Networks Show Respect for TV Streaming by Ignoring It

AdAge has a compelling thesis from this year’s television upfronts: “[T]he rise of Hulu, DVRs and Facebook and slipping ratings across the board have forced the networks to do something we didn’t expect this year: make the case that TV still dominates.” That certainly rings true with our reporting from the last three months. From AdAge:

“In the past, everyone was trying to prove they ‘got’ digital. That they had a digital value proposition to put forward in the marketplace,” said Margaret Clerkin, co-head of Mindshare’s Interaction unit. “This year it seems much more of a PowerPoint element. They are recognizing that digital isn’t core, and they’re focusing on their core business, which is the big screen.”

It’s a testament to the early success of online television distribution that networks no longer coddle it in their presentations, and have turned back to justifying their existing businesses. That more than anything shows the networks think web video is a legitimate threat.

Or — eventually — an opportunity. Coincidentally, there are a few good stories out today about how networks are getting along with the most prominent online TV streamer, Hulu. AdAge reports Hulu is asking for $40 CPMs, just below the $45 network sites can charge, because Hulu doesn’t break out individual shows on its own sales. Mediaweek adds that as Hulu grows faster than advertisers expected, “sources familiar with the site say that leaving a lot of inventory unsold at Hulu is a calculated measure so network CPMs don’t slip.” Mediaweek puts the actual price of Hulu CPMs at $25 to $40, compared with $30 for broadcast TV. Says its unnamed source:

“[Hulu’s parent companies are] still figuring digital out, and they need to find a way to increase those digital dimes to at least quarters or 50 cents. They’ll give up an additional $20 million to $50 million in ad revenue rather than get the model wrong and cannibalize themselves.”

In a separate story, AdAge reports that CBS Interactive CEO Quincy Smith has approached Hulu about distribution on a nonexclusive basis while maintaining control of ad inventory. While Hulu appears interested in such a deal, “the stumbling block is the continuing dispute between CBS’ TV.com and Hulu, which began after TV.com, which had a deal to distribute Hulu content, fashioned itself as a direct competitor, under Mr. Smith’s leadership.” C’mon guys, sounds like it’s about time to sweep that water under the bridge.

But the real question is when profits will come to online video. And that’s not just a matter of revenue but also of costs. Mediaweek quotes a source saying that Hulu’s streaming and maintenance expenses add up to $1 million per month. Elsewhere, a paidContent interview with Google VP of strategic partnerships David Eun has him saying of YouTube, whose traffic dwarfs Hulu’s and whose team is so often criticized for failing to make money, “I know that our costs are significantly lower than what anyone else is serving up and hosting.”

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