IP Democracy: Web Video Warnings from Web Video Pioneer

Mark Cuban, who made his fortune selling his web video channel venture Broadcast.com to Yahoo in the good old days of the boom, has this essay about how hot the web video market is now. Whether you buy his arguments or not, his lengthy and somewhat pessimistic assessment is worth a read.

He makes one inarguable point: trying to recreate traditional TV on the Internet is a losing proposition.

What never worked back then, and what i dont think will work today or tomorrow is recreating a TV station on the net. Its not that its technically difficult. Its not, its easy. The problem is that there are no hits on the internet. A hit being defined as appointment viewing.

He makes another great point: video ads that accompany video programs on the web take forever to load.

Money is pouring in because its new , exciting and its not a 30 second ad on TV. But have you noticed the ads on some of the broadband networks ? It took 15 seconds of waiting for video on National Lampoons TOGA TV broadband channel before the commercials came on. As they do every time you load TOGA TV.

But then he makes an arguable point that the rise of web video will “dilute” the audience sizes for popular video programs, resulting in a situation where companies, accustomed to big ad revenues for their videos, start losing those revenues and then are stuck with fixed bandwidth costs.

But when ad dollars slow because of competition and audience dilution and they will, they will fall faster than the cost of bandwidth and content costs. It’s going to create a very difficult balancing act: Limiting your audience size , and the resulting bandwidth costs to match your advertising dollars over the long term that everyone seems to think that internet TV is going to be popular. That won’t be easy.

What’s missing from this neat scenario is the fact that once a web video provider starts generating decent revenues, it can pour those funds back into creating more and better content, thereby keeping up the ad revenue momentum. Those fixed bandwidth costs can just be applied to (hopefully) equally compelling product. It’s called competition.

Posted by Cynthia Brumfield on April 6, 2006 10:42 PM to IP Democracy