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Will Paying for User Video Pay Off?

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Paying for content is the biggest weapon left for independent online video sites, though they’re still trailing the portals — Yahoo, MySpace, YouTube/Google, MSN, and AOL. Today, announced it’s raising its bounties for user video, and Metacafe tells us it’s seeing a larger-than-expected uptake of its “producer rewards” program.

While Revver seems to get most of the attention for paying content creators, Break was one of the first sites to do so, starting with $50 prizes in January 2005. In a recent interview, Break CEO Keith Richman told us that he’s tried revenue sharing, but prefers to buy good content when it sees a traffic spike, and commission videos from up-and-coming creators such as Barats and Bereta.

Monday, Break will raise its payouts from to $400 to $2000, up from $250 to $1000. Richman said the company, which unlike many of its competitors has not raised venture funding, has paid its members more than $300,000 to date.

Metacafe, the Benchmark-and-Accel-funded Israeli video site, whose traffic ranking also hovers just outside the majors, started paying contributors a month ago though its Producer Rewards program. The company uses more of an established metric than Break, but has a higher threshold for payment than Revver. Metacafe pays $5 for every 1000 views if a video breaks 20,000 views, while Revver splits a reported $0.75-$1.00 cost-per-click evenly with creators and affiliates.

Metacafe’s scheme is performing better than expected, according to CEO Arik Czerniak. “We were hoping to get 1000 videos accounting for 10 percent of our total traffic by end of 2006,” he told us recently. “We are now getting about 300 videos being uploaded a day, and the producer rewards program already accounts for 8 percent of our total traffic.” The company is getting 1.2 to 1.5 million unique visitors a day, according to Czerniak.

Independent video-sharing sites seem to be choosing one of a few tweaks to stay alive. Some, like vMix, vSocial, and KickApps, are going the white-label route. There’s the niche markets, of course. Katie’s been covering the mobile plays — such as MyWaves, profiled tonight.

As for getting access to professional video and music, media players like litigation-happy Universal Music Group seem interested in consolidating video sites by picking off smaller players through lawsuits and saving their negotiation energy for pork-filled deals with YouTube. To that end, CBS seems more than happy about the increased audience it’s attributing to 300 clips uploaded to YouTube in mid-October, which have been viewed about 30 million times.

Richman of Break said he doesn’t like cutting studio deals to co-produce content because the terms aren’t good for him. Czerniak of Metacafe mentioned a recent deal with crime television impresario Steven Bocho, and said he’s in negotiations with other legal content owners such as NBC and Viacom. Guba has a partnership with Comcast, Sony, and Lionsgate for a horror movie network. Grouper offers some content from its new parent Sony.

So while the marquee deals are few and far between, paying amateurs is a pretty easy way to attract attention, creators… and perhaps even the next big thing. Revver has gained fame along with talents such as lonelygirl15, Ask a Ninja, and Ze Frank for its clean and simple rev-share deal. AtomFilms (now owned by Viacom), Brightcove, and DivX’s Stage6, some of the stronger players out there, also pay for content in various ways.

Still, we’re doubtful there’s enough good stuff lurking around to satisfy all the talent scouts turning over stones. It’s only fair to pay content creators, but adding and/or bumping up bounties does seem to smell like a desperation move. “Who’s not for sale?” asks Break’s Richman, when we poke at the obvious question. As the days tick on by following YouTube’s $1.65 billion deal, you gotta stand out somehow.

With additional reporting by Om Malik.

9 Responses to “Will Paying for User Video Pay Off?”

  1. I think one of the big hurdles for rev-share model for popular UGC sites expanding outside the borders is that the logistics of payout become very complicated. It’s one thing to payout US contributers with valid tax id and credit card. It’s an entirely different scenario when you start thinking about paying out teenagers in Brazil or Chile.

  2. These sites are all going to have the following problems:

    • The money to be made is in original content because mainstream content will be too expensive/low margin.
    • Anyone who gets successful on their network will be “attacked” by the other networks to get that content on their network.
    • Zero switching costs for either the producers or viewers means that they have no sustainable advantage.

    YouTube was right to sellout – at least now they can be sure of broad distribution.

  3. I have a fundamental issue with the notion that users are uploading content only to make money. A very small percentage of users will think about money when uploading their content. Most content is uploaded for bragging rights and fun. It’ll be more of a 95 – 5 rule where only 5% will do it for the money. I just hope there is enough content for all of these sites who clearly choose the same strategy to attract content.

  4. I thought Web 2.0 was principally about User clustering and democratization.

    Since the late 90’s launch of Napster, we’ve seen Users flock to sites that offer services and incentives that are in their best interests, individually and collectively.

    Any thing that empowers, rewards, and frees Users is a good thing.

    Whether or not, these companies succeed is a question of burnrate or runway.

    Will vSocial, KickApps, MyWaves, et. al. have enough money in the bank to offer Users incentives and pay the bills while allowing their new strategies to gain traction?

    It will take each of these companies at least 18-24 months to gain any significant uptake.

    It would be best if vSocial, KickApps, MyWaves, and a few others merged into one entity then merged with Facebook…then we would see the internet video competitive mayhem that everyone’s looking for…

  5. “…paying amateurs is a pretty easy way to attract attention, creators… and perhaps even the next big thing…”

    Indeed, it seems like the Internet is getting more and more “fair” to its users. Starting paying to content creators and distributing the $4.2 Billion of the advertising market ( between the people that put the the content up there sounds right and makes sense.

    Paying for user video is just a small part of a trend to pay for all user content. Places such as Triond and Associated Content give an answer to what seems to be an emerging need of the Internet population.

    Just one last thing, I also agree that “adding and/or bumping up bounties” seems desperate, and taking a model other than rev-share is not going to work in the long run.