Challenges for online vid
Skepticism for NBCU-News Corp.Bear Stearns analysts have found flaws in the News Corp./NBC Universal joint venture and the online strategies of Viacom and the Walt Disney Co.
Citing a new survey analyzing the online video consumption habits of more than 1,000 U.S. consumers, analyst Spencer Wang said Friday during a presentation that online video is "a powerful new application" that is best consumed on a single site with many choices.
While Google Inc.'s YouTube remains in a prime position to capitalize on this, these findings do not bode well for entertainment companies looking to expand their own dot-coms or collaborate on sites, he said.
"While we are open-minded and will take a 'wait and see' approach, we are preliminarily fairly skeptical that users will find this compelling," Wang said about the unnamed News Corp./NBC Universal joint venture.
Wang also was critical of Disney and Viacom's strategy of focusing their attention solely on their own Web sites, saying that this approach could only see "limited traction." Consumers value "choice and simplicity," he said, two things that media conglomerate dot-coms do not provide.
Wang did express optimism about Time Warner and News Corp.'s digital strategies because they have an "existing base of online users" with their respective AOL and MySpace properties.
When asked about Viacom's decision to sue YouTube in March for copyright infringement, Wang called this strategy "counterproductive."
"I understand Viacom's reluctance to put their content on YouTube," Wang said, "but ultimately there will have to be some sort of commercial agreement. It's in the best interests of both parties to do that."
According to their research, 57% of respondents watch video online, with 30% streaming content at least once a week. Males age 18-24 are the group most likely to watch content online, with 62% streaming videos at least once a week.
Although many users prefer online video with no ads, 48% of all respondents and 67% of males 18-34 said their preference for monetization of the platform would be a free ad-supported service with 10- to 15-second commercials. Only 4% said they prefer paying $1.99 per video, and 3% answered that they would like a $14.99 subscription to a service.
A central site for videos was important to consumers, with 56% of all respondents and 69% of males 18-34 preferring that option to different sites. According to the survey, 42% of all respondents and 72% of males 18-34 report that they use YouTube.
Wang and Bear Stearns analyst Robert Peck stressed that YouTube remains the "behemoth" of the online video space, and they do not see any serious competitors at this time. Peck agreed with Google chairman and CEO Eric Schmidt's assertion last month at a Bear Stearns conference that "you tend to see power consolidated in a market leader." For now, Peck said, YouTube remains that market leader, "far and away."
Wang said that News Corp.'s MySpace could emerge as a potential competitor in this space. The "entertainment companies," though, are too slow and bureaucratic at the moment to compete in this platform, he said.
"First mover advantage is pretty critical here," he said. "MySpace and YouTube are more fleet of foot."
Because the survey also found that users are not adverse to ads during online videos, Wang and Peck are confident that online video will be able to be monetized. They also found that users prefer short videos, such as film trailers, user-generated content and music videos, and that online video is not yet cannibalizing television viewing.