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2009 Looks Like Make-or-Break for Web Video Companies

Feb 15, 2009  •  Post A Comment

If 2008 was a boom year for Web video, then 2009 looks to be a bust.
While advertising dollars directed to Internet television are projected to grow 45% this year, experts nonetheless expect the recession to considerably thin the ranks of digital studios, online video destinations and Web video technology firms.
For TVWeek’s comprehensive coverage of how the recession is affecting the Web video industry, visit the Economic Crisis Navigator page.
The handicappers TelevisionWeek consulted wouldn’t specify which companies they think will go belly up, but most are betting that this year will be strewn with Web video wreckage.
Metacafe website
Anywhere from 20% to 30% of the online video sector likely will disappear in the next 24 months, said Ross Levinsohn. The former president of Fox Interactive Media now is partnered with new-media investor Velocity Interactive, which has invested in online studio Next New Networks and online video ad network Broadband Enterprises.
“There are dozens of companies that mushroomed and gained funding during late 2007 and 2008 which I think will not survive the downturn because funding has dried up,” he said.
Companies with business models predicated on landing a second or third round of financing will be especially challenged, since venture dollars are tight this year. “Those companies with capital, a clear business model and a brand, I think, will survive if not prosper,” Mr. Levinsohn added. “I doubt whether many will hit numbers that were projected six or 12 months ago, nor do I believe there will be too many who are profitable.”
Attorney Jeff Sanders has a bleaker view. “Most early- and midgrowth-stage companies in the online video space will fail,” said Mr. Sanders, a partner with Roberts Ritholz Levy Sanders Chidekel & Fields, a New York law firm specializing in media, entertainment and technology.
That’s because this year is the make-or-break point for startups to prove they can generate sales. “If a service cannot make a measurable contribution to facilitating revenue-generating transactions between advertisers and sponsors and their customers, or provide a less expensive way to manage existing customer relationships, that service or company is a good candidate for failure,” Mr. Sanders said.
Web programmers will face the toughest time because content is a big gamble in any economy, said James McQuivey, analyst with Forrester Research. “People who produce original content will always struggle to generate an audience for that content without a tie-in to some kind of franchise. ‘Dr. Horrible’ was a hit because of who made it and who starred in it, not just because it was a brilliant idea,” he said, referring to the Web show starring Neil Patrick Harris that television creator Joss Whedon crafted last summer.
To avoid ending up in the graveyard, digital producers should aim to partner with large studios and Web services that have distribution muscle, said Will Richmond, analyst with VideoNuze.com.
Aggregators also will have a tough time this year; Web video portals that fail to differentiate themselves will likely go under, he said.
But sites that provide some level of editorial guidance and audience preference are better positioned, said Tom Guida, a new-media attorney with Loeb & Loeb. “Case in point is Metacafe, which claims to post content based on audience preference and give its audience the ability to find content it is most likely to be interested in quickly,” he said. “The net result is the eyeballs watching its content are more appealing to its advertisers because the people behind those eyeballs are more engaged with the content and likely to tolerate ad messages to get to it.”
But the poor economy also is an opportunity for winners to make big leaps in digital media ad spending, Mr. Sanders said. “The media businesses we know will experience tremendous disruption that is marked by a migration away from traditional quasi-measureable inventory in favor of less expensive, ROI-calculable digital inventory.”

6 Comments

  1. Very insightful. I was just having a conversation with someone about Dr. Horrible’s success and the reasons why. If not for Joss, and the fact that he got name actors to work for nothing up front, it may have been lost in the sea of other online content. Partnering or getting recognizable names attached to your project is going to be key to web success in the years to come, especially during the time it takes for the economy to recover.

  2. I think there’s another aspect to this that has been missed. Content watchers (and ultimately Content buyers) have been sold a bill of goods. YouTube dishes out and markets trash as good video and the professional content is lost under a deluge of teenyboppers lip synching boy-band tunes. Viral ain’t the same anymore. People want something inspiring, emotional and thoughtful. Independent filmmakers who manage and maintain control of their content have the ability to stand out from the crowd and connect with their audience on a personal level. How many people for YouTube or Hulu or Google Video have we connected with? None. With a “personal touch” I don’t think celebs will be as much as a factor on the web in achieve success.

  3. Why would an attorney have any insight as to what is going to be successful in the market? The guy is an IP litigator, not a “new-media” expert. Is Metacafe a client of his? Why would you let him promote his clients without disclosing this fact?

  4. There’s more opportunity to make an online video business sustainable than Mr. Sanders realizes, or perhaps cares to acknowledge. It’s time for a higher level of creative insight and conversion of research into effective relationship cultivation on a lifetime cost per action basis that extends through the momentum effect, and is compensated for having done so. It doesn’t matter whether a case study or success story builds its’ program content around widgets, contests, interactive video, or combines all three. Take a good look and listen at what Angela Courtin said at OMMA Social 2009 about building partnerships that pay: http://richreader.blogspot.com/2009/02/lessons-learned-in-listening-engagement.html

  5. One key to survival will be to offer Internet TV platforms that not only “make a measurable contribution to facilitating revenue-generating transactions” as Sanders states, but which also provide publishers with the ability to control and manage their content and brand. Partnering with the studios and video aggregators is not an option for most niche content publishers. But by putting the platform and distribution tools directly into their hands, publishers can have the potential to drive their own audience (and monetization) while delivering authentic and relevant content.

  6. We are out in the mid tail region providing constant updates, and connecting with viewers. Not getting huge views (no one catches on fire, there are no explosions), but those who are watching are engaged and paying attention.
    We now have sponsors on board, have broken even, and will trun a profit this year.

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