“The money’s still in TV” says Kai Hsing from the internet entertainment brand College Humor. Hungry Beast’s Dan Ilic embedded himself with three American online entertainment companies to discover the digital realm sure are giving old media a run for its depleted money.
For those who have invested in creating inane video blogs, the news is good – people are starting to take you seriously. 2011 is the year the web video entertainment industry has hit its straps, both Netflix and YouTube announced one hundred million dollars of investment into original online content. Australia’s number one video blogger – Natalie Tran – has replaced SBS as the national multicultural broadcaster and is edging close to a million subscribers. And although The “Beached As” crew, moved their whale to the wading pool of TV in 2008, they’re now heading back to the ocean of the Internet to foster new creations. All the while small groups of web entertainers are banding together to focus on a myriad of financial models to make web video entertainment sustainable. Last year I spent some time lurking around the offices of a few of the bigger names in web entertainment to find that their success is dependent on not really knowing what they’re doing.
A New Type of Business Model
A pioneer of original web video content, online portal Heavy (launched in 2000) began aggregating and producing rich web series on limited resources. Ten years on, (twenty in internet years) Heavy is still around, and the founder and CEO Simon Assaad has been there every step of the way. But now in a market flushed with both amateur and professional content, this company has had to restructure the way they do things three times. “We’ve gone from a content business, to a social business, to a video serving business, and then back again to content – we were always content guys at heart” Assaad explained. These days, with very little advertising dollars in the market, the entire site has gone from a propriety database, to be rebuilt entirely using off the shelf tech. Their CMS is WordPress and video is served up on a YouTube platform rather than the very expensive but ubiquitous Akamai.
Heavy has had quite a lot of success with branded content, and has paired up with a niche sporting brand to deliver unique behind the scenes coverage and commentary of the ultimate fighting championships – a 2nd tier mixed martial arts sport. For Assaad, playing to these niche markets is incredibly attractive for advertisers – because the demographic is loyal and is well defined. “It’ll get to a point one day where we’ll be just as competitive for eyeballs as a TV network,” Says Assaad.
All of this makes for a super lean and profitable business – an achievement for a company that has been around just six years longer than YouTube.
“I will note that video web content is still incredibly hard to make money on, to be frank you’re better off with pictures and articles,” says Kai Hsing from College Humor. According to Hsing, the focus right now is on how the socially connected audience works, and how to best leverage that connected audience.
“We want to able to understand your connections to other people and how your social circle works. Thus the challenge is for us is to find like-minded people to drive new audience discovery as well as gaining information on how tastes are evolving and changing to create new content.” Both Heavy and College Humor have an extensive range of content other than video. College Humor however has taken to upping the production values of their originals series so it looks just as good as anything being produced for TV. Hsing believes that value will come back to the company later on down the line.
“The greatest challenge online is getting noticed. That’s why we’re focusing on higher quality programming. This means we have the ability to be known as program creators which can pave the way for larger integrated deals with TV. It also gives us a brand name which we can subsequently leverage in other areas” – something the youth comedy site already does. College Humor first became cash flow positive after starting a side merchandise business called Busted Tees; the number one destination for joke-based t-shirts.
The fact that Apple and Google plan to release mass market IPTV boxes this year, indicated that online TV content has truly hit puberty. “We clocked up one billion views this year, and now we’re averaging 150 million views a month,” said Vanessa Pappas, Vice President of Audience and Strategic Partnership at Next New Networks. “With numbers like that you can’t afford to ignore us.” Specialising in short-form, quick turnaround video programming, Next New Networks have a similar model to a traditional media organisation. “We find talented producers who are already doing amazing content on their own, and invite them to be part of our family,” Pappas said. If you’re a digital native you may not have heard of Next New Networks but you’d know some of their online properties – like Barely Political’s Obama Girl, or perhaps you have even sung along with Key of Awesome or Auto Tune the News’ “Bed Intruder Song”.
“The biggest trend at the moment is the cult of personality,” Pappas said. “Take a look at the top YouTube video creators – they’re all personality driven. Many of them have five different channels; they’re beginning to turn themselves into their own mini networks, spinning off their own little franchises. Once you find the thing that works you’ve just got to do it over and over again. Rinse and repeat.” It’s been so successful that in March this year, Next New Networks was bought out by Google, and is being rebranded as YouTube Next.
Unlike Heavy.com, College Humor and Next New Networks are more dependent on the video giant YouTube for their audience and for Next New Networks in particular it’s the main distribution channel. “Early on we said we’re not going to drive traffic to our sites, there’s no real reason. YouTube is such a beast and we can get out to a larger number of people,” said Pappas. For YouTube it also makes sense to partner with professional content creators too, as Kai Hsing explains. “They want to partner with higher profile producers and brands to make YouTube more premium. The exact execution changes constantly as they have not figured anything out, either.”
Next New Network’s founder and former boss Fred Seibert considered himself at the cutting edge of new media 30 years ago when “New Media” meant cable – so when it comes to grappling with YouTube, Fred’s been there before.
“The first time we walked in [to YouTube] to launch an original series, we said ‘we’re going to launch this animation every Thursday at noon.’ And someone very high up there said ‘Why?’ I said ‘Why what? Why Thursday or why noon?’ He said, ‘Why either? What difference does it make? It’s YouTube, just put it up anytime you want.’ I said, ‘Well, you know maybe we’re a little old fashioned, maybe we’re too tied to TV ways of thinking, but we think that human beings like dependability, and even though they don’t have to find it at that particular time, they know a schedule exists, somehow or other their internal clocks work that way.’ They just rolled their eyes and laughed and said ‘Good, do whatever you want.’ So 100 million views later they were like, ‘oooh, tell us what you guys know’. Interestingly, within YouTube there is a religious war between the algorithmics vs the traditionalists
and I think that tension has helped YouTube dramatically, because they bring in two radically different points of view and have figured out a way to meld them together.”
The Eyes Have It
It’s this blend of aggressive and disruptive thinking on and around a brand new distribution platform that turns courageous business ideas into leaders in their field. Companies who work in the digital space have a strong knowledge of just how good their competitors really are (hence YouTube’s acquisition of Next New) but still – the dinosaurs of traditional media are, as Lawrence Lessig puts it, ‘Addicted to Incumbency’ – which in a way is blatant denialism. It’s kind of like adding an extension to your house while it’s burning down.
Seibert is in a unique position and is pragmatic in his approach to how media dinosaurs see his business. “People who are successful in traditional media, have trouble adapting the things that make them work in traditional media, they don’t necessarily transfer over. People that work in traditional media think that they already have succeeded – they think that they have the secrets.”
And it’s especially so with advertisers, says Seibert. “There’s a generation gap between video digital media and advertisers. Advertisers are acknowledging that the future is coming, but they’re trying very hard to make the future act just like the past, so they’re comfortable with it.”
After spending six months in New York City hanging out at digital companies trying to glean any insider secrets, the number one thing I learnt is that “the experts” in new media, are just making it up as they go along – which is ruffling more than a few feathers within traditional media. So this means it’s a really exciting time if you’re in your lounge room making whale videos, riffing on the week’s news, or making referential jokes about google maps – because the competition that claims to be professional has as much clue as you.
While it’s still working its way through puberty, web video entertainment is only a few short years off from being a better looking, young, fitter, and more attractive television that everyone will ogle over… and when that happens, the ad dollars will go where they always go, to where everyone is looking.
Dan Ilic is a writer, performer, comedian and filmmaker. He is a presenter on ABC-TV’s Hungry Beast and in his spare time runs Downwind Media, an agency for digital entertainment that bridges the divide between advertising and entertainment online.