• by Ashkan Karbasfrooshan , Op-Ed Contributor, February 27, 2012

Indie video network Blip emailed producers to announce that it would discontinue redistribution to Boxee, Samsung, Vizio, DivX TV, MeFeedia, Sony BIVL, TiVo, Vimeo.  Blip has done an admirable job of differentiating itself over the years, and has been an important enabler for indie producers.

But what does the decision really mean?

Hyper-distribution is dead. 

It was always a foolish premise that because the marginal cost of distribution was nil, then all incremental distribution was accretive. Truth is, it’s not.  When you give everything away to everyone you dilute the value of your content and the marginal (additional) revenue is just that: marginal (immaterial).

Is OTT hyped?

The list of Blip casualties suggests that despite some cord-cutting and all devices being connected in the future, today viewing over-the-top (OTT) connected devices remain immaterial.  My company has joined the bandwagon, so I don’t want to appear hypocritical, but I caution video executives not to get too bullish over OTT at a time when online video remains underwhelming relative to the expectations and forecasts.

What to Make of Long Form Programming?

comScore’s January numbers revealed a rise in long-form programming consumption.  Blip’s DNA is in longer form, recurring, episodic content. While OTT aims to mirror the lean-back television experience with long form programming, it’s possible that comScore’s long-form programming spike was an exception -- likely when you consider the Millennial generation’s ADD-like nature.

Mobile Viewers Far Outpace Dollars

It’s not just OTT that is more sizzle than steak. While everyone remains giddy about mobile, it’s worth noting that the delta between mobile consumption and monetization is even greater than that of online video consumption and monetization.  As consumption shifts to wireless devices, the need to remain lean becomes more important than ever.

Is YouTube the Only Dog That Matters?

Blip argued that “the overwhelming majority of  views come from three sources: the Blip destination site, YouTube, and our embedded player.”  I don’t want to speak on Blip’s behalf, but I’ll guesstimate that YouTube -- where Blip redistributed its licensed content -- accounts for the lion’s share of streams.  It’s likely that over time it will remove additional distribution partners.  It’s increasingly hard to justify -- let alone argue for -- hyper-distribution.

What Would Machinima Do?

Machinima’s critics claim that the LA-based content maker rode the popularity of the generic “machinima” term (and corresponding YouTube tag).  But that’s unfair and misleading.  While everyone’ssuccess is helped by luck and timing, Machinima executed by focusing on:

1) Subsets (Halo gamers, then shooter games) of a specific vertical (gaming). However, I’ll bet that the company will add new verticals and go horizontal, the same way IGN “won” gaming by merging with Gamespy and then ventured into movies (via RottenTomatoes) and lifestyle (via my old company AskMen). 

2) YouTube.  According to CEO Allen Debevoise: “We decided not to put all our content on every platform, instead saying ‘let’s just get this one right.’”

Yes, the company’s $15 million in financing helped, but it’s less than most.

YT Building Massive LA Studio?

Machinima’s bet on YouTube paid off; it’s one of the most popular channels on YouTube. 

But the reality is that practically every video content executive talks privately of his or her frustration about YouTube.  None of them will go on record given YouTube’s massive size and scale (the $200 million the company’s spending on content may have something to do with it, too).

I’ve long argued that YouTube is the greatest ad platform ever at the macro level, but it’s more of a promotional than commercial platform at the micro level.  Beggars can’t be choosers, so to speak.

However, when you read that YouTube -- a video aggregator -- is building a massive Los Angeles studio, you have to wonder if it’s indeed to enable producers, or if, rather, YouTube’s super-smart staff has seen the writing on the wall and knows that over time, content providers will need to find ways to succeed outside of YouTube. The same way that Hulu, Netflix are now producing content, it’s really just a matter of time before YouTube evolves from aggregator to underwriter (where it is now) to become a producer (recall a few years ago the notion that Google’s getting into content was unbelievable; last year it bought Zagat).

So, what’s the bottom line?

Online video is incestuous.

The game of musical chairs in the aggregation space has begun. 

The leaders in aggregation are realizing that they need to own content. 

And those in the content business realize that their models, cost structures and cap tables are not sustainable -- and they’re running scared.  But that’s nothing new if you’ve been reading this column for a while.