Q&A: MeTV.com's CEO Jeff Pescatello
Ambitious is the best word to describe MeTV.com (http://www.metv.com)--perhaps even overly ambitious. The company's ultimate goal is to deliver full-length, full-screen movies over broadband Internet connections.
The company has a "proof of concept" site where surfers can go and watch some not-so-well-known movies, watch TV previews, listen to music and more. Yes, the video is full screen but it's not quite DVD- quality. MeTV.com uses Windows Media video then lets users expand the window to full-screen mode.
Currently MeTV.com has focused on making deals with DSL providers to supply content to broadband customers. But MeTV.com's main goal is to strike deals with the major Hollywood studios, which to date have been afraid of releasing any movies online.
Streamingmedia.com contributor Scott Bass spoke with MeTV.com's CEO Jeff Pescatello to talk about the company's broadband future.
Q: I guess the first thing I would want to ask is that your site talks about online movie rentals, but it's not actually being done yet. Can you tell me what's on the site now and where you are trying to move?
There are actually two sides to the company. There's MeTV.com, which is really a promotional vehicle for movie studios, record companies and TV networks to promote their content to our broadband user base through all partnership with broadband ISP's, whether it be DSL or cable ISP's. And then there is MeTV Network, which actually works as a video on demand and video services primarily for the telephone industry.
Q: I see. So you are currently providing the telephone industry with -
We are currently working with DSL companies and some of the telephone companies, too. We're in the initial states of starting to put video servers inside of their networks creating secure private networks so we can provide video services to their customers direct to their television. Either through a set top box device or by using our hardware and software that uses the computer as a set top box device and then transmits it to the television and allows them to operate it with a proprietary remote control.
Q: You're offering a device for sale on your site that will transmit computer video to a television. It looks like a co-branded X-10 unit. Is that what it is or is it something else?
Well, it is made by X-10 (http://www.x10.com) for us, but it's made to our specifications.
"I don't think that major studios are going to license content for the public Internet as we know it. That's why we're working on these secured private networks."
Q: What's the scoop for just the average Joe Surfers that come to your site? When is it going to be pay per view and movie rentals on a large scale?
Well, actually we signed a deal with Intel Media Services to do the distribution of our program. We were waiting for Intel to build up their network a little bit more so we would have a better quality of service. Intel should have about 12 servers up and running by the end of this month across the country and then I believe around 26 servers by the end of the year. At that point in time, we'll start offering pay per view services.
Q: Do you have the licenses or the agreements in place already for obtaining the content?
Well, the major studios are kind of - there's kind of a two-fold thing there. I don't think that major studios are going to license content for the public Internet as we know it. That's why we're working on these secured private networks. We actually have control of where the content goes and you're really being authenticated through the IP addresses of that particular DSL or Telco provider. So for instance if you're in New York and you're getting service from Horizon, you would only be able to see what's on Horizon's particular thing. If you are in Los Angeles and you are getting service through Pacific Bell, then you would only be able to get what's on Pacific Bell's network. You couldn't go from Horizon and see what's on Pacific Bell's network. I think that stuff would be - is what we will see happen in our industry. We'll have these much smaller networks that we can control the territory and the digit rights management a little bit easier than stuff that's on the public Internet.
Q: In short term, you said that you don't think that the big studios are ready to stream new releases to public Internet users. Who do you envision as being the customers for this?
Well, what our company is trying to do is really create a cable TV headend inside of the telephone industry and provide video on demand and video services to their customers. Initially, the quality of service is limited to how they are building out their broadband network. So for instance, if Pacific Bell was building up their network to be 600Kbps, then we're limited to stream at 600Kbpswhich is around VHS quality. Other companies are building out to be a 900Kbps, which is better than VHS quality. So depending on each of the DSL providers and how they are building their networks, we will provide video to those specific DSL partners based on how their network is being built up today. So it's almost like when the cable industry was starting, in the late 70's. There were a lot of little tiny cable companies and they started up in all the major markets first and they spread out to the medium markets and into the small markets. That's kind of what I see happening with this industry, the same thing. We'll concentrate on the big markets where the DSL penetration is greatest and then we will move to the medium market. Then, we'll move to the smaller market and then there will probably be some sort of a consolidation.
Q: Speaking of which, you recently struck a deal with iNYC.com. Can you tell me about that?
Yes, we did. One of the things that we saw early on was we needed to have relationships with DSL partners and we started with what's called a DSL enhancement program which starts with a tier one and moves to a tier two and then to a tier three. The tier one relationship, we basically provide a DSL partner with a limited amount of content so they can show people what they can get on their site by signing up for broadband. Tier two moves into more of a branded towards the DSL partner and it's more powered by MeTV and then tier three, we actually work with them to put a video server inside of their network and provide true video services to their customers.
Q: Are these video services for the content currently on the MeTV site or are you talking about other third party content?
The content that they are getting right now is generated off the MeTV site and all the stuff is either owned or operated or licensed to MeTV.
"We were doing [the site now] more for proof of concept to say: 'Look, if we can do it with this type of content, we can pretty much do it with any type of content.'"
Q: And can you tell me a little bit about the content that's on the site now and what its origin is? For example, I noticed that they are all not rated. Does that mean they are all independent films? What's their origin?
All of the long format stuff that we got, we purchased from smaller producers that are looking to generate revenues for their particular content. We were doing it more for proof of concept to say: "Look, if we can do it with this type of content, we can pretty much do it with any type of content." The reason we did that is because we can strike a licensing deal that was financially acceptable to us and to the content creator. Whereby, we would have certain rights to broadcast that content over a period of time without having to pay royalties for every time it was played. And really, for a proof of concept thing, it worked out well for us. When we start getting into the pay per view arena or when you are talking with major studios, the licensing deals will be different where there will be revenue splits. Until we had our system built out, we didn't want to get involved in that.
Q: Do you plan to feature made for the web content or are you exclusively looking to movie rentals to the on line's fair?
Yeah. I think the primary focus will be around traditional TV, music and movie content. That doesn't mean that we won't strike deals with companies like Atom Films or iFILM. We have talked to them in the past and that may be something that we add to the site, but primary we're looking at establish content creators and promoting that type of content on the site and on the MeTV private networks.
Q: Using the analogy of music, a number of sites have played with models where they are trying to charge for downloads and no one has really been too successful yet. I think one of the common criticisms is that they are trying to charge too much. Like the new Universal effort whey they want $2 a song. That just seems kind of high. How do you imagine the pricing for streaming video rentals?
The way I see it happen is exactly what RealNetworks is doing and we actually have the same system getting ready to go into place as well and I was very happy to see RealNetworks do it. Basically charging a subscription per month for a pool of content that we get from the record companies. Basically, it's $9.95 that they're charging. We'll be charging $9.95 or maybe $12.95 per month and that gives you access to that content for the whole month. And then there would be a revenue split to the music label.
Q: How do you figure out that split? Is there a cap on usage?
Again, there is nothing set in stone right now. The thinking would be that you would take the total revenue generated for the month and then divide it out by each of the record companies that participate and there would be a formula to figure out how much each person would get paid.
Q: I see. So it's not necessarily a "per play," it's just a -
Well, it would be. I mean, obviously, if a record company had 100,000 plays and another record company had 20,000 plays, the one that had 100,000 plays is going to get paid more.
Q: You guys are selling DSL subscriptions - you're actually pushing DSL on your site. A lot of broadband content sites aren't doing that. Is this as a result of your ties with the DSL providers… is this a significant part of your revenue model right now?
Absolutely, it is to drive broadband. We are looking to be a broadband site destination portal and in order to help proliferate that we're trying to push broadband in any shape or form that we can.
Q: Is it really just about getting good position for an impending broadband explosion or if I can rephrase: how do you support 375Kbps-streaming video in this stage of the game?
Well, I think you really have to have a company that's distributing the video for you. So you either really need to have a company like Akamai, Intel or iBeam that's going out and putting edge servers out there. So it's important for a company like us to partner with somebody like that. We happened to choose Intel and we are very, very happy with the way things are going with Intel. That doesn't mean that we're not going to do something with Akamai or iBeam down the road. You definitely need a company like that to help support you.
"I look at MeTV.com more as a promotional loss leader for us. . .it's going to be able to support itself fine. It's a way to promote our main product, which is to secure private networks."
Q: In terms of how the site supports itself regarding, not just the ability to deliver that video, but just the ability to be able to afford to provide that video, is it based on ads or what's the primary source of revenue?
Today it's advertising generated and I don't think there are a lot of streaming companies out there making a lot of money off of ad revenue today. Especially banner ad revenue. Banner ad revenue is very, very low right now. The exciting thing is that streaming advertisement is starting to come of age and I think you'll see by first quarter of next year, the revenue generated from streaming ads will be significant. That being said, we're in a build out phase. So we look at MeTV.com more as a promotional loss leader for us. Over time, it's going to be able to support itself fine, but today it's more of loss leader. It's a way to promote our main product, which is to secure private networks.
Q: What do people have to look forward to in the next coming months?
Well, I think we found some really good content deals with some good companies. I think you'll start to see a lot more content from us. I think you'll start to see a really aggressive roll out with broadband. We've got some great broadband partners that we're getting ready to announce. I think one of the very exciting things that we're doing right now, is we are doing some trials, closed trials, with PanAmSat (http://www.panamsat.com) and Qwest, now in the Denver area and I think we'll see up to 100,000 customers there. So I think there are some pretty exciting things happening in the next several months that will get a lot of people's attention.
Q: Great. The actors that appear in graphics on the website, are very excited. What show are they are watching?
I couldn't tell you that. You would have to ask the graphics department.
Q: Okay. Those were happy, excited people.