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« What the Apple iTV is Really All About | Main | Gotta Love Mark Zuckerberg’s Authenticity »

September 21, 2006

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Ajay

I do agree with you that there will be a lot of informal sharing between consumers that will drive awareness of shows and other content (just as you might loan your DVDs to a friend right now). However, any business that attempts to make this easier, like Napster or the video websites, will be sued out of existence (because of the Grokster decision as mentioned before). Rather, this will be the domain of open source or generic P2P applications that have noone to sue, other than the consumer. The content companies will realize that it's pointless to sue these consumers and will eventually leave them alone, focusing on businesses who don't learn this lesson and who are easier to sue. It's all about controlling when and how their content gets distributed. They will not be able to go after consumers who do this on their own but they will certainly eradicate any business that tries to enable this and become the new middleman.

As for content revenue, I think the split will be the opposite of what you propose. Consumers are not interested in paying for content with their attention, as the proliferation of Tivos/DVRs shows. As a result, content-providers will have no choice but to go to PPV. Only poorer consumers who cannot afford content will be forced to download and watch advertisting through video formats that disable DVRs' fast-forwarding capabilities.

As for your proposed alternative, are you suggesting that consumers will download and watch high-quality, stand-alone video ads to pay for their other video downloads? You're nuts if you think that's ever going to happen.

Joel Downs

My guess on the other revenue source would be paid downloads - an iTunes Store competitor. Now that YouTube is established as the place to go for online video, why not add buttons for "buy the full-resolution version here!" (or the like)? I think that this model (in partnership with studios) is is also YouTube's best shot at avoiding lawsuits.

Alex Rowland

You make a good point, Ajay. What I meant to actually say was that there was scant evidence that 'piracy' helped drive additional consumption of the PAID version of the asset as well. YouTube is a massive low cost viral marketing machine for good content and reveals the inefficiency of the current studio system that relies upon a few individuals to estimate market demand for any given product (a job that continues to get harder.) If a person is happy to watch a video clip in low quality streamed video and refuses to pay for the content in high-quality (either through attention or actual cash) then they probably we’re going to be a customer anyway. In other words, any business lost by people watching the video through YouTube pales in comparison to the additional paid business created by the awareness YouTube syndication creates. This is also crucial to the role of advertising to the monetization of video…

As for the alternate source of revenue, my argument is actually that advertising will be a growing portion of the revenue pool for content (probably on the order of 80% vs. PPVs 20%). I just think that the primary venue for that advertising is going to be in high-quality video ads downloaded (and eventually streamed) to the consumer. The reason why the CPMs will get astronomical in comparison to existing low-quality in-stream advertisements is the high quality of the deliverable.

Ajay

Actually, Mark's right, it's exactly like Napster. What do you mean Napster didn't help distribution? It distributed music to everyone, for free. And why would someone pay to watch Jon Stewart on iTunes when they can watch the funniest segment of that show on one of these video sites? Effective removal of copyright infringement is crucial to all these video sites. Right now, they're all doing the easy part by distributing the videos, they will all get sued out of existence because of the Grokster decision, like all the p2p music software businesses did. There is no question that content is going to be distributed over the internet, but you have to have effective methods of licensing content and policing infringement.

Your most interesting statement to me was the one about other revenue sources. I too think advertising will be relegated to a minor role in funding online content. What do you think the revenue sources will be?

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