Online video could look more like TV programming

Online video could look more like TV programming, with venture, ad dollars paving the way of new media

By Constance Loizos
Mercury News

YouTube built a powerful Web presence by hosting clips of everything from skateboarding bulldogs to high school class presidential candidates. Its sale to Google last month for $1.65 billion marked a key milestone in the development of video on the Web.

And YouTube, experts say, is just the beginning, although not necessarily the model for the future. Despite the popularity of its user-generated videos, entrepreneurs, venture capitalists and traditional media heavyweights say online video is heading into a new age, one that resembles TV programming. Think glossy production values. Think big-name stars. Think channels.

Major advertisers will be the biggest drivers behind the change. “They still want to know that programs reflect the particular values of their product; you largely can't get that right now at a YouTube,'' said entertainment analyst Todd Chanko of JupiterResearch. One measure of their reluctance? Advertising across the Internet last year was $12.5 billion, according to the Internet Advertising Bureau. That number was up 30 percent over 2004, but a far cry from the $61 billion spent on TV advertising last year.

Basic economics are also changing the landscape. Jason Pressman, a venture capitalist at Shasta Ventures on Sand Hill Road, said he's seeing “a huge move toward higher-end content because cheaper bandwidth and tools are making it more affordable to produce and distribute quality programming online.''

Finally, traditional media is jumping into the game for fear it will otherwise be left in the dust, bringing its sensibilities and programming ideas to the Web.

It isn't clear how fast online video will grow up, or which efforts will pan out. And not everyone agrees with how sweeping the changes will be.

Josh Bernoff, vice president of Forrester Research, said, “I don't think it would be accurate to say that there's a shift strictly to more quality video. Rather, I think there's plenty of room for top-of-the-pyramid programming online and YouTube and lots of stuff in between.''

But plenty of start-ups are vying to become the best next-generation company, and investors are lining up to find and fund them.

“I now spend about 60 percent of my time'' looking at video-related start-ups, said investor Mike Maples, who manages a $15 million microfund.

Venture capitalist Jim Breyer of Palo Alto-based Accel Partners, which has already made a number of bets on online video, is also focused on finding breakout video models. “Two years ago, I spent 20 percent of my time on the space. Today, I'd say I spend at least a third to a half of my time.''

Some of the investing centers on video “networks,'' such as Los Angeles-based RipeTV, which raised $32 million in funding in October from traditional media companies like Time Warner as well as VC firms. The company's 11 advertising-supported, short-program shows cater to young males who want to watch sports, music and bikini-clad women. (One show is titled “Perfect 10.'')

The 3-year-old company isn't disclosing its financials, but said that it attracts 3.5 million unique viewers monthly, and its advertising customers, including Target and Cingular, pay the company 15 to 20 cents every time someone clicks on one of their ads.

Another start-up, Denver-based ManiaTV, is perhaps an even clearer example of old TV meeting new. The 2-year-old company recently signed up celebrity comic Tom Green, who now hosts a live show on the network five nights a week.

According to Drew Massey, its 35-year-old CEO, ManiaTV, which attracts 3 million visitors monthly, is also developing a show with Jason “Wee Man'' Acuna, best known for his work in “Jackass: The Movie'' and “Jackass: Number Two.'' ManiaTV, which also features user-generated content, has raised $16.6 million from investors so far, though Massey hints that it may raise more. “We've spent a lot on our technology,'' he said. Its advertisers include Cingular and General Motors.

Then there's Revision3 in San Francisco. An Internet television network launched last summer, it produces its own content with some financial help from angel investors like Maples, Ron Conway and Marc Andreessen, who recently gave the company a combined $900,000. Its founders, who also run the news aggregation site Digg, have overseen the creation of 11 shows so far that vary in length from 15 minutes to an hour and include a science show and a cooking show for people who don't cook.

“I invested as soon as I was invited to,'' Maples said of the company. “I would have liked a bigger piece of Revision3. It costs nothing to create these shows. They can just roll out a new program, and if no one likes it, they can try another.''

Broadcast and cable companies have also begun to take an active interest in how online video evolves, hoping to avoid the mistakes of the music labels, which were notoriously slow in adopting as the Internet changed their business.

Among the efforts is an online marketplace called NBBC, for National Broadband Company, recently introduced by NBC. Its plan: to marry online content producers, from to CNet to broadcast competitor CBS, with sites interested in showing their videos — splitting any related advertising revenue three ways.

Turner Broadcasting also plans to launch a new advertising-supported online channel in January. Called Super Deluxe, it will feature original Web-specific stand-up and sketch comedy by veteran performers and unknown talent.

And Fox Interactive CEO Ross Levinsohn said that the News Corp. unit is moving into a new phase of Web video. “I don't want to announce anything until we've locked up what we want to do,'' he said. “But we may create derivatives of our core (TV and movie) programming and we may do some original programming.''

With so many people rushing into this field — from amateur producers to seasoned media veterans — some entrepreneurs and investors are creating companies to help them out.

Two start-ups looking to extend a hand are Brightcove and Maven Networks in Cambridge, Mass. Maven Networks creates video channels for customers and sets up ad campaigns for them, getting paid whenever someone clicks on a video. CBS's College Sports Television uses Maven's service; so does NBBC.

Brightcove, meanwhile, aims to get video producers online, get them distributed across the Web and get them advertisers through a complex marketplace that it has developed over the last two years — all in exchange for 50 percent of the advertising revenue they attract. It, too, is working with traditional media companies, including Warner Music Group, which has turned to Brightcove to expand online access to its music videos, artist interviews and live performances.

Brightcove is also targeting what its CEO, Jeremy Allaire, calls the “30,000 independent production companies in the U.S. that have been packaging and selling their shows to TV networks and are now saying, `Wait a minute. We can do this ourselves, online.' ''

YuMe Networks, in Fremont, is another new start-up, and though it isn't yet discussing details about its online advertising delivery business, it offers some intriguing hints. “There needs to be an organized way to classify video online,'' said CEO Jayant Kadambi. “Until there is, TV (advertisers) who are afraid of bad content vs. good content won't come online as fast as everyone thinks they will. That's the problem we're trying to solve.''

JupiterResearch's Chanko's echoes Kadambi's view on the pace of these changes. “I do think YouTube will become less a place for people to set their pants on fire, and more a place for traditional content providers to place much more content, but it will happen over a couple of years. Despite what everyone in Silicon Valley likes to think, it's not in advertisers' interest to abandon broadcast and cable networks. That's still where the money is.'

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