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Summary:

Scrounging for “digital cents” is a risky business that makes content companies worried about losing analog dollars. But they’re forging ahe…

Scrounging for “digital cents” is a risky business that makes content companies worried about losing analog dollars. But they’re forging ahead regardless. At the second panel of the Battle for the Digital Home, executives from CBS (NYSE: CBS), Hulu, and Microsoft (NSDQ: MSFT) talked about how they saw their companies making ends meet in the digital future.

Just because digital distribution isn’t close to producing the same level of revenue that broadcast does, doesn’t mean it can be dismissed, said Zander Lurie of CBS. “Broadcast is by far the biggest generator, but that doesn’t mean we dismiss smaller platforms–every revenue stream starts at zero,” he said. “People are watching 27 hours of television in their home a day. It’s not like people are cutting the cord.”

But the gap between analog dollars and digital pennies is closing, said Andy Forssell, senior vice president of content acquisitions and distribution at Hulu. “There’s still a gap, but it’s not nearly as large a gap. Half the ad load, but double the CPMs — whether it will work out to exactly that, we don’t know. But that’s not five years away. It might be a couple of years away.”

When will content creators be able to treat online like they treat cable, and get the kind of revenue from an MSN or a Hulu that they get from a cable distributor today? “This distribution on web and mobile, part of it is experimental,” said Zander Lurie, senior vice president, strategic development, at CBS Corp. “We are in a competitive business–we want people to watch Hawaii Five-O. But we do have to have control. Are consumers asking for it, can we get the value that we think we need, and does it cannibalize other revenue streams? That’s what we need to figure out.”

As players in digital media try to balance their checkbooks, the meaning of “content” itself is changing, pointed out Paul Mitchell, general manager, standards and practices, of Microsoft Entertainment. Video games in particular have changed ideas about what content is, he noted, and television is only just beginning to catch up with that. “Mostly today, we watch stories, similar to how we’ve watched stories for 30 or 40 years,” said Mitchell. “In television, one of the things we’ll see change is the genre of content. We’ll have the ability to interact with it in a social way, with other people that are watching.”

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  1. Sounds to me that Paul Mitchell ‘gets it’. Indeed the possibilities extend far beyond interacting in a social way too. Total interaction with the media is the prospect. Maybe that interaction will be driven and responded to by another viewer or by the media-server itself – fully interactive programming.

    Most importantly, if well done, people will pay for that sort of content.

  2. Paul Mitchell definitely seems to get it, and I look forward to seeing Microsoft’s contributions to new content models in the online space.

    Here’s how I think of it: The Internet allows users to interact with video, thus giving them a sort of added value that traditional television hasn’t, so it stands to reason that online video should be able to generate a certain amount of profit that traditional television does not generate. Platforms that put video at the center of social networks, like http://www.fargotube.com (my employer), are especially promising because they allow users to interact with each other and with the characters in a show.

    For example, it’s easy foresee online video helping to popularize a new genre where viewers watch an episode and then help decide what should happen in the next episode by e-mailing suggestions and/or by voting on two or more possibilities. Soap operas seem readily adaptable to this format. So do traditional sitcoms, although it might be necessary to break them into two or more shorter episodes every week. It would be kind of like traditional TV series crossed with comedy improv.

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