Pipers At The Gates Of Dawn
October 14th, 2006 Davis
Pipers At The Gates Of Dawn Hosted on ZooomrPosted in Photos | No Comments »
Pipers At The Gates Of Dawn Hosted on ZooomrCarl And Ray Prove To Be An Online Blockbuster
October 13th, 2006 Davis
I may have thought that this year’s Blockbuster Super Bowl ad was terrible, but I found this clip on Microsoft’s new Soapbox site very very funny. I’m pretty sure that this clip has been around for sometime, but I’ve never personally seen it on TV. Seeing the clip on Soapbox really made me think about ways that businesses could leverage the video sharing sites for marketing purposes. On one level, businesses could put their ads on YouTube, Soapbox and Stage 6 in order to get their brands in front of those viewers, but unless an ad spot is absolutely incredible, it will be lucky to get 10,000 views. You could pay to have the ad promoted to the front page of YouTube Google, but I think that there is a much more valuable way to use these sites.
With all of the video sharing sites, viewers are given the option of not only sharing the videos on their blogs and web pages, but they also have the ability to comment and rate the videos. While video sharing sites tend to skew to a younger demographic, getting real world feedback on the quality of an ad BEFORE running a commercial could be invaluable in finding out what works and what doesn’t work. In comparing Blockbuster’s Super Bowl ad on Google vs. this same clip on YouTube you can see that not only does it get significantly higher ratings, but it’s also inspired a techno remix and a number of blog posts talking about how cool the Carl and Ray ad campaign really is.
Over the last few years Blockbuster has had an awful lot of problems with their marketing campaigns and while they’ve been dialing back their TV ad spending lately, if I were running Blockbuster, I would bring back Carl & Ray as an online video viral campaign and start using these services to test the popularity of new characters and new ad spots. If something really takes off online, then you start using that for your commercials on TV, instead of finding out after the fact that an ad campaign completely sucks. If something doesn’t get any traction, then you haven’t really lost anything because bad commercials aren’t all that viral. (unless of course it’s really really bad) With as much money as businesses spend on airing advertising spots, a misfire can be very costly and by giving web users a “sneak peak” at upcoming commercials, companies could really benefit from the feedback provided and occasionally, they may even get some viral love by making their commercials easily accessible for consumers to view and to share.
Posted in Marketing, VOD | No Comments »
VitalStream To Be Acquired For $217 Million
October 12th, 2006 Davis
Earlier this week I wrote about VitalStream and how I thought that the company could be a diamond in the rough. With a healthy portfolio of streaming on demand customers and a balance sheet of $50 million, they were in a good position to take advantage of the growing popularity of VOD technology. After seeing their stock sell off, on the loss of their MySpace account, a rare value play in the VOD market presented itself. Just as quickly though that value window closed when Internap announced this morning that they intend to purchase the company for $217 million in a stock.
Investors in VitalStream will receive approximately a half a share of Internap in exchange for each share of VitalStream that they hold. The deal is expected to close in the first quarter of 2007 and should be an excellent compliment to Internap’s existing 38 data centers that they currently run. Internap provides VOIP, VOD and hosting services for a number of large corporate customers and with the acquisition of VitalStream, it marks a bold committment to video on demand technology. While VOD is still a young industry and there is certain to be a lot of turmoil in the industry as the market develops, at first glance, this seems like a smart move by Internap and should help to make the company a significant competitor in the VOD market. With Internap’s VOIP technology and their existing hosting solutions, both companies should benefit from the synergies formed by combining the two companies.
Posted in VOD | No Comments »
Black Diamond Or Cubic Zirconia - VitalStream Deals With Loss of MySpace
October 11th, 2006 Davis
Black Diamond Or Cubic Zirconia Hosted on ZooomrIn the diamond industry there are many types of diamonds you can buy. Each offers it’s own risks and it’s own profit potential. You can save up three months salary and buy a sparkling diamond ring for your fiancee, you can buy a freshly cut diamond and have it mounted yourself or you can buy a black diamond that looks more like a rock then a precious gem. Each level of quality offers greater opportunities to profit, but also greater risks that you must take in order to achieve those higher profits. Such is the case for VitalStream. After announcing that they had lost a major partnership with Myspace on Monday, the company looks more like a black piece of coal then a diamond in the rough, but for investors who don’t mind taking chances on an uncut stone, a real opportunity may be presenting itself after the stock has sold off by over 25%.
There is little doubt that online video is hot. Everybody wants a piece of the action and if you could compare the VOD industry to the diamond industry, you could argue that Akamai Technologies represents the most expensive engagement ring in this space. They have the most compelling technology, but at a valuation of $7.8 billion this little kept secret has very limited upside for jewelers willing to invest in their technology. YouTube and DivX may represent a cut diamond waiting to be mounted, but at a price of $1.6 billion and $700 million respectively, these developing diamonds aren’t exactly cheap either. However, with a market cap of only $155 million Vitalstream could be a diamond in the rough when it comes to VOD technology. Like black diamonds it doesn’t come without a high degree of risk, but for jewelers who understand what they are doing, there may be a real profit opportunity.
VitalStream’s technology is all about streaming video. They have the technology to do downloads, but streaming is their bread and butter and over the last few years, the company has done an impressive job of demonstrating that their technology deserves a place in the VOD market. Along the way, they’ve moved from being an over the counter penny stock to a small cap Nasdaq play and while definetely risky, the company represents a rare value opportunity in the hot VOD market. Over the last few years the company’s focus on streaming technology has managed to win them contracts with ABC, Comcast and up until September 30th of this year, MySpace. Unfortunately for VitalStream, after MySpace moved from being just 11% of their revenues in 2005, to 33% of the company’s revenues last quarter, MySpace decided to take their business in house and has put the company on notice that they intend to end their business relationship at the end of the 3rd quarter. When the news leaked out last Friday, Wall Street punished the stock by selling it off over 20% and when they actually announced this development on Monday morning, the markets gave VitalStream another 3.5% haircut to boot.
Losing the MySpace’s business has undoubtably been a huge setback for the company, but even without the 4th quarter MySpace business, VitalStream still expects to generate $25 - $27 million in revenue this year and assuming that they can replace the lost MySpace business with their new advertising inititives, they are predicting that they should achieve $38 - $42 million in revenue for 2007. Central to VitalStream’s approach has been their focus on being a revenue center instead of a cost center for their business partners.
When it comes to VOD, most companies think servers, bandwidth and IT expenses, but VitalStream provides these hosting services for content owners and instead of making their partners buy new technology, they instead use the content to sell advertising so that all content owners need to worry about is cashing their checks in exchange for cutting VitalStream in on a piece of the action. Because the company is focused on providing multiple VOD solutions for their customers, they’ve taken a format agnostic approach and are able to use either flash or WMA based VOD technology. The company has recently expanded to international markets and earlier this year, they acquired a company named EonStream that will be crucial to the company’s success or failure.
From a consumer standpoint, EonStream is a real pariah. They deliver pre-roll, mid-roll and post-roll advertising that you can’t fast forward through. While YouTube has resisted implementing this technology, VitalStream has been more then happy to fill this void for content owners who want to capitalize on the high CPM opportunities that online video ads offer. From an investor standpoint however, the pre-roll ad is the future of VOD and with the company positioned in the middle of this market, they may be one of the largest beneficiaries from the challenges that the PVR is placing on the ad industry.
Historically, content has been paid for either on a subscription basis or on an advertising basis, but as the PVR has eliminated advertisers ability to reach live audiences, advertisers have struggled to deal with the loss of the live audience. Through their acquistion of EonStream, VitalStream has created a solution for advertisers who still cling to the forced 30 second ads. Unlike time shifted content, streaming content is always viewed live. Because VitalStream can dynamically update their ad inventory, they can ensure that people who stream their content on a Thursday night are able to see trailers for movies coming out the next day. They can also require viewers to enter demographic information and can target those viewers with geographic or demographic sensitive advertisments in a way that broadcast television can only dream about.
As the company has moved their VOD technology forward, they’ve wholeheartedly embraced this ad platform and have begun integrating it into their core VOD services over the last few months. With this year being the first year that internet usuage has actually surpassed television usuage when it comes to competing for our leisure time, more and more consumers are adopting VOD and streaming video as an entertainment solution and VitalStream is well positioned to take advantage of this trend. With over $20 million in cash and a balance sheet close to $50 million dollars, the company trades at slightly more then three times their book value and in an industry that just saw Google pay over $1.6 billion for YouTube, this number seems awful cheap to me even with their loss of the MySpace account.
Investing in a stock like VitalStream contains a high degree of risk. The company still isn’t profitable and it will take at least 6 months for them to recover from the loss of the MySpace revenue. They’ve authorized a ridiculous 290 million shares and have already announced their intention to price another 8.95 million shares in a secondary offering. If the company moves forward with their underwriting at these valuations, I would be very cautious with this stock, but on the plus side, the MySpace account was a real drag on the company’s gross margins and with the loss of the account, VitalStream is expecting to exceed the 65% gross margins that they had previously predicted for 2007. While their technology isn’t necessarily unique and their contracts are always at risk as companies become more reliant on VOD technology, VitalStream has still done an excellent job of carving their way into this niche market. With strong organic growth amoung their own customers and the potential to partner with other studios and media companies in the future, VitalStream may be worth considering for those who don’t mind investing in a black diamond. Only time will tell whether it ends up being cubic zirconia or whether a diamond really exists beneath the surface, but after seeing the beating that their stock has taken, it could end up being a real gem, if the company can continue to execute on their business plan.
Posted in Movies, TV, VOD | 1 Comment »
Just Put Me Out Of My Misery
October 11th, 2006 Davis
Please Just Put Me Out Of My Misery Hosted on ZooomrPosted in Photos | No Comments »
HDTV 101 - What You Need To Know Before Buying Your Next TV
October 11th, 2006 Davis
About two and half years ago, I made the jump to HDTV. In fact, not only did I make the jump, but I actually moved apartments after learning that my landlord had refused to let Comcast install the underground cables necessary to deliver that rich HDTV experience. After reading so much about the technology and having an opportunity to see the clarity of the picture, I knew I needed to upgrade. At the time, I felt pretty tech saavy, but when it came to making a purchase, in reality I had no idea what I was doing. It’s confusing enough trying to understand the resolution differences between 720p or 1080p, let alone issues like HDMI support or whether 1080i is really a better format. In fact sometimes, I think that the consumer electronic industry almost wants to intentionally confuse consumers. With so much confusion over HDTV technology, it’s no suprise that 25% of HDTV owners haven’t hooked up their televisions properly.
Well for those of you who are in the market for a slick new HDTV set, have no fear because TechDigs has put together an excellent HDTV overview on the differences in the various HD televisions. Can’t figure out if you should be going plasma or LCD? Need to know if that extra $1,000 is really worth spending on a new set? Well TechDigs has the answer. Like any overview, it won’t answer every question that you might have about HD technology, but it’s a good resource for helping to demystify some of the confusion surrounding HD television and is a good starting point for anyone who is still trying to figure out how to stop their VCR from blinking 12 o’clock.
Posted in TV, HDTV DVDs | No Comments »
Walgreen Has Right Prescription For The Next Blockbuster
October 10th, 2006 Davis
I’ve had friends refer to Netflix as the little red pill, but Walgreen is betting on a different DVD prescription in the latest development for the DVD industry. Instead of trying to sell the next Blockbuster drug, Walgreens is instead trying to become the next Blockbuster by partnering with Redbox to bring DVD rentals to their customers. According to the Chicago Times, over the last month Walgreens has been silently testing Redbox kiosks in 19 stores in the Chicago area and another 19 stores in the Houston area. The program is still in a testing phase, but according to Walgreen Spokesman Michael Polzin, “If it does well, we could look at other markets.”
This is a big development for the kiosk industry on two fronts. First it’s expands DVD rentals into the pharmacy, which is a natural compliment for the kiosk business. More importantly though, it could potentially add another distribution partner for Redbox and a significant one at that. Walgreen’s has over 5,000 locations and if their testing proves sucessful, it’s possible that through Walgreens alone, Redbox could install as many video kiosks as Movie Gallery has video stores.
Perhaps the most interesting tidbit to be leaked in the article however was the disclosure that Coinstar, who currently owns 47% of Redbox, is still planning on making an additional investment of $12 million in Redbox next month. This will give the company a majority position in Redbox, assuming that certain growth targets are hit. The $12 million was originally negotiated last year when Coinstar paid an initial $20 million for their 47% stake in the company, but if they do go forward with the reinvestment, it would be a clear sign that the last 12 months have been very good for Redbox. Over the last year we’ve seen the number of Redbox locations grow from 800 to about 1,500 and considering the response that retailers are having for the technology, I fully expect Coinstar to move forward with the reinvestment.
So far Redbox has been deploying their kiosks on a regional basis. This makes a lot of sense because when you rent from kiosks, you want to be able to rent and return your DVDs from a number of different locations. Instead of deploying 1,500 kiosks spread out across the country Redbox has instead focused on entering specific geographical regions and then building it out from there. Chicago marks a new footprint for Redbox and as the video store market continues to struggle in the metropolitan areas, Redbox is positioned particularly well to benefit from customers who still want to be able to rent the top hits without having to wait a few days to receive them in the mail.
Posted in Movies, Kiosks, Disclosure - I own stock in co. mentioned, Netflix | 4 Comments »
BuzzLogic Goes Beyond The Hype
October 9th, 2006 Davis
Buzzlogic is a company that recently launched a private beta at Demo and while I noticed them during the Demo media blitz, I didn’t really take much time to think about their business model until Read / Write / Web featured an interview with their Co-Founder Mitch Ratcliffe. In a nutshell the company seeks to automatically identify the influencers for specific brands and industries. This analysis goes way beyond traffic analyzation and looks at the quality of an idea being presented, the direct sphere of influence that a blogger may have and the impact that mainstream journalism may play on a brand.
“We’re seeking influencers in conversational markets, giving them more power and marketers better insight into how to deploy their limited resources to deal with the explosion of incredibly specific feedback that companies, organizations and political campaigns are receiving through social media. The tools we’re building will be applied to many of the challenges we talk about with social media, such as valuing individual contributions to the conversation, rather than just traffic - and how to interact through a dynamic personal form of communication in order to get the results you aim for.”
There have been a lot of companies that offers blog consulting services on the web, but the reason why I find Buzzlogic so interesting is that they don’t try to identify what the top stories are, but rather who the top contributors are and the scope of their influence. Essentially, they are offering a way to not just look at what bloggers are saying about a company, but to give companies a sense of what those bloggers RSS feeds may look like and who may have the greatest impact on their brand image.
BuzzLogic’s reports go beyond just identifying which stories have the most traffic and instead attempts to find out who the big fish in the small ponds are. One of the more controversial measurements that BuzzLogic takes into account is the impact that splogs play on brand image. Some might argue that Sploggers shouldn’t really get consideration in an analysis on influence, but splogs are clearly getting traffic or they wouldn’t exist, so if someone writes something and it gets picked up by the splogosphere, then it does add to the impact that this buzz has on a company or brand. Bloggers may hate splogs, but if you’re brand is negatively or positively featured by a blogger who is heavily splogged, then the splogs can work as an amplifier of sorts. The whole business concept is pretty fascinating and I know that I would love to see what BuzzLogic thinks my own sphere of influence may look like, but curious bloggers will have to wait for now because the company is focusing their beta for PR and marketing executives.
As more and more businesses continue embracing the blogs, it is going to become increasingly important for their PR teams to develop relationships with those writers. Some companies may use this data to ghost sites for good ideas while others will embrace bloggers and try to develop relationships, but either way, if the service works as advertised, this tool could save companies a lot of time when it comes to figuring out which sites really matter and which sites are producing noise.
Posted in Marketing, Web 2.0 | No Comments »
Could The Video Download Craze Make Media Center PCs Cool Again?
October 6th, 2006 Davis
Thomas Hawk’s Media Center PC Hosted on Zooomr2006 has turned out to be an experimental time for the movie industry, but clearly the studios are becoming more comfortable with the prospect of selling paid films over the internet. In the past, they’ve been reluctant to embrace digital downloads in large part because it’s hard to justify charging DVD prices for a download and they don’t want to give up the revenue that they make from selling DVDs. Nonetheless despite all of the developments we’ve seen, nobody has seemed to figure out a way to bring these movies to the couch where people actually want to watch movies.
TiVo is rumored to be in talks with Amazon, iTunes has their iTV product coming out, but that isn’t going to have a TV tuner involved, so the only real solution out there right now is the Microsoft media center PC.
This gives Microsoft a big advantage over any other platform out there and while to date the Media Center PC has largely been seen as an early adopter product, David H. Deans looks at this issue and asks if all of these downloading agreements may in fact benefit Microsoft’s Media Center more then anyone. In yet another well thought out post, he cites some figures by IDC that may indicate that the Media Center may finally be ready for prime time.
” - This year, 5.85 million media center PCs will ship worldwide. These systems will have the software and hardware necessary to qualify as media center units, with both the media center operating environment and combined TV tuner and remote control. The value of this market is estimated at nearly $6 billion, with the U.S. market accounting for 46.3 percent of the total.
- In the longer term, based on the most likely scenario, worldwide shipments of media center PCs will expand at a compound annual growth rate (CAGR) of 41.3 percent from 2005 to 2010, with the U.S. market increasing at a CAGR of 34 percent during the same period. In 2010, IDC expects worldwide shipments to reach 27.5 million units, with 9.5 million units absorbed in the United States, generating a worldwide revenue opportunity of $29.4 billion. The U.S. revenue opportunity in 2010 will be $12.6 billion.”
These numbers almost seem hard to believe, yet given Microsoft’s early entrance into this market and their commitment to the product, it really shouldn’t be that much of a surprise. A media center PC may be a little on the expensive side for most people, but if you are going to upgrade your computer already, it’s really not that significant of a cost and without the on going guide data expense, one can make an argument that it may in fact be more economical then even the cable DVRs in the long run.
Earlier this year, TiVo gave a presentation to the advertising community where they indicated that their internal research suggests that consumers really don’t want the ability to surf the web from their couch, yet I can’t help but think that with all of these download solutions coming to market, that their research may be a little off. Had I been in that focus group, I can tell you I definetely would have wanted that ability and without an all encompassing internet solution, TiVo could be at a disadvantage in this area, especially if the downloading business remains fragmented like it does today.
While TiVo may think that mainstream customers don’t want this functionality, nothing would please me more then to see them release an accessory product that consisted of a wireless keyboard, a wireless mouse and a linux based operating system where cutting edge consumers could pay to adopt the technology if they wanted. I’m not holding my breath that we’ll see this happen because by opening up their system, it will make it hard for TiVo to highlight things like TiVoCast, but with the exclusivity deals that the studios are cutting and TiVo’s lack of progress on this front, I think that there would be real value for consumers who want access to programming found anywhere on the net, instead of just the half a dozen or so partnerships that TiVo has thus far cultivated.
Posted in Movies, Media, VOD, Disclosure - I own stock in co. mentioned, TiVo | 5 Comments »