Online Video: “The problem isn’t cost, it’s revenue.”

“The problem isn’t cost, it’s revenue,” writes WatchMojo CEO Ashkan Karbashfrooshan in a MediaPost story titled “What Revision3’s Sale Means for the Online Video Industry.”

Indeed while I’ve long urged marketers and media providers to keep costs down for online video, that’s because revenue (via ad-sharing) is modest and dependent on finding an audience. There’s no cost that can sustain without revenue. Fortunately the dollars are moving to online video, accelerated by the rapid convergence of television and what we’ve called “online video” (a term that is becoming increasingly obsolete). The article is a nice reminder that the online-video medium is at a point where it needs (and is getting) financing and sales muscle of larger media properties.

The article is an informed view about the changing business of online video, and how TMCs (traditional media companies) are acquiring and adapting to online video.

“(TMCs) have the sales force and means to generate revenues; their problem is producing good content in the world of “good enough content” at ever-lower costs,” writes Karbashfrooshan.

This is an important point since most online video providers — even the well financed online-video studios (OVS’s) lack the sales muscle to fetch media dollars. Heck Google/YouTube sales people aren’t even doing a great job of capturing the attention of advertising media buyers.

Here are some important insights from the piece (mostly quotes or paraphrases):

• Revision3 snatched an approximate $30 million from Discovery.  Next New Networks last March sold for approximately $25 million to YouTube. Both companies improved the ecosystem.  “Both Revision3 and NNN were acquired by companies looking to buy a competency and address a headache.”
• For Discovery Communications to recognize the value that Louderback and his team created is a positive for the industry.
• For online video to flourish, it needs an assist from TMCs. Conversely, after years of trying to build the competency internally, it’s clear that the TMCs need web-natives to produce online content.