Why the future of video might not be the future of TV

Richard Rosenblatt has built a content factory that churns out ultra cheap video clips at staggering volume. He’s aiming to generate 1M pieces of content per month at roughly the same cost as the New York Times spends to generate 5000 articles. At this rate, Demand Media seems intent on burying traditional media with sheer verbosity, akin to TeaBaggers who recently shut down Town Hall meetings by making a lot of noise to drown out other voices. This is an audacious gambit: we don’t typically think of major media companies as underdogs, but Rosenblatt’s business model will surely undermine theirs (on the web, at least).

Check out Daniel Roth’s article in this month’s WIRED magazine about Rosenblatt’s Demand Media . The article illustrates what’s coming next for video on the web. What’s notable is the company’s entire focus is on consumer demand: their editorial agenda is driven by search queries.

The article is a worthwhile read. I thought it was worth posting to Facebook where it triggered an interesting cascade of commentary from smart friends in TV and new media.

There was a big reaction, particularly from those who insisted that Demand Media is flooding the web with low-quality fare that cannot compare to the high-quality fare from television. That may be true, but I think that this reaction misses the point: Rosenblatt isn’t trying to compete with TV, he’s creating the next market for video that would never appear on television. Or, more accurately, he’s addressing a new market that traditional media companies have overlooked entirely.

I am no fan of low quality video clips churned out in huge volume, especially when the editorial direction is computer-generated. But I understand the strategy. Rosenblatt is optimizing his media business to meet consumer demand (hence the name of the company). The traditional media giants are entirely focused on supply, not demand. And that may be one reason why traditional media companies are unlikely to blaze new trails on digital platforms. They are preoccupied with resurrecting a moribund business model in a new medium. That’s a dubious approach.

To paraphrase Marshall McLuhan, the big broadcasting companies are in the fast lane, but they are looking in the rear view mirror.

It’s no secret that there is downward pressure on the advertising rates charged by major broadcast networks. These companies maintain an elaborate fiction about their audiences, claiming insights about consumer behavior and advertising effectiveness that they really cannot prove. The big broadcast networks are aided in this fiction by agencies and the audience measurement companies, each of whom has a significant financial stake in maintaining the status quo. This is not news: broadcast TV has been in a slow-motion descent for two decades.

But meanwhile, the web continues to evolve and improve gradually and steadily. The age-old story of Moore’s law, extended metaphorically to the entire network, means we can expect continual improvement (in the case of streaming video, this means a progression from terrible in the mid-1990s to watchable by 2002 and nearly-acceptable today… which means that online video will probably be pretty good tomorrow. By then it will be too late for the broadcasters).

It’s easy to be numb to this incremental progress. For thirty years, we’ve grown to expect every digital gizmo to get cheaper, better and more powerful each year… and cost less. As consumers, we take it for granted that each year the bandwidth gets faster and the screen gets brighter and the video quality gets better. . But for major media companies, it may prove to be e a fatal mistake if they overlook the gradual erosion of viewership caused by the web.

According to eMarketer’s August 2009 report on Video Content, nearly 50% of the US population watches video online (That’s 144 million people, 79% of US Internet users). By 2013 eMarketer expects that audience to increase to 188 million, about 85% of US Internet users. This is no longer fringe behavior: it’s mainstream.

It’s no surprise, then that broadcast TV should be chasing its audience onto new platforms. It’s clear that the Great Migration is underway. The most attractive demographic segments (wealthy, upscale, professional, empowered in every way) have already migrated away from broadcast towards platforms that afford more control, more choice and fewer interruptions (including DVRs and VOD in addition to the web).

Ten years ago, researcher Nick Donatiello of Odessey Research predicted that the demographics of broadcast television would resemble those of cigarette smokers: poor, less educated, downscale in every measure.

He was right. Looks like we’ve reached that point now.

But the shows on TV haven’t changed very much, and the business model of broadcast television hasn’t changed at all during the past ten years. On the contrary, the major broadcasters seem to be intent on replicating the TV experience on the computer, a strategy that seems misguided. So they are deploying full length episodes on Hulu and elsewhere with the same kind of commercials as you might find on television.

One can’t fault the broadcasters for attempting to squeeze a bit more profit from their investment in primetime shows by recycling them online. But TV content is not necessarily what audiences are gravitating towards on the web.

Consider the numbers. From eMarketer’s August 2009 report:

TV content available on the web has increased in the past year by 49% That seems like an impressive growth rate, and of course it reflects the recent decision by ABC and other broadcasters to offer full length episodes.

But the biggest growth is not happening in TV content repurposed for the web. Full episodes are available, sure, but that’s not the main event. According to eMarketer, the real growth in online video consumption is happening in a category called “Multimedia” which is a catchall for short clips, comedy, opinion, original web series, how-to clips and user-generated fare. The Multimedia category grew an astonishing 412% in the past year, That’s nearly ten times as much growth as TV content repurposed for the web.

And that’s where Richard Rosenblatt and other demand-centric online video providers come in. These renegades are cranking out original video clips at an incredible rate to meet surging demand from online audiences who are typing search queries into Google.

They are staking out terrain in a brand new market instead of shoring up a declining business model from the past.

Posted via email from Robert’s posterous