As part of our wrap up of 2013 the boys in the office asked me to write a commentary on trends we are seeing and what their impact is going to be in the coming year. The singular benefit of being middle-aged is that you get to see and experience cycles over decades. I know I bore my colleagues in the office when we fire up a Smart TV or Roku and watch our programming flow flawlessly into our channel over the office Wi-Fi. But when we started Baeble, our first video stream was in a small computer window streaming at 200 kbps. Today we deliver content to your phone, tablet, desktop, and TV in full HD at what nearly amounts to broadcast quality. You can imagine my excitement!
Clarity – What does Baeble do?
We get asked this all of the time. The short, yet inaccurate answer is we are in the music business. That satisfies most people...especially those who go on to pitch that friend of theirs in that REALLY GREAT band we should be paying more attention to. It doesn't satisfy us. One amusing factoid I recently ran across suggests the global recorded music business is roughly the same size as the sex toy industry...both of which bring in roughly $16 billion in annual revenue. Which of these industries do you think has gone limp over the past decade and a half, down from $34 billion? There will always be a market for fuzzy handcuffs. We are in the business of creating a top-quality curated library of original music video programming and building branded distribution around it. We knew seven years ago the macro trends (again, the benefit of now qualifying for my $16/year AARP membership) were in our favor (see below), having seen what the web / digital distribution did for the photography industry. You can't pay to be on Baeble and you can't upload your video. You have to be selected...and we've gotten pretty good at it.
Trend # 1 – Smart Televisions
As someone who first experienced television via a black and white block that picked up all of three channels, I constantly marvel at this phenomenon. Instead of grabbing a mass signal out of the air, today I am curating my own programing from a local one. Of course the reality is that the concept of a broadcast network has evolved. Thankfully the airwaves are still full of digital signals to pull into our homes for entertainment. Now, thanks to Smart TVs and devices like Roku, I can cast based on my specific tastes —which of course revolves around obsessive viewing of our own material on whatever device is handy.
This evolution has also thrown the media landscape into a massive free-for-all. Television manufactures are now competing with cable operators who all compete with Google and the rest of the internet. My head hurts just thinking about it. If I were the CEO of one of the major cable operators or media companies (they are mostly the same — 85 percent of your programming on cable is provided by five companies), I would be looking into my crystal ball daily. As much as I hated those zealots running around Silicon Alley in NYC in 1998, they were correct in their bombastic claims. The web has once again changed everything.
Who would have thought that lowly television manufacturers, with the expense of a few dollars in pre-installed microchips, would be able to transform themselves into global media companies, selecting and packaging television programming on a global basis? Sony, Samsung, LG and others are selling these TVs in virtually every major country in the world. As ever cheaper Smart TVs flood the global marketplace over the next few years, the manufacturers themselves will take advertising dollars from the cable providers and broadcast networks in every market, sharing the revenue with the programmers on their respective platforms. Then there are the vast hinterlands of the world where cable programming doesn't even exist. Smart TV consumption will become the de factor entertainment at the center of the home. From our perspective —in the "wow, who would've thought category" —we see usage of our applications in small towns across places like Russia and Poland. The truth is we thought this would happen...now it is.
In the US, the cable networks and operators are not going down without a fight...and they still have a major weapon in the fight: sports programing. If you tune into more than just the Super Bowl, you still need to pay for cable. The networks and sports franchises know this of course and the side effect is that licensing rights for this programming have headed for the moon. Spending $100 million per week to broadcast a frequently dull Monday Night Football game makes zero sense on an advertising basis...until you realize it's nothing more than a catalyst to bind millions of people to continue to pay for ESPN on a monthly basis.
But, for the stock pickers in the room, I recommend going long on companies like Samsung, as the numbers concerning what we are talking about are simply stunning. Globally, Samsung sells roughly 100 million televisions per year with an ever increasing portion of them being "Smart TVs". The programming on these types of platforms will drive Samsung into the global media elite, giving them the type of power that dwarfs the evil dreams of Elliot Carver in James Bond's Tomorrow Never Dies. With their lowly 20 million subscribers, Comcast can only dream of this kind of growth and influence.
Trend # 2 – Mobile
The media love to talk about mobile and how important it is. But there is an important point for us in the video business. Snap Chat, Twitter, Facebook and Instagram are mobile. Every teenager or twenty-something hurtling down the street intensely looking at their smart phone is looking at one of these applications. Actual video consumption on "mobile" is stationary and situational. You are waiting for a plane,;sitting in a doctor's office; pulling out your tablet or smart phone to catch up on an episode of House of Cards; connecting to someone else's Wi-Fi to avoid blowing up your phone's data plan.
Situational video consumption will continue to grow. My generation brought a newspaper or magazine to kill time. My kids watch video or play games in their downtime. Just last week, prior to having knee surgery, I brought along a Samsung (get the trend?) 10-inch tablet and passed pre-operative time while watching our videos with the pretty intake nurse, who happened to love our videos with Bear's Den and Mumford and Sons. "Daddy, can I watch Netflix?" makes my blood curdle when we are on a long drive somewhere. On our YouTube channel alone mobile viewing has increased over the prior year from 20 percent of all views to 30 percent, with most of the growth coming from viewing on tablets.
For us, mobile means the struggle for ubiquity. This type of situation viewing implies device hopping. Netflix has this nailed this challenge. You can start watching something on your phone, leave that device and wrap up watching on your Roku, Smart TV or Gaming platform later in the day with Netflix saving where you left off viewing for you. We aspire to be that good, but then again most of our programming is 15 to 30 minutes long, as opposed to 90 to 120. Chromecast is an interesting and potentially powerful way to broadly address the nomadic nature of situational video watching. Start on your tablet and then swipe it onto your Chromecast equipped television when you want to have a lean back experience or share what you are watching.
Wow, I have overstayed my welcome on this post. But for the few of you who are still reading, here are some of my favorite bands/songs/videos/moments of the year. You know, since we are a music company.
Rhye - "Open"
Dudes singing like girls and the raw sensuousness of the video keep me coming back to this track time and time again. If we didn't have that afternoon into evening, we dreamed of it.
Foals - "Late Night"
Though the video is dark and amazing, take a crack at this song alone. It is masterful.
I can't get enough of the drummer and his head moving about in our session. Also, who hasn't dreamed of occasionally killing people and burying them in the backyard? Not me...nope!
Talking to Crystal Fighters' Sebastian Pringle prior to our session, turning around a few moments later to find him rocking a beaded mumu that I swear he stole from my grandmother. I almost wet my pants, which would have been embarrassing.
Bear's Den performing "Pompeii" in the Baeble back yard. I almost cried over the loss of my mother, only to remember that she is very happily still alive in Philadelphia. The very best parts of our jobs are these magic moments.
During the last digital gold rush fifteen years ago Kodak went into the fray...the king of analog with a huge potential to own the future. Today, Kodak is gone. Who is going to be Kodak this time around?