The Real Bottom Line For Streaming Video

by Wayne Friedman, Feb 15, 2007, 1:30 PM

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What's your average cable or broadcast network really pulling in advertising-wise for its digital video downloads and streams? The results may be a tad smaller than current headlines about the new business may be shouting.

One veteran cable network sales executive works the math this way: Start with the number of 1 million video streams in a month for an advertising-supported network-owned Internet site. "That's a pretty good number -- most cable networks are well below that," he says.

Now factor in a high network-like prime-time CPM price of $25 per thousand, he says. That means you have a cable network pulling in $25,000 a month - which at the best of cable networks might give an advertiser one thirty-second commercial airing in one prime-time show.

"OK," says the executive. "Now, let's get crazy. Everyone is talking about how those streams on the Internet are worth way more than on network. Let's say they are getting an even bigger $40 CPM." At that level, he says, this gives some major established networks a grand total of $500,000 a year.

How does this compare to, say, a TNT or TBS or USA Network? A drop in the bucket -- make that a spritz. Each of those bigger established cable networks pulls down anywhere from $600 million to $900 million a year in traditional national advertising sales.

What about a top-flight broadcast network? At the high side, ABC says it does 3.7 million streams a month. At the high $40 CPM level, that means ABC does $148,000 a month -- which probably wouldn't even get you one prime-time spot on "Men In Trees." Grand yearly gross total for ABC video streams: $1.78 million a year in advertising sales. By way of comparison, during last year's upfront ABC did $2.1 billion to $2.3 billion.

For sure, there are other valuable factors to consider with a network's Internet business -- residual effects of marketing, as in what their sites do to promote and lure viewers back to their traditional TV showings, with virtually no new production programming costs. Additionally, we haven't considered the value of banners, buttons and so forth. We also haven't added money from those pay areas, iTunes Music Store, for example.

Then again, there's the possible downside for advertisers of the whole measuring issue for streaming video. Do you count someone who has watched part of a video? All of it? What about those downloading "The Office" but who haven't watched it yet? What about people who have watched it in parts on a network-owned site, then on YouTube, then on their phone?

This isn't an argument against digital delivery of traditional TV programming and the "wherever, whenever the consumer wants it" common refrain from network chiefs. It's just some perspective from a straight-ahead advertising point of view -- one that perhaps network sales chiefs are really looking at when formulating their current media sales strategy.

One last calculation: Look at the top 35 networks, broadcast and cable, making $1 million or so dollars a year from advertising on video streams. Then get crazy, again. Jump this up to, say, $5 million a year for each network on average. Right now that comes to $175 million for stream video advertising that traditional TV networks are offering.

Not chump change for sure. But put this $175 million against the TV industry total of $80 billion, and you see what the Internet really means to network right now- that's 0.2% of their total business.

So during this upfront season, what are TV sales executives really going to be working on?

There is a pie in the Internet sky, for sure. But right now this isn't even about crumbs. It's about the molecules holding the sugar and flour together.

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