Is Web Video a Threat to TV?

The Internet has made it possible for anyone with a video camera to

become a filmmaker or YouTube star. But can independent creators make a

living off Web video? And will this army of amateurs pose a threat to

traditional broadcasters and studios?

Several video-sharing sites,

including Revver and Metacafe, are trying to translate Web fame into

dollars by sharing advertising revenue with contributors. Even YouTube

has adopted a similar program. Traditional broadcasters, meanwhile, are

taking steps to capture online viewers (and ad dollars). NBC, for

example, is adding social networking features to its flagship site and

will debut "Coastal Dreams," a Web-only soap opera, in October.

The

Wall Street Journal Online invited Sab Kanaujia, vice president for

digital product strategy at NBC Universal, to discuss the future of TV

on the Web with Steven Starr, co-founder and chairman of Revver. Their

exchange, carried out over email, is below.

THE PARTICIPANTS

Sab Kanaujia is vice president for product strategy and development with NBC Universal's Digital Media group. He is responsible for initiatives across NBC Universal's sites, including NBC.com3 and BravoTV.com4. Before joining NBC in August 2006, Mr. Kanaujia spent two years as an executive at AOL, where he worked on acquisitions and developed the product strategy for AOL Video. Previously, he worked at a private-equity firm and as a consultant at KPMG.

Steven Starr is co-founder and chairman of Revver5 and served as the video start-up's CEO from 2005 until June 2007. Before starting Revver, Mr. Starr co-founded Uprizer, a peer-to-peer networking firm, and was CEO of AntEye, a user-generated video site. Previously, he was a writer and producer of independent films and co-creator of MTV's "The State." He also spent nearly a dozen years at the William Morris Agency where his clients included Tim Robbins and Larry David.

Sab Kanaujia begins:

Can independent creators make a living with Web video? I don't think

they can in the short term. Current business models online are not

attractive enough to make a living or leave your other day job. The

CPMs [cost per one thousand ad impressions] paid by online distributors

for independent content are not very high compared with those for

professionally produced, long-form content, so it requires a lot of

views to translate into a decent amount of money. Low CPMs also

indicate the appetite of advertisers at this point for content from

independent creators. There are of course some exceptions

(LonelyGirl15, etc.) where we have seen good, engaging content that has

driven a lot of traffic.

Steven Starr responds: Well, it all

depends how you define independent creators. Old school independent

creators, used to Hollywood economics, should stay home. But successful

independent online creators are seeing CPM and [cost-per-click] returns

that can exceed $10,000 per month.

The promise of an online

creator economy is right around the corner, one that supports an

entirely new form of creativity quite distinct and separate from

traditional TV creation. This is happening in the short-term, with Web

video creators not controlled by the linear programming demands of

traditional TV. The Web video toolkit is far more interactive; response

videos, social networking, mashup technology and the like are changing

the parameters of content creation. Web video as a nascent art form,

one that promises significant and sustainable revenue as it develops,

is close at hand.

Mr. Kanaujia: I agree with the promise of

online platform for both content creators (non-linear, timeliness,

etc.) and for users (interactivity, more features, etc). But I think

business models are still evolving. In the short-term, I think the Web

will continue to provide a great vehicle for independent creators to

get discovered (zero barriers to entry). And when they do get

discovered, many may want to join traditional media — or not.

Here

are two real-life examples: Rocketboom — Amanda Congdon established

herself online. She leveraged her online popularity to get an offer

from ABC, which she accepted. Now, she's using that opportunity to

marry the digital and traditional worlds by anchoring in addition to

doing video blogs on ABC.com. I was recently at Om Malik's Pier

Screenings in San Francisco, where one of the creators of LonelyGirl15

spoke. They have thus far not joined a traditional media company amid

several such offers that their agency was able to secure for them. They

want to maintain total creative control and flexibility with their

shows. Also, their storytelling style requires quick turnaround and

interactivity — which does not yet fit the traditional TV platform,

with its many other considerations (advance scheduling, advertisers,

etc.). Though they've not seen a financial windfall by going alone,

they're still sticking to their original plan. These examples provide

different paths taken by two successful online independent creators.

Mr.

Starr: Using the Web as a discovery platform for old media trolling for

talent is 1999 all over again; why take these new media creators and

force them into old media formats? If the future of TV on the Web is

continuous streaming, everywhere-accessible and ubiquitous, isn't a far

more exciting outcome the emergence of an entirely new art form?

In

today's Hollywood, over 90% of [Writers Guild of America] and

[Directors Guild of America] members are not even close to making a

living at their chosen craft. In the high-stakes game of traditional

TV, the prospect for an Amanda Congdon or LonelyGirl15 achieving the

financial windfall you refer to are incredibly remote, at best. Yet

online, where Rocketboom and LonelyGirl15 can take incredible risks

with format and genre, can grow their own audience at a fraction of

network costs, can enjoy free syndication, hosting, audience-building

and ad services at their disposal, an absolute cornucopia of

opportunity awaits.

And yes, the business models are evolving,

but it's happening quickly and well. At Revver, we're seeing a 4x and

7x jump in creator revenue just by adding pre-roll [ads] as an option

to our Revver creators. It may be the wild west, but the opportunities

are historic; there has never been a better time to be a creator, not

in the history of media.

I've got a question for you, Sab: How does NBC Universal see its role as a supporter of this new art form?

Mr.

Kanaujia: I'm not arguing that traditional media should either force

new media creators into old media formats or restrict in any way the

tremendous opportunities provided by digital platforms for content

creation and distribution. I was just highlighting what is happening

today as we evolve towards realizing the full potential of the new

medium.

NBCU whole-heartedly supports the new art form. In fact,

one of the primary goals of NBCU's Digital Media group is to explore

how we can proactively embrace new digital platforms. We've created a

Digital Studio that is extending NBCU's history of quality programming

into the digital age by producing original programming and interactive

experiences that engage consumers across a variety of topics and genres.

We're

also exploring how we can creatively marry originally produced online

content with our on-air shows. I think democratization of content

creation and distribution provided by technology innovation on digital

platforms and changing user behaviors would in the long run be a

win-win for all stakeholders.

Mr. Starr: NBCU has been quite

proactive in extending its brand online; the digital studio sounds

promising. But I really don't envy what big media's facing. Consumers

are their own programmers; control over the media experience has been

ceded.

New media is social, all about connection and inclusion,

and the challenge to monetize those connections is starting to be met.

Andrew Keen's "The Cult of the Amateur" disputes the disruptive

history-in-the-making prospect of all this, and blames new media for a

"loss in quality." So maybe it started with cats swinging from

chandeliers and frat boy video, but it's evolved in less than a year to

budding auteurs like Goodnight Burbank6, Happy Slip7, Studio88 and

LoadingReadyRun9, all building audiences, all operating at the

forefront of new media. No doubt it's early days, but a year or so from

now we may see world-class creativity emerge, and Mr. Keen's dismissal

seems shortsighted at best.

The fact is, while new media creators

keep bursting out of nowhere, old media has yet to figure out how to

truly engage this unique audience. Repurposing TV and film content is

not a long-term solution. Social media demands a different expertise.

We're in a period akin to the transition from silent to talkies, and

it's going to leave a lot of traditional creators and content suppliers

behind.

Even more disruptive, social media rejects the cult of

the velvet-roped celebrity, demanding far more fan-creator interaction

than ever before. This drives the attention of a connection-expecting

audience into the hands of the independent creator, not the entity that

controls their channel, and empowers creators to control the advertiser

relationship themselves. Again, a heady time to be making media, to be

building an audience.

Mr. Kanaujia says: All these are examples

of Web TV done right. In the long-run, I believe Web TV will co-exist

with the traditional media. Forecasts claiming that the new media will

swallow traditional TV are grossly overblown. Today, almost half of the

total media consumption in the U.S. is on TV — 47% of 68

hours/week/user (Source: Veronis-Suhler 2006). Rest is split between

radio, recorded music, print, Internet, mobile, etc. Future trends also

point to the dominance of TV (48% of users' media time in 2010).

For

advertisers, the lean-back user experience allowing deep engagement

with the long-form content on the TV is undoubtedly the best

opportunity to develop brand awareness. Having said that, traditional

media would still need to adapt to the growing reality of the new

media. Over the past 80+ years, traditional media firms have

successfully gone thru many transitions in the industry (from radio to

broadcast TV to color TV), and have emerged stronger each time. No

reason why they can't succeed the current transformation from

traditional to what I call "integrated media," that combines digital

platforms to traditional ones.

Talking about integrated media, I

think ultimately Web TV will make its way into the living room as well

(it has already started; e.g., YouTube/Apple TV, AOL's deal with Sony

for their IP connected Bravia TVs). But for Web TV to succeed, it has

to leverage the Internet not as a platform, but as a medium that is

non-linear, social and interactive. Web content creators will not

succeed if they develop their content by copying what has historically

been done for the TV. They have to leverage the above three fundamental

advantages provided by the Internet. Compelling, storytelling skills

will always be critical — no matter what the screen is

(Web/mobile/TV). Advertisers will naturally follow if the execution is

done right.

Mr. Starr concludes: I agree in almost every regard.

Traditional TV absolutely will adjust and survive, just as there's

still a market for books a century after movies were introduced, after

TV, after the Web. But I think we're not far off from having most of

the advertising dollars spent predominantly on the Web — and around

that corner we'll see most of the fortunes made from storytelling come

from Web-based media. There will always be exceptions — J.K. Rowling

will make over a billion dollars from an old-fashioned book series —

but my point is that, in the storytelling and visual arts, the future

is moving quickly towards Web-based media. It's just too efficient in

gathering a motivated mob for the smart money to go elsewhere.

Serials

produced in the creative diaspora already engage repeat audiences that,

per episode, number in the millions. A new breed of storytellers are

inventing new ways to narrate, new formats, new genres. At the same

time, a new breed of audiences are finding new ways to interact, to

participate, to engage with these storytellers. It's all happening

outside of traditional media auspices, and that's what makes this new

art form so unpredictable and so thrilling.

This disruption

itself is what drove me to start Revver. I'm absolutely convinced

online video is where the creative center of the next decade, and

possibly the next quarter century, will reside.