User-generated blues
Remember when user-generated content was all the buzz? It still is in the social networking space. Facebook is nearly 100% user-generated content, but where’s the business model?
Facebook is top dog in social networking, but it’s number one among the most fickle user base. Not too long ago all your Facebook friends were on MySpace. Should Facebook irritate users further with another UI change or more ads, its users will go elsewhere.
In 2005 Rupert Murdoch surmised that MySpace had achieved permanent dominance in its segment due to Metcalfe’s Law, and promptly shelled out $580 million for the soon-to-be-number-two social networking site. Apparently Murdoch failed to factor zero switching costs into his network valuation model.
But this isn’t about MySpace or Facebook. It’s about user-generated video content. In another blow to the Long Tail [see previous post], both AOL and Brightcove have announced their free video publishing services will go dark in mid-December. From Brightcove’s announcement:
Although more than 40,000 publishers have signed up for the Network, it represents less than 1% of our revenue. Our core business, the Brightcove platform, has been extremely successful for us and for our customers. So we’ve decided to focus 100% of our business efforts on the Brightcove platform, which customers pay us to use.
That’s not much revenue, but a good amount of storage and bandwidth. Brightcove is a distribution platform, so it makes sense to move unprofitable content off the system. AOL is in a much different position. Liz Gannes gives a good analysis over at NewTeevee.
If you’re truly pushing your overall platform as a default, there should be a way for users to post videos without leaving to log in somewhere else. But it’s also an ominous sign that simply hosting a few user videos is a significant enough diversion of resources to be considered worth cutting. The cost of running a video service is pretty high, regardless of how cheap everything is getting.
Video differs from other types of UGC. Watching video online requires greater audience commitment than text, still images, and even audio. Having reasonably short, clearly rated, and easily searchable content all in one place are the table stakes. YouTube for UGC and Hulu for commercial material are the clear winners. There’s no room for a second tier player.
The dynamic changes somewhat for longer form content. Users have to block out a time to watch the content. That investment in time must be rewarded. Quite often the content offerings on the free platflorms don’t reward that investment. Put more succinctly, a lot of the content on free Brightcove Network wasn’t very good, making it difficult to find the good stuff. What Brightcove learned is that charging producers to publish content filters out a good proportion of the nearly unwatchable.
It’s not a feel good story about the democratization of the media or the Long Tail. It’s just a market working itself out. To this capitalist, that’s a pretty good feel good story in 2008.
Debunking the Long Tail?
Repeat a theory often enough and it is treated as fact. The Long Tail may have attained such status. Because it is the basis of so many Web 2.0 initiatives, and it’s both elegant and charming, many content producers no longer question it. Last week an article in The Register cited the work of economists Will Page and Gary Eggleton with Mblox founder Andrew Bud in putting the Long Tail to the test. It doesn’t fare well.
This really isn’t the upbeat fairy tale message Anderson has spent four years selling on the conference circuit. However, as he took his “message” to Davos and beyond, the Long Tail has gradually developed into a ‘Policy Based Evidence Making’. Having convinced himself of the truth of his hypothesis by looking at one US music service, Anderson widened his search for facts that might fit his theory. But he didn’t examine the numbers closely or critically enough, say the economists.
At some point the Long Tail has to prove itself in real-world business applications. Storefronts (real and virtual) and mass marketing are going to be with us for a long time, so a pure application of the Long Tail may be years away. Until it’s catalogued and easily discoverable, it’s unsellable. The iTunes Genius sidebar might be the Long Tail’s first true enabler… someday, but it’s a ways off. If an application can’t recommend something to go with a Beatles tune, how useful is it?
I’ve always appreciated the elegance of the Long Tail theory, and have been surprised that it failed to produce superior profits in the media and entertainment sector. The article goes a way towards explaining why it is failing in the market place.
Others have appreciated it for the Utopian vision the Long Tail provided of being able to make marginally marketable media, but still turning a profit on it. Who wouldn’t rather make an art film over an infomercial? Like Santa Claus, people believe in the Long Tail because it makes them feel good to believe.
At the end of the day it proves an old algebra teacher quite prescient – “Question anything that doesn’t resolve to a normal curve.” An exaggeration to be sure, but something to keep in mind.
To this I add the Capria corollary – If the guy sounds like he’s selling snake oil, he is. Chris Anderson and his theory have long been more hype than substance. He’s parlayed a single theory posited in a magazine article into a career.
Post Election Day blues
This year broadcasters will mourn the passing of the US election season more strongly than they have in the past. As noted in an NPR piece yesterday, the billions spent in television advertising during the primaries and the final election barely covered the advertising revenues lost due to the economic downturn.
Couple this with the finding that about one in five televisions that receive over the air broadcasts will not be upgraded to receive digital signals in February, and it’s clear broadcast television is in for some challenging times. It should be noted that only 15% of US televisions use a traditional antenna. The other 85% will continue to receive satellite and cable signals as they always have, so only 3% of US televisions are slated to become doorstops.
As noted in the NPR piece, many local broadcasters will be motivated to move more offerings online. In tough economic times, internet advertising becomes even more appealing with pay per click pricing models and more precise audience tracking.
Content producers will be producing more content specifically for internet distribution to further differentiate their local news and public affairs offerings in a hyper-competitive environment. Workflow enhancements that speed the process of versioning and publising video online will be in demand.
Most interesting will be to see which platforms and business models broadcasters choose. Will they host their own content? Though much less expensive than building an operating a transmitter, few broadcasters in a tough economy will enthusiastically embrace increased headcounts and infrastructure costs. Look for Akamai and Brightcove to thrive in this environment.
