Wednesday, June 16, 2010

Making money from online videos

I am speaking at an event tomorrow, where I will speak to this very topic. Come hear me to hear all my thoughts on this matter ;)

At the very basic level, there are only three ways to monetize videos - all of which have been exploited to the hilt for decades, by the various players in the ecosystem.
  • PayTV Model:
This is the traditional cable network model. An aggregator/channel such as ESPN contracts the rights for content from the rights holders such as NFL. They then license it on a per subscriber basis to the distributors (MSOs), who in turn pass on the fees to the end user/subscriber via TV packages.
  • Ad supported Model
This is the traditional broadcaster model. Content is effectively paid for by Advertisers, and has a nice downstream effect of being free to the end user.

  • Pay (own, rent or subscriptions)
This is the traditional blockbuster model - users pay to own or rent content. Netflix did well by introducing a subscription model here and extending it to be a streaming service.

The beauty of the Internet is that it can enable players in the ecosystem to employ a mix and match approach of these models, and also make the model more efficient and targeted.

For example ESPN3 has employed a variation of the payTV model for its online site. Only subscribers of affiliated ISPs can access content online - this is the traditional payTV model. However, taking advantage of the Internet, they also enable subscribers of the affiliates to access the site when traveling within the US - the premise of TV Everywhere. Outside of the US, you can use a pay model to access the content. See here for some very detailed analysis on ESPN3.
EpixHD also announced a payTV approach for broadband access of its content. is not tied to the payTV model, and is offering its content online directly to users on a pay/ala carte subscribe basis.

At youtube, premium content is mostly ad supported - ads can be targeted to preferred user demographics and can also be interactive. We are also working on pay content: A very innovative solution on ads is offered in the form of promoted videos. The concept here is that ads are also content - and can drive organic as well as promoted views in its own right. In fact, if you can drive more views for your video ads, that speaks volumes for the quality of the ad.

So which model will win on the Internet? Like I said, it will be a mix and match approach, with the winner being the ones who can take advantage of the unique aspects that Internet to make the model more effective and efficient for the end user.

1 comment:

  1. Very nice summary of monetizing video.
    OPENIVO is developing a managed network of HTPCs to offer premium DVR services and Social TV financed with addressable advertinsing. Please consider checking out our linkedIn group OPENIVO New Television.