Turning analogue dollars into digital cents?

There was an quote floating around at the end of last year that discussed the dangers of turning analogue dollars into digital pennies.

It was made by Jeff Zucker, who heads up NBC Universal.

This article here has some info – http://seekingalpha.com/article/105897-online-video-advertising-from-analog-dollars-to-digital-pennies – around the comment and some US debate around yield and the future viability of online video.

In the US the stakes are high – TV is big. Seriously big – billions and billions of dollars are at stake. What the NBCs/CBSs/Disneys etc of the world don’t want to happen is to dramatically cut their yield by making errors with how they distribute their content on the web.

Many web maniacs believe that EVERYTHING on TV should be online and free … nice idea but would it be able to sustain itself? Not sure …

News Digital Media’s Ed Smith (who is never short on a soundbyte) made a comment that free to air TV would lose 2/3’s of its revenue within 5 years (seriously) – http://business.brisbanetimes.com.au/business/online-awaits-audience-and-revenue-bonanza-20090826-eztq.html

This is an industry that brought in over $3.7b in 2008 (metro + regional – Free to air only). 66% of 3.7b is a lot of money.  It’s $2.4b. Yes, Ed Smith believes in 5 years this revenue will just leak out of FTA stations.

Now, of the 3 main FTA players – Ten, Seven, Nine – all have web interests. What they want is for these 2 interests to not work in conflict with eachother, they want them to ADD to existing revenue not cannibalise existing revenue. Just like NDM and Fairfax don’t want to (or shouldn’t want to … what happens in real life is a different matter) take money away from their newspaper cousins.

At $3.7b per year, and with an average daily audience around 13m … TV shows pretty strong extraction per user. It’s around $284 per user per year.

Web isn’t as efficient a machine in terms of pulling dollars out of the market. Google is probably making around $61 per user per year (based on approx. 13m users) and the display players as a collective generate around $37 per user.

Now before you start saying ‘well thats because TV is more expensive’ … don’t, because it’s not. Sure, it’s more expensive than a $1cpm blind buy but compare apples with apples premium environments with premium shows and it stacks up pretty similar cost wise.

It’s a significant challenge. How do you build on the current $3.7b revenue pot by using the web for video distribution? And how do you not fall into the trap of losing huge ground yield wise? How do you not turn what is a high margin proposition currently into a low margin proposition (ie what happened with classifieds?)

This is something I feel like exploring this week.

I wrote a few months back that online video for a company like ninemsn could be worth $20m in a few years. The more I think about it, the more this amount seems grossly understated.

So … could online video be worth 10% of the current FTA pool in the next 3-5 years? Can it become a $370m industry? And can this $370m be incremental revenue, not just thieved from free to air?


One response to “Turning analogue dollars into digital cents?

  1. So I do not understand what you mean by incremental revenue or rather why you are asking.

    Revenue is revenue.

    If banners can generate 480m then video writing 370m doesnt feel a stretch.

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