Make-or-Break Time for Online Video Players

Online video was scarcely discussed during the recent round of TV upfront presentations. But the 2009 upfront season is shaping up to be make-or-break time for the crowded lineup of pure digital video purveyors, said industry insiders, as many look to aggressively court advertisers during this traditional time of heavy video spending.

The next few weeks will be key. On June 3, Digitas will host its second annual NewFront event in New York, headlined by former U.S. Vice President and Current TV co-founder Al Gore. And on June 9 the digital content trade pub Tilzy.TV will host Onfront NYC. Both events gather a mix of original Web video producers, aggregators and networks—the Crackles, Next New Networks, Revision3s and BBEs of the world—to showcase their offerings to advertisers.

There ought to be optimism in this space as Magna Global recently forecast that spending on online video ads would surge by 32 percent in 2009 to $699 million. However, Magna and other analysts anticipate that the majority of those dollars will go toward professional TV content on the Web. “It’s a very, very tough marketplace for [independent] producers,” said Jamison Tilsner, co-founder of Tilzy.TV. “Now is crucial for them to develop a business model.” Tilsner said the fledgling market—particularly original, Web-only series—continues to be challenged by poor metrics and a lack of breakout hits, and that agencies are still adapting to buying this sort of content.

Jordan Bitterman, senior vp, media, marketing, content at Digitas, who’s organizing this week’s NewFront, agreed the market for online video hasn’t materialized as quickly as many had expected a year ago, and he wants to use the event to explore why. “We feel there is an opportunity to get a large number of clients thinking about the digital content space,” he said.
“We want to lay some context down and ask tough questions such as, ‘Why hasn’t it reached critical mass like we thought it would?’ The medium has lots of benefits that broadcast doesn’t have. But let’s face it, it hasn’t exploded.”

Bitterman said he knows full well Web video won’t steal away a huge chunk of broadcast upfront dollars. But the timing is right to capture brands when they are thinking both about content and budgets, and the plan is for the NewFront to serve as facilitator. “We are thinking about this as a marketplace, and we’re trying to match up clients with content creators… Hopefully we’ll see some packages come together.”

Jordan Levin, CEO of Generate, who will attend both events and deliver a keynote at Onfront, sees the situation as somewhat dire for many pure Web video companies. He fears that given the state of the economy, many clients will stick with TV. “In anxious times, people inevitably retreat toward security,” he said. “This will be a reminder that institutions and people are resistant to change.”

That’s why he’s approaching the events with a sense of urgency. “Nobody’s asking marketers to risk their jobs,” he argued, “but the case can be made to invest in nurturing original content now. Otherwise the segment is going to devolve into a small set of players.”

Most buyers do expect a shakeout in online video, which grew quickly and created an inventory glut. “There are too many of these companies to hold individual meetings with,” noted Margaret Clerkin, CEO, North America, MindShare Interaction. “It’s an efficiency driver to do all this in one place.”

Still, Clerkin remains particularly bullish on opportunities for brands to integrate ads within Web series from conception. “Bad economy or good economy, clients are very interested in that,” she added.

But as dozens of Web video entrants struggle to break out, what about the two biggest players in online video? Andrea Kerr Redniss, senior vp, managing director, Optimedia, said that while YouTube “is not really going after TV dollars…Hulu’s been out in full force.”

Meanwhile, despite Hulu’s recent growth and aggressiveness in the marketplace, Redniss said that its broadcast parents NBC, Fox and now ABC hardly mentioned Hulu during their upfronts. “They sort of flew over the Hulu thing,” she said. “They are excited about it and distancing themselves from it at the same time.” In fact, each network has the option to purchase back up to 20 percent of its Hulu inventory to sell, but they seldom if ever do, said Redniss.

Regardless, buyers say there is little pressure to lock up deals in online video at the moment, even for top TV content. Said Redniss: “Despite talk of tight inventory, you can always go out in the market with a few million dollars and get great video and good rates. And clients want flexibility more than anything in this market.”


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