increase the overall ad load for its online video—the minutes of advertising per hour of video viewed—-to a point that’s even higher than its on-air load, according to Lepe.
ESPN can’t charge as much for online pre-roll or post-roll ads as it can for TV commercials—but increasingly, it can use the engagement statistics it gathers from its Web and mobile channels to sell sponsorships across TV, Web, mobile, and print (yes, ESPN has a dead-tree magazine).
Lepe and Knapp say Ooyala’s long-term vision is about making the online video viewing experience just as smooth as broadcast television—with no buffering or dropped frames—and enabling media companies to offer fully personalized video streams to every user, based on their viewing preferences and the device they’re using at any given moment.
“It’s not about having 500 channels of niche content,” Lepe says. “It’s about having one channel that understands you. My own ideal channel would be primarily financial information in the morning, coming from CNBC and Bloomberg and Forbes. Then in the evening it should be cooking shows. I shouldn’t have to go out scouting for it. To me, that is the ideal model, and it’s one of the primary reasons that companies are willing to pay a premium to buy our stuff.”
For all this talk, though, online video still represents only 10 percent of overall video consumption. (And at the moment, the Internet simply isn’t a plausible replacement for video delivery via the cable and broadcast networks: aside from the monetization challenge, the pipes just aren’t fat enough.) So offering an alternative content ecosystem, as Google is attempting to do, is an interesting exercise, and it may result in some fascinating new programs. But it won’t sate viewers’ hunger for live sports and expensive shows like Mad Men and Breaking Bad.
“The philosophy at Google obviously works phenomenally well for YouTube, but we’re not convinced it works for TV as it evolves,” says Knapp. “Consumers’ need to suspend reality and sit back for a few hours a day is not going to change. The producers will change—we have already seen an evolution toward lower-cost content à la Machinima. But that’s fantastic [for Ooyala], because guess what? They have the same problem. They want to reach more users and monetize better.”
