New Report Sees Strong Gains in Online Ad-Supported Content Market

LOS ANGELES: Online ad-supported content revenues in the U.S. will reach $1.45 billion in 2013 from $448 million this year, according Screen Digest, but this increase will not be enough to offset the fall in television ad spend.

Screen Digest’s latest research also indicates that the online video players on ABC.com, CBS.com, NBC.com, Fox.com and Hulu.com accounted for 53 percent of the U.S. ad-supported web content market. The remaining share of last year’s $448 million in revenues was made up of the online video services of major sports leagues, video services from traditional online portals, and direct services from other major channel groups and content owners. The leading broadcaster-supported platforms will drive the gains forecast for the next five years, Screen Digest reports. Third-party sites such as YouTube, Joost and others, with no direct ties to content owners, will struggle to aggregate ad-supported movies and TV shows. In the opinion of Screen Digest, the Hollywood studios and major rights holders limit their deals with external sites, preferring to build their own syndicated ad-supported online video services. The third party ad-supported video platforms will either have to diversify into original programming, shift their business models towards offering technology and advertising solutions to the content-owners and broadcasters‚ instead of delivering content, or being affiliates of the broadcaster-owned platforms. The report adds that free online TV will challenge the paid model of TV download services such as iTunes, as well as pay-per-view and subscription online sports video offerings, and will require innovation from these service providers to remain competitive. The paid market will remain robust, increasing by 67 percent to $1.33 billion by 2013.

Arash Amel, author of the report, notes: "With better targeting and increased ad inventory, online TV services could be generating per-viewer revenues comparable to an average TV broadcast viewing in as little as three years. However, based on the current online ad strategies implemented, it will account for 2.2 percent of all U.S. TV advertising revenue by 2013, but definitely won’t be generating enough to offset the $2 billion we expect total U.S. TV advertising to have declined by during in that period. The challenge right now is to maximize the ad-supported online video business model, see how new forms of short form and traditional long form content can drive growth, and explore more advanced methods of video advertising while there are still revenues from the traditional business to support the transition to multiplatform. In this regard, the next few years will be critical."

Amel concludes, "A successful online entertainment distribution business model is about establishing and maintaining interest in trusted brands and syndicated services that go hand-in-hand with the content, often free at the point of audience consumption. The music business has been struggling to find that model, but the television business has been well positioned to meet the challenge. It is coming to understand that audiences are evolving, that the economics of supply and demand operate very differently on the open internet, and that the traditional TV networks must evolve with them. Producers and networks alike will only succeed in this space if they continue investing and building value in platforms that meet audience expectations with compelling services, rather than relying on content revenue alone."