Apple Buys Hulu ... Wed's Big Announcement? 5 Reasons It Could Happen

Apple's September 9 mega-press event is fast approaching -- and the rumor mill and pundit speculation are at a fever pitch.  I certainly have entered the fray in separate interviews in the New York Times and Los Angeles Times, etc.

One central theme in all of this pre-event hype is Apple's inevitable launch of its own Netflix-like subscription streaming video service -- will (or won't) it happen on Wednesday?  I just published my own Apple v. Netflix 5-factor analysis in a head-to-head showdown when it does -- and, my headline was, "Maybe Apple Should Just Buy Netflix."

But, here's the thing -- Apple won't buy Netflix.  But, Apple may buy Hulu (and it wouldn't be beyond the pale that Apple announces that on Wednesday).

Here are 5 reasons why an Apple/Hulu mega-deal would make sense -- and why Apple's not-too-distant acquisition of Beats on the music side is both consistent and highly instructive on this tantalizing possibility:

(1) Hulu gives Apple the immediate mass of content (and related rights) it needs.  It is no secret that Apple has been challenged in its content negotiations with studios and broadcasters for the streaming rights it need (just like it was on the music side).  That has delayed Apple's "Netflix Killer" over and over again.  Hulu (like Beats Music) would solve that problem immediately at mass scale.

(2) Hulu gives Apple the immediate marquee differentiating content it needs.  Hulu has been on bender lately buying up exclusive premium marquee video content and television rights at significant price-tags.  Cases in point include South Park ($192 million for 5 years), Seinfeld ($160 million for 5 years), and last week's coup of stealing away Epix cable movie rights from Netflix.  A new boldness at Hulu is in the air -- highly differentiated from its appetite in the past.  Was this all simply part of plan to better position itself to Apple (and potential other mega-buyers)?  Certainly, Hulu has actively flirted with the idea of being acquired for several years now (that has been big news in Hollywood for years).  This may be the time.  Previously, those who woo-d Hulu (including Yahoo! and several media behemoths) didn't step up to the plate to meet the bold demands of Hulu's media owners (Disney, Fox and NBCUniversal).  Apple, with its mega-$200 million cash hoard certainly is in a position to be significantly more aggressive.  It certainly was with Beats -- spending a cool $3 billion (which is significantly more than any purported Hulu offers previously).

(3) Hulu gives Apple the immediate core creative and production expertise it needs for its inevitable "Originals" strategy.  The buzz about Hollywood this past week centered around Apple's reported newly-rejuvinated plans to develop its own premium original movies and series a la HBO, Netflix, Amazon ... and Hulu.  I was interviewed this past week over and over again about this captivating rumor, underscoring how critical and fundamental an effective originals programming strategy is to differentiate any one service from the growing field of mega streaming competitors.  Hulu -- which already features a deep slate of original programming -- has those chops (and the relationships that go with them).  Let's not forget -- Apple still is first and foremost a technology company -- it critically needs that Hollywood expertise and those authentic relationships with the creative community.  Hulu immediately solves that problem (just like Beats did on the music side with Jimmy Iovine and Dr. Dre -- critical creative and relationship elements to that deal).  Apple should (and likely will) augment that expertise further by buying an innovative, connected premium marquee production house (and the talent that goes with it) in an effort to "out-marquee" all others.

(4) Hulu gives Apple an immediate widely-recognized video brand and immediate mass distribution.  Yes, everyone knows (and uses) Netflix.  But, everyone also knows Hulu.  It is a widely-known -- and increasingly widely-respected -- brand (especially now as more and more exclusive compelling premium content is available on its platform).  Hulu also -- importantly -- already is featured on most significant non-Apple distribution platforms.  Yes, I know, Apple dropped the Beats brand when it recast that music streaming service as Apple Music.  But, remember, Beats Music had launched only months before Apple's acquisition (and didn't yet build its own significant user base yet and the "goodwill" associated with it).  And, let's also not forget that Apple DID retain the Beats brand for headphones -- its established business that had built up a significant customer base and goodwill.  So, it certainly is no longer unprecedented for Apple to feature a different brand name.  Hulu's brand is fundamentally different from the Beats Music service brand.  It is an established premium video brand, as well as a respected video service with mass scale, goodwill and a generally applauded customer experience (an Apple hallmark).  Hulu's "Swiss" non-Apple brand is beneficial to further expand the service beyond the Apple platform.  And then, of course -- in the big inevitable shot across the bow to Netflix -- Hulu (in the hands of Apple) would also be the headline primary featured service on Apple TV and in the overall closed Apple eco-system.  Others may still exist on that platform (as they do now), but they would be buried into relative obscurity.  You can be sure of that.  Membership has its privileges -- and Apple controls what we see on its platform (and in its retail stores).  That, of course, significantly impacts what service we use (and the switching costs from Netflix to Apple are minimal in this subscription streaming game).  Compelling.

(5) Hulu gives Apple a significantly more cost-effective way to enter the streaming video market at mass scale.  Yes, Apple could afford to buy Netflix (as I pointed out in my recent blog post).  But, Hulu would be massively more cost-effective (by a significant multiple).  Again, Apple's Beats deal is highly instructive in this regard.  Apple could have easily bought the market mega-leader in the streaming music space -- i.e., Spotify.  But, that move would likely have carried a $10-$15 billion price-tag (since Spotify's last round valued the company at $8+ billion).  Instead, Apple paid $3 billion for Beats (and got the lucrative headphone business to go with it).  Apple likely could buy Hulu for something more in the $4-$6 billion range (previous reported Hulu M&A discussions indicated that a $2 billion-ish price likely would have closed the deal).  Netflix, which trades at around a $42 billion market cap (as of this past Friday), likely would cost $60-$80 billion.  And, although Apple holds $200 billion in cash, that massive differential (between Hulu and Netflix) matters -- especially if Apple gets many of the ingredients it needs via Hulu.  Apple also could sweeten the pot to further entice Hulu's owners (i.e., the studios) to consent to the transfer of Hulu's content licenses to Apple by giving them some equity in the newly-acquired company to give them a piece of the action -- and to make Hollywood a bit more amenable to licensing its content to Hulu as a result in the future.  Again, membership has its privileges.

So, will Tim Cook announce a Hulu deal on Wednesday?  I absolutely believe he will make some kind of major strategic video content announcement as part of his Apple TV "main event."  But, I peg odds of this intriguing Hulu possibility as being small ... for now.

However, that doesn't mean it's not a logical move.  Nor does that mean that it won't eventually happen.  Apple understands it needs to enter the streaming video service game now in a big, big way.  There is no time to wait any longer.  Netflix has simply gotten too big, too fast.  It ultimately saw the same writing on the wall on the music side.  Spotify had simply gotten too big, too fast.  So, Apple finally made is long overdue move with Beats.

Apple will make a massive move on the video side too.  That is inevitable.  Hulu could be that move.  And, when it does, its vastly different (and significantly more compelling) underlying business model from Netflix's will be a significant advantage (see point 5 in my recent blog post which discusses that oft-overlooked point).

Ladies and gentlemen, buckle your seat belts.  It's going to be a bumpy ride.

But, an incredibly dramatic and exciting one as well ....

Apple v. Netflix (Or, Maybe Apple Should Just Buy Netflix)

Well, the grand-daddy of all digital media rumors is back again.  Yesterday, Variety reported that Apple's quest to build its long-anticipated "Netflix Killer" is hot again in Cupertino.  More specifically, that Apple too -- like Netflix, Hulu, Amazon Prime, and virtually all OTTs and MCNs these days -- plans to "do an HBO" to accomplish its mission (i.e., have a significant focus on creating its own exclusive original programming to woo customers away from the other established streaming video services).

Variety's article is new, but certainly the inevitability of Apple entering the premium streaming video game -- as well as the article's focus on Apple's quest to create compelling and differentiating original content -- is not (I have written about it several times).  And, much like Apple finally choosing to focus on buying/building its own "Spotify Killer" on the subscription streaming side for music (and finally recognizing that the times had moved away from a "pay per download" model), Apple at long last will go the same route for video (initially focusing on longer-form premium video content like movies and series).

With this most recent story now breaking before Apple's upcoming announcements, it is worth revisiting my earlier analysis where I pit Apple v. Netflix.  In that direct battle royale -- which absolutely will happen -- who wins?  Let's analyze 5 individual battles that define that war.

(1) Content/Programming -- Let's take Apple first.  Apple will offer (i) both VOD and live/linear TV (Netflix only offers VOD), and (ii) both ESPN and HBO, the two premium channels that matter most (Netflix doesn't).  How does Netflix counter this attack?  In two ways (i) exclusive original "must have" programming like House of Cards and Orange Is the New Black (although -- as I wrote months ago -- you can bet Apple absolutely will get into that "originals" game as well (and smartly fast-track those efforts by buying a high-end and highly-respected production house with deep relationships -- or perhaps even buy a major Hollywood studio), and (ii) a significant depth of content that Apple will not have ... at least for a long time.  Advantage Apple.

(2) Distribution -- Apple's ecosystem is closed.  Netflix's is open.  That means that Apple's OTT video service will be bundled only into Apple products, whereas Netflix comes with virtually everyone else (including Apple TV -- although you can bet that Apple's Netflix-Killer will be front and center and free (at least for a while) on Apple TV's when it launches).  So, Netflix's sheer reach significantly outdistances Apple.  Oh yes, and Netflix already has built a massive customer base -- and is growing fast internationally.  Advantage Netflix.

(3) User Experience -- Virtually everyone on the planet has Netflix.  It's part of our Zeitgeist and its UI is practically burned into our brains.  So, it is easy to use.  But, Apple's hallmark is user experience -- a UI/UX that is both "pretty" (yes, that matters) and intuitive/easy.  And -- and this is a critical "and" -- Apple can do (and does) what Netflix and others can't.  It seamlessly integrates software/services with its hardware (including Apple TV).  That means that Apple's new OTT video service will be front and center and easier to use.  Advantage Apple.

(4) Price -- Netflix charges $8.99 monthly for new users, whereas Apple's "killer" service likely will cost significantly more.  ESPN alone costs cable/satellite operators about $6 monthly per sub.  Advantage Netflix.

So, we have a draw here, right?

(5) Business Model -- Well, here's the ultimate rub.  The companies' fundamentally divergent business models.

Neflix is a pure-play video service.  The company monetizes its service only.  That is its business model -- and that means that it must be profitable based on subscription revenues alone (unless and until it finds a way to effectively mine its treasure trove of customer data).

Apple's business model is fundamentally different.  For Apple, its "coming soon" OTT video service can be (and likely will be) a loss leader -- a losing proposition that ultimately wins.  You see, Apple's core DNA is unlike Netflix's.  It is hardware pure and simple.  Apple makes money (boatloads of it) by selling "cool" metal -- iPhones, iPads, Apple Watches, Apple TVs (and ultimately the iTV?).  That means that Apple's new video service is essentially a "marketing" expense that drives incremental hardware sales.  That also means that Apple can (and will) subsidize its content licensing costs -- and original programming efforts -- in order to keep its subscription pricing down.  Apple's massive cash hoard offers a lot of highly coveted freedom that others simply don't have.

How does Netflix match that?  Maybe, Apple simply buys Netflix with all that cash -- after all, as massive as Netflix is, its market cap is a downright paltry $49 billion compared to Apple's $643 billion, which includes about $200 billion in cash).  Now THAT would change the media landscape ....

5 Reasons Apple's Netflix-Killer Will Be a Smash Hit

The worst-kept secret is very much alive again -- i.e., Apple hopes to launch its long-anticipated (overdue?) OTT video service by fall.  To be clear -- with Apple, it has always been a question of "when," not "if" (I wrote about this about one month ago in a detailed overview of the entire OTT space).

Here are 5 reasons Apple's "Netflix killer" will be a massive hit when the inevitable becomes reality:

(1) It's Apple!  That's all many of you need to know.  You will immediately sign up in droves just like you line up in droves anytime Apple launches a new hardware product.  No product reviews are necessary for you.  You just trust that it will be good.  It's downright Pavlov-ian -- you can't help yourselves.

(2) Many of you will ditch Netflix.  Yes, you and the rest of the planet already have Netflix subscriptions.  But, unlike Netflix, Apple will offer both VOD AND live/linear TV (Netflix's Achilles heel).  And, switching costs are low (essentially non-existent -- with two important caveats below).  All you need to do is go online and cancel. That's the beauty of Netflix and other non-linear TV OTT services for you.  (But, that's certainly not beautiful for Netflix, Amazon Prime, and Hulu.  That's a real problem that can be countered only with two things: (i) content -- both (a) kick-ass original content like House of Cards, and (b) content depth that Apple will not have for a long time; and (ii) price -- Netflix's price will be lower (although Apple can do what Netflix can't -- subsidize content licensing costs via hardware sales -- a fundamentally different business model)).

(3) Millions of you already have Apple TV's.  That means one software upgrade and BAM!, you got your iTV!  Netflix doesn't have that seamless "hardware/software" advantage (an Apple hallmark).  Of course Apple will place its new OTT video service front and center and give it to you for free (for several months).  The user experience will be compelling.  You will try it!  And, then you will let your credit card auto-renew.

(4) Millions more will buy new Apple TV's.  Heck, those crafty Cupertino-ians are practically giving them away now -- dropping the price to $69.  That's just two weeks of Starbuck lattes!  (And here's a tantalizing thought.  What if Apple's New "Netflix killer" is just the app-e-teaser for the main event -- its launch of the long-anticipated all-in-one real iTV -- something about which I first wrote 5 years ago?  'Tis a real possibility.  After all, Steve Jobs always called the current little Apple TV black box a "hobby."  This could be time for the real thing).

(5) It will feature ESPN and HBO.  This is the programming 1-2 punch.  Apple TV already is alone with HBO's new stand-alone HBO Now service (a 90 day exclusive).  And, Dish's Sling TV already cracked the code with ESPN, so the door is wide open for Apple so long as it pays just like the other Pay TV guys (which it absolutely will for ESPN, the most necessary programming ingredient).  Netflix, of course, doesn't have either.  (One more little detail -- don't forget that ESPN is owned by Disney, and Disney's Chairman & CEO Bob Iger sits on Apple's board.)

Apple's "Netflix killer" -- it came, we saw, they conquered!

YouTube V. Facebook, Amazon, Apple - Clash of the Video Titans (& The Role of DNA)

It's a wrap for the Digital Entertainment World (DEW) Expo in LA -- a conference in its second year that celebrates precisely what is happening now in the media & entertainment business -- which is what most call "disruption."  But, I call it "transformation" -- a positive (but authentic, real) "take" on the massive new opportunities to reach, build, and effectively engage with, an audience in our increasingly multi-platform world ... well, at least for those who accept new realities and have the resolve to act.

Yesterday, I moderated an "all about MCNs" panel with nothing but A-list executive talent.  But, MCNs are just one part of the overall digital-first video ecosystem that is at the center of the fundamental media and entertainment transformation in which we find ourselves -- an ecosystem that was birthed by YouTube, which remains the "mother of all video platforms."

Now, for the first time, even mother YouTube faces what seemed to be almost unthinkable just one year ago -- i.e., real formidable challengers.  THESE are the conversations that took place at DEW.  On the stages ... and, even more importantly in the bars of the Hyatt Hotel where liquor flowed and candid discussions followed.

YouTube "challengers" are everywhere.  And many loudly preach (more like screech) their "alternative platform" gospel to every would-be believer.

Who are these contenders?

Well, you have your primarily short-form video-focused MCNs about which I write regularly.  Leaders include broad-based Maker Studios (now owned by Disney), Fullscreen (now owned by Otter Media, the JV of AT&T and The Chernin Group) and Collective Digital Studio; fashion/beauty young female-focused StyleHaul (now essentially owned by Euro-based media company RTL Group); young male gamer-focused Machinima; foodie-focused Tastemade; sports-focused Whistle Sports; Latino-focused Mitu; urban-focused All Def Digital (with the perfect acronym ADD for our short "bite-sized" vid world); and dance-focused DanceOn.  All of these now actively look to find their audiences on as many "off YouTube" platforms as possible.

Next you have young OTT/MCN upstarts like high-profile Vessel which punches above its weight and hopes to open subscription-based distribution exclusivity windows while others (Netflix) try to slam them shut.

You also have social sharing sites like Twitter and increasingly Snapchat.  Snapchat, a media company?  Really?  Just discover "Discover."  And talk to the CEOs from the leading MCNs.  Snapchat matters. A lot.

You now even have your major brands that advertise on all of these platforms.  Lifestyle brands Red Bull and GoPro aim to be your first-choice destination for a certain, specific action/adventure segment of short-form video content that historically has found its home on YouTube.

Then, you have your established major OTTs like Netflix and Hulu who -- at least up to this point -- focus instead almost exclusively on longer-form motion picture and television content.  That will change over time.  It is inevitable.  Each must play more effectively in the mobile space -- and that means short-form video content.  Just trust me on this one.

You also have your major carriers like AT&T (via its Otter Media partnership with The Chernin Group) and Verizon (via the OnCue OTT platform that it acquired from Intel) getting into the OTT game with their own major plays.

And, of course, you have your more "traditional" cable/satellite companies entering the fray (case in point, Dish Networks' surprisingly heavily-discussed new Sling TV service which is getting real "buzz" here at DEW for what it represents).

But, YouTube's biggest challenger right now in the minds of those at DEW clearly is Facebook.  The votes are unanimous there.  Less obvious -- but real, very real -- are the other two 800 pound gorillas known as Amazon and Apple.

When considering the media ambitions of all 4 behemoths -- YouTube, Facebook, Amazon, Apple -- consider this.  While each of their ultimate video ambitions are roughly the same (essentially to "own it all" -- both short form and long form video), their individual core DNA is not.  And, that unique individualized DNA colors each company's particular video offering and opportunity, as well as the video opportunity for both brands and those who buy from them (in other words, us).

To understand what I mean in this DNA discussion of genetics, first, let's recap.

YouTube is a video destination first and foremost.  It was built for our viewing pleasure.  Plain and simple.  Yes, we can (and do) share videos.  But, we primarily come here to find something of interest and watch.  Passively.  And, YouTube makes money from ads served against that watching.

Facebook -- the video challenger on everyone's lips at DEW -- has fundamentally different DNA.  Facebook is all about sharing.  We go to Facebook to share pieces of our lives and pick up the breadcrumbs of others.  Yes, we can (and do) watch videos.  But, we primarily come here (at least up to this point) to share.  Actively.  And, so while Facebook, like YouTube, makes money primarily from serving ads, the path to (and mindset of) engagement with those ads is very different.  And, the numbers related to engagement bear this out.  Check out this excellent analysis from Advertising Age to take a look behind the curtain.

How about Amazon?  NOT a YouTube competitor, you say?  Don't be fooled.  Amazon wants to own it all.  Yes, Amazon Prime is front and center with its premium long-form movies and television.  But, take a closer look.  That's right, there it is -- something called "Amazon Shorts" that looks a lot like YouTube.  So, now we increasingly watch videos on Amazon.  But, let's face it, we still primarily come to shop, because Amazon's core DNA is commerce.  And, Amazon's differentiated genetics put it in a unique position to effectively monetize videos through commerce.  Videos serve as a marketing spend -- digital billboards that drive us into its virtual store.  Intriguing.  Very.

And then there's Apple .... don't forget this $700 billion juggernaut, of course, because although it has laid largely dormant on the video side (causing all of us to occasionally scratch our heads), let's not forget that little thing called iTunes.  And, reports just recently surfaced, once again, that Apple hopes to launch its own OTT streaming service to become our video platform of choice.  Speculation abounds that Apple's OTT play may be akin to DISH's stripped-down programming bundle approach known as Sling TV.

But, here's my guess.  Apple will not launch its OTT service unless and until its OTT package includes ESPN -- THE critical pay TV ingredient.  And, let's not forget that small little detail that Apple has a long and uniquely cozy relationship with ESPN's owner (Disney) (Jobs/Pixar, anyone?).  If Apple were able to score ESPN (just like only iTunes scored The Beatles), that move alone would be a game-changer.

Why would Apple play in the "alternative YouTube" world?  Sure, incremental revenues are nice.  But, that's not it.  Instead, Apple's DNA reflexively drives its actions -- and Apple's core DNA is not like any of the others.  It is hardware pure and simple (Samsung shares that same DNA via Milk Video).  Apple makes its money by selling "cool" metal -- iPhones, iPads, iWatches and the inevitable iTV (and perhaps even ultimately the iTesla?).  We ride the video Trojan Horse into our neighborhood Apple Stores (in the same way Apple bought Beats Music to build it's music streaming Trojan Horse).

So many video players, and oh so little time.

YouTube.  What to do, what to do?  Well, for now, YouTube remains the "must be there" platform for creators.  We also are still very, very early in the overall digital video game.  So, while YouTube's ultimate market share will be chipped away, that reality will be countered by significantly (massively) more volume.  And, just like long-form video platforms like Amazon and Netflix increasingly play on YouTube's short-form turf, YouTube will play on their home courts and seek to steal share from the in the long-form video space.

After all, many of these players' ultimate vision is to own it all -- be your single destination for all your video needs -- short-form, long-form, and everything in between.

Vessel -- My Review of the New "Alt" YouTube

Vessel -- your single "holder" of all the premium short-form video content you could ever want and need.  At least that's the hope for Jason Kilar's new high-profile and heavily-financed ($75M) digital-first video company that set sail in private beta just this past week.  With Vessel, Kilar -- Hulu's former CEO -- embarked on creating "the next gen Hulu" -- i.e., premium high-quality short-form digital-first video content optimized for mobile-using millennials.  And, even more than that, he and his fellow Love Boat crew want you to happily pay for it -- even if much of that content is freely floating elsewhere in the great virtual sea (okay, enough of the noxious nautical narrative!).

With a form of entrepreneurial alchemy and brash counter-intuity (entrepreneurial qualities that I love), Vessel aims to open windows of 72 hour exclusivity in a digital video world where most others (cue up Netflix) hope to close them.  And, Vessel takes aim directly at YouTube and other alternative video platforms (an excellent discussion of which from Digiday can be found here), hoping that creators of compelling video content and who have amassed their own audiences come to them first with a promise of better economics (another excellent discussion of which from VideoInk can be found here).

Will Vessel succeed?

I embarked on my own exploration of that question in Vessel's private beta, and here are my overall observations after wading through the experience in my first days.

I.  UI/UX

As expected, first impressions were positive as I first entered (and interacted with) the app -- and, let's face it, first impressions matter.  A lot!  Set-up and navigation on both my laptop and mobile were as they should be -- simple, intuitive.  Once you choose a user name and password, Vessel takes you through a set-up wizard -- a collection of video tiles that represent different content "categories," "channels" and "music artists."  You click on those that matter to you -- and that informs Vessel's individualized "vessel" for you.  For the most part, I liked the channels that Vessel laid out for me -- as if my own personal butler laid out my clothes for the day (although I found the particular video featured in the main pane to be an odd choice ... begging the question of whether it may be better to feature several videos that are potentially "meaningful" to me rather than take the lower probability route of just choosing one).

Next, the overall UI was clean and "pretty" -- very pretty.  No clutter here, which is important.  And, the overall user experience (UX) is strong, impressive (a respected press insider dubbed it "amazingly creative" in our own private conversation).  Simplicity rules the day (which is ideal for this mobile-focused experience).  The core features are all those you would expect -- none that you won't (NOTE: sharing is "disabled" during this private beta; in this regard, it will be interesting to see how share-able exclusive content is from one paying subscriber to non-payers who have yet joined Vessel's journey).  The overall mobile nav -- including swiping back and forth between the main menu and the video screen itself -- is remarkably aero-dynamic and downright addictive.  That bodes well for user engagement.

Next, Vessel's much-heralded new advertising forms are intriguing.  5-second pre-roll ads flutter by -- unobtrusively and ephemerally (a word?) -- and feel more like 2 seconds that have real visceral impact.  Much more compelling and meaningful than "dumbed-down" 30 second ads that are skip-able after 5 seconds (and lose virtually all of their meaning as a result).  And then there are the newly minted "motion posters" that float on in Modest Mouse-ian fashion (music lovers will "get" that reference) as you scroll through your videos.  Clever.  Very.  Remember one thing, however, you see these ads even if you become a paid subscriber.  Just like at Kilar's former home of Hulu, you pay for early access and content exclusivity -- not for an ad-free experience.  Important to know.

All of this worked flawlessly.  Downright snappily (another word?) --  even (even in my broadband-challenged home environment).

But, although critical, a compelling beautiful UX is not enough.  Other pretty faces exist in the increasingly cut-throat competitive digital-first video world.  That requisite beauty and elegance (which Vessel has in spades) must be backed up by substance, depth.

II.  CONTENT

And "depth" in this context means a depth of compelling video content.  This is especially true here where Vessel's business model and overall differentiation (and value proposition to creators) are tied to exclusivity.  (Here again is an excellent deep discussion of Vessel's overall business and pricing model -- which I won't repeat here).

So, is there enough here to justify paying $2.99 per month (especially when much of the content is available elsewhere for free)?

As a threshold matter, no matter what, that will be challenging to many millennials who are dependent upon their parents' credit cards.

But, for others who have a real ability to pay (and there are many of us, even non-millennials like me), Vessel is banking on two things: (1) exclusivity of course (for that 72 hour window); and (2) convenience -- i.e., curation/consolidation/navigation of the video creators/sources/channels you want -- all in one place.  Once again, hence the name "Vessel."

To even get to question (2) above, exclusivity is at the crux of Vessel's success or failure.  For Vessel to succeed, it must become THE first mobile "home" for must-see premium short-form video content to you (and a critical mass of others) -- much like Netflix is THE home to you for "House of Cards" and "Orange is the New Black," or Amazon with "Transparent," or Showtime with "Homeland," or FX with "Fargo," or HBO with "Game of Thrones," or ....  well, you get the point.  You need to build it for people to come.  Is Vessel there yet with content you can't get anywhere else for a limited period of time?  I don't know enough quite yet to make that judgement.

BUT, the fundamental difference for Vessel, as compared to all of those others, is that Vessel's form of exclusivity is transient.  So, while its $2.99 monthly subscription fee is a fraction of those of the others (making it almost invisible to your pocket book, in a very Pandora-like way), it remains to be seen whether significant numbers will feel the need for speed -- i.e., 72 hours of early access (rather than much more permanent exclusivity).  At least in part, you need hard-core, rabid fans of particular content or personalities to accomplish that mission.

The good thing for Vessel is that in our increasingly niche, verticalized mobile and millennial audience-driven world, rabid fans come in rich supply.  So long as the content is compelling, personality-driven and "authentic" (THE key word in the millennial lexicon), you have a shot.  And, Vessel's $75 million doesn't hurt.  In fact, it was that money that helped Vessel land tent-pole audience-attracting talent like musical comedy duo Rhett & Link (for a reported $500,000) and bleeding-edge content from major multi-channel networks (one deal alone is reported to be $3 million).  The company's panache also led to its ability to assemble a "dream team" of advertising partners that impress even industry insiders.

Vessel has set sail with the necessary ingredients -- and then some.  It is a luxury liner for sure.  And, its early disembarkation is impressive.

Lots of icebergs out there, though.

But isn't that what being innovative and entrepreneurial is all about?  After all, there were plenty of nay-sayers when Hulu first launched -- and look at it now.

So, FULL STEAM AHEAD!

[AND CUT my rambling and loquacious nautical imagery ...]

Yahoo! Finally Buys Hulu? What It Should Do with Its $8.3 Billion Alibaba Windfall

Ready, set, GO! It is Alibaba IPO time ... right now. Set to be the biggest IPO in US history (that’s $22 billion). And, prescient Yahoo! is set to get $8.3 billion of it.What should Yahoo! do with that windfall?

VIDEO, that’s what! Video is Yahoo!’s future, plain and simple. With this massive cash infusion, Yahoo! now has the means -- like never before -- to take on YouTube ... and potentially big cable operators themselves. The BIG VISION is the massive 1-2 punch of premium broadcast television on-demand and live linear programming. All wrapped with a nice purple bow.  (I also discussed my thoughts on this subject, together with others, in Todd Spangler’s article in Variety).

Yes, Yahoo! tried to buy its way via massive M&A before -- making bids for Hulu and outright acquiring France’s Dailymotion (in an ultimately failed attempt due to French regulators). But, that was then, and this is now. Yahoo! could go back to Hulu and go for M&A v2.0.

With that single move, and if it negotiates “right” (getting the rights it needs), Yahoo! would be the differentiated home for the deepest catalog of premium television broadcaster content. Content that YouTube does not have. And, Yahoo! could significantly ramp up Hulu’s own original programming efforts to further differentiate itself from YouTube and others a la an HBO-like strategy.

One more critical ingredient -- Yahoo! could use some of that cash hoard to woo key tent-pole YouTube creators over to its platform, perhaps offering better economics among other things. And, why stop there? Why just woo? Go all in! Buy! Multi-channel networks (MCNs) are for sale right now -- and deals are happening fast and furiously (just one being Disney’s recent $500-$950 million acquisition of Maker Studios). That would give Yahoo! immediate scale for the kind of authentic, grass-roots-driven short-form video content that is absolutely critical to millennials. And, marketers need to reach those millennials in an increasingly fragmented world. Yahoo! should offer the full spectrum of content -- from long-form to short-form -- to truly do it right. Different platforms demand different premium content.

But wait, there’s more. Yahoo! could use its significantly expanded war chest to take on cable and satellite bundled services themselves. The studios have accelerated the pace of their “noises” in the past two weeks alone indicating that they may now be ready to license in an unbundled world (take Viacom and Sony for example). And, if Yahoo! succeeds in convincing its Hulu broadcasting partners to play in that world, Yahoo! has the potential to offer live linear television programming as well (i.e., a true virtual/OTT MSO). That would be potent. Yahoo! could be THE place for both premium television on-demand and linear programming. Programming that could also be re-packaged in myriad ways -- including into “bite-sized” smaller packages that are optimized for mobile viewing. That too is a critical ingredient, because mobile is increasingly where the eyeballs are -- especially those coveted millennial eyeballs.

Now, don’t get me wrong, that’s a lot of things that must go “just right” in order to make the big “IT” happen.

But, you gotta dream big, right?

And, NOW is the time for Yahoo! to do that kind of dreaming ....

2014 - A New Golden Age of Content - My Latest Article in Huffington Post

I frequently write for other publications like Huffington Post, TechCrunch, Wired and Venturebeat.  Here is my latest just-published article in Huffington Post, titled “A New Golden Age of Content.”  I am posting it here in its entirety:

Amidst the maelstrom of technology shattering decades-old media-centric business models – a reality that continues to frighten many in its wake – often lost is the fact that we are now in the midst of a new golden age of content. Yes, it’s true. There has been too much doom and gloom, and not enough of the content creators’ boom.  We will look back at this era decades from now as being a period of creative boom, not bust. Here’s why. 

Mobile. We now have more than 7 billion mobile devices worldwide – more mobile devices than people on this planet. Just think about that. That absolutely is a revolution. And thanks to this mobile revolution, content creators now have the opportunity for the first timeto reach virtually any of us anywhere we are at any time. And they are. Hulu just announced that over 50 percent of its subscribers now watch their videos on tablets or mobile phones.

But reaching us does not mean that content creators must find us directly. If they do their jobs right – which means telling compelling stories – we consumers will do the work for them. We will find their content ourselves. In fact, we will do even more than that. With 58 percent of online videos consumed on social networking sites, we enthusiastically (frequently feverishly!) will go further. If we like what we have consumed, we will pass it on to our families, friends and co-workers – and we will urge them to consume it themselves.

Just take a look at Will Ferrell. He – in the guise of Ron Burgundy of Anchorman fame – is literally everywhere now. We have put Mr. Burgundy everywhere. We retweet his videos. We post them. We have become individual broadcasters and marketeers, amplifying the voices of creators whose stories we deem worthy to be seen and heard (even those, like Mr. Burgundy’s, that are blatant promotions!).  Think about that. That is quite incredible.

Not only has the media distribution game been disrupted by the new technologies, the form of that content itself has been disrupted. Gone are the days of creativity being locked into serial 22-minute segments dictated by traditional broadcast time slots and ad spends. Digital media (online and mobile) has shattered those constraints, unleashing a torrent of unprecedented creativity. Content creators have more ways than ever before to express themselves. Those ways truly are unlimited, because mass story-telling has been democratized. All of us can have a public voice – and most of us now do. We can tell the stories we want to tell. Some may be “traditional” in form, but others most certainly are not. Have you seen YouTube lately? Have you seen your kids’ school homework projects lately? At our school’s recent parent-teacher conferences, I was amazed by my son’s sophisticated iPad-driven multi-media presentation about “The Big Bang.”  That is creativity. That is power.

And, here’s the deal. An audience exists for allof it – both the traditional and the new/disruptive. These forms don’t compete with one another, precisely because our mobile “phones” are with us 24/7, giving us more (not less) of an opportunity to consume. And, consume we do – voraciously. All of us like to experience a good story – and we enthusiastically embrace new ways of telling them – anytime, anywhere. 

We now live in a world where we have myriad choices of content available when we want it – so long as content creators create compelling content and give us those choices.  This is what Kevin Spacey so eloquently discussed in his recent speech that reached many of us via the same digital media technology that launched this new golden age. Binge viewing Netflix-style works. Why? Precisely because someconsumers (but not all) want it that way. Netflix simply offered a new type of content package. A new mode of consumption. It’s not binge viewing vs. “traditional” viewing. It’s not either/or. It’s simply different. Different experiences.  Some don't need the water cooler conversation. Some crave it. We can self-select what we want.  We want that power and control. Just make it compelling.

Due to its unprecedented reach and endless “packaging” possibilities, that content also can impact us like never before – not only to buy things (although that too is true, look again at Mr. Burgundy), but also to inspire us. To motivate us. To mobilize us (just look at digital media-driven global political upheavals of the past two years). To fund even more new stories to tell.

Don’t fear this disruption. Embrace it. We are in a new golden age.  

Media Companies -- Remember, YOUR Content IS King -- You Hold the Cards (If You Have the Will)

I wrote this post for TechCrunch over one year ago, but it is perhaps even more applicable today due to the continued proliferation and aggressive resourcing of premium online distribution services (Netflix, YouTube, Amazon, Hulu, Vudu, Comcast, Intel and inevitably Apple -- all of whom are in massive "land grab" mode).   It covers all the bases of my perspectives from my nearly 25 year career -- the content owner/licensor's perspective (my time at major studios like Universal Studios), the online distributor/licensee perspective (online music pioneer Musicmatch) and the technology perspective (online video innovator Sorenson Media).  Although I wrote this in the context of Apple's long-awaited iTV, it has broad applicability to all premium online video licensing and deal-making and interaction with all online video distributors.

Apple’s all-in-one physical flat-screen iTV is coming, make no mistake. And, when it does, it will represent Apple’s attempt to reinvent the television experience in much the same way it did for music. But, while media execs were hopelessly naive in Apple's presence back then, they feel they are ready this time. They are determined not to let Apple rule the premium online video world like they did (and still do) for online music. The question is, do they have the will?

Apple will, of course, follow its established playbook – which most CE companies inexplicably still do not follow -- and seamlessly marry its beautiful hardware (the iTV) with its underlying software and services (in this case, movies and television) in the same way it did with music via the iPod and iTunes.  Apple’s goal is to be the center of the online movie and television universe for consumers (just like it is for music). Yes, content is king to Apple, but only because content serves as the Trojan Horse consumers ride into Apple’s kingdom of riches (initially Macs and iPods, and later iPhones, iPads and the inevitable iTV).

There’s the rub. The content king-makers – motion picture and television studio execs – now know this. They have seen this movie before, and this time they are determined to monetize content more directly for content sake – for themselves. Apple transformed itself into the #1 most valuable global company and juggernaut that we see today precisely because those media execs handed Apple the keys to unlock music value in the online world. Steve Jobs wooed them with his charms, pitched a great story, and established the rules of the online music licensing game. Apple’s massive growth in the past decade all started there with its iPod-iTunes 1-2 knockout punch. That, in turn, led to the resurgence of Macs, which led to the iPhone, then the iPad. Apple would be a very different company today if didn’t get the music it needed 10 years ago.

And, how did Jobs’ playbook work out for the labels and musicians? Not so well. Online music sales (and royalties) were an asterisk next to iPod sales. Don’t get me wrong. Rampant piracy – and the music industry’s misplaced attack strategy – destroyed significant content value. Nevertheless, the music industry’s negotiations with Jobs one decade ago resulted in a massive transfer of value and wealth to Apple.

So, what lessons have media executives learned from this past decade?

Lesson #1 – Dictate the Rules of the Game, Rather Than Have Them Dictated to You.

Music execs were on their heels reeling in fear when Jobs approached them a decade ago with the promise of iTunes. They had no real experience with the Internet. They certainly had no experience with technology (many still do not) – and how it could be used for both good and evil. Piracy was rampant. Napster ruled the day (the bad one, not the good one). Kazaa’s Niklas Zennstrom was public enemy #1 (now of course he is a media insider with Skype, Joost and others). The music industry was understandably panicked.

Jobs promised a way out – under three conditions. First, Apple must be able to sell individual tracks unbundled from albums. Second, its price for those unbundled tracks must be $.99 each. Third, Apple must define and control the entire online music experience. The music industry capitulated, and these 3 commandments are fundamental rules of the game that still largely rule the day.

Well, those rules haven’t worked out too well for music creators and owners. Lesson learned. So, one decade later, media execs are striving to proactively dictate the value of their content and support multiple online experiences and business models. But, even now, they frequently significantly under-value their content. More on that later.

Lesson #2 – Never Again Put Too Much Power in the Hands of One Distributor.

Prior to iTunes, piracy was rampant, and only relatively small players (including my former company, Musicmatch) played legitimately in the online music world. Amid this backdrop, media execs empowered Apple to be the first and only established online music source and experience. As a result, iTunes incredibly still commands 60-70% of all online music sales. That represents incredible power in the hands of one. It represents a downright monopoly.

Media execs are determined not to allow that kind of power in the hands of any single player in the online video world. They instead are committed to fostering an eco-system of as many legitimate distributors as possible. They actively license their prized motion picture and television assets to all those willing to pay.

That’s why we already have myriad established behemoths in the premium online video game. We have Netflix, Amazon Prime, Hulu, Google/YouTube, Comcast. The list goes on and on. Apple too is on that list, but it is behind the curve this time. Those same media execs who ceded control to Apple ten years ago have refused, thus far, to broadly license their crown jewels on Apple’s terms. But Apple – or more accurately, Apple’s massive hoards of cash – can be very persuasive. More on that later.

Lesson #3 – License Broadly & Make the Licensing Landscape as Confusing and Opaque as Possible.

Media execs aren’t panicked this time. They have a decade of learning under their belts. Yes, piracy continues to be rampant, but they now understand that it cannot simply be litigated into oblivion. The best defense truly is a better offense. Support better customer experiences, make your content available broadly to those legitimate distributors willing to pay, and experiment with business models and terms.

That’s why we have over-the-top (OTT) “Internet TV” models in which content is monetized via paid downloads, subscriptions, and ads. We also have big cable’s “TV Everywhere” models in which consumers must continue to pay their monthly cable fees. And, coming soon, Google, Intel and others are becoming virtual cable operators that also distribute live linear programming like ESPN. Apple too wants to be on that “virtual MSO” list, because that is the kind of premium content that ultimately moves mountains of consumers. Case in point – DirecTV’s “NFL Package.”

This melange is great for the studios. No two content licensing deals are the same. Each negotiation takes place in a black box. No clarity. No certainty. Just the way media execs like it (I know, I have been there). Now THAT's power! Right? Up to a point. More on that later.

Lesson #4 – Be Audacious – After All, Content is King.

Jobs ultimately taught music execs one fundamental truth – that content is THE key to unlock tremendous value online. The corollary to this is that without content, value is lost. That’s why all the deep-pocketed tech titans are lining up for a chance to play in the premium online video game. Just as it is for Apple, premium online video distribution is strategically central to their business. Apple? Sell its hardware. Amazon? Sell more goods and services. Google? Sell more ads. Comcast? Hold onto those cable subscriptions. Netflix? Survive!

These players continue to ink a steady stream of significant licensing deals, the financial terms of which are almost never disclosed (remember, just the way the studios like it). But, one telling deal’s terms did slip out over one year ago – Netflix agreed to shell out nearly $1 billion to stream shows from the CW Network. Think about that – if the CW can command those kind of numbers, think about the price tag for real “premium” content like ESPN. And, we are still in the early innings of this premium online video game.

Apple – with its head-spinning $150 billion war chest – is a lock to win (or at least be a massive winner in) the online video game, right? Most likely, the answer is yes. The inevitable iTVs will fly off the shelves. But, Apple isn’t alone this time. It is playing on a crowded field with other deep-pocketed and committed players (including CE guys like Samsung). Even more importantly, to really hit it out of the park, Apple’s coming iTV must be an experience. That means Apple must offer an extremely deep pool of compelling video content from the start (including sacred programming like ESPN). Otherwise, consumers will find holes, get frustrated, and look to fill those holes with programming offered by others.

Each frustrated customer represents real significant loss, which is especially magnified in Apple’s case because of its closed product eco-system. For Apple, it’s not just about a single product sale (like an iTV). That sale, instead, marks the beginning or continuation of a long-term lucrative purchase relationship, which is the key driver of Apple’s stratospheric growth. That’s why Apple will be willing to strike very different content licensing deals with media execs this time around.

Of course, Apple doesn’t control the content – the studios do. So, who really holds the cards here? Will the studios be as audacious as Steve Jobs was one decade earlier and demand terms that they believe reflect the true value their content creates for distributors over time? In Apple’s case, one truly audacious idea could be to seek a share of revenue for every iTV sold. Remember, not every license deal must be the same. Value means very different things to different players. If Apple, or any other online distributor, refuses to play, then they lose out. No soup for you! There are many others (including the studios themselves), but only one ESPN!

Or, will media execs instead go for the quick-fix of easy money? After all it’s hard to say “no” to someone writing a big check. If they do go this instant gratification route (which is more consistent with their DNA), at least they should realize that their prized motion picture and television assets will be worth significantly more than they think in the online world over time. Avoid long-term deals!

So, yes, media execs have learned their lessons well. Content is, in fact, king. Apple will continue to wear the crown, however, unless media companies have the will and creativity to take it back. After all, Apple continues to drive tens of billions of dollars of revenues each quarter, a number that dwarfs global motion picture box office receipts for the entire year. Apple could buy Hollywood. But, will Hollywood let it?