Commentary

2010: Early Momentum For Paid Video Models

by Eric Franchi , January 25, 2010

With 2010 just beginning, there are several interesting themes emerging within the media space. One is the notion of paid media models: asking users to pay for media that they currently access for free, or perhaps don't have access to at all. What started as a movement by a vocal minority of a few major media companies -- most notably, News Corp. -- is now being seriously considered by entities of all types.

This past week, the New York Times announced that it will move to a paid online model in 2011 to augment its display advertising efforts and declining print business. No one was really surprised by this announcement, and in fact many Times readers (yours truly included) support the experiment.

What was somewhat surprising, however, was recent news that online video companies (YouTube and Hulu specifically) are pursuing paid strategies as well. These developments definitely raised some eyebrows of those who watch the space. With online video consumption growing substantially in 2009 and spending continuing to grow at an outsized rate, why would media companies potentially stunt this momentum with pay walls?

The simple answer is: at this point, to deliver the content and pay creators and owners fairly, it looks like they're going to have to. Three major announcements this week alone support this notion.

YouTube announced that it is rolling out an online film rental service, starting with five Sundance titles. This is a major win for independent filmmakers, who can now have the ability to have their films widely distributed and get paid for their efforts. But the two major questions are, will users pay -- and will this lead to a model that the major studios will embrace?

Rumors of a paid model for Hulu have persisted for months. The LA Times reported this week that a potential structure may offer recent TV show episodes for free, and past shows will be accessible for a modest $4.99 monthly fee. Is that the best way to go about it, or would the opposite way -- charge for new shows, and give the old ones away for free -- actually work better?

Finally, Boxee officially announced that a payments platform is in the works for a summer 2010 rollout. Boxee's is similar to Netflix's successful on-demand model. Content owners will be able to charge whatever they wish for viewing of shows or films, with Boxee receiving a commission for the transaction.

It's early in the year, but this certainly looks like an emerging trend. The two biggest questions that remain: Will users be willing to pay for their desired content, and which of these models will win?

pay wall, video

6 comments about "2010: Early Momentum For Paid Video Models".

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Douglas Ferguson from College of Charleston, January 25, 2010 at 2:40 p.m.
I expect that videos on paid sites will become like songs on paid sites, freely shared among users, only some of whom pay for the privilege.
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Jonathan Mirow from BroadbandVideo, Inc., January 25, 2010 at 3:34 p.m.

This is early momentum for pay models amongst content companies - of course they're going to say this. What the hell else is the VP of Biz Dev going to say in meetings "We're hosed when it come to charging for this stuff?" Why would anybody think this will translate into anything except abandonment by consumers? It's harder for me to be legal and download songs from Amazon than it is for me to hook up to any of the dozens of free alternatives. Are these media companies so clueless that they think this hasn't happened to ANYTHING (including movies) that can be digitized? I can see the YouTube model (premium vs. free content - which will translate into many people watching free cat barf movies and nobody watching paid art films) but I stand by my earlier rallying cry "A paid Hulu is a dead Hulu." You'll see.

Paula Lynn from Who Else Unlimited, January 25, 2010 at 3:49 p.m.

$4.99 plus tax here. $4.99 there plus tax. What's an extra $50 or more per month ($600 per year per person) ? And we know other fees by the biller will be added somewhere. It is just going to get too expensive for the average person which does not include anyone reading this column. Also, when an advertiser pays for x and get x-50%, there in lies another situation. Libraries can become the rue du jour.

Kevin Nalty from Nalts Consulting, LLC, January 26, 2010 at 7:46 a.m.

My two cents.... a tiny portion of content on video (or other media) will be purchased. The vast majority of video content will be add supported. I buy TONS of video via AppleTV because it's easy and high quality. Meanwhile YouTube's most popular creators (with views surpassing many television shows each day) would vanish if payment was required. So the industry needs to focus on effective non-intrusive ads, and let the paid model sort itself out (micro-payment standards would be a major achievement).

Nelson Yuen from Stereotypical Mid Sized Services Corp., January 26, 2010 at 10:28 a.m.

LOL it's kind of funny to me how the same people are always commenting.

I don't necessarily group YouTube's paid strategy in with the rest of the group. Most of the content on YouTube will continue to be ad supported - the tiny portion of content they charge for will most likely be content they currently do not have "viable" access too. (Example: when someone wants to watch a R5 version of "Book of Eli" broken up into 10 parts VS paying to get the movie streamed in HD.)

I think the key here is flexibility. (Kevin and Paula both hint at it.) Where other paid models attempt to group consumers into 1 basket & aggregate revenue from one source - YouTube is segmenting the customer base into a subset of users willing to pay for specific content, on a specific platform, in a specific way. Meanwhile, not affecting users that have an elastic price point of 0 for amateur content or sub-optimal content.

Paula hints at the numbers "not making sense" for the average user. They don't make sense of me either. Some things I'll pay for some things i won't. If given only two choices - paying for everything or paying for nothing. I choose nothing, and move to the next econ substitute.

Mike Einstein from the Brothers Einstein, January 26, 2010 at 12:04 p.m.

Forget about what I'm willing to pay for. The day is fast approaching when the numbers will be so bad that they'll be compelled to pay me to watch their crap.