Tag Archives: online video

Online Video – Where Do Viewers Live?

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Consumers are watching more and more television, movies, and user-generated video content online.  How people consume video is going through a fundamental shift as content is available on new and emerging platforms.  According to comScore Video Metrix, 181 million US Internet users watched nearly 40 billion videos of online content in January 2011.

Where people live often can have an effect on their behaviors including viewing habits of online video.  What areas of the country have online video viewers?

As expected, people on the west and east coasts index high for online video viewers.  This means individuals in those areas are more likely to watch video online than in other parts of the country.  An index of 100 represents the average US consumer.  A higher index means there is more demand for a product or service in a given area.

There are pockets of counties with higher online video viewership throughout the Midwest, but in general people are less interested in going online in the Midwest and South than in other parts of the country – especially on coast in California and the eastern seaboard.

The county that has the highest online video index is Arlington County, VA.  Their index is 167, meaning that a given person is 67% more likely to watch online video than the average American.

Localized information is often more helpful when looking at behaviors, so this data can also be looked at using zip code level data.  The zip codes with the highest Online Video Index are:

  • 06269 – Storrs Mansfield, CT
  • 13244 – Syracuse, NY
  • 14109 – Niagara University, NY
  • 27411 – Greensboro, NC
  • 27710 – Durham, NC

What do these areas all have in common?  One way to look at the population is through segmentation analysis.  Esri, a geographic information systems company which also does data analysis, developed a tapestry segmentation that classifies US residential neighborhoods into 65 unique market segments based on socioeconomic and demographic characteristics.  The tapestry segments that have the most online video viewers are Dorms to Diplomas, Metro Renters, Laptops and Lattes, Trendsetters, and Military Proximity.

Who are these consumers that love online video?  Metro Renters residents are young, educated singles and are just beginning their professional careers in some of the largest US cities such as New York, Chicago, and Los Angeles. The median age is 33.6 and the median income is $56.311.

Lifemodes and Urbanization can also be used to classify consumers.  Segments within a LifeMode group share an experience such as being born in the same period or a trait such as affluence. Urbanization groups share a locale, from the urban canyons of the largest cities to the rural lanes of villages or farms.  Solo Acts and Scholars & Patriots residents, all Lifemode segments, are big viewers of online video.  Metropolis residents live in cities and High Society residents are very wealthy.  This information can be used to help market and target more online video viewers.

More information about Esri’s tapestry segmentation can be found at http://www.esri.com/data/esri_data/tapestry.html or to learn more about Esri in general, go to www.esri.com.

Netflix – Qwikster – I’m confused

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I have to admit – I’m really confused about Netflix.  I have been a customer of theirs for a long time.  I didn’t understand their large price increase announced 2 months ago (that just went into effect Sept. 1) and now I definitely don’t understand why the company is splitting its DVD and streaming services into 2 companies, announced in Reed Hastings post yesterday (http://blog.netflix.com/2011/09/explanation-and-some-reflections.html).  I guess the new “Qwikster” is for its antiquated DVD customers (I’m one of them) which doesn’t exactly make me feel special – or even like a customer Netflix wants anymore.  I get that streaming is the future, but DVD isn’t dead yet.

I am also confused by Reed Hasting’s apology.  It didn’t really seem like an apology at all – other than admitting that he should have explained sooner why Netflix raised their prices.  But he didn’t really do anything about it and the apology seemed half-hearted.  Why did it take so long?  He’s a smart guy.  There are lots of smart people at Netflix.  He admitted that Netflix made a bunch of mistakes but he didn’t correct any of them.  He could have bundled the DVD and streaming services for a bit of a discount – but he didn’t.  Then the announcement of the new Qwikster brand for the DVD service just seemed even more out of place.

I am just confused.

When Netflix decided to raise its prices and charge separately for their DVD and streaming subscriptions, I debated what I was going to do.  I finally decided to just go with the DVD service.  I realize that I write a lot about online video services and have even developed strategies for companies around it but despite that the Netflix service doesn’t have enough content to (yet) justify $7.99 per month – for me.  I like watching new movies and old seasons of TV shows and these aren’t available on the streaming service.  I guess this just makes me a Qwikster customer, but now I feel a bit abandoned by the brand of which I have been loyal (and even evangelized) for several years.

I realize that Netflix has significantly more streaming customers than DVD customers (21.8 million vs 14.2 million expected in Q3 2011) but both are interested in subscribing to content.  They just happen to like consuming content different ways.  Many DVD customers are likely to switch over to streaming as Netflix licenses more content they want.  I know I will – or I’ll go to some streaming service.  I love the fact that it’s available through my Internet-connected Wii, on my computer, and on my iPhone.  I just haven’t been hooked (yet) on the content.  I think a lot of consumers will subscribe to streaming in general as more content becomes available.

This new strategy of separating out the DVD and streaming service is alienating many of the customers that got Netflix where it is today.  One key difference between now and when Netflix started is there are more options – especially for streaming.  Amazon and Hulu are getting in the game as I’m sure will others.  Microsoft announced Xbox 360 TV, so a subscription service isn’t out of the question for them.  While Netflix certainly is ahead of their competitors, others can quickly take their place.  Netflix displaced Blockbuster.  Couldn’t someone do that to Netflix?

Reed Hastings talked about how he has been afraid that Netflix would end up like AOL or Borders as the business transitioned from DVD to streaming.  That fear is very fair as that has happened to many companies as they transitioned from one technology or business model to another – but the strategy of spinning off the legacy service to an unknown brand name just doesn’t make sense.  Does that means Borders should have created a e-book reader, called it Borders, then changed the name of the bricks and mortar bookstore?  Changing a name doesn’t make a company.  It’s the service that does.

I do get that streaming is the future and Netflix should put a lot of resources towards it as consumers do want that in the long run.  It is the future of content consumption.  I just can’t get past the new branding.

I also don’t get why there are going to be two separate websites for Netflix and Qwikster.  This means that people who have both services have to go to both sites to look for content – and rate content.  One of Netflix’s most valuable features has been its recommendation engine which helps consumers discover new content.  Is a customer on the DVD service that much different than a customer on the streaming service?  Just because people watch content differently – and on different platforms – doesn’t mean their content choices are going to be different.  Integrating the sites makes sense – especially if Netflix wants to convince their DVD customers to migrate to streaming in the future.

Netflix has long been a respected brand.  That now appears to be changing a bit as their management team develops strategies that just don’t make sense to consumers.  Consumers understand that prices go up but they don’t understand when their loyalty is not rewarded and that branding changes dramatically.  Netflix has a lot going for it – a deep catalog of DVD content, significant streaming deals, a newly launched kid’s area, international streaming services, and a well-known brand.  I hope they figure out their mistakes and listen to their customers before someone else takes advantage and displaces them.

 

Xbox TV – Microsoft is positioned to succeed

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Microsoft announced last week that it is going to launch Xbox TV later this year.  While there is no guarantee of success, Microsoft is well positioned – much more so than others – to succeed where others have failed.

Apple TV, Google, and even Microsoft (with its Windows Media Center) did not succeed in getting consumers to watch Internet-delivered content on their televisions – at least not in mass quantities that many expected.  The biggest challenge for these players is that consumers had to purchase ANOTHER set-top box in their home for another specific purpose.  Many consumers already have a cable or satellite set-top box, DVD player, and likely a game console.  They don’t want another box in their entertainment system just for watching Internet-delivered content.  Consumers would rather use an existing set-top box for that purpose.  Google smartly integrated their service into televisions, but consumers are not likely to buy a new television simply to get the Google TV service – unless they were already ready to buy a new TV.

Microsoft has sold 55.9 million Xbox 360 consoles worldwide of which 33 million are in the United States, according to VGChartz.com.  This is a large installed base that Microsoft already has – positioning it to at least come out of the gate ahead of other competitors.

Microsoft’s plan is to include video-on-demand (which it has already) as well as live television on its Xbox 360 game console.  The announcement didn’t include other business models (like subscription VOD) but my guess is that this will be included in some way.  The company also didn’t yet announce content partners, but Microsoft has deep relationships with all of the major content owners, so it is likely that many deals are already in the works.

Another option for Microsoft is to become the “TV Everywhere” extension for cable and satellite providers.  Many have already rolled out their plans (e.g. Dish, Comcast) but many have that.  Microsoft could include the Internet-delivered content on the Xbox 360 and also make it available through their other outlets like the Zune Marketplace, which is available on a Windows 7 PC (of course that software could be extended to other platforms).

Live television will be a difficult proposition for Microsoft if it is done separately from a TV Everywhere strategy of a cable or satellite company.  It might be possible for broadcast channels, but for cable channels that would be much more difficult as cable and satellite providers may threaten to drop channels that are offered an a la carte offering through Xbox 360.  Cable programmers like to package channels together and sell those packages to customers.  A la carte offerings on other platforms would threaten that.  Since cable channels are the bulk of a cable channel’s revenue base, it’s unlikely that would leave that large revenue stream.

One way to help ensure success with Xbox 360 is to make the content available on the console available on other platforms as well.  This strategy has served competitors like Netflix and VUDU really well.  Their content is easily accessible on everything from set-top boxes to computers to mobile devices.  Consumers like to use the same service in multiple places – and don’t want to pay to access content just because it’s on a different platform.

Despite the challenges, Microsoft is in a position to be successful with an Internet-connected television service with Xbox 360.  Customers flocked to the service when Netflix was made available on the console, so it’s clear that there is demand for content on the console.  As long as Microsoft has a significant amount of content with multiple revenue models that appeal to a broad customer base and makes content discovery easy and organic (like Netflix does with its recommendation engine) then it will do very well.

Vudu – Why is Everyone Surprised at Their Success?

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In late August 2011, Screen Digest/IHS announced that Vudu now has 5.3% market share of the online movie market in the U.S. – up from just 1% in the first half of 2010.  What surprises me is that everyone is so surprised.

Vudu has a lot going for it.  It is now owned by Walmart, who purchased it in February 2010. Walmart has a significant number of eyeballs that come across its in-store marketing and on walmart.com, all of which are opportunities for Vudu and ones Vudu (and Walmart) have taken advantage of.  The company easily introduced its millions of customers to the brand and get them to purchase movies.  Second, Walmart has developed a very smart device strategy.  They have integrated the service into a number of televisions and set-top boxes, making the content easily available to the consumer – where they want it – on televisions.  They have also smartly ensured that the service is easily available on computers and mobile devices.

Part of people’s surprise of Walmart’s success with Vudu is that the company wasn’t very successful before when it tried to launch an entertainment portal before.  People just didn’t go to Walmart for content.  A lot has changed since then.  People in general are buying more digital content and are now used to looking for it beyond the typical locations of a video store or their cable or satellite provide.  Initially it was the technically savvy and die hard movie buffs buying digital content.  It has now expanded to the general U.S. audience, which is exactly the customers that Walmart already has.  Additionally, the great focus on devices positions Vudu in front of consumers so they can easily buy.  Additionally, Walmart can develop marketing campaigns that link DVDs purchased at their store to downloads on Vudu.  They have already experimented this to encourage trial of Vudu.  Walmart is the number one retailer for DVD sales, so marketing an extension of a DVD to a digital download makes logical sense – and Walmart is the only retailer – currently – that can do this.

It will be very hard for Walmart to overtake Apple and their movie store, which as 65.8 percent of the online movie market. Apple has a well-integrated store and device system that is difficult to outmatch.  That said, Walmart caters to a different audience – many of which do not have Apple TVs and Mac computers (though they do have iPods).  They do have PCs and a growing number have connected TVs.  They know and trust Walmart, so they will trust Walmart to deliver content digitally as well.

Zediva – Something to Think About

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For some reason the case of Zediva (www.zediva) just fascinates me.  The service was shut down in early August 2011.  It was really just waiting to happen.  The company was distributing content over the Internet without the permission of the rights holders so the shutdown was inevitable.

Zediva’s plan was to enable consumers to stream content from a DVD over the Internet.  Zediva claimed that the user was simply renting the DVD but playing it on Zediva’s DVD player – and watching that DVD through the Internet.  Their theory that this was the same as going to a movie rental store (like Blockbuster) and renting the physical DVD.  The difference was, of course, that the consumer didn’t have the DVD in hand.

Zediva believed that they did not have to obtain a separate license for streaming content (vs. DVD rentals) from the studios to distribute the content over the Internet.  They claimed that since they had the content they could deliver it however they wanted.  In part, their theory was that if they had 100 DVDs of a movie, then they would simply limit the number of online streams to 100 at any one time.  Therefore, if the 101st customer came along, then they would have to wait for someone to finish watching the movie before they could rent it.  This strategy was very beneficial for Zediva as it meant they could control what content they distributed without getting permission from the studios

While it is clear what Zediva did was illegal as they didn’t have the rights to distribute content over the Internet, their goal was to get content out to consumers when they want it.  A challenge that the studios have, especially for older content, is getting the rights to stream content over the Internet.  When studios made initial deals with producers, actors, musicians, and more, for “older” content, the Internet didn’t exist – and wasn’t even a thought in their heads so the studios didn’t ask for those rights or they didn’t think the Internet would ever be a real distribution channel, so it didn’t get addressed in contracts.  Studios are still working on getting those rights in some cases, but it takes both time and money to obtain those.  Of course, consumers don’t always want to wait – nor do they even understand why they can’t find the content.

Ensuring that content is available for consumers is paramount to the studios.  One of the reasons for piracy is that consumers want content but can’t find it so instead they go to places where they can get it – and the studios may not get compensated at all for it.  The fact that content isn’t available doesn’t justify piracy but it is one reason for it.

I’m definitely not saying that companies should go create services that violate studio’s rights.  The studios have the right to do whatever they want with their content.  It’s theirs.   I am saying that studios need to continue to spend time looking at what consumers want and ensuring that they are doing the best they can to meet their demands for where and how they want to consumer content.  This means testing out new ideas and distribution strategies, as Disney did with DIRECTV’s premium VOD test and Warner Bros. did with Facebook.  These haven’t resulted in large amounts of revenue but that doesn’t matter.  The only way to know if it will work and make money is to test it out  Studios weren’t all that keen on home video to begin with and now that’s a bigger revenue stream than theatrical revenue.   You never know what will happen.

Netflix Subscription Plan Change Means unhappy customers

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Netflix announced that they are changing their subscription plans to separate DVD subscriptions and streaming subscriptions.  The net effect of this is a 33-60% increase (depending on the plan the consumer has) in the cost of their subscription prices for consumers if they decide to keep both their DVD and streaming subscriptions.  Here are the numbers:

Plan Old Price (included streaming) New DVD Plan Price Total with Streaming % Increase
1 DVD $9.99 $7.99 $15.98 60%
2 DVDs $14.99 $11.99 $19.98 33% 

To say customers are unhappy about this is to be simply understated.  This seems like a very short sighted increase by Netflix and will serve to only upset their very loyal customer base many of which are threatening to discontinue to their Netflix subscription altogether – but in the past had been huge advocates for the company.

One of Netflix’s biggest problems is how it set expectations to its customers.  Consumers initially signed up for Netflix in order to get DVDs sent to them in the mail.  The price was reasonable especially if you turn over the DVDs quickly – and there were a lot of choices not only in terms of plans, but the amount of content available was tremendous – much more than the brick and mortar video store.  Netflix then added on streaming initially for free then for only a marginal increase for $2/month.  This didn’t seem like much of an increase – even if you didn’t use the streaming service – but it was nice to have the option there and a lot of customers took advantage of the streaming service.  Consumers got used to having the streaming content available along with their DVD subscription at this low price, so this large increase is a huge slap in the face to loyal customers who have been advocating the service for Netflix.

One point of frustration with the price increase is that there are no additional benefits to the new pricing structure for customers – unless you plan on cutting back, of course (which many will do – just look at the comments on the Netflix blog).  Customers don’t get a discount by subscribing to both the DVD and streaming service (I’m thinking Netflix may re-think this move) and no additional content is made available for the higher price.  All of this makes for a very unhappy customer base.

I can understand why Netflix separated out its DVD and streaming business from a pure business strategy point of view.  Costs for licensing content for streaming are going up significantly as content owners have discovered how much content is being consumed (and will be consumed going forward as it is made more accessible) so they are demanding more money for their content.  Netflix wants to license more and more content (especially popular content) and the only way to do this is to charge directly for the streaming content so they can earn more revenue (hopefully) so they can get more content for customers to watch.  Additionally, there are more devices today that can display the streaming content (game consoles, Internet-connected TVs, Roku boxes, smart phones, etc.) so the content can be viewed in more and more places. Netflix and the content owners view this as more valuable to customers since the content is so easily accessible so they feel they can charge more.  Unfortunately, customers have come to expect all of this without the higher or separate price.  Customers like it when they get “free” content or the price gets lowered – not raised.

Netflix eventually wants streaming to become its core business.  It’s a lot cheaper for them to deliver content over the Internet and it’s on demand, so it keeps customers happy and there are less logistics to handle.  So far their streaming business has been very successful already bringing in millions of dollars but it pales in comparison to the DVD business. Customers like the variety of content available on the DVDs (which is significantly more than streaming) so until the same amount of content is available on streaming, many customers won’t switch to a pure a streaming subscription or perhaps subscribe at all.

I am not sure what I will personally do at this point with my Netflix subscription. I subscribe to 1 DVD out a time per month and I rarely stream content.  I like having the option available, but I have yet to get an Internet-connected television (yes, I know, I’m in the business…one of these days) and I don’t like how the content looks through my Wii.   I do occasionally watch on a PC or iPad, but that’s rare.  If I do keep Netflix, it will just be the DVD plan and I’ll stream from Hulu or Fancast or some other site – there are other options.  Lately, I have been getting TV-seasons on DVD, so Netflix has been worth it for that.  If I start getting movies, I’m not sure Netflix will be necessary for me at all, since I can get movies from Redbox at a much cheaper price – especially since I don’t turnover DVDs that quickly.  If Redbox had TV seasons, I’d probably just switch to that (perhaps this is an opportunity for Redbox?).  I think as Redbox increases its variety that is going to be a viable option for me – and many others – while streaming content from other competitors to Netflix.

I do hope that Netflix figures this out.  To date it has been a great company with a business model that really worked for consumers.  I can only hope this change is a small glitch.

Flixter – Content in The Cloud – Can it Work?

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The announcement by Warner Bros. that it plans to use its recently acquired Flixster to encourage consumers to upload their DVDs to the “cloud” so that consumers can access that content from anywhere – and on the device of their choice – is very intriguing.  Using the cloud to store content which is then accessible anywhere has been on the minds of studio executives for many years, but no one has implemented a solution that works – or that consumers have bought into.

Consumers like the idea of being to access their content from anywhere – and on the device that they choose.  If consumers can just put all of their content in one location and access whenever and wherever they want – they would be very happy.  Consumers also like the idea of purchasing content just once rather than needing different versions for their TV than for their mobile phone.  The average consumer doesn’t really understand rights management or codecs.  They just understand that if they bought content, then they want to access it anywhere and on the device of their choice.

In order for the cloud service on Flixster to work, there are a few challenges they must overcome.  First, a DVD is often several gigabytes and a Blu-ray disc is even larger.  It could take hours for a consumer to upload their DVD to the cloud, which is very daunting to consumers.  A better solution is to allow consumers to register their DVD online and just be able to access a copy already in the cloud.  This would enable consumers to quickly access their content without having to go through the painful process of uploading all of the DVDs – which they don’t really want to do.  The challenge with this, of course, is that Flixster would have to make deals with other content providers to store their content in the cloud.  This would not only be expensive and time consuming, but likely impossible with some content providers who prefer to do distribution deals with aggregators rather than other studio’s services (this is a big challenge that Hulu faces with content licensing).

Second, the concept of the cloud may only be attractive to subset of consumers.  Business models are changing and content consumption habits are changing.  Consumers today are less interested in content ownership than in the past – in part because there is so much content and in part because it is so inexpensive to rent content.  Kids are typically the biggest market for DVD purchases as children love to watch the same content over and over.  Services like Netflix allow customers to access a significant amount of content online.  As Netflix and others expand their online catalog which is available for a subscription, the need for the ability to access a personal library of content decreases.

Third, content online doesn’t always work.  Bandwidth has to be available (sadly we’re not ALWAYS in a place where there is an Internet connection) and it has to be fast enough to stream the content at a speed that makes the content watchable.  If I’m watching on my HDTV, I want the content to be in HD. I require higher video quality on my TV than my mobile phone.  There are also times where I’m simply not connected, which is a challenge for any of these online services.  It’s great when I’m connected and it’s not great when I’m not, so the ability to offer downloadable content can be a key feature of these services.

These challenges don’t mean that Warner Bros. shouldn’t try out the service and launch something.  Having a direct relationship with consumers is important and the studio can learn a lot about consumers and obtain a lot of useful data.  It can help them learn more about what consumers are watching and how they are watching it to make better distribution deals.  It’s difficult at this point to believe that Flixster will end up becoming a competitor to Hulu, Netflix, Vudu, or other online video services who offer a large breadth of content with no requirement by a consumer to upload content at relatively inexpensive prices…but time will tell if consumers become interested in the idea.

Can Netflix Compete with Pay TV Operators?

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In March 2011 Netflix announced that it acquired the distribution rights to the series House of Cards, outbidding HBO.  The series is based on a BBC mini-series and stars Kevin Spacey.  It is the type of show that would typically air on a pay TV network, like HBO or Showtime.  Some speculate that Netflix paid as much as $100 million for these rights.   This may be the start of a strategy for Netflix to distribute original content and compete directly with channels like HBO or Showtime or even with Pay TV Operators, as it is distributing both old content and new content.

In order for a strategy that includes the distribution of original content to help Netflix compete effectively, they will need to produce, or license, a significant amount of new “hit” programming, and that will probably take a lot of cash and luck.  Netflix has a significant amount of cash but licensing “hit” content isn’t the only part of its business – and they need some of that for deals with other libraries, such as Starz and Epix.  Additionally, there is no guarantee that any piece of content will be a hit so they would need a breadth of content to ensure some hits.  Netflix does have the advantage that they know exactly what DVDs people are renting and what content people are streaming so they can market a piece of content directly to users – but, marketing alone does not ensure a hit show.

Netflix licensed content from Starz in 2008 to stream 2,500+ movies over a period of 3 years for $30 million.  That deal expires in late 2011 and Netflix is not likely to get similar terms.  Future content deals are likely to cost much more, so some of Netflix’s cash needs to be allocated to that deal and others for already produced, popular, content.

Content owners may already be starting to rebel against Netflix’s potential strategy because they don’t want Netflix to be a direct competitor.  Current Showtime shows will only be available through the Showtime Anytime broadband service. Starz recently changed their policy such that original Starz programming will be available on Netflix 90 days after it premiers on the channel instead of 24 hours after it premiers.  These changes could affect how some users use Netflix if they want the content more quickly.  Users may end up going to other sources for this content.

If Netflix decides to go for an original content strategy, it’s possible that the company will have to raise its subscription prices, which it may have to do anyway as content deals from Starz and others gets more expensive.  It is unknown how much more consumers would be willing to pay to stream for content on Netflix.  One potential option is that Netflix goes to a tiered model with different content available at different levels but that could be more complicated than Netflix wants, though they do have a tiered strategy for DVDs.  Also, typically to date, much of the content on Netflix Watch Instantly has been “library” content, so studios have just been thrilled to have a new distributor for this content that they may not have sold anyway.  If Netflix becomes a direct competitor, content owners may decide to look elsewhere (perhaps to Amazon?) to license their content.

Is Facebook the next Netflix or Hulu?

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Over the past year Facebook has been slowly entering the world of online video.  First, the site began offering live video streaming through two partners – Livestream and Ustream in August 2010.  This partnership enables companies or individuals to stream live content directly to viewers while still in Facebook.  Several popular events have been streamed this way including Facebook announcements and concerts.  MLB is streaming some its 2011 pre-season games through Facebook as a way to promote their MLB.tv online subscription.  Live streaming within Facebook keeps people within the website and getting the content that they want.

Facebook has also started allowing content owners to offer movies for rent in March 2011.  Warner Bros. was the first studio to start offering content through Facebook. Users can rent The Dark Knight directly from the movie’s fan page for 48 hours.  The cost is 30 Facebook Credits (or $3).  The selection was expanded to another 5 movies ranging in price from 30-40 Facebook Credits ($3-$4).  Before a user can rent, though, the user has to agree to allow a “watch app” to install itself into her Facebook account.  This grants Warner Bros. access to the user’s name, profile picture, gender, list of friends, any public information shared, and other information.  This is a great deal for the studio as they get direct information about the people watching their content.  It isn’t clear, though, if consumers will agree to this, as that is more information than they would normally have to give to a studio – or even a retailer – if they were going to the theater or renting on another site, such as Amazon or Movielink – or through their cable company (though admittedly the cable company, or even another website knows a lot about their consumers’ viewing habits).

Facebook hasn’t yet released any plans about becoming a video aggregator, but they seem to be putting their toe in the water to see if consumers will consume video on their site – and pay for it.  According to Nielsen NetRatings, the site had 130.8 million unique visitors in the United States in February 2011 who spent an average of 6 hours and 36 minutes on the site over the month.   One strategy to increase these numbers even more – especially the amount of time on the site – is to add video so that the visitors will stay to watch content.

Facebook has the capital to invest in a video strategy – if that want.  People are already discussing movies and television shows on the site and sharing recommendations.  Distributing large amounts to the video to the site, though, may not make sense.  Facebook would have to develop a method for user’s to discover content in a way like they do on Netflix or Hulu and they’d have to host the content.  Of course, they’d have to manage all of that as well and develop a content acquisition team to handle – and then develop all of those content relationships.  Yes, they already have many of the relationships and clearly the company has scaled up as they grew but content distribution is not the same as social media.

My expectation is that Facebook won’t compete with the existing content aggregators but rather will complement them.  There is a rumor that Netflix and Facebook are working together to develop a closer relationship.  It would likely allow people to share their comments about content on Facebook and then watch on Netflix Watch Instantly, if available and they are a subscriber, or direct the user to sign-up for Netflix.  Netflix and Facebook had a previous relationship where Netflix users could rate content and comment on it on Netflix then post that comment to Facebook.  That feature was removed last year, but will likely come back bigger and better – and help both companies.  It makes sense for Facebook to develop features like this for many video sites and focus on their social networking expertise.