New Media Bulletin: September 2007

Frequently Asked Questions

 

1. What are the different ways video content is being delivered

in the new media world?

Video content is now distributed to viewers in a number of new ways in

the new media world. On their PCs, viewers can watch content via free

ad-supported video streams or download to own or rent both movies and

television programs. Video content can also be accessed using found on cell

phones, video game consoles and other devices.

Ad-supported videos are available on all of the network-owned Web sites

as well as other sites across the Web including AOL, Yahoo, Joost and many

others. In a new twist on free online videos, NBC announced this month that

it will begin to offer free ad-supported, temporary downloads of its

television programs. The downloads will contain multiple, unskippable ads

and will last for a seven day period.

Movies and TV shows can be downloaded to own or rent through a number of

different sites and services. Most well known is iTunes. The new NBC-News

Corp video site ³Hulu² will also offer TV show and movie downloads for sale.

Amazon Unbox offers programs for sale or rental, and through a partnership

with TIVO these programs can be watched on a television. Microsoft's Xbox

360 allows subscribers to download programs and watch them on their

television set through the video game console. A new set-top box device

called Vudu was recently introduced to the market. This device connects the

Internet to the television set and offers movie downloads for rental or

purchase.

Cell phones have also become video content providers. To watch video

content on a cell phone, many carriers require customers to pay a flat

subscription fee to have access to video channels. Others are experimenting

with ad-supported streaming of video content.

2. What are the different revenue models for new

media?

In new media, two distinct revenue models have emerged for monetizing

content. The first is when the advertiser pays for the content you watch.

This is the dominant model for streaming content. Similar to the broadcast

network revenue model, advertisers pay based on how many people watch the

video and the company's commercial. Kagan Research has reported that the

advertising rates for professional content online are higher than the

network primetime rates, due to increased user engagement online. eMarketer

projects online video streaming revenue to reach $3 billion by 2010, with

Hollywood companies claiming 75% of that amount.

The second revenue model in new media is when the consumer pays to watch

content. This is done through download sales and rentals of movies and TV

shows. This model is projected to be the smaller of the two revenue streams.

PricewaterhouseCoopers projects download revenue to reach $1 billion by

2011.

3. What are the strategies for delivering content in the new

media world?

An important component of Hollywood¹s new media strategy is to reach

consumers, wherever they are. On the Web this means that the networks and

studios cannot rely only on their own Web sites. To reach viewers, many

Hollywood companies have partnered with major Web sites and online

distributors to ensure that their content reaches as many viewers as

possible. For instance, CBS has partnered with a host of online distributors

including AOL, Microsoft, CNET Networks, Comcast, Joost, Bebo, Brightcove,

Netvibes, Sling Media and Veoh to deliver CBS content across the web. These

and other distribution deals made by the studios and networks with the

online distributors include revenue sharing agreements. Deals with Joost

reportedly include a 70/30 revenue split with 70% of revenue going to the

party that provides the advertiser.

At the same time, Hollywood companies also want to attract viewers to

their own Web sites, for a variety of reasons. If a network can attract

viewers to its own site, it will not have to share any of the advertising

revenue generated from its content with third party distributors. Networks

would also prefer viewers to visit their site because it gives viewers the

opportunity to explore and discover new content from the network. To attract

viewers, networks advertise their Web sites on television. They also use the

press to attract attention to new online ventures. This is evident in the

creation of the ³YouTube killer,² NBCU and News Corps online video site

Hulu.

4. How can the WGA track new media viewers?

Download sales are sometimes tracked by the companies. In these cases,

the WGA can request download counts to support residual payments. In

addition, the current guild efforts to audit company financial records

(often conducted jointly with SAG and DGA) are the subject of specific

proposals in the negotiation to augment the resources and procedures already

in practice and to adapt them for the new media complexities.

5. Are the online aggregators like Yahoo, Google and Microsoft

the biggest threat to the 6 conglomerates in new media?

While the major online aggregators attract the most web traffic through

their portals, they do not have developed video content production

businesses. Many of the online aggregators now offer some type of video

content on their sites, but much of it is supplied by the networks, studios

and Hollywood production companies. ABC news clips can be found on Yahoo.

Eric Schmidt, CEO of Google has said, "We're not competing with newspapers,

we're not competing with television stations, and we're not competing with

the Viacoms of the world. We're trying to partner with them." For video

content, the online giants have found that they need quality programming,

that many WGA members write, and in order to have access to this content

they must partner with the major media conglomerates.

6. What original content is being produced for the

Web?

Currently, every kind of program that is made for television is being

reproduced online. Much online content is shorter in format than traditional

half hour and hour long programs on TV but genres include comedy, drama,

game shows, competition reality shows and animation. Many of the networks

have created webisodes to accompany their television programs. Hollywood

production companies Mark Burnett, Endemol and Reveille all produce

competition and reality type programming for various sites including AOL and

Microsoft. Warner Brothers recently announced a slate of online original

programming including comedies, animation, and game shows. A priority for

the WGA will be to ensure that writing of original content in the new media

world is Guild covered.

7. How significant are the revenues from new media platforms for

the major media conglomerate?

For the media conglomerates, revenues from television and film are the

dominant sources of income. However, revenue from downloads and video

streaming are significant to the companies because they are growing at fast

rates. US film revenue is projected to grow 4.6% annually through 2011,

according to PricewaterhouseCoopers. During the same period, online sales of

movies and television shows are projected to annually grow 52% and 77%,

respectively. eMarketer projects online streaming revenue to grow 63%

annually, reaching $3 billion in 2010. New media revenues represent an

expansion in the pie for the media conglomerates. As the more mature markets

in the industry grow slowly, new media platforms are poised to explode.