Internet Video: End-to-End is the Key

Internet-based TV is white hot and evolving quickly.  It has the promise of enabling video anywhere and any time, delivering new interactive experiences, providing lots more choice, and enabling new business models and revenue streams.  Newcomers to this market are getting lots of attention.  Boxee is unveiling their beta software in week, Roku recently released a new Channel Store, and Clicker just launched and got a review from Walt Mossberg.  These and many other newcomers are providing a component, rather than an end-to-end solution for video.  I think this is problematic.

Rather than delivering a comprehensive solution, many newcomers to video are pursuing a model like we see on the web.  The web works as a series of independent but highly compatible components that make up a larger media experience.  Google is the leader of the search component, Amazon is the leader of the commerce component, and Facebook is the leader of the social media component.  Each component works efficiently with the others – it’s great for the businesses and it’s great for consumers.  Unfortunately, I don’t think the web model works well in the video domain for a few reasons: 

• Video is premium in nature.  Consumers are willing pay for video and producers will seek payment.  Inevitably most video consumption will be tied to transactions, authentication, and DRMs.  Consumers will seek an end-to-end solution that removes complexities and interoperability problems with these components.

• Video is bandwidth intensive.  Delivering HD quality video with reliability is a non-trivial task.  Consumers won’t tolerate noise or disruptions in their video.  They’ll gravitate towards one solution for this rather than leave it up to multiple content providers and distributors like we see on the web.

• Video is smaller in scale.   The value of the web extends across billions of web pages, while the value of video is consolidated in thousands to millions of programs (on the very high side).  Delivering a solution for this breadth of content is well suited to an end-to-end model versus a component one.

• Video is a lean back experience.  Consumers won’t spend much time searching, purchasing or configuring video.   They’ll seek one integrated solution that makes all of this a lean back experience.  

When I talk about an end-to-end video, I’m not referring to a completely proprietary system.  Rather, I’m referring to the tight integration of four critical components that are delivered and supported by one provider:

1. Device – one set-top box to support your TV.
2. Discovery – one experience for content discovery that stays with you across the video you watch.
3. Transactions – one account and one common experience to buy or subscribe to content.
4. Delivery – one reliable delivery agent for the bulk of your video.   

There are some firms taking the end-to-end approach.  Apple’s is doing this with Apple TV, just as they did with iPod/iTunes.  Sales have been slow thus far, but the content offering is still very nascent (e.g. no broadcast sports/news content yet).  Sezmi is another company that intrigues me.  They’re a start-up aiming to bring a lower cost, more personalized solution to what cable and satellite offer today.  The cable operators are also taking this approach with TV Everywhere.  This initiative extends your existing cable subscription to include Internet video that can be watched on a PC or mobile device.  Watch these companies and other like them; I think they could be disruptive.