< Is Online-Only TV Ready For Prime Time?

Transcript

Friday, May 25, 2012

BOB GARFIELD: For more than 50 years, advertisers have gotten together with television networks every spring to do a dance called the Upfronts. The networks tout their upcoming programs and entice advertisers to buy ad time up front. This month’s TV Upfronts proceeded as usual, but this year, the torch seems to be in the process of passing to a new generation, sort of.

The brand-new digital NewFronts are an acknowledgement that viewers always watch TV-like content over the Internet. How many people? No idea. What are they watching? Unclear. And how much should advertisers pay to reach them? Eh, not sure. But all these digital platforms did just announce their offerings, and Sahil Patel attended, so you didn’t have to. Sahil, welcome to the show.

SAHIL PATEL:  Thank you for having me.

BOB GARFIELD:  First, can you give us a birdseye view of what the so-called NewFronts look like?

SAHIL PATEL:  It started out with Hulu, Google/YouTube, AOL, Microsoft, Yahoo and Digitize – they’re an advertising agency. So those were the six founding partners. Smaller content creators and distributors also wanted to get involved, so it eventually expanded to 15 or so different companies. NBC had the distinction of being the only network that was actually involved in it because they do have a lot of digital content properties, so they actually did have their own presentations at the NewFronts.

BOB GARFIELD:  Now, if this were the TV Upfronts, the networks would trot out the big stars. What did the exhibitors at the NewFronts have to offer?

SAHIL PATEL:  Each of them trotted out celebrities who they got to create contents for digital platforms. At the Yahoo NewFront, Anthony Zucker, who is the creator of CSI, is creating this new movie that will be distributed in short clips over like ten weeks. Hulu had Adrian Grenier. Seth Myers was there for a cartoon that he is co-producing for Hulu. Richard Linklater’s “Up to Speed” looks pretty interesting. That’s on Hulu.

BOB GARFIELD:  And there are bigger names still. Tom Hanks –

SAHIL PATEL:  Mm-hmm [AFFIRMATIVE]

BOB GARFIELD:  -is producing a series. So the good news is that online video is sufficiently advanced as an advertising medium that there is at least now a marketplace.

SAHIL PATEL:  That’s exactly the case.

BOB GARFIELD:  And vast amounts of content are consumed online, so that’s a hopeful development.

SAHIL PATEL:  Of course. For example, comScore, which is one of the most prominent measurement services for online content, came out with their latest report for April, which said that Americans watched 37 billion pieces of online video content last year. Well, of course, a lot of that is, you know, short clips. There is also a significant amount of premium content that is being watched. This is going back to YouTube; their top channels are receiving 23 million unique viewers per month. That’s not nothing.

BOB GARFIELD:  So that’s the good news. Let’s move on to the bad news.

SAHIL PATEL:  Mm-hm.

BOB GARFIELD:  If the broadcast and cable model are suffering in a thousands-channel universe, what can we expect in terms of an ongoing business model in a zillion-channel universe?

SAHIL PATEL:  Content companies - these exhibitors have started out doing it the only way they really can, sign these influential people like Ton Hanks, like Adrian Grenier, like Seth Myers to bring audiences over. And it’s not just creators but brands, as well. For example, Machinima, which has one of the most loyal followings within the video game content community, has a really big channel on YouTube.

 

So while it is a wide open playing field, there’s only a certain select number of premium brands that have the capacity and the means to actually broadcast, for the lack of a better term, to a wide audience online.

 

But, at the same time, the thing about digital, and I think this is one way that it differentiates itself from what broadcast and cable do, is they have the ability to create content that is more targeted to audiences, and it makes it easier to monetize that content, where advertisers want to actually come onboard and reach that audience.

BOB GARFIELD:  One final obstacle, just discovery itself. Even a low-budget Hollywood film spends a minimum of $30 million, and sometimes way north of $100 million, to get people into the theatres.

SAHIL PATEL:  Mm-hm. [AFFIRMATIVE]

BOB GARFIELD:  How do these shows get anyone to look at them, in the absence of very, very substantial promotional budgets?

SAHIL PATEL:  Look at the companies that are actually involved in the NewFronts. If 700 million people are on Yahoo on a monthly basis, there’s at least an opportunity there to reach them. At YouTube’s event, at the Digital Contents NewFronts, they actually announced that they were gonna spend $200 million marketing their original channels.

BOB GARFIELD:  There’s one company we haven’t mentioned yet, also a distribution platform that is reinventing itself, in some respects, as a studio, and that’s Netflix –

SAHIL PATEL:  Mm-hm.  

BOB GARFIELD:  - announcing new productions that it will stream and send out as DVDs. Did Netflix participate in the NewFronts?

SAHIL PATEL:  No. It’s a little bit of a different animal. Their CEO Reed Hastings has basically talked about how he wants Netflix to become like a digital version of HBO. Pay a certain amount of money per month and you can get access to whatever content that Netflix has, but also original programs that they’re creating, whether it’s “Lilyhammer” that they announced recently or, you know, they’re bringing back “Arrested Development.” But, you know, Netflix, they don't need this advertiser money.

BOB GARFIELD:  Given all the obstacles I mentioned, isn’t the subscriber model maybe the only one that has a chance to survive?

SAHIL PATEL:  There is definitely value in there. Hulu has a subscriber model. There was a report out of The New York Post about how Google and YouTube are considering a paid subscription model, where they would develop premium content exclusive to that.

But, at the same time, it’s so early. This was the first event of its type within the digital space with this kind of reach, with this kind of participation. You know, you can’t say for sure the digital space is not going to develop a model where it will be able to effectively grab ad dollars and also effectively reach audiences.

BOB GARFIELD:  Sahil, thank you very much.

SAHIL PATEL:  Thank you very much, Bob.

BOB GARFIELD:  Sahil Patel is associate editor for Cynopsis, an online trade magazine.

Guests:

Sahir Patel

Hosted by:

Bob Garfield