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NEW YORK—If you listen to the people tasked with building new ways to market and deliver digital content to consumers, theyll tell you that were on the cusp of a multimedia revolution.
With Apple Computer Inc. selling network TV shows on iTunes, Verizon Communications Inc. launching its fiber optic television service, and Microsoft Corp. partnering with MTV Networks Co. to push music video downloads to Xbox gamers, theres no question that media convergence is entering a formative era. But even the most optimistic experts gathered at the DigitalLife conference here this week conceded that many questions remain regarding the delivery and business models needed to make these services user friendly and profitable.
Despite the many promising flavors of these digital content services, which offer to deliver on the long-held vision of entertainment available to consumers nearly anywhere they choose to look for it, executives from companies providing the infrastructure, hardware and broadcast networks on which the materials will be programmed said theres still a lot of ground to be covered.
If theres a sensible place to begin examining the issues digital content providers must address, the physical bandwidth needed to beam all these various services into peoples homes seems to be a logical jumping off point. According to Nick Lehman, senior vice president of strategy and operations for MTV Networks Digital and Music Media Group, the more bandwidth that becomes available, the more opportunities companies such as his will have to create sophisticated multimedia offerings.
“Really what we need is unlimited broadband access, but for now, programs will expand to fit the available networks,” said Lehman. “You cant put a 30-minute television program on a cell phone yet, so we have to play to the available platforms and tailor services to the bandwidth and devices that make the most sense.”
Jeff Klugman, senior vice president at digital video recorder maker TiVo Inc., agreed that content providers must focus on tapping into the network capabilities currently available to large numbers of consumers, and not get too caught up in building futuristic delivery services.
“Consumers want to think about their favorite shows, not whether theyre delivered via a broadcast network or broadband,” he said. “Given the constraints of bandwidth today, [the challenge is] really just about making these new services available.”
Marilyn OConnell, senior vice president of the Video Solutions Group at Verizon, said that there will be a demand for many different types of content delivery models that exercise the latest capabilities provided by carriers such as her firm. By tapping into the available networks, service providers will give themselves a better shot at succeeding, she said.
“No one is saying that niche content and network TV cant coexist,” said OConnell. “We just need to figure out ways to provide a variety of multimedia offerings that suit all the facets of delivery that are already available.”
Another significant obstacle that programmers will have to tackle, said experts, will be in creating advertising applications that allow consumers to purchase and view digital content at their leisure, while creating an attractive enough value proposition to persuade companies to buy those ads.
According to Jim Funk, vice president of marketing for streaming media software provider Akimbo Systems Inc., content programmers should look to the development of successful online advertising models by companies such as search giant Google Inc. to get their cues for creating new ways to package content with ads.
Googles AdWords program, which encourages companies to bid on ad placement by purchasing particular search engine keywords, is widely considered an innovative leader in the online advertising space. The contextual ads generated by the companys Gmail online e-mail client is another groundbreaking, yet controversial, platform.
Next Page: Directing ads to the right users.
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To MTVs Lehman, the challenge wont be so much persuading marketers to spend dollars on emerging advertising platforms, but more about figuring out ways to direct those ads at just the right users.
“The demand for marketing wont go away just because people consume things in different ways,” he said. “We, as an industry, need to find ways to help marketers do what they want, and reach even more targeted audiences than they have in the past.”
The experts agreed that another sizable detail yet to be ironed out around new content delivery services is making the hardware needed to view emerging services as affordable as possible. For instance, even though Microsoft is readying its new Xbox 360 video game consoles for sale at $299, the company will offset that cost by bundling free access to its Xbox Live service, through which consumers can download many different types of media and interact with other people online. Access to Live currently requires a $49.99 annual subscription.
TiVos Klugman said his company is looking at ways to make its own hardware less expensive to spur more widespread adoption of the devices. A base TiVo DVR retails for roughly $50, while pricier models go for as much as $200. By comparison, TiVos monthly service, which allows users to record and replay TV broadcasts and download other content, is available for only $12.95 per month.
“Were working hard to eliminate the box cost because we know that we need to move in that direction to grow the services business,” Klugman said. “Its all about what the consumer is willing to pay to get the multimedia services; we know that this is the most important issue we face.”