Commentary

For Whom The Video Tolls: Um, Actually, It's All Of Us

In the 30-plus years that I've been covering the video marketplace, I don't think I've ever seen our industry as confused as it is now about what should, at first thought, be its simplest issue of all: how the people who create, package and distribute video programming plan to make money from it.

Whether those folks can actually make money from those plans, of course, is a function of the marketplace: how good their content is, how rare and/or substitutable it is, how perishable it is, how broad its appeal is, etc., but you at least have to start with a plan.

Lately, it seems to me that no one has a plan -- a genuine long-term vision -- for how they want to make money from their video content. Instead, their tactics seem to be simply poking about, changing direction, and going knee-jerk until something sticks. In other words, they haven't got a clue.

This surprises me, because when you think about it, the business models for media content -- especially video content -- should be pretty simple. In fact, one of the best lines I ever heard to describe the model's simplicity was said by industry consultant and pundit Shelly Palmer. Speaking at an OMMA Global conference some years ago, Palmer quipped, "There are only three models for making money with content: I pay, you pay, someone else pays."

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I thought that was brilliant, and it has stuck with me in recent years as I've watched some of the biggest media conglomerates struggle over how to monetize some of the best content ever made. But lately, I've begun to wonder whether there isn't actually a fourth model: We all pay. Let me explain.

 

The reality is that there never has been a singular model for monetizing video content, and almost every successful video franchise has actually exploited multiple streams. Think about it. We all call the "free," over-the-air broadcast TV model a singular, ad-supported one. Still, the reality is that with very few exceptions, the broadcasters or suppliers that have created broadcast television have always relied, in part, on other models too, including, "pay" ones.

Take the traditional broadcast networks. Yes, they derived the bulk of their revenue from selling national advertising time to big advertisers, but they made money in other ways, too. Networks owned local stations that sold advertising to local advertisers, and in some cases, packaged their advertising inventory to create local events and merchandise that tapped nontraditional advertising budgets. But they also made money in other ways, especially through licensing their content and/or signals via: international markets, off-network domestic syndication, and more recently, on-demand, and even iTunes.

And while it has been rare, broadcast networks also got money from consumers paying directly for their content, including home video/DVD repackages, and by selling their signals to third parties (cable, satellite and telco operators) that charged consumers subscription fees.

OK, so retransmission deals have been rare, but if Fox's recent ones are any indication, I would expect see more. And I would also expect to see some of those models begin to migrate online, onto mobile platforms, and to just about any other platform where end users view content.

 

Other broadcasters actually charge consumers even more directly. Public television stations are primarily supported by viewer donations, as well as corporate underwriters. They also have licensing deals, and even more lucratively, merchandising deals. And they even have yet another revenue stream that comes directly from consumers, though most of us don't think about it that way: taxpayer dollars.

 

I use broadcast TV as an example, because it illustrates how diversified its business model actually is for a form of video distribution that we think of as being fairly one-dimensional. And I think it is a good one for people developing online video to think about, too, because when you have content that people want, there are many ways to make money from it. It's just not an either/or proposition.

 

The first time I began thinking this way -- and the first time I started thinking about the "we all pay" model -- was just before the dot-com crash of 2001. I was lucky enough to be invited into a project that former Advertising Research Foundation executive Gabe Samuels organized to help big advertisers, agencies, media content and technology companies get a handle on how things might change as digital platforms began to propagate.

Gabe called the project D-Map, which stood for "digital mapping," and he teamed with Russ Neuman, who was then a professor at the University of Michigan, as well as the MIT Media Lab. He also got some big companies to help sponsor it -- Microsoft, CBS, H-P, and even a couple of agencies (Grey/Mediacom and Universal McCann).

The main feature of the project was to develop an "operating system" that could be used by the sponsors to model and plan for changes in the media content ecosystem affecting how they do business and make money. These changes included technological innovation, policy and regulation, and especially consumer behavior. The project was successful in doing that, though for the life of me, I have no idea what became of those models, and/or how those companies applied them.

But the real reason I'm mentioning it in this column is to highlight another element of the D-Map project: a summit the organizers held inside MIT's Media Lab, in which all the participants, and some invited guests, discussed the various scenarios and their likely outcomes. It was fascinating, and not without some disagreement.

Still, if there was a consensus there, I would say it was around the unlikelihood of a singular business model emerging for the future of monetizing media content. Instead, participants concluded that the future was likely to be an array of hybrid models -- and not necessarily hybrids within companies, or forms of content, but hybrids among different consumer types. In this scenario, the experts said, some consumers might be willing to accept a form of media content chockful of advertising, so long as they got it for free. Others might be less price-sensitive and might prefer to pay to receive the very same content without commercial interruptions. And various other models in between.

In other words, the media content marketplace -- and the consumers who ultimately underwrite it either directly or indirectly -- would continue to behave pretty much the way they always have, even if we don't think of it that way. The big difference is that the creators, packagers, distributors, and underwriters of media content would have to be more flexible in the way they thought about their models, and far more fluid in how they executed them. Kind of how they actually are behaving, despite the rhetoric you hear at industry conference keynotes, or in the media and technology press.

So I'm going to amend Shelly Palmer's brilliant observation about the simplicity of media content monetization models to say that, no matter what you call the model, and no matter how many of them you envision, ultimately, we all pay.

And there's one model I assure you will absolutely not work: the one in which no one pays.

10 comments about "For Whom The Video Tolls: Um, Actually, It's All Of Us".
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  1. Chris Pizzurro from Canoe, January 22, 2010 at 1:51 p.m.

    amen joe...a.k.a. - man does not live on pre-roll alone.

  2. Pinaki Saha from Me!Box Media Inc., January 22, 2010 at 3:02 p.m.

    Great insight and inputs Joe!

    One problem is evident in the confusion - producers and brands are still struggling with the lack of a standardized metric to assess the efficacy of any property or video campaign at this instance. This is partially due to the inertia of a long-practiced monetization framework in broadcast TV that depended on 30-sec spots. Then the other source of the problem is Internet - actually, it is. User interactivity and its zillion metric variables associated with static or dynamic consumption (google analytics) have completely thrown campaigners off. Now, you really don't know whether a coupon code associated with a Netflix ad pop-up in a Mayo clinic site is more effective or a pre-roll of Palmolive Antibacterial soap in a Royal Caribbean cruise video is more prone to conversion.

    This nebulous nature of a property's effectiveness in online paradigm and lack of a user interface that can not only allow users to engage with your content without the feeling of intrusion but can also collect the right engagement data is fundamental to real monetization in the near and long term.

    From the perspective of technology enablers like us, it is paramount that we deliver an interface that makes absolute sense for the end-user in evaluating the value of your content - whether it is delivered through a subscription model or an advertisement model. If the end-user starts looking at your video property as a facilitator of their purchase decisions and as a knowledge provider for their learning motivations, the channels for monetization will automatically evolve from the nature of the consumer demands and usage behaviors.

  3. The digital Hobo from TheDigitalHobo.com, January 22, 2010 at 3:07 p.m.

    Well said, Joe.

    However, other than straight broadcast (TV, Radio), hasn't it always been a combination of that model across most mediums?

    What would a magazine or newspaper cost at the news stand if it didn't have ads in it? What would we pay Discover Channel if we had an a la carte option that wasn't subsidized by a cable carriage charge or retransmission fee?

    I think you're right about the models. Someone, or combination of entities, is going to pay for that content. In fact, its the perception of free content that has consumers in an uproar and content producers scrambling. The perceived value of the product has gone to nil.

  4. Jeff Einstein from The Brothers Einstein, January 22, 2010 at 4:13 p.m.

    Joe, hope you're not too busy to read this. The reason why we can't make sense of the video landscape is precisely because we simply aren't willing to stop long enough to turn down the noise in our own heads, because we aren't willing to recognize and let go of our own failures, and because we seem to have a masochistic preference for complexity over simplicity.

    You should talk to Jaffer Ali, CEO of the Vidsense Video Snack Network. Vidsense not only works for Jaffer, it works for more than 20,000 network publishers, it works for more than fifty major motion picture and TV studios, and it works for lots of major advertisers -- all without any need for costly targeting or data-collection
    technologies.

    More to my original point, Vidsense is just one example of what can happen the moment we slow down, let go and simplify.

    Best to you and yours,

    Jeff

  5. Mike Mcgrath from RealXstream PTY LTD, January 22, 2010 at 8:50 p.m.

    1. if you value your time more than your money then trade money in return for your content
    2. If you value your money more than your time, then trade your time in return for your content and several sponsors will pay small amounts each to show you several advertisements that are not specifically relevant your relationship to the content in question, in return for your low engagement in the advertisements in question.
    3. If you value your money and your time then trade some information in the form of your social graph, and and one sponsor can pay a large amount to show you one high contextual, relevant, entertaining and informative ad in return for your high engagement in question.

    You can choose on the fly based on our current budget of time, money and attention and we the media will be happy to work with you

  6. Chris Moise from Consultant, January 23, 2010 at 1:34 p.m.

    I find a lot of the examples on multiple revenue streams misleading. Take public television. They are taking a big hit in reduced tax support for their operations and are struggling to keep on-air on their other revenue streams due to their minimal ad revenues.

    Or broadcast TV. I would like to see a revenue breakdown on whether it was their handful of locally owned stations that drove their numbers (remember they were limited on the number of stations they could own) or was it their national ad operations.

    I don't disagree that multiple revenue streams are needed, but it with online video, it may be leveraging your audience to non-video related web products versus finding different streams with only the video itself.

  7. David Zietz from Full Sail, January 23, 2010 at 9:48 p.m.

    Great post... excellent points. It only makes sense that a successful company would be fluid in it's business practices.

  8. Richard Monihan, January 25, 2010 at 12:04 p.m.

    Flexibility of approach to generating revenue, as well as flexibility in defining exactly what business you're in, is essential to success.

    The ad-only model cannot survive, nor can the subscription-only. There are plenty of hybrid models which can, and will, work effectively.

  9. John Osborn from Ultramercial LLC, January 25, 2010 at 3:40 p.m.

    Excellent thinking and writing, Joe.

    It seems that in the everybody pays model, the shift in the model for funding major, full length dramas and comedies that we've grown up with on cable and broadcast has been driven by the heavy proportion of support from the traditional national and local television advertising marketplace (longer term revenue commitments are produced by the upfront buys of major advertisers). In the next generation of everybody pays, I agree that the sources of revenue for content will be much more fragmented and much harder to guarantee. How then will a season of "West Wing" be funded ahead of time when advertisers may be paying, for instance, after interactive advertising click-throughs are counted in exchange for premium content? In the past CBS, NBC and ABC and even some cable networks held the biggest receivables from the advertisers, and could sign a long-term contract for tens of millions of dollars. These networks also had much more control over the distribution of video content which is now much more complex in the new, fragmenting digital multi-platform world. Today, we see NBC having to buy out Conan because they over-committed to the 10PM hour slot for Leno - already a lower cost production alternative to the quality 10PM prime time drama. The next commitment from NBC for this "time slot" will be even more conservative, and so it will go until there will may only be reality shows and newsmagazines left on traditional broadcast TV. Hopefully major content producers will ultimately be able to monetize their investments through multiple platform and global distribution systems, with many pieces (and as you point out - many beyond advertising) adding up to more revenue in the end. But who will be able to make that big upfront commitment? It will be interesting to see.

  10. Adriana Kaegi from dearaddy production, January 26, 2010 at 10:47 a.m.

    as a survivor of the 2001 crash, i create sponsored content, that is how i get paid.
    a

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