As online video producers experiment, fumble, and tinker their way toward a model for making money on scripted online video content, an old school premise emerges on the new media scene: product placement.
It makes sense. Because online video needs to be able to be seen where there’s audience (see: YouTube), advertising that is already “baked in” to the video content itself can help producers to monetize their product.
Fred Seibert, creative director of NextNewNetworks, talks about creating programming around “community need” and then finding a way for video content and sponsorship to crossover to meet that need. Interesting stuff.
Online video advertising is still, relatively speaking, a brand new industry. People only started watching videos on a massive scale over the last three or four years, as broadband penetration peaked and video platforms like YouTube emerged for non-technical people to easily upload and publish video to the Internet. And it’s only in the last year or two that online video advertising has emerged.
Much like for the Internet itself, the idea of advertising for online video was strange at first. But over time, people are getting used to the idea, and depending on the quality of the content, will put up with it in certain forms. Further, if the advertising is contextually relevant and/or blended effectively with the content itself, audiences might actually enjoy it.
Here’s what we know: people are online, they watch video online, they spend money online. Therefore, video producers and advertisers are going into overdrive to figure out a model that works. And as this marketplace matures, we’re going to see higher quality video content online and advertising models emerge that make money for producers.
There are probably many people who will disagree with that last statement, by the way. It’s conventional wisdom in some circles that you can’t make money online from scripted video content. I disagree. It’s simply a matter of time and experimentation.
Mark Cuban wrote a piece last night about “the failings of Internet video and the expectation of free content,” which references a Bernstein Research report called And Now for the News…The Emperor Has No Clothes.” Cuban’s premise is that “the a la carting of video on the net” will force video production budgets to be slashed and video content quality dumbed down, which will only benefit “Google and Youtube and black and white hat SEOs.”
This is an interesting and complex topic, and no one really has all (or even many) of the answers right now, but I find some flaws in Cuban’s thinking.
Let’s walk through this. Cuban’s initial premise is:
* Consumers won’t pay for content on the web, so it will have to be ad supported. - Is this true though? Over the last month, I’ve paid for music and video on the Internet, purchasing both through the iTunes store. The content was high quality (a great 2007 album by The Hives, and episodes of Lost that I had missed) and the price was right.
Consumers will of course be savvy in setting the barometer on what they will and won’t pay for. Most people though will be willing to be subjected to some form of video advertising.
Then we have:
* [Video content] will have to be ad supported, and it won’t be ad supported - Cuban is arguing that video content producers won’t be able to make money back on video advertising that it will take to create video content. This is a tough one, but it makes a number of assumptions. It assumes that video is being produced for web distribution (only?), and that the revenue model is based on some form of video advertising.
There are a number of ways, however, that things may work differently, in whole or in part. Video could be a branding vehicle to drive eyeballs back to television or elsewhere, or it could be a “loss leader” in an effort to get people to purchase video.
Cuban is right in stating that “a la carte” consumption on the Internet is exploding traditional methods of media consumption. In other words, people would only pay for the cable television channels that they wanted if they could, but they’re forced into paying for expensive packages at present. The print newspaper and music industries are flailing because people can purchase “a la carte” or get the content for free online.
So Cuban is looking ahead to see how the television and movie industries are going to deal with these same issues when it comes to video.
The short answer that anyone can say for sure is that it’s both an exciting and chaotic time for media creation, distribution, and consumption. I would argue though that in the end it’s a great thing because people are able to get more of what they want and how they want it than ever before.
Here are a number of other factors that I see playing out in the years ahead:
* Television will compete with the Internet for a long time - The opposite is of course true. However, if seven or eight million people watch a show on broadcast TV or one or two million watch on basic cable, no one blinks an eye. These numbers are astronomical when compared to numbers of people watching any one show online. That means that television – and that includes premium channels like HBO and Showtime – will be producing high quality content for the foreseeable future.
And really: the last decade has perhaps been the best in the history of television. The Sopranos. The Wire. Buffy the Vampire Slayer. Dexter. Lost. The Shield. Great shows are managing to be produced. One could argue that the proliferation of cable TV helped to drive this “golden age.” So as a devotee of great TV, I’m confident that that won’t change anytime soon.
* Producing and distributing “high quality” video content on the Internet is still very new - New web enterprises like Funny or Die and web-only shows such as Prom Queen are voyagers on a brand new ocean. Television has been around for decades, so of course many of these newer efforts are going to look and feel awkward, as production budgets and episode lengths are tinkered with to meet brand new economics.
This will get figured out though. Here’s the thing to remember:
* People love to watch video on the Internet - So people will figure out a way to make money on it. Sure, there will be some of the “dumbing down” and SEO plays that Cuban fears, but there can and will be a way for high quality shows to find an audience, and for that audience to help drive revenue for the content producers.
* The video advertising industry is still brand new - Pre-roll, mid-roll, post-roll, sponsorship, banner ads, companion ads, takeover ads, ad overlays, hypersyndication. These are all brand new tools for video publishers to play around with to find the model that will be acceptable to viewers and will make the most money. If it sounds confusing, it is. But there are hordes of hyper smart folk working on the equation even now. There’s gold in them thar hills, if you follow.
Production budgets, content type, and content length will all be experimented with wildly for many years to come. And over time, expectations and norms for advertising and monetizing online video content will evolve and mature. Let’s remember that a decade ago, online advertising wasn’t respected as a way to make money!
* Creative destruction - If nothing else, the Internet is a powerful force that is still only beginning to shape our daily lives. We’re only a few short years into widespread broadband cable distribution, which is driving the mad wild rush of video consumption.
So, finally, Mark Cuban asks: will it lead to destruction?
Yes. And that destruction will clear the way for what’s next.
