Business Model Focus: The Case for Syndication
Until recently, the word "monetize" played a fairly low-profile role in the English vernacular. But thanks to the struggle of finding potential revenue sources on the financially anemic Internet, monetize (coined circa 1879) has entered into heady days. Today, the word is at the crux of the question that so plagues the streaming media industry right, stumping both code geeks and VPs of BizDev alike: How do we monetize content for the Web?
Banner advertising strategies have fallen hopelessly short for all but a few destination Web sites. Highly coveted, targeted ad-insertion technologies have generated a tremendous amount of hype, but few actual results. Subscriptions and pay-per-view models, at this point, really only work for porn and sports sites.
With that in mind, a few months ago, the streaming media industry was abuzz about syndication as the latest, sure-fire business model to monetize original online content. Partnerships were announced, press releases were widely circulated, and technology labs stepped up alpha testing of "syndication solutions."
Months later, the buzz has yet to materialize into earnings. "I've seen a whole bunch of press releases, but little in real syndication products," says Blaine Reeder, president of Overdrive Media, a San Francisco-based streaming media development house. Indeed, more press releases about syndication have crossed the wires in recent months than commercials on fledgling WB stations pitching Monday-through-Friday blocks of Moesha.
"Syndication is a radically different way of structuring business than anything that's come before."
In addition, Reeder points out that the "technology solutions" most releases tout, aren't exactly revolutionary. "Syndication is really nothing more than glorified database management," he says.
Still, outside of the technology to make it happen, and the hype to get there first, syndication as an online business model has strong merits.
Last summer, in a widely acclaimed article written for the Harvard Business Journal, Kevin Werbach speculated on just how profound syndication might be to the future of the Internet: "Syndication is a radically different way of structuring business than anything that's come before. Those that best understand the dynamics of syndication -- that are able to position themselves in the most lucrative nodes of syndication networks -- will be the ones that thrive in the Internet era."
Werbach, who is managing editor for Esther Dyson's Release 1.0, goes on to artfully describe the structure and dynamics of Internet syndication, without ever mentioning streaming media specifically. But the premise holds true for rich media companies. "Virtually any organization can benefit from syndication, often in several different ways if it's willing to view itself as part of a larger, interconnected world rather than seeking exclusive control at every turn," says Werbach.
In an interview, Werbach expanded on the advantages syndication holds for content creators: "Syndication allows content providers to focus on core competencies, rather than devoting unnecessary resources toward marketing and distribution."
The Content Marketplace
Werbach's allusion to overextending resources raises the question: Could the likes of Pseudo and DEN have survived with a syndication model? "The failures of Pseudo and DEN were mostly related to the companies' focus on the technology, rather than on creating quality content or building an actual audience," says Dan O'Brien, analyst with Forrester Research. "But syndication could have maximized points of distribution for their content, and potentially given their brands more exposure."
Not surprisingly, Kevin Clark, chief executive officer of New York-based ScreamingMedia, agrees. "[DEN and Pseudo's strategy] was all about driving traffic to their sites," he says. Clark, whose company syndicates content from roughly 2,800 sources to more than 1,200 Web sites, is a true believer. "The only way to guarantee millions of eyeballs is to have a syndication strategy," he maintains.
ScreamingMedia, along with competitors iSyndicate, YellowBrix, and NewsEdge, to name a few, are in the business of content aggregation and syndication -- acting as intermediaries between sites that need content and sites that want to sell it. With an ASP model, ScreamingMedia utilizes filter technology to syndicate content to its 1,200 affiliate sites. In addition to a one-time set-up fee of between $3,000 and $40,000, subscribers pay between $500 and $50,000 per month, depending on the number of articles delivered. While rates vary, content providers may receive up to 30% of the revenue generated from the subscribers.
While Clark says, "content is the DNA of the Internet and its number one core capability," he admits that streaming media currently comprises only a "fraction" of the content offered in the ScreamingMedia catalog. Clark predicts streaming video, in particular, is still 12 to 18 months away from being a significant part of the company's offering.
Still, there appears to be sufficient demand from affiliates for streaming media content. The bottleneck, perhaps, is the owners of the content. According to Sean Bell, self-described "Mandarin of Marketing" with Seattle-based Loudeye Technologies, content owners aren't confident in the technology of syndication. "Mainly, content owners want control of their content, to make sure it's not being streamed to sites they'd rather not be associated with," he says.
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