Commentary
Trad Media Firms' Foray Into Digital Video: Those Who Want To, Can't -- And Those Who Can, Won't
- by Ashkan Karbasfrooshan , Op-Ed Contributor, May 5, 2010
Back in May 2007, CBS acquired comedy video site Wallstrip. Soon afterward, the network shut it down. When doing so, CBS brass said they would take the Wallstrip spirit and apply it to other Web efforts. Then the recession hit and online advertising hit a speed bump. CBS shelved most of its Web video aspirations.
Faring slightly better, in 2008 NBC Universal's Local Media division acquired LX.tv, whose 1stLook airs in New York City taxis, on WNBC's 24-hour network, New York Nonstop, and on American Airlines in-flight entertainment.
Last year, AdConion bought Red Level (aka Kush TV) and folded the branded content vehicle into its overall offering.
Besides these deals, we've largely seen a number of high-flying shutdowns, including Ripe Entertainment (despite raising $45 million in funding) and PodTech (with $7.5 million in funding). Mania TV shut down briefly but came back this year after a change of control.
There remain a number of other companies trudging along hoping for the online video market to take off. The problem is that even if this happens, the first benefactors will be the largest media organizations that have video inventory and existing sales teams, be it Yahoo or ESPN. Then you will have the leading video destinations such as YouTube and Hulu. Without a doubt, over time, the content producers who survive will have a very promising future, especially as reach-driven network ad buys get replaced with branded content integration deals.
But the reality is that while television advertising is a $70 billion market and total online advertising is a $30 billion market, online video advertising barely cracked $1 billion in 2009.
As a result, unless you have multiple revenue streams and a low cost structure, the best-case scenario for many content producers right now isn't an independent strategy, but one where they are folded into a larger company with a larger audience and a sales team to monetize it all. That, however, can't be your sole strategy because while the M&A market has recovered, the list of larger companies that can sign those checks falls under two buckets: television companies and print companies (even those with assets in both, such as a Hearst, tend to fall under one, in Hearst's case print).
The thing is, print companies escaped near-death experiences in 2008-09 and are showing signs of life after massive cost-cutting. But kid yourself not, even a believer like Warren Buffett is blown away by "how fast the newspaper industry is losing ground." While newspapers (and magazines) should be scrambling for ways to leverage their content in a digital age, they're experiencing "iPad myopia" and "video impotence."
Television companies can't even be bothered. Apart from the WallStrip and LX.tv deals, generally speaking television media companies are focusing solely on monetizing their vast archives. Last week CBS promoted Zander Lurie to senior vice president, strategic development, serving "at the center of CBS's next-generation content initiatives, including oversight of the Company's efforts to explore authentication and other new, additive methods of distribution and monetization." Honestly, I don't blame them: clearly there is a demand for "premium content" that players like WatchMojo (or Revision3 and Next Net Networks) are producing -- but those who have "super premium" programming (like NBC, CBS, ABC, FOX, etc.) will be incentivized to generate more revenue from that asset before turning any meaningful attention to made-for-web content. Of course, we've seen this story before: there will never (never say never? I am saying never!) be enough digital dollars to offset lost analog dollars. The Web shrinks media -- and the sooner participants realize this, the better.
Meanwhile, Big Media is partying like it's 1999, doling out bonuses like it's printing money: "Anybody who reads the business section knows the margins are being squeezed at media companies, so the fact that there are these huge packages makes no sense," said James F. Reda, the founder of James F. Reda & Associates, a compensation consulting firm, quoted in The New York Times.
What also doesn't make sense is that while "five companies (Time Warner, Disney, Viacom-CBS, Comcast-NBC Universal, Fox) control 85% of video-viewing hours in America," as consumers migrate online, there will be a great need for made-for-Web programming, instead of the repackaged stuff traditional media insists on shoving before consumers.
Any amateur student of history or media intern will recognize that much the same way that Google, Yahoo or AOL generate more online advertising revenue than the traditional media companies, a similar pattern will develop and emerge with digital video.
Indeed, when it comes to traditional media companies and digital video, those who can, won't -- and those who want to, can't, with television falling in the former camp and print in the latter. But everyone's reluctance and inability to take steps is turning into self-fulfilling prophecy and a recipe for disaster.
Hi Ashkan, online video has barely begun to scale and it's way too early to assume that it's game over and the big portals and media companies will win. In fact, most of them are still trying to figure it out and it's pure chaos in the market, which is why there's a significant opportunity to create value.
In regards to video content producers, I couldn't disagree more. Their time has now finally arrived, which is why you see so many TV and Film production companies moving into Branded Entertainment. There's now an entirely new distribution outlet for video (e.g. the web) that didn't exist before, creating a whole new class of creators and new revenue opportunities without the massive cost structures of traditional media. The real problem or missing element is audience, but this can be solved with a savvy understanding of syndication.
Chase Norlin
CEO, AlphaBird
hey Chase, when I write these articles, I try to avoid using the soapbox to suggest that our company or industry is going to put everyone else out of business.
But naturally as a content producer myself I remain very bullish on digital video and new media content (as opposed to refurbished content from TV or studios).
Bottom line: it boils down to the strategy and tactics, regardless of whether you're new media or traditional media.
That all being said, I just suggested that we need to realize that success won't come overnight as the first benefactors will be the larger portals and established players, but over time the new contestants will do just fine... the same way we saw this in other media.
In fact, I am saying that traditional media (TV and print) need to get their act together, otherwise their myopia might lead to their demise... not tomorrow, but over time.
Ashkan - This is a good article, but do you think it might be possible for you to write an article that doesn't mention your company directly or a service you provide? Come on now - "Players like WatchMojo..." of which you are CEO. There are thousands of players in this space - some who "get it" more than others. I tell you what, when writing articles in the future, when you want to type WatchMojo, just type BroadbandVideo (a "playah" of which I am CEO) and see if it still works for you. You'll notice most folks (even in the comments section) have the courtesy to point out shameless plugs for their own stuff.
OK, now that I've bitch-slapped you for shameless self-promotion I can respond to your article with a clear head. You're absolutely correct about major media companies either not understanding how to create video content specifically for the web or not wanting to. Here's why - people in large media companies (regardless of BS titles like "Director of Imagination" or "VP of Dreams") are not in a position to innovate nor are they paid to innovate. They are paid to go to meetings - end of story. They respond to project managers who are there to make sure no projects actually get done. True internet innovation does not come from major corporations (media or otherwise) - internet innovation comes from small groups who display passion and are willing to take risks (ebay, myspace, facebook, youtube, etc.) NONE of these "game changers" could have come from a large company - video will continue to evolve on the web, but the really cool stuff will come from small shops (maybe even WatchMojo or BroadbabdVideo - note: shameless plug).
hey Jonathan to answer your first comment, if I don't mention anything then I am accused of not disclosing a potential bias.
But more importantly, if you read the actual articles it's not exactly like I am putting our company or industry on a pedestal with no drawbacks, weaknesses or threats... I think that is more important than the one-time mention of what I do for context.
I'm in agreement with Chase on this...and on the opposite side of the fence from you.
Big media..cable...telephone..these are companies that we deal with because we have had to. No love and as soon as there is a way to not support them...everyone will leap.
To presume that consolidation is the only answer on a democratized web is i believe shortsighted. This industry, now that distribution has democratized, will find a new model with great content as the ruler and old model pipe as history.
I'm a realist but when companies have strangled the public and there is an option, they will move.
We shall see. If you (Arnold) and Chase are right, then I will be very happy (via WatchMojo). Definitely agree that there will be a lot of fragmentization and not an oligopoly as we see now.
I look forward to all your mediapost newsletters. They are so helpful and have motivated me to take my video show to the next level. Thank you so much Ashkan. I have a big announcement to make this fall about my new show sponsors and love that I get a good solid base of high quality and credible information from your news blast. I'm speaking on many panels re: video and would love to have you join me at some point. Think about it! Cheers.