Allow me to start off by saying I’m biased. HipMojo.com’s sister site, WatchMojo.com, is a publisher of video content, custom made for the Web… Online video is exciting partially due to the low barriers to entry, in other words: no agents, no Hollywood headaches… just good content.
But these days, it’s not the content that is getting the love, it’s the distribution. How so? Read on.
I came across the following article, outlining some of the excitement surrounding online video sharing sites like YouTube, Veoh, Revver and company. The sites have combined user-generated content with elements of social networking and forced old media companies to move their video libraries online. They have even forced social networking giants like MySpace to introduce video hosting and sharing features…
Of course, this is creating a problem for old media companies, even if they do not realize it yet. Let’s face it: TV generates a helluva lot more advertising revenues than the Web. Broadcast Networks generated $18 billion in ad revenues in 2005, Cable TV generated $16 billion in ad revenues in 2005, that’s $34 billion for TV. The Web has been growing, and will continue to grow, but it generated $12.5 billion in 2005. Over 40% of that went to Yahoo!, MSN, AOL and Google.
Offline, on TV, the bulk of revenues goes to the content owners at NBC, ABC, CBS… they have distribution, of course, but they also have content.
Online, it’s a different dynamic.
As such, old media is confused, rightfully so: its got plenty of compelling content, it would make more sense for them to publish it on TV than on the Web, since they do not have the audience [yet?] to generate ad revenues online, whereas they do on TV and could make money off it.
But by thinking solely about today and what they can generate now, they will not be in a position to eventually generate ad revenues online… inside the boardrooms, there’s a civil war… ok, well maybe not a civil war.
But you get the idea.
What sites like YouTube are doing is creating a critical mass that forces media companies call time out and take notice.
One must ask: what we are seeing these days, the excitement over online video sharing sites, the VC investments, and the soul searching going on inside media companies… is it justified or is it hype?
[and why do I feel like Sarah Jessica Parker asking that question?]
After all, online video ads are only going to be a $1 billion market in 2010… that’s a big number, sure, but not a huge number (overall online advertising was a $12.5 billion market in 2005).
Oddly enough, an article in Business 2.0 by Erick Schonfeld goes on to argue that distribution is overrated. So while the YouTube’s, Revver’s and Veoh’s of this world are busy building up critical masses and distribution for content, maybe the euphoria will not be justified.
Of course, that’s nonsense. YouTube has in one year generated more video streams than all other sites apart from MSN Videos. The same way that MySpace’s astronomical rise went on to incite News Corporation to pay a whopping $650 million for it, maybe, just maybe, VCs aren’t so foolish to plunk down so much money for online video sharing sites after all and overlook the content creators like WatchMojo.com.
But then again, I’m biased…
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