Martha Stewart “plans to start charging for online video downloads of the domestic diva’s TV show episodes and segments”, according to Paid Content.
It might work, it might not.
Rule #1: Individual Users Don’t Like to Pay for Content
I don’t think end users (individuals, basically) like to pay for content: not monthly subscriptions, not micropayments, nothing, nada, zilch.
Rule #2: Business Will Consider Paying for Content, If and Only If…
I do think that media companies can be convinced to pay licensing fees for wholesale videos, if the
a) quantity,
b) quality,
c) frequency and
d) consistency
meet a certain threshold.
Reason # 1 Why Traditional Media Companies Are Getting Disrupted
The problem for traditional media companies is that their content libraries are generally of
- great quality (it’s what I call “super premium”),
- the quantity can be enormous, as it encompasses years of archives,
- it’s consistent, with professionals involved in a “stable and reliable” manner in pre-production, production and post-production.
The problem is that the frequency of future publishing cycles is erratic at best and non-existent at worst.
Examples:
- CBS only basically goes all out on its NCAA College Hoops tournament.
- Disney/NBC and News Corp. largely publish old stuff on Hulu (either years old with sitcoms or days old on things like Saturday Night Live).
- Discovery outright avoids it by keeping their good stuff offline.
Reason # 2 Why Traditional Media Companies Are Getting Disrupted
But there’s one more major obstacle for traditional media, and this is where we exploit things quite admirably. Traditional media needs licensing fees in the 5-6 digits monthly and/or 6-7 digits annually to make it worth their while, and guess what? They can never/rarely get those.
Want to know how WatchMojo.com has managed to disrupt things in the online video content business?
We can license categories of “premium” content (travel or health, for example) or our entire treasure cove of content (nearly 5,000 videos and hundreds of hours) for bargains relative to what traditional media companies would demand.
So over time, we have actually developed a “software licensing” model, but positioned for upside when partnerships grow.
What Not to Do (I Think)
We could also, of course, simply give away the content, but that is quite foolish because the concept of hyper-distribution is one of those fads that doesn’t really make sense in practice and actually dilutes your leverage and wipes out any pricing power you have.
I am not saying it works for everyone or that every content producer can pull it off. It’s very funny to see established media companies belatedly run after free, ad-supported content during the boom and now scrambling to protect their derrieres.
By the time they get their houses in order, the market will turn once again and they’ll be preaching free is the way to go.
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WatchMojo NewsletterContuining on the Twitter is the Facebook of 2009 theme, weren’t we having the same “what is the business model” discussions about Facebook last year?
Yes, we were.
Oddly enough, we were also looking at the same things
—Search: Twitter’s real-time search capabilities have been well-documented (so much so, that even Google has stepped up its real-time search features); Thau said the startup will monetize its search traffic “in some way”—though he didn’t elaborate.
—Carriers: Much of Twitter’s traffic comes from mobile: both through data plans and via SMS. Thau said getting some sort of a cut of the carriers’ data business wouldn’t be a huge source of revenue—but definitely a portion. Twitter’s also working on handset deals that would “integrate the service” into certain devices right out of the box.
—Content: MTV is sharing ad revs from an upcoming show with Twitter, so will we see an influx of similar content deals? Thau said yes—which is partly why they hired a new exec to focus on the media/entertainment business. “The media industry is looking for ways to stay fresh and interactive; you’re already seeing CNN and ABC Nightline using it, and we think more media companies will start using Twitter as a utility.”
Last year, Facebook’s search was “the” threat to Google’s search. Nope. Same thing about carrier (Facebook Mobile) and Content opportunities for media companies and brands (Beacon, Fan, etc).
Don’t get me wrong: both Facebook and Twitter are interesting communications products, but the next Google?
No cigar. Not even close.
Latest figures peg Apple’s revenues off the App ecosystem at a whopping $20-45M. I should have added “quotation marks” to whopping to connote sarcasm.
Back in March 2008, when Facebook hype was at current “Twitteresque” levels and FB (and iPhone) app funds were popping up right and left, I asked Where’s The YouTube Fund. Side note I: YouTube is one of our largest distribution partners.
The rationale then was:
In my opinion, monetizing YouTube is the single greatest business opportunity online right now:
- YouTube streams 1 out of 3 videos;
- YouTube is part of the most profitable online media company, Google;
- Online video advertising is the next high growth area;
- YouTube has hitherto not generated any meaningful revenue, so the upside is far more considerable;
Nothing has really changed my point of view.
In fact, the case for a YT-focused fund is stronger.
You can’t, after all, tell me that Google’s rules of engagements are any harder to overcome than Facebook’s or Apple’s, after all.
- Much as Google has become the dominant navigation platform,
- The iPhone will be a dominant ecosystem in wireless,
- Facebook is the dominant “directory” platform, and
- Google’s YouTube is the dominant entertainment platform right now (no disrespect to Hulu, of course, though Hulu knows its role: to serve traditional media’s interest). Side note II: Hulu, too, is a distribution partner.
Biggest Opportunity in Business Today: Cracking the YouTube Enigma
Online video is big in terms of consumer activity right now: there are more video streams generated than search queries.
Over time: it will be huge in terms of advertising (it will also be huge in terms of e-commerce, and some companies are playing in that field.)
I don’t think - despite my evident bias as the CEO of a content production, distribution, syndication company - that online video advertising will totally usurp television advertising’s size ($1B vs. $75B right now, after all)… but I do think that since online advertising/publishing/media in general will shrink traditional advertising/publishing/media, over time, online video could be larger than a smaller television ad market.
The economic meltdown is shrinking media companies faster, but even without the meltdown, I have news for you: CBS, News Corp., Disney, Viacom etc. will have shrunk anyway. To quote Chris Rock, no one [in media] is above an ass-kicking [because of the Internet]. Ok, so that was a quasi Chris Rock quote.
It might sounds crazy now, but basic math suggests eventually online video will be larger than search and online ads (by 2018) in general will be bigger than television ads (by 2021).
This is why it baffles me to see both Facebook, Apple and yes, “even” Twitter app funds get all of this hype. I think it’s cute, frankly.
Media vs. Technology
So why are investors not rushing to fund YouTube related companies?
- Well, for one: VCs (for the most part) are irrelevant after the meltdown. Their limited partners are broke, the VCs have nothing to show for it… and this is why apart from follow-up investments in portfolio companies that have a shot of succeeding (ie. not dying, forget the cliche 100 or 1,000x returns some of the more ballsy VCs sought), you will see very few new investments.
- But more importantly, all video-related investments - even the tech oriented ones such as CDNs, players, platforms, etc. - are really media businesses and not technology ones. In other words, the technology nuts and bolts is afterthought, a detail. By now, the truth is out: VCs understood technology so they successfully helped build the backbone of the Web. But when it comes to anything touching media and entertainment, they are clueless.
These two reasons explain why despite YouTube’s massive business opportunity, you won’t be seeing any YouTube funds.
Seeing how Twitter’s every move is being scrutinized, it reminds me a lot of Facebook circa 2007-08.
Like Facebook, Twitter is essentially a communications tool. But unlike email and chat, what Facebook and Twitter (as it continues to grow) are also navigation tools, look at the Top 10 beneficiaries of Twitter’s surging traffic:
And here is the trendline for each:
Twitter’s growth has been nothing short of spectacular, but I repeat what I said: Twitter is 2009’s version of Facebook… and before you know, I predict Crapstr will come along and steal Twitter’s thunder in 2010.
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