You'd have to have slept through yesterday to miss the big news that ESPN is now syndicating video clips from a cluster of its programs to AOL, its first-ever such deal. I interpret the deal as an extremely strong indicator that the "Syndicated Video Economy" (as I described this trend 3 weeks ago) is inexorable, even for the richest and most powerful video brands.
ESPN is one such brand. In 2007 it generated 1.2 billion video views from its own site, placing it in the top 10 of all sites. In January '08, ESPN generated 81 million views according to comScore, ranking it #9. And much of ESPN's broadband video (aside from what it shows exclusively on ESPN360, its online subscription service) is essentially re-purposed from on-air, likely making the margins on ESPN's online efforts insanely profitable.
Yet with the AOL deal, even the mighty ESPN has now capitulated to the lure of the syndicated video model. And the AOL deal is surely the first of many more deals to come. ESPN has likely come to the same conclusion as have scores of other video content providers, including the major broadcast networks: the future broadband video value chain is going to be more about "accessing eyeballs" - wherever they may live, at portals, social networks and devices - than about "acquiring eyeballs" by driving them to one central destination site. As the most stalwart proponent of the latter approach, other market participants should take heed of ESPN's strategy change.
The motivation behind video providers shifting from traditional scarcity-driven distribution strategies lies in the peculiar dynamics of the Internet: while audiences continue to fragment to a bewildering range of sites, they are simultaneously coalescing in a relatively small number of influential new brands such as YouTube, MySpace, Facebook and the traditional portals. Consider the comScore January stats again. The Google sites (dominated by YouTube) drove 3.4 billion video views or 42 times ESPN's video volume. A distant second was the Fox Interactive Media sites, including MySpace, which drove 584 million views, still 7 times ESPN's total.
These dynamics incent established video providers and startups in particular to get their video in front of all those eyeballs with more flexible business models. (For those interested in more detail on how the video distribution value chain is fast-changing due to these emerging players, I've posted slides from late '07 here. I'll have updated slides soon.)
The "Syndicated Video Economy" is creating both unprecedented opportunities and challenges for video providers. I continue to believe the future winners will be relentlessly flexible and willing to adopt new business approaches that keep them in synch with evolving consumer behaviors.