Content's Never Been a Profit Center, So Why Should It Be Any Different Online?

Content and marketing are connected at the hip.  Content amplifies marketing, and marketing fuels content.  Increasingly the line between the two is getting blurred, until some scandal or controversy brings back the adage that church and state ought to remain separate. 

Everything old is new again, right?

But now, we’re on the “future of marketing is content” train ride, and we don’t know when we’re getting off.  Part of this convergence stems from the so-called death of the 30-second spot. The reality is that television is doing quite well: advertising in the U.S. crossed  the $70 billion mark for the first time ever, and paid TV companies added another 484,000 clients in Q1. 

Yes, viewers are moving online, but despite billions of connected devices out there, it’s unreasonable to think that in the slugfest between TV and the Internet, TV will lose.  But the fact remains that with falling rates, the pre-roll isn’t enough to fund online content. 

For content to survive -- let alone thrive -- it needs to make economic sense.

Someone left common sense back in the analog world

On television, media companies fund the production, marketing and distribution of content, money they then recoup over time through advertising, sponsorship, subscription, licensing, theatrical and home purchases, and so forth.  Occasionally, content loses money -- it is a “hits” business, after all.

Online, we treat content as a profit center.  Like advertising, content generally bears a negative ROI early on.  Content isn’t a widget (in the economics/accounting sense), where producing it at X amount of money and selling at Y will yield a profit, provided Y is greater than X.

It’s a new medium, but not one for the faint of heart

Most of the new-media content businesses ceased producing content.  Once it became clear that they could not produce content at a sustainable cost, they chose exclusive licensing deals over production.  Next New Networks (acquired in 2011) and Revision3 (acquired in 2012) shifted to identifying existing programs and then bringing them in-house. 

Even though for traditional media companies (TMCs) online revenues are incremental in theory, in fact they cannibalize traditional sales -- so naturally TMCs have refrained from publishing aggressively online.  This has led to piracy of their super premium content.  But TMCs have also hesitated to produce premium Web programming. 

That hesitation stems partly from the expectation that content ought to fund itself from the get-go. Print-centric companies like Hearst, Conde Nast, or the New York Times could have led the way in online video production (since for them it’s incremental to print and doesn’t cannibalize TV revenues, since they’re not TV-centric media companies), but they haven’t.  

Enter Sponsorships

While branded content remains the wild card that could make programming’s ROI skyrocket, it remains a promise.  Sponsorships will drive video funding for years to come. While ad networks continue to focus on pre-rolls, this leaves the opportunity for other media companies to jump on the opportunity with their sales forces.

What about e-commerce?

Of course, focusing on multiple sources within advertising (be it pre-rolls, sponsorships or branded content) is still not a truly diversified strategy.  Some might turn to e-commerce.  I asked Ben Lerer, CEO of Thrillist, for his thoughts: “Many commerce companies talk about content but not actually invest into it properly. I think part of the reason for this might be that without directly monetizing content through advertising sales, content gets relegated to the cost side of the business rather than being seen as a profit center”.  Thrillist and Sugar Media have positioned their companies to generate dual revenue streams from advertising and e-commerce.

The “user propensity” to…

If your site’s DNA is content, it’s very hard to introduce commerce as an afterthought (same way, perhaps, that Google can’t nail social or Facebook has challenges on mobile -- it’s not something one staples on).  So if you plan on generating e-commerce revenues via video content, you have to seed it early on and foster it in your editorial strategy.

Whatever your plan to recoup your investment in content, it’s worthwhile remembering that the company that produces the best content at the lowest cost will have an edge over time -- but a “low enough” cost is good enough; the focus ought to be on the revenue side of the equation.

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9 comments about "Content's Never Been a Profit Center, So Why Should It Be Any Different Online?".
  1. Mark Burrell from Tongal , May 14, 2012 at 12:52 p.m.
    well said!
  2. Mike Einstein from the Brothers Einstein , May 14, 2012 at 1:28 p.m.
    A quick review of radio/TV history from the 1930s and 40s proves you wrong.
  3. Robert Repas from Machine Design Magazine , May 14, 2012 at 1:36 p.m.
    Just remember, without content, marketers have nothing to sell. To claim content isn't a profit center is ludicrous...it might not be a center, but there sure isn't any profit without it. People don't tune in to see commercials (with one notable exception, the Super Bowl.) If they did, then we would have nothing but advertising networks showing nothing but ads. As for sponsorships, seems to me that was the way TV ran back in the 40's to early 60's. As they say, everything old is new again.
  4. Ashkan Karbasfrooshan from watchmojo.com , May 14, 2012 at 2:14 p.m.
    Hmm... I never said content isn't or can't be profitable. I said content shouldn't be a profit center. Mgmt guru Peter drucker coined the term and regretted it, arguing in hindsight that "only the client's cashed check is a profit center". In that context I'd argue that content is basically a "cost of goods sold" and if quality matters then the objective isn't to minimize it at any cost... Which makes sense if content = marketing,P no? The profit center would be the audience...
  5. J A from Content Guru , May 14, 2012 at 2:16 p.m.
    Content can be a fabulous content center. But for operators content has become a means of winning customers for Internet services with 70%+ profit margins and other bundles. You're dead on about content not being in a company's DNA = content fail. The philosophies of YouTube and Google, respectively couldn't be more different. Listen to Eric Schmidt continue to shoot his mouth off about building the best widget versus YouTube spending $300 million to license/market great content.
  6. Jaffer Ali from PulseTV , May 14, 2012 at 2:30 p.m.
    Very well articulated...Ash, you consistently have a clear head regarding online video.
  7. Paul Cosway from Ressen , May 14, 2012 at 5:26 p.m.
    While it can be tricky to clearly identify the ultimate source of revenue, the basic TV/radio model is to give away the content (to consumers) and charge for the audience/attention.That is a hard model to break.
  8. Walter Sabo from SABO media , May 14, 2012 at 5:38 p.m.
    Content has been extremely profitable for HITVIEWS. YouTube is making an insane error in paying for what it believes is "premium" content. Yes, it's premium in the movie theatre or TV but they will learn that what you are looking at right now is not a TV. When they learn that, they will realize the answer has been on their site from day one.
  9. Reg Charie from DotCom-Productions , May 14, 2012 at 7:06 p.m.
    How about comparing apples to apples? "Content" as taken in the context of a website is not the same as what fleshes out a tv production. In the case of a website "content" is considered what is being offered, sold or rented. You have to think of online content as you would the inventory of a brick and mortar store.