The largest advertising platform in the world
Internet TV: In the U.S., companies are upgrading their web TV offerings. But even at Google, no one knows whether YouTube can actually turn a profit.
Internet TV: In the U.S., companies are upgrading their web TV offerings. But even at Google, no one knows whether YouTube can actually turn a profit.
There’s only one thing on the minds of professionals in the American media industry right now: Internet TV. Online video—as the category is also known—is one of the fastest-growing forms of advertising. In January, the unregulated file-sharing site YouTube recorded by far the most visitors of any video provider, with a market share of 43 percent. The major players therefore have little to offer in response to the phenomenal popularity of Google’s acquisition. Even the community site MySpace, which belongs to News Corporation, seemed far behind in second place with a meager 16 percent, not to mention Google Video and AOL Video with 11 and 7 percent, respectively. Although many providers do not make it into the top ten in terms of numbers—such as Apple TV with its video download service on iTunes—the traditional media companies that produce the content must gradually come up with new strategies so they can compete with the tech giants in the online market.
The project generating the most buzz is the one from NBC Universal and News Corporation, which have now announced the launch of a competing website for online videos. Although it doesn’t have a name yet, it’s said to be more professionally designed than YouTube, where countless amateur videographers are active. But that’s not all: MySpace is also set to launch a sister site, tentatively named MySpace-TV, where users can download content they can’t see anywhere else. «There’s certainly a need for more YouTubes,» believes Eli Noam, a professor of media economics at Columbia University in New York. «The social networking aspect also remains cool and trendy.»
Media Companies Want to Secure Their Share of the Pie Although advertisers are currently allocating only a fraction of their budgets to online video advertising, media companies want to establish themselves as advertising partners early on. Of course, it remains to be seen which Internet TV sites will ultimately be financially viable. After all, it’s still unclear how even YouTube is supposed to turn a profit. «We bought YouTube because of its community aspect,» Google CEO Eric Schmidt said recently. «Ubiquity comes before revenue.» Efforts so far to place ads before the videos have made only slow progress because advertising professionals consider the quality of YouTube videos to be too low.
In contrast, the NBC/NewsCorp project—which doesn’t even have a name yet—already has high-profile advertisers like General Motors and Intel on board. After all, according to NewsCorp COO Peter Chernin, the whole thing is set to become «the world’s largest advertising platform.» It’s clear that the business model of the future for Internet TV is still a long way off. «Media companies are facing financial difficulties because viewer segments are becoming increasingly fragmented. But marketing costs are rising to promote these offerings,» says media professor Noam. «At the same time, however, people are consuming more and more media content, and the number of content providers will consolidate.»
(Almost) everyone is collaborating with everyone else. NBC and Fox aim to distribute their content as widely as possible. To that end, the two networks have entered into distribution agreements with AOL, Yahoo, and MSN, which in turn will also make the corresponding programs available on demand in order to attract as many online viewers as possible. «One of the cornerstones of traditional media has always been limited distribution of content and the attempt to draw viewers to their own media platforms,» says William Richmond, president of the Internet consulting firm Broadband Directions. «Online syndicates capitalize on the Internet’s greatest advantage: attracting as many customers as possible across as many online platforms as possible.»
Competitors ABC and CBS are also eyeing something similar; although they have been courted by NBC and Fox to join their new project, they have so far remained cautious to see where the trend is headed. Nevertheless, CBS content is available not only on its own websites but also via Yahoo and Google. Apple’s iTunes service partners with ABC, NBC, and MTV, among others. The former online bookseller Amazon.com has also launched a video service through which users can purchase individual TV programs. «Even though the networks will face a lot of competition, their content will be available everywhere,» says Michael Sprague, president of the Internet TV company WaveExpress. «Whether that happens on community sites, through Internet service providers, on their own websites, or on iTunes doesn’t matter.»
IPTV is also constantly upgrading. Things are currently a bit more organized among IPTV providers—who distribute content via a high-speed fiber-optic network—even though they are still in their infancy. Unlike the offerings from Yahoo or AOL Video, these systems are closed and require a subscription fee. Although consumers have fewer control options, the video quality is better. IPTV has an advantage over traditional television in that the measurement methodology will be far more precise than before, which in turn benefits advertisers.
The two main players in the U.S. IPTV market are currently the telecommunications companies AT&T and Verizon. While the broadband capacity of AT&T's service, called U-Verse, is considered too outdated to download large-file movies over the Internet, Verizon Fios is regarded as more advanced.
Fios offers a total of 350 TV channels, 22 of which are in HDTV, as well as an extensive library of video-on-demand movies. The service is already available in 200 cities and 5 states and currently has 202,000 subscribers. So far, Fios’s programming lineup still largely resembles that of established cable providers.
But with the next-generation Fios TV, customers will also be able to view Internet content on their TV screens, and Fios will offer search functions for online videos. «The integrated search functions will make it possible to search among hundreds of TV channels and thousands of web videos,» says Verizon’s chief marketing officer, Bob Ingalls. «That will leave cable providers in the dust.»
Gerti Schön, New York
United States: Internet TV (Selection)
Internet TV
Google: Google Video, YouTube
Apple: Apple TV/iTunes
Yahoo TV
AOL: AOL Video, In2TV
MSN TV
Newscorp: MySpace Video, N.N. (in cooperation with NBC)
Broadcaster Websites
Disney: ABC.com, ESPN.com, and others.
Viacom: CBS.com, Vspot (VH1), MTV Overdrive, Turbonick (Nickelodeon), and others.
NBC Universal: NBC.com, SciFi.com, and others.
News Corp: Fox.com, Foxnews.com, and others.
IPTV
Verizon Fios
AT&T U-Verse
There’s only one thing on the minds of professionals in the American media industry right now: Internet TV. Online video—as the category is also known—is one of the fastest-growing forms of advertising. In January, the unregulated file-sharing site YouTube recorded by far the most visitors of any video provider, with a market share of 43 percent. The major players therefore have little to offer in response to the phenomenal popularity of Google’s acquisition. Even the community site MySpace, which belongs to News Corporation, seemed far behind in second place with a meager 16 percent, not to mention Google Video and AOL Video with 11 and 7 percent, respectively. Although many providers do not make it into the top ten in terms of numbers—such as Apple TV with its video download service on iTunes—the traditional media companies that produce the content must gradually come up with new strategies so they can compete with the tech giants in the online market.
The project generating the most buzz is the one from NBC Universal and News Corporation, which have now announced the launch of a competing website for online videos. Although it doesn’t have a name yet, it’s said to be more professionally designed than YouTube, where countless amateur videographers are active. But that’s not all: MySpace is also set to launch a sister site, tentatively named MySpace-TV, where users can download content they can’t see anywhere else. «There’s certainly a need for more YouTubes,» believes Eli Noam, a professor of media economics at Columbia University in New York. «The social networking aspect also remains cool and trendy.»
Media Companies Want to Secure Their Share of the Pie Although advertisers are currently allocating only a fraction of their budgets to online video advertising, media companies want to establish themselves as advertising partners early on. Of course, it remains to be seen which Internet TV sites will ultimately be financially viable. After all, it’s still unclear how even YouTube is supposed to turn a profit. «We bought YouTube because of its community aspect,» Google CEO Eric Schmidt said recently. «Ubiquity comes before revenue.» Efforts so far to place ads before the videos have made only slow progress because advertising professionals consider the quality of YouTube videos to be too low.
In contrast, the NBC/NewsCorp project—which doesn’t even have a name yet—already has high-profile advertisers like General Motors and Intel on board. After all, according to NewsCorp COO Peter Chernin, the whole thing is set to become «the world’s largest advertising platform.» It’s clear that the business model of the future for Internet TV is still a long way off. «Media companies are facing financial difficulties because viewer segments are becoming increasingly fragmented. But marketing costs are rising to promote these offerings,» says media professor Noam. «At the same time, however, people are consuming more and more media content, and the number of content providers will consolidate.»
(Almost) everyone is collaborating with everyone else. NBC and Fox aim to distribute their content as widely as possible. To that end, the two networks have entered into distribution agreements with AOL, Yahoo, and MSN, which in turn will also make the corresponding programs available on demand in order to attract as many online viewers as possible. «One of the cornerstones of traditional media has always been limited distribution of content and the attempt to draw viewers to their own media platforms,» says William Richmond, president of the Internet consulting firm Broadband Directions. «Online syndicates capitalize on the Internet’s greatest advantage: attracting as many customers as possible across as many online platforms as possible.»
Competitors ABC and CBS are also eyeing something similar; although they have been courted by NBC and Fox to join their new project, they have so far remained cautious to see where the trend is headed. Nevertheless, CBS content is available not only on its own websites but also via Yahoo and Google. Apple’s iTunes service partners with ABC, NBC, and MTV, among others. The former online bookseller Amazon.com has also launched a video service through which users can purchase individual TV programs. «Even though the networks will face a lot of competition, their content will be available everywhere,» says Michael Sprague, president of the Internet TV company WaveExpress. «Whether that happens on community sites, through Internet service providers, on their own websites, or on iTunes doesn’t matter.»
IPTV is also constantly upgrading. Things are currently a bit more organized among IPTV providers—who distribute content via a high-speed fiber-optic network—even though they are still in their infancy. Unlike the offerings from Yahoo or AOL Video, these systems are closed and require a subscription fee. Although consumers have fewer control options, the video quality is better. IPTV has an advantage over traditional television in that the measurement methodology will be far more precise than before, which in turn benefits advertisers.
The two main players in the U.S. IPTV market are currently the telecommunications companies AT&T and Verizon. While the broadband capacity of AT&T's service, called U-Verse, is considered too outdated to download large-file movies over the Internet, Verizon Fios is regarded as more advanced.
Fios offers a total of 350 TV channels, 22 of which are in HDTV, as well as an extensive library of video-on-demand movies. The service is already available in 200 cities and 5 states and currently has 202,000 subscribers. So far, Fios’s programming lineup still largely resembles that of established cable providers.
But with the next-generation Fios TV, customers will also be able to view Internet content on their TV screens, and Fios will offer search functions for online videos. «The integrated search functions will make it possible to search among hundreds of TV channels and thousands of web videos,» says Verizon’s chief marketing officer, Bob Ingalls. «That will leave cable providers in the dust.»
Gerti Schön, New York
United States: Internet TV (Selection)
Internet TV
Google: Google Video, YouTube
Apple: Apple TV/iTunes
Yahoo TV
AOL: AOL Video, In2TV
MSN TV
Newscorp: MySpace Video, N.N. (in cooperation with NBC)
Broadcaster Websites
Disney: ABC.com, ESPN.com, and others.
Viacom: CBS.com, Vspot (VH1), MTV Overdrive, Turbonick (Nickelodeon), and others.
NBC Universal: NBC.com, SciFi.com, and others.
News Corp: Fox.com, Foxnews.com, and others.
IPTV
Verizon Fios
AT&T U-Verse
