Isn’t it ironic that as yet another format war brews in the physical media world (HD-DVD vs. Blu-ray), Internet video delivery has become the business the media is paying the most attention to? Although consumers have accorded pay-per-download services a lukewarm reception by (see CinemaNow, Movielink, and even Amazon’s Unbox Video), free, ad-supported content is making waves.
The volume of video viewed on YouTube (not to mention its brand equity) helped the company sell for $1.6 billion. It seems everyone has a broadband video channel these days. Many record labels have been opening their libraries to Web properties for a piece of the action. Over a year ago, the labels signed deals with portals like AOL and Yahoo to license their content for pennies per view.
That same content is now given away — for a percentage of the ad revenue, of course. The structure of some deals even allows for content to live outside the properties the deals were struck with, such as Google’s Viacom deal in which content can be syndicated to Google’s AdSense network. Viacom’s baby-stepping toward getting TV content in front of consumers while bringing in the ad revenue that’s a mainstay of its business model.
We’re witnessing not only the acknowledgment by big media that audiences want to consume their content online but also the liberation of the video content itself, setting it on its way to becoming almost infinitely accessible. Video liberation works for everyone. Content producers still make money from the content, and audiences get to consume more content without paying disproportionately for it.
It’s notable the recording industry is taking a leadership position; historically, it’s been one of the most resistant content industries to change (Napster, anyone?). After watching CD sales slip year over year, some of the largest record labels signed deals recently with upstart SpiralFrog to give music away while taking a generous cut of the site’s advertising revenue.
All this hinges on something we’ve known for years: if audiences get free access to the content they want, they’ll sit through tolerable, proportional amounts of advertising. It’s the broadcast TV ad model, but from a different perspective. The TV model is built on buying massive programming reach against generalized demographics. The online video ad model must be built on buying niche demographic and psychographic targeting across (and against) content.
Video content liberation may benefit advertisers and consumers alike. A savvy marketer looking to reach the youth market could have already bought video (or other) ad inventory against Jay-Z’s new music video, which premiered this week, making the experience possible for audiences.
Content producers must continue to evaluate premium content use not just as a sales revenue driver but also as an ad revenue driver. This requires a shift in thinking by media buyers and publishers, though it just may be the most effective way to advertise using online video. As content continues to be liberated by the recording and TV industries, it’s possible the film industry isn’t far behind.
If content producers can find the optimal level of rights restrictions on downloaded video and marry that with the optimal amount of advertising, we may witness the full maturation of online video as an advertising medium. As for streaming video, content producers must continue to work with the vehicles implicated as facilitators of copyright infringement or create their own vehicles… or leave audiences to figure out their own ways to get content.
The ad-supported liberation of video may not work for all content producers. Those whose content can only be accessed by audiences who pay for it and have narrower distribution channels may opt for the sale or rental of online video. But one thing is certain: the more ways consumers have to access free content, the more content they’ll want. Consumers will always pay a premium for content without advertising. It is, however, in our best interest to liberate video and deliver as much content to consumers as possible — for advertising’s sake.
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