• by Erick Hachenburg , February 18, 2008

As the writers' strike comes to a close, those of us in the online video entertainment industry are contemplating what we can learn as we build our businesses into the leading media companies of tomorrow. For me, five things stand out.

1. "Old" and "new" media distinctions are no longer relevant. The lines are blurred, and there's no going back. In fact, it's easy to imagine a world in which the Internet is the only way that content is delivered. Major studios are distributing more of their TV shows and movies digitally. And they increasingly recognize that if they don't, someone else will illegally.

Content originally created for the Web is now being picked up by television programmers. A movie made to look like it was shot on a handheld camera was the largest-grossing January theatrical release of all time. And across the value chain--from talent agencies to advertising agencies--the lines between online and off are blurring. This is not a new phenomenon, but the writers' strike put a spotlight on this fact and has helped accelerate the momentum.

2. Compensation models have to be flexible. As we build online video entertainment into a real media business, we need to figure out how to value content and how to pay its creators. If a traditional 30-minute TV show is being distributed via the Internet, it makes sense that writers receive a cut of the revenues under existing residual-based contracts. It's dangerous, however, to apply this model to short-form original content created specifically for the Internet medium.

As an industry, we are working tirelessly to monetize our content, and we need the freedom to explore a number of different compensation models for creators to ensure our shared success. In some cases, a one-time upfront payment may be the best choice. In others, an ongoing revenue share may make more sense. Or maybe it's a flat CPM. The point is that no one yet has the monetization formula for online video figured out, and there may well never be a one-size-fits-all solution. We'd be doing ourselves--and the creative talents who fuel our content pipelines--a huge disservice by adopting the status quo.

3. Rights structures need to be simpler. Just as creators should be paid for the online distribution of their work, copyright holders should be respected and fairly compensated online. Again, however, it's dangerous to apply the old system to a new medium. The unbounded nature of the Internet makes it extraordinarily difficult to monitor and manage where any one video appears--let alone the millions that are now on the Web.

The existing rights management structure is complicated--and requires significant time and money to monitor and manage. Take music as just one example: it's often unclear who needs to get paid, how much they should be paid and how to actually execute a payment for a snippet of one song that is included in one of those millions of videos. To take full advantage of the power of "viral video," we need to simplify the rights structure for content. If we don't collectively come up with a simpler solution, we'll stifle the growth of the online video industry--limiting the potential benefit to copyright holders along with everyone else.

4. Content, content, content. Audience tastes and preferences shift rapidly in a hit-driven industry such as entertainment, and what was hot last fall may well be a "not" this spring. Media companies must be nimble in reacting to these shifts and responsive in delivering content that suits viewer preferences in the here and now. One key to meeting this imperative is to have a huge breadth and depth of content available, which the Internet makes possible in a way never previously imagined.

Online video has broken down the barriers to distributing content, making it possible for creators--large and small, established and emerging--to find their audience, regardless of time or place. What we see online is that viewers' appetite for content is voracious. Without the constraints of a weekly programming schedule, people consume staggering amounts of entertainment. Perhaps the best parallel in the offline world is the experience of watching a TV series on DVD. I can tell you, for example, that I have never once watched only one episode of "24" at a time. One of the advantages that online video offers its viewers is the ability to consume as much entertainment as you like, whenever you're in the mood, wherever you may be. That's powerful.

5. People's Choice rules. The Internet has sparked a power shift in the entertainment industry, and "the suits" now play a much less important role in determining the hits. As online video sites like Metacafe democratize the entertainment experience, it is the viewers themselves who determine which writers, directors and actors realize fame and fortune--much more so than ever before.

Media companies no longer control the distribution or consumption of content. They--we--must embrace this fact if we are to be successful. This is the kind of shift that can prove simultaneously exhilarating to the little guy and terrifying to the big guy--but ultimately, I believe it is beneficial to each key stakeholder in the value chain, and helps advance the industry as a whole.

This is just the beginning, of course, and we are learning each day how to better deliver exceptional entertainment experiences via the Web. So many declared the race over when Google acquired YouTube. Nothing could be farther from the truth. Over the course of the past year or so, online video entertainment has gone truly mainstream--with about 75% of U.S. Internet users watching online video monthly, according to a Frank N. Magid Associates study conducted in July 2007.

Over the course of the next year or so, I predict that a handful of leaders in the space will successfully turn online video into a real business--meaning that we're delivering outstanding original content that attracts a large and diverse audience, which in turn attracts marquee brand advertisers. Online video is still in its black-and-white era--on the cusp of its golden age--and I'm excited about the opportunity in front of us.

Hachenburg is CEO of Metacafe, a video entertainment site with more than 28 million unique monthly viewers.