Online video is very young in the big scheme of things, which means it’s a business still finding its way in the world. Revenue is a topic only now starting to be seriously debated. Will free services with ads win out or will we eventually be charged for content?
Early Days Experimentation
Despite now being a few years old, the online video sector is still in its infancy, especially in terms of premium content provided by the traditional TV networks. But these companies face a problem – making money from the venture. They aren’t in it for any other reason than profit and where that profit comes from is a huge dilemma.
There’s a feeling at the moment that the big American television networks are really only experimenting with online video. They know there’s a demand there, one that’s growing as quickly as Broadband speeds increase, and they don’t want to miss out on being a part of what will likely take over from traditional TV one day.
Free Ads Or Paid For?
However, the experiment will only continue if these companies can figure out a way of making money from having their shows available to watch online. If it’s unprofitable then no matter what the demand is, most will likely cease to provide for it.
There are currently two options open to the providers of premium content: a free service supported by advertising, or a paid-for service with either a one-off fee, a monthly fee, or a per-item charge. In the States both Hulu and CBS currently operate a free, ad-supported model, as does the BBC iPlayer and similar services right across the Web.
CBS Vs. Hulu
The approaches to advertising are very different across the sector. As Business Week reports, Hulu and CBS are both trying to find the right strategy to achieve profitability without annoying viewers too much.
CBS is taking a similar approach to the one it uses on traditional TV, inserting as many adverts and advertising breaks as viewers will put up with before switching off. The network is apparently using infrared beams fired into testers eyes which can detect when each individual zones out from being bombarded with too much advertising.
Hulu, meanwhile, is taking a different approach, aiming to show fewer ads than traditional TV but charging advertisers more per slot in order to turn a profit. Execs use Twitter to gage whether its strategy is being welcomed or not, reading Tweets for an indication of viewer annoyance.
There’s no guarantee either of these strategies will work because finding that line between making money from advertising without bombarding viewers so much they turn off is obviously a tricky task. If advertising-based models fail then in the same way online newspapers are starting to talk about keeping content behind a pay wall, then so will TV networks and content creators. Needs must.
If that happens then the number of viewers using online video sources such as Hulu and the CBS Web site is likely to drop massively, so timing is probably key. At this relatively early stage of proceedings the networks have a chance to form the relationship they want with their viewers. If they push things too much, either by going over the top on advertising or charging for content then I fear a viewer backlash.
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