The Professionalization of Internet TV

Next New Networks, ON Networks, Revision3, 60 Frames, Vuguru, Telegraph Ave Productions, WatchMojo — what do these companies have in common? They all use Moore’s Law and low-cost distribution over the Internet to disrupt the studio model, in the process building audiences that can rival a small cable channel. They are professionalizing internet TV.

And this business is going to get bigger. iSuppli, a market research firm, projects that professionally produced video will will bring in nearly $5.9 billion in revenues in 2011, up from $423 million in 2006.

At present 3- to 10-minute videos are popular because they can be downloaded quickly over today’s broadband networks, running at typically 3 megabits per second in the U.S., and 8 megabits in other parts of the world. As speeds soar past 20 megabits per second, longer form videos could be downloaded quickly. Longer videos would mean more advertising opportunities.

screenshot10-edit.jpgThe professionally produced video business, including professionally produced and distributed advertising-supported news, sports and entertainment, will account for 79.3 billion streams worldwide by 2011 up from 3.7 billion streams in 2006, iSuppli projects.

Professionally produced Internet TV also has an opportunity to find distribution on new IPTV networks, especially the ones being built by telephone companies. Given the startup activity in the U.S., the report indicates that a substantial portion of Internet TV content will originate in North America and Western Europe

The online video boom is already igniting investment in the back-end and infrastructure companies, especially ones that lower the cost of distribution. Expect many more startups to emerge in the coming year, both on the production and distribution sides.

Nearly $1 billion in venture financing was invested in about 150 video-related started between 2002 and 2006, according to iSuppli. Of that more than $250 million came in the first half of 2006.

Ask Dow Jones VentureOne, which specializes in the finance sector, and they’ll paint a slightly different scenario. Web-video related startups between 2002 and 2006 raised $325 million in venture capital funding. Of that, $98 million, or 30 percent, came in during first half of 2006. And during the first six months in 2007, startups in the space have already raised $111.5 million more.

With help from Om Malik and Liz Gannes.