CES: Studios see big swell ahead for online distribution

By Paul Sweeting -- Video Business, 1/7/2008

JAN. 7| LAS VEGAS—Top digital executives from four major studios on Monday predicted an explosion of professionally produced video content on the Internet in 2008, driven by improved streaming quality, the proliferation of video-capable devices and the media companies’ need to find new business models for their content.

“Technology is creating many more ways to consume content,” said Thomas Gewecke, newly named president of Warner Bros. Digital Distribution. “One core of our strategy is to make content as available as possible and in as many configurations as possible.”

Dan Fawcett, president of Fox Entertainment Group Digital Media, said his company will be focused on extending the distribution of its content online as far as possible in 2008.

“We’re strong believers in ubiquitous distribution,” he said. “That’s the reason we created Hulu. We’ll be aggregating content on Hulu.com but we’re also interested in letting people distribute our content virally through the Hulu player.”

Hulu is a joint venture between Fox-parent News Corp. and NBC Universal. Currently in private beta, the site is slated to go live “in the next few months,” according to Fawcett.

Also driving the proliferation of online video offerings this year is the need for the studios to test a variety of distribution and business models as they try to figure out the best ways to monetize their content.

“Everybody is experimenting right now,” Disney’s executive VP for digital media Albert Chang said. “As content owners, we need to diversify our revenue streams as much as possible. We’re all going through the process right now of windowing TV for the first time. We’ve never done that before and we need to experiment to find out the best way to do it. Product development and how we handle our video is going to change very quickly over the next few years.”

Experimentation doesn’t mean missing financial targets, however.

“The iTunes business is revenue-positive for the studios that are participating,” Paramount Pictures Digital Entertainment president Tom Lesinski said. “Our digital video-on-demand business is revenue-positive. None of these businesses are being run as business development projects.”

Lesinski predicted that 2008 will see “significant growth in the amount of content moving from broadband to the TV,” as set-top boxes like Apple TV and Vudu gain traction.

“You have five or six really serious players in that space right now, and I think you’ll see them start to have an impact,” Lesinski said.

Pressed by panel moderator Charlie Koones, publisher of Variety and president of the Variety Group (of which Video Business is part), the executives largely side-stepped questions about the impact of Apple’s growing strength in the online video business.

“I think Apple has to be rewarded for the products they make,” said Chang. “They’re really compelling. It’s a great ecosystem for consumers. ITunes was really our first opportunity to legitimately distribute video online.”

Apple CEO Steve Jobs is the largest individual shareholder of Disney and sits on its board of directors.

“Do they have too much sway? They compete against a lot of other options,” Chang said. “They even compete against piracy. So to say they have too much control is looking at too narrow a slice.”