Secondly, the rates that networks can charge for the ads wrapped around videos (usually appearing before a video clip) are high. Tillinghast says MSNBC charges a CPM (cost per thousand views, the standard measurement of non-keyword online advertising) of around $35-40 for the ads it serves around its videos.
This rate is “in line with other video ads,” according to an analyst at Jupiter Research; but it is quite a bit higher than, say, banner ads, which may command only $3-5 per thousand viewers. (Keyword-based advertisements, such as those served up by Google alongside its search results, operate on a “click-through” model and aren’t really comparable.)
So repurposing network content and selling lucrative new ads around it should be a no-brainer business decision for the networks – free video drives traffic, traffic drives advertising revenue, and video ad rates are among the highest online.
From the other side of the screen, the increasing adoption by consumers of broadband connections makes this explosion in Internet video content possible. It was only a year ago that broadband penetration in the United States crossed the 50-percent threshold, according to Nielsen/NetRatings.
These faster connections, coupled with the increased sales of digital cameras that capture video and companies’ willingness to provide video content, has made video one of the fastest-growing media online. Research firm IDC predicts that by 2009, 591 million gigabytes of video content will be available online.
Most free video available from television networks online is in streaming format, using Windows Media Player or Real Networks’ RealPlayer. This makes sense because of the short shelf-life for most episodic, time-sensitive fare, such as nightly newscasts and topical humor programs.
As evidenced by the Apple/ABC video announcement, though, companies are also experimenting with making some of their less time-dependent content available for permanent downloading at a cost.
Of course, any time customers migrate from one medium to another, there’s the risk that businesses will cannibalize their own time-tested revenue streams. Online ad rates at $40 per thousand views may be good on the Web – but they pale compared with the six-figure sums commanded by networks for 30-second ads.
Many TV executives see the shift as inevitable, though, and also don’t view the change as a zero-sum game. Says MSNBC’s Tillinghast: “Offering the newscasts online is accretive, not cannibalistic.”