Hopped Up on Hope

Jun 19, 2006  •  Post A Comment

When Neil Punsalan joined NBC in 2003, the young man from Ohio wore a blue suit and a tie every day for nine months, giving tours of the broadcast center in New York. At the time, working as a page at a network was one of the few paths to a career producing television shows.

Three years later, Mr. Punsalan has become an Internet sensation with a video titled “The Easter Bunny Hates You,” a two-minute skit featuring a menacing man in a rabbit suit that drew at least 1 million viewers in April.

The popularity of the clip puts Punsalan, 28, among a growing breed of 20- and 30-something producers ditching network jobs to start their own companies and produce video for the Internet.

The rise of these video auteurs represents the biggest entrepreneurial blossoming in TV since cable networks sprouted by the dozens in the 1980s. It may also grow to rival the hype of the Internet boom of the late 1990s, drawing starry-eyed would-be moguls to ignore the disastrous fate of most start-ups as they take a shot at business fortune. “Working your way through a network isn’t something you need to do anymore,” said Mr. Punsalan, who is building a team to launch a Web video portal for the kind of original and edgy comedy that networks won’t touch, he said. In late May, he left his most recent job as a producer for NBC Universal’s digital studios.

Relatively low start-up costs for video-heavy Web sites and consumers’ appetite for material that lacks the production sheen of Hollywood are driving executives to defect to the Web.

In late April, Jennifer McBride, a former series producer for Discovery Health and VH1, fired up a site, Savorynewyork.com, that features video profiles of New York restaurants. And last week, two former MTV executives launched Code.TV, an online network that features short video clips on New York shopping, nightlife, food, arts and other categories. Code Networks, the parent company, plans to launch a similar site for Los Angeles by August, with more cities, including Miami, to follow.

“You will continue to see people who have good ideas willing to take a risk and leave a traditional media company to start something on their own,” said Morgan Hertzan, Code’s chief creative officer. “The barrier to entry and the cost to start a media platform is continuing to plummet every day.”

Starting a professionally produced, high-quality broadband channel costs about 10 percent of what it would take to start a traditional network, said Joseph Varet, CEO of Code Networks, which will produce a video a day for each of its city sites. Likewise, Internet distribution eliminates the need for satellites and network operating centers, and there’s no need to program 24 hours a day.

“You can service a niche audience and only deliver a couple hours, well-focused and well-produced,” Mr. Hertzan said. His company is pursuing national and regional advertising with a focus on luxury advertisers.

Venture capitalists are looking past the trail of corporate wreckage left in the Silicon Valley six years ago to find the next big thing at the intersection of TV and the digital world. In the first quarter of 2006, investors poured $107 million into video start-ups, up from $86 million in the first quarter of 2005, according to venture-capital research firm Dow Jones VentureOne.

“Given the heat and expected market growth in interactive video, investors are very interested in backing TV [executive] teams with deep industry knowledge and contacts,” said Tolman Geffs, managing director of the Jordan, Edmiston Group, a New York-based investment bank.

It’s too early to tell how real the opportunities are for the new crop of content producers. Already, Web-video startups such as Break.com and Heavy.com are competing for advertisers. The media Goliaths that gave some of the new video producers their start also are moving into the digital world-and using established relationships with advertisers to shove newcomers aside.

Online video is projected to generate $385 million in ad revenue this year, a figure that may rise to $640 million in 2007, according to new media research firm eMarketer. Gordon Borrell, president of media research firm Borrell Associates, wonders whether that’s enough to go around.

The bulk of money flowing into online video is coming from major brand advertisers, whose links with established broadcast and cable networks may give the old-line TV companies a leg up. Niche start-up video sites that focus narrowly on topics like New York restaurants will have to compete against local newspapers and TV stations for local online video money, Mr. Borrell said.

“It’s going to be big, but not next month,” he said.

Mr. Borrell expects that somewhere in the divide between your father’s TV and the TV your kids will watch, an industry leader will emerge, as happened with Google, eBay and Amazon.

For content producers in the world of new video, the first imperative is to establish a unique programming brand, said Jeremy Allaire, CEO of Brightcove, whose technology supports Internet TV.

That specialization will let video content companies target niche advertisers, he said. Brightcove is trying to capitalize on that dynamic by playing middleman between video providers and major brand advertisers.

Ms. McBride, along with husband Chris McBride, launched their restaurant Web site with less than $20,000 in seed money.

“We operate a small office in Manhattan and have a staff of freelancers helping us with research and editing,” Mr. McBride said. “Our operating costs are minimal, mostly due to the fact that we are currently not taking salaries.”

The couple raised seed money for the company from family and friends. They plan to seek additional funding later this year to expand.

The McBrides for now have declined to pursue offers from venture capitalists, opting instead to build their equity in the company. As the Savorynewyork.com brand grows in markets including San Francisco and Chicago, the company may need outside investors. Leaving a network means sacrificing big staffs that help lighten the load and network budgets, but the elimination of network bureaucracy balances out the equation, Ms. McBride said.

“Chris and I make a decision if we should feature [a restaurant] and we feature it,” she said. “We set it up and shoot it.”

Natural selection will weed out entrepreneurs who can’t find funding, develop a business plan and cope with the sacrifices of running a start-up.

“I’ve had to leave everything I’ve worked for,” Mr. Punsalan said. “I’ve had to sacrifice well-rounded meals for cold cereal, and it’s probably a matter of time before I have to sacrifice my apartment for a smaller one … or a basement.”

Mr. Punsalan says he’s confident he’ll find investors to cover the “few hundred thousand dollars” he’ll need for his portal.

“It’s the Wild West digitally, and real frontiersmen are going to start panning for gold soon,” he said.