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April 16, 2008

Keynote: Consumers, Content and Control – Big Media in the Digital Age

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Day 2 of Ad:Tech and it’s time for the first of three back to back keynotes. We’re running ten minutes late already. Um, they do know we don’t have a passing period, right? [Methinks they're trying to kill you. I hope you brought drugs today. - Lisa]

Anyway, today we begin with an interview with George Kliavkoff (NBC Universal). He’s going to talk with moderator Adam Lashinsky (Fortune Magazine) about fragmentation, distribution and consumer control. I don’t know what that means; I copied it out of the program guide.

First up, Drew Ianni is going to do some housekeeping. He wants to know how many people went to the parties. Not many by the applause. Those people are still sleeping. [I like overtired, snarky conference Susan. She's funny. - Lisa]

And now time for a commercial about the Olympics. All the many ways that I will be ignoring its existence: online, on your phone, on demand, on broadcast, on iTunes. Oh, hey, they’re during my birthday? Cool. Oh, and during SES San Jose but that’s not nearly as important.

Let’s get going. George goes over a few of the many, many things that NBC is into. His group is about centralizing from a digital perspective as well as a tactical perspective. He’s also responsible for doing search engine optimization for the sites that aren’t big enough to have their own separate SEO team yet.

In three to five years all those things that he’s centralizing right now will be big enough to stand on their own and his job will go away.

They’re in the process of starting a bunch of digital cable networks.

Metrics: Topline revenue company-wide is $1 billion. Up 40% from last year. The operating profit is up 50% year over year. They’re outperforming the market in some areas.

Pageviews for NBC.com is 17 million or 18 million for the last full fall season (pre-writer’s strike.) They’re changing from a Fall launch to a 52 week launch schedule, much more like cable so that there is always stuff launching.

Hulu is a joint venture between NewsCorp/NBC. They have the right to create a destination Web site that would go and get good content. They have distribution deals with several sites so that people can find the content where they want it. In terms of Hulu, their competition is anyone looking to take the consumer’s attention away from their site. They wanted to develop something that was good for the customer and good for the advertisers. He thinks it worked despite the general mocking reaction at the announcement because the two guys at the top from each of the companies involved were very passionate about it.

They have deals with 50 different content providers. George thinks it’s the best video experience on the Web. But then, he would.

The ad sales guys didn’t like it so much because they didn’t get to control what people saw and where they saw it. (Sales: Vertically and Horizontally, show and demographically)

They gave the Fox/NBC sales teams a first right to the inventory, they get it at a discount. It works great for Hulu sales because they get a good deal at no cost of sale.

They did 95% of their homework before they launched the site so things are running pretty smoothly.

What’s unique about Hulu ads? The content has fewer ads than the TV broadcast version, just one ad at a commercial break. They sell demographic and psychographic and genre, not brand. They give people the option of watching either one movie trailer pre-roll or 5 ads sprinkled through the program. That just came out of beta (500,000 people).

Hulu is the syndication strategy for NBC Universal.

The player allows you to take just a clip or the whole episode and embed it anywhere. So if you just want Michael Scott saying ‘That’s what she said’, you can do that. (Heh.) Depending on how long the clip is, you may or may not have ads embedded into that. They want to let people take the content, put it anywhere and use it. That was a ‘difficult’ conversation 18 months ago. (Heh, again) This is their viral strategy.

He sees Hulu as a shopping mall, lots of products, not much depth. NBC.com is the boutique, lots more depth, less products. They’re building widgets that can be propagated and borrowed across the Web.

Adam: How did it feel to give Steve Jobs the finger? (When they yanked NBC content from iTunes.)

He says that with any distribution partner except one, they get to set the wholesale price and it’s very hard to agree to a partner that says here’s your wholesale price and here’s the retail price and here’s what we’re giving you.

Adam: So you distribute films on iTunes. And NBC demands to set the wholesale price. Therefore?

George: Are you sure you weren’t a lawyer?

He says that they’re harmed every day by piracy. Adam asks if there are piracy problems in iTunes. George blames “leading mp3 players” with pirated content and says that if there is a way to manage that (again, no names given) and offer a legitimate

YouTube and NBC relationship?

He thinks it’s a great promotional vehicle. Right now he thinks that the demand looks a little high because there hasn’t been good quality professional video available online and that’s what he thinks people really want. They don’t have a distribution agreement with YouTube for full episodes.

Adam: How much theft is going on?

George: Much less and that’s to YouTube’s credit.

Adam: Is it thanks to Viacom?

George: No, I don’t think so. They’re doing what they’re doing and I think that incentives work better. The best defense is a good offense. It used to be at the end of SNL, YouTube had the content up. If we didn’t have an alternative for people to go to, there wasn’t much incentive for people to come to NBC/Hulu instead.

Adam: Has anyone made a distribution deal with YouTube that you know of?

George thinks that maybe a sports network has but he can’t think of anyone.

Right now they’re getting aggressively into putting video on mobile devices. They have distribution deals with every major carrier in the US. It hasn’t taken off yet though. Today Hulu doesn’t have mobile rights but that isn’t saying they never will.

It’s the screen that’s always with you and it’s very personal. If you want a song on iTunes you pay $.99. If you want a ten second clip to represent you, you pay $3.99 so that tells you a lot about how people view their phones. The other advantage is that while they have to train people that everything on the Internet isn’t free, people already know that everything on phones isn’t free.

They talk a bit about distributing auto video. DriverTV make videos on the cars and they get to use it in their auto network. They’re focusing on the top ten advertising categories to make digital networks about. They have so much endemic content that they can basically just repurpose existing content.

2200 live hours of programming on the Olympics. They partnered with Microsoft. There will be 3600 hours of on-demand content. You might not be able to see archery on NBC.com but you can find it on one of the other distribution channels. Advertising is being sold as a three part package.

Adam: What’s the feeling about the Tibet stuff?

It’s not appropriate for him to comment. He wants to focus on getting people to say ‘wow, that was a great digital/media experience’. Nicely dodged.

Question & Answer

How did you deal with the affiliate local TV stations when launching Hulu?

The thought was that this would cannibalize the local viewership but three studies were done and it showed that after an episode was viewed online, ratings went up the next week for the same show. So it was an easy conversation. What they don’t know is what having all this freely available on the Web will do to syndication.

Will you have more than one property per ad category?

We think about it like a network and there are often more than one channel per network. So yes, basically.

Are you happy with NBC direct?

It’s still in beta, you get downloads peer to peer. It’s an extension of NBC.com for them. You get a higher quality experience because it’s a download. It doesn’t really compete with Hulu except in the previously mentioned everyone competes with Hulu.

Okay, done. Quick turnover time.





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