For an entire industry that defines itself based on the word "quality", today there is still no agreed upon standard for what classifies HD quality video on the web. Both Microsoft and Adobe have different views on what classifies a video as HD and many content owners I speak don't truly know themselves how to classify HD video on the web. If the industry wants to progress with HD quality video, we're going to have to agree on a standard – and fast.

This isn't the first time I have written about the HD video problem and every time the subject comes up, you get a lot of comments from people who all have different options on how HD video should be classified. Some want the rate at which the video is encoded to be the deciding factor, others think it should be the size of the window (called aspect ratio) and some say it's the resolution that's the determines what is HD or not. While all of these examples could be the way to decide what is HD, the fact of the matter is that to date, no one has agreed upon anything. We have content owners calling videos HD that in my book, and many others, is not truly HD. Simply scaling up the aspect ratio by itself does not mean you've achieved an HD stream.

To me, the term HD should refer to and be defined only by the resolution and not by a minimum bitrate requirement. Since you could have a 1080p HD video encoded at a very low bitrate, which could result in a poor viewing experience inferior to that of a higher-bitrate video in SD resolution, the resolution and bitrate is the only way to define HD. One thing I did notice about the March Madness videos is that Microsoft and CBS are using the term "HQ" in the payer instead of HD. I think this is a smart move on their part as a way to help define what is considered high quality video, content encoded at a higher bitrate, but content that is not truly HD. It seems as if Microsoft is going out of their way to tell content owners to only call video HD if it is at least 1280 pixels wide.

Adobe on the other hand is calling 480p HD but I don't agree that 480p should be classified as an HD size for web content. If 480p is not defined as HD video quaity for the TV, why should it be for the PC? I think HD video needs to be defined using the broadcast standard of 720p, 1080i or 1080p. One thing that might make this a bit more complex is that there are more devices playing back web video than just the PC. When I download an HD show from iTunes and play it on a 50" TV, it looks great, but does not look even close to Blu-ray. Is that a fair comparison? Where do you stop comparing the quality of the video to the device it is being played back on?

It's important to remember that an industry standard needs to be created not for those in the industry but rather for viewers. Consumers don't care what codec is being used, what the bitrate is or how the video is being delivered. But they do care about quality and we can't expect them to want to adopt HD quality video when the industry itself has not even defined what HD video is.

So, what is HD quality video on the web? What is the definition and more importantly, what is it going to take to get both Microsoft and Adobe to agree to use the same standard so that content owners aren't confused? For all the competition amongst the two companies, some things need to be worked on together, with the understanding that it will help everyone in the industry if done correctly. I think Microsoft has started to do this with their definition but without Adobe and others agreeing to all use the same metrics, it's will only slow down the adoption of HD. So Microsoft, Adobe, what is it going to take for you guys to publish an agreed upon HD web video standard? We're waiting.

As the program wraps up this week for the Streaming Media East show in May, I've added speakers from Joost, Motorolla, Limewire, AP, Veoh, LG Electronics, Zillion TV, TheStreet.com and moderators from Silicon Alley Insider and All Things Digital. We've got a great lineup of almost 100 speakers, which you can see on our website.

One company missing from the list is Hulu. I've already received a bunch of e-mails from folks asking me, "How can you have an online video show and not have Hulu speaking?" I agree and I've reached out to multiple people at Hulu but haven't gotten any e-mails or calls returned. In fact, I think it's so important to have Hulu at the show that I even offered them a keynote speaking spot, in front of a crowd that's usually 500 strong. So if someone from Hulu is reading this and wants to be involved, please get a hold of me right away, we'd like to have you represented. But the program is closing this week and being sent to the printer so there's not a lot of time left.

I am closing out the Streaming Media East program this week and have a few spots that have opened up that I need to fill. Today I am looking for at least one and maybe two speakers for a session entitled:

Successful Content Syndication and Aggregation Strategies
This panel will discuss the new ways content owners and site developers are aggregating content and distributing it on the web. See examples of ways to develop niche vertical sites without significantly expanding staffing, and discuss how to reach audiences on social networking sites like Facebook. Learn about some of the new emerging platforms for niche video distribution and best practices for increasing your chances of making money with your content.

The panel takes place on Tuesday May 12, 2009 from 4-5pm. While I am open to all speaking requests, ideally I am looking to fill the spots with content owners, those who are syndicating their content across multiple platforms. If interested, please contact me ASAP.

Neil Hunt, Netflix's chief product officer posted to the Netflix blog earlier today that the problems some users are facing with Netflix's streaming service is as a result of how ISPs handle traffic and is in no way an indication that Netflix is throttling their service. This should not come as a surprise to anyone who's in the industry as the idea of Netflix throttling their own service on purpose simply lacks common sense.

Not to mention, this whole issue isn’t even debatable since Netflix is not the delivery network pushing out the streams and has no control over any network. They don’t serve the streams, Limelight and Level 3 do. How can Netflix “throttle” something they aren’t delivering?

This whole debate started on the Break It Down Blog when the author was complaining that the quality on the Xbox 360 is much better than the watch now service on the PC. Of course it is, that’s because content for the Xbox 360 is encoded at higher bitrates, which Netflix already disclosed on their blog back in November and which Neil re-confirms in his blog post today.

The author on the Break It Down Blog may very well be having issues with streaming to his PC, but it’s not as a result of Netflix doing anything as many people pointed out in the comments section. Not to mention, Netflix is all about keeping customers happy. Why would they make anyone's viewing experience crappy on purpose? Neil's post today did say that Netflix is looking to improve the streaming experience in general by, "incorporating an initial version of multi-sourcing, and as we improve it, we’ll roll it out to everyone including our device partners such as Roku and Xbox. We hope by the end of year to have this problem largely solved."

Hopefully this ends the debate about whether some Netflix users think Netflix is throttling their streams and intentionally providing them with a poor video experience. Some users are going to have problems with streaming, but it's not isolated to Netflix. They would have the same or similar problems with other high-bitrate content as well.

Yesterday, Apple announced that shortly they will start selling HD quality movies for download from the iTunes store. While it sounds like a great idea, the business model is completely flawed and clearly the movie studios are living in a bubble. As I have mentioned in the past, how on earth can the studios continue to charge more for a digital download than a physical DVD?

I really don't get the thinking from the studios when they think they can make a business model out of charging $19.99 to download Quantum of Solace from iTunes when the average price to buy the physical DVD, from retailers like Amazon, is $16.99.

With digital downloads, studios don't have to pay to produce the DVD or any of the packaging. The bandwidth cost to download a two hour movie costs pennies and online promotion of digital content is a lot less expensive than other forms of marketing. Yet even with all those savings, the studios charge more for digital downloads. While one could say this is an iTunes issue, it's not. Looking at CinemaNow or any of the other online movie services and you'll see that digital movies cost between $3-$5 more than buying the actual DVD.

Why is no one questioning this? How can this be the future business model for the online consumption of entertainment? Many of us have waited a long time to get to the point we are at today
with broadband connections capable of getting movies and having
multiple devices to play them back on. Yet even with all the progress
we have made, studios will keep the business models from being
successful. Part of me really wants to see all the studios fail just so they learn their lesson. I know it would not be good for the online video industry but studios continue to run their business on one simple principle – greed.

For over four years now I've been a happy customer of Verizon's for their FiOS broadband service, deployed to my home. In that time, I'd be hard pressed to find any other technology product that has made as bigger of an impact on my consumption of online video. For all the talk of capping by ISPs and throttling of bandwidth, I can't help but think that none of this would be an issue if everyone had the ability to get Verizon's FiOS service. Last year I wrote that "Verizon's FiOS Service Will Change The Game For Video Delivery" and I think they already have.

Whenever discussions take place about ISPs capping users, it's always from ISPs and networks that have broadband services that were not built to truly handle video. Comcast and others never anticipated that their network would have to scale as quick as is now required or have to carry as much video as they are today. Verizon's FiOS service was built for video from day one, with a focus on pushing as many high-quality bits as possible directly over fiber.

Five years ago I had a 10MB connection and since then, Verizon has upgraded the speed to 20MB at no additional cost. I pay Verizon $95.99 a month for broadband, TV and phone combined and would never think of cutting my service. You see lots of folks talking about cutting cable and using the Internet for watching videos but I have to wonder, are any of these folks paying for TV and Internet from the same company? Because if you are, then your TV service is not $75 a month with the discount you get for multiple services. With FiOS, I think paying what averages out to be $32 per service, per month is quite fair.

I know that many folks can't get FiOS where they live so it's not an option for them today. But as Verizon continues to get more and more customers each quarter and as more competitive services like AT&T's U-verse get adopted, the whole debate of capping users should not be a big deal in a couple of years. Right now, many want to get upset over the capping that ISPs are doing but I have yet to hear one person who is complaining because they have gone over their cap. In addition, many of the ISPs have said that they will raise the caps over time as the market demand increases. I also wonder how many of those users complaining about capping can get FiOS but haven't. If they can get it but haven't, then why are they complaining about capping?

I've been writing about FiOS for a few years and still, the service amazes me. I've never had a single outage, the quality of the TV signal beats any cable company hands down and believe it or not, the support Verizon provides for FiOS is excellent. You don't get some phone company tech person on the line, you get someone from the FiOS group who knows the hardware, the service and even how it works with Mac users. It's no wonder Verizon continues to see good subscriber growth quarter after quarter.

For all the talk of how far behind the U.S. is with broadband, I think a lot of that is hype. The average broadband speed in the U.S. is 3.2Mbps. That's not slow and while it's not enough to stream HD movies to the TV, no one has a content service today that has a real business model to even support it. The problem is not the technology or the infrastructure, it's the business model. If we use the average broadband speed of 3.2Mbps, which means every content owner could encode their content for at least 2Mbps. So why aren't they? Simple, the business model does not work. Blame the business model, not the broadband infrastructure.

The bottom line is that FiOS is a product we've been waiting on for years and for many, it is here today. The service works as advertised, it's affordable, and it has no limitations. Not to mention, while I have the 20Mbps package, it's capable of up to 50Mbps if you want to spend more money or need it for a business location. For those that can't get FiOS in their area, I feel for you. But keep in mind one of the biggest hurdles Verizon has faced in their expansion is from the cable companies who have tried to do everything in their power to make it hard for Verizon; clear proof that the service really is that much better than what the cable companies offer. As Verizon continues to win more franchise licenses in more towns, FiOS will become available to a wider audience. When that time comes, get it, you won't be disappointed.

While Netflix is not yet giving out a lot of details on their costs associated with their streaming video service, they have given out enough data for us to have a pretty good idea of their costs when it comes to their streaming delivery costs for the Xbox 360 and other devices. Here's what we do and don't know and how it all breaks down.

We know that the average encoding rate for video streamed to the Xbox 360 is about 2000Kbps. That means one person watching a two hour movie would transfer roughly 1.8GB of data. For high definition movies, the average encoding bitrate is around 3200Kbps and one user would transfer about 3GB of data. Based on the high volume of movies Netflix is doing each month, they are getting a very good rate in the market. I estimate they are paying on average about $0.03 per GB delivered across Limelight and Level 3 and potentially have even a slightly lower rate.

Based on the three cents per GB assumption, that means it would cost Netflix about $0.06 to deliver one SD movie and $0.09 to deliver one HD movie. Those numbers would be about 25% lower if the length of the movie were ninety minutes instead of two hours. It would also be a little lower or higher depending on the exact bitrate since some movies are streamed higher and some lower and Netflix only has about 400 movies available in HD. Taking all that into consideration the average cost to Netflix to stream to the XBOX 360 is about five cents per movie. Streaming to the PC is a lot cheaper, about half that cost, as the bitrates are much lower.

Based on those numbers, their streaming offering looks like it would save them tons of money and make them a lot more profitable since Netflix spends about 78 cents out and back for standard pre-sort first class mailing of their DVDs. But the one problem is that these streaming costs do not yet include the licensing costs from the content owners. It's the costs associated with licensing the content that really makes or breaks their streaming service, not the cost of bandwidth.

I don't know what Netflix is paying to license content and many of their licensing deals are all at different prices. In other online video offerings I have seen content owners charge a one-time flat fee per video, a fee each time the video has been watched, a one time licensing charge for a specific number of plays or many various other licensing models. I've seen licensing costs as high as $4 per movie, per play, and I've seen pricing on the other end of the spectrum at a few pennies per play. That's why many of the content licensing deals Netflix has in place are a one time cost no matter how many movies are watched. While that works great for Netflix today, most of those licensing deals are not with major studios for first-run content. It's also interesting to note that Netflix's recommendation algorithm takes into account which movies have a cheaper licensing cost and makes those movies show up as recommendations more often.

One of the major reasons that Netflix does not have a lot of new content in their streaming offering is the fact that the licensing costs for new content is so high. Studios are still greedy and Netflix simply can't afford to pay the costs associated with first run movies.  Netflix's CEO had said many times that they are going to spend a lot of money this year to license content where the costs are "reasonable". That comment goes to show that much of the newer content is simply out of reach for Netflix, as well as others and that studios simply want too much cash. Over time, you would think the studios would get on board with this and license some newer content faster, but so far, they don't seem to want to. At some point, one of the major studios is going to break from the pack and give it a shot and test the waters, making it affordable for Netflix to offer some newer, first-run content. But right now, the studios think they don't need Netflix.

I would not agree with that, but looking at the penetration rate Netflix has, it is very small. Netflix has ten million subscribers and while they and Microsoft said last month that "1 million Xbox LIVE Gold members have downloaded and activated the groundbreaking Xbox LIVE application from Netflix", they didn't say if those are paying Netflix members. With 48 hours free trail cards showing up in Xbox 360 games, we don't truly know how many paying customers are using the service. And as of January of this year, Microsoft had sold 11.2 million Xbox 360 consoles in North America. (Source: NPD) So if the penetration rate is only one million today, it's going to take years before it truly scales. And that's really what the movie studios care about, a large audience. I think it is short-sided thinking on the studios part, but I don't think anyone would disagree with me if I said it's not the first time the studios didn't get it.

But the question remains, what is the total cost to Netflix to stream a movie? For some content Netflix has today, it's clearly cheaper than mailing out a DVD, but for other content, it's still more expensive based on the licensing costs. And with all the talk lately of Netflix wanting to some day offer a streaming only service, probably this year, running the numbers for such a service does not make a lot of economical sense. Lets say the average cost to stream and license a movie is $0.50. All it takes is one user streaming ten movies a month and Netflix's cost is five bucks. And with their cheapest DVD offering with unlimited streaming being $8.99 a month, how much can Netflix realistically charge for a streaming only service? Maybe $5.99? So far, the economics of a streaming only service don't work unless Netflix can get very good licensing terms and hope that users who don't stream a ton of movies each month make up for the ones that do. At this point it's a guessing game, although Netflix is already compiling some great data on what users are doing with streaming and what their consumption habits are.

For now and some time to come, Netflix's streaming service is not going to generate revenue. Yes, Netflix does expect it to help retain customers and if that is all it does, that alone is worth the cost. With Netflix's churn being 4% last quarter, anything that helps keep churn down from their core business is very valuable and can generate a return. While Netflix said it spent around $40M for their online video offering in 2007 and most folks I spoke to said they thought Netflix spent twice that last year, clearly it appears as if Netflix is ramping up to spend close to $100M in 2009.

The key thing I think people are missing is that Netflix's streaming service is not a substitute for their DVD business; it's a complement to it. Over time, many years from now when broadband enabled TVs and Blu-ray players get some install base, things may change. But for the next few years, Netflix is not going to make money from their streaming service unless the financial benefit comes as a result to their core business.

That said, what Netflix is doing is exciting and I love the streaming service on my Xbox 360. Netflix is laying the ground work for the future and it's going to be really fun to see where they take this service a few years from now. We're all keeping a close eye on the financial impact streaming movies could have on their overall business. Studios, give them a chance! License some decent content already.

Image Credit: Soft-Co.com