headphone jack in the remote which lets you listen to your content with a pair of headphones. The Roku 3 ships with purple headphones, complete with different sized interchangeable rubber earpieces and audio is sent from the Roku 3 to the remote using WiFi, thanks to a WiFi chip inside the remote. This is really a very nice option that can be used by those who want to watch content without bothering others around them or for those who don’t hear well and might have to use subtitles. This is one of the nicest features of the new Roku 3 and one that is extremely practical, considering many consumers have to contend with background noise while trying to watch their favorite shows or movies.

Fans of the most current Roku models will be happy to know that the new and improved user interface that comes with the Roku 3 will also roll out to many older Roku models as well, specifically the Roku LT, Roku HD (model 2500R), Roku 2 HD, Roku 2 XD, Roku 2 XS and the Roku Streaming Stick. Roku didn’t give me an exact date of when the updates would be available but did say “sometime in April”. The new user interface is nice, very clean, easy to navigate and retains the simple and straight-forward approach users have always loved about the Roku. Many times when a new UI is released, it can be sluggish and buggy but the new UI I got to use on the Roku 3 was very fast, much faster than the current UI on the Roku 2 models. I haven’t had the chance to test the new UI to see how is works on older Roku boxes, but I expect it will perform well. In addition to the new navigation, Roku also has a new search function which lets you search amongst all content channels and returns results for both subscription and PPV services. It’s a universal search option with predictable results that reminds me of the look and feel to the search function when using TiVo.

Roku isn’t announcing any new format or codec support for content being played back via USB and those looking for a streamer that can act as a media hub to playback all kinds of various formats should look to other boxes in the market made for that purpose. Roku’s not going after that market but rather those consumers who want a quick and easy way to stream content from the widest selection of content. If Roku can get an official YouTube channel on their Roku 3 boxes going forward, many will upgrade. Roku would then be the only $99 box in the market to have YouTube, Netflix, Hulu Plus, MLB.TV, NBA, NHL, EPIX, HBO Go, Amazon Instant Video, Vudu and UFC. The Xbox 360 has all of these channels, plus ESPN, but costs twice what the Roku does and is really targeting a different market and type of user.

Roku already had the best content available and with a new user interface, faster loading channels, increased WiFi performance and quicker video playback, the new Roku 3 is easily the best $99 streamer in the market. While Roku isn’t currently offering any kind of upgrade option the company did tell me that from time to time, existing customers will receive different offers to upgrade from older Roku models. The Roku 3 comes with a 90-day warranty, is available and shipping from the Roku.com website today and will be available via Amazon.com and retail stores in April.

And if you want a shot at winning a free Roku 3, I’m giving one away to one lucky reader of my blog. You can enter the drawing here.

Earlier today, Lexmark announced the completion of two acquisitions, including San Francisco based online video platform provider Twistage. The total acquisition price for both companies was approximately $31.5 million. I don’t remember the exact amount of funding Twistage had raised to date but it was small. Lexmark isn’t commenting on what value they placed on Twistage but I would guess it was $10M or less. I haven’t had the chance yet to speak with Twistage’s CEO but will update this post once I have more details.

Nine months ago, Amazon launched their new dynamic content delivery service in beta and two weeks ago, I posted details on how their product is coming along and outlined new features they have added since launch. Every since Amazon announced their new service, people keep asking me if Amazon will disrupt Akamai’s DSA business and drive pricing down in the market as a whole. While Amazon still has a long way to go before that has the possibility of happening, make no mistake, they are gunning for Akamai, even though they won’t call out Akamai by name.

Today, Akamai is still the undisputed king of the dynamic site acceleration industry and to date, no one has even come close to taking a large percentage of their web optimization business or knocked them from the top spot. But over the past four or five years, market dynamics have changed. Companies no longer have to spend hundreds of millions of dollars to enter this market, services are getting cheaper to deploy and scale and the old rules of how to build out web acceleration services has drastically changed. Cotendo proved this better than anyone else. In under three years, Cotendo was able to disrupt Akamai’s dynamic site acceleration margins so much, Akamai was forced to acquired them, even though Cotendo wasn’t doing that much in revenue and had only raised about $40M in funding.

While Cotendo drove pricing down in the market and pressured Akamai, the one thing Cotendo didn’t do was generate a lot of revenue. Services can only scale and grow so much when you have $40M in funding, but it was still enough to impact the market as a whole and get Akamai’s attention. Cotendo’s service didn’t have the scale or functionality of Akamai’s service, yet it was still able to be a disruptor. In Amazon case, they have the opportunity to not only impact Akamai’s margins for their services, but also generate a lot of revenue on top of it. Amazon has more resources than Cotendo, more money, more R&D, more marketing reach, a well known brand and a built-in customer base that is projected by Analysts to do at least $2B in revenue this year from their web services division, AWS.

That’s not to say Amazon is ready to disrupt Akamai tomorrow, they won’t. But don’t be fooled by Amazon’s approach, which may appear slow to some. Amazon has a very methodical way of rolling out products and services to the market and it typically takes them about 18-24 months before a product goes from beta to a full-fledged offering with a lot of the features and functionality of their competitors. Look at their CDN product, CloudFront, which went from a bare-bones beta product to one that could compete, by my estimate, for 75% of the commodity CDN market, in 18 months. CloudFront is estimated to have generated more than $100M in revenue last year and Amazon continues to build out additional services to support their CDN, announcing their video transcoding service last month.

From purely a features standpoint, Akamai’s dynamic content delivery service still trumps Amazon’s, by a wide margin. But that’s not going to last for too long and little by little, Amazon is already starting to close the gap. Amazon’s working on rolling out a lot more functionality and while they will never be able to compete for 100% of Akamai’s DSA business, they will continue to get stronger and go after more of the business that doesn’t require a ton of professional services. Amazon will never compete for 100% of the market, but they don’t need to. All they have to do is continue to roll out features, add an SLA, lower pricing and prove their dynamic content acceleration services performs well and can scale, with reliability. Of course building all of that out to scale doesn’t happen overnight, but it’s not as hard as some vendors make it out to be and Amazon has the resources to make it happen and more importantly, has multiple lines of businesses to generate revenue from. Amazon can be patient and grow the business over time.

I don’t expect Amazon to disrupt the market in the next one or two quarters, but come Q4 of this year and into Q1 of 2014, I expect we’ll see signs that Amazon is starting to have a major impact on the dynamic content acceleration market and Akamai in particular. This is an interesting time for Akamai right now. For the first time in Akamai’s history, that I can remember, they have a growing competitor they can’t acquire. Akamai’s competitive strategy has always been to simply acquire anyone who impacts their business and remove them from the market, but they can’t do that with Amazon. And unlike two years ago when Cotendo was really the only competitor to Akamai for dynamic content acceleration services, Akamai now faces competition from more than just Amazon. Small startups like Yottaa want to be the next thorn in Akamai’s side and more established players like EdgeCast and Level 3 are making moves to get into the market, or expand their focus.

The good news from all of this is that customers will have more options in the market for dynamic content acceleration services, at different price points, in different regions of the world, for small and large deployments. As a result, these services will become mainstream, demand will increase and prices will decline. Customers will become educated as to the business benefits and learn there is more than one way to deliver content on the web with scale and performance. For Akamai, this will cause a negative impact on their margins if Amazon can disrupt their business the way Cotendo did, but on a larger scale.

Keep in mind though that as dynamic site acceleration pricing declines in the market, it won’t be at the rate video content delivery pricing declined. Unlike delivering video on the web, performance measured in fractions of a second does matter when it comes to delivering dynamic content. For video, customers aren’t willing to pay a premium to have their video start-up half a second faster on one CDN over another. Half a second does not impact a video based business. But half a second of performance difference in the dynamic site acceleration market can mean the loss of revenue for a customer. So the good news it that customers will be willing to pay for different levels of DSA performance, which will help to keep prices from falling as quickly as they did for video.

Amazon does not charge any premium for dynamic content delivery, something Akamai has done for a long time. Amazon customers who have been previously reluctant to adopt dynamic content acceleration services due to the cost, will now be able to simply buy it as an add-on, without worrying about any type of premium pricing. It’s hard to compare Akamai and Amazon’s pricing side-by-side for dynamic content services, because there is still a wide gap in performance, and they both charge a bit differently, but it’s a safe bet to say that Amazon’s price is anywhere between 50-75% cheaper than Akamai’s. That’s a really big difference and will continue to be more of an apples-to-apples comparison, once Amazon’s dynamic content delivery service becomes closer to Akamai’s in functionality.

The bottom line is that Amazon still has to prove themselves in the market. They are still the new kid on the block and Akamai has first mover status and a proven business, but Amazon has a lot more advantages in the long run. Akamai may be at the top right now, but Amazon’s following their tried and true method of methodically rolling out more products and services. To think they won’t be able to disrupt the market, at some point in the near future, which would impact Akamai, would be foolish. It will happen, the question is how quickly and to what degree.

When I joined the military and entered basic training after graduating from High School, as soon as I got off the bus a drill instructor was in my face making it clear to me that by the time my training was over, I will have learned that even the most well laid plans can and do fail. Things change, stuff happens and there is only so much you can anticipate. Learning to adapt and overcome unexpected challenges was something we needed to learn if we wanted to make it and this concept is at the core of what they teach all new recruits, in all branches of our military.

Right now, many vendors are working to finalize their go-to-market strategy, budgets and plans in the New Year, with some making big bets on what will impact their business the most in 2013. A lot of vendors have reached out to me over the past few weeks asking what I see coming, where I see the most opportunity for their business and what trends we’ll see in the industry.

No matter how well any of us plan, market dynamics take place we can never anticipate and all vendors need to be able to adjust to changing market conditions. That’s what the leading vendors in any industry do, adapt and overcome, by being quick and nimble in how they react to changing conditions. In my opinion, too many vendors are focused on trying to figure out exactly what will happen and instead, should be looking at the bigger macro trends and thinking about the core strengths of their business, the key verticals they need to focus on and the problems they need to solve for customers.

Trying to come up with exactly how many streams will be served, how many more videos a consumer will watch by the end of the year, when Apple will ship an all-in-one TV, or what percentage of consumers will cut-the-cord (answer: less than 1% a year) aren’t questions that help your business in the short or long-term. Any good company needs to be able to make a game plan for steady, consistent growth of their business which highlights their key strengths and will make them successful, no matter how fast or slow a segment of the market grows.

Some vendors made some big bets years ago that TV everywhere would be rolled out by most MSOs and that they would be able to grow their business based on those deployments. Three years later, true TV everywhere deployments are hard to find and many of the vendors who shifted their business models to that segment of the market aren’t doing well. Companies like Cisco can bet big on TV everywhere, with their Videoscape offering, because they have the operational resources and more importantly finances to be able to wait until TV everywhere is a real market. It’s the same way Google was able to buy YouTube and lose money for many years, before the market was large enough, and business and content models had evolved enough, to where Google could profit from the deal. But most vendors aren’t in the position of the likes of a Cisco or Google.

Vendors need to get away from hardware products where the only value proposition is “higher performance” and focus on layering software on top of hardware. Delivery networks need to get away from focusing on delivering a huge amount of bits with small or no margins and instead, focus on delivering fewer bits, but ones that are profitable. Most are trying in this regard, but years later, still aren’t doing it fast enough. Vendors in the advertising markets need to stop telling us how well they allow for “monetization” and start offering better targeting of ads, better analytics and provide more help to get content owners higher CPMs. Online video platform providers need to stay away from focusing on who has the best platforms for encoding or player development, which are important, but aren’t really helping content owners with a strategy that leads to success. Highlighting the fact that you can help a content owner “reach every device” is meaningless if the devices they are reaching have low penetration rates, have no commerce functionality on them, or don’t allow for multiple business models and consumption abilities like pay to own, pay to rent, subscription etc. It has to be about more than just devices and hardware.

As a whole, vendors need to do a much better job of moving with the markets and being flexible, quick and nimble. Whenever a vendor tells me they are or have been working on a new product or service for two years or more, that’s a problem. Unless you have the financial and operational ability to work on something that won’t provide any revenue to your company for two years, you’re setting your company up for failure. I keep seeing companies trying to roll out new products and services into markets they should not be in. Just because you are in the broadcast market does not mean you can easily enter the enterprise market. Some companies can make the transition, with the right planning, but most can’t from a product, marketing and operational standpoint.

Every day I read reports saying how big a certain facet of our industry is, or how big the market opportunity is, yet when you look at the revenue of the vendors in that segment, it never adds up to the total market opportunity. Yet even with that, we see many vendors decide they no longer need to focus on that one segment and increase their share, but rather offer new products and services that don’t really align with their core business or their core verticals. If you are good at a few things, and you haven’t saturated your market, and it’s still growing by a healthy CAGR (compound annual growth rate), why are you taking your eye off the ball and losing focus?

While segments of the market can get crowded with lots of vendors, if you look at just about any product or service in the market, 3-4 vendors usually own the majority of the market share. And most of the reason for that is their laser focus. But lately, even some of those who have led the market are straying from their expertise and trying to “reinvent” their company, thinking they need to enter new markets or get into services that aren’t part of their core focus, just to grow their business. For most, that leads to problems.

The biggest advice I can give all vendors in the industry is to stay focused, spend time growing your core business, don’t bet big on services/products that are built on “hype” and learn to be quick and nimble so that you can adapt and overcome to changes in the market. Many companies seem so hell-bent on the idea that there is only one right way to do something or that their product/service is the only way to solve the customers problem at scale/costs/flexibility etc. that they lose sight of the fact that there are many different ways to accomplish the same task, all successfully. Live in the real world, not the fantasy world that most of the media who report on this industry live in. Setting real and proper expectations is all that matters.

The market you are in may not grow as fast as you hoped for, new competitors may start competing with you and customer’s challenges may become more complex to solve. But that’s the case of any industry, it’s what tends to take place each year, and in the online video world, that’s the cost of doing business. Vendors that are product/vertical focused, have systems in place to be nimble and move with the markets are truly the ones that are going to be able to adapt and overcome.

While many vendors talk about Europe and Asia as the regions of the world they are expanding into, Latin America is going to quickly become the next go to hot spot. In specific countries like Brazil and others, online video consumption has increased significantly in recent years. Just take a look at some of these recent stats:

• Video market in Brazil is one of largest worldwide – viewing audience of 43 million people monthly and penetration of 82.2% among internet users (Dec/12);
• Internet is the #2 in advertising spending;
• Brazil ranks as the 5th largest internet market globally.
• Brazilians spent $12.2 billion in online retail sales in 2012 – and will spend over $25 billion by 2017.
• Brazil will host the two most important sport events, World Cup and Olympics, receiving over $30 billion on investment from the Brazilian government.
• Local Government will invest $ 9 billion in broadband in the next 4 years.
• Latin Americans spend 56% more time on social networking sites than the worldwide average.
• People in Latin America spent $3.62 billions in digital ads in 2012 – 112% increase in just four years.
• In 2013, Latin America will be #2 in the world in digital ad spend.

While not every country in Latin America has a large population capable of getting a 2-3Mbps video stream, many do, and they have huge populations with large Internet penetration rates:

• Argentina: As of March 2010 the country had a 64% Internet penetration rate with 26.6M users with an average broadband speed of 3.33Mbps.
• Brazil: As of Dec. 2009 the country had a 37.8% Internet penetration rate with 75M users with an average broadband speed of 4.46Mbps.
• Chile: At the end of 2009 the country had a 50% Internet penetration rate with 10M users with an average broadband speed of 6.62Mbps.
• Colombia: In mid 2010 the country had a 48% Internet penetration rate with 21M users with an average broadband speed of 4.32Mbps.
• Mexico: In 2010 the country had a 27% Internet penetration rate with 30.6M users with an average broadband speed of 3.54Mbps.
• Peru: As of June 2010 the country had a 27% Internet penetration rate with 8.8M users with an average broadband speed of 4.62Mbps.

For all of Latin America combined, we’re looking at a population of roughly 600M with more than one-third of them online, with a combined average broadband speed of more than 3 Mbps.

Investments in companies involved in providing video services in the Latin American market are also starting to pick up, the latest being Brazilian premium video ad network Samba Ads, who announced last week that they have raised $500k in seed funding and Level 3’s purchase of Global Crossing at the end of 2011. We have also seen more content services launched in Latin America in the past few quarters with Deezer rolling out in 35 countries, Netflix launching in 43 countries and OTT offerings like Total Movie continuing to expand. I’m also seeing new tradeshows and conferences popping up in countries like Brazil and Columbia with Sportel Rio being a good business venue for high-level sports and new media vendors and Andina Link, which is Latin America’s premier trade fair for the broadband and cable television industry.

While you may not hear much about the Latin American market for streaming media services yet, you will soon. Over-the-top video has launched in several Latin American countries (with at least a dozen countries poised to follow), offered by no less than six digital media operators. We see it as being such a large opportunity for vendors that we hosted a whole panel on the topic at last year’s Streaming Media East show, with speakers from Telefonica, Total Movie, Bazuca and DLA. You can check out a video of that session here.

If your company is based in Latin America and offers streaming media services, please put the name and website URL of your company in the comments section below so I can keep track of vendors in that region.

I’ve started planning the agenda for the fifth annual Content Delivery Summit, taking place Monday May 20th in NYC and like past year’s, I’m looking to highlight new startups or products pertaining to the infrastructure of web, acceleration and media delivery. We cover a wide assortment of technologies including the FEO, DSA, transparent caching, licensed/managed CDN, web acceleration platforms, mobile content acceleration and service provider deployments amongst others. Check out the home page at www.contentdeliverysummit.com for a deeper overview.

In previous years, companies like Cotendo, Qwilt, Deepfield, Cedexis, Yottaa, Aflexi, BNI Video and Conviva have all been featured as startups at the show. This is a great opportunity for stealth or startup companies to get some time on stage to showcase what they are working on and what problem they are looking to solve. If selected there is no fee to present and you’ll have 20 minutes to present.

If interested, reach out to me directly and let me know a bit more about your company and what you looking to showcase. I will be picking companies over the next 2-3 weeks, so contact me ASAP if you are interested.

And if you haven’t already seen the news, Ken Florance, VP of Content Delivery at Netflix will be the opening keynote speaker at the summit. So come join telcos, carriers, ISPs, MSOs, major content owners and CDNs to see and hear case studies on real-world deployments, see demos of new technology platforms and discuss business model considerations for web acceleration and media delivery.