Over the past few months, Adobe has been starting to see more competition in the market thanks to Microsoft’s Silverlight platform and products like the Wowza Media Server. While they are not in jeopardy of losing the tight grip they have on the market with Flash video anytime soon, it does mean that they have to work harder than they had to last year, when they didn’t have as many threats. With their recent H.264 announcement and the work being done on the new Adobe Media Player, they are not sitting idle by any means.

But put that aside and Adobe still has a major problem when it comes to the cost of licensing the Flash Media Server. While Adobe points out the functionality the Flash Media Server provides and what they feel that is worth for content owners, many still find it too expensive and it stops them from adopting the platform. Every single week I hear from customers who want to use Flash video, but have not done so once they find out how expensive it is. With prices for licensing starting at $45,000 for any website that wants to host its own content and reach more than 1,000 simultaneous users, it’s not cheap. And for those who instead use a content delivery network to distribute their content, customers typically have to pay the CDN 2x what it costs to stream content in the Windows Media format, since CDNs have to charge customers a Flash platform license fee.

CDNs are required to have to share revenue with Adobe based on Flash streaming delivery over their network. It’s a very similar deal that RealNetworks use to have in place with the CDNs many years ago, and one that didn’t work out well for RealNetworks in the long run. How is a CDN suppose to know what it’s fixed cost of doing business is each month when each quarter the revenue share number changes? And why is the license fee so high? Would customers mind paying a small premium if they see the value? Not at all. But when it is 2x the cost of other platforms, that’s not a small premium, especially since the fee is based on the volume of transfer a customer does. As the customer grows and does more delivery, overall the license fee they pay goes up each month because of the growth. In the long run, it’s a bad licensing model for Adobe, the CDNs and content owners.

CDNs would much rather pay a one time cost for the license and then pay 10% of that cost each year for upgrades and support. Now Adobe probably feels it’s better for them from a business model to share in revenue and make more money that way, but as I hear from customers all the time, that business model of Adobe’s is stopping a lot of customers from adopting Flash. And while the Flash Media Server has it’s strengths, like all platforms, it also has it’s weaknesses, especially in the areas of live, digital rights management and scalability, when compared to other solutions in the industry.

When it comes to the buying trends in the market, we know that many customers buy on more than price alone. But price is always a factor in their decision. It’s my belief that before too long, Adobe is going to have no choice but to reduce the license cost for the Flash Media Server. While there has been a lot of talk in the industry about Adobe’s strength in the market, pricing is one factor that can easily affect any company very quickly. And as Silverlight continues to provide more functionality in its platform, over time customers will have more options in the market and Adobe won’t be the only game in town. Adobe is smart and knows this and it is my belief that they want to make the pricing issue less of a problem over time so that customers don’t have any strong reasons not to use Flash streaming. Before too long, I think Adobe will reduce pricing of the Flash Media Server and head this off at the pass before it becomes an issue that starts to really have an impact of their market share.

Note: I asked Adobe if they wanted to discuss their current or future licensing plans for the Flash Media Server but they declined comment.

Last week my three and a half year TiVo box started showing signs of dying. Programs would not record and playback properly, video was constantly freezing and it was starting to affect the live TV signal as well.

I put in a call to TiVo this morning expecting to have to pay to get a new DVR since mine was over three years old and I was not under a contract, which apparently means the DVR is not under warranty. After telling me I had to pay $179 to get a new unit, I figured I should probably cancel my TiVo service since I will be switching from Cablevision to FiOS TV in the next few weeks anyway and would want a Verizon DVR. After harassing my local town board, calling each week for the past three months, I’ve learned that they have come to terms with Verizon for a TV license in my town and should be offering the TV service later this month. (I’ve had FiOS Internet service for almost two years now and love it.)

After telling TiVo it would be best to just cancel my service, I was transferred to someone who didn’t try and sell me anything, flat out said they didn’t want to lose my business and would just send me a new DVR at no cost. They didn’t give me the run around, spoke English, was friendly and understood the situation and was honest and upfront. The sad part about this for TiVo is that while I didn’t cancel my service, they can only get another month or so of my business as once FiOS TV is available, I can’t come up with one strength TiVo has over the Verizon TV DVR. The Verizon DVR can record in HD, can record two shows at once, can playback recorded shows in multiple rooms at once with only one DVR and can record up to 85 hours of standard definition. Even the new TiVo box they are sending me can’t do HD, can’t record two shows, can’t playback video in more than one room and only records up to 40 hours.

The only thing that TiVo has over Verizon that I can think of is the TiVo VideoToGo feature which while cool, I’ve never used once. I’ve always liked TiVo for their customer service and how easy their product is to use. And to date, it’s their customer service that keeps me as a customer. But I’m afraid that pretty soon, that won’t be able to keep me much longer. I wish Verizon would have licensed the TiVo software for their DVRs, but they ended up building all of that on their own. Just don’t see how TiVo can survive in the long run, even though I wish they would.

Over the next three months, I’m organizing panels for at least five shows or events. I’ll be posting speaking openings for all of these over the next few weeks. The first one I need to wrap up is the Streaming Media West show taking place in San Jose Nov. 6th-8th which will have 110 speakers. Below is what I am looking to fill this week, all for round-table sessions:

Tuesday, November 6, 2007

• Video Search: Finding Content In A Thousand-Channel Universe (moderator position)
• YouTube for the Enterprise (panel position)
• Best Practices For Webcasting Production (moderator position)
• Entertainment Devices: How TiVo, Xbox, and iPod’s Are Changing The Content Landscape (moderator position)
• Demo: Compelling Video Advertising Campaigns (special session. looking for companies with compelling video ad campaigns that can showcase them)

Wednesday, November 7, 2007

• The Enterprise Streaming Ecosystem (panel position, looking for enterprise customers only)

For session descriptions on all panels and more details please go to www.streamingmedia.com/west/program/

Also, if you know of someone who you think would be a good fit for one of these panels, please let me know. If they end up speaking, I will give you a free all-access conference pass to any one of the shows we put on, valued at $995.

I’ll be moderating a session at Mediapost’s OMMA show in NYC on Sept. 25th entitled "Access and Activism: Harnessing Video Distribution and the Clip/Mash-Up Revolution". It’s being put together last minute so I’ve got the potential to add one or two last minute speakers to the round table panel. In particular I’m looking for content owners and/or agencies who can talk to the implications for content owners and producers to adapt to the Web 2.0 world of viewer control. If you’re interested in speaking, contact me now! Spots will be gone in a day or two.

In addition, if you know of someone who you think would make a good speaker for this panel and can introduce me to them, I’ll be happy to get you a free pass to the event.

Session Details:
Tuesday, Sept. 25th. 12pm-12:45pm

Access and Activism: Harnessing Video Distribution and the Clip/Mash-Up Revolution
How should content owners – used to placing tight controls on their content – adapt to the Web2.0 world of viewer control?  With digital distribution of top-tier video content expanding and new services and tools evolving to let viewers capture, clip and mash content – what are the implications for content owners and producers?  How "fluid" should the content economy become and what challenges (if any) does that pose for ad-based monetization?  Join a panel of programmers, distribution enablers, and agency executives to initiate a discussion of the coming age of "content malleability."

For many years, the online video industry has always had some who like to point to limitations on the technology as being the excuse and reason why the industry is not grow as fast as some may like. For years it was people complaining that video quality is not good enough, that it’s  too hard to deliver and too difficult to scale. Today, those arguments are no longer valid. The technology is here today to have great quality video, to deliver it with performance and to reach as big of an audience as today’s business models support.

But when it comes to online video advertising, there is a valid argument that the technology today does not have the functionality that is needed for us to see video advertising growth on a faster scale. Will we get there? Yes. But it’s taking longer than it should due to these ten technical and industry issues:

• There is no set standard for the length of an ad based on the length of the content. We all get ads at 10, 15 and 30 seconds in length for both long and short form content, with each content site doing it differently. And in some cases, like I outlined with Yahoo!, some sites deliver different ad lengths in the same piece of content. What a bad user experience. How can we expect viewers to get use to watching ads when the experience is different on each site?

• Many times, ads are delivered at a lower quality and smaller window size than the content itself. This is a trend I am seeing more and more of lately. I click to watch a video that is encoded at 300 or 500Kbps but the ad I get before it is only encoded at 100kbps and the ad only fills up a fraction of the video window. What a poor experience. For instance you are given a 320×240 window but then the ad shows up as 240×180. The only reasoning behind this that I can think of is that it’s cheaper to deliver the ads this way since they are at a lower bitrate and/or the agency encoded all of it’s ads at only one bitrate. It looks like crap.

• There is still very little being done in the way of targeted ads. Due to many technical issues, ads are still being churned out and delivered to web users with almost no insight into what the user wants to see or more importantly what the user should see based on their location. I always use the example of how I see Crispy Creme donut ads yet the closest Crispy Creme to where I live is 43.3 miles away in Milford CT. I know some ad platforms are doing more and more with targeting, but still not enough. This needs to be figured out faster. If you can’t deliver ads based on a persons interests, geographic location or even gender, then the majority of these video ads are completely being wasted. It’s no wonder the pre-roll ad format is dying.

• Reporting metrics. Where are they? It seems that every ad network I talk to all measures and records user metrics for ads very differently. What is the problem here? Not being able to give advertisers back the reporting they want, thereby enabling them to try and come up with their own metrics to judge if their campaign was a success or not is like shooting the industry in the foot. No service, product or offering is worth anything if you can’t give the person who is paying for it the data they need to analyze if they should keep paying for it. The ad vendors make this WAY too difficult. For instance, if you look at the top six to eight vendors websites who provide these services, why can’t you download a product sheet from their website that shows exactly what type of reporting is offered? Why are they hiding this info and keeping it mysterious?

• CPM rates. Ok so this one is not a technical issue but it is one of the biggest problems in the industry. Why is it that no one is willing to say what they get per CPM for online video ads? I ask content owners all the time, I ask the portals, I ask the major networks and to date, I don’t know of a single specific example I could tell someone of what the rate is. I could not point you to one major content owner and say I know what price they are getting for CPMs rates and no one shares this info. Yes, everyone says it’s between $10 and $60 and that’s completely useless. All of the major studios keep telling us how well they are doing online with their content and how well the advertisers love to sponsor it and how much growth they are seeing yet, none of them will give any numbers, to anything. Short-sided thinking folks. You know how many content owners actually have good content worth syndication or licensing but don’t as they have no idea what type of rates they can get? There is such a lack of information in the market for CPM rates and no one is doing any educating of the market. It’s a losing proposition for everyone when this information is hidden away as if it’s some sort of patented trade secret. They always have excuses like the one where the major broadcasters say advertisers are buying ads across many different platforms and they can’t break out the P&L from just one platform like the web. What crap.

I’m certainly not the first person to point out some of the technical problems the online video advertising industry is facing and I won’t be the last. We all see the potential that online video advertising holds and see the many ways that content owners and portals are embracing all forms of online video ads for pre-roll, post-roll, in page, in stream etc.

Part of the problem is the industry itself but a good deal of the problem lies with the technology of the entire ecosystem for video ad creating, selling, fulfillment, delivery and tracking. I’m as big a fan as anyone when it comes to ways that content can be monetized, but the industry as a whole needs to do a lot better job of working together to create as much in the way of standards as they can.

Last week was a busy one for news. By now, everyone has already read many articles about the Microsoft and Adobe announcements along with many other mainstream news from IBC. In addition to the major announcements, there were some news stories and articles less mainstream that I found of interest.

• From Rich Miller over at DataCenterKnowledge.com, which is a great blog about the data center industry, Rich has a post from last week entitled "Dueling Data on Volume of P2P Traffic" which talks to some new data released in the market that about what percentage of traffic on the Net comes from P2P. Lots of competing data, lots of different results.

• From the last100.com website, a post from last week entitled "11 video download stores compared" gives a good detailed overview of the services lack of innovation and technology choices on how they are implementing DRM.

• Scott Kirsner, who runs the CinemaTech blog is putting on a class entitled "Digital Distribution and Marketing" at The Film Arts Foundation in San Francisco. The class will be featuring a lot of case studies and Scott’s asking for help in spreading the word. I am always up for helping to promote anyone who is trying to educate the industry. Don’t know if Scott is still looking for good case studies, you can contact him at his website.

• There was plenty of talk last week about how the Justice Department said Internet service providers should be allowed to charge a fee for priority Web traffic. Some sites already covered the news, but if you have not read about, do so now. It’s important.

• Chris Albrecht over at NewTeeVee.com had a great post last week entitled "What Constitutes an Online Hit?" where he addresses the problem with the way video sites measure traffic. Chris addresses a great question and one that I have been complaining about forever when it comes to online video metrics. This industry lacks any and all standards.

Troy Dreier over at WebVideoUniverse.com published an except from the "Hands-On Guide to Flash Video" book, by Stefan Richter and Jan Ozer, which looks at the history of Flash video and how it started life as an animation package called SmartSketch, to it’s current incarnation at Adobe (ADBE) today.

Makes for some interesting reading if you want to learn how Flash started and the steps it took to evolve into the platform it is today. You can read more details about the book and it’s table of contents on Amazon.