Broadcasters Are Doubling Down on Online Video

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Online video content is finally not only real, but commonplace, with more consumers watching programming delivered over IP versus a traditional broadcast network. The Obama presidential inauguration was watched by more people online than on broadcast television. While much popular online content is enabled by broadcasters that put their programming online, business models, content strategy, and long-term monetization issues are still in play across the industry, with many broadcasters really not sure of what strategy to take.

To decode the secret to success online, I spoke with representatives from several traditional broadcasters (some with multiple channels of broadcast TV), an online content aggregator, a channel designing exclusively for the internet, and a few technology companies that help enable the online experience. Intriguingly, not one approach emerged as a leading strategy today, let alone in the future, suggesting an industry on the precipice of something big.

When it comes to putting content online, several concerns exist: preservation of original rights, piracy, monetization (and much concern around the impact of the now-clichéd "trading analog dollars for digital pennies" trend), preservation of brand, concern about consumer experience across various viewing devices and networks, and eyeball drift. On the flip side, most broadcasters are aware that online video can also encourage brand extension across demographics and geographies, strengthen TV show popularity and audience reach, drive higher TV viewership and subscriptions, and keep content alive for a longer period of time, theoretically increasing monetization in the long run. What isn’t clear is which business models will drive monetization, and since content won’t produce itself without money, this places the ultimate role of online video in jeopardy.

Also notable are what appear to be emerging mythologies. For one, while everyone talks about cannibalization of eyeballs from the TV to the PC, little or no data supports it—at least not yet. Rights issues, while still key, are quickly being fixed with new contracts that start to address online content (remember that digital rights issues were a major part of the 2007 writers’ strike, and the cost of not managing these rights is apparent). And technology, while still a challenge in some respects, cannot be used as an excuse anymore. Advances in streaming technology, transcoding, HD, ad insertion, and localization mean fewer reasons to wait. More important than knowing what might go wrong is understanding what is right about online content, and I’ve witnessed multiple approaches, none of which are perfect nor the final answer for the industry.

The kind of broadcaster you are dictates, in large part, how you view the potential for online video. I identified six major types of broadcasters:
—Major over-the-air broadcasters with very broad content portfolios (such as ABC, CBS, NBC, and FOX) that typically have rights to only some of their content
—Specialty networks (such as HSN, ESPN, MTV, TLC, Discovery Channel, and MLB) that typically own the rights to some or most of their content
—Subscription-driven broadcasters (such as Showtime and HBO)
—Local broadcasters
—Internet-only broadcasters with unique content designed for online consumption
—Online aggregators that rebroadcast content from many sources (such as Joost and Hulu)

The major traditional over-the-air broadcasters have the most content to share online (disregarding rights issues for a moment) but also the most complicated business models. Historical, complex models with content holders, multiple system operators (MSOs), and other partner relationships must evolve before these broadcasters revolutionize their strategies.

Over-the-Air Broadcasters
At NBC, the primary online strategy is to provide a deep experience into key properties such as Heroes, something that aggregator sites are not equipped to do. Providing rich worlds around the content online helps draw in TV fans and simultaneously create new fans. Online content also encourages viewers who watch a show on TV to watch it again online to gain a different experience. One notable benefit of going online is demographic expansion to a younger audience—NBC.com’s demo is 10 years younger than the broadcast demo. Being online also helps keep fans up-to-date and engaged in a property, improving long-term loyalty.

Vivi Zigler, president of NBC Universal, Inc.’s digital entertainment division, says that quarter after quarter, internal studies show consumers turn to online content primarily as a way to "catch up" on missed episodes, not to watch shows in lieu of TV viewing. NBC is also finding success in promoting shows online that are not on-air. Lipstick Jungle, a broadcast series now in limbo, has picked up a very strong fan base online. This success could help propel Lipstick Jungle and similar shows back on-air, or it may encourage the emerging trend of online-only properties.

Figure 1. NBC Universal is finding success promoting shows online that are not currently on-air, such as Lipstick Jungle.

According to Zigler, "This is an interesting time of constant change and innovation, and things will keep changing until we find equilibrium. Trying to understand online video today is like taking a Polaroid photo of a moving train—it’s a blur. Every day we uncover a new behavior or figure out a cost issue." Because of this dynamic, NBC, like other networks, remains cautious but still rolls out various technologies, such as embeddable widgets for third-party sites and NBC Direct, a trial program which allows consumers to actually download content (with embedded ads) for 7 days before the content expires.

ABC sees things similarly. Karen Hobson, vice president of digital media and corporate communications for Disney-ABC Television, says that the average TV-show fan catches about eight to 10 episodes of a show per season. So why not use a DVR? Not all fans have DVRs, and often the person too busy to watch a show is too busy to remember to set up a season pass. Having content online is just simpler for the consumer. Just like NBC, ABC sees online usage primarily for catch up and has not seen cannibalization in its demographic because as Hobson puts it, "people like to watch TV the way it was meant to be watched, as a sit back, bigger screen experience."