We’ve had beer wars, cola wars and, for those who remember, the legendary Macy’s versus Gimbels rivalry. Right now cellphone marketers are exchangingblow after blow. So who are the next combatants from the school of Coke andPepsi, or Apple and Samsung?
So far the ascendant streaming services haven’t waged much of an ad war, but that seems likely to change. The subscriber counts and video content of all three are continually growingby leaps and bounds, increasing their competition, costs and potential rewards at a rapid pace. Netflix, which offered about 1,000 movies and TV episodes when it began streaming videos in 2007, now has thousands more for its 29 million US subscribers. Just last week it signed a deal with the Weinstein Co. for exclusive rights to its movies starting in 2016, a pact Harvey Weinstein called “probably the biggest” in the company’s history. One media analyst estimated the cost to Netflix at $30 million — [≈ Energy industry 2011 political donations] per year.
Amazon’s free-shipping-and-streaming-video combo, Prime, has meanwhile accumulated the rights to 40,000 titles and episodes since 2011 and more than ten million subscribers. Hulu owners, and 21st Century Fox just decided not to sell the service and instead increase their spending on it by $750 million [≈ box office sales of The Graduate, 1967]. The Hulu Plus premium offering generated $695 million [≈ box office sales of Mary Poppins, 1964] in revenue last year and counts about four million subscribers.
All three services are doubling down on exclusive original content, including Netflix’s Emmy-nominated “House of Cards” and its just-announced forthcoming Aziz Ansari stand-up comedy special.
As a result, we are all streaming video more and more. The average person spent8 hours and 20 minutes per monthstreaming video in the first quarter of this year, nearly three hours than a year earlier, according to Nielsen.
With every other vector on the rise, it’s only a matter of time before the consumer marketing gets much more serious. Netflix spent a somewhat respectable $160 million[≈ cost of F-22 raptor, a stealth fighter jet]advertising in measured media over the 12 months ending in March, over half of it on display ads online, according to Kantar Media. But Hulu spent under $40 million [≈ Health industry 2011 political donations]. And Amazon spent less than $10 million [≈ Small hospital] on Prime.
These ad expenditures are a fraction when compared to the dollars being invested in the more established products and hyper competitive categories such as automotive, quick service restaurants, movies and discount department stores.
The companies have also not yet begun directly targeting one another in ads. Netflix informs its investors that of its 100 most popular movies and 100 most popular TV shows, Amazon has only 74 and Hulu Plus offers just 27. In the future couldn’t it create an ad highlighting that selling point to the general public?
The streaming video space is rapidly expanding, moreover, beyond Netflix, Amazon and Hulu. Redbox Instant with Verizon and Wal-Mart’s Vudu service offer some competition, and there are likely more to come. A “Halo” TV-type series will be available on Microsoft’s Xbox gaming console, and YouTube has scores of professionally made and long-form video channels. And then there are the “TV Everywhere” initiatives from the traditional TV industry, which will presumably eventually become more coherent and heavily promoted.
Netflix, Amazon and Hulu should follow the example of Samsung, a mobile competitor that is in a product category battle with Apple. Its U.S. ad spending in measured and unmeasured media grew 58% last year, according to Ad Age DataCenter estimates — more than any other major marketer. Inone sign of Samsung’s success, many rivals now target the company in their ads instead of Apple.
July 23, 2011 3:02 PM EDT
Each tech giant has their case for obtaining Hulu in leading its company toward dominance on the web. Apple seeks interest in possibly jumpstarting their Apple TV services. Google may have a similar case along with solidifying its social networking features on Google+. For Yahoo, the former premiere search engine website seeks a comeback in both traffic and revenue with Hulu as their missing piece of the puzzle.
Hulu shines as a highly attractive online property by proving its value with over 1 billion ad impressions a month, according to Comscore, and impressive offerings of video content. The latest auction for Hulu has left many pondering on the potential combination of services that may birth from current bidders in Apple, Google, and Yahoo.
Google+ has been rising in popularity with their innovative approaches to content sharing and video chat. The addition of Hulu could concrete Google’s spot as the top online video website as a new flood of content may do wonders for visitors and advertising revenue. The search giant already owns YouTube, which rakes in nearly 150 million unique visitors a month, and will seek ways to integrate video watching within Google+. The Hangout feature in Google+ may open the door to online video watching with multiple friends at once. The platform makes watching video content and commenting on them through mobile devices easy and social. Content from Hulu combined with Youtube’s offerings can lure potential users to join Google’s growing social network.
Apple’s case for a potential bid for Hulu comes in the form of Apple TV and content for their upcoming lineup of mobile devices. Financially, Apple may hold the advantage in terms of having over $76 billion in cash on hand for a purchase. If Apple were to follow its current business model of renting out shows rather than making revenue on ads, then the Hulu acquisition can potentially transform into another Netflix service. Apple would then hold great advantages in terms of reach, marketing, and content distribution through iTunes. As GigaOm pointed out, the deal would definitely provide Apple with additional video content to offer through iTunes and increasing the company’s content value.
In terms of distribution, Hulu’s high definition, HD, quality content can be a valuable asset as Apple’s new platform of HD capable iPhones and iPads plan to hit the market possibly later this year. The iPhone 5 and iPad 3 are rumored to have HD display screens that can play 720p and 1080p videos. With Hulu already reaching out to media devices through it s Hulu Plus subscriptions, the millions of Apple mobile devices will only increase the content reach.
Of all the players involved with the current bid, Yahoo may appear to be the front runner as it has much to lose without Hulu. Yahoo would love to see more traffic and utilize its strength in media and content. .
In an interview with Adage, EVP of ‘Americas’ at Yahoo Ross Levinsohn spoke about Yahoo’s desired future plan, “to be the premier digital media company. We’re No. 1 or 2 in 19 categories. That’s insane! That doesn’t exist anywhere else in the world. You embrace that. You support that. We’re focused on premium content. Some of its original, some of it’s curated, some of it’s aggregated. And we’re focused on premium advertising,” said Levinsohn.
The Hulu acquisition would bolster the media aspect in Yahoo’s offerings as well as increasing their online advertisement revenue. Without Hulu, Yahoo may have less footing in their continuous role in playing catch-up with premiere rivals in YouTube or Apple.
Recent news ruled Microsoft out of the bidding for Hulu saying that the company would not continue with future offers in the second round. With Microsoft out, the remaining three big players will duke it out for ownership of a highly prized online commodity. According to reports, Yahoo would be willing to pay $2 billion in a deal that includes an exclusive package for TV shows and movies. Based on that, the LA Times suggested that Yahoo may be in the lead spot among other bidders.
Internet piracy is on the decline in the U.S., according to new research from NPD Group.
The percentage of the U.S. Internet population using a P2P file-sharing service to download music has decreased from 16% (28 million users) at the end of 2007, to 9% (16 million users) in the fourth quarter of 2010 — the very quarter that LimeWire was forced to shut down its file-sharing service. In the quarter previous, a federal judge ruled against LimeWire in a copyright infringement case versus the Recording Industry Association of America (RIAA).
Between Q4 2007 and Q4 2010, the average number of music files downloaded from P2P networks also dropped from 35 tracks per person to 18 tracks, NPD found.
LimeWire was used by 56% of those using P2P services to download music before the ruling (Q3 2010), and 32% by the time it shut down (Q4 2010). Many users have since turned to other P2P networks, such as Frostwire (which is used by 21% of those sharing music files via P2P as of Q4 2010, up from 10% in Q3 2010) and Bittorrent, which increased its userbase from 8% to 12% in the same period. It is not yet clear, NPD says, whether LimeWire’s shutdown has had a significant effect on the number of illegal music downloads.
“LimeWire was so popular for music file trading, and for so long, that its closure has had a powerful and immediate effect on the number of people downloading music files from peer-to-peer services and curtailed the amount being swapped,” Russ Crupnick, an entertainment industry analyst for NPD, observes. “In the past, we’ve noted that hard-core peer-to-peer users would quickly move to other websites that offered illegal music file sharing. It will be interesting to see if services like Frostwire and Bittorrent take up the slack left by LimeWire, or if peer-to-peer music downloaders instead move on to other modes of acquiring or listening to music,” he added.
NPD’s data is based off a January 2011 survey of 5,549 U.S. Internet users ages 13 and older.
Online piracy is a popular scapegoat of the music industry, which has suffered a 30% decline in global sales between 2004 to 2009, according to IFPI’s annual digital music report [PDF].
But given that only 9% of U.S. Internet users use P2P networks to download music illegally (that percentage does include those who obtain music through unauthorized online streaming services and download sites), one wonders whether that blame is merited.
Increasingly, consumers are being introduced to new, more convenient — and, for the music industry, often profitable — methods of obtaining music legally, such as download stores (iTunes), ad-supported streaming sites (Pandora, Spotify), subscription services (Rhapsody, MOG), video channels (Hulu, VEVO), and through bundles with broadband services (TDC in Denmark, Sky in the UK) and mobile phone handsets (like those made by Nokia and Sony Ericcson). All of this has translated into significant revenue — $4.2 billion in 2009, according to IFPI — although it is still not enough to compensate for the sharp falloff of physical format sales in recent years.