I just returned from Digital Hollywood 2009, and it was quite an experience. The posts in the next few days will detail some of the learnings, and some hard facts about the online industry in general.
Online video has been the news for the past few years, with companies launching just to produce and distribute online content. But, who is making money with online video? The answer may surprise you. Let’s take a look at the value-chain of online video.
1. Content creator.
With the web, there are millions of online content creators. Starting from those that upload videos of their pets to those that produce professional content. However, as almost every video content creator knows, selling advertising for online video is nearly impossible. I think this article from PaidContent summarizes the situation adequately.
2. Content publisher.
On the web, content publishers are often times content creators. With the lack of video advertising on the web, content publishers are not making any money at all. Need proof? Check out some of the video shows on the web and see how much advertising they’re selling. Often times, the video CPMs are equivalent to text-based CPMs.
3. Content host.
Content host is a broad and sweeping term for companies that hosts content. This includes CDNs and web hosting companies. CDNs are making a lot of money, because companies like YouTube and publishers like Visual Avenue have to pay for hosting services.
4. Content distributor.
A content distributor includes companies like YouTube, Blip, Viddler, etc. These companies allow publishers to host and distribute content at low or no cost. However, each of these companies have to pay a significant amount of hosting fees, and there isn’t enough revenue to cover these costs.
Taking a look at the above chain, it’s surprising to know that only content hosts are making money. Content producers have severely injured themselves by providing and giving away content for free. With very few expectations, only a handful of content producers are turning a profit. And, the above scenario not only applies to under-the-radar producers, but also applies to content creators that deliver millions of views.
