In a move that has been repeatedly predicted here long ago, NBC is now inserting commercial content into the show to avoid people who skip commercial breaks with their DVR:

To fight the challenge posed by TiVo, NBC is borrowing a tactic from television’s early days—live commercials.

Tuesday’s broadcast of “The Tonight Show” will air a live skit promoting car satellite-navigation devices made by Garmin International. The skit will air immediately before the show goes to commercial break. There, the message will be reinforced with a taped spot for Garmin taking the first slot in the break.

However, this skit is really only the beginning of the long inevitable slide towards advertiser sponsored programming. The genius of the 30-second spot was that it created a firewall between content producers and advertisers. The content producers were free to create compelling programming and the advertisers were free to create whatever spots they wanted within their allotted time.

Now, the only way to ensure that viewers see the ad is to make the entire show the ad. Remember folks, you heard it here first. Now its time to go watch some Texaco Star Theater.

Entrepreneur magazine has a profile of the startup YuMe, which helps advertisers looking to target video ads online. Of course, the new company discovered that the massive patchwork of players/competitors in the online video space created some snags:

“We’re finding that people who have the content and want to distribute it want control over the ad sales, and people who are actually distributing the content, like YouTube and other distribution agents, also think they have control or a share of the pie,” says Kadambi. For now, though, everyone seems to be working together.

“Everyone seems to be working together” sounds a bit ominous to us. It is true that much good content isn’t licensed because current business models aren’t profitable enough but that’s because there are a whole host of other infrastructure issues no one has dealt with starting with the overwhelming lack of good broadband in this country. Generating more demand for video would be trivial if the infrastructure was in place…

The WSJ covers the recent announcement by lala.com that they will stream music for free via browswers and sell albums only if you want to load songs onto your iPod:

It’s like a subscription music service, but without the monthly subscription fee. Lala is betting that in return for getting all that free access to music at home, listeners will pay to buy the songs they want to take with them on iPods and other music players. The prices will range from $6.50 to $13.50 for an album. (For now, Lala plans to sell music only by the album rather than song by song.)

Entering the online digital music sales fray is not big news. What is big news however, is that unlike all other digital music shops, Lala has reverse engineered some of Apple’s iPod technology and found a way to load their music onto iPods without having to use iTunes!

The risks include enabling Lala customers to circumvent the proprietary iTunes software. That may be viewed by Apple as a provocation. Spokespeople for Apple didn’t respond to requests for comment.

The WSJ analysis is rather rosy but we feel that with Apple’s history of frequent updates to iPod and iTunes software that its only a couple of weeks before they release an ‘update’ that completely disables Lala’s technology. Let the rat race begin!

With the rise of YouTube came the implicit conclusion that the online video format wars were over and that Flash Video (.FLV) had rendered both Apple’s QuickTime (.MOV) and Microsoft’s Windows Media (.WMV) formats to the trash heap of history. But Steve Jobs may have found a way to secretly move YouTube away from the low-resolution and low-quality Flash Video format and strike a decisive blow against Adobe:

...Youtube will be encoding all of their videos into a “H.264 streaming-efficient compression format” specifically for the Apple TV. All of Youtube’s videos are currently encoded in Flash Video (FLV) format.

While no official reason is given for the mass transcoding of Youtube’s entire catalog, Macformat.co.uk believes it has to do with the iPhone.

“As far as I know even now, Flash content per se might not play on the iPhone from day one. But Apple clearly doesn’t – indeed, shouldn’t – care, as YouTube is for many people the most critical site that uses Flash.”

Indeed, both the iPod and iPhone can play H.264 encoded video, and so it seems the entire Youtube catalog may also become available to those devices later this year.

It’s almost as if Steve Jobs took a move from Bill Gates’ Microsoft monopoly playbook, by tying the video format to the hardware devices, content providers have no choice but to adopt Apple’s video software. Although it seems interesting that the Apple “tail” managed to wag the YouTube “dog.” Who needs whom more?

Jeremy Liew has an excellent opinion piece up at NewTeeVee that points out the current dilemma with trying to make money via online video advertising:

Suppose that instead of watching a video, that user spent the same five minutes looking at regular web pages instead. Comscore says that the average time spent per page for the entire internet is about 0.7 minutes (April 2007 data). So in 5 minutes they would have seen 7 pages. Since the average webpage has multiple ad units (say 2), they might have been exposed to 14 ad impressions in those five minutes. So even if a video ad unit had a 5-10x pricing premium, the site might still have generated more revenue from regular web pages in the same amount of time because they would have served 14x more impressions.

We’ve noticed that many video sites (YouTube included) have attempted to bridge this gap by using a hybrid model of including banner advertising along with video content but that probably still doesn’t make up the gap. That leaves only two options: hoping that the premium for video advertising will grow to 20x-30x that of banners (which may take years) or grow the amount of alternative text and interactive content surrounding video.

The inevitable slide continues:

Broadcast television revenue slipped 5.3 percent to $11.7 billion in first quarter, according to a Television Bureau of Advertising analysis of TNS Media Intelligence data. Local broadcast turned in the best performance, down 3 percent to $4.04 billion. Network TV had the toughest quarter, declining 6.5 percent to $6.7 billion. Syndicated TV was down 5.9 percent to $986.7 million.

Another couple of years and it will start snowballing…

Bad idea: repackaging the ol’ “captured on home camera” clip shows as a new-fangled internet-social-media-thingy.

Amateur video will form the basis of the show’s segments, but ABC News correspondents will build news stories and features around video captured on cell phones or digicams and uploaded to a companion Web site.

Remember, blurry and shaky handheld footage is still boring after you watch that tornado caught on camera for the umpteenth time since the 80’s.

Good Idea: Turner seems to have a better idea of what to do with the web, put some good content online for everyone to watch. What a radical idea:

Turner Broadcasting System’s TNT and TBS plan to stream all seven of their combined original summer series on their respective Websites. For the most part, they will be available the morning after they premiere on TV.

[...snip..]

Cable networks typically have had a harder time than their broadcast counterparts in streaming shows online because they have to get both the rights from studios and the go-ahead from cable operators.

[...snip..]

“From the studio side, it’s becoming part of the package of rights you’re willing and able to buy,” says Turner Entertainment Networks President Steve Koonin. “We take the streaming piece very seriously, and when we’re looking to greenlight series, this is something we push with the studios.”

Sounds like Turner has ABC beat on how to take advantage of the net which is a bit of a role-reversal as the article points out about the rights situation. Maybe this is the start of a new trend, it was easy for the public networks to get out of the gate first but now the cable tortoises may beat out the broadcaster’s hares…

Sometimes these stories just write themselves:

During his keynote address Wednesday at the Digital Living Connections Conference here, Scheinman talked about how digital media is disrupting the tech and entertainment industries. Usually that means talking about networking standards and media servers, but Scheinman’s recommendations, instead, were a bit more pop culture than geek culture.

“A lot of you should go spend time on Facebook and MySpace. Spend time to understand why social media really does matter,” he said. Social communities are the solution to some of the biggest problems facing Hollywood and other content providers in today’s Digital Era, Scheinman said.

[snip...]

(For the record, following a cursory search, Scheinman does not appear to have a Facebook account.)

Despite the clear hypocrisy that is typical of senior Silicon Valley executives (everyone remember the Friendster board members who never had a Friendster profile?) Scheinman does make an interesting point.

Where young people congregate is an excellent opportunity for them to share culture word-of-mouth and research done by danah boyd indicates that teens are quite frequently relegated to hanging out online since paranoid parents don’t let them out of the house.

Scheinman then went on to call Rupert Murdoch a “genius” for purchasing MySpace but of course he forgot to mention that Murdoch hasn’t yet managed to generate any massive profit.

An interesting piece in the LA Times on Sony’s web marketing efforts for Spiderman 3:

All the studios have been directing some of their marketing dollars away from traditional media outlets, primarily newspapers and to a lesser extent network television. Spending on Internet advertising rose from negligible amounts in 2002 to around 4% of promotional budgets last year, according to the Motion Picture Assn. of America.

4% may not sound like very much but we have to keep in mind that the estimated marketing budget for Spiderman 3 is $100 Million (so although Sony did not give out how much they spent online, we can estimate it around $4 Million). Hollywood may be very slow about catching on to using the internet but this is following the exact same pattern that Hollywood followed when first using TV advertising. It took nearly 25 years of competition with television before the studios realized that TV was in fact the ideal medium to promote their films. Hopefully this time, they will embrace the internet a little bit faster.

We love Mark Cuban because he is never afraid to speak his mind, even in front of a congressional panel:

Representatives from YouTube, Sling Media, HDNet and others appeared before a House Energy and Commerce telecom subcommittee to discuss the future of video entertainment. Providers and lawmakers have grappled with a variety of issues that could change the way consumers access online video content, including net neutrality, copyright concerns and bandwidth issues.

[snip...]

“In our current bandwidth constrained environment, the concept of Internet video replacing TV is laughable,” Cuban said. “Replacing high-definition TV [with online content] isn’t even on the radar. There is certainly a market for video content on PCs, but it’s a complimentary market, not a primary market.”

What’s even better is that when the officials raised the topic of net-neutrality, Cuban basically shrugged his shoulders and pointed out that it would not even be an issue if bandwidth was not so constrained. Unfortunately, tech companies and net video providers are in a tough spot. They are typically laissez-faire, pro-net-neutrality advocates but the only way to improve bandwidth is via government intervention which is anathema to them.

In one will likely become a textbook example of a bad quote coming back to haunt you, Richard Parsons adressed the 56th annual National Cable & Telecommunications Association conference in Las Vegas with:

“The Googles of the world, they are the Custer of the modern world. We are the Sioux nation,” Time Warner Inc. Chief Executive Richard Parsons said, referring to the Civil War American general George Custer who was defeated by Native Americans in a battle dubbed “Custer’s Last Stand.”

“They will lose this war if they go to war,” Parsons added, “The notion that the new kids on the block have taken over is a false notion.”

Let us look beyond the fact that Parsons is attempting to portray the world’s media giants as underdogs comparable to Native Americans, which is already ridiculous on its surface. Let’s instead look to his larger message: Custer may have lost his last stand but while they may have won the battle, ‘manifest destiny’ ultimately steamrolled the Sioux nation.

Other than ridiculous statements, it seems that the official old-media stance on Google being a “frenemy” is now morphing into just plain “enemy” (much as we predicted back when the “frenemy” term was first coined).

While yesterday may have depressed our TV friends, Bloomberg (following the journalistic principle of ‘balance’ we’re sure) has made sure to put in a story to cheer them up:

From almost the dawn of television, the networks set standard rates for all advertisers based solely on the popularity of a program. Today, with spending on broadcast TV in decline, they’re scrambling to capture more of the ad dollars aimed at video on the Web.

ABC, Fox, NBC and CBS are telling advertisers they can shape any deal to suit any need, according to ad agency executives. That means companies such as Coca-Cola Co. or Procter & Gamble Co. can choose any combination of advertising - - on TV, over the Internet or on mobile phones—and work out individual terms.

That is a nice spin they are putting on it but begging ad-buyers to work out a custom deal for every single one just smacks of desperation, no? We would love to see what one of these ‘custom deals’ looks like.

It just seems like good ol’ broadcast TV just can’t catch a break these days. Once again, another year has passed and the Upfronts are upon us and they are looking as dismal as ever:

“I don’t think there’s any network chief who can get up there and say they had a successful year,” said an ad buyer, who asked to go unnamed.

In terms of total primetime viewers, ABC is down nearly 13 percent this year, NBC is down almost 11 percent and CBS is down more than 7 percent, according to Nielsen.

Fox is up slightly but even its ratings juggernaut, “American Idol,” has shown weakness recently. News Corp. owns Fox and The Post.

Some of the declines can be attributed to the rise of digital video recorders, or DVRs.

The current live ratings used to negotiate ad rates don’t include any DVR playback, although the major networks and advertisers are trying to address that issue.

We love how they say “some” of the losses can be attributed to the rise of DVRs. How about we attribute “some” of the losses to the internets, video games and bittorrent pirates? That would punch up this story and lift it from the cilched and depressing ad-buyers-upset-at-Upfronts story.

After spending $1.65 Billion for YouTube and then $3 Billion on DoubleClick, Google is most certainly in an acquisitive mood. It comes as no surprise then that while GE is considering selling off its NBC Universal unit that analysts start throwing around the idea of GoogTube snatching it up:

Nicholas Heymann of Prudential Equity Group Inc. in New York said a company such as Google Inc. may be interested in buying NBC Universal as part of its effort to add to its mix of media offerings including YouTube.

Of course later on in the story they include the typical denial:

Google doesn’t comment on ``market rumor or speculation,’’ spokesman Jon Murchinson said in an e-mail.

It’s very doubtful that Google would ever buy NBC. Google is perfectly happy selling advertising to the longtail of web search but Google clearly does not want to get into the content creation business. Content production is an expensive and risky business (the reason GE wants to sell it off in the first place) and Google is accustomed to adding advertising to other people’s content. Other people’s content (much like Other-People’s-Money) is far more fun to deal with.

Broadcast TV is not far off from the Google biz plan. As we’ve explained here before Google can be classified as a media company instead of a mere ‘technology’ company.

We came across this thought-provoking tidbit:

CBS News has announced a partnership with internet TV leader Brightcove, in which the news organization will use Brightcove to syndicate ad-supported video across the Web. Approved Web publishers will be able to embed a CBS News video player onto their site. In addition, Brightcove.com will offer content from CBS News.

Nothing is interesting in hearing yet another broadacaster making a deal to distribute their content online but what is interesting is that they are taking a step backwards technologically. Birghtcove makes an embeddable flash-video player but apparently only “approved web publishers” can embed the video. We can understand that some companies might be nervous about their brand being linked to an unsavory site on the internet but isn’t it silly to stop people from watching your ad-supported content? Which committee thought that was a good idea?

We can hardly wait to endure the tests required to become an ‘approved’ CBS News video ‘publisher.’

While everyone and their brother are tripping over themselves to share in the orgy of User Generated Content (UGC) a couple of striking events in the last couple of days has shown that it can be fraught with danger. The first event was the hilarious "riot" that ensued over at Digg.com when the administrators exercised censorship over the theoretically user-controlled news process.

Nerd anarchy? An e-Rebellion? Or just mob justice… which ever way you look at it social news site, Digg is facing the greatest crisis of its young life. The front page of Digg has been taken over by stories about and related to a hacked HD-DVD key.

To recap, someone has posted a link to a story about the said key getting cracked, and included the key in the title and description of the story. Digg staff took down the story, fearing that it would get sued by MPAA, as outlined in this blog post by CEO Jay Adelson.

This resulted in a proverbial take-to-the-streets riot, and now most of Digg front page stories are either related to the key-story, or are variants of the original deleted story.

In the end, the site’s administrators caved-in to the rioters, virtually guaranteeing that the tactic will now become a regular occurrence on their site. Good going guys! We look forward to the next riot and we think that Kevin Rose should start practicing his “we don’t negotiate with terrorists” speech in preparation for it.

But Digg’s cowardice in the face of adversity pales in comparison to the stupidity of the Barack Obama campaign staff. Back in 2004 a Barack fan named Joe Anthony created a fake Barack Obama myspace account for the senator which became rather popular for obvious reasons and then…

After Obama entered the presidential race, the campaign initially worked with Anthony to suggest improvements and Anthony even shared the site’s password so the campaign could make its own tweaks. When MySpace created a channel featuring profiles of presidential candidates, the Obama campaign chose not to create an official profile but instead suggested Anthony’s page, which already had a large following.

But as the campaign progressed and the network surrounding the page exploded to 160,000 online friends, the Obama campaign decided it should control the content and responses to MySpace users who sent messages.

We’re sure that working a presidential campaign can be stressful and expensive but outsourcing your online strategy to random, unpaid fans is a clear recipe for disaster. We just want to know who thought it was a good idea to NOT create their own official myspace profile. Were they really so lazy as to not want to deal with the most critical medium for reaching young people? You might want to reconsider voting for him if this is a sign of things to come.

If you thought the iPhone redefined the relationship between Silicon Valley and the U.S. cell carriers, you ain’t seen nothin’ yet:

The venture capitalists L. John Doerr and James L. Barksdale have joined an investment group that is promoting a plan that would open a portion of the radio spectrum for both uses, through technologies flexible enough to support both next-generation wireless Internet devices and public safety emergency communications.

The plan is being put forth by Frontline Wireless, formed earlier this year by Reed E. Hundt, the former Federal Communications Commission chairman. Frontline Wireless is one of several potential bidders for spectrum in the 700 MHz band, used until now by UHF television, that is being opened up by the move to digital.

Mr. Hundt said that Frontline had begun building an investor group, which would ultimately include large banking partners, to participate in the auction. Significantly, the company’s first public investor was K. Ram Shriram, an early Google investor and board member and managing partner of Sherpalo Ventures.

American technologists have often complained about the poor status of domestic cellular and broadband technologies, often accusing them of holding back the great internet revolution. As the old saying goes, if you can’t beat ‘em, join ‘em.

Rather than continuing to complain, Silicon Valley has decided to pursue what it does best which means they’re just going to have to do it themselves. In the end, why would the incumbents contribute to their own demise? It was nice that Apple could work out a deal with Cingular/AT&T;but its a whole new ballgame when tech companies like Apple have obsoleted them out of existence.

Those of you who happen to be in Southern California and want to meet us in person, should come visit us at Barcamp where we will be presenting.

Barcamp Los Angeles-3 is Saturday, March 24, 2007 - Sunday, March 25, 2007

BarCamp is an ad-hoc un-conference born from the desire for people to share and learn in an open environment. It is an intense event with discussions, demos and interaction from attendees.

All attendees must give a demo, a session, or help with one. All presentions are scheduled the day they happen. Prepare in advance, but come early to get a slot on the wall.

Anyone with something to contribute or with the desire to learn is welcome and invited to join.

Continuing on our theme from last week of Silicon Valley becoming a media capital, Robert Young over at GigaOm speculates that Google might soon cut its own distribution deals:

The parallels between an existing media company’s business model and the one that Google is pursuing are pretty strikingly similar, aren’t they? And as you click down further, you start to wonder what will stop Google from eventually going directly to the Bruckheimers of the world, cutting out the broadcast networks as middlemen?

Tom Evslin points out that the bandwidth crunch isn’t necessarily in the last-mile to our houses:

But wait, you say, my Internet connection already comes into my house on my cable.  And so do all 200 channels.  So I’ve already got enough bandwidth.  You’re right; you do.  It just has to be rearranged a little.  And remember, you’re not even gonna need to bring in 200 channels at once, just the ones you’re actually watching. Maybe you should get a rebate.

His argument is that the real network crunch is further up the chain, back at the telecom end.