We Need To Remember, Online Video Is A Cost Center, Not A Profit Center

It seems that no matter who you talk to, or what industry segment they are from, you can't escape the whole online video monetization debate. While it's a topic that is important to talk about, I think many forgot that today, for the vast majority of content owners, online video is a line item cost, not a revenue generator.

While everyone is working to change the economic dynamics of online video from cost to profit, we have to be realistic and truthful about what content owners are going through, especially in today's tough economic climate. I hear a lot of industry vendors talk about how they are looking to "add value" with their offering or how their platform allows for "monetization" of content. In many cases, the value is not clearly spelled out by the vendor or it does not exist. Many times what one vendor or customer sees as adding value, another customer wouldn't. Content owners don't want a bunch of fancy marketing terms used to describe what they are buying. They want simple, straight-forward details on how the product or service is going to help them generate money, lower their costs, or at least allow them to break even with their online video offering.

The other day, one major content owner told me that they have nearly 50,000 hours of video archives they have yet to encode and place online as doing so would simply cost them money each month. And while they already have a large volume of traffic to their site, the simple cost to encode, store, manage and deliver all of that content won't generate them any revenue this year. This highlights the major problem that content owners are facing, even a top-tier major content owner such as this one.

Aside from a handful of online video offerings from companies like Apple, MLB and others, how many other companies can we point to who are making money today? When asked, even the major broadcasters won't give out any real details on whether they are even covering their costs for their online video offerings. As an industry, if we can't point to dozens of successful case studies published online that show content owners making money, then we have to be even smarter on the projections and expectations we set with content owners and with one another in the industry.

Many are working and working hard to solve this problem. Online video advertising is only just beginning, new consumer devices are starting to come to market and the quality of video is getting better each year. Three to four years from now this will look like an entirely different industry, but it's going to take a lot of work to get there. Some content owners won't make it and many are going to struggle for some time to come. While we are seeing progress with many different facets of online video, we need to keep the industry grounded and realistic and remember that for nearly all content owners, online video is still a cost center.