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Building relationships
Live events
Web infrastructure
Advertising revenue
Syndication
From TV to Internet

Well somebody is making money with streaming media (and it's not just the porno sites). Here's how...

by Christina Fox

Danni Ashe President of Danni's Hard Drive knows how to sweat the assets on her internet site. She started it as a hobby run from her bedroom and made money from day one. Profitable month after month for five and a half years, it has expanded with full digital broadcast facilities and "produces a lot of streaming content both live and pre-recorded, employing 42 people" boasts Ashe. The site offers adult entertainment and more revealing shots of a company president than most shareholders would be used to seeing.

Even though the content is compelling she still faces the same problems as other sites trying to make money. "Because Visa, MasterCard is the only billing system that is predominantly used we have to go to those higher rates which is $10-20 per month really what we need for a subscription model is an alternative payment system that will allow for 50 cents to look at that video clip. As soon as an alternative system is widely adopted we'll see a lot more digital content being sold." Until then the content has to be sufficiently compelling to justify the high charges. "What it gets down to is you have to be able to aggregate vast amounts of content that people are willing to pay $10 -$20 on a recurring basis for there is a lot of content out there that is compelling but people are not willing to sign up, fill out the forms, sigh up for a payment every month."

Building relationships with customers

Nigel Walley managing director of Decipher a London, New York and Hong Kong based consultancy that looks at consumer and brand trends believes "One of the key things to making money from any kind of content and content distribution is having a relationship with the consumer which gets them to write cheques to you, or sign a direct debit or put their credit card details into your system that relationship is key to all of this." Of course many traditional broadcasters already have a billing relationship in place. Walley believes that there could come a time when the TV companies will do the billing on behalf of internet content sites. "So, on your SKY bill you will see a bill for the channels you want and any material you downloaded. No need to get out a credit card or set up multiple subscriptions." Unfortunately the technology doesn't exist to make this a reality yet. But in the future it could be a new revenue stream for broadcasters while opening up the subscription business model to content providers with low value material.

All of the speakers at the Streaming Media session agreed that relationships with the consumer do seem to be vital. Arguably one of the strongest relationships is the one between football teams and their fans. "We did some work calculating the size of the market for premiership football outside the UK" outlines Walley. "It is absolutely vast, there are something like 50,000 fans for one particular premiership club, living in the US alone, who would pay for streamed versions of their games. You can see the time when they stream premiership soccer and consumers will get up at four o'clock in the morning in San Francisco, type their credit card in and watch a live [British] game." But how do we know whether the demand is really there? "We know that because they are already doing that with audio. Leeds united set up a facility on their website they charged 5 for a live broadcast of a game, in one week they had 35,000 people from around the world type their credit cards details in and pay the money to listen to a live game from Elland Road. And this was very low quality audio commentary of a soccer game."

Live Events

Ashe has certainly done the maths "Its all about the ratio to how bad they want it to how easy you make it. And that is the beauty of the internet you can reach those ex-pats wherever they are in the world. So, having the rights is essential."

Perhaps more football clubs should take some lessons from the adult entertainment sites " We do live events every week and it is one of the things that really drives subscription." Advises Ashe "A lot of people buy subscriptions based on [the fact it is live]. But, then they don't show up to watch it live - because it is inconvenient, something came up, they couldn't make it. But they will come and watch it later. So, doing it live is your marketing tool that's what makes it sexy . However, the vast majority of your audience is going to look at it when it is convenient for them."

Infrastructure

But as Michael Demko VP and general manager of NET 36 reminded us. "The infrastructure is not out there either yet we all take for granted that we can switch on the TV and get pictures or pick up the receiver and make a call. The internet is still a very frustrating experience for a lot of people. It takes a lot of time for buffering and pictures to load, content cannot be protected against piracy." If the infrastructure is a concern then trying to second guess how the future might look is an even bigger problem for content providers and distributors. "We have to understand how the consumer infrastructure is going to evolve. Consumers will have lots of screens in their homes. Some will be recognisable as TV screens some will be recognisable as PC screens but that distinction will blur in the future as hand held and mobile devices appear." Says Walley. "In 2003 there will be a billion [hand held devices]. There will be more people accessing the net through these devices than through PCs. This is not that different from Game Boy. The gaming market is bigger than Hollywood globally. So, don't recreate TV, incorporate some of the aspects of interactivity with unique compelling content." Warns Michael Comish MD of Atom Films

Content producers will have to figure out what content works best on each device. "Consumers have to perceive value. There is a privacy in terms of enjoyment that the PC offers in delivering adult content. It is a great device to enjoy that content it's one on one. You can perceive of a time, in the not too distant future, consumers will have the option to sit in their lounge and download to a set top box via DSL internet connection content straight from the content producers website but that means delivering the right type of content to the right type of device over a network that is owner operated by a TV company." Comish agrees "[content on the internet] has to be different from what you see on the TV. Television is a very good medium. If you're just regurgitating TV on the PC no-one is going to come."

Advertising Revenue

One of the first business models on the internet was revenue through advertising. However, many sites including one of the largest, Yahoo!, have seen revenue fall from hosting banner ads. Steve Rosenbaum, president and CEO of CameraPlanet based in New York explained that "When cable first rolled out there was a promise of niche channels. But, the reality is that advertisers are looking for mass audiences, millions of eyeballs gathered around the TV set. Advertisers look at the cost per 1000 viewers not in terms of the contents value." Ashe sees it another way "The internet is built for narrow casting the problem is selling narrow niches of content is difficult. Advertisers don't want to have to buy 50 million small ads. So, advertising is not the model for that. It has to be pay per view. "

But maybe there is another way Chad Richard executive producer at shockwave.com offers an alternative to banner ads "a site like ours has tens of millions of dollars in annual revenue just from banners. But, CPM's are dropping, click through rates are dropping. This is clearly not the way of the future. But, you are not going to throw away literally tens of millions of dollars. But what has been great this year especially is sponsorships. Sponsorships for us have been going through the roof." But there could be pitfalls for regulated TV - sponsorship can be a back route to product placement.

Syndication

But Michael Comish MD of Atom Films has yet another business model for content creators "The largest revenue stream for us is syndication. If you have an asset that you are able to syndicate across multiple platforms to multiple companies in multiple countries then you have a viable business model. At the same time you have to be lean and watch the costs. We are bringing in millions in revenue."

From TV to Internet

Roman Padiwy of WebFreeTV has a word of warning for those who think that the transition from TV to internet will be easy. "With streaming content we have to develop a whole new culture. The mistake in the past is that is was seen to be like TV. We have got to have a team that is trained to make internet videos. It's a completely different world."

© 2000 - 2010

More...
Successful Streaming - how to get it right.
Making streaming work - A seminar report from Sreaming Media Europe 2000.
Streaming Gets Reality Check - keynote speech by Martin Tobias of Loudeye at Streaming Media Europe 2000
Webstation: Gritted.com - how one post house launched its own Web channel.
Akamai - leading edge streamers!
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Christina Fox