New media proved its mettle-and that it commands a seat at the advertising table-in 2006.
In 2007, online video, mobile television and other new venues for viewing TV shows and viral video will need to prove their staying power, analysts said.
Online video will be the most hotly watched of those industries, as onlookers want to know whether it can live up to expectations set last year with the rise of YouTube and the growth of Web video across broadcast and cable network Web sites, as well as Internet portals. Online video ad spending should grow by 89 percent this year, following 82 percent growth last year, new media research firm eMarketer said.
To take the temperature for new media expectations for this year, TelevisionWeek spoke to top analysts in the areas of online video, mobile TV and video-on-demand. Look for all of these businesses to take deeper root in 2007, they said.
The online video consortium that executives at News Corp., Viacom, NBC Universal and CBS talked about creating to compete with YouTube appears to be dead given the lack of interest from Disney and Viacom. In its wake, networks should focus on replicating the “clip culture” of YouTube on their existing Web sites, said Will Richmond, president of the research firm Broadband Directions.
Networks have been aggressive in offering streaming episodes of their shows online and on iTunes, but they haven’t embraced the viral video mind-set on which YouTube built its massive cachet. “They need to create the ability for users to create clips at their own sites and seed those with clips they create themselves,” he said.
The networks already have a sturdy online base. About 22 million unique visitors came to Fox.com, ABC.com, NBC.com and CBS.com combined in November, according to Nielsen//NetRatings.
Mr. Richmond also expects the online video syndication business to take off as early movers such as Google, NBC Universal and Brightcove extend their reach. “In 2007 we’ll see the implementation of those syndication models,” Mr. Richmond said. “They’ll transition from strategy and experimentation to implementation and scaling up and rolling out these ideas.”
Keep an eye on what role YouTube might play in the online video syndication business now that the company lives under Google’s corporate umbrella, he added.
As YouTube grows up, look for new features to sprout up to support amateur video. A number of technology enablers, such as One True Media and Gotuit, recently introduced new services to make it easy for the average consumer to craft better-looking and smoother video.
As part of the maturation of online video, 2007 will be the year of broadband video downloads for movies and TV, said Kaan Yigit, analyst with Solutions Research Group in Toronto. “Just as the music market opened up a year after Napster, the video market will open up big time a year after YouTube,” he said. “All signs support iTunes getting stronger on the video front.”
Finally, peer-to-peer technology is starting to go legit. AOL Video uses a peer-to-peer network to serve some videos online, while BitTorrent has struck deals with TV networks and movie studios to distribute their content online starting next month. Peer-to-peer technology is considered a more efficient means of transmitting video on the Internet. Media executives are exploring how to make it work.
Along with TV networks, local stations will also take deeper steps into online video this year, said Gordon Borrell, president of local media research firm Borrell Associates. The timing is right since 2007 is an odd year for stations without Olympics or elections. He expects stations to devote additional resources to hiring online-only sales staff and to expanding the amount of content they produce for their sites because the Internet is the best growth opportunity for stations as on-air viewership continues to contract.
“There is a lot of expense being plowed into Internet TV,” Mr. Borrell said. “Many have realized that broadcast reps are only going to get them so far in selling this, so they need online-only sales folks.” Stations will reach out more this year to advertisers who only market online. That’s why broadcasters need the specialized help.
“The bigger opportunity is to go after non-traditional dollars and develop separate businesses,” he said, adding that stations will do that by invading newspapers’ turf-real estate and classifieds.
This year, streaming video for local TV stations should also become ubiquitous. At the end of last year, about 71 percent of TV stations sold streaming video ads. Of the 29 percent that did not, 80 percent said they would start doing so this year, Mr. Borrell said. That increase should result in virtually all TV stations offering online video ads in 2007.
The money is there. Last year at least 36 TV stations earned more than $1 million in online advertising revenue, with the highest-grossing station topping $4 million, he said.
TV on the cellphone is also slated to grow rapidly in 2007, said Kanishka Agarwal, VP of new products for mobile research firm Telephia. By the end of the third quarter of 2006, the United States counted about 5.1 million mobile video subscribers, double the number at the end of the first quarter. The mobile video business generated nearly $141 million in the third quarter, about even with revenue for mobile games. “[Mobile TV] already reached the size of the mobile game market in 2006 and will likely surpass that in 2007,” he said.
To do that, cellular carriers will convert more potential customers into users and also increase the number of light users into heavy users, Mr. Agarwal said, adding that they’ll do that through better video quality, faster delivery speeds and a greater variety of content. The diversity in content will come in part from partnerships that delve into the long tail of user-generated videos, such as the one Verizon struck with YouTube in December to offer YouTube’s viral videos on its cellular service, he said.
Mr. Agarwal added that mobile advertising should increase this year. “[That] provides for a business model that allows the big advertiser dollars to get pumped into this business, which in turn allows media companies and carriers to offer greater choices to the consumer at lower prices [or] for free,” he said.
VOD will increasingly move into the mainstream this year, as deals for better content and additional consumer promotion begin to deliver, said Paul Rule, president of VOD research firm Marquest Research. As an example, Mr. Rule pointed to efforts by Time Warner Cable in North Carolina last month to offer high school football playoff games on a dedicated “Carolina VOD channel.” The games were sponsored by several regional advertisers, he said. “Absolutely no one except cable has the distribution plant, sales staff and promotional muscle in place to do something like this on VOD,” he said.
VOD availability will grow from 26 million homes at the end of 2006 to 36 million at the end of 2007, according to Kagan Research.
But VOD will face challenges. The set-top box is not evolving as rapidly as the computer and the user experience leaves a lot to be desired, Mr. Yigit said. “Service providers need to enhance the on-demand platform in terms of selection, interface and experience. In the absence of these improvements it’s a matter of time before broadband becomes the delivery choice for video entertainment because it is searchable, inherently on-demand and responsive to perceived time poverty,” he said.