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Q&A with Kai Henniges, CEO of Viewster

  28 January, 2013

Kai HennigesViewster is a video on demand company that specialises in premium long-form content. The company is headquartered in Switzerland with regional offices in most of the major media markets. VAN spoke with Kai Henniges, CEO of Viewster, about how the company is selling its inventory (hint: private marketplaces are working very well in some markets), about how licensing deals are restricting the growth of premium video, and about the prospects for mobile video.

Could you give a little background on Viewster?

We started in 2008 as a video-on-demand company and we initially had more of a B2B focus where were supplying device manufacturers with movies in the days when movies would come preinstalled on mobiles. We were also working with TV manufacturers who came to us and said they needed an end-to-end product from us, which we were happy to provide.

We then took on some more money from investors and at that point we reached a crossroads where we realised we needed to also consider B2C. We’ve grown into a company of 25 people spread across various locations, with our head office in Zurich, our technology team in Romania and Ukraine, and offices in London, California, Singapore and Australia.

So we’re spread across all of the busiest markets. We’ve 150 suppliers of movies and TV shows, much of which comes from Hollywood but also local language content from the markets we’re working in. The most prominent company we work with is Warner Brothers and we’ve got more of those deals in the pipeline.

We feel we’ve come into our own as a full-on, consumer-facing play that shows as much content as we can, most of which is free of charge and ad-funded. Some of the content is so new that we can’t get rights to show it on an ad-funded basis so we have to make it paid. We also have relationships with literally all of the device manufacturers and have apps preinstalled on connected TV, tablet, mobile. Since we launched our connected TV app with Samsung we’ve been one of the top three apps in multiple markets.

In the early days we were having trouble with our payment system, so we decided to remove it and make everything available for free. This worked out very well for us as we’ve learnt a lot about usage patterns and behaviours. People love ad-funded content and people love free. Last year, we reintroduced the payment system as a way to up sell and it’s important as part of our deal with the major content providers.

So how are you selling your inventory – through direct sales or are you selling anything on networks or programmatically?

We’re using all of the above right now. We are working with a multitude of ad networks, particularly in the more evolved markets like the US, the UK and Australia. Over the last six months we have started to develop more relationships with agencies and trading desks ourselves. In Australia we’ve got a private marketplace running which has helped us to lift CPMs quite nicely.

Contrary to the belief that RTB leads to falling prices, we’re finding a month on month increase in net CPMs inventory sold by RTB. Video is scarce inventory and we liked to be sold out so we don’t come in right at the top of the price range, like say Hulu does, but even where we are as an independent company we see a month on month uplift which speaks for the fact that there isn’t so much high quality content around.

What is Viewster doing with connected TV and how much attention are you giving it at this early stage?

Viewster comes pre-installed on most internet connected TVs today. It’s important to have it as part of the mix because it gives us a lot of credibility as we’re genuinely cross-device, so the consumer can start watching on one device and continue on another.

However, effective usage is still below what we would like for a variety of reasons. – For instance on the web and on mobile we can directly drive users to us through search engine marketing and optimisation, or by drawing them in from YouTube or Facebook, whereas this is not possible on a connected TV. The other thing is that many connected devices still remain underused, although we’ve also done deals with manufacturers to supply them with movies to persuade people to connect their TVs.

That said, we think the downloads for our app are good and compare favourably with the figures I’ve seen for the major media companies. But it is still a lot smaller than the other platforms.

Why is premium inventory still scarce online?

I think it’s because video is quite possibly the hardest part of the Internet to operate in. The Hollywood studios make a lot of demands in terms of the margins they’d like to see or the views they’d like to generate. Then we’ve got to employ DRM and observe age ratings in local countries. You also never get global rights to a film and on top of that we have to encode and encrypt every film for each of the platforms. And then you also have different languages.

So all of this makes the cost of working in video relatively high, so I can see how, for example, if you’re running a product in the social space, where the product creates itself through social interaction, that’s obviously a lot easier than doing what we’re doing. Even video platforms that use semi-professional content gets a far easier ride that we do.

Are the problems with licensing inevitable or could something be done to improve the flow of content around different markets?

Licensing is always a relationship business and people want to see you. They usually want to see you more than once and feel comfortable with you. This applies to the larger end of the spectrum as well as at the independent end of the spectrum. When we started out five years ago, people would give us all rights to all territories because they weren’t using it online and they didn’t think we’d make much money with it either, but they’d give it to you if you asked nicely enough.

Since then usage patterns have changed, Netflix has caught everyone’s attention and they’ve paid big money for rights. Content owners now look very carefully at the rights they give you, for which territories and at what price. But there’s a threshold you cross when you grow to a certain size and once you prove you can make the studios money. We think we crossed that threshold last year.

What kind of impact – if any – is online video having on TV advertising?

You still see TV usage increasing slightly in the US, but I think what’s happening is that the ageing populations are driving those rises. Many young users – and I would put that cut-off at approximately 40 and below – don’t even have a TV any more. The whole concept of appointment viewing is/will be alien to them. We’re already hearing that from some of the media buying agencies we’re working with. Some of the big brands are finding it harder and harder to find their audiences on TV.

We think there will be a watershed moment similar to when all of the small ads suddenly disappeared from the newspapers and moved to online platforms. That process started around 2005/2006 and over the space of five years it all shifted. We think we’re seeing the beginning of that move now in terms of TV budgets moving online.

Some people in the industry are concerned about whether budgets will cross over to mobile because of the smaller screen, accidental clicks etc. How is mobile working for Viewster?

Demand is outstripping supply for us on mobile. We see good prices and one of the things we did last year was to convert all of our ads into VAST 2.0 tags, so customers can then run cross-platform campaigns and easily allocate their budgets towards advertising on specific devices. Mobile of course started out with people hard-coding ads into the content, but we didn’t get involved at that stage of the game.

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