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Summary:

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 […]

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.

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  1. Barrett Garese Monday, June 29, 2009

    Here’s the thing though: If you’re interested in creating original web content, it needs to be more than just shortened versions of TV shows (“It’s a sitcom, but it’s only 4 minutes per episode!”) If all you’re doing is making “TV Lite” you’ve already got a better competitor in the marketplace: it’s called TV and more people have it.
    Original web content is more than just web video, and it’s more than just 3-10 minute versions of TV-esque shows. There needs to be a reason for it to be online.
    When Youtube and content creators are giving the audience a unique content experience that can’t be had in any other media, we’ll start to see the types of projects that justify the hype of online content.
    Is Youtube screwed when it comes to TV content? Perhaps, but that depends on whether you consider “premium” content to be solely defined as “mainstream television or film content.”

  2. Ad supported content is not the way to go – if I wanted ads, I’d stick with regular TV.

    Did you also notice the web ads suck! What are they thinking? This is a new medium and the best they can come up with is a repackage of the ad they have on TV. L A Z Y !

  3. Youtube is the price that Google pays to be Google.
    Yes, everyone in Google is probably convinced that youtube is not a monetize-able asset. It is a business compulsion, almost a necessary evil. Let’s see why.

    1. Youtube cannot get ad revenues, even if it managed to get great content because we customers would never accept a youtube that spews ads like linear tv. More over, Google wouldn’t let it’s clean image take a hit from ad pollution.

    2. Youtube will not get the best content in town, because the content owners will clearly want a piece of the revenue pie. Staying free (and actually draining money), youtube cannot guarantee that piece of the pie. Digressions such as HD version and a version for CE devices (such as TVs, IP STBs) will not help as the number of users of good-old browser based, free youtube will only grow as netbooks takeover. In summary: youtube will not carry premium content because it cannot find the way back to the “premium”.

    3. Even if Google concludes that youtube doesn’t make money, Google cannot close down youtube. Unlike other fallen google assets (think Lively), youtube is far too important to get the ax.

    4. youtube will only drain more money for Google as time progresses. Google will simply account for this under infrastructure costs for their business. In the infinitely convoluted economy that we live in, we will all pay for youtube indirectly, as users of Google, as statistics in the game of ad sense.

  4. michelle1976 Tuesday, June 30, 2009

    Absolutely NOT. There will always be wierdos like me who engage in more online media then offline media. The Internet is so massive, that even if video sites get only a fraction of viership, it’s still worth it. That’s why smart marketers of taking advantage of the video craze and submitting their content to sites like YouTube and video ads to sites like Adwido.

  5. I doubt very seriously that YouTube is complaining about anything. They are getting their fair share of eyeballs and aren’t hurting for anything. Sites like YouTube and Adwido.com are sure to experience more and more success and more people logon and become comfortable with the net.

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  9. Absolutely NOT. There will always be wierdos like me who engage in more online media then offline media. The Internet is so massive, that even if video sites get only a fraction of viership, it’s still worth it. That’s why smart marketers of taking advantage of the video

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