Octavianworld

Online Video: That Sound You Hear Is The Dam Bursting

By various measures there are some $500 billion spent globally on advertising.  About 40% of this goes to TV, which is why Oxygen is worth a billion dollars to folks like NBC.

Yesterday I saw a press release in which Sony announced more content partnerships, with folks like CondeNet and Sports Illustrated, for the "Internet Video Link" service it packages with its BRAVIA high-def television sets.  Sony gets unique content it can sell ads against.  The online publishers presumably get a rev share on video assets they've already produced, and extra traffic going back to their sites.  If I understand how the service works, this completely bypasses the cable TV infrastructure by using whatever broadband you have available.   Memo to cable company, re: $100/month digital cable subscription:  "Ask not for whom the bell tolls..."

(Ok, you say, but why buy an HDTV if all you can watch is low-res Flash clips?  Not so fast.  See this interesting announcement from Brightcove and BitTorrent yesterday?  How long will it take Sony to add BitTorrent nodes into the   Internet Video Link modules on its sets?)

So, how do we know if Sony's video content bet is ultimately better than NBC's?

NBC paid $12 per Oxygen channel subscriber.  According to news reports, there are about 300k Oxygen viewers in prime time.  Let's assume of course that different people watch different shows each week, and that prime time is as popular as all other times combined.  So I figure that 300k prime time viewers translates into 1.2 million unique viewers per month (cross-check: Oxygen.com has 1.2m uniques).  OK, so $900 million (Oxygen's acquisition price), divided by 1.2m = $750 per unique viewer.  (NBC also has to continue producing programming and pay carriage fees to cable networks to continue to reach those viewers.) Against this up front and ongoing cost, Oxygen gets about $7/unique (per month of course, ~$100M in sales/ 1.2m uniques/12 months). Figure a 15% margin, and NBC's netting $1/unique out of that top line (Oxygen Media LLC didn't disclose income AFAIK).

I don't know the terms of Sony's rev share, or how they are placing those ads with advertisers.  Let's assume the overall split is 1/3 to each party (Sony, content partner, video ad network).   Let's assume a $30 gross CPM for the premium content.  So  Sony's getting $10 CPM.  If  I assume each unique is good for 25 impressions per week, this translates into $1/unique, but that's essentially cost-free (no programming, no carriage fees, no amortization of acquisition costs) if you ignore the cost of the Internet Video Link network infrastructure.  So, Sony's getting the same $/unique.

Now for the sound of the dam bursting:  if I'm an advertiser and I can pay an ad network $3/unique (split three ways between publisher, ad network, and Sony) to reach my audience of women watching TV via, say CondeNet content, vs. paying NBC $7/unique, and get better targeting and measurability (remember, this is *Internet* video), which do I prefer?

Seems to me Sony's got the better growth/ scalability story, though reach is more limited in the short term.

I'm not criticizing the Oxygen deal;  there are sure to be cross-promotional opportunities with iVillage that add to Oxygen's value to NBC (if a small fraction of iVillage's 15M uniques go to Oxygen, that's a huge leg up).  And of course, there are near-term limitations of Sony's Internet Video Link value proposition to advertisers: low reach (the number of people with Internet-ready HDTV sets), and low availability of content from its partners.   Plus, there are a number of apples-and-oranges problems with my analysis (like, are these ways of reaching viewers really the same?  Do they ultimately reach the same viewers?  Are viewers in the same frame of mind?). 

The broader point, though, is about the significant arbitrage that is appearing for advertisers between reaching TV viewers the old-fashioned way and the new-fangled way, and about the dramatic shifts in fortunes that will occur over the next couple of years as dollars flow accordingly.  It's a good time to be long high-quality video content, and to be aggressive about getting online with it.

Media as Software: A Conversation With Doug Turner

Kiki Mills at MITX introduced me recently to Doug Turner, whose past includes eight years as a member of the 3D graphics research team at Apple's Advanced Technology Group.  Doug and I met for breakfast and talked shop about digital media.  One of Doug's ideas, which I found particularly interesting, is (his words) the concept of "media as software".  Right now rich media streams are largely analog audio and video once they are "published".  (If you've composed or edited a digital video "project" and then converted it into its final form, you know what I mean.)  Doug describes this  as publishing digital media as platforms on which other people can add/edit their own stuff. 
 

Update: Gotuit Media and Video Search

Recently I wrote (http://www.octavianworld.org/octavianworld/2007/02/gotuit_video_se.html) about cool stuff going on at video search service Gotuit Media, where my friend and former colleague Patrick Donovan is a senior executive. 

Patrick got in touch the other day to pass on some great news:  Gotuit is now supporting the NFL "Film Room" at Sports Illustrated's si.com (http://sportsillustrated.cnn.com/football/nfl/specials/draft/2007/video/) and at the National Hockey League's video site (http://onthefly.nhl.com/index.html). 

For the NHL, Gotuit transforms what used to be a 60 minute linear viewing experience to one that can be sliced and sequenced in a variety of ways, without having to cut, splice, or otherwise edit the underlying video asset. 

Here's a review of Gotuit at latimes.com that does a good job of explaining the potential of this service: http://opinion.latimes.com/bitplayer/2007/04/gotuit_and_web_.html

Good Luck Patrick!

The Sound And The Fury: 2006 US Ad Spending, By The Numbers

Just came across this summary of 2006 US ad spending from TNS Media.  It's striking that despite all the talk about online advertising's growth, Spot TV still outgrew it on an absolute basis, and TV as a whole is still outgrowing overall ad spending as a whole by 25% (5% vs. 4%, led by Spot and by the growth of Spanish language advertising). 

Advertising on the web is great, but having seen services like Spot Runner and Visible World, and related vertical efforts, TV may not be dead for a while.  Of course, as content from each begins to flow to each, and with mobile to spice things up further, perhaps the category definitions are becoming less useful anyway. 

This is a rear-view perspective.  While 2006 may have been the year of online video on the conference circuit, the ad models for this medium haven't yet been really worked out (though there are some interesting ideas out there), and both advertisers and media players are still "organizing for digital"  buying and selling.  So I'd expect the shifts everybody's been hyping to accelerate somewhat this year.

Of course, this is one summary, among many that might report the numbers differently, and it would be interesting to compare them to each other, and with what the leading prognosticators have been saying...

Go Daddy

This post was originally published on my first blog, hosted by Harvard Law School's Berkman Center.

I've been travelling between Boston and Washington a lot lately, and have been dipping into the bin of free magazines by the airline gate to keep stimulated until "electronic devices are permitted" in flight.  Recently I picked up the Valentine's Day edition of Ad Age and came upon some interesting data.