CC #4: Creating a relationship with the end user and monetizing the back catalog with Erik Hoffman
Erik Hoffman is the Chief Technology Officer here at Clipsource but prior to that, he worked in a variety of technical positions in the media industry.
In this conversation, we sit down with Erik and discuss his journey into the technical side of entertainment where he worked with everything from building video applications for mobile, TV and web to analysing data and consumption for some of Sweden’s largest broadcasters.
We also dive into the possibilities that lay ahead in the concentrated world of TV, SVOD, AVOD and FAST and discuss:
The importance of ads being a part of your service and not just a payment method
Ideas for how you can use ads to drive revenue but to also create a better user experience (e.g. selling within the video)
Possibilities for monetizing the back catalog on SVOD services and driving more users to your platform
Find the full transcript below.
Mattie: Hello everyone and welcome back to another Clipsource Conversation. I am so happy today to be interviewing one of our very own, Erik Hoffman.
He is the Chief Technology Officer here at Clipsource and has a super interesting career working in the broadcasting and video streaming industry, which I am so excited to dive into today.
So welcome to the podcast, Erik. And before we get going, I have to ask, what series are you watching right now?
Erik: The Sisters at Apple TV Plus. It’s about a family where a few of the sisters see that their sister has a terrible relationship with her husband and they try to free her from him.
Mattie: Great, I always love the recommendations.
But like I said, I've been so stoked to talk to you because I think you have such a cool history working on the tech side of broadcasting and streaming. And I think that it’s fascinating since all people are talking about now is all of the content that is being produced on different platforms and the various ways of monetizing it. And I think it's cool because you've literally worked on doing that and know how the technology side of it works. So I can't wait to get into the specifics of that.
But, I also know that you were voted as one of the top developers in Sweden, which I think is incredible. And I really just want to start out by hearing how you got to this point in your career and got into the media industry in general.
Erik: Yeah, I've kind of always loved the media industry. I was thinking about it this morning that I must have been extremely lonely as a child, but I always loved to consume media and to try to understand how things are created and how the industry works.
And I don't really know why, but already on a high school level, we actually created quite a lot of 3D movies and animation. So I got my hands into it quite early.
And later on, moving to the university, I actually chose to go to the media program where we dived into the technical stuff of the industry as well as in a part of live streaming ourselves and broadcasting from sports and so forth. So my interest started there.
Then I moved on to become a developer like everyone else in Stockholm in my generation. But I've never been that techy guy that just wants to put on the headphones and sit by myself doing the code of the applications. I want to understand the business side of it and the relationship. How the things I do in the back end can be beneficial for the project and for the end user and connect all of these dots.
I then moved on to be a solution architect and software architect and moved closer to the product department and sales departments. But still, on the tech side, I moved on to TV4, Sweden's biggest commercial broadcaster back at the beginning of 2016 or the end of 2015. I became a solution architect for a video platform over there which was quite nice since moving from all these smaller companies to two big household brands was exciting when you are young to try to climb the ladders and all of that.
But there you have this environment where you have the opportunity to work close to media creation, media distribution, ads integration and how to interact with the end users. And there were a lot of dots to try to connect and build stuff from a lot of data and consumption. So the creativity really sparkled.
Moving forward a few years, I became the head of player individuality where I really had this end-user connection by building all the video players for our applications both on mobile TV and the web.
And then my interests grew to be the interaction with end-user interactivity in the player, not only the play out of content.
Mattie: So you've built the systems that play the content and then now you're analyzing how people interact with them.
Erik: Yeah. And then I've got this interest from the ad side of it. I mean, video by itself as of today or moving back a few years even more is just one-way communication. And ads as default are that as well but they also create an opportunity of getting the end user to interact with something. Rather than trying to lower the user to interact, instead try to build an ad experience into something exciting that will not only be beneficial for the advertiser or for the broadcaster, but for the end user as well.
And that's a journey. That's what the ad industry is still in. It's quite a long way to go, to be honest. But it's quite interesting when you have all this data from the end user consumption and you have different ways of interacting on different platforms with different possibilities.
You have patterns of consumption that differ from a small mobile screen where you have your thumbs on the screen more or less, to desktops where you have your mouse pointer to TV, where you don't have a pointer in any way, but you might have a second screen that is your mobile in your hand. And all of these things is what I'm quite interested in.
Mattie: I feel like that's so overwhelming. It used to be so simple. You watch TV on a TV and now…
Erik: Yeah, I mean, this is something that will grow even more. Just for the last few months or years, we've seen all subscription services wanting to move into AVOD and being supported by advertising. So I mean, for now, they might just go with trying to replicate what we already have in the broadcasting industry or just playing ad breaks.
But I'm quite sure that over time there will be even more exciting stuff going on with ads since it needs to be a part of your service and can't just be the payment for your service. It should not be either pay with money or spend your time-consuming ads. It should be more of a driver to something else and enhance experiences online.
And there are a lot of techniques to do that already. There are possibilities to go inside and change the ads in the video so in one country it might be a Coke on the table and the next one might be someone from Asia.
And looking at these big brands going into streaming like Amazon and Apple. They have this broad business and there are so many possibilities for them that is not direct revenue from their video but come from other things.
Take Disney for instance, they have videos of their brands and IPs like Star Wars but what they really earn money on is the park and recreation or the merchandise or the music or everything around that. So why not sell things in the context of the video?
My biggest example of this is usually Amazon coming from being a marketplace and now having a streaming service.
Now they have this x-ray functionality of showing what’s in the scene, whether it's a song or an item or book or what it might be. You can imagine that it can be quite a simple upsell for them to just try to sell it from their own marketplace, from the scene itself, when you see it.
Mattie: And that's so crazy to me. It’s crazy thinking that on the back end, you're not even thinking about just the entertainment anymore and delivering the entertainment, but it's like, what else can we put in here to make people interact with it more or to make them spend more money or to, you know. There's so much going on.
Erik: And it's not only about trying to drive revenue as such, but it's also to create a better end-user experience.
I don't know how many times I've been watching a TV show or a film, and I sit with my mobile trying to search like IMDB to see which actor is in there. Which other series have I seen her or him in or where can I buy this book that's in this scene or these shoes that the actor has in this scene?
So it's about creating this relationship with them and trying to understand what they might be interested in before he or she knows it themself.
Mattie: But I think it's like I said, it's so interesting just hearing what goes on on the backside of like creating the platforms that people like me are just binging content on. You know, there's so much going on.
Erik: Yeah. And I mean, there's a lot going on that's quite standardized as well. Well, that's just I mean, a lot of data flowing through the system. But what I like is this creativity of building not necessarily new stuff, but trying to move things forward through combining technical possibilities and changes in consumption patterns and all these things.
Mattie: In your opinion then - from where you've worked and what you've seen develop because you've been part of developing a lot of new things in Sweden - where do you think the entertainment industry is going or what do you see happening in the future?
Erik: I think everyone kind of agrees that where we're going with all the SVOD services, where they are creating a lot of originals for their own service, might be valuable for themselves and like a quarter but it’s not something that will work in long term.
Looking back a few years when House of Cards was the front runner for Netflix, it was a great production and there are a few of the seasons that are really, really great. Not the last one.
And I mean, nowadays I can't imagine that Netflix gets any new users due to House of Cards, even though there was so much money put into it. And that applies to more or less every TV show or movie that they create. The monetization window for new content is so short it has to be this great success directly otherwise it is just scrapped.
So I think what we need to do moving forward is to find a way to monetize the back catalog.
And I think you can see it on all these services. Looking at Disney Plus, for instance, everyone is talking about what a great job they’re doing and that they are growing a lot.
But looking at like the US, Disney hasn’t grown at all for the last few quarters and Netflix hasn’t either but Netflix is like twice as big as Disney Plus in the US and no one talks about that. HBO Max is bigger than Disney Plus in the US - no one talks about that.
Everyone just celebrates Disney for being this great company.
Mattie: They are just iconic so you just assume that they're just up there with the other players.
Erik: But they more or less only grow in new markets and I mean, you can still compare them to Netflix because Netflix is in a lot of markets already and Disney still has rollout plans. So, I mean, Disney is good. They have a lot of subscribers and they still grow a lot.
But if you look at these markets, when the growth has stopped, it's obviously a problem for them. But they have this amazing back catalog. Everyone knows quite a few Disney movies that they love and probably like a few of these series on Disney Plus as well. They have the ABC catalog and they have all the Star Wars.
Mattie: Yeah, Marvel…
Erik: And serious fanaticism, but I can't even mention a TV show from Disney Plus that's not Star Wars that has been produced as a Disney Plus original and I think over time that will become a problem.
They have stickiness because they have a lot of child content. I can look at my daughter and she watches Vianna and Encanto like ten times a day. I know these songs better than the music I listen to myself and I assume that's the case for all parents.
Mattie: I watch those and I'm not a parent.
Erik: So the back catalog is the big question going forward. Look at Netflix as well. Every quarter where they don't make the result, they just say it's because we didn't have any front runner this quarter. But look at this next quarter then we have Stranger Things season 100, more or less.
Mattie: So what is it though, people are like ending their subscriptions and then waiting until they get better content again and then restarting their subscriptions and going back and switching around now.
Erik: Yeah, I mean, that's the scenario when there's so much to choose from and we can come back to that in a minute.
But every quarter when Netflix has a frontrunner, they get good results and they are quite obvious about it being because they had a frontrunner.
So they’re putting all this money in new content each and every quarter and not getting any monetization with their old back catalog but still have that on the service. I think we as an industry need to come up with an idea of how to handle that.
Mattie: What would you do or what do you think could even be done with old content?
Erik: I mean, to some extent, there are already two things being tested out there. I don't know if this is specifically for that purpose, but looking at Amazon, they have more of a low-end service in what was named IMDB TV, but now is free to read, which is why they rather have older movies and such on that service and it's a cheaper AVOD service that's more of like a back catalog of things that you can have and subscribe to without having to pay a lot. That will attract some people.
Then you have the FAST technique thing going on, Free Advertise Supported TV, which is kind of the application of linear TV in the streaming world. It's a hybrid, it's not really something new. It can be any channel out there and it doesn't really have to be ads at all either. It can be just streaming content. This is really big in the US because the end users there are used to having these cable subscriptions with thousands of channels.
Where in Europe or in Sweden, most aggregators have had like ten channels in the cable industry. People here aren’t as interested in zapping around 1000 channels so it’s harder to reach all of the segments and all of the markets here.
But as a streaming service, I think it might be like a hybrid between AVOD and SVOD so you can have this laid-back linear experience playing out your older content to be more of a promotional channel for your streaming service so you can monetize on that content for having ads on this channel or trailers for new content bundles.
But you will get the reach of being on all these platforms and having these channels so end users can consume some of your content without subscribing to you as a service.
Mattie: I think that’s actually really smart because I feel like even now when I watch cable TV sometimes, I don't pick anything that I haven't seen before. I go, oh my gosh, this old movie is on or something like that, and I get excited. But I would never choose it if I was on Netflix or HBO or something.
Erik: And I mean, that happens to me from time to time as well. It's a movie that you would never choose to watch on a streaming service even if it might be on three or four of the ones you subscribe to.
But you don't even move from this channel over to the streaming service and restart the movie. You just sit there. Well, I can watch that.
I mean, looking back when I was younger, when you were home from school, for instance, most of the channels were like streaming old stuff or yesterday's comedy series over and over. And you don't really care if you came in from the start of the show or if it's in the middle of it. You just wanted to have something to do.
Mattie: I have one more question. If you’re trying to get your catalog, like you said, like on a FAST channel or something like that so you have different ways of using it, would that mean that - and this is just a scenario - but in the case of Netflix, would they get their own FAST channel as well as have their same streaming service?
So then when you get a subscription, you get access to both and when they don't have originals, you jump over to the FAST channel?
Erik: I don't think it necessarily needs to be inside Netflix to watch these channels.
It might be, but it would also be provided in every other FAST streaming service. I mean, like Pluto TV or Roku or Rakuten TV. So people selling their content. So it's more of a promotional channel where you want the reach, but you can brand the channel so it’s like Netflix comedy channel, drama channel etc..
Mattie: I see what you're saying.
Erik: You're trying to make people interested in your content and what you're putting out is your older content that might drive users into your platform.
Mattie: So this is strategic. You think about what should be happening.
Erik: Yeah, I think so. We at least we need to find a way to monetize this older content.
