Hulu’s growing pains are emblematic of old media’s challenges and symptomatic of its pedigree.
Hulu is the free premium video site that was launched by News Corp. and NBC and today also includes Disney/ABC as a third parent. A bit of a disclaimer: WatchMojo supplies Hulu with a plethora of videos across multiple categories.
Let’s first look at Hulu’s pedigree to understand why this script ending should not have come as a surprise to anyone.
Too Many Cooks in the Kitchen?
According to Mediaweek: “Observers predict that the already complicated arrangement is likely to become more so, particularly given the prospect that NBC Universal may be sold to Comcast—which already operates its own online video site (Fancast) and has a markedly different philosophy regarding just how free TV content should be on the Internet.”
I’ve always feared that what led to Hulu’s quick ascent - access to great content - would in turn mean that its media owners would eventually bicker and have divergent opinions on strategy. After all, while Google’s YouTube is Big Media’s frienemy, over time, Big Media’s biggest enemies are one another as they vie for market share.
That is half of the equation.
Market Timing Never Works, You Have to Stick to Your Guns
Old Media makes decisions based on today’s conditions, which ensure that in a few years time, when the project has taken off, the conditions might no longer be conducive to their strategy and execution.
Case in point: Hulu decided from Day 1 to go free, this helped the company’s traffic take off: Hulu has soared from 12.5 million unique users in September 2008 to 38.7 million this past September, per comScore.
When the site launched, the decision to go free was smart. After all, the challenge was to change consumer behavior and thwart piracy.
To put things into context, in the summer of 2007, Rupert Murdoch’s News Corp. was seeking to acquire Dow Jones and there was talk of making Dow Jones’ Wall Street Journal website - the most successful paid content website in the world - go free to capture more advertising dollars.
At about the same time, Hulu was moving from an idea to beta to launch. Never was there talk of making consumer play, not because Hulu’s media owners (which included Murdoch’s News Corp.) cared about user preference, but because it was an advertising play.
The Economic Meltdown Changed the Script
With the 2008 economic meltdown came a slowdown in advertising. This slowdown affected traditional media and advertising more than online. As a result, the downward pressure on media companies’ share prices accelerated and this forced them to reconsider the free, ad-supported content model.
Incidentally, there is no more talk of converting WSJ.com into a free site, in fact, Mr. Murdoch today talks of serving less users on his web properties but charging them to access the content.
Yes, times they change.
Hulu is a great partner of ours. We really wish them well. The CPMs they command are so much higher than the industry standard that we wish that they grow as a site so we grow with them. But the story twists we read in the press should come as no surprise because media companies are impatient and desperate.
Have We Seen This Movie?
What they fail to realize, ironically, is that no matter what plan they hatch today to get users to pay, by the time these plans are implemented, the advertising market will return and they will find themselves on the inside of the pay wall looking out, once again finding themselves going against the grain.
WatchMojo provides content to Hulu, we have nearly 10 channels on the popular aggregator site.
News Corp. Deputy Chairman Chase Carey opened the B&C OnScreen summit to discuss where he sees the business going. “It’s time to start getting paid for broadcast content online,” he said. Carey said that while everyone cites the infamous Jeff Zucker quip that “We’re exchanging analogue dollars for digital dimes,” the industry continues to do exactly that. The strategy needs to be more than just fighting piracy and Google, he says.
“I think a free model is a very difficult way to capture the value of our content. I think what we need to do is deliver that content to consumers in a way where they will appreciate the value,” Carey said. “Hulu concurs with that, it needs to evolve to have a meaningful subscription model as part of its business.”
From NY Times:
Why were so many people in the technology world wrong about Hulu? It was an idea that seemed like a relic of the worst excesses of the dot-com era: a portal for content run by a joint venture of media companies. Could any venture have more going against it?
The key words are “technology world”. Joost failed because a bunch of technologists (KaZaa, Skype) hired a technology executive (Mike Volpi) and thought that better technology would prevail.
Also, the perception of what happened at Hulu is somewhat different than what actually happened at Hulu, which basically spawned from NBC’s initially ill-fated NBBC venture. I am not sure if Hulu would have succeeded without the lessons and leadership of the NBBC experience. At WatchMojo.com, we worked with NBBC, Hulu and Joost and trust me, Hulu is far and away more impressive when you see how many other ventures in video have failed… but I think chalking it up to content or UI alone is over-simplifying it.
Some time ago, online media professional Dave Haber (and reader of this blog) emailed me an article from MediaPost, titled “How Can Independent Video Producers Compete In The Super-Premium Era?”
The article was written by Lewis Rothkopf, who is vice president of network development at BrightRoll, one of the pre-roll networks out there. As a side note, I really admire Brightroll’s CEO Tod Sacerdoti. Unlike most of the pre-roll intermediaries who seem to be either in denial or out of touch about that the pre-roll format, Sacerdoti is realistic about the pros and cons of the format, not insulting people’s intelligence about why his firm focuses on the unit.
Anyway, for some time, I was considering writing a related piece on indeed how independent video producers (such as WatchMojo.com, the company where I am the CEO) can compete in the super-premium era. It was the first time I’d seen someone else use those terms, because for some time, we’ve separated “premium content” (what new media producers like WatchMojo.com produce) from “super premium content” (what TV networks and film studios create).
Rothkop’s three tips included:
1) Compete on quality.
2) Compete on price.
3) Compete on advertiser-friendliness.
As proud as I am about WatchMojo.com’s content, I don’t think that economics permit premium content quality to surpass that of super premium. It won’t happen. After all, with text content, a kid in a basement can pass off for a Pulitzer-prize winning journalist. In video, that is pretty darn hard.
So while his ideas are good, I would add that you should also compete on:
4) Rights: giving partnerships the opportunity to go global and multi-platform
5) Frequency: the drawback with traditional media is that it does not really update as frequently as online consumers of media (be it listeners, viewers, readers) are grown accustom to.
I could list a few other things, but the purpose here is not to give away too much of our secret sauce.
The purpose of this article, in fact, is to look at how traditional media companies can avoid the music industry’s fate by understanding how new media companies fit in their strategies and ecosystem.
Tenet 1: The Web Shrinks Traditional Media
Due to the economic meltdown and subseqent slowdown in advertising, a lot of cable companies are regretting putting their shows online for free.
It’s not just the cable companies, though. From Michael Lynton, the CEO of Sony Pictures, via HuffPost:
I actually welcome the Sturm und Drang I’ve stirred, because it gives me an opportunity to make a larger point (one which I also made during that panel discussion, though it was not nearly as viral as the sentence above). And my point is this: the major content businesses of the world and the most talented creators of that content — music, newspapers, movies and books — have all been seriously harmed by the Internet.
Is that true? I think the Web shrinks the traditional media business (producers of super premium content) by giving an enormous opportunity for new media creators like WatchMojo.com (producers of premium content) to disrupt things.
Tenet 2: Amongst Traditional Media, With Online Video: Those Who Can, Won’t. Those Who Want, Can’t
As I’ve long argued: online video can be a salvation to print media, at least they should care about online video. The problem is that print media lacks the DNA - be it in terms of asset or people - whereas TV-centric media firms have the DNA but lack the financial incentive.
Either way for traditional media, it does not look good. Those who can, won’t; those who want, can’t.
Tenet 3: Super Premium Content vs. Premium Content
On the traditional media video company side of things, you have companies who slant towards scripted entertainment, news and sports (CBS, ABC, NBC and FOX) and then the non-fiction ones, such as Discovery Communications, Liberty Media (who owns the Travel Channel), Scripps.
The advertising budgets in television are massive. As such, these companies spend what it takes to produce “super premium content”.
Memo to New Media Guys: Know Your Role
I don’t think new media producers have the budget or financial incentive to create super premium content. Startups who raise tons of venture capital money to do so end up making mistakes because they borrow traditional media’s inefficient and wasteful ways and burn a lot of money early on, before the web video market (be it in the form of ads or subscriptions) materializes.
This is why, I think, you have seen companies like Mania TV shut down. I am not saying they were producing “super premium” content but by attacking the music category, they ended up adopting traditional media’s bad habits.
At WatchMojo.com, we made a counter-intuitive decision to avoid focusing on one niche and produce content across the main verticals: Automotive, Business, Education, Fashion, Film, Food, Health, Music, Politics & Economy, Space, Sports, Technology, Travel, Video Game categories. A lot of accomplished people thought I was crazy to do so, but we are one of the few media companies (traditional of new media) that gets guaranteed, recurring licensing fees. Judging by our revenue breakdown, the bet paid off:
The proof is in the pudding: our content is of high enough quality to merit getting licensing fees, but in the really grand scheme of things, I am not delusional: I don’t pretend that our travel content is going to trump The Travel Channel’s, or that our Science videos will put the Discovery Channel on the brink of collapse, or that our cooking videos will put the kybosh on the Food Network.
Of course, that is not the point. Right now, our content beats 99.9% of the content out there, and the 0.1% that traditional media’s super premium content represents is still only being tested online. I think Discovery’s CEO David Zaslav is 100% right to say:
“I’ve spent a lot of time looking at the economics. If you take out a pen and you add it up, there’s not a lot of economics there [of putting full shows online]. The business model is not that strong…we get substantial value by distributing our content on dual-revenue-stream platforms, domestically and around the world. We’ve been able to take the best of our content and use pieces of it through HowStuffWorks.com or on our other sites..there’s no reason for us to take a fire hose and take a fantastically valuable library and make it available on the Web for free.”
He’s right. The web right now, and potentially never (yes, I am saying never), will grow large enough to become bigger than TV is today. However, I think that TV will shrink enough and online will grow enough for the Web to surpass everything else.
I’ve compiled the experts’ projections and ran the numbers myself, it is highly possible that online video advertising will surpass search ads by 2018 as online ads altogether take over television advertisings by 2021.
Tenet 4: Is The Objective Not Maximizing Value?
If and when that happens, the television business will have shrank by so much and online video companies will have grown so much that the disparity in market value could very well be in the favor of new media players.
Right now, it is a given that Netflix is worth more than Blockbuster. Netflix is worth $2.25 billion; Blockbuster all of $135 million. That’s right. But ten years ago, that seemed impossible and 13 years ago, Netflix didn’t even exist.
Mind you: in 2008, Blockbuster lost $375 million on revenues of $5 billion; Netflix earned $83 million on revenues of $1.3 billion. Ultimately, it’s about each company’s prospects.
Don’t get me wrong, in 10 years, traditional media companies like Walt Disney (parent of ABC and ESPN), CBS, GE’s NBC unit and News Corp.’s FOX division might make more money each year than any new media outfit, but mark my words, some of the new media outfits involved in the production and distribution of premium content (such as our own WatchMojo.com, but also the Revision3’s and Next New Networks and countless others who get less coverage) will be worth more than some of those venerable traditional media brands.
I know, I sound crazy now, delusional. But you judge for yourself:
In all likelihood, there will be an enormous amount of consolidation and an outfit that amalgamates the pieces will be worth a lot. If the traditional media guys get it right, they will outright buy everything in sight now, and leave them alone for a while.
I respect the hell out of the CBS brass, but while they made a prescient bet on acquiring Wallstrip, they dropped the ball in the market meltdown of 2008 by rushing to shut it down. Again, this is not about CBS or Wallstrip per se, it is about the interaction between traditional media and new media content companies as one market shrinks rapidly and the other balloons faster than anything else.
Tenet 5: Actually, TV Can Avoid the Fate of the Music Industry
I came across this graph by Magna Insights via the GrowYourBusiness blog. If we were to extrapolate it to the video business (all filmed entertainment, be it theatrical releases, home entertainment, or television programming), you’d think that television is as doomed as music, but it need not be that way.
Regular readers know that I don’t think anything will “kill” television outright, but this graph does suggest that online video will shrink traditional video, as was the case in music. There is a rationale to support this argument:- if the traditional media companies don’t legally make their content available online, then there is the threat of piracy. Think of music labels.
- if they do publish their content online, then they shrink their businesses via the threat of cannibalization. This is what happened to print companies, the more aggressive ones actually shrunk much quicker than those who weren’t very aggressive (think NYTimes, or the Chronicle).
But, I think it doesn’t have to be this way.
Here’s my thinking:
Music is one-dimensional in every sense of the word: it’s just audio, meaning that despite what the crack-smoking analysts seem to think, advertising-supported music is dead on arrival. For music to generate revenue online, it would require subscriptions, and consumers don’t want to pay. Media companies might pay record labels for the right to distribute music, but record labels want such massive fees that this becomes killer, too. So ultimately, because of music’s limited scope, there is really no viable business model to support it.
This is why music is increasingly seen as promotional fodder to drive merchandising, ticket sales, etc. The artists get it, the labels are adapting to it.
Video content is different. Ad-supported economic models won’t replace offline revenue streams, but they can grow to become material over time. Of course, this isn’t enough to offset the losses in traditional revenue streams, I get it, but in music, the independent artists that used the Web to promote themselves did not generate any revenue for traditional record labels per se, however, in video, new artists can represent new revenue streams for traditional TV and film companies. As such, to illustrate the point, in addition to digital sales off traditional libraries (represented by the purple), there would be additional incremental revenues from new media studios (represented by the green), as I’ve tried to demonstrate in the make-shift graph below:
But the same way that music has become promotional for other, related activities (merchandising, ticket sales), I would argue that if traditional media companies use the promotional card righ, they can actually stop the pace that traditional television is shrinking. Notice I didn’t say reverse it. I don’t think anything will reverse it, but with the web, they can optimize their inefficient production processes:
- You know what will be a hit and won’t be a hit without having to burn tens of millions of dollars in production fees.
- You can advertise your television and theatrical releases online, which is cheaper than offline media.
- etc.
The point is, even if revenues get clipped, costs should fall too. If this is managed right, then the traditional media companies’ can technically preserve their profit margins.
I think it is sheer lunacy to take a $1M production made for TV - where the economics are sound - and put that online and get nothing. But using the examples I outlined above, since audiences are increasingly online, I think there’s an argument to be made for:
- the Travel Channel to partner with us on our travel content;
- for Discovery Channel to partner with us on our science content;
- for the Food Network to partner with us on our food content;
- etc.
Tenet 6: Gobble, or be Gobbled
Eventually, though, I think traditional media companies can use new media companies for much more than just promotional vehicles. In fact, they can use the CBS/Wallstrip example and outright acquire new media ventures and commercialize the new media library while protecting the core value of their offline stuff, which can be showcased online, but not in its entirety.
Does this open the door for some piracy? Sure. But Wolverine was pirated but in the end, it probably helped augment buzz for the movie.
CBS is working now with EQAL, for example. Eventually it might outright buy them. It might not, of course.
Tenet 7: It’s All About the Multiples
Ultimately though, as the traditional media companies become more digital, via
a) the acquisition of new media companies
b) the digitization of some of their traditional assets
c) the convergence between shrinking offline revenues and growing digital revenues
their price-to-sales and price-to-earnings multiples will grow… meaning that the companies can remain very valuable, avoiding Blockbuster’s fate.
Tenet 8: Print Shall Strike Back
Of course, because print media companies lack the DNA to dive fully into video, and because online video is purely incremental, I suspect a lot of the print companies (both newspapers and magazine ones) will put the new media video companies in play on the M&A front.
It is possible that the current wave of managers in print still likes to stay within their comfort zone (behind a typewriter/computer) and not behind a camera, but the economic argument over time will be too great to overlook. To clarify on this point, it is not that I suggest that in 2009, online video revenue can make up for print loss of revenue. Rather, I suggest that print revenue will do dry up in the next decade and online video will so grow that these two will converge, and unlike for TV companies, this revenue will be incremental.
Tenet 9: The Reality Remains the Same, Though
But despite all of this, the reality remains the same: old media is fundamentally inefficient in today’s digital and connected world. Perhaps the carnage of the past 6 months has forced traditional media companies to cut back, but many have not. The NYTimes has a staggeringly large newsroom, its relevance and survival is at risk by leaner new media outfits.
Tenet 10: History Repeats Itself
A decade ago, a lot of savvy media folks didn’t quite recognize the full extent of online media’s risk to print. Today, the writing is on the wall.
Ultimately, if television wants to avoid the fate of music labels, then maybe it can dive in to the history of newspapers.
Business Week has a good quick Q&A on why Conde Nast failed with Portfolio.
Come to think of it: News Corp. and NBC - two TV-centric media companies - launched a joint venture in online video distribution by selling 10% to private equity firm Providence Capital for $100M and it has managed to become a serious contender in the professional video content space by tapping into their parents’ content libraries. Sure, they got a few things wrong, got a lot of things right and while questions remain on the viability of the property’s long term prospects, the overall tide in online video is rising, and the company can seemingly do no wrong.
On the other hand, Conde Nast - a print-centric media company - poured the same amount of money itself and basically got the timing wrong. But even with better timing, I don’t think things would have changed.
As much as I criticize VCs, I think this echoes what VCs say about picking companies based on the size of the broader market: if the market is big enough (and trending upwards) then it can fix mistakes. With print, everything is priced to perfection and the slightest obstacle can derail a product. In 2008, we didn’t just encounter the slightest of obstacles, the world went belly up and Portfolio became a victim of that.
But you have to ask yourself: why is Conde Nast not reinventing itself in new media such as online video? That’s the $100M question people!
Live coverage of ad:tech San Francisco by David Shabelman.
Hulu CEO Jason Kilar just wrapped up a short question and answer following his presentation. Responding to a question regarding whether Hulu will explore different types of advertising, such as interactive television advertising, which is gaining steam with cable operators, Kilar said Hulu remains focused on brand advertising, noting that brand advertising is a $60 billion business.
Kilar noted that online brand advertising can be twice as effective as television, and that with all the knowledge Hulu has on its users, it remains well positioned for targeted advertising. But Kilar was not dismissive of exploring new and different advertising opportunities, saying Hulu is “uniquely positioned” to do advertising in ways that haven’t been done before.
For more coverage ad:tech SF, visit our overview page here.
Live coverage of ad:tech San Francisco by David Shabelman.
A near packed-house greeted Jason Kilar, CEO of hot online television and movie service Hulu.com, to hear his keynote speech that started the second day of the ad: tech digital marketing conference in San Francisco. Kilar is speaking about the user revolution in the digital age.
Kilar believes many advertising experiences are awful for users because advertising is often done as an afterthought, “rather than a virtuous mission in and of itself.” In other words, so much of the focus for Web sites is on the content and what the site is trying to do, and once that is completed then the site tries to figure out how to deliver its advertising.
Kilar says that Hulu’s aspiration, developed early in its existence, was to create a service that its users, content owners and advertisers “unabashedly love” and that neither users nor its advertisers could be sacrificed for the other. How Hulu accomplishes this is fairly straightforward. First, he said Hulu’s users are drawn to one message when they go to the site, not overloaded with multiple messages. As opposed to commercial television, where shows are 22 minutes with eight minutes of advertising, Hulu has a lighter ad load with only four minutes of advertising.
Second, Hulu allows users to choose what type of advertising break they want to view — if someone prefers regular soda to diet, they can watch a non-diet soft drink ad. The benefit with the targeted advertising is to both the user and advertiser. Hulu also lets users choose their ad break, giving them an option to view a three-minute trailer before their show or multiple ads during the show. A study done by Hulu showed that its users who were exposed to advertising had a 16% greater intent to purchase the advertised item than ones not exposed to the ad.
Update: Hulu did email us to clarify that “On background, I wanted to tell you that 30 minute show on Hulu generally show 2 minutes of ads, not four minutes. Overall, as I think Jason mentioned, our goal is to show about ¼ the ads in comparison to normal broadcast TV“.
For more coverage ad:tech SF, visit our overview page here.
Yesterday, when I was looking at our stats from Google Analytics, I noticed that Hulu send out a bunch of clicks to us. At first, it seemed odd. After all, in a given day, we’ll generate 100,000 to 200,000 streams off our total online distribution network, and not even YouTube (who accounts for 50% of our 50,000,000 all-time streams) will pop up in the top referrers. Yet Hulu, who doesn’t generate all that many streams, appeared in the Top 10?. What gives?
WatchMojo.com has so many partnerships, and I am bound to so many NDA’s, that every time I come close to writing about something a partner is doing, my lawyers rush in and toss my laptop out the window. But, something tells me the following won’t cause any issues. I hope. Hold on, phone’s ringing…
Ok, I’m back: was only the wife.
Anyway, Hulu is doing something very interesting as YouTube becomes the #2 leading search destination: it is tapping into partner’s RSS feeds (I can only assume) so that if someone searches for something a partner (like WatchMojo.com) hasn’t yet uploaded to Hulu’s servers, then it sends out the user to said partner’s site.
Huh? Come again?
Basically, search for How to tie a tie on Hulu. As you will see from this image below,
Whereas the Howdini search result will take you to an internal page on Hulu, the WatchMojo.com result clearly takes you outside, hence the “Watch at WATCHMOJO” display.
Now, since I have an NDA in place, I can see a few reasons why Hulu needs to do this… I can only presume that if this happens enough, then the overlords at Hulu will email us to say “hey, maybe you should upload this clip”.
But I also think that this positions Hulu as a “search” destination as well as a “viewing” destination, which in the long term help Hulu serve its purpose as a hedge against Google/YouTube.
This makes Hulu a very interesting proposition to media companies that have hitherto sat on the sidelines in the Hulu/YouTube war.
Hold on… phone’s ringing, think it’s the wife again.
Oh-oh, my lawyer’s on the line… gotta go.
Once in a while, I spot a comment that is either interesting, insightful, intelligent, irreverent… and I post it.
From Tech Crunch’s piece on Veoh Compass
Cut them some slack. IF ANYONE IS OLD ENOUGH TO REMEMBER, VEOH came into being right behind YouTube, along with Vimeo/Revver/Brightcove/now-Crackle/etc. — Yes, VCs threw money at them (bless those days), but, NO ONE IN THIS SPACE has figured out a great business model and they burn through money because they burn through bandwidth. YouTube’s projected to LOSE $470k this year? Without Goog propping them up, they’d be deader than day-old fish.
BRIGHTCOVE abandoned it’s mission and strategy a few times and guess what? They’re alive. Adapt or Die.
The problem with most/all of these ventures is they never learned how to be a “Distributor” in the film industry sense of the word. They are networks without distribution “Rights” (value). They never tapped into the traditional media talent pool to truly converge the Industries. Yes, they could have used their money in a less-geek’d out sort of way and maybe become sustainable businesses.
Hence, we’re stuck with Hulu, which is old media on a new screen and the shining golden child of “newteevee.” Hulu is part of a distribution chain, it’s not a standalone tech network.
VEOH tried (a bit) with their Prom Queen deal, etc., but, there are only so many B. Diller’s in the world and VEOH wasn’t pro-active in more alliances of that nature. And, they didn’t nab ownership in the distribution Rights.
Technology isn’t Content.
$70MM later, there are no tangible/valuable assets. Because they didn’t understand Distribution. That’s kind of sad, because no one has an exit strategy or safety net.
Hopefully, Dmitry’s Twitter quest for a date will end better than his company has.
Read the whole piece here. See our two cents on Veoh and its peers here.
In November 2007, we published a piece called Online Video Distribution: The Race for #3 is On…
Hulu wasn’t even around, so #1 was YouTube and #2 was MySpace TV. Then came the usual suspects: Metacafe, DailyMotion, Break and Veoh.
Since then, Hulu has launched, gone from Clown Co. to media darling, to being called just another big bad media thug… but in the process, it has become a major player thanks to its stash of super premium content.
We define premium content as any made-for-web content that is professionally produced, such as our own content at WatchMojo.com.
We then define super premium content as television and theatrical content that is repurposed or published online. Despite their resistance, super premium content owners such as Disney and Sony are seeing no choice but partnering with YouTube.
Having taken notice, CBS, who initially refused to join Hulu, bought CNET for $1.8B, obtained the TV.com URL and has now set its sights on clashing with Hulu for super premium video supremacy. As a side note: wesupply videos to TV.com, Hulu and YouTube.
Meanwhile, YouTube continues to forge ahead, though rumor has it, its costs are spiraling out of control and turning it into a profitable business is becoming more challenging as every day goes by. YouTube is in a thankless position:
- consumers want free videos
- it has to take on “Big Bad Media” when they file a lawsuit (how dare they, right, it’s their content!)
- oh, we also want someone else to foot the hosting bill for increasingly better quality video.
How do we thank them? By calling them a monopolist. Evil. Or worse, heartless. The last one came from us, but it was actually meant as a compliment. Sort of.
What About the Rest?
Anyway, in the past 18 months since I wrote that first piece, more has changed:
YouTube, Hulu, TV.com have all made life for Break Media, Metacafe, DailyMotion and Veoh tougher and tougher. They made things nearly impossible by launching their own sites, however, and not acquiring them. You see how with content, you can launch a new site (Hulu, Tv.com) and scale quickly if you have the resources. By launching these sites and shooting up in the traffic rankings, they removed a lot of leverage these companies would have had in any M&A talk.
I should mention, we have partnerships with all of these companies as well, and to borrow an analogy from Fred Wilson, like any book/newspaper/magazine publisher wants to see bookstores or newspaper stands do well, we genuinely want these companies to grow in traffic and in revenue, but the truth is, you don’t need a gazillion aggregators, either.
YouTube’s success comes partially from the fact that it stayed one step ahead of the copyright issue and managed to literally aggregate all of the videos in the world (or close to it). Hulu and TV.com will leverage their pedigrees to remain relevant and grow.
But there will be a shakedown amongst Veoh, Break, Metacafe and DailyMotion, unless they shift strategies or get some kind of differentiator.
Some would argue the shakedown has begun:
- Last week, sadly Veoh laid off more people. It will now focus on its toolbar, called Compass. Here is a piece by Tech Crunch talking - and describing - Compass much better than one my one-line “it’s a toolbar” description.
- Break Media, in trying to avoid such a fate, seems to have taken a different strategy: producing, investing and acquiring content libraries… which I personally think makes sense. They just bought HBO’s Runaway Box.
Few of these companies will ever really become profitable businesses, I think, though one or two might cash out and exit, making some money for investors. The challenge they face lies in demand and supply: too many similar offerings.
But by making a play for content, I do think that Break Media differentiates itself from the others enough to have some kind of premium or leverage in potential M&A talks, because a buyer would be getting everything else the others offer (traffic, technology, advertisers and content they not only have rights to, but actually own).
Please note, as a content producer, I am biased. Readers of this blog know this all too well. But the fact is, Break Media does get an edge here, ironic or fitting, since they are partially owned by Lions Gate, who owns a right to buy the whole piece.
Since Lions Gate owns the right to buy the whole company, then logic would suggest that Veoh, Daily Motion and / or Metacafe will also make a bid to own content libraries as a differentiator, as well, since they are actually sellable and “in play”. I am not saying they are thinking of doing so, or will for sure, because the VCs that backed these aggregators were adverse to content to begin with… but the fact remains, in their quest for relevancy, it sure would be a hedge against obsolescence.
You are also going to see this with ad networks, as well. AdConion bought Red Lever, I do expect over time for others to follow suite.
PLAY
