• Does Glenn Beck's New Dish Network Deal Portend Pay-TV Riches for Other Internet Stars?

    Is online video its own medium, or is it a farm league for those aspiring to make the transition to the majors of traditional TV? This has been a persistent question for years, and has gained more attention as numerous big-name celebrities have begun creating online-only originals. Are these stars committed to online video, or is it just a stepping stone to the conventional TV world they know so well and have benefiting from so greatly?

    No doubt, the question will be re-visited anew, as former Fox News host - and current online video star - Glenn Beck has announced this morning a new distribution deal with Dish Network for his online network TheBlazeTV, along with the intention to pursue other pay-TV carriage deals. Regardless of what you think of his politics, Beck's move back into pay-TV, leveraging his success online, will surely be viewed as a template by others looking to make a similar leap.

    Since leaving Fox over a year ago, Beck has succeeded online, with TheBlazeTV gaining 300K subscribers paying either $10/month or $100/year for his and his colleagues' original video network. Creating an approximately $30 million/year content business in a little over a year, with 9 million monthly unique visitors, is nothing to sneeze at, especially with low production costs for a talk show/commentary based format, so margins are healthy. Though it takes advertising, the way most online businesses run, Beck's focus on subscriptions has been a differentiator.

    But still, an audience of 300K paying subscribers is small relative to the exposure Beck got on Fox, so there's clearly an untapped fan base of conservatives. In addition, Beck has marketing and acquisition expenses, and also has to deal with churn, the bane of all subscription businesses. Last but hardly least is the reality that despite the rise of connected TV devices, subscribing to an online-only network is still primarily an early adopter behavior.

    Conversely, under the Dish deal, TheBlazeTV will be paid a monthly carriage fee for ALL Dish subscribers in its "America's Top 250." I don't know what percentage of Dish subscribers are in this tier, but say it's third of Dish's 14 million subscribers. And say Dish pays TheBlazeTV 5 cents per subscriber per month, that would total approximately $3 million per year.

    Clearly the Dish deal isn't retirement money for Beck, but the network gets that whether Dish subscribers watch his channel or not, and he also has a proof-point in the pay-TV business to take to other operators to copy. Plus he has the status of being on the same dial with established news networks like CNN, Fox, MSNBC, etc. Until other deals are done, Dish gets to use Beck as upgrade/acquisition fodder which should be especially useful during the heated election season. And conservatives who aren't necessarily among the 300K early adopters subscribing to Beck online, or don't have the budget to do so, now get easy living room access to him again.

    All in all it seems like a pretty good deal for Beck and TheBlazeTV. They keep creative control, can keep selling subscriptions direct to consumer and get the Dish distribution/revenue bump. Which brings us back to the question of whether online video is the warm-up act to getting a traditional pay-TV deal or an end to itself. My guess is that if you hooked up a lie detector to online creators, most would say they'd love a pay-TV deal, as long as they could retain creative control.

    The problem is that most won't ever get one; Beck is an exception, not the rule. That's because pay-TV operators are ruthlessly trying to contain their programming expenses, in order to avoid raising subscriber rates more than is already necessary. There is very little programming still available that has a direct, measurable impact on gaining or keeping subscribers (sports is an exception, which is why their rights fees are skyrocketing and there are new sports networks popping up all the time). Beck's brand appeals to a definable audience of conservatives which gives him a huge distinction that few others have.

    So for the vast majority of online video stars, and aspiring ones, they need to be relentlessly focused on succeeding in this new medium, not viewing it as a stepping stone. Personally, I believe that's ok. There is a confluence of factors - changing consumer behaviors and expectations, a plethora of mobile and connected devices, better wireless networks, advertiser interest, etc. - that are contributing to online video becoming a bona fide alternative to pay-TV.

    The keys to success will be keeping production costs down, building audience and being persistent. A pay-TV deal would always be nice to have along the way, but as many online creators are already finding, success is achievable without one.