Online TV: free vs. pay
I'm a big fan of advertiser-supported content online, but I heard something today that made me think twice about the viability of that business model for long-tail or niche-y material. I'm at the IBC 2007 conference, which is Europe's annual blowout on broadcasting and new media issues. At a panel today on broadband rollouts, Gideon Summerfield, managing director of Pioneer Online, talked about FirstScience.tv -- an online video-on-demand service specializing in science programs that have been locked in broadcasters' vaults. This is typical long-tail material -- it has limited appeal but avid fans, and little of it is available in any other format. The goal isn't to attract a TV-sized audience, Summerfield said, but "thousands and tens of thousands" of viewers. "As long as we have a big enough inventory, we can make a good business out of that."
By that he meant a good rental and sell-through business, not one based on advertising. The reality, he said, is that selling ads based on so few viewers won't generate enough money to sustain the business. Babelgum might make $250 by coaxing 5,000 people to watch a free video with advertising, Summerfield said, but FirstScience.tv can make 20 times as much by charging viewers $2-$3 to rent and $1 extra dollar to buy. Besides, he said, there's a growing supply of free, advertiser-supported video sites online, and that situation isn't sustainable.
Not that everything's peachy in the video-on-demand business online. Like other speakers, Summerfield said it's not easy enough for people to view and pay for online videos. He lamented the lack of an easy connector between PCs and the TV, and the incompatibilities caused by rival DRMs. And although peer-to-peer technologies are critical to solving the Net's capacity problems, Summerfield said users complain about the effect on their PCs' performance and Internet speeds. "I just think we're going to have to see radical development of the technology," he said.
The FirstScience.tv site draws about half a million unique users each month, according to Summerfield. About 60% of them come from the U.S., which accounts for about 75% of the sales -- an imbalance that reflects how much more experienced U.S. Web users are when it comes to paying for content online.