The Web Video Challenge: Can the Big TV Players Be Leaders Again?

by Matt Farber, Apr 6, 2012, 7:30 AM

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As Internet-based original video content platforms emerge, companies like YouTube and Machinima have already claimed seats at the table and are generating significant revenues. The veterans are taking notice and scrambling to find their place. Some will move quickly and get a prime seat, some will buy theirs (e.g. Alloy’s recent purchase of Smosh), and others will move cautiously running the risk of being relegated to the kids table.

So what will it take for the big television players -- the programmers and producers -- to be the big players in IP-based video? What do the Viacoms, Scripps and Fremantles need to be doing to sit at the head of the table?

Study the economics and invest anyway.

It’s time to commit the resources.

It’s hard to justify allocating significant money to a business that currently generates additional pennies when focusing on your core business still generates additional dollars.  Or even worse, substitutes pennies for dollars.  

When the biz dev folks at NBC run the numbers, it’s hard to convince management that devoting resources to create original Web video content should come at the expense of creating the next "Real Housewives" franchise.  

It’s hard for MTV Networks to justify that watching "South Park" episodes on Comedycentral.com trumps watching them on the linear cable channel -- an episode on television has about 14 ad units, while the same episode streamed online currently has about six.  

Why would Mark Burnett want to develop and produce the next "Survivor" for Yahoo when the profit margins are miniscule?  

It wasn’t long ago that broadcast networks and television studios felt the same way about cable programming and the related economics. ABC and Carsey Werner probably thought "House Hunters" was quaint.  A show about shopping for a home that costs under $50,000 per episode? That’s not quality programming, and there’s not big money in that -- we need to focus on creating a lead out for "Roseanne."

Turns out, Scripps built a pretty good business with such lower-cost niche programming that viewers seem to enjoy—and now ABC does "Extreme Home Makeovers" in prime time.

Today, Revision 3’s “Epic Meal Time” costs just a few thousand dollars per episode to make and each one averages 3 million views across YouTube and other platforms. They are making money, as are others -- the economics can work!  While it’s true that revenue pales in comparison to a hit TV show, that is evolving.  

Inject the company with new DNA.

It’s time to expand the culture.

There’s a reason that Rolling Stone didn’t create MTV, and MTV hasn’t give birth to a YouTube.  On the production side, Aaron Spelling didn’t build an Endemol, and Endemol hasn’t launched a Machinima.  It’s not in their cultural DNA.

The same people that think about programming, producing and monetizing “television” aren’t going to be the out-of-the-box thinkers for original video content creation, marketing and monetizing on new platforms.  They are great executives and managers, but not great entrepreneurs and inventors. They are celebrated internally and each department head of the core business has a seat at the table -- digital usually has only one.  

Most of these executives manage functional specialists to create content and manage brands and have sizable infrastructure.  Cross-functional, entrepreneurial roles that nurture the new and keep costs down are not the norm.

Leverage your competitive advantages.

It’s time to utilize your assets.

The big players have advantages that upstarts don’t.  They have the resources -- financial and personal -- and don’t have to worry about raising the next round of funding.  They can “pivot” easier as they experiment and fail.  

Networks have promotional loudspeakers in their existing cable/Web properties that these new companies would kill for. Production companies have access to talent and production resources that the new entities are trying to build.

The brand names, infrastructure and resources of these companies can attract the great talent that exists in the new world. The dinner bell is ringing.  It’s time to take a seat.

























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