Web-dedicated content still isn’t making money

No one is making money from dedicated online video, not even YouTube. Although the Internet is no longer a nascent video delivery platform, distributors are still experimenting with ad-supported and pay-per-use models to find ways to generate profits from web-exclusive content. "Youtube is spending more on professional content than it's getting from ads," Scott Bushman, VP at Palo Alto CA-based video entertainment site Metacafé told delegates at the Interactive Content Exchange (ICE) conference in Toronto late last month. "The economics of professional content generates little return in an ad-based model." Metacafé, however, is exploring ways to develop an ad-supported rather than an ad-based or video-sharing model, and is working with Google and other big players to create an overlay network for advertising. Metacafé, which features short-form original video, raised $50 million from investors to fund the venture. The company pays content creators based on the number of views videos receive, and about $1 million was paid out in 2007. Seven of the site's top 10 videos were user-generated, and Metacafé's top contributor earned $100,000 for a series of geeky how-to videos for making exploding engines, laser beam security systems and other DIY projects of that ilk. "The costs for acquiring and creating content is where the real challenges are," said CTV director Richard Kanee. In response, the broadcaster is exploring combos that integrate advertising with content where possible. "For example, hockey guys talking on a Virgin mobile. This works best in a sponsorship model." Getting advertisers to pay any attention to interactive media is another issue, said independent consultant Gavin McGarry, moderator of the panel session Pipelines: The Future of Online Video. To demonstrate, he asked for a show of hands from people involved in the advertising industry; only one of the approximately 100-person audience responded. Big advertisers such as Proctor & Gamble aren't prepared to spend much on online video until there are solid metrics available, said Kevin Bartus, a VP at Rogers Media. But consultant Jason Roks retorted that advertisers are using this as an excuse because they don't get solid metrics from television either, and they still spend billions there. Where the panel did agree was that advertisers aren't interested in low-quality or user-generated content. "Major advertisers are saying, ‘Give me something like the TV series Lost,'" said Kanee. To explore this point, McGarry asked Bushman what the number one video on Metacafé was, which turned out to be a user-generated piece from a zoo called Monkey Pees in Mouth. McGarry searched for the video online and played it to the curious audience, which immediately collapsed in laughter at the images of the agile monkey urinating into its own mouth. With understatement, Bushman said advertisers had "expressed concern" about advertising in the piece. Regardless of the issues surrounding online video, broadcasters are mindful of the hard lessons learned by the music industry and know they can't ignore the medium. "If we don't figure it out soon, people will anyways," said Bartus, adding that most infrastructure issues are solvable. "If you have a data centre set up for HD screens already, it's no big deal " said Kanee. "The costs for broadband television are negligible and continue to go down." Most of the intractable issues are at the receiving end; the pay-per-use broadband model can make downloading a video extremely expensive for end-users. "It's a disincentive that may make it cheaper to buy a DVD than to download a video. End-users can't afford to receive content so producers must do deals with Rogers and CTV," said Roks.

Web-dedicated content still isn’t making money

Broadcast | April 15, 2008

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