Over the past year, YouTube has made a concerted effort to embrace premium content like TV shows to attract ad revenue. But according to a new report from Screen Digest analyst Arash Amel, the video-sharing giant faces an uphill battle as the Hollywood networks and studios gobble up most of the market for ad-supported TV programming online.
In his report “US Networks claim half of free online TV market,” Amel says that the broadcasting and cable business in the U.S. will shed $2 billion in ad revenue by 2013, dropping to $67 billion from $69 billion in 2008. While TV ad dollars go down, there will be an increase in ad revenue generated by TV programming on the web. Amel says that ad-supported, web-based TV programming generated $448 million in revenues in 2008, and the total ad revenues from online entertainment programming, sports, news and events will be more than $1.45 billion by 2013.
While online ad revenues will grow, they will only account for 2.2 percent of TV ad revenues by 2013, according to Amel. The bummer news for networks is that increase in web revenues won’t cover the $2 billion in overall ad losses. The good news for networks, though, is that they’re doing a good job of keeping Google/YouTube at bay when it comes to premium content.
Amel writes that combined, the network web sites (ABC.com, NBC.com, etc.) and Hulu accounted for 53 percent of the ad-supported online TV market in 2008 (the remainder going to “online video services of major sports leagues, video services from traditional online portals, and direct services from other major channel groups and content owners”). Further, Hollywood’s dominance should perpetuate itself. From the Screen Digest press release:
In contrast, third party platforms such as YouTube, Joost and other portals, which have no direct vertical affiliation with major rights holders, nor direct access to premium content rights, will struggle to aggregate ad-supported movies and TV shows. The Hollywood Studios and major rights holders will continue to limit such deals, instead preferring to build their own syndicated ad-supported online video services – such as Crackle, developed by Sony Pictures, and the CBS Audience Network. This is a trend that will gather momentum. As a result, third party ad-supported video platforms may have to either diversify into new forms of their own original programming, exit the content aggregation business and offer technology and advertising solutions to the content-owners’ and broadcasters’ own services, or settle on the low-margin business of becoming affiliates of the player-platforms distributed by the content rights holders themselves.
Screen Digest’s comments come after recent numbers from TubeMogul that found full-length TV shows are not that popular on YouTube, averaging just 7,407.9 views per episode.
Funny Amel should mention original programming as a survival strategy for the likes of YouTube. Over the weekend we wondered what the role of original web series was anymore as so much emphasis is placed in creating web extensions of offline brands.