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article imageOp-Ed: Why it may be worth it to pay for online video

By David Silverberg     Jun 24, 2009 in Entertainment
News Corps' chief digital officer, Jonathan Miller, recently hinted online viewers may have to pay for video content. It's not such a crazy idea, and a business model should soon emerge for the booming online video market.
Today, Americans can watch episodes of The Office, American Dad, and The Tonight Show with Conan O'Brien on Hulu. Free. In Canada, Web surfers can watch legal streams of The Daily Show with Jon Stewart on ComedyNetwork.com, and the finale of Da Kink in My Hair on Global TV's website. Also free. It almost seems too good to be true.
The honeymoon could be over. Jonathan Miller of News Corp suggested his property Hulu may switch to a fee-based model. He didn't peg a date on any kind of switch from free to fee, but there is increasing pressure for these services to finally find a business model.
Recently, Laura Martin at Media Metrics went so far as to call sites such as Hulu "anti-consumer, anti-media employees, and even anti-America." She believes Hulu puts at risk $300 billion worth of market value. Putting TV shows online is giving away your core product for gratis, she says. Investors will start to worry if entertainment executives aren't valuing their priorities.
Credit Suisse’s Spencer Wang echoes that concern, noting the fallout of posting shows online: a broadcast show earns at least 64% less online than it does on TV and a cable show about 36% less.
It only seems inevitable players such as NBC.com and Hulu will eventually come up with a business model to protect their property. Yes, they'll continue to experiment with pre-roll ads. Yes, product placement could become ubiquitous in some online-only series. But will a subscription-based model be necessary for online video ventures to survive?
First, let's see if paying for video will scare off customers. A recent survey from Bernstein Research found that of the 35% who are contemplating “cutting the cable” and watching content online only, only 28% said that cost would be the major consideration. Around 27% suggested they'd be interested because of the Web's wider selection of content.
Once again, content is king. Look at how many people visit Megavideo or YouTube to get their daily dose of TV entertainment. Look at how Huffington Post provides video recaps of last night's Colbert Report and Daily Show, almost on a daily basis. People are hungry for variety on the video channels of the Web, and it might not be so far-fetched to persuade viewers to fork over a bit of cash for unlimited access to a certain site's content.
Screenshot of Hulu.com
Hulu.com is one of the free services available to watch online television
Photo by .dq
A hypothetical scenario: Hulu.com decided to add a fee-based model to its video service. For $15 a month, viewers can watch all the Hulu content absolutely free, with only one 15-second ad per show. For $7 a month, viewers can watch 45 minutes of video a day and are subject to three 15-second ads per episode. Would you mind paying either model? Or would you hunt on YouTube for some grainy footage of the episodes Hulu wants you to pay for?
We shouldn't get all in a tizzy yet, though. The average person only watches twp minutes of Web video a day compared to 309 minutes of live TV, Bernstein Research points out. Evidently, broadband access has reached levels in the U.S. many online video watchers want. Some videos buffer until patience wears thin. But the voracious video viewer shouldn't be naive to think the broadcasters aren't brainstorming business models as we speak. TV is experimenting with the Web right now, and they will likely tinker with a pay model in order to monetize all the content they've been giving away for free.
A year ago, we heard about the idea of free emerging as a full-fledged economy. As the Wired article pointed out, "Just as Moore's law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster. Which is to say, the trend lines that determine the cost of doing business online all point the same way: to zero." It's a utopian scenario, but it won't last, especially in the online video arena. Enjoy your free primetime faves while you can.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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