Online TV at the tipping point

December 12, 2007: 2:50 PM ET

By Josh Quittner

Is Net-based TV ready for its close-up? Television ratings are already starting to plummet, the ongoing writers' strike shows no signs of ending, and the development schedule for next year's programming is looking increasingly dicey. While one report suggests that ex-TV watchers are turning to books and magazines, some folks in the nascent Internet TV business say they're enjoying a sudden uptick in audience.

"We are seeing increased viewership at our top video products - Ask A Ninja, Boing Boing TV and Webb Alert, " says Chas Edwards, publisher of Sausalito, CA.-based Federated Media, which sells advertising for Web sites. "But it's hard to say how much is organic growth (the latter two both launched in the past six months) versus the migration of TV viewers to online video."

The new TV properties are each already serving up around a million streams a month, he said; Ask A Ninja is doing closer to 3 million. Ads for premium video tend to fetch revenue of 2 to 4-cents a stream, notes Edwards, meaning that the hottest sites are starting to show quit-your-day-job-type returns.

Tech pundit and entrepreneur Marc Andreessen, observing that television viewership "has been dropping as much as 10 percent a year over the last four years, especially among kids," says that the writers' strike simply adds fuel to the fire. "The Hollywood writer's strike fiasco, which is just a huge mess, is killing an entire season of TV shows," he says, "And quite possibly the next season as well. Which will drive even more people to the net, especially kids."

Others agree. "We've definitely seen a marked increase in traffic over the past few weeks," says Hayden Black, who produces the popular Net sitcoms, Goodnight Burbank and Abigail's X-Rated Teen Diary. (Burbank is a fairly conventional, behind-the-scenes spoof of life at on a local TV news show; Abigail is a more cutting-edge comedy centered on Black, who plays a young girl afflicted with a fake disease that makes her look like a bearded, middle-aged man.) "Without any marketing at all, Abigail is doing about 10,000 streams a day," Black says. The program, which launched two months ago, is now generating as much traffic as Burbank, which is a year old. Black, 34, who worked for years in network television writing promos, says he plans to keep his day job for now.

Edwards says that, while the near-term effect of the writers' strike is hard to parse, he believes that in the coming months and years, Net TV will pay off - mainly because advertising dollars will increasingly flow there.

"Premium online video has always sold well," he says. "Big brand advertisers for years haven't been able to find enough video inventory that they consider 'quality.' I do think stumbling TV ratings (both from the Tivo effect and from the writers' strike) will drive more video ad dollars online - it literally has to. Ratings that drop fast mean networks are giving advertisers part of their money back, and digital will benefit."

He believes that much of the new media windfall will go—where else?—to Google. "The big digital video plays will win biggest: YouTube offers huge scale fast, they have moderately believable technologies to filter for scary content, and it's becoming more than acceptable for brand advertisers to tell their bosses they bought YouTube."

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