Yep – for online video to reach revenues that equate to 10% of current FTA revenue it needs users to spend 73.9 minutes per week watching video content online.
And this number implies everyone – ie, all of Australian’s 13m internet users – are watching this amount of video online per month.
Over the course of a month this works out at around 5 and a half hours per user.
Last week I wrote a series of posts that tried to take a bit more of an in depth look into online video – the challenges it faced with content, commercialisation and ad formats.
One thing I didn’t look that closely at was, how would it actually get to the revenue target of $370m?
I read the other day (from someone misinformed no doubt) that Google’s business model was apparently ‘build first then monetise’ which struck me as a bit simplistic. I am absolutely certain (or hopeful) that in the area of online video none of our publisher chiefs are looking at the area in this way. They would want to build and monetise at the same time, there’s no room to bleed cash here.
Ok – so how did I get to these figures?
Well – FTA TV generated around $3.7b in 2008. 10% of $3.7b is $370m
I assumed that a video CPM of $60 is what the main players would be working towards. Is this feasible? I don’t know … but for the purposes of this it seemed like a strong figure and in line with current publisher wants.
Personally, I think that in the next 3-5 years there will be effectively 4 ways to make revenue off video. Short form (ie less than 5-10 mins), mid form (under 10 min – 30 min), longer form (1 hr) and content creation (ie producing video for advertisers and placing as editorial/advertorial/content)
Now, this is a stab in the dark but most predictions are … that each area would account for the following % of total video revenue
– Short form – 40% (1 ad per video stream)
– Mid Form – 30% (3 ads per video stream)
– Long Form – 20% (5 ads per video stream)
– Content creation – 10%
As dollar values per year they work out at …
– Short form – $148m
– Mid Form – $111m
– Long Form – $74m
– Content creation – $37m
Ok … so based on the factors above (ie CPM and ad placements per format) – below are the amounts of streams that would be needed
– Short form – 2.4b
– Mid Form – 616m
– Long Form – 246m
– Content creation – N/A
So based on 13m Internet users you’re looking at per user per year
189 short form clips (3 mins)
47 mid form shows (30 mins)
18.9 long form shows (60 mins)
Breaking out these by week you get 73.9 minutes per user.
So – with this in mind – is $370m a year in online video revenue feasible?
Maybe. Maybe but a few key factors need to be explored. Namely
– CPMs. These estimates are based on a $60 cpm across the board … this is definitely at the high end and still far more expensive than TV. Hypothetically if the CPMs drop to $30 then you need to double the amount of time users spend with online video from 73.9 mins a week to 146 mins a week … or just under 2.5 hours.
– Sell through. These estimates are based on 100% sell through. Likely? Doubtful … but not impossible … 60-75% would be a good effort based on these volumes.
– Volume. Whilst these figures seem achievable (which they are) they involve an absolutely massive increase in online video consumption. Ninemsn stated a few months back they were generating 11m streams across their 2.8m users. This works out at just over 5 streams per user per month … so based on each clip being 5 mins that is around 25 mins per month. For $370m to be a yearly revenue figure users need to be spending 12x that amount of time watching video online.
– Content. 73.9m per user per month will require amazing content. Exclusive, first run and a big selection.
– Mass adoption. This is the key area. Remember, the numbers above are based on 13m people watching video … which implies universal adoption. Can the publishers get all Internet users embracing video en masse? If they can’t, the figure will be almost impossible to reach and advertisers will be difficult to transition.
So what are your thoughts? Am I way off?