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10/6/2008
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Contentonomics: HD Video Will Take Off When Its Business Model Works

With fast Internet connectivity, broadcasters have been reluctant to put video, particularly HD video, online, a panel of industry digital broadcasters suggests.

Worries that the Internet will collapse as demand for high-definition video surpasses available bandwidth are exaggerated. In fact, the technological problems that have dampened the market for HD video are being solved.

The most pressing issue now is coming up with the right business model.

That was more or less the consensus of a panel of content infrastructure company executives at the Contentonomics conference in Los Angeles on Monday afternoon. "The future of the Internet is happening right now in Tokyo," said Kelly Egan, VP of business development for Swarmcast, a streaming services provider.

In Tokyo, the Internet runs fast. The fear has been that, given sufficiently fast Internet connectivity, viewers could abandon traditional viewing platforms and watch everything online. Thus, broadcasters have been reluctant to put video, particularly HD video, online. But as Egan tells it, those fears are overblown. "There's no cannibalization problem [in Tokyo]; the business models have worked themselves out," he said.

The biggest issue "is demand and figuring out how the ad dollars flow," said Egan.

To be sure, technical issues remain. That's why many of the panelists' companies exist, to make video flow faster online. But the technical challenges are being overcome, making it easier for media companies to deliver a compelling HD video experience. That's appealing to advertisers because HD video tends to be more engaging than standard video.

"There's a ton of capacity out there and there're a lot of people trying to make it more efficient," said James Segil, president and co-founder of EdgeCast, a global content delivery network. As Segil sees it, it all comes down to revenue. Even the largest video sites today, he said, are not making a profit off of video.

The last mile -- the constrained capacity pipes that connect consumers to service providers' high-speed networks -- remains an obstacle to HD adoption. It's much harder to get people to watch HD video if there's a download delay. Egan likened it to pushing a rock down a straw.

"The last mile is still an issue for our customers," said Marty Roberts, VP of marketing for thePlatform, a video management and publishing services company. "Making sure consumers, wherever they are, get a good experience out of that HD is paramount."

Roberts said the business model is sorting itself out. And, he observed, that things look particularly promising among cable companies -- thePlatform is owned by Comcast. With the switch from analog to digital broadcasting next year, cable companies will free up 50% more bandwidth in the cable pipe and 25% more when they move to switched video, he said.

In other words, the capacity for HD video will be there. What content providers have to nurture is consumer demand and a business model to deliver it.

As Perry Wu, co-founder and CEO of content distribution network BitGravity put it, "We have to get to a world where there's a revenue model."

To read more about Contentonomics, go to Contentinople.com.

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