Did I just call studies and researchers misguided? That’s pretty ballsy and arrogant isn’t it? Well, please hear me out.
Back in 1994-2000, there were so many reports, studies and forecasts about the size of paid content, in other words, money that consumers would pay to read premium content. Premium content was content from offline magazines, newspapers, etc.
That did not happen. Because broadband penetration soared to well over 50%, content flourished, a community was created and commerce pursued. In the process, people began to spend some 25% of their time online. Yet as of last year, advertisers don’t spend even 10% of their marketing budgets online, this is a major opportunity for FREE, ad-supported content. Companies like Time Warner exemplified the missed opportunity of not unleashing their content online for free: CNN Pipeline (video) was paid, then free. AOL.com was paid, then free. Why is that?
Because consistently between 1994 and 2003, free sites whooped paid sites’ derriere.
In other words, all of those studies about how much subscription for paid text-based content would be enormous proved to be wrong in that they misjudged the quantity and quality of text-based content that could be found online for free.
Specifically because of this miscalculation, newspaper and magazine companies suffered big time.
Today we see history repeating itself and promises of paid video content leading to a booming market for paid video content:
Annual consumer spending on Internet downloads of movies and TV shows will top $4 billion in 2011, up from just $111 million last year, according to a study released Wednesday by Adams Media Research.
“The Internet is going to revolutionize the distribution of video,” says Adams Media Research President Tom Adams.
The growth will be fueled by the introduction of hardware devices such as Apple TV, a $299 box that converts videos downloaded from the Internet into signals that can be played on high-definition television sets.
Apple Inc. is selling those boxes on its Web site and says they will be shipped later this month.
Adams Media Research is betting that video downloads will ramp up gradually as Apple TV and similar devices win acceptance among consumers.
The market researcher forecasts that sales of video downloads will total $472 million in 2007, $1.2 billion in 2008, $2 billion in 2009, $3.1 billion in 2010, then hit $4.1 billion in 2011.
It also predicts that advertiser spending on Internet video streams to PCs and TVs will approach $1.7 billion by 2011.
Read more.
Not gonna do it, not gonna happen.
Right now you can watch practically anything online for free, though it might be pirated. While the quality of TV networks’ content is high, they will be shy and slow in putting it online, as we have shown in our landscape of video in this graph:
Obviously, we are looking at the model in a free content context. But because there will be plenty of decent content available for free and pirated high quality content available, few consumers will actually pay for video content. Don’t get me wrong, many will, but nowhere near as what we expect.
This is why thus far, print companies are doing better than TV companies in terms of video online. The former view it was a new business opportunity while the latter views it as cannibalizing. The networks are holding out in trying to generate subscription sales, and in doing so, consumer will adapt their behavior and find free content and the advertising will follow the users.
Once again, history repeats itself and those who fail to learn from it will be doomed.
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