Online video service Vudu this week showed signs of financial distress when it hired a new CFO to replace the one that resigned and terminated nearly 20% of its 100-person staff, including former VP of marketing Patrick Cosson.
“The restructuring is all part of the company reorg to focus more on sales and distribution,” an unnamed company spokesperson said. Vudu requires consumers to add two new elements to their online entertainment process. A new set-top box has to be connected to a TV set and users have to use Vudu’s online movie service. There’s a question whether consumers will bring in two new elements to access movies and TV shows that might not be top draws.
Vudu competitor Apple TV, no barnburner when it comes to success, requires a new TV-connected box too but allows its users to access the same iTunes store they are already familiar with. Roku’s Netflix Player also requires that a new TV-connected box be installed but Netflix subscribers can use the Roku box to access the same online store they’re accustomed to dealing with.
The company said the layoffs were necessary to compete in the online marketplace. “It is the normal course of business for fast-growing startups to align resources to meet market opportunities,” said CEO Mark Jung in a statement.
Jung said that simultaneous with the terminations the company is hiring sales and support personnel. Vudu will focus on adding more content and expanding the distribution of its products in both retail stores and via specialty AV resellers. Vudu says it has a library of 10,000 movies that can be delivered in high-definition.
Earlier this month Vudu announced a “bargain channel” that allows users to stream from a rotating list of 99 movies for 99 cents each. It also added a significant amount of pornographic videos.
The online video entertainment industry – from iTunes to Xbox Live – seems to have lots of content but very little in the way of “must see” material. Sony, in announcing an online video service for some models of its TV sets, promised only one “hot” movie, “Hancock.” Sony did promise that its service would soon allow users to connect to Amazon’s upcoming streaming movie service.
Vudu has hired former eBay financial executive Chris Watts as CFO to keep a rein on spending. In addition to financial and accounting matters, Watts will also handle human resources, legal and administrative functions.
Watts’ background is interesting in that he helped grow eBay’s business and he didn’t just count the beans. He was divisional CFO for eBay’s North America marketplaces, including eBay.com, StubHub, Shopping.com and Rent.com. He also spent four years helping eBay launch new businesses in Asia and build its businesses in Europe, including in the UK. Jung said Watts “brings deep experience in translating business strategy into financial and operating plans and that will be immensely valuable to our company going forward.”
The online video services’ biggest competition is not each other, however. It’s the pay-TV operators who don’t want to lose even an hour of their subscribers’ available viewing time.
Basic pay-TV alone has more content than many people have time to watch. Premium pay-TV provides an overwhelming amount of video entertainment, much of it in the “must-see” category.
Pay TV companies have several major advantages over the “for-pay” online video services like Vudu when it comes to “watch what I want when I want.”
For starters, they have more clout with the studios and TV networks in getting audience-appealing content. They already have an established audience for their video-on-demand services. They don’t need to have another box installed and connected to the TV set. They offer DVRs that can store viewers’ favorite shows. Their users don’t have to change the TV’s input every time they want a new source. And their customers can use the same remote control they’re accustomed to.
Additionally, the pay-TV operators have deep pockets and, if necessary, can operate at a loss for a longer period than most start-up online services.
The cablecos as a group have developed two new technologies to help them fight off the Internet and Internet-based video services. DOCSIS 3.0 promises the higher speeds that are needed for delivering high-definition video. Tru2way will add Internet-like interactivity to traditional TV broadcasts – everything from ordering a pizza to voting for the best dancers, and with the same remote control.