Content Is The New Must-Have: Why Video Is Hot Right Now

Now that two-thirds of North American households are online, and broadband has reached 72.5 million US households, value has begun to shift from the business of connecting pipelines and selling products to the market for content. Home networks and cheap devices free media content from the shackles of space and time, opening up distribution, and creating the opportunity for new business models. Fasten your seat belts: The content explosion is only beginning.

New audio and video outlets are turning up everywhere. Audio content is reaching a connected audience, as evidenced by Apple's iTunes music store's more than half a billion downloads and the launch of Napster To Go.

The old-fashioned 30-minute grids of the TV networks and release structure used by movie studios are weakening as video makes the jump to the Internet, mobile phones, hand-held video games, and recently to Apple's newest iPod. In 2004, more online consumers -- 58% -- viewed Internet video than listened to streaming or downloaded audio (see figure below).

With media content flowing freely thanks to the Internet, device-makers, Internet portals, and service providers are scrambling to increase their value by acquiring original content and/or getting a piece of the distribution pie. Google and Comcast's recent interest in AOL, and rumors of Yahoo!'s competing desire for Time Warner's portal property, demonstrates the growing appeal of Internet content distribution. AOL's original content has always been a strength for the ISP veteran, helping the provider survive as many of its customers made the leap from dial-up to broadband. With a wealth of content from Time Warner library, AOL could provide Comcast, Google, or Yahoo! with a strong beachhead for Internet distribution. Despite growing content offerings, Comcast.net and other ISP-proprietary portals fail to attract more than 11% of their subscribers to their sites.

As video content breaks free from the constraints of space and time, executives should take some lessons from the music industry. Content executives who are looking at the risks and opportunities of online video distribution should take note:

• TV networks, movie studios, and cable and satellite operators will need to jettison the notion that revenue should derive from a single source, and embrace alternative ways of thinking about making money from video.

• To make alternative video distribution profitable, content producers should begin to focus on the small(er) screen and the creation of unique content that consumers will pay for to use on their mobile phones or iPods.

• Internet video -- with its ad-supported model -- will increase in quantity and improve in quality. Some of the currently free content will make the leap to fee-based offerings as the video iPod and similar devices prove their worth to content owners and consumers.

• Consumers will begin their own video explosion of video podcasts that will let them be seen AND heard, some with hopes of recognition that would mirror the mainstream success of Internet-goofball-turned-MTV-star Andy Milonakis.

• Traditional TV advertisers will be forced to find new ways to market their wares in portable video: Look out for sponsorships, product-placement, and long form showcase-style ads to become more prevalent.

Research Referenced In This Issue Apple Breaks The Digital Music Logjam (16769) Apple Kick-Starts A Legal Video Download Market (38054) Brightcove Will Fuel An Internet Video Explosion (38033) Broadband ISPs: Get Over Your Fear Of Tiers (33057) Consumers Embrace Wireless Internet Access (37787) Getting Real About Podcasting (37473) Google Splinters The ISP-Portal Connection (36599) How AOL Can Thrive On Broadband (16013) How Youth Communicate (37052) In-Game Advertising Has Arrived (37987) Laptops And Home Networks Transform Behavior (37046) More Consumers Pay For Online Content (36200) Music Lessons: Is Your Industry At Risk? (36036) Napster Launches Subscription Music To Go (36371) New Products Will Lead AOL's Strategy (33152) The Business Of Video Games (37518) The Real Potential Of Internet Video (37606) The Right Model For Mobile TV (36989) The State Of Consumers And Technology: Benchmark 2005 (36987)    US eCommerce: 2005 To 2010 (37626) What Next For TV Advertising? (35120)

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