Internet Video Still Faces Big Revenue Challenges

INTERNET VIDEO STILL FACES BIG REVENUE CHALLENGES
[SOURCE: Wall Street Journal, AUTHOR: Ellen Sheng ellen.sheng@dowjones.com]
Online video is getting a lot of hype these days, but it is not clear how companies will make money off such sites, a new study from Convergence Consulting finds. "As it was a decade ago, the Internet is once again being positioned as taking over the content universe ... but there are a number of cold, hard realities" that prevent broadcasters and cable networks from moving away from TV, the report states. One such reality is advertising. Online advertising rates can command high prices, but online viewership is still considerably smaller than TV. Broadcasters that put their TV shows online have seen about 5% of their TV base watching the online streams; cable networks such as MTV see about 15% of their audiences watching shows online. Given the audience size, there is no assurance of similar advertising returns from online video. The report from the Toronto-based research and consulting firm calculates that average U.S. households spend about 20 cents an hour to watch TV, but broadcasters would have to charge a lot per download in order to compensate for what they get in advertising revenue for an average TV episode. For cable networks, there is an added disincentive to move to online distribution because the networks get about half their revenue from carriage deals with cable and satellite companies. One exception -- where online distribution could work better -- is with movie studios. The report points out that selling movies online helps studios save on distribution costs of DVDs. Studios also aren't dependent on advertising the way TV broadcasters and cable networks are.
http://online.wsj.com/article/SB117505059839651390.html?mod=todays_us_marketplace
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* The Battle for the North American Couch Potato: Bundling, Internet, TV, Telephone, April 2007 Edition
http://www.convergenceonline.com/reportA.html