Venture capitalists are always looking for inflection points in a market – events that turn a market up or down dramatically. In our firm we have been having an “active discussion” as to whether or not the writers’ strike in Hollywood is the inflection point that […]

Venture capitalists are always looking for inflection points in a market – events that turn a market up or down dramatically. In our firm we have been having an “active discussion” as to whether or not the writers’ strike in Hollywood is the inflection point that will drive mainstream America off their couches and onto their computers for new video content.

Just to be clear, I am not referring to YouTube clips or previously aired network television shows online, but something that Mom and Dad would want to sit on the couch and watch for an hour. At Panorama Capital, we are all believers in using the Internet for cost-effective video distribution and have invested in this space, but we’re still waiting for the market to really rival that of traditional television.

For the demographics that currently do not spend more time in front of the computer than in front of the television, will the hangover from the strike drive them to watch new content on the Internet? Will it deliver a Nielsen ratings point for some Internet video shows? What shows would you recommend to your parents to watch to get them to move away from the television?

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  1. It’s not that simple. The number of people who get their content from television are far greater than those who get it from a computer. And you can’t go down to Costco and buy a computer with the robustness to adequately view online content. We’re going to have to see a huge upsurge in the purchase of equipment and training to drive an inflection point for online content. That’s not going to be easy, especially in the current economic climate

    What I have been finding is more people are turning to Netflix and are watching more movies and boxed sets of favorite, but cancelled television series. My teenage son has become a big fan of video podcasts and is moving away from network production. So there is a possibility of an upsurge in independent production of content supported by advertising taken from networks and major production houses. The momentum is on the side of content creators if they can hold out long enough.

  2. Drew Robertson Friday, January 4, 2008

    A rating point? That’s the goal? Not going to happen for any single web property. Just the same way cable has made it hard for top network shows to put together more than half a dozen points themselves. Here are last night’s numbers. Ratings/Share

    Jan. 3, 2008
    ABC 1.8/5 NBC 4.0/10 CBS 2.6/7 CW 0.9/2 FOX 4.0/10
    Adults, 18-49
    Source: Nielsen Media Research

    The internet video market is of course even more fragmented for any one program or network to build TV scale audiences. That said you’ll notice that the internet is now a larger advertising medium than TV in Sweden and by next year the UK as well. It’s a tough place for mass marketers would need mass advertising channels.

  3. Help a VC Understand Internet TV « NewTeeVee Friday, January 4, 2008

    [...] Internet TV Allan Leinwand, a venture capitalist who often writes columns for GigaOM, is asking readers there “whether or not the writers’ strike in Hollywood is the inflection point that will [...]

  4. Alan Wilensky Friday, January 4, 2008

    There are some great unknown and previously know artist that are just begging to be aggregated into new internet properties that may be the harbinger of the shift to put internet video on the same footing as Television.

    Want an example of raw talent? See http://rhondavision.com

    With a little budget and script development, talent like this can steal the show from the crippled television industry.

  5. IMO, Internet TV is the bomb and leads to new forms of broadcasting which some of us are already practising profitablly and it is going quite well in fact. A rating point may not happen for one Internet program but it does not matter b/c the aggregated audience of an Internet network that distributes programming may be far larger than a Nielsen 6.0 or even Grey’s Anatomy 12.0. Business methods we have implemented is the future of broadcasting b/c we hit millions per week with ads for a fraction of the cost. In fact, TV may charge around $30 CPM we charge $.30 and the results are far better and measurable. The writer above points out that these days networks are drumming up 4.0 nielsen ratings. I can reach 4 million targeted people with an ad in five minutes and most likely 15% will open it and 4% will go on for further information. Of that 4%, I will convert 4% on the first touch. We have seen the future of broadcasting and it is here today. Cheers.

  6. I live in LA and have many friends in the WGA.

    While I think an influx of web viewership is happening due to the strike, I would not expect any ‘mass’ migration until audiences can easily watch video on their TV sets. That’s the big missing ingredient. Right now, this process is way too cumbersome… and audiences lack patience if viewing palm-sized clips that are surrounded by tons of distracting desktop clutter (windows, folders, icons, IMs).

    Once TV can become more of a jukebox, more people (even the “moms and dads” you speak of) will watch longer online content.

    I think the internet is a fantastic distribution medium, but it’s not a great display medium (at least when it comes to watching a series). TV sets offer the reverse– great display, lousy distribution. We’re not too far away from finding a hybrid of the two that will succeed. Apple TV and OnDemand had some big hiccups but they are steps in the right direction.

    As a case study/testimonial…

    In a week or two, we’re a launching a very cool web series, The Mortified Shoebox Show, based on our popular books and stage shows, MORTIFIED. We’re really proud of what we’ve produced and think it has huge potential.

    That said, we recognize that we are launching a series via a medium that has yet to mature. So while we hope our series will catch on in the current web environment… we don’t expect our efforts to have giant payoff until the medium matures and offers something more akin to OnDemand.

    The good news?

    The web is actually changing pretty damn fast. Which is EXACTLY why getting in on the ground floor is worth the risk (for content creators like us… or sponsors… or VCs).

  7. It’s not just the Writer’s Strike you need to consider. Analog Television ends February 2009 – and with it the power of “Must-Carry” for the local broadcasters. I suspect that the next round of cable negations will look a lot like past agreements – with the local powerhouse stations getting compensation for carriage. However, in the next round, when it has become apparent that the consumer no longer watches “Over The Air” television, the cable companies will turn the tables on the broadcasters.

    As new television “appliances” are developed with Internet connectivity, the consumer will achieve their demand of “a la cart” through a combination of providers and services.

    The Strike, if it carries into the Upfronts, will force the networks to alter their plans, with a result of the consumers foraging for content. People will hear about great things on the Internet seen on their neighbors Internet enabled TV and more will buy these appliances.

    Broadcast Television only shines on live events, everything else is delivered via tape or video servers – even now. All that’s needed is one provider to cut out the broadcaster middleman.

  8. My time is too valuable to sit through 20 minutes of TV commercials in an hour. I only watch about two hours of TV a week and it is all from DVR with a commercial skip button. The evening news is a joke, might as well rename it drugs are us. If my wife would let me I’d have the cable disconnected.

    Only exception to this is live sports which still completely annoy me with commercials. Sometimes to the point that I will turn the game off rather than watch the commercials.

    I spend at least three hours a day consuming information from the net mainly in email and RSS form. Ads? I can’t name a single ad I’ve been exposed to in the last week. I’m bombarded by 10,000 ads a week; I’m so desensitized to them I barely know they are there.

    When I want to be entertained I read a book (two or three a week) or see a rare movie (once a month). Neither of these are filled with overt commercials.

    My advice for online content – sell one or two targeted ads at a high price. Not 2,000 for $100 each. If there were only one or two ads I might even watch them.

    Channel based TV is going to disintegrate into total on-demand. What’s the status of the court case where Comcast is building a DVR in the sky? If they record every show on every channel just in case you missed it, it is the end of channels. Once TV goes total on-demand with playlists there will be no difference between TV content and Internet content. Of course with total on-demand TV comes targeted advertising and Google.

    So the answer is: the writers strike has no impact. TV as we currently know it is already on the path to its destruction.

  9. James Gardiner Friday, January 4, 2008

    I very much agree with this. I have a blog in which I write about technologies and digital media. I have written a post at
    called “Predictions for digital media for 2008″.

    If your agree this is happening, my blog covers some predictions on how I think it will take shape.


  10. Wow! I’m kind of shocked by most of these answers. My personal shock aside from statements like “getting in on the ground floor” or “not expecting any mass migration from TV to web” (are these people under 90 years old?), I’ll try to stay close to the question: Will the writers strike be the inflection point for online video?

    In short, yes! If the current migration to web for rich media, the rapid rate of technology that improves that experience and the low cost, ubiquitous platform that is the web were not enough, having no new content on TV is the nail in the coffin. Ironic isn’t it? I recently stated that the lack of new TV content will ironically be the greatest disruptor we’ve seen in years, to drive more people and more importantly, peoples time, to viewing video online.

    Ratings points are an obsolete measurement and we need a new set of metrics really. I took at look at panorama’s portfolio and while it’s mostly medical, gridnetworks is the one I believe Allen is speaking of. Everyone in the space says they have the “best” haha, so I’ll just assume that Grid is actually the best at giving the user the true HD experience. Although when I tried it out I couldn’t use it because I’m on a mac at the moment. I know there’s no scale in mac’s but most video, content, early adapter people use them, so I always find it frustrating that stuff isn’t made for mac users in the video space. Anyway, Allen, would love to debate this point more offline. For the record, I hope the WGA gets a fair deal, but if the strike goes past March, the snowball will have rolled to far down hill and online rich media is going to eat TV’s lunch sooner than later.

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