Interview with VeriSign’s Jeff Richards

Sometimes clouds really do have silver linings, as this week’s Sound Off interview shows.

During NAB2007, an overcommitted schedule prevented a visit to VeriSign. Setting up an interview post-show proved equally difficult — at least until last week.

But the reward made the two-month wait worthwhile. Rather than a 10-minute booth visit, a highly informative 45-minute telephone interview about Internet TV was the end result.

This week, Broadcast Engineering presents part one of that interview with Jeff Richards, VeriSign VP digital content services. In part one, Richards discusses how Internet TV is developing. In part two, he lays out how Internet TV is likely to affect the network-affiliate relationship, as well as what it’s doing today to movie studios and other content owners.

BE: When I think of VeriSign, I think of secure payments over the Internet. What’s the company’s involvement in the Internet TV space?

Jeff Richards: A lot of people think of VeriSign for secure payments, and the funny thing is that we sold our payment gateway business to e-Bay last year. It’s actually a business we aren’t in anymore, but everyone obviously sees the checkmark on the Web. It gets about 100 million impressions a day.

The fastest growing and most exciting part of the company is focused on content. Our Digital Content and Messaging Business was started four years ago from scratch and today is about 750 people and well more than $100 million in revenue.

We’ve gone from nowhere to being a pretty significant player in the content space. Most of what we do is B2B, so you never see our brand. You see other people’s brand, but it’s running on our technology.

For example, we do a lot of the interactive voting in the mobile space. So when you see an advertisement to vote on “American Idol” or “Deal or No Deal” or “The Apprentice,” and it says “Text your vote to 45897,” that’s all run by VeriSign.

Over the past year, we built out our presence in the broadband content space, launching a content delivery network that really combines what you think of traditional content on the net — streaming and download — with the ability to use our secure pure-assisted platform.

We bought a company called Kon-Tiki, which at the time was the largest secure peer-to-peer network platform we could find in the market and still is. It’s used by companies such as BBC, Channel 4, Sky in UK, and AOL Video In2TV and IQvideo here in the U.S.

So we are a very large, but unknown, player in the content world because everything we are doing is sort of the brand behind the brand.

BE: What’s your perspective on the size and potential of the Internet TV market?

Jeff Richards: We’re certainly seeing a pretty significant spike in download activity, actually both streaming and download. I would say the biggest trend we are seeing is that people are moving toward quality, so sites that are putting out higher quality video — whether it’s a higher encode rate or just a premium studio content — consumers automatically switch to the higher quality. It’s without fail that they immediately go to the higher-quality stream.

A second trend is we are going to see a lot more studio-quality video hit the net. We are seeing a lot of our customers who are moving forward with their plans to launch sites. We are absolutely seeing more studio-quality content hit the net, and then obviously when you see the News Corp. NBC joint venture — their site will go live later this year — that will be studio-quality content, and it will be syndicated out as well.

The third thing we are seeing is advertising. Anyway you slice it, advertising is going to pay for the bulk of this content being distributed to consumers. So we are seeing a lot of venture-funded startups that are coming up with new and innovative ways to plug advertising into the model here. And I don’t think anybody’s cracked the code, and most players are in experimental mode, but that’s something we’ve seen a huge uptake in activity on in the last six months.

Then the last one is syndication. A lot of the studios had an original strategy of setting up their own shop and waiting for people to come to that. With the advent of things like YouTube and MySpace, they’ve pretty quickly realized they need to move into a syndication model.

BE: Will the bandwidth be in place to sustain these business models as higher-quality content begins to dominate?

Jeff Richards: Humans are an amazingly adaptive species. I remember when I was growing up, everyone was worried we were going to run out of land, run out of water and run out of energy. Somehow we’ve continued to survive — not that they are not issues, but we’ve figured out how to survive.

We will continue to figure out how to survive the coming issues of bandwidth challenges.

BE: Broadcasters until recently haven’t had much of a feedback loop, certainly nothing like IPTV or even cable can offer. Where do you see the opportunities for interactivity leading for broadcasters as they pursue Internet TV?

Jeff Richards: We have seen a huge surge in interactive TV. That market alone has gone from a market that didn’t exist to well over a $1 billion market. Just to give you a sense, 80 million people voted in the finals of “American Idol” last year. That’s more people than voted in the presidential election.

I would say the interactive TV notion of 10 years ago that you were going to sit there with your remote, click on a commercial for Cheez Whiz and order Cheez Whiz never really took hold, but the desire of consumers to participate in the show has absolutely taken off.

If you look at what we are doing across the mobile and broadband front, we are focusing on all three screens. It’s the home television, it’s the PC, and it’s the mobile phone. We think we have a pretty strong position across that scope. We think we have a stronger position than anybody else in the space.

BE: Doesn’t this same interactivity potentially offer new revenue streams to broadcasters?

Jeff Richards: There is a second component of interactivity beyond being a part of the show, and it is what is happening with broadcasters and advertisers. It’s no hidden secret that over the past few years, the advertisers have gone to the broadcasters and said, “We don’t necessarily like this traditional advertising model because we are paying you for a certain demographic of consumers who are now fast forwarding through the commercials. And the demographics we’ve historically gotten from third parties have always been a little suspect.”

It’s a very small sample set. The data isn’t exactly accurate. Some of it is manual. So they are looking at the Internet and saying, “Gee, with the Internet side of our advertising, we get extremely timely and detailed feedback. We know exactly what consumers are doing on the net. We can do demographic profiling by IP address.

So, I would say the biggest thing we are seeing happening across the interactive front, or we will see and certainly trying to push along, is the ability for the broadcaster or content distributor to offer a much more enriched advertising market for the advertiser.

BE: How?

Jeff Richards: What will happen is you as a consumer will establish your identity online, which will be secure, and you’ll be authorized as you go to these different sites. You will opt in if you choose to authorize certain sites to advertise toward you, and in return for that, you will get free content or discounted content — whatever the bargain may be.

What you’ll see is that these studios and content producers will be able to go to the advertisers with a much more targeted base of consumers and viewers. Rather than saying, “I can bring you 1 million households that have a viewer between the ages of 18 and 24,” they’ll now be able to go to an advertiser like Nike and say, “I can bring you 150,000 18 year-olds who already own a pair of Nike shoes.” So you are going to see this very targeted advertising world.

What you are seeing is the studios lining up and saying, “Gee, maybe that dollar that I used to get in the old world of advertising, which has now become 70 cents because I’m losing dollars to time shifting, I can now actually get back to a dollar or maybe even $1.20 because I am now delivering a much more valuable advertisement than I was previously.”

The click-through rates on advertising in the Internet video space are off the charts compared to what you would see in television or even a print ad.