Sundance Film Festival

Just attended a panel on one of today’s seriously hot topics–the evolution and monetization of content over the internet. The panel fielded industry big-hitters Netflix’s Ted Sarandos, Veoh.com’s Dmitry Shapiro, Joost.com’s Mike Volpi, and the NBC Universal/NewsCorp private beta venture Hulu.com’s Jason Kilar, as well as MPAA’s Dan Glickman, Phil Lelyveld formerly with Disney, and MTV Networks/Comedy Central/South Park Studios Digital Media representative Erik Flanagan.

The discussion was moderated in a humorous, yet no-holds-barred manner by Kara Swisher of The Wall Street Journal and AllThingsD.com–attendees included Quincy Smith of CBS Digital, a retired exec of AOL, a major Facebook investor, and actress Jane Lynch from The 40 Year Old Virgin and Best in Show and Sundance ‘08 film Adventures of Power.

The entire discussion was highly insightful, but here are some of the highlights (in no particular order):

Dan Glickman says the MPAA is playing both offense and defense on the matter of online content distribution. The defense is protecting the intellectual property of the artists while still utilizing the new media the consumers are flocking to. Their offense is the fact that studios are cutting big deals with online distributors–which he says is a top priority as consumers shift the paradigm from the studios deciding what/when/where/how content will be viewed to the point where now the content is consumed in whatever way the consumer decides.

Dmitri Shapiro finds the big challenge for his company is creating a new “hyper-aggregator” in which to aggregate content from all the current aggregators. In this structure, users create profiles which will essentially become a “recommendation engine” that then delivers the right content to the right people at the right time.

As far as the cost of producing online content, or content repurposed on the internet, Erik Flanagan states that the current budgetary lines in the studios doesn’t allocate assets for the online content reproduction and distribution. This may change, starting with Comedy Central who has invested nearly $3 million over the past 2 years for online content creation and delivery. Mike Volpi added that current production costs need to move to an online cost model–one which less production overhead is involved.

Ted Sarandos says the monumental challenge for online content distributors is streaming–online distribution is all about consumer access and current broadband constraints in the U.S. are holding users back.

An interesting note on when viewers are consuming online video content, Dmitri Shapiro says veoh.com has seen 30 million hours of programming consumed and 40% of it was during network Prime Time. He notes that the new generation of viewers is not just sitting in front of the boob tube and vegging out, rather, the TV set may be on, but they’re also in front of computer watching different videos, perusing online sites, etc.

On Distribution:

Jason Kilar says that hulu.com will have an embeddable player for people to put on their own personal web pages, but has also secured deals to possibly add the player to mass outlets like Yahoo! and AOL. He says that this type of embeddable content is the best way to protect the not only the content itself, but also the advertising since the video all remains housed on the hulu.com site.

Dmitri Shaprio added that such free-flow of content via embeddable players would eliminate the need for piracy.

What’s to come?

The panelists said there are three monetization models we can expect: paid download, ad supported content, and premium subscription–all of which are currently established.

Ad supported content is the model they see as the most important with the largest upside for the future of content delivery stating that last year theatrical releases equaled $10 billion whereas network TV grossed profits multiple times that amount. Thus, look for more of that type of model to be refined for the Web as not everyone wishes to pay for content.

Erik Flanagan sees viral distribution (hyper syndication) will be the most important model for content awareness, which could drive revenues. Clips posted to various pages, like myspace, youtube and facebook has provided important measures for the success of online and even offline content.

Dmitri Shapiro added that personalization models (like the “recommendation engine”) will target the best content and most suitable advertising to online content viewers (similar to a video version of google adsense).

The panel listed the most powerful/important/influential companies currently running today in the market are: Google/YouTube, Bittorrent (due to the possibility of HD delivery and higher quality viewing experiences), and FaceBook.

Bandwidth was a big talking point, with Kara Swisher noting that the U.S. government has failed us here–telling a story about a Korean interviewee telling her “The U.S. is in the third world regarding bandwidth, I’m sorry about that,” and then noting that our current state of the internet is similar to the government saying “dirt roads are perfect for a national highway system.”

Netflix’s secret to no-buffer online streaming for feature films under current bandwidth constraints? Each film is broken up into 4 different encodes while the site reads your connection speed, pre-determining the best type of encoding to provide the flick to your monitor without buffer.

All agreed that bandwidth needed to be upgraded to satisfy perceived future demand.

Another trend the panel noted was that they believe Content Delivery Networks (CDN) for ISP’s will drastically drop in price over the next few years, using Panther and Bit Gravity as examples. But, they also said that CDN hosting is currently dropping as a necessary service as they all start hosting content themselves.