How many ads will video viewers online tolerate?

I was in a preso today from a large publisher, which was presented by the CEO of said large publisher.

We were talking about online video and I brought up that I thought it was interesting that said publisher was open to losing revenue on programming putting it online (compared to what they could get for the same user viewing it on TV).

He made the comment ‘we’re looking at just serving 1 ad on video programming’.

I was a little taken aback … 1 ad for, let’s say, a 30 min piece of programming … how does this pay the bills?

Based on that – a 30 min show could have 1m viewers (which ain’t gonna happen) and it would generate maybe $60,000 in revenue. The same show in broadcast with the same viewer volume would make over $400,000

I might be a backward idiot, but it seems like this isn’t much more than throwing money away. How is this sort of revenue going to cover the cost of producing this content? And surely these players owe it to their shareholders to make as much money off their content as they reasonably can.

His response was ‘if we don’t do it, someone else will.’ My response to that was ‘who … you own the content.’

Right now it seems to me like they’re prepared to take massive hits to better the “user experience.” My question – how good is the “user experience” going to be in 5 years if they can’t afford to produce the depth and amount of content people expect. And what impact might this have on LOCAL programming and the industry surrounding it.

Anyway – revenue and profitability seems a secondary concern for many.

Business Week in the US has investigated the same issue (albeit in more depth) with the US broadcasters –

Anyway it’s a good read and it raises an interesting issue – what is a fair price for video online.

Right now, $60 or thereabouts seems to be the cost if you want to place your ad around video content (ie pre-roll)

But is this a fair amount?

The science now to back this price up. Zero (same with mobile advertising CPM expectations …). And it can really only go one way – down. Over the years I haven’t seen CPM’s go up in the world of online.

Maybe we’ll see a mix of pay and free. Newscorp’s Chase Carey has said that Hulu should look at charging for some content.

“Ad-supported only is going to be a tough place in a fractured world. You want a mix of pay and free.”

Pay and free. Sounds like what the newspapers are considering.


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