Last week, the online video world rejoiced. For the first time, Hulu, the online premium video provider, had more viewers than Time Warner Cable subscribers. Pro online video folks all around gathered to support the revolution as it unfolds.

The only thing missing is, well, like in most cases, money. Hulu is making small time money compared to Time Warner Cable.

The paradigm of digital cents is very simple - services are much cheaper on the internet, and the value of goods is diminished when they are distributed or sold digitally. The full phrase states that the media industry is facing a challenge - as it transforms from analog dollars to digital cents. This issue is affecting advertisers who are asking agencies to shift dollars from expensive TV spots to cheaper online advertising, which in return hurts the media business.

Hulu, though delivering the same shows as TV channels, is not making as much money as the traditional providers. This is a major challenge to the whole media industry. But it is not alone.

The slow demise of the walled garden adds another pressure, to a different section of the value chain - the operators. The mobile market is a great example how technology is threatening the old world order. Early in this decade, when GPRS launched all over Europe, operators believed that the answer of their declining voice ARPU would come from selling content, such as ringtones and wallpapers.

The basis of this strategy was the operators controlled the availability of content to users - whatever an operator put on its portal could be sold - but nothing else. This way, by creating scarcity, the operators could gain revenues and control the subscriber's experience.

Then came Apple.

And Google.

And Nokia.

And all these companies decided to break operator's hegemony and tear down the garden's walls. Android, iPhone and Ovi challenge the mobile operator's ability to control the content and customer experience.

While media companies such as NBC and HBO don't have a choice but to be a part of the digital cents game, operators have some ways to leverage this market disruption to their advantage.

Services are, in my opinion, a key to change the cents to dollars. Some of them are clear but still not done well, such as three screen syncing - allowing users to start watching a show on their TV set and continue to watch it on their mobile phone.

Some are based on cutting deals with the devil - and tightly integrate web services with traditional TV content. Several companies unveiled such services, such as TV and Twitter integration.

And some are downright evil, such as disregarding net neutrality and providing differentiated quality of services to content providers, based on deals with preferred content providers.

If operators will succeed in finding the right services and implement them in the near future,  we might see that they will rise to play a more significant role in  the media industry.

How wrong can a YouTube competition get  http://bit.ly/cNKdd

Justin.tv becomes more social   http://bit.ly/1aKVNF

How can I share video on Twitter?   http://bit.ly/Jecii

Concrete news about Hulu's international expansion  http://bit.ly/18u7Aw

After long negotiations, ABC are becoming a stake holder in Hulu, the Internet TV company funded by NBC, Fox and Providence Equity Partners. This deal further strengthens Hulu's position as the leading premium online TV provider, with 27 partners, and newly extended 2 years exclusivity of the main players' content.

Hulu is proving that great content is king. The site, that was launched a little more than a year ago, has shown meteoric growth and is the third largest online video site in the US. However, as Jeff Zucker, NBC's President,  mentioned in his NYC Media Summit interview, the site is still not profitable.

This deal has a profound effect on YouTube, the queen of video UGC. The site, which is losing hundreds of millions of dollars annually, is facing a huge challenge, that puts it in a collision course with the TV networks' prodigy.

UGC videos are less attractive to advertisers, as many of them do not wish to associate themselves with acts of stupidity caught on video. This leads to lower CPM in these sites. However, video streaming is still an expensive operation. This is why I believe that UGC is not a viable business model in the video world, and this equation is the biggest challenge to YouTube today.

YouTube is trying to change the equation, by introducing premium content on its platform. Some of the first moves in this direction was the introduction of HD player, and hosting videos longer than 10 minutes. The company also announced a deal with MGM, a major move in this direction.

After creating the online video revolution, and empowering users across the globe to broadcast themselves, YouTube has to play the big media game.

And in this game it is facing the biggest challenge of all - beating the TV networks in the online market.

Would they succeed to leverage their huge user base? Time would tell...

- 12Seconds is testing vide rooms. Seesmic is doing the same

MTV changes embedding policy

11% of Americans read or post Status updates

Kangaroo, the UK Hulu, closed by UK competition commission

The friend connect war intensifies with Google's new social widget

Have a great day!

Image by via CrunchBase

This post is a part of a series about media, regulation and technology. It is aimed to encourage conversation and exchange opinions, and is not a legal advise or a single comprehensive article.

Regulators are facing new and complex challenges in the recent years, when new technologies are changing the way people consume media.

In The Past Things Were Simple

In the past years, Media and Medium were one. In this post I define media as the type of content being delivered (TV show, Radio Show, etc), and medium as the carrier technology (Broadcast TV, cable, RF, etc). In this environment, regulators that were in charge of the medium, in a way of providing licenses, could control the content itself.

Also content had one main format - all TV shows were moving pictures seen on TV sets. All radio shows were audio delivered via the air, based on regulated spectrum regime, and so on.

Another important angle was that cost of delivery was relatively high - broadcasting requires considerable investment in technology and licenses. The requirement for such an investment was an automatic filter that enabled only large companies to play this game.

Types of Regulation

Media regulation could be divided to two:

1. Competition - regulators are protecting the citizens from monopoly, by stopping one from forming, and in most cases, restricting existing ones.

2. Content - regulators are protecting citizens by prohibiting specific types of content from being broadcasted in specific hours or in specific channels, as well as require tagging specific content as appropriate to a specific age or population.

The New Paradigm

Technology changed fundamentally the digital media landscape. In short it decoupled media and medium. One can view a TV show over the Internet, with services such as Hulu, buy it from iTunes, or view it on a mobile phone.

This major change created the following regulatory challenges:

1. New players are providing media . But it is not the whole picture. Telecom companies are gaining ground in this area with services such as BT Vision. In many countries, telco companies are regulated separately, through telecom regulators. Therefore regulators face challenges when telecom companies become media companies, which leads to convergence of regulation.

2. Some of them were not regulated in the past, at least not as a major market player - iTunes is a great example of a product from a computer company that changes the viewership habits of consumers, by selling music and TV shows. The same goes for Netflix's and Blockbuster's move in this area - brick and mortar retail comapnies are changing their focus to digital distribution, while Aamzon turns into media distributor as well.

3. Smaller players can distribute media - look at company such as blip.tv. It has 20 employees, but it is a video network with 40,000 shows that release a new video episode every week. By using tools such as blogTV and ustream everyone can open his or her own live broadcasting operation. As the barrier of entry for media delivery is being lowered (though it still costs money), smaller players can be a part of the media market. And as new marketing paradigms, chiefly social media marketing, offer low cost alternative to the expensive traditional marketing, which in turn enable smaller companies reach their consumers. Is it possible at all to regulate such players?

The Result - Complete Mess

Laws are general, and aimed are creating frameworks. The reason is simple - legislation is a very long process. Therefore it is based on concepts and wide definitions. However. this area is being disrupted as well. Here are some example:

1. What is a broadcaster? If one will see every person who streams media as a broadcaster that needs to be regulated, then every 16 year old boy in BlogTV should have a lawyer by his side. by the way, this issue is problematic not only in video content. One can look at podcast as a radio on demand application - should every podcaster get a broadcasting license?

2. What is a TV station? If I am creating a video playlist on my computer and broadcasting it to the world - does it make me a TV station? If I am opening a VOD service - am I a TV station? If so - YouTube is a TV station, as well as blip.tv, and every other video hosting solution.

3. What is TV content? Is it a creative format? Is it determined by the first medium which the content was presented?

4. What's linear program has to with it? Is there a difference between on demand services and linear services?

5. Is there a difference between regulation of TV content when it is being watched on TV or through the Internet? In other words, should there be a difference between the regulation on Hulu and the regulation on NBC?

A lot of questions, and many conflicting answers.

In the next posts about regulation we will review how the EU, UK, and US regulators tackle these issues.

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YouTube, the UGC (user generated content) revolutionary platform, the site that changed forever the world of online video, the second biggest acquisition of Google, is admitting, implicitly, that UGC is dead. At least business-wise.

UGC was the main focus of internet video for years. Those poorly lit, shot and edited videos, which ranged from dogs on skateboards to kids running into walls, were the holly grail of online video revolution. Do you remember all those discussions about the death of TV as we know it, how YouTube is going to take charge of the industry?

Well, it seems that though content is king - it is only relevant to, well, good content. At least, business-wise.

Let's look at the facts:

1. Out of the ten most viewed clips on YouTube of all times, only 2 are UGC. The rest are professionally produced video clips of famous songs.

50% of UGC in YouTube's Top Ten

2. YouTube announced deals with major studios to bring proffesional productions to their platform. It seems that the competitive landscape moved from YouTube Vs. Metacaffe to YouTube vs. Hulu

3. Speaking of which, Hulu is gaining momentum quickly:

They are still much smaller than YouTube though:

4. Recent research shows that YouTube could monetize only 3% of its content. Not that good, one will say.

Does anyone really believe that UGC is still a viable business model?

So what's the future of UGC?

It seems that there is an agreement that UGC is not a good way to make money. Advertisers don't want to associate their brand with poorly produced content, and Google are trying to maximize the value of YouTube, without a lot of success.

But one cannot ignore the huge traffic this site has, that is still growing.

UGC is nothing more than a loss leader, a great way to bring eyeballs, but nothing more. The myth of UGC as a cheap way to create and monetize content is false. And in my opinion, companies that look at UGC as their main revenue engine, will simply, fail.