Television, Videos, Web/Tech, Weblogs, Yahoo

More Pain Coming for Online Video

My sympathies go out to the people behind the shows canceled on Revision3 last week. Clearly, a lot of fans were upset. You could see it in the comments on CEO Jim Louderback's blog: People loved the shows that were canceled and outraged that Rev3 would do such a thing. That outrage fed itself as they read each others comments. "See! Other people loved these shows too! How could you cancel them?!?!?!"

I have no doubt they were loved and no doubt Jim did the right thing. And that weird dichotomy shows why we still don't have full-fledged original content channels online: Video is hard to do well and video is expensive.

That causes two problems that are still hurting original video content online especially as we enter a protracted downturn: Audience and money.

Of course the two go hand-in-hand somewhat, but they're also separate. As we've seen with blogs, the Web allows you to catalyze powerful niches that cut across normal geographic and social barriers, culminating in surprising mega-niches.

Consider TechCrunch. We think of the site as a Silicon Valley phenomenon, and certainly in the early 2005 days when Arrington was having events in his living room that was the case. But really it's evolved into something for people who feel a kinship towards the Valley way of building companies. At a recent UGBT stop in Memphis I asked the crowd of eighty or so attendees how many read TechCrunch everyday. 90% raised their hand. "Wow," I said. "I should tell Arrington. Actually, I'm going to tell him none of you raised your hands just to screw with him." (A big learning from this tour: Mock Arrington on stage for a big laugh every time.) More evidence: At the TechCrunch50 conference last year, Israeli mega-angel Yossi Vardi asked for a show of hands of who was outside the Valley and the overwhelming majority of the crowd raised their hands.

Even though few blogs have been able to build such mega-niches, they can still be highly profitable businesses. That's because text is cheap. The software is free, ad networks are plentiful and you can blog in your living room in your underwear if you so chose. Sure, video is far cheaper than it used to be. But to do it right you still need talent, producers, equipment, broadband, crew and ad sales. And even if you just had one of each, the best people in that part of the industry do not come cheap. Believe me-- that skill matters greatly in video. One of my biggest learnings from a year doing TechTicker: Good producers and good editors make or break video content. (Don't tell my new boss, but I'd argue more than the talent.)

That's why when it comes to video, you still need mass scale to build a business around original programming online. Yes, mass scale. Because it's not only costs, it's the other side of the balance sheet too: Revenues. Advertisers don't yet get what online video does for them and the people selling online video don't really know how to sell it either. Even YouTube-- with enormous reach-- hasn't figured it out yet. As a result eyeballs online are in no way considered equivalent to those on TV, meaning you need way higher viewers than TV to bring in enough money to break even.

For example, TechTicker has two-to-four times the audience of CNBC. I don't know anything about the business side of our show, or CNBC for that matter, but I'm guessing ads on TechTicker are at a huge discount on a per viewer basis even though TechTicker has the advantage of clips being on demand and organized by ticker. Hell, I bet it's even a discount to Fox Business, simply because of the imprimatur still assigned to TV. Last time I did Fox they not only had hair and makeup for me but sent a car. We certainly don't give our guests that treatment!

Of course, that's one of the benefits of remaking a medium-- taking out all the waste. TechTicker is run incredibly lean, as were the Revision3 shows compared to TV. But low costs aren't not always enough. Obviously, I think TechTicker is going to make it. I wouldn't spend so much of my week here otherwise. But if we weren't part of a mass property like Yahoo Finance where a huge number of people already go to consume investing content, I'm not so sure. I had several offers to host online video shows at the time I was considering TechTicker, and ultimately I felt a big platform was game-changing-ly important for video, in a way it's not for text.

But in hindsight, I underestimated how important.We've really only seen the beginning of people watching online video in a mass way in the last year or so. My guess is it's another cycle before startups really figure out how to build a promising media business around it.

Comments

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"Advertisers don't yet get what online video does for them"

Not sure about that statement ... I think they completely get it, it's just not a strong enough medium for the necessary dollars to migrate from TV

i think they say they get it. i think they want to get it. but i think it's one of those examples where business people say one thing, but do another. i've spent a few months talking to advertisers and media buyers and online video companies off the record and i've heard this pretty consistently across the board. the evolution, the tools, the sales people-- all just not there yet. it will be in a big way-- but not this cycle

Interestingly, our sponsorship model is delivering real revenue, it's just unevenly distributed. We can really track how engaged our audience is with certain shows, and that gets added into our thinking.

Media transitions are hard and don't happen as quickly as anyone hopes. Think about Yahoo - you guys did FinanceVision in 2000, have TechTicker now. But it'll be another 3-5 years before we reach early majority. It'll happen, and we'll be a big part of it, as I know you will too!

jim

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