Monday, June 8, 2009, 8:56 AM ET|Posted by Will Richmond
Today I'm pleased to introduce "VideoNuze Forums," a periodic opportunity for online video industry experts to contribute their thoughts and ideas to the VideoNuze community. I'm a firm believer that only through the industry's collective ideas and energy will online video reach its ultimate potential.
In this kickoff post, David Graves shares his thoughts on how advertisers can collaborate with online video producers to fund original online entertainment, while leveraging the syndication model. David is a veteran media executive who I've known for years; he's served in executive roles at Yahoo and Reuters, and more recently founded PermissionTV. He's now consulting with Global Capital Strategic Group.
Please contact me if you're interested in contributing. I can't guarantee I'll run everything, but I welcome your ideas.
A New Old Model for Making Money with Original Online Entertainment Video
by David Graves
In the very beginning of television, advertising agencies worked directly with creative people to produce the dramatic programs they wanted to put their ads in. Now, 60 years later, it's time for them to do so again, on the Web.
Between then and now, distributors such as TV networks have become the ones who financed and controlled video programming and acted as the middleman between creatives and advertisers. But today there aren't enough distributors with both the will and the resources to speculatively fund large volumes of online entertainment video.
There are many creative people who would like to produce for the new online medium, particularly now that it can be done for historically low costs. But it's hard to make money. Even so, some dramatic video like Strike.TV is getting produced on the hopes that it will attract an audience that might get sold to advertisers. This is nice but inefficient and usually unprofitable.
In order for the Internet to develop as a substantial platform for original entertainment video, a new model has to form that gives producers some additional upfront confidence. There needs to be a better chance of generating a profit in order to encourage Internet producers to produce and people with money to fund them. Since the paid model is still highly challenged, even for well-known, branded fare (e.g. broadcast network programs), advertising is the most likely source of revenue.
Advertisers are clearly open to the potential benefits of online video advertising. To begin with, they love TV commercials over every other form of advertising. Online, their ads can't be skipped, can be better targeted and offer the possibility of an immediate response or interaction on top of the branding value. What's not to like?
But experiments with advertiser-created programming have by and large been disappointing. That's because it doesn't make sense for advertisers to be the ones financing, creating or distributing video. It's not what they do. On the other hand, partnerships like that of Alloy Entertainment and Johnson & Johnson, to create the "Private" Web series for teen girls, which debuts next month, exemplifies the potential. Brands like Neutrogena will be subtly integrated into the shows.
The model that will work is one where advertisers hook up directly with creative programmers to help encourage show ideas they like. Some call this "branded entertainment" and it can take many forms. For example, it could be an advertising commitment at an agreed-upon CPM, contingent on seeing the finished product. Or a pre-buy that helps fund the production in return for a lower CPM. Even a smile and a wink would have value.
If a producer had an embedded advertiser at a decent CPM, they could arrange for distribution both on their own sites and through syndication. Given the state of ad sales today, offering syndicated sites free, high-quality video content with a built-in CPM split would be like offering the proverbial candy to a baby. Further, there will be syndicators like Pixsy and others who would no doubt be happy to take on the job of arranging distribution for a slice of the CPM.
This model is very similar to the way TV stations have been getting their first run syndicated content (like Oprah and Wheel of Fortune) for years. The programs come with a certain number of embedded commercials along with slots that the stations can sell themselves. It's called "syndicated barter." There are many advertisers who have used this method to ensure that their ads run in the right editorial environment. What they end up paying is the aggregate rating that the individual stations generate.
For original online video entertainment to flourish it seems inevitable that producers and advertisers will need closer partnerships to address the vacuum created by the lack of distribution funding.
What do you think? Post a comment now.