Varied Models Underscore Uncertainty of Web Video as Moneymaker

Mar 30, 2008  •  Post A Comment

Online video producers have a ways to go before they can support themselves on ad sales alone.
While advertisers are expected to pour $1.4 billion into online video this year—up from $775 million last year—that money isn’t yet trickling down in a meaningful way to episodic Web series, so online studios are either supplementing their income by providing production services or they’re riding the venture funding wave.
Take For Your Imagination and Next New Networks, two like-minded online video studios that sit less than 10 blocks from each other on Manhattan’s East Side but whose financial fortunes couldn’t be more different.
Both companies produce and distribute targeted Web series and sell ads against them. But while FYI is slowly approaching the break-even point, Next New Networks just landed $15 million in venture funding. The former is making do by producing branded online video projects on a work-for-hire basis, while the latter is focused on building an ad sales team and launching more shows with its new venture money.
Their disparate strategies underscore the uncertainty surrounding Web video.
For Your Imagination and Next New Networks are part of a growing cadre of new-media producers that includes San Francisco-based Revision3 and Austin, Texas-based ON Networks. Profitability is still a goal for many of these companies.
For Your Imagination, which produces and distributes about 10 Web series including “Break a Leg” and “Dad Labs,” raised about $1 million in funding last year and has burned through most of that money, CEO Paul Kontonis said. But the company also earned $340,000 in gross revenue last year and moved close to breaking even by producing online video projects for movie studios and TV networks, he said.
Mr. Kontonis said For Your Imagination needs about $300,000 per quarter to pay costs and the salaries of its 11 full-time and part-time employees. The company is currently booking about $220,000 in gross revenue each quarter, mostly from video production.
In the last few months, For Your Imagination has produced video for an online game for Showtime’s “The Tudors,” online promos for the upcoming Warner Bros. film “Get Smart,” a music video for singer Alexa Wilkinson and the daily Web series “Lunchbox” that runs on Independent Film Channel’s IFC.com. The work-for-hire deal with IFC will bring about $120,000 into FYI this year, Mr. Kontonis said.
“Why not offer these services as it relates to our business and we can hone our skills and make some money to do it?” Mr. Kontonis said.
But a work-for-hire model is not viable long-term. “There is no future valuation in that model. We want to own the content, but it takes time to build an audience,” he said.
Next New Networks, by contrast, has the luxury of focusing solely on producing and distributing its shows. The company recently landed $15 million in funding on top of a previous round of $9 million.
“We wanted to launch large,” said Tim Shey, one of the co-founders. “There was only a very limited window of time before traditional media figured this out.”
The audience for Next New Networks’ content is growing and views for its dozen or so Web shows jumped from 25 million in January to 33 million in February.
The company’s first ad sales chief started last week, and Next New Networks will use some of its venture money to hire an ad sales staff. The company has previously inked deals with Lionsgate and Sony and others and expects to announce new ad partners in the coming weeks, Mr. Shey said.


  1. Content will always be king. As long as users are engaged in the content, then there are opportunities to monetize that content. I think NextNewNetworks is a great model for providing targeted content to appeal to niche areas of interest. The way to monetize is to develop content with the intention of product placement sponsorship opportunities. Now the advertising becomes part of the content. This can be done subtly or more overtly. Interactive video is already here and Overlay.TV provides companies like NNN the ability to develop new revenue and reach streams by allowing overlays to be created that are contextually relevant to the video content. Product placement overlays can now be clickable to the point of transaction (purchase or brand traffic).

  2. request of both FYI and NNN (and Hessie Jones), PLEASE DO NOT just duplicate the traditional tv ad model online, and “interactive” pre-rolls or overlay ads don’t count as different. Relevancy is important, but adding value is critical. Otherwise it is just going to create more noise.
    Take a minute to search “banner blindness” to see where we could all end up if we don’t change the model.

  3. the question i have is what would be the reason i would partner with FYI or NNN as an advertiser instead of NBC.com, CBS.com, Fox.com, ABC.com, Hulu.com, Heavy.com, YouTube.com…? and that is just touching the surface.
    Is it because of their niche audiences? Is it bc their willingness to create more flexible ad programs? Is it bc they are cheaper? What’s their point of differentiation? That’s question they should be answering for advertisers.
    Also, question for Daisy, how are you defining the category of “new-media producers”? I think there is a strong argument that all media (or entertaining video content in this case) is ‘new’. I struggle to find anyone (big or small) that is creating video content that only exists on TV. Everyone is placing forms of their content online, in VOD or on mobile. Even the subscription based cable networks are doing it (Showtime just released the season premiere episode of The Tudors on YouTube for free).
    I’m wondering how long these “new media producers” will last before they are eaten up by the bigger players with bigger pockets with bigger distribution models and bigger writing staffs. They can, and will, eventually go niche just like the little guys. They’ve done it once before, it’s called Spike TV, TLC, Oxygen Network, and so on.

  4. In response to m. What Overlay.TV has created is not duplicating what already exists online. Relevancy is important and so is value. What Overlay.TV has enabled is user generated capability to add that value on top of the video content via links to more information whether that be point of purchase or just information sites. The user can also turn off the overlays or watch the video in its original form. The integration of Overlay.tv and video content puts more control in the user’s hands. What we have built mitigates user annoyance and increases performance for advertisers.

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