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Summary:

The new year doesn’t promise to bring much in the way of good tidings for most startups, much less those with the shaky business models found in digital media. But, at the same time, online video consumption is a strengthening reality that won’t be suppressed by […]

The new year doesn’t promise to bring much in the way of good tidings for most startups, much less those with the shaky business models found in digital media. But, at the same time, online video consumption is a strengthening reality that won’t be suppressed by tough economic times. So, if you’re involved in a video venture looking out at the spread for 2009, where do you stand?

enteringstartupFirst of all, let’s talk about where things ended up last year. The big news items for video startups (and young, internal ventures at big companies) in 2008 were acquisitions, layoffs and shut-downs — and of course fundings. Many of the companies we cover raised funding last year, though the pace of new investments slowed along with the economy. (As for including a category for IPOs…yeah right.) To recap some of the highlights (and lowlights):

Acquisitions: There were no blockbuster acquisitions in 2008 — at this point it seems impossible that anyone will ever match 2006′s Google-YouTube. At $160 million, Yahoo-Maven was probably the biggest deal that’s directly relevant to our space, but that deal has faded, along with the products involved. Other than a couple biggies on this list, you’ll be forgiven if you hardly recognize any of the names.

Vidmeter by Visible Measures, NBCU buys LX.TV, Maven Networks by Yahoo, Revver by LiveUniverse, Weblistic by Spot Runner, Bebo (the social network has significant investment in original video) by AOL, MediaXstream by Secure Media Solutions, Kontiki by MK Capital, FanLib by Disney, CNET (which has many video assets) by CBS Interactive, Navic by Microsoft, Omnisio by Google/YouTube, Radiance Technologies by Comcast Media Center, Visual Connection by KIT Digital, Illumenix by TubeMogul, ClearStory by The FeedRoom, SportVU by STATS, TIOTI by Vizimo

Layoffs: These stories sped up considerably as the year went on. Most, if not all, failed to put an end to tough times for the companies involved.

Digeo, Crackle, MeeVee, Akimbo, SuperDeluxe, Vudu, Seesmic (twice), Heavy, PermissionTV, ManiaTV, Break, Revision3, Smashface, 60Frames, Vuze, Spot Runner (twice), Veoh (twice), BitTorrent (twice), Current Media, Qik, Strands, Brightcove and DivX. (Not to mention public companies like TiVo, Netflix, Akamai, Viacom, NBCU, Adobe and AT&T.)


Shut down
: This category was actually smaller than we might have expected, given how tough it is to succeed in this business. Last year, when we asked a panel of online video experts — from video makers to professors to VCs and media execs — what would happen in 2008, one of the most common answers was that me-too video sites would shut down. Here’s what they told us:

  • “If you are running an online video company that features non-premium, commodity content and you missed the Internet ‘network effect’ enjoyed by YouTube and a few others, it might be time to cash out.”
  • “Sadly, the second-tier video sites this year will sell to larger companies or fade away.”
  • “Any of the companies who have raised $15 million or more and are running out of funds now are in serious danger.”

Well, it turns out doomsday wasn’t quite nigh… But it’s a good bet that many of the startups on the layoffs list will be forced to make even deeper cuts in 2009.

Stage6 (DivX’s video portal), Akimbo, Firebrand, AllPeers, Peerflix, Streamcast Networks, Pickle (after being acquired by Scripps), Red Swoosh (after being acquired by Akamai), SanDisk’s Fanfare and TakeTV, Starz Entertainment’s online service Vongo, Skyrider, ClickStar, Moblogic (after CBS acquired Wallstrip), Mobuzz, Jumpcut (after being acquired by Yahoo), Eyespot (though the assets were acquired by PixelFish),

But people are watching more and more online video, from user-generated video to TV episodes to a growing portion of web video originals. Here are the consumption stats:

Unfortunately, global video stats are hard to come by, but here’s one impressive measure of how much video has infiltrated our lives: comScore says U.S. online video watchers watched 273.1 minutes of online video in the month of November 2008, up from 195 minutes in November 2007. And the number was only 151 minutes in January 2007. A 40 percent increase in consumption in a single year is massive, and there’s no reason to think it will go away.

And what about the money? Here’s what we’re looking at for market size:

eMarketer has been looking at video advertising revenue closely. First it said 2008 would net $1.3 billion in U.S. video ad revenue, but then halfway through the year it revised that estimate to $505 million. By the end of the year, that number was bumped up to $587 million. Notwithstanding the whole “track record” thing, here’s this year’s eMarketer forecast: $850 million in U.S. online video ads 2009.

As for paid video, it’s the red-headed step-child of video business models — but it’s also being opened up in new ways by services like Netflix, which includes unlimited online streaming with most of its physical DVD rental plans, and sports services like the exemplary MLB.tv. ABI Research forecasts $2.49 billion in worldwide — N.B. worldwide, not just U.S.! — revenue for paid video over broadband, more than double the $1.16 billion it estimated for 2008.

So what’s next on the agenda? I am generally uncomfortable with predictions, given how self-serving they are (plus I hate to be obvious or wrong). But here are some of the most provocative and specific video-related predictions I’ve seen from people who take an active interest in the space.

  • Rise of video use by marketers for SEO — “a short cut to the top of Google” (Kevin Nalty)
  • Growing market for cheap video stock footage (Robin Good)
  • Influence of video on politics deepens with President Elect Barack Obama’s fireside chats (Alex Castro)
  • Closure of most of the startups on this list: Revision3, ON Networks, NextNewNetworks, 23/6, Funny or Die — “Normal people have no idea what any of these things are.” (Rex Sorgatz)
  • “The biggest trend in online video is where and on what people will watch” (Hulu CEO Jason Kilar). Is this a smoke signal given the source? Hulu was the break-out story of 2008, but it’s only available on the web right now. Meanwhile, the push to bring web content to the TV, driven by Netflix, is gearing up to be a prominent storyline in 2009.

So, there you have it, a cornucopia of data points and pointers. Of course, when it all comes down to it, silly things like founder dynamics, funders’ indulgence, and luck will likely have as much a part in your success or failure as the market. What’s sad is that we may not see a lot of new startups this year, just at a time when some of the best ideas about online video are being crystallized into shows, products and services that people actually want and enjoy. But if you’re lucky enough to have a little runway left, we hope to see you out there.

Photo by Flickr user dierken.

  1. This is where the cream rises to the top.

    Chris McCoy, Founder
    YourSports Network
    http://www.yoursports.com

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  2. [...] it harder for online video companies to make money. Situation is harder for online video startups. An analysis of some of the leading indicators – shut downs, layoffs, consumption stats, market size [...]

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  3. Nice post Liz. It’s good to see a recap of activity from last year along with going forward thoughts. In my opinion, the video space is going through the right progression as we’ve achieved the 10-year mark when online video first really hit the market. Virage (a company where I worked) along with AltaVista and Real Networks launched the first public video search site in 1998 indexing the Clinton/Lewinsky testimony. http://www.virage.com/content/customers/case_studies/altavista.en.html. And yes, ‘cigar’ was the biggest search term, although I recall that a good number of users misspelled it ‘sigar!’ Infrastructure readiness from converting analog to digital to broadband to cheap storage and now rights and business are all part of the evolution. Whether solving direct to consumer or behind the firewall enterprise applications, video clearly is on an amazing upward trajectory. And while eMarketer’s forecasts have gyrated (recall that they aggregate research as opposed to conducting primary research), it’s good that we’re seeing a tightening of the forecast which suggests that more reliable data is becoming available for the number crunching. On the business side, a back of the envelope analysis shows that video advertising is doing well when compared to cable advertising in the early 1980′s. In 1980, US cable advertising was approx $72M (or say $180M in today’s dollar) and then jumped to $732M in 1984 (or $1.5B in today’s dollar), so online video advertising seems to be in the right zone. And whether it’s full-length shows, short clips or films supported by advertising or for-pay, I think over the next two years this market will start to enjoy some material business momentum. If anything, 2008 proved the cultural value and mainstream interest in online video from the Olympics to the elections. Now that the audience has tipped into this mainstream category, the business momentum should quickly follow. Yes, shake-outs are also a natural part of a market’s maturity and growth and 2009 will no doubt see companies (pioneering companies) leave the market, but we should also see break-outs on the upside.

    Jeff

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  4. Sadly, the concept of “newteevee” (based on predictions above) has been consumed by Old Big Media and there is minimal innovation or originality in any of the prospects for the near future.

    Really, “Hulu” is an old media story and has nothing to do with “newteevee” (though it gets alot of coverage here).

    The “content is king” mantra is reversed to “the king(s) control the content.” The prospect of an independent and democratized entertainment and news industry is just about over.

    Unless, a few unknowns slip through the cracks and innovation (technology and content) is funded — activities that will revive the prospect of a diversified, niche-driven video industry (look at how BRIGHTCOVE sold-out on that notion), we might as well all go back to watching cable, the picture’s larger and better.

    So long “newteevee,” it was nice while it lasted.

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    1. @ the_end – The story is evolving. You’re right that the indies did not maintain their initial turf. But there’s still interesting stuff to come. Remember, it’s all about Jimmy Fallon.

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  5. [...] will struggle, but the silver lining is that more and more people are watching online video, says NewTeeVee’s Liz Gannes. Online TV network Revision3 hires TV producer Ryan Vance — Vance, who has worked at cable [...]

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  6. “Sadly, the concept of “newteevee” (based on predictions above) has been consumed by Old Big Media and there is minimal innovation or originality in any of the prospects for the near future.”

    Hold on, not so fast. Hate to disagree with you, but innovation is alive and well at EXIT Stage Left – http://www.lowrytheatercompany.com

    We have absolutely no intention on giving in to the OBG and feel rather strongly that we are producing television quality content for the web. As a matter of fact, the more I talk to other content producers, I realize that quality and quantity is GROWING exponentially, so sounding the death knell at this point is anything if not counter-productive.

    Would we like our show to be on a network or cable channel, absolutely. Would we walk away from original web production, absolutely not. While many of the early conduits, the very companies that supported viral programming in the beginning, have struggled (and in some cases gone the way of the 8-track) there are still many viable alternatives that allow the consumer to watch shows with solid acting and excellent production quality. If anything, it gives us a standard to live up to.

    Each year we witness the death cry of DVD, or VHS, or laserdisc, yet that industry still provides the lion’s share of revenue when valued against theatrical or other outlets; so why would we put a fork in a freshmen industry that is just gaining its footing?

    While I am the first to admit that this is a struggle and a challenge of the highest order, online media as a marketable and profitable business model is going to take time, but over – heck, we are just getting started!

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  7. The current state of affairs is an unfortunate bump in the road. I’m optimistic that the number of quality internet television channels on Ziptyzap will continue to grow as will the number of folks who watch their web-based entertainment on their televisions.

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  8. Liz – What are your thoughts about video syndication in 2009? There were some big changes in 2008 that could (should) turn into real businesses in 2009. For example, Hulu kicked off the “syndication glasnost” in April 2008 with video enclosures in RSS feeds and then in May when they implemented some initial syndication deals with Yahoo, AOL, et al. Until that time, fear of losing control really ruled the day (along with constraints on syndication due to last gen ad mgmt systems). Other than single-video embeds, almost ALL video Web sites at that time were walled gardens where the video never left the rights-holder’s domain [sic].
    Things changed a lot in the 2nd half of 2008. For example, the video RSS index and “feed reader” that we recently launched – Channels.com (shameless plug) – now includes over 10,000 active video feeds all of which include video enclosures. We tried to develop a feed index in early 2007 and found less than 100 (!) RSS feeds with video enclosures. Evolving ad management systems now allow video publishers to get “credit” for ads (and videos) played on 3rd party Web sites and Hulu’s boldness/openness has raised the bar and reduced other’s fear.
    Where do you think this evolves in 2009? Is it the year we blow the doors open for syndication or, as the ranks thin and lines are drawn, is it the year of walled gardens?

    Sean

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    1. @ Sean — I have to think it’s all about syndication. Consider the difference between Hulu’s traffic numbers when they include embeds and when they don’t. And there’s still an opportunity for someone to massively expand the syndication universe by doing what RedLasso was doing before.

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  9. Hey Liz, great recap. Year 2009 will follow the old adage – content is and will be the king.

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  10. building_burrito_stand Thursday, January 8, 2009

    I think “evolving” is wishful thinking as we all seek relevance that has been taken away from us.

    Let’s face it, the “new networks” (Veoh, YouTube, Revver, Blip, Brightcove etc etc) haven’t supported original content (in a meaningful way) and haven’t developed tech/tools to differentiate themselves from “old TV” (in a meaningful way to the User). Everyone got all excited over Barry Diller (Old Old Media) playing in this space and waited for the money to rain down on us all…

    A handful of Bay Area talking-head content guys have gotten funded, but we’re already projecting their demise (they were a snooze, except to each other)…

    I have to agree with some of the above, Hulu is an Old Media company; many of the posts today are about LG and Samsung Old TV’s (with new gadgetry) — there’s very little innovation happening in the NewTeeVee space as it was originally defined (or, per this article, very little money in the space). I’m sorry, but, even reading this blog has become redundant to glancing @ msnbc or huffingtonpost’s media page.

    I’m not so sure NewTeeVee has evolved. I’m not sure it never got off the ground when the onslaught of OldTeeVee decided to move in, repurposing alot of linear pablum, and sucking the eyeballs away from the hopeful tiny niches that were developing.

    It was supposed to be far more interesting than where we’ve all ended up…

    Light @ end of tunnel: content and tech teams working together (in concert) to create better user experience(s).

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    1. @ the_end and building_burrito_stand – If you don’t mind my asking, what do you guys do? You’re clearly tuned in. Also, what would the alternate universe of NewTeeVee as you define it look like?

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  11. The facts are that Analog $’s will become digital ¢’s . The reason is the vast amount of content being created and digested will continue to grow and the viewers habits will continue to fragment the industry by taking away their defensible business model (their control over who and how). Also as more advertisers become active in the analysis of their spend they will realize that they have been spending TOO much money on TV and they will demand a more market driven process of buying media that is accountable to a measure.

    What does this mean? It means that in the end the BIG media companies will fall apart and their cast of supporting parties will slim down. We are entering an era where content is not king but its digestion and distribution is.

    NBC is a king not because they produce the best content, but because they have a monopoly and control where, when, how and who see’s their content and their ads. This is not tied to better content but instead is directly tied to control over who else can access those eyeballs. The web has removed the barriers of entry into distribution.

    As the web overtakes broadcast in hours spent their monopoly diminishes in equal parts. Most importantly the web will change the way people watch what they watch.

    Soon you will have the choice of “a la carte” TV and that will be the death of the traditional broadcaster. Sure people will still like the “lean back” brainless method of watching TV but as more and more of our lives are spent pursuing and digesting “what we want when we want ” the viewers penchant for irrelevant ads will disappear.

    Just like the shift in music consumption happened in parallel to the significant decline of the cost of production and distribution – so will the way people consume video and from whom they choose to watch what. In 10 years you won’t turn on your TV and see what’s on, you’ll choose to watch what you want when you want. This could be a 100m dollar movie or a show produced by high school kids – in the end the monopoly maintained by the big 4 will dissolve and be replaced by something that is un-imaginable to us today.

    There will be no separation from the web and other forms of terrestrial media – it will all be one and the consumer wont give a damn about the legacy and the traditions.

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  12. Doesn’t NewTeeVee go on closure list?

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  13. building_burrito_stand Thursday, January 8, 2009

    Liz

    Sorry ’bout being sorta stealthy and/or evasive, but, other than my last line about content/story and tech teams actually working together, in concert, I can’t say much more right now (and, I’ve got a burrito stand to build).

    ’08 was a disappointment to see this space get bulldozed into moving the “same old same old” content onto different screens in nearly identical formats. Life also became about replication of ad units and near-zero understanding of the User Experience.

    I do believe there is a lot of growth/room for the evolution of new filmed entertainment storytelling that will also introduce a different, more engaging User Experience. Can’t wait to send you the first press release.

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  14. Phenomenal post, as always, Liz. I think also that the next big step to be taken online is mass adoption driven by high quality, marketable productions.

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  15. good post, Liz,

    of course, that we believe there is another big trend that we already started to see in 2008 — the shifting away from video as destination to video as part and parcel in any website. as we all know, the white-label video space is crowded, and we expect a serious consolidation in that space, one way or another. at Kaltura, of course, we think things will go the Open Source route, and we’re helping this happen.

    Shay David,
    VP Business and Community Development
    http://www.kaltura.com

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  16. I am with Robin Good and Shay David — as video gradually starts becoming part and parcel in any website, there will be a ready market for cheap video stock footage, and the value will be in offering search efficiency. For instance, on CountSpin, we have started showcasing video demos of the featured brands/products to add more infotainment… and these videos are sourced directly from YouTube.

    Monica Roy
    http://www.countspin.com

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  17. [...] una excelente nota en NewTeeVee: The Outlook for Video Startups in 2009 en la cual se describen a casi todos los startups relacionados con video online y como, todos los [...]

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  18. [...] Tee Vee does a great job outlining the major 2008 Online Video news – from aquisitions, fundraising activities, closures etc. They also compile a list of what industry [...]

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  19. [...] Video startups have it rough. YouTube (and now Hulu) gets all the attention, but what about the smaller ones, trying to take a piece of the huge pie? Well, it might be a great year for Video Startups. Here are some predictions by some of the industry’s top bloggers and opinion makers: [...]

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  20. Great insight and commentary. Nailed it. It seems to be clear, especially in a tighter economy, the bricks and “established” clicks in video publishing will be the winners / survivors. Understanding these shakeouts always occur for different reasons, and know what to offer and position, as well as manage, is central to startups that expect to get through today’s environment. Steve Robinson, PanacheTech.com

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  21. Whew, glad to hear there were no layoffs at the Pirate Bay. Great roundup, Liz!

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  22. Great article! I agree that video is still a great marketing tool. Especially the new sites where video walks right out in front of all the content! Like http://www.WebSiteWalkOuts.com

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  23. Will someone please show me a single case where the “old guard” media has been successful in dominating “new media”?

    They always, ALWAYS screw it up and leave plenty of room for start-ups to wipe them out.

    This will play out the same way with video – its not the content that keeps them at the top its their monopoly of distribution channels.

    I agree with Adam that this will play out in the same manner as music and the written word. The yet unkown tech start-up will win in the end while the suits and egos of the big media companies will sit around with their thumbs up their overpaid asses.

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  24. Ten Cents predictions for 2009 internet video

    1. P2P based video distribution technology will become the norm. It will get licensed, and the companies holding patents will laugh their way to the bank (or shoe-boxes, given the trust levels for banks)

    2. Technology companies will not dominate the video distribution business. Media companies will.

    3. Google and/or Apple will rethink their server based distribution technology, given the green pressures.

    4. Integrated “living room IP” solutions for the masses (think TV) will be postponed until economy improves.

    5. CE Chip companies will see Intel as threat – and will rally around to keep it away.

    6. Apple will rethink Flash

    7. A major media house will launch a hot video show, exclusive to the internet (think reality TV)

    8. Media companies will open up tonnes of content for free in SD resolution – from 3 years or older movies/tv shows to 1 day or older sports …

    9. Ad spend percentages will not change (from 2008) for different media. Total spends will.

    10. Video mashups will emerge (as tech demonstrators, if nothing more).

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  25. Aaron Kleiber Monday, January 12, 2009

    Quick comments on all I read:
    - OBG will cave and start giving waaay more media up for free.
    - New media producers MUST find a new way to show new content to OBG, the people with real production money instead of taking a dvd to some office in NY or LA. They will.
    - We may dislike OBG but we’ll find a happy medium soon.
    - Content IS king and will be soon again. Amercia is getting tired of reality tv and remakes of movies we love.
    - We have not sold out either. We have a great fan base. http//:www.captainbalsto.com

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  26. Good post Liz,
    Given the dynamic nature of the video market, who are some of the more viable online video aggregators to look for in 2009? Tx.

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  27. Read it with pleasure Liz.

    Is there any reason you left out ViralTracker? Is it because they are not a start-up anymore?

    I could imagine that, since WPP has bought it. They buy lots of digital companies, but mostly the successful ones and not start-ups. See this ViralBlog post about ViralTracker:

    http://www.viralblog.com/online-video/wpps-groupm-acquires-viraltracker/

    Cheers

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  28. [...] Though CBS thought that a 4 million dollar aquisition was reasonable, apparently keeping that 4 million dollar show running was not. As the first big web show aquisition, people thought the purchase of Wallstrip would be the first of many. It even spawned a few rip offs . Conversly, it’s canceleation was thought of as an omen for the crumbling video economy. [...]

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  29. [...] can you make up your mind: Is internet video screwed or not? Oh, it’s totally screwed? Right. [...]

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