The Video Market—Hot or Not in 2009?

At recent video industry events, optimism filled the talks of virtually every speaker, from content generators, to service providers and even extending to the normally staid world of venture capitalists.

A theory is the online video market is *so* ready for prime time that no economic turmoil or consumer malaise can stop it, even if progress may slow. To turn this on a cynical head, perhaps it is true that so much money and hope has been invested, and so few other emerging markets exist with such promise, that the market really must happen to maintain the momentum.

No matter where the level of optimism deserves to be pegged, a few very interesting facts have emerged as we exit 2008. A few key observations include:

Old media and new media fans are beginning to agree that online video does not cannibalize broadcast video in any way, and in fact, evidence is mounting that MORE eyeballs are heading to broadcast if online media promotes it. As seen in the Beijing Olympics, online highlight reels and special interest stories actually created more interest in broadcast content. One way to think of online video is as a channel for syndication. Just like TV syndication increases the longevity of a show, it also increases viewers by making content available at different times and through more sources. Online video, therefore, is just a syndication method, allowing a much broader reach. Of course, figuring out how to monetize that broader reach is still a major issue. In the long run, it’s clear that eyeballs, and dollars, will shift away from traditional broadcast services to new services, and among one new service to the next.

Once upon a time, at least 10 months ago, the market was convinced that online video was all about short clips and specialized online content. Long form TV shows and movies would have no consumer acceptance. What a difference a year makes! With the availability of premium, quality long-form content, acceptance (at least among younger demographics) for PC video watching, and technologies that fling PC content to a TV, long form, mass market content is where the eyeballs are trending. Yes, YouTube is still quite popular—for user generated, short form content—but consumers are keen to pay for quality, longer viewing experiences. (As an aside, video for mobile devices is still a market where short form content—user generated or paid premium—still have a strong play). Again, this is another market where monetization models are being explored.
A big problem exists with the proliferation of content sources and content digesting/viewing devices. While there are popular formats for content, there are no standards, per se. Consumers are already overloaded with the number of formats, and could go for broke having to buy multiple devices to get and play back content. To date, some of the devices have been successful, like the Netflix-Roku box, but the content is limited to what Netflix has available for download. It seems the proliferation of sources and devices will continue (an opportunity for revenue), but the market will have to rationalize if truly widespread consumer acceptance will occur. While I have many ideas about how the future needs to involve in this space, that complication topic will be addressed later. In the meantime, keep your eyes on Apple, Sony, Netflix, Google, Nintendo, Yahoo, and Microsoft, among others!

Money abounds in the online video market. Big names, like the CSI TV show franchise, are investing in new and innovative online content, trying to use online presence to enrich the broadcast experience—without cannibalizing their broadcast efforts, since that’s where the proven dollars are today. Venture capitalists are actively engaging this market, too. While valuations are smaller and money is harder to get, venture capitalists are still hunting for new companies. Clearly, to them, they want people with unique ideas and first mover advantage; no longer can the me too, and me three, get money. The online video market fascinates the VCs because revenue models around content and advertising online are completely uncertain. Yes, this means risk, but it also means incredible potential upside. (To watch an enthusiastic VC panel from NewTeeVee Live conference, click on the following link)

As we head into 2009, the online video market certainly provides much intrigue-and much hope-and I look forward to telling you more in the coming months.