Here’s an excerpt from a blog on this topic that I just posted on the Inlet site:

1. Consumers WILL pay for content that they really want, especially if they can’t get it on traditional platforms. I know this because consumers ARE paying for online content. Major League Baseball Advanced Media generated $380 Million in subscription revenue in 2007, up from $317 M in 2006 with their MLB.tv service.

2. Ads do and WILL continue to support viable business models for content delivered online. Mark seems to have found the one Analyst whose research supports his claim. I think I’ve got the weight of the evidence on my side, but you be the judge:

o For 2008 March Madness, CBS ran equal amounts of ads on TV and online – and they made $4.83 in advertising for each of its 4.8 M online viewers and $4.12 for each of its 132 M TV viewers (Washington Post, April 08)

Here’s an example: A 30 minute clip with two advertisements will yield 1/8th the ad revenue as conventional tv. Perhaps this is true. If my web “season” is 10 episodes, I’m getting 20 ad placements per season.

However, a 4 minute clip with 2 advertisements (head and tail) and a season of 80 episodes will yield 160 ad placements, overcoming the per-placement value disparity. Additionally, a web video constructed in a certain way (see Zero Punctuation) will yield multiple views per video per visit, across multiple visits. This kind of viewing paradigm creates a higher per-eyeball value than tv, even if that value is spread across multiple advertisers, multiple visits, and multiple ad spaces (video ad, text ad, sponsor banners).

However, even this does not represent the shifts that I see occurring. Web-driven DVD release alone has tremendous possibilities, allowing more premium content (think about a one year later double-length sequel episode) that can be released alongside primary content.

Or four-walling a theater in key cities to show back to back episodes, capped with the premiere of a sequel episode, exclusive merch sales, and signings with cast/crew. (suddenly $12 a ticket doesn’t seem so bad)

Mark Sigal brings up something which any website creator can tell you: web content will be supported by ads, but be monetized most effectively by ancillary markets. For video, this can be merch, soundtrack sales, and licensing into conventional media. Case and point: http://www.homestarrunner.com , a completely independent and profitable flash-based media buffet that has not a single ad anywhere. This is in addition to the conventional website monetization methods (affiliate links, etc.)

In other words, the web content is only the beginning. The goal will be to create a franchise with a core niche audience that will be reached initially through web and monetized numerous times simultaneously and react to derivative work (sequels, etc.) I’m talking about sequels with DVD release being made within weeks of a season’s completion.

I’m currently completing a work that will be released using some of these methods, and developing a series that will be very well suited to these methods. You know, people use the web for a lot of things, not just looking at porn and talking games/tech. There are a lot of large communities already on the web that can be grabbed and placed in front of content.

-Rene

There is a lot on the horizon (and happening behind the scenes now) that is going to help grease the skids for online video. Just because you cannot see it (or dont want to take it into account) doesnt mean its not happening.

Specifically, I don’t think that people will pay for web video for three reasons. One is that the FREE train has left the station, and with every day that passes greater amounts of decent quality FREE content proliferate online. Why pay for the milk when there are plenty of willing cows out there?

Two, most of the content that is watched online are short clips (two minutes or less). This inherently limits the type of ad units that can be considered non-disruptive.

Three, the most popular clips in terms of actual view counts are user-generated, user-captured and/or user-modified, suggesting murky copyright, qualitative bucketing and the like, which again limits total monetize-able inventory and effective CPMs.

Given that, I think that there are two areas where web video will shine. One is as the proverbial bread-crumb drawing viewers back to the broadcast hub, increasing loyalty to watch specific programs, enhancing the brand goodness of specific talent, etc.

In many respects, this is akin to brand advertising for media backed by registration and capture of viewing data that should lead to forms of advertising that are incredibly context specific — akin to the huge CPMs that a LinkedIn generates by having a highly targeted audience engaged in a very specific conversation. It also implies an online advertising 3.0 model that does not yet exist but invariably will (if old media is to realize the value of its assets before they get co-opted & commoditized).

The other area of opportunity is for web video to evolve from the simplistic “player” model to more of an “engagement” model. In this model, new types of media units emerge where video is “pre-wired” with relevant search paths, links to related content, product/business listings and interesting conversations around the clip.

Thus, the clip is antithesis of search — a fully realized “answer” that points to a broad set of engagement questions. Again, this implies a different set of muscles than simple web page or media container, akin to the way that movies are increasingly filmed with cinema, TV, DVD and video game instantiations in mind.

While SEO is part of this equation, I would argue that it is more tail than dog — closer to LinkedIn than to link farm.

I have blogged on the bread-crumbing aspects of this trend in social media in a post called, ‘Breadcrumbs and Conversations.’

Here is the URL:

http://thenetworkgarden.com/weblog/2007/05/breadcrumbs_and.html

Check it out if interested.

Cheers,

Mark

You are correct, if I fail and move back in with my mother, I will no longer be any competition for you.

However, my company represents a total investment of a few hundred thousand dollars. That is a really, really low bar – many series are produced for much less.

What that means? My company isn’t special.

The host of very talented people making great, interesting work will expand dramatically. This stuff will be produced for less and less, cutting into the margins and attentions of those demographics that larger organizations need to maintain their enormous costs.

This is, in fact, happening. Where I live has no bearing on the fact that folks in the media are going to have to learn to live with a lot less.

Outsourcing is coming to Hollywood.

There are certainly niche markets. But are there economics in place so we can make the roomies move out? I wish that were the case.

My prediction: entertainment goes the way of the airline industry. Where we were once served fancy meals by stewardesses in white gloves, soon it’ll be time to bring a bag lunch to the movie theater.

Hopefully I’m wrong! lol

Long time reader first time commenter. Very much enjoy your blog.

m

My last project cost less than $1000 a finished minute. If I can produce content for 1/1000th of his costs, but make 1/8th of his revenue, I have 125x of his margin.

I live on brown rice, in a shared house, with a borrowed car. I’m an independent producer and the stuff people like me are producing is getting better at internet-speed.

I’m not worrying about buying a second Ferrari, I just need enough to keep the lights on and rent the camera.

Like it or not – that’s your competition Mr. Cuban. And it WILL work – it’ll work just fine.