Q&A With High-Tech Analyst

I recently had the opportunity to interview Daniel Taylor, senior analyst at Yankee Group. Daniel has had more than 15 years of high-technology experience, and in 2006 was recognized with an Award of Merit by the Society for New Communications Research. At Yankee Group, he focuses on emerging advertising-supported business models as well as traditional interactive online advertising markets, including search, display, video, social networking and other types of applications and content where advertising features prominently. When I met Daniel in Boston last month I thought his take on the video landscape was interesting and worth sharing. Some of my questions and his answers follow.

Mike Cassidy: What challenges are you seeing with online video?

 Daniel Taylor: With online video, you never know how much inventory is actually being monetized. 

There are still many fundamental issues out there, like finding the right format, copyright issues and figuring out how to put advertising around user-generated video.  Television has been a reach play, and advertiser's paid for that. When online audiences get as big as or bigger than television audiences, you will then begin to see a greater shift to online video.

Cassidy:    VOD/DVR seems to be the hottest segment of alternative video.  How are the broadcasters approaching and handling the changing landscape?

Taylor:   Assume 30% of television audience is going to DVR/VOD/ - how do you monetize that? That is the key area for broadcasters to focus on.  It's like an airline that went from economy to steerage seats; it's the same flight, but they're driving less money, so they need to figure this out. Broadcasters are airing the same shows that cost the same amount of money to produce, but they are not seeing the return they used to. With 'market correction,' DVR/VOD shouldn't kill broadcasters, but they have to figure out a way to make it work. After all, look what the internet has done to print advertising.

Cassidy:   So how do the broadcasters adapt to make sure they are not hit as hard as the print folks?

Taylor:   There are lots of ideas floating around, but no one has figured it out yet. One scenario is less content production, like fewer shows created, different types at different prices, and leveraging syndication even more.  Expect a certain audience for regular television, monetize that accordingly -- and expect a certain audience for DVR/VOD, monetize this accordingly.  The various targeting capabilities in DVR/VOD inventories should be worth a higher CPM. Does the pricing structure become CPA or CPC?  I say, throw the rate cards out the window, and yield management becomes much more important.  It's no longer a golf game and a rate card.

Cassidy:   Are there any new video companies or technologies that have caught your attention?

Taylor: The deal AT&T did with OnNetworks is interesting.  AT&T said we'll push out across IPTV service, our mobile network, and direct satellite - a three screen offering.  They're pushing out new capabilities and 'pro-sumer' content which is a cross between professional and user-generated content.  The content is fairly professionally edited and in certain cases available in HDTV.  Similar to what you will see on cable networks - it's actually pretty good.  AT&T's attitude is go free for now and see how users respond, then develop a platform you can monetize. 

Cassidy:   Do you think this is an approach others should take?

Taylor:  Absolutely - see where users go, then we define the models instead of impose. Go free for now and then build around that - there's not enough data to know what works yet.

Cassidy:  Do you see content providers going the route of CBS where they license to everyone, or more like ABC where you have few if any outside agreements, and rather let people visit your platform?

Taylor:  Everyone is trying to figure out the secondary market and what 3rd party distribution is going to be like and what will it be worth.  There is only so much traction each broadcaster will achieve on their own player.  Broadcasters will have to know they will make less money, but ask themselves if the additional reach is worth it.  I think it is. 

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