The inability to compare the measurement and pricing of audiences for broadcast network content across television, as well as new media platforms and devices, will prevent content producers and providers from securing the full financial advantages of universal distribution in the digital age. Just tracking the alternative outlets for prime-time series is overwhelming, given the explosion of streaming video and consumers watching "TV" shows and shorter teaser clips on their computers.
The overriding goal is to offset shifting TV ad revenues with the more than $7 billion in annual Internet video income expected from advertising and user access fees by 2010. Nearly 75% of all U.S. Internet users already watch an average of three hours of online video, or more than 9 billion videos overall, according to comScore.
The online video joint venture between NBC Universal and News Corp. called Hulu, an ad-supported site that will offer free streaming of the networks' complete series for free, is the most ambitious attempt yet by broadcast kings to control online video. The new Hulu venture, backed by a $100 million investment from 10% partners Providence Equity, also has revenue-sharing distribution agreements with MSN, AOL, Comcast, Yahoo, MySpace and CNET, which will help it to secure 98% coverage of the domestic Net universe.
It will directly compete with Apple's iTunes, from which NBC recently withdrew its TV programming, and with which other broadcast networks are becoming bolder in their pricing demands. The broadcast networks also are becoming unlikely business partners with retailers such as Wal-Mart, Amazon and Microsoft's Xbox Live in what's now called a "distribution land grab."
The broadcast TV networks are walking the fine line between keeping the lid on unauthorized user access and manipulation of their pricey prime-time content online and reaping the benefits of viral product sharing to maximize the ad and download revenues. In reality, no one has an accurate way to qualify, quantify and cash-in on the value creation associated with new audience connections across the media spectrum. The advertisers asked to support so-called new and old media need to know what different audiences are worth in relation to each other on contrasting media platforms, devices and outlets. Such a comparative system, if devised, would surely be a linchpin to emerging media economics.
Hoping to maximize the financial returns on their series investments and extend their reach beyond their stagnating TV platform, the major broadcast networks are providing series streams and downloads on their own ad-supported Web sites, as well as to leading Web aggregators and social networks. For instance, although ABC says it has logged more than 140 million streams of complete episodes and short-clips of its series on ABC.com in the past year, it is opting to distribute its ad-supported programs on Time Warner's AOL in a revenue-sharing arrangement. NBC will soon allow series downloads from its Web site, the video quality of which will disintegrate after one week to preserve the afterlife value of its programs. Just the same, General Electric's commercial finance arm has created the $250 million Peacock Equity Fund to develop relevant new platforms and products for its NBC Universal.
With Internet users spending more time viewing content than any other activity on the Web, according to studies conducted by the Online Publishers Association, the broadcast networks are competing with everyone from major studios to user-generated content. Quite rightly, AOL chief executive (and longtime NBC chief) Randy Falco has dubbed the Internet "a full-fledged entertainment medium."
Forrester Research estimates that the revenues from ad-supported video streaming could top $800 million in 2007. But there are many nascent streaming and downloadable video markets, including the less-than-5% of more than 220 million domestic cell phone users who pay to watch video on the small third screen. In a recent report, Cisco Systems forecast that Internet video will increase to nearly one-third of all consumer traffic on the Web by 2011, from 9% today. The big question: what is it worth?
Downloadable episodes of TV series generally sell on iTunes for $1.99 each, which is split between the broadcast networks and Apple. According to some reports, NBCU was seeking to more than double the price of iTunes downloads. But as witnessed in many upfront negotiations, it is not as clear how much of a network series' prime-time price value is related to its extendibility on the Web for advertisers that want their messages running in both venues.
Nielsen Media is still only talking to its media clients about how to report what it refers to as "incremental viewing" on the Internet, personal video devices such as the iPod, and to interface the measurement of programs on both staid and streaming platforms. No other company is providing a cross-media barometer that would be instrumental in reinventing media business models.
More simplistically put, the same 1.23 million consumers represented in one estimated Nielsen media national TV household rating may be worth more when delivered by a myriad of interactive platforms, where they will be more targeted, engaged and quantifiable.
Until more accurate, comparative metrics can be devised, there is no certifiable way to fully monetize cross-media reach and pursue converged media economics. One giant step in the right direction would be for the broadcast TV networks--during their self-proclaimed new season of fare--to concede they have been reduced to branded content aggregators and providers in a dynamic media world in which the value of content is increasingly determined by interactive consumers.