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Summary:

When all that’s worth watching on a network is one show, or all that’s worth watching in a show is one scene, or all that’s worth watching in a scene is one line, just take us straight to the good stuff, right? But Mark Cuban, in […]

When all that’s worth watching on a network is one show, or all that’s worth watching in a show is one scene, or all that’s worth watching in a scene is one line, just take us straight to the good stuff, right? But Mark Cuban, in an apocalyptic blog post, says online video will be destroyed by its ability to cater to these a la carte watching habits, because the economics don’t support them. He seems to thinks this will lead to the eradication of quality content.

Inspired by a Bernstein Research report that’s not publicly available, the cranky Cuban (who’s often blogged about his dissatisfaction with web video) quotes Bernstein analyst Craig Moffett,

Five years into the video-over-the-Internet revolution, we have learned two things. First; consumers won’t pay for content on the web, so it will have to be ad supported. And second; it won’t be ad supported.

Moffett’s math: Even if web video got the same CPMs as TV, because online viewers will tolerate less advertising, “a 30-minute program on the web with two minutes of advertising yields approximately 1/8th as much revenue per viewer.”

Though a la carte is what consumers want and deserve (why watch the crap if you don’t have to?), Moffett and Cuban are worried about the implications of legacy models dying out. Quoting Moffett again,

“On the web, watching SportsCenter not only robs ESPN of its ability to pull through carriage fees for ESPN Classic and ESPN U (and SoapNet and Toon Disney), it also, and much more importantly, robs ESPN of its ability to use SportsCenter to support the economics of the rest of the 24-hour ESPN schedule.”

Sure, the legacy model promises a diamond will emerge from the rough once in a while, but c’mon, all change is not necessarily bad. Cuban (who clearly has a vested interest in traditional television channels and high-quality content, seeing as he owns HDNet) turns this in an interesting direction, saying web video will be forced to play into the search engine optimization game that rules web content these days.

The economics of supporting content will force independently produced Internet content to be dumbed down to levels that create a perfect match for Youtube. There will be SEOs that come up with arbitrage solutions that will drive traffic to parked videos. Content creators will partner with SEOs and create budgets that reflect the CPMs they can earn in and around the video hosted on YouTube against the costs of the SEO driving traffic to the video. SEO support will be the only even marginally effective way to create baseline traffic to a video/show.

There’s something in his logic; we hear every day from content creators complaining that promotion is the only way for them to get noticed. But then again, you don’t hear winners whining. A web series like Zero Punctuation — “video game reviews [by an] obscure, foul-mouthed Brit,” as James described them in our review — shot out of the gate to millions of views per episode with minimal promotion. Yes, it does cater to web nerds, but most importantly it’s good.

Also, as a separate counterpoint, SEO may rule web content these days, but there’s still a lot of really good stuff on the web.

What do you think? Are lowered online video budgets a recipe for disaster?

  1. I really think that the assumptions here are that online tv programming/content will be essentially like current broadcast TV — aimed at a general audience. The real potential for online TV is nichecasting, creating shows with a very specific audience in mind that allows the creators to charge advertisers a premium over traditional broadcast CPM. Then the lower cost of web video production can then completely make sense. Right now the niche audience is tough to build because of the nerd factor, but will it be that way forever? Why does everyone seem to want to be smarter than web video at the moment?

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  2. I see his objection and raise him a business plan.

    My last project cost less than $1000 a finished minute. If I can produce content for 1/1000th of his costs, but make 1/8th of his revenue, I have 125x of his margin.

    I live on brown rice, in a shared house, with a borrowed car. I’m an independent producer and the stuff people like me are producing is getting better at internet-speed.

    I’m not worrying about buying a second Ferrari, I just need enough to keep the lights on and rent the camera.

    Like it or not – that’s your competition Mr. Cuban. And it WILL work – it’ll work just fine.

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  3. stephen
    it will work for you until you decide you dont want roommates and your mom wont let you move home

    m

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  4. I’ve been thinking about this issue a lot and can’t help but agreeing with Mark on this one. I too follow Stephen’s model of producing stuff by cutting every corner I can. And I don’t see that changing anytime soon.

    There are certainly niche markets. But are there economics in place so we can make the roomies move out? I wish that were the case.

    My prediction: entertainment goes the way of the airline industry. Where we were once served fancy meals by stewardesses in white gloves, soon it’ll be time to bring a bag lunch to the movie theater.

    Hopefully I’m wrong! lol

    Long time reader first time commenter. Very much enjoy your blog.

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  5. An amusingly barbed retort – but not one that reflects a greater understanding of the changing landscape.

    You are correct, if I fail and move back in with my mother, I will no longer be any competition for you.

    However, my company represents a total investment of a few hundred thousand dollars. That is a really, really low bar – many series are produced for much less.

    What that means? My company isn’t special.

    The host of very talented people making great, interesting work will expand dramatically. This stuff will be produced for less and less, cutting into the margins and attentions of those demographics that larger organizations need to maintain their enormous costs.

    This is, in fact, happening. Where I live has no bearing on the fact that folks in the media are going to have to learn to live with a lot less.

    Outsourcing is coming to Hollywood.

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  6. [...] being bought up at festivals like Tribeca are actually going to VOD platforms. For example, Mark “online video gloom and doom” Cuban HDNet acquired the rights to the dark comedy Finding Amanda, starring Matthew Broderick, but [...]

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  7. [...] another post in NewTeeVee today by Liz Gannes, reacting to Cuban’s prompted us to not hold back any [...]

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  8. This is a tough one, as I think the basic thesis of what Cuban is saying is dead-on, but it misses the bigger picture.

    Specifically, I don’t think that people will pay for web video for three reasons. One is that the FREE train has left the station, and with every day that passes greater amounts of decent quality FREE content proliferate online. Why pay for the milk when there are plenty of willing cows out there?

    Two, most of the content that is watched online are short clips (two minutes or less). This inherently limits the type of ad units that can be considered non-disruptive.

    Three, the most popular clips in terms of actual view counts are user-generated, user-captured and/or user-modified, suggesting murky copyright, qualitative bucketing and the like, which again limits total monetize-able inventory and effective CPMs.

    Given that, I think that there are two areas where web video will shine. One is as the proverbial bread-crumb drawing viewers back to the broadcast hub, increasing loyalty to watch specific programs, enhancing the brand goodness of specific talent, etc.

    In many respects, this is akin to brand advertising for media backed by registration and capture of viewing data that should lead to forms of advertising that are incredibly context specific — akin to the huge CPMs that a LinkedIn generates by having a highly targeted audience engaged in a very specific conversation. It also implies an online advertising 3.0 model that does not yet exist but invariably will (if old media is to realize the value of its assets before they get co-opted & commoditized).

    The other area of opportunity is for web video to evolve from the simplistic “player” model to more of an “engagement” model. In this model, new types of media units emerge where video is “pre-wired” with relevant search paths, links to related content, product/business listings and interesting conversations around the clip.

    Thus, the clip is antithesis of search — a fully realized “answer” that points to a broad set of engagement questions. Again, this implies a different set of muscles than simple web page or media container, akin to the way that movies are increasingly filmed with cinema, TV, DVD and video game instantiations in mind.

    While SEO is part of this equation, I would argue that it is more tail than dog — closer to LinkedIn than to link farm.

    I have blogged on the bread-crumbing aspects of this trend in social media in a post called, ‘Breadcrumbs and Conversations.’

    Here is the URL:

    http://thenetworkgarden.com/weblog/2007/05/breadcrumbs_and.html

    Check it out if interested.

    Cheers,

    Mark

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  9. I think this analysis doesnt really take into account other factors like an online studio potentially evolving to spread the wealth from major successes to up and comers and ever decreasing bandwidth costs. Factor that in with Stephen’s points above and I think you have enough there to bet against Mark on this one. Let’s face it, its not 1999 anymore. Real money is changing hands now in online video and no, its not coming from corporate IR clients or big companies throwing out loss leaders like it did in the Broadcast.com days.

    There is a lot on the horizon (and happening behind the scenes now) that is going to help grease the skids for online video. Just because you cannot see it (or dont want to take it into account) doesnt mean its not happening.

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  10. I also have to agree with Mr. Cuban, but respectfully suggest that business will find a way.

    Here’s an example: A 30 minute clip with two advertisements will yield 1/8th the ad revenue as conventional tv. Perhaps this is true. If my web “season” is 10 episodes, I’m getting 20 ad placements per season.

    However, a 4 minute clip with 2 advertisements (head and tail) and a season of 80 episodes will yield 160 ad placements, overcoming the per-placement value disparity. Additionally, a web video constructed in a certain way (see Zero Punctuation) will yield multiple views per video per visit, across multiple visits. This kind of viewing paradigm creates a higher per-eyeball value than tv, even if that value is spread across multiple advertisers, multiple visits, and multiple ad spaces (video ad, text ad, sponsor banners).

    However, even this does not represent the shifts that I see occurring. Web-driven DVD release alone has tremendous possibilities, allowing more premium content (think about a one year later double-length sequel episode) that can be released alongside primary content.

    Or four-walling a theater in key cities to show back to back episodes, capped with the premiere of a sequel episode, exclusive merch sales, and signings with cast/crew. (suddenly $12 a ticket doesn’t seem so bad)

    Mark Sigal brings up something which any website creator can tell you: web content will be supported by ads, but be monetized most effectively by ancillary markets. For video, this can be merch, soundtrack sales, and licensing into conventional media. Case and point: http://www.homestarrunner.com , a completely independent and profitable flash-based media buffet that has not a single ad anywhere. This is in addition to the conventional website monetization methods (affiliate links, etc.)

    In other words, the web content is only the beginning. The goal will be to create a franchise with a core niche audience that will be reached initially through web and monetized numerous times simultaneously and react to derivative work (sequels, etc.) I’m talking about sequels with DVD release being made within weeks of a season’s completion.

    I’m currently completing a work that will be released using some of these methods, and developing a series that will be very well suited to these methods. You know, people use the web for a lot of things, not just looking at porn and talking games/tech. There are a lot of large communities already on the web that can be grabbed and placed in front of content.

    -Rene

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