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Key Learnings: VIDEO ATE THE WEB?

NEW YORK, New York — The NetForum gathered on March 18, 2015 for a far ranging and fascinating discussion on the explosion of video on the web/mobile and its impact on the business models of traditional media and web companies.

The attendees at this NetForum represented an incredible wealth of experience relating to Video (although we “only” had one bona fide (Emmy winning, Oscar nominated) film producer around the table). We were joined by Featured Guest and long time member Ann Lundberg, whose responsibilities as SVP at Scripps Networks include the monetization of Scripps’ market leading food, home and travel digital channels, and other participants from the music, news, feature films, education, children’s, financial and political linear and interactive content, as well as talent management and venture capital.

Where is video content coming from?

As always, the discussion was off-the-record and this NetForum blog summarizes and paraphrases the group’s discussion (with some light editorial from me).

“Everyone is into video now” was a statement that our group took as a given. I wanted to know where was this video content coming from and why was it bursting unto the scene now?

“Video is coming from everywhere” was the answer to my first question. Both traditional and non-traditional sources of video are accelerating their supply of video content to the market. For example:

  • Movie and TV library owners, traditional video producers, are streaming more of their content online and on mobile. Not a day passes without the announcement of another studio or content owner announcing they are going to offer more content on a streaming platform, or launch their own OTT channel direct to consumers.
  • News providers are breaking news on digital channels with links to citizen journalists’ videos. With billions of people carrying a video camera in their pockets, the sourcing of news video has been democratized, going from a “one to many” model to a “many to many” model. Real-time news about major events, the most interesting video news content, can now be broadcast from the mobile phones of individuals to Twitter and Facebook, and even to the linear production systems that feed broadcast news. News outlets have had to find a way to incorporate these new sources into their own linear and interactive programming.
  • The music industry has relaxed its position on unofficial video material (concert snippets and even spoofs) that appears on YouTube, viewing it as more promotion of the artist’s work, something to accept and even encourage, rather than copyright infringement. So, we are seeing more and more music related video content from fans.
  • Magazine publishers are jumping in. As I was writing this synopsis, I got notices that the Economist is launching a video series, and so is CondeNast. In my opinion, this is an attempt to move from the long form text format to the video format to tap into subscriptions (for The Economist) and ad revenues (for CondeNast).
  • Native web/mobile content, as is now appearing on Multi Channel Networks on YouTube, is captivating audiences of millions due to its raw authenticity and helping discover new web/mobile celebrities. These low cost of production channels are specializing in viral distribution of their content and leading to the creation of self-reinforcing communities of viewers passionate about their content.
  • Personal video streams, appearing on social networks (Facebook, Snapchat, Meerkat) are competing with text and audio messaging as the most personal means of interpersonal communications. Often derided as content about nothing, Snapchat video streams could be seen as “videos about me shared with people who care about me.” What could be more powerful? (Thanks Ann for making me see the light on this.)
  • All this new video content is capturing significant attention from viewers, so advertisers are interested in getting involved. Since ad banners have not proven effective on mobile, where the majority of digital video is consumed and will be consumed, brands are producing more video advertising for the new interactive platforms and adding to the massive increase of video on the web/mobile.

Why video, why now?

My next question was why is all this happening? Is it because of a technology shift that is enabling new services and causing people to rush in without regard for the consequences, or it is because there is a real business opportunity that people want to capture? Or both? The key to the answer, I believe, was provided by Ann: follow the money. Let me try.

For content owners who are not intent on creating a direct channel to consumers and are satisfied to license their content to digital distributors, the math is simple. With the addition of new delivery platforms that are in billions of people’s pockets come new opportunities to monetize catalogs by selling streaming rights to their content. Assuming that these rights were not already sold to older digital platforms, selling streaming rights can be a big business to these content owners. Whether these revenues make up the lost revenue from declining viewership on linear TV remains to be seen. I suppose the answer is it depends. Linear TV is still one of very few media to deliver a mass audience so advertisers have little choice but to stick with it, at least for those time slots when that audience is there. That surely benefits the content owners in those time slots. For the others, they have to fight it out on all the non-linear, on-demand platforms.

How is video monetized?

With a couple of billion people having the technical ability to produce video anywhere anytime, the competition among different video producers is intense. The entire value chain to monetize video viewing needs to be rearranged to deal with the fact we went from a world with relative scarcity of video (high cost of production and high cost to view) to abundance of video (anyone can produce, distribute and view, cheaply and instantly).

If non-linear video platforms are going to be financed by advertising, it is important to remember that advertisers, largely, don’t care about content, they care about audiences and their characteristics. As long as they are able to reach their target audience at scale and at the right price, advertisers don’t care what people are viewing. This is perhaps a devastating statement to producers of high production value video who may expect to find a market in the web/mobile ecosystem – they are fighting for a smaller piece of the attention pie and need to compete with low cost, sometimes-ad financed video.

This is setting up a fight between mass video platforms that can deploy programmatic video ad technologies and generate targeted audiences to advertisers at scale, and content curation experts and context creation experts (aka as the studios and networks which picked which content to produce and distribute). The argument made by the traditional curators and tastemakers is that consumers are drowning in content and that they need the curation. Advertisers are not insensitive to the argument.

The video advertising model

This shifts the discussion from whether advertisers should pay a premium for advertising on content that has been curated out of the mass and put into an advertiser relevant context to how large that premium should be. The key criteria is performance – are clickthroughs higher (or better, sales) when an ad is shown to the target customer just any site or when it is shown on a curated site – or their mobile app equivalents.  Performance is key and it is not clear that the current price spread between context-based advertising and audience-based advertising is sustainable. Another key criteria is brand building. Advertisers who are concerned with building long term brand value and are not looking just at the day to day sales metrics may be more responsive to the pleas of the contextual ad sales pitch.

Snapchat is an interesting case study. The platform has systematically executed an evolution to a multi-faceted media company. It has accumulated a very large user base by enabling person to person short evanescent video. Then it has enabled longer form, more permanent films that users could share more broadly with each other. And now it has curated a collection of third party content providers, including Scripps, to which it is giving access to the platform. The content partners are on the platform to protect their position as the leaders in their respective content areas and not allow an upstart to get unto a new platform that might take off and create the new brand in their category and challenge them more broadly across all distribution channels. It’s a smart move.

Who really benefits from video?

A group of winners in this contest for new viewers are well-branded celebrities. As the power of the producers and the aggregators diminishes due to the overabundance of video, power will shift to the stars themselves. Stars, whether they be authors, actors or even celebrity chefs, with a strong social following are able to assert themselves in this new universe because they are able to offer users a multiplicity of experiences associated with their personality brands – like tickets to “experiences” and merchandise. Treating content as marketing for “experiences” benefits the stars to the detriment of their partners who are solely making monetizing one form of content. Management companies and talent agencies are also benefiting from this shift.

To conclude, perhaps the right corollary to the earlier statement that “Video is everywhere” is: disruption is everywhere.

The Weather Company’s Digital Video Strategy

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