Online Video Entertainment
Anthony Rommens
26-Aug-06
Venture Capitalists and large corporations have recently shown great interest in entertainment and media companies that either create content or are an avenue to deliver video over Internet connecting devices. There is no sign of this demand being satisfied anytime soon. Good news for Business Angels to obtain ‘buy outs’ from a variety of players. In this article, we explore online video entertainment in order to better understand the general landscape for investment opportunities in this broad field.
INTERNET POPULARITY
Online media companies have existed since the dawn of the internet however the recent focus on multimedia investments has arisen because there has been increased Internet access by the general public. People (especially under 25) are utilizing the internet in larger numbers and they are also spending more time on it.
A big reason for this popularity is that Internet technology has developed to a point where it is practical enough to be used effectively for entertainment purposes. The computer software most credited for effective World Wide Web video transmission is Adobe’s Flash player. Flash is bundled with all major web browsers and allows video to be easily displayed on a webpage. Users visiting a hosted internet site simply click on the selection of their choice and then instantly view moving pictures with sound.
Consumers are now much more in charge of how they are individually entertained as the internet allows them to pick and choose products that fit their schedules and personal preferences. Because of this increased accessibility in time and variety, popular taste may turn out to be much wider than anyone has previously pondered. This creates opportunity for new firms that offer fresh new interactive content.
Favorite video sites are currently grown by the public sharing their user uploaded videos for free. Internet videos tend to be homemade and popularity is derived from online ‘word of mouth’ that people pass on to share interesting and entertaining content. This is in contrast to off line corporate advertising which is currently used to market products.
VIDEO PRODUCTION SET FOR CHANGE
Internet is now altering traditional business models. We all know about how the publishing industry has forever changed by being able to purchase books on the world wide web. The music industry also has been definitely affected by increased song downloading. Video gaming is forever modifying as well because of networking.
Multi media and especially the area of video production is next to be affected by internet technology. There has been a noticeable decrease in the general public viewing of highly rated Television shows and blockbuster Movies. We have seen the growth of Google, Yahoo and Microsoft online video over the past year and it is apparent that the internet will definitely be a place for video entertainment.
NO SOLID PROFIT FOR NEW MEDIA
Large television networks and movie studios are aware of these developments. They are beginning to partner up with new web media companies. Some say that the big broadcasters or studios are a little late to catch on but it is worth noting that there still is no solid profit model in place for the current free internet content. It is important to note that big production companies have significant costs in producing quality programming. Video hosting websites also have to pay for bandwidth traffic usage to deliver content.
Consumers still need to realize that they might have to actually pay either by paying upfront for video or imbedded ad marketing. This can be a difficult sell to the public who currently receives free content and may be suspicious of advertising. What this means for business angels is that their investments will quickly ‘burn through’ capital and perhaps be more expensive until viable profit models are established.
VIDEO DEVELOPMENT
Online video will probably be quite different in the future from that currently used by commercial TV broadcasters and cinema. People tend to watch television and movies in a semi-comatose state of mind and at odd angles. When they use the internet or a mobile device they typically pay close attention to the screen. It will be interesting to see what is developed by content marketers to take advantage of the differences. There should be effective advances in marketing to young people who tend to be skeptical of current messages blasted by prime-time television advertisers.
Many problems must be overcome as Internet picture quality is not quite as good as that of television. There is significant technical difficulty in moving web content freely to Television where it can be watched by the majority of consumers. Tech has not quite caught up with viewers desires to have internet content available on TV.
There are also larger issues regarding sharing of legal content. There is a definite struggle to balance the rights of media owners with those of consumers.
Both current technology constraints and legal issues will significantly slow down the widespread use of compatible content.
BIG BUSINESS
NBC (a major US television Network) and YouTube.com (a video website with over 70 Million video views per day) have recently announced a strategic partnership to promote NBC fall programming.
Popular sharing site Guba.com has landed deals with both Sony Pictures and Time Warner. Site visitors can download previews, rent or purchase videos for download to their hard drives.
Major marketers such as Nike, American Idol, MTV2 and Dimension Films have also begun to advertise on various video access websites.
In the UK, “Putting programming on the internet could revolutionize broadcas t ing, and prompt a wider, cultural shift in television consumption,” according to Ashley Highfield, British Broadcasting Corporation’s Director of New Media & Technology. The BBC has found that putting video on the Internet betters program viewings and extends peak-time but more importantly builds loyalty and provides more access to BBC programming.
POTENTIAL
The large studio and broadcasting firms are working deals to find common ground with smaller broadband media firms in order to increase professionally produced licensed material and also expand from user provided content on the internet.
The internet has done a fantastic job of speeding new selections of niche books, music, games and video. Sales of an ever wider variety of products are on the increase because of internet technology. Traditional ‘Hits’ might be overall on the decline but there still is big potential as the internet world delivers a variety that appeal more to personal tastes especially that which is downloadable or accessible online.
Products do not necessarily have to be main stream in order to be sold profitably because they do not have to have the same high marketing and expensive old distribution costs associated with current business models. Many downloaded products are not available in regular stores and customers are paying for them. Companies are now able to effectively market every one of their products equally online rather than just focusing on sales of a few best sellers.
The Internet is becoming both a store and broadcaster that operates at a fraction of the traditional cost of pre-existing movie and television business models. However quality content, not random hits will be required to continuously keep the consumers visiting popular online media sites.
Video on demand is most likely to become the next profit model for many online companies. Profit opportunities for multi media companies could also come from product marketing in Video ads, Mobile/ Wireless Advertising, Podcasting and various Video Game Product placements.
Content that is originally produced on the internet at lower costs could spread to television and cinema. We have already seen many video games become movies and vice versa. Expect to see similar developments from proven and original online media. Having an existing and reachable fan base could help justify expensive production that exists for current independent movie and TV productions.
There will be opportunities in offering bespoke multimedia marketing services to other businesses as well. Leading companies like Land Rover are becoming multimedia providers. Land Rover has created a continuous 24 hour broadband TV website channel that gives a very measurable target audience, allowing them to showcase products and contact consumers. If this type of corporate site is successful, it could open up new fields for media companies offering custom broadcasting that is accountable and delivered at a lower cost than traditional television and movie advertising.
It is important for many content companies to offer something original that can attract a large audience. This will obviously attract interest from larger buyout players. New media firms must have enough flexibility to sell across multiple platforms and distributors of Games, Television, Movies, and Internet. In this way they will not have to rely on any one business model and are more able to adapt as changes unfold.
In order to achieve success, talented and artistic production people are necessary to deliver more than just a few hits. Recognised multimedia brands must be developed to provide steady demand for content.
CONCLUSION
Startup companies that supply video entertainment must work out deals with established firms and ultimately form into modified production companies. Big studios who have creative and experienced individuals must also work closely to coordinate content with startup media firms. There will undoubtedly be a many mergers and buyouts of small firms by larger production houses in television, movies and also film distributors. This should open up opportunities for Business Angels to obtain returns.
As with all investments, the future of how online media unfolds is uncertain. It is clear however that online video entertainment is here to stay. Only the most cost effective, business flexible and tech adaptive firms who sell to various distribution channels will reap big rewards for investors.
