Web 2.0 Podcast: Disruption Opportunity - Broadcast

by Daniel H. Steinberg

Web 2.0 Summit program chair John Battelle moderated a panel about the disruption opportunity in broadcasting. His panelists were Beth Comstock, president of Digital Media and Marketing Development for NBC Universal, Blake Krikorian cofounder of Sling Media, and Jason Zajac, GM of Social Media at Yahoo!.

You can download the audio as an mp3 or download the video as an mp4, or you can subscribe to the audio podcast or to the video podcast. Check out the entire set of Web 2.0 Summit podcasts.

Intel Software Network Intel Software Partner Program

This episode is sponsored by the Intel Software Network.

Transcript created by Casting Words.

Announcer: Web 2.0 summit program chair John Battelle moderated a panel about the disruption opportunity in broadcasting. His panelists were Beth Comstock, president of digital media and marketing development for NBC, Blake Krikorian, CEO and founder of Sling Media, and Jason Zajac, the GM of social media at Yahoo. Here's the broadcasting panel with Web 2.0 summit program chair John Battelle.
John Battelle: Beth Comstock, the president of Digital Media and market development for NBC. Beth, Come on out. Blake Krekorian, the CEO and founder of Sling Media. And Jason Zajac. Did I get that right Jason? All right. The GM of social media at yahoo, which includes, of course, Yahoo video. Welcome. You guys need to get comfy or whatever makes you comfy.
Blake Krikorian: I thought these chairs were for like a Jerry Springer episode.
John: C'mon you guys, get friendly. We're all pals here. For goodness sake. So, the title of this is disruption and opportunity and the reason that I wanted, in particular, the two of you to come, was that you represent probably the leading edge thinking of a very large, significant player in traditional media company with entertainment businesses and massive distribution and so on and so forth. And you represent a guy who wanted to see a baseball game in another city. So between the two of them, I just very curiously, want to start with you, Beth. What was the response inside the offices of NBC the first time the Sling Box showed up? Was is generally positive, or generally Negative?
Beth Comstock: Probably a little of both.
John: A little of both?
Beth: A little of both. I think it's exciting technology, you can't help but look at it and go 'wow, this is exciting.' It serves a really exciting niche, and we're all about we'd love consumers to have our content any way they can get it. So, I mean, that's exciting. The, 'Oh my gosh, ' is how do we get our head around the rights issues? You know, how do we understand who has a right to redistribute our content? And so those are some of the conflicts that we have to work through. It's early we're all learning. I think that's...
John: The one thing you didn't do, as far as I understand, is you didn't send out a cease and desist. Is that right, Blake? You haven't, did you? Is it quiet? Oh, we don't know about it? Are we discovering something for the first time?
Blake: We have not received any cease and desist. We've received one nasty letter from a company. When six months...
John: From a company?
Blake: From a company before we launched.
John: What company was that?
Blake: No comment.
John: Oh, come on.
Blake: It was a large TV network. It was...
John: Well it really only gives us four choices. We'll leave it at that. A 25% chance it might have been Beth.
Blake: It actually was a nice letter and it actually was not commenting on any copy - if I remember - not commenting on any copyright. There was no copyright statement. They were waiting to hear about the Grokster case. And then also, just bringing to our attention some of the challenges, actually, that it imposed on this network. Which was stuff we already knew, but it was, coming from Silicon Valley, I think, it was probably not a bad assumption that the Silicon Valley guys don't get it. Just looking at it and trying to help us understand what the challenges were. But, besides that, we really haven't had much issues at all.
John: Right, right, OK.
Blake: People have to get their arms around a lot of this and what ends up happening quite a bit is as soon as a new product comes out, it's good to have forward thinking folks in these companies. Because you have a tremendous asset. And a tremendous existing business. A new product comes around that's so empowering to a consumer like the Sling Box is, and it's very easy to have an immediate knee-jerk reaction to say, this must be bad. Consumers love it, it must be bad. And so a lot of times I think we all find it takes some time for people to even understand what the heck it is.
John: Right.
Blake: And then start to understand what the heck it means to their business.
John: Right.
Blake: and there are a lot of knee jerk reactions early on. But that's about it.
John: Jason, now Yahoo and Video first of all you have a pretty significant presence in the video business, right?
Jason Zajac: Yeah.
John: How come we don't know more about that?
Jason: Sure, well I think that a lot of people certainly know about it. It's interesting, Yahoo video dating back to both the acquisition to which was and remains one of the largest providers of...
John: By the way that's your responsibility for making Mark Cuban, you understand that?
Jason: For making him what he is today. And I think, so that capability's there whether its huge live events like NASA shuttle launches, certainly one of the largest simultaneous streaming events on the web, powered by Yahoo. But also I think because Yahoo has always believed that the goal is to sort of put the media in context. So in other words, if you are in Yahoo music, there's video there. If you're in yahoo news, in yahoo sports, yahoo finance has a rich sort of collection of video there. The goal is to give the users the content that they want in sort of the richest most engaging way, in the context that they've chosen. So they've told you I'm interested in sports, I'm interested in TV, I'm interested in movies. And without sort of taking them out of there and sending them to, say, a central destination which is the only place on the network you can get the video, we actually allow them to consume it, and our goal is to make it as seamless an experience as possible. And so, I think for a long time that served us very well. People felt they came to Yahoo, they went to the portion of the network they wanted to, and the content was there in all the different formats. Obviously as there's been also a lot of visibility about a new form of a video destination where you go to one place and you get all the video no matter what it's about, it's made the apples to apples comparisons more challenging. But I still think whether you look at, choose your favorite market research report com score in the last few months it's started doing a really nice aggregated look at Yahoo and all the video on Yahoo, and I think it sort of confirms there's as many people consuming as much video on Yahoo as there is anywhere else on the web.
John: Well let's talk about anywhere else on the web for a second.
Jason: Sure. AOL, Microsoft.
John: Do you wish you'd bought YouTube?
Jason: Do I wish I'd bought YouTube, or does Yahoo wish Yahoo bought YouTube? I think Yahoo has a great corporate development group in discussions usually aware of when any asset is available or potentially in play. And I'm sure they thought about it. And in general the key questions are always I actually spent a year in the corp. dev. group before I took over the social media group. And it's always about the complementarity of the assets. Do you partner? And we partner very aggressively with content owners, with distribution, whether it's the mobile guys, the set-top-box guys. In this case there were certain assets that were certainly interesting in terms of audience and engagement, and there were other elements of their business model that we thought maybe weren't such a good fit for Yahoo. So I don't know necessarily where that calculus came out, but I think we're always looking and looking for businesses that are consistent with the direction we're heading and that serve the audience that yahoo has, the best way.
John: So, Beth, let me ask you. Was there ever a discussion in the executive switch, NBC, perhaps requiring this disruptive company, YouTube, might be to the benefit of your company?
Beth: We had a lot of discussion about YouTube but there was never really any discussion that we should be requiring it. And it's fascinating. We're looking at what it has done for video in the past year. It has really brought video to the forefront. It showed there was community around video. We're learning a lot from that so we are getting excited about it. With respect to the same discussion we were having before, meaning there are also issues about rights and video that's out there but I don't know that YouTube would have found the right place with us.
John: The next thing I want to ask you is "the right place with us." There is a line of thinking which I think is probably in this room that there really was only one place that could have bought YouTube. And that was a good one, the reason being that, unlike Yahoo or NBC or a lot of other companies (IC, News Corp. and NN) they really have no aspirations to be a content production companies and therefore competitive to you. Had you purchased YouTube, it's quite possible you would have purchased an awful lot of lawsuits from the other four or five major media companies because they see you as, perhaps, being preferential in your use of your content on the YouTube's distribution system you have purchased. Did you buy into that line of reasoning and has there been anybody showing up at your doorstep from Google with a big check book lately?
Beth: There have been lots of people showing up at our doorsteps, but they show up all the time, and when they show up with check books we are always happy to see them [laughter]. That's part of our challenges to try and get an understanding of real content that's worth something and worth a lot in the marketplace, but no specific big checks that we can talk about at this point, that are real.
John: But do you expect that at some point you will get a visit from Santa Claus... in the form of Eric Schmidt? [laughter]
Beth: I don't know. I expect to see all the folks coming in. As I said, we've got content and we value and we would like to be able to find the right place for them.
John: So, in a way, YouTube is a distribution system not unlike Comcasters or something like that and if your stuff is going to be there, you are expecting to get paid.
Beth: That's it.
John: Absolutely. Good, it's clear now. But it was in no way set aside as part of that $1.65 billion launch.
Jason: Sure.
John: Wait, we'll settle that. What's your view of YouTube actually? Because you were an innovator in the same space. Be honest!
Jason: They are a bunch of good guys but sometimes I'm not sure if they fully had the whole thing baked out when turned into a business plan, but that's OK. It's actually interesting that it's actually a lot harder to build a company that you can sell for over a billion dollars if you actually have the business plan. So, if you want to sell for a billion, it's probably not a good idea to have a business plan [laughter] [applaud]. It's true! I mean, it's not the same as YouTube, either. I think it's actually true.
John: Do you have a business plan?
Jason: Yeah, we do! [laughter] We are not worth nine hundred million dollars. It's a billion dollar market cap, meaning that you have to be thrown off at nine hundreds of millions of dollars at minimal. I think one of the issues of me, just me, being an armchair quarterback, looking at me from the artist's perspective who's spending a lot of time in building a lot of the close relationships with the media companies, I do believe that certainly there's a differentiator when different content is in different locations, but as soon as everybody has the same content the value is going to be in how it's packaged, how it's presented, and there is a value in aggregation and presentation. If there was any challenges that kind of get a little bit ahead on that front, that feeling with the content, it is that clearly there were things there that were not being approved, people work stealing content and posting it up there. It's a risky thing if you are a company, not from the legal perspective but from the political perspective and the relationships that a company like that is trying to build. To go and make a move like that, it could really hurt your image a lot.
John: Another thing, to make sure that I'm understanding. For Yahoo to purchase YouTube, given its current approach to video, which is to have deals with companies like NBC, would have been eventually seen as a slap in the face.
Jason: Absolutely! It's a pretty gutsy move! The real funny thing is that how the UGC is to generate content. But, guys, come not, let's not kid ourselves. Let's not kid ourselves. The traffic was about watching copyrighted material -- period. End of story. That what was all about. And everyone else trying to build new businesses talking about user generated content, please, stop and think about that for a second. User generated content can be very very compelling, but it's not necessarily a billion dollar business.
John: [pause] I just want to let that sink in...

Now, Beth, I want to ask you another question. From YouTube we'll go to Google. Are you comfortable with Google?
Jason: Yeah!
Beth: Yeah! I think Google represents some really interesting opportunities and it's not quite where they're going to go, but I think in terms of what they are doing to the marketplace from an advertising perspective, the efficiency that they are bringing to the marketplace, is awesome. It's incredible. We all have a lot to learn and it's great! I come to this from a marketer's perspective, I think that's very very exciting. I think when I look at the approach, the algorithms, the way of creating a marketplace, sometimes you can't quite put a value on experiences. So that's the part I think is going to be a challenge for a company like Google.
John: Google has made no secret of its desire to sell as much advertising as possible and it has moved recently into the kind of advertising that your company sells a lot of: broadcast, video advertising, display advertising, radio. You mast see that as a competitive threat.
Beth: ...that I love the efficiency of it. I think that's great for the marketplace -- to create some open, transparency to the marketplace. If the market's really great, it should help drive the premium content. It should find its right price. That, we feel really excited about.
John: That's a very good point.
Beth: But it is that experience piece -- you contemplate that. And that's a different kind of piece.
John: Jason... pop quiz: what company is the largest seller of display advertising in the world, on the web?
Jason: Yahoo!
John: So, how do you feel about Google getting into that business? And obviously you are selling video advertising as well, as are they, but you are doing it in different ways.
Jason: I think that the distinctions that were made all along between performance advertising versus sponsored search versus display versus video... the reality is advertising and marketing is the process of trying to match a consumer with an offer and a need, and there is always been different kinds of advertisers that have gravitated to folks who were initially the big buyers of sponsored search, now by display advertising and the branded guys have come in to the sponsored business.

I think the reality is that it's our role at Yahoo and at Google, at anyone who wants to be a intermediary between consumers and advertisers to be as efficient as possible.

And I think the difference is we really tend to converge over time. So absolutely they are a core competitor, it's always been sort of the flip side of Yahoo's core competency in packaging for the consumer and also sort packaging and targeting for the advertiser and that is the way we describe our business which is provider of services for consumers and advertisers.
John: Your model as I understand it, and I don't have a slingbox yet because I can't get my Comcast HD to work alone much less with another box. But your model as I understand it is subscription, right? or I buy the box and then it works?
Jason: No. We sell the box.
John: You sell the box and that's it. Are you ever going to have that box report back to headquarters to tell you what I'm and then target advertising based on that?
Jason: I think there are a lot of different avenues for us. First of our business model right now is one where, it's actually starting to change, is where we made it really simple first. Let's make a product that we can make a decent margin on, hopefully the consumers will love it and they'll buy it, and I don't want to start wrapping $200 dollars around every single box and making it up in volume later and all those kind of funny tricks you can play.

So our model to date has been pretty straightforward. Selling the box for a margin, giving unlimited PC clients for sling players that if you wanted to watch your TV on your PC and we're actually selling the mobile client for a Treo or Motorola Q phone for $29 dollar software download, but we just signed some of our very first deals with some Pay TV operators outside of the US, no surprise, they are a little bit more progressive, and we also about to announce a pretty interesting deal with a big mobile operator. And you can very easily see the model change around where Hey get your, whatever it might be, get your DirecTV anywhere or Echostar anywhere or your Comcast anywhere type of service.

The slingbox is actually provided as a service so the model can actually change. Now on the advertising side it is kind interesting and it's been some things that we have explored over the course of time. I just want to make sure that we are delivering these great consumer experiences, I don't want to start throwing up banners and everything all over the place. But there is potentially some ways to make really If you see what we are doing we were always talking for years about bringing the web to the television and it never quite happened, and we actually just did is take your familiar type television and bring it over to the web. And so the opportunity to make that even a richer more engaging experience, stuff that we've talked about for twenty years on the interactive television, there are some interesting possibilities that we can do on that side and here is where I think it can start being a fantastic thing for content owners and for networks.

Because there is really two things, one is, when people are using the slingbox and we didn't even quite realize this until we looked into it, we are actually from a television ratings perspective a net add. So if I am sitting in Bangkok watching my local channel five news and I was a Nielsen measured household and my set top box got tuned to channel five then actually channel five is getting credit for my views. So we found that a lot of networks have seen that as a opportunity but also advertisers have seen it as an opportunity.
John: Have you given all the Nielsen households slingboxes?
Jason: I wish we could, I wish we could stack the deck, that would nice. But advertising is possible but I think we'd need to change our business model.
John: To put myself in your shoes, I'd get a little nervous about the idea that Blake is making money on your stream, right? This is an ongoing debate as the web sort of mixes and remixes, with RSS for example it's the same kind of thing. Someone streaming a full text feed, someone else puts a window around it and then makes money around it, shouldn't they be paying you for that privilege a little bit?
Beth: They should be, yeah.
John: You guys are going to work it out right?
Beth: We are going to work it out.
Jason: And if there are additional monetization opportunities like people should share, nothing wrong with a little bit of sharing here and there.


As long as we get the most...
John: I'm pro sharing. You guys, there are microphones set up so please come up to them so that I can pick you out.
Jason: Look one thing at the end of the day that I would really like to prove is that, it's looked at it seems like in this collective industry that it's either good for the consumer or it's good for the industry. It's like somehow this binary cleared line that's drawn and I think that's absolutely not true. In this day and age consumers want more flexibility and more and more empowerment that if you don't create products, it sounds so logical but it's seldom practiced, if you don't create products that deliver these great experiences you are never going to be successful. But just because make products that are fantastic experiences with consumers doesn't mean the industry has to suffer. You can actually build business and a market around it where everybody wins. And it's easier said than done but I think it's something that we want to try and prove.
Beth: And I think we couldn't agree more. I think you have to start with that great consumer experience, that's what it's all about. And if the industry isn't with the consumer, the industry isn't going to stick around. But if there aren't the economics the industry isn't going to be able to make the great content in the beginning, so that's the conundrum we have.
John: OK. I have a question for each of you, we'll get to you in a second. When we spoke on the phone you said you expected, and perhaps maybe you are expected to build your unit of NBC to over a billion dollars in revenue in two years and two months, by 2009. How are you going to do that? What do you think are going to be the one or two or three major revenue lines for you?
Beth: Well a couple things. Clearly the liberation in video and just the new opening of markets with video is a big boon to us.
John: And that includes Video on demand.
Beth: Video on demand, it includes video on your iPod. It includes sort of the consumer pull.

Wireless we see as taking of and just broadband. I mean we see broadband as really growing, direct to consumer on broadband and also advertising on broadband. So I would say it's fueled by those key buckets.
John: Great. And Jason where do you think you are going to? I mean in two to three years, as Blake mentioned, is the market going to catch up to your approach so to speak? Or do you think there are other approaches you might take?
Jason: Yeah, But I think in addition to just the distribution of increasingly rich content throughout the Yahoo network, the other side of the equation and the other piece of our group, the one that sort of gives it it's social media name, the social part, is more the true user generated content.

Which is the personal and the enthusiast part. So between Flickr which obviously started out in photos and there is reason to imagine that it wouldn't grow sort of continuously richer in media, and Jumpcut which is another company that Yahoo acquired that is very much in the true user generated content, people do not upload the whole contents of their TiVo to Jumpcut, they actually come to create video content. And the way we really describe it is that we provide the tools and the platform for people to connect or for communities that are already formed to sort of share their connections and their passions through video or through photos in the case of Flickr.

And that I think just as you've seen, whether it's with blogs in terms of text or digital photography in the photo area, video is going to become a more and more mainstream way for people to connect for equal to share. Again, I am very much the private friends and family side of things or kind the enthusiast where there are their clubs or they are sort of people who are not out just sort of making money with their first sort of film school effort to put out to sort find out other people who are interested in similar genres and I think the tools there and it may not be advertised because of the sort of implications from the experience but the tools to do that right and Flickr is a great example. The rates of growth can be seem in the engagement I think are really going to create a very large and deep engage communities which there is always a way...
John: And, and this is exactly why you...because you consider it a tool to allow the...
Jason: Yeah a Flickr like tool and it has seen you know a sort of tremendous engagement from content donors like Fox Atomic that have created an entire site, it's an independent film studio part of fox... an entire site that allows people to kind engage with their film properties, remix, edit them, the Doritos campaign we are doing where there is a chance for people to create their own commercials the winner put it on air during Super Bowl and I think you know for advertisers and you are talking about the ability to create unique commercials not a just 30 seconds pre-rollers in front of what may be 15 seconds video, right...
John: Well, lets hope the 30 seconds pre-rolls has a short...
Jason: Yeah, but instead it's a very interesting sort of take on the model where advertisers actually provide content that consumer can take engagement in their own way and if you measure time spent in that kind of advertisement environment versus the fact 99% people never even see the banners on the page, in a conscious way, it's really is an opportunity as focused on as we are in the traditional broadcasting.
John: Quick question for you because I want to get this guy. I am a big fan of TiVo and, but, increasingly less so because TiVo I think got kind bullied in lobby and almost legislated and sort of threatened into not being what really wanted to be when it grew up, I believe. Do you fear that?
Jason: Oh yeah, any time you are dealing with a very large entrenched players who sort of act as gatekeeper between you know, you as a technology company, a product company and consumer and basic monopolies. It's always a scary thing. I mean I think there are a lot of things to be learned from TiVo's perspective. Not that I wanted to make the same mistakes, but you know there is always a series and look, the end of day they make quite a lot money for their investors. They've been successful from the standpoint, they've been changing landscape and entertain people so lot of people are talking about they are a failure now is sort of funny. But you know, there is couple things just we just have to keep remembering ourselves and one of them is not to be religious. Because lot of times as you look convergence one thing something is a product and the next moment it's a feature and something else and if you all a sudden to believe that you are the platform and you have this religious feeling, and you just... you know, curtain off the rest of the world, that's a problem and I think sometimes may be have some kind of religious issues there. I think in terms of you know people wanting to work with us and partner with us and wants our technology whatever we have to embrace it.
John: Great, Great. OK, we have a question over here?
Ben Schachter: Ben Schachter from UBS. Question about how Yahoo works with the video but really really to the question of syndicating copyright issues. So when you are on Yahoo video often in times it points you to another site says "Here is a still image but this video is housed somewhere else" and then you watch it. But you go to YouTube and they actually show the video and then if John wants to put up a video on search blog you can put up a video that's actually housed at YouTube but showing through his site. So, how do you think the issue resolve around copyright issue if John makes money off of having that copyrighted video on his site and money went from advertiser from Google to John, who's responsible and how do some of these issues play out?
Jason: So there are couple of different comments and questions there I think what you described first and just for clarify folks, there are at least two very different experiences on Yahoo Video. Yahoo Video started out as Yahoo Video Search which crawls web which as index of tens of millions of videos just like a web search index has in billions of web pages. So when you get that experience when you points out that's just part of our search franchise in the value we offer to sort of help people to discover information anywhere one the web. That's what that's doing, it's pointing you off to some body else's site and just providing discovery. We also allow just as YouTube does and we have tens of thousands of people uploading hundreds of thousands of video clips directly to Yahoo Video and those are also displayed basically in parallel with the search results. When we launch the upload feature, it was completely open programming. The goal is to be as comprehensive as possible and if you did search for Tiger Woods you might get the clip on ESPN. On ESPN site that we point you to you also might get a clip that some one caught you know...outside the gates of the British Open and they happen to be chatting with them and captured on their Treo. So our goal is to provide access to the widest range of video.

In terms of...the second part of your question which is how does the syndication model work. I think you know again, that's a great question, you can do the same thing on YouTube, Google Video or Yahoo Video and embed those videos on other people's blogs and if you read the terms of service they are pretty much virtually identical on any which is when you as a user upload your content to any of those sites, you give the site the right to syndicate your content out there with no explicit commercial relationship. I think in some cases, publishers who feel that they have a brand and they deserve to be compensated negotiate something outside the normal use term of service and don't allow that kind of embedding or syndication.
John: That brings us right back to that Santa Claus visit. Really, at the end of day that stuff is going to be available on the web... how you choose to monetize, whether or not you allow it to be on YouTube or on Yahoo Video or...
Jason: And certainly there are plenty of sites you know Yahoo and Google both do it in terms of syndicating search ads along with search results generated from third party sites. Sites like Rev or others insert an ad in user uploaded video such that even when it's syndicated to a third party site the revenue gets tracked back and split three ways between the publisher, the syndicator and the original uploader. So I think you'll see a lot of theses like kind of multi-level affiliate relationships through out the web.

One thing I just hope for you know is that as we move to this new era there is going to be jockeying for position in terms who become sort of that aggregator you know, of the internet whether it's a Google or Yahoo or Microsoft or you know piddly company, you know other little companies like us. I hope that we don't live through the same mistakes happened in the past which stifled innovation, creating some form of monopoly. Where the big companies are coming in and hopefully they don't just all have the same content that is available through multiple outlets so there is more and more innovation.
John: Are you saying you are worrying a little bit about...
Jason: I am worried there are some companies coming who I can write some pretty big checks and they can start to...
John: Do you want to name any of them?
Jason: No. [laughter]

Daniel H. Steinberg is the editor for the new series of Mac Developer titles for the Pragmatic Programmers. He writes feature articles for Apple's ADC web site and is a regular contributor to Mac Devcenter. He has presented at Apple's Worldwide Developer Conference, MacWorld, MacHack and other Mac developer conferences.