Three online video startup CEOs stepped down last week. The departures were for different reasons, but when you hear about them in the span of a few hours, as I did on Friday, they glom together. Herb Scannell of Next New Networks said his company would be better served by someone more web-oriented; Mollie Spilman deferred to her co-founder to lead Tidal TV; and Bill Joll of On2 didn’t give a reason, though it’s worth noting that his company recently had to restate earnings due to “falsified” sales accounts (the three are pictured in that order). And they’re not the only ones: Founding CEOs Josh Felser of Sony-owned Grouper (now Crackle) and Tim Tuttle of AOL-owned Truveo are also members of the recently-departed online video start-up CEO club.
Meanwhile, investors are calling for disciplined spending by online video companies (huh? where were you when those checkbooks were opened? VCs spent $461 million on this space in 2007 alone) and video views were down slightly in April (though I don’t doubt that at least that metric will rise overall).
Running a video startup isn’t a cakewalk. Despite its rising impact on the media business in particular and the population in general, the sector has few exit trophies on its shelf (YouTube, Grouper, Maven Networks, thePlatform, Wallstrip, Jumpcut, Truveo, Atom Films…the list isn’t much longer than that). And once a company is bought, the slog for revenue is hardly over.
According to our sources, YouTube will make $70 million to $90 million this year; a friendlier estimate from Forbes is $200 million. And that’s as Google’s Eric Schmidt, CEO of a company that did $16 billion in revenue last year, says making money on YouTube will be “our highest priority this year.” Meanwhile, the few public online video companies are feeling the pressure even more acutely.
And while video portals and video search may no longer be as hyped as they were 18 months ago, the new kids on the block — niche and interactive web programming companies, for instance, like Scannell’s Next New Networks, EQAL, JibJab, and Revision3 (which, full disclosure, produces the GigaOM Show, but has also been on a tear lately, signing web stars Veronica Belmont, Zadi Diaz, and Gary Vaynerchuk) — don’t seem any closer to turning a profit. And creativity and efficiency are hardly best friends. It may well be that this first generation of new media content companies paves the way for the future of entertainment but gets crushed by business realities in the meantime.
Lately, the belief seems to be that the money is in content delivery software and infrastructure — with Brightcove, for instance, revamping to compete with the current darling, Move Networks — but as Om has written many times, the CDN business is not a good one. Living just on top of it may be precarious.
That’s not to say I don’t believe in online video — just that I can see why someone would have trouble holding onto their CEO berth in this space.