Lime thinks there’s more green to be made on-demand than as a traditional linear cable channel.
The healthy-living media company is launching a broadband channel and giving up the 7 million cable subscribers it got when it acquired the Wisdom channel in 2005. It will also continue to distribute its programming through cable video-on-demand services, podcasts, satellite and mobile.
“As we’ve grown the business, we recognize that more and more of the business is shifting to on-demand,” said C.J. Kettler, founder and CEO of Lime, majority owned by AOL founder Steve Case’s Revolution Living. “Clearly the cable operators’ focus has shifted to on-demand, the consumer focus has shifted to on-demand and as a result, we’re shifting our business model to on-demand as well.”
Lime has gained major advertisers, including Toyota, Silk soy milk, Garnier and Wild Oats Marketplace, which will be sponsors of broadband video content. It also signed key digital distribution deals with Yahoo and Joost.
Media companies are struggling to achieve a balance between traditional linear distribution channels and the new growing linear ones. It’s almost unprecedented for a network to give up cable carriage to embrace on-demand this way, but times are changing.
“For thinly distributed younger networks, particularly those that are independent of larger network groups, they will have an easier time pursuing on-demand-only initiatives,” said Will Richmond, president of research and consulting company Broadband Directions. “The costs of delivering a 24-hour linear channel, marketing it and getting carriage for it are very, very steep and these other new delivery methods are much lower cost, provide much more flexibility and also stay in synch with emerging customer behaviors much better.”
Mr. Richmond said he wouldn’t recommend that a well-distributed network switch to on-demand. One network that did was NBC Universal’s Trio after it was dropped by DirecTV in 2005. Elements of the network moved to broadband and a spokeswoman said to stay tuned to see what happens to the Trio brand.
Even the nation’s biggest cable operator, Comcast, which could put a channel in 20 million homes if it wanted, sees VOD as a good strategy for launching new networks. Its children’s network PBS Sprout is now also a linear channel, while Fear Net remains on VOD, broadband and mobile.
Ms. Kettler downplayed the significance of Lime’s linear cable carriage. Most cable channels get a big chunk of their revenue from subscriber fees, but Ms. Kettler said that new networks often agree to free carriage in their early years, which means Lime isn’t giving up much.
“Truth be told, if you’re a small linear channel with distribution of about 7 million homes, and if you’ve got 1.5 million uniques, you actually may be reaching more people on the Web,” she said. According to Comscore Media Metrix, Lime’s Web site grew from 500,000 unique visitors in June to 1.5 million in December.
Lime is counting on new online video deals to help boost its reach. Short-form versions of Lime programming will appear on Yahoo Health. A Lime channel on the new Joost will feature long- and short-form versions of its shows. Lime also has syndication deals with Google and AOL.
In the short term, that makes advertising Lime’s most important revenue stream. Ms. Kettler said that since the number of advertisers on the service grew 50 percent over the last three months of 2006 and that revenues increased five-fold. Major advertisers on the Web site include Target, Weight Watchers and Nestle.
Lime also generates revenue from content and Ms. Kettler sees subscription VOD as a “huge opportunity.”
From the beginning, Lime’s programming has been designed for multiple platforms. “All of our original content was created in what I like to describe as a pre-purposed format,” she said. Lime starts with 2- to 3-minute segments of a show, then builds to 5- to 10-minute segments, then strings those together to create a linear half-hour. “Our view is that this is what next-generation media looks like. It doesn’t look like half-hours cut down, it looks like 2 and 3 minutes built up.”