For the past two years now, many in the online video industry have been falling all over themselves to hype TV Everywhere services and preach about how they are the future of the broadcast industry. But beyond all the hype, the fact remains that Comcast, who is the only major MSO to even offer such a service in the U.S., has stated that they lose money with Fancast Xfinity TV and don't know how they will turn it into a profitable business.

So it comes as no surprise to me that over the weekend, Comcast announced that for the second time in less than a year, they are raising rates. Starting on August 1st, customers in some areas of California and Pennsylvania will see their rates go up 3.5%. Comcast has been quoted as saying the rate increases are as a result of, "new technology, new features, additional programming, higher broadband speeds and improved customer service." In other interviews, they have said the increase is to pay for "digital services" and someone I spoke with at Comcast, who didn't want to be quoted for the blog, said the rate increases are helping to offset the costs associated with their Xfinity streaming service amongst other digital products.

For many customers, this is the second rate increase in less than a year as Comcast previously raised rates across the board on April 1st for what they said was, "part of our commitment to provide you with the very best entertainment and communications experience." And six months before that, in the fall, they raised rates again. While raising rates is something the MSOs have always done, no one that I have seen does it as often as Comcast. And with the Fancast Xfinity TV offering, all it does it give them an excuse as to why they have to raise the rates, telling customers that the service has value, even if many customers don't agree. While Comcast is quick to point out that they need to raise rates to pay for "better" services for consumers, it should also be noted that last quarter Comcast's operating income was $1.9 billion.

For those that think TV Everywhere is the future, it's not. In the U.S. at least, consumers are not willing to pay for the service, in the current state, and cable companies can't afford to offer a so called "free" service that they lose money on. If MSOs offered real TV Everywhere services that allowed for linear programming viewable to multiple devices, then consumers would pay for it. But no MSO is going to offer that as it then competes with their core business. The entire reason why Comcast doesn't charge a monthly fee for Fancast Xfinity TV is because they know they won't get enough people to pay to cover the cost of the service. So instead, they raise rates even for those who don't even use the service as they have no other way to try and get their money back.

Is this the kind of service and business model that the industry should be getting all excited about? Absolutely not. As I've written before, TV Everywhere is a pipe dream, something that people speak of without looking at reality, refusing to give up hope that it can save the broadcast industry. The first problem for someone who thinks this is that they are under the false impression that the broadcast industry needs to be saved. It doesn't. For all the talk about how great TV Everywhere is going to be, online video services are never going to replace cable and will always be a compliment to TV.

Another problem with TV Everywhere is the fact that there aren't enough large MSOs in the U.S. to make an entire business out of the service. Last year, the top 25 MSOs in the U.S. had a combined total of 60+M subscribers. Of that number, the top three MSOs combined, Comcast, Time Warner and Cox, made up 70% of those subscribers. Seventeen of the top 25 MSOs have less than 1M subscribers each. Looking at those numbers, it's clear that very few MSOs are going to be in a position to offer TV Everywhere services. There is no incentive for a MSO with 300,000 subscribers to bring to the market any type of TV Everywhere offering.

While I can understand that people want to get excited about new technology, there is nothing new about the technology used for TV Everywhere type services. It's the same online video technology we've had for years, re-packaged into a business model that does not and will not work. When I hear people say things like "TV Everywhere is disrupting the traditional business model," that's simply their way of trying to sound hip, kind of like how everyone used to drop the word "convergence" into as many sentences as possible. The reality is that TV Everywhere isn't disrupting anything. When most people write about the topic they seem to always focus on the technology used or the authentication process and not about the business model, because one does not exist.

The true value of any service is whether or not people are willing to pay for it. I'm sure Comcast would argue how popular Fancast Xfinity is by providing all kinds of data on how many number of streams have been served or how many hours of videos people have watched, but that means absolutely nothing. If the service was so popular and considered valuable, then consumers would pay for it and it would be a profitable business, but that's not going to happen with TV Everywhere.

Related Posts:

– Some Industry Vendors Betting Big On TV Everywhere, Most Will Lose

– The Promise Of TV Everywhere Is Doomed For Failure, Here's Why

– TV Everywhere Offerings Will Struggle To Be Successful

– Internet Video Distribution Will Not Displace Cable TV: "Cord Cutting" Is Hype

– Cable Companies Hyping Over-The-Top Video, But Where's The Business Model?

– TV Everywhere: The Future of Television, or Another Over-Hyped Promise?

If your AV company is local to the Los Angeles area, I am currently accepting bids for video capture of the Streaming Media West show, taking place November 2-3rd at the Hyatt Regency Century Plaza in Los
Angeles, CA. I'm not in need of any webcasting services for the event, only video capture from multiple rooms across multiple days. Please contact me if you'd like more details and want to bid on the project.

Each week I spend a lot of time trading emails with CEOs in the industry and simply due to time restraints, many of the conversations never go up on my blog. While probably half of what they tell me I'm not able to disclose anyway, there is a lot of information they share that I can make public, especially when it comes to the trends they are seeing in the market. With that in mind, this post with KIT Digital's CEO Kaleil Isaza Tuzman kicks off a new CEO Q&A format that I am going to try and do each week on my blog. If you want your company interviewed, send me an email and let me know as I already have a bunch of these Q&A posts in the hopper and will always be looking for more executives to interview.

Over the past two years, KIT Digital has made quite a name for themselves with all of the acquisitions they have done in the market. As a result of these acquisitions, KIT Digital is now selling a very rich product set across all three screens and into multiple verticals in the U.S, Europe and Asia. From a product standpoint, I hear KIT Digital get mentioned a lot in the context of Brightcove, yet the two companies are quite different. While there are some similarities between Brightcove and KIT Digital's online video platform offerings, KIT Digital is also focusing on IPTV services, signal acquisition and ingestion, live events and a whole host of broadcast and professional services that Brightcove is not in the business of.

With all of the platforms and technologies that KIT Digital has acquired, it hard to think of just one company to compare them to. They have a lot of competitors for various aspects of their business, but their product set tends to be a lot more diverse. While that can be a good thing, it could also cause problems for the company. Trying to integrate so many companies into the fold can be difficult, time consuming and end up costing more money than originally expected. In addition, with so much going on under one roof, trying to explain to the market what your focus is and who you are can be very challenging. These are some of the points that I've been discussing with KIT Digital's CEO Kaleil Isaza Tuzman who answered some of these questions in a Q&A interview I conducted via email.

Question: As a result of the company making so many acquisitions over the past two years, it's very hard to tell what the real organic growth is within the company. How would you break out the rate that KIT digital's core business is growing without all of the acquisitions?

Kaleil: It's a question we get pretty often, so we've run the numbers in detail: Using previously acquired company revenue run-rates and top-line growth prior to acquisition, we estimate that over the last three years our overall growth has been about 55% organic and 45% from complementary accretive acquisition. We expect our growth in 2010 to follow a similar pattern. We are not a “roll-up”. We believe in consolidation of our industry-and the scale in G&A and R&D that comes with it-but our strategy is one of a vanguard of organic growth with complementary, accretive acquisitions at the margin.

Our acquisitions have also been quite small. Over the last several years, there have been several statistically insignificant transactions (the buy-in of our minority interest in a subsidiary, for example, or the purchase of a two-person consultancy firm) and five “real” acquisitions that have comprised between 5-15% of our consolidated revenues in each case at the time of the transaction in question.

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Over the past few hours I've been testing Hulu's new Plus service and as aside from a few quirky issues with the player, the service is quite good. I've been using it on my MacBook, iPad and iPhone and the quality of the videos are excellent across all three devices. Hulu's 720p streams look just as good as Netflix's and of all three Apple devices, the size of the iPad screen naturally makes Hulu's videos look best on the iPad.

So far I have not seen any quality issues with the video and buffering is extremely low. As it should be, the quality of video with the Plus service is quite an improvement over the 480p content on Hulu.com. As a test, I found a clip from Scoundrels which starts off with a shot of a bunch of spinning windmills in the desert and there was no pixelation at all. Clearly Hulu got the encoding down right as things like spinning windmills and running water in shots tend to show pixelation very easily if not encoded properly. Even taking the video out of my MacBook and in to a 50" Vizio TV, the quality is very good.

The registration process to sign up for Hulu Plus is super simple and only requires your basic contact details and credit card info on one page and currently Hulu only accepts MasterCard and Visa. With the way Hulu displays all of the video preview windows, it could be very difficult to figure out which content is free and which requires a subscription. To address this issue, Hulu places a green plus icon next to any content that's available only with the subscription service.

While I didn't see any major problems with the service, there were a few quirks I came across in the player. When I changed my video player settings from auto-select to 720p as default, the video would stop and not start back up again. Clicking the update button would update my settings, but also require me to have to refresh the page and watch the ad all over again. I'm assuming this is an issue that Hulu will get fixed or that it could potentially be an issue on my side based on the version of my browser, player etc. I'll update the post when I hear back from Hulu on this. I've also reached out to Hulu to see if they will disclose some of their video encoding settings. I've also had an issue where the player delivers me the same ad twice, before it plays the video, but I don't think this is a widespread issue as it didn't do this all the time.

Whether or not Hulu Plus has enough content to make it worth paying for is something everyone is going to have their own opinion on. But from a technical and quality perspective, Hulu Plus offers exactly what
one would expect it should for ten dollars a month.

Note: I didn't have time to capture video of Hulu Plus in action on my Apple devices but I'll try to update this post later with some videos.

Update 7:53pm ET: Move Networks has just issued a press release saying that it, "intends to retain a financial advisor to assist the Company in evaluating strategic alternatives, including a possible sale of the Company." It has announced that President and CEO Roxanne Austin will step down, "following a brief transition period", and that Marcus Liassides who is the EVP of sales and biz dev will now be the President and handle day-to-day operations. Previously, Marcus was the CEO of Inuk Networks which Move acquired last year. Move also said that to converse cash the company "announced a reduction of its workforce".

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In the past month, Move Networks has received three offers from other vendors in the industry interested in potentially buying the company so it's no surprise to hear today that Move Networks is laying off employees and that Move's CEO Roxanne Austin will be leaving the company.

Even after all the problems and layoffs Move had more than a year ago, Move's board still seemed determined to try to make a go at it and bring some value back to the company in a different segment of the market, that being a platform for linear TV. While the board had seem fit to be in this for the long run and allowed Roxanne to add some new high profile executives to the board, it appears as if the investors are now going to cut their losses.

While terms of the deals that are on the table were not disclosed to me, in a call I had last week with one of the interested parties, they confirmed that multiple companies have approached Move Networks in the past month with interest in buying their assets. While I can't disclose who the companies are, some of them are a natural fit for simply bringing the technology in house and using it for their private network. I do know that the board has spent the past few weeks reviewing the proposals and with Roxanne leaving and others being laid off, it won't be long before the Move Networks brand is gone.

Combined, Move's investors including Benchmark Capital, Hummer Winblad Venture Partners, Steamboat Ventures and Televisa invested more than $67M into the company in three rounds. No one is going to be willing to pay that much for the company so unless the investors can get stock in the company that eventually purchases Move, they will lose money on the deal. I give them credit for trying to get Move up and running after all the problems they had, but they would have been much better off simply selling the company back in 2008. Hints of what was taking place came out today when someone posted a comment to Move's Twitter account suggesting the company was looking to sell the assets for $150M, but that's an obvious joke. No one is going to pay much for what Move has.

Move's downfall over the years is a great learning example for others and once again points out that you can't build a business on technology alone. Unless you have a way to take that technology and turn it into a product/service that has a business model that makes sense, the best technology in the world won't save you. Move learned that first hand and for anyone who has followed the company over the past few years, today's events won't come as any surprise.

Related:

– March 2010: ESPN To Use MLB To Stream All Their Events, Drops Support For Move Networks

– July 2009: Interview With Move's New CEO: Company Will Focus On Solutions For Full Linear TV

– July 2009: Move Networks Announces New CEO: Former DIRECTV President And COO

– April 2009: Move Networks Acquires IPTV Company, Adds To Their Confusing Portfolio

– Feb. 2009: Move Networks Lays Off 30% Of Company, John Edwards Still CEO

– April 2008: Move Networks Rasies C Round Totaling $67.9, Not $91.3 Million

Today at 12pm ET I'll be moderating another StreamingMedia.com webinar on the topic of "Encoding Best Practices and Strategies". High-quality, efficient encoding and transcoding is crucial to the success of any online video initiative, but there are so many issues to consider—format, codec, bitrate, aspect ratio, and more—that the whole subject can be more than a little intimidating. Come learn the latest tips, tricks, and technologies for making your video look the best it can.

Presenters from Telestream, Sorenson Media, Twistage and ViewCast will talk about:

• Choosing video and audio formats
• Optimizing bitrate for bandwidth
• Transcoding content for multiple device delivery: PC, mobile, and TV
• Encoding and transcoding best practices
• Industry-leading transcoding technologies

Be sure to bring your questions, because there will be plenty of time for Q&A with and as the moderator, I'll be making sure we answer as many questions as possible from the audience. We have a record 1,709 people already registered for the event and you can still register and attend for free.

With today's announcement by Hulu of their long awaited subscription service, Hulu Plus, it was only a matter of time before the blogsphere was quick to jump all over the news and suggest that Hulu is now a competitor to Netflix or that this some how gives consumers more reason to ditch cable. While it's easy to suggest this, the reality is that the business models, type of content, number of devices and other factors between Netflix and Hulu are very different.

CNET was quick to say that "Hulu has also made up ground on Netflix when comparing the number of devices that feature the services." But if you look at the number, that's not true. Netflix says they will be on 100 devices by the end of this year. Hulu looks like it will be on about ten. Devices like the Xbox 360 and others won't support Hulu Plus until next year.

Of course, for Netflix, none of their device success happened over night. It's taken Netflix three years and hundreds of millions of dollars to make this happen. Since Netflix does not rely on their streaming service to generate direct revenue, they can afford to spend the money and invest the resources to make their streaming offering as good as it is.

Hulu did just over $100M in revenue in 2009 and half of that money went back to the content owners. Compared to Netflix, Hulu has very little money to spend on R&D and can't dedicate the resources needed to work with dozens of consumer electronic manufactures to get their platform embedded into devices. Even Blockbuster, who is much larger than Hulu admitted they don't have the resources to work with all the hardware providers that they want to.

Not to mention, Hulu would have to design apps for a lot of these devices and none of that happens overnight. Hulu's CEO was even interviewed today talking about how each device needs to get a custom interface with new software. Just look at the amount of resources Netflix has put into this and it's still taken Netflix three years to get to the point they are at today. Hulu simply doesn't have the money or resources to replicate what Netflix has done anytime soon. That's not a knock on Hulu, it's just reality. Think of it this way. Hulu has been working on their Hulu Plus service for easily more than a year, and at launch, they will have only a few hardware partners. That shows just how long it takes and the work involved in getting a content offering integrated into a CE device.

The other big differences between the companies is the rate at which they move. Even though Netflix is much larger than Hulu, Netflix is very nimble. Talk to any of their hardware partners and they will tell you how easy it is to work with Netflix, how fast they get things done and how well their service works. Compare that to Hulu who is smaller than Netflix, yet is not known for moving very quickly and is completely new to working with CE manufactures.

Whenever someone says one service will replace another or at least compete with it, that means that it needs to provide a similar experience to what's in the market. Hulu is all about short-form content, TV shows, and Netflix is mostly about long-form content in the form of movies. Yes, Netflix has TV shows as well, but movies is their strength. Netflix has around 12,000 pieces of content and Hulu Plus will have about 2,000 to start. That's a big difference in the type and volume of content available.

As for those who suggest that Hulu Plus will now enable consumers to "cut the cord", that's just more hype. Hulu Plus and Netflix combined do not offer enough content for the average consumer. Sure, for some it will be sufficient, but not for the the vast majority of consumers. Hulu Plus will not start any kind of trend of cord-cutters.

Hulu's new subscription service is very straight-forward in what it offers and it's great that Hulu's CEO is very clear at where it fits in the market. At no time has he said it will replace Netflix, or that the cable companies should be worried. Hulu Plus is the first step for the company and this is not a sprint to the finish line. The battle for consumers eyeballs in the living room and across devices is only just beginning and there is a really long way to go before anyone is considered the winner. Hulu's Plus service is a great thing for the industry as it gives us another model in the market, another way to consume content and will enable other content owners to test the waters with new forms of distribution.

Will Hulu Plus work? Yes, but not like most people think. Hulu Plus is not meant to replace Hulu.com, only compliment it. Hulu Plus won't have millions of subscribers in the next few years and that's just fine, it does not need to. Hulu Plus is just another extension of the Hulu brand and is only the first of many types of content offerings to come. We should like Hulu Plus for what it is and not ike it by comparing it to Netflix, which it isn't.