The major US broadcasters are evolving into multi-platform TV distribution networks in a "land-grab" attempt to replicate their traditional channels business online.
So much so that the online web-based TV services of the four major US TV networks – together with Hulu, the joint venture between NBC Universal, News Corporation and Disney – accounted for 53 per cent of an ad-supported US online TV market, according to a report from Screen Digest.
The online TV market generated USD $448m in revenues in 2008.
The remaining share of revenues was made up of the online video services of major sports leagues, video services from traditional online portals, and direct services from other major channel groups and content owners.
The report goes on to state that the combined dominance of the leading broadcaster-supported platforms – ABC Full Episode Player, CBS Audience Network, NBC.com and Fox.com – will drive the total ad-supported model for the distribution of online entertainment programming, news, sports and events in the US to more than USD $1.45bn in revenues by 2013.
In contrast, third party platforms such as YouTube, Joost and other portals, which have no direct vertical affiliation with major rights holders, nor direct access to premium content rights, will struggle to aggregate ad-supported movies and TV shows.
The Hollywood Studios and major rights holders will continue to limit such deals, instead preferring to build their own syndicated ad-supported online video services – such as Crackle, developed by Sony Pictures, and the CBS Audience Network.
The report said this is a trend that will gather momentum. As a result, third party ad-supported video platforms may have to:
- diversify into new forms of their own original programming
- exit the content aggregation business and offer technology and advertising solutions to the content-owners’ and broadcasters’ own services
- settle on the low-margin business of becoming affiliates of the player-platforms distributed by the content rights holders themselves
According to Arash Amel, author of the report: "With better targeting and increased ad inventory, online TV services could be generating per-viewer revenues comparable to an average TV broadcast viewing in as little as three years.
"However, based on the current online ad strategies implemented, it will account for 2.2 per cent of all US TV advertising revenue by 2013, but definitely won’t be generating enough to offset the USD $2bn we expect total US TV advertising to have declined by during in that period."
Amel said the challenge now is to maximize the ad-supported online video business model, see how new forms of short form and traditional long form content can drive growth, and explore more advanced methods of video advertising while there are still revenues from the traditional business to support the transition to multiplatform.
He said that in this regard, the next few years will be critical.