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Streaming Video Goes From Media ‘Stepping Stone’ to Major Player

March 20, 2013 at 12:00 AM EDT
Traditional Hollywood studios now compete with streaming content providers like Netflix and Amazon to capture viewers' attention. Hari Sreenivasan looks at the growing impact of broadband and its effect on our viewing habits and entertainment industry with Brian Stelter of the New York Times and Lisa Donovan of Maker Studios.
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JEFFREY BROWN: And finally tonight: the start of a series about the growing impact of broadband and the way it’s changing our habits, our work and our communities. 

High-speed access to the Internet at home has risen steadily in recent years. Studies show that some 66 percent of Americans now have broadband connections. 

We begin with a focus on how all this is playing out in the entertainment industry. 

And again to Hari, who has that story. 

HARI SREENIVASAN: Traditional Hollywood studios have long produced the movies and television programs we love to watch, but in the era of high-speed broadband, companies like Netflix, Amazon, YouTube, and Hulu are some of the new power players. 

All of them stream movies, TV and video. Increasingly, they’re creating their own unique content as well. For the moment, Netflix has raised the stakes most prominently. Last month, it debuted all at once 13 episodes of its original $100 million dollar series “House of Cards” all at once. It stars Kevin Spacey as a cynical U.S. House majority whip. Its success turned up the heat on its competitor, Amazon Prime, which is spending millions on new content. 

Amazon in turn announced an exclusive deal with PBS to stream its hit show “Downton Abbey.” Cable providers like Xfinity and Time Warner are making more of their content available for their online customers, an audience that is growing.

According to comScore, a company that tracks digital media, every day, 75 million people in America watch videos online. 

We take a closer look at this now with Brian Stelter, who covers the space for the New York Times, and Lisa Donovan, a producer and co-founder of Maker Studios, an online video production company responsible for hundreds of millions of video views. 

Thanks for joining us. 

Brian, I want to start with you. 

If broadband is ushering a new era of what we would consider networks, how are these different? 

BRIAN STELTER, The New York Times: Well, there are a couple of distinguishing factors about what Netflix and Amazon are producing and what other companies in the space could produce. 

For one thing, these shows don’t have to be a half-hour or an hour long. They can be various lengths. For the most part, they don’t have advertising in the traditional sense. They could add advertising in the future, but right now they don’t have it. And they can also be on demand pretty much forever. They could be at the click of a button. They’re not confined to a traditional television schedule. 

HARI SREENIVASAN: And, so, Lisa, you work with more than 10,000 producers. What are some of the advantages that you have that sort of traditional media or traditional networks don’t? 

LISA DONOVAN, Maker Studios: Well, I think we’re able to move very quickly. 

The producers, the content creators are really able to do and produce what they want without having to ask, you know, permission to do it. So, if something happens in pop culture, they can make a video immediately and get it out to their fan base. They’re able to communicate directly with their audience and have, like, a very, very engaged audience connection. 

And I think that’s an advantage that you don’t get to see in mainstream entertainment. 

HARI SREENIVASAN: Brian, on the business side of things, you have reported that Netflix is essentially buying up shows without even having seen a pilot. 

BRIAN STELTER: Right. 

HARI SREENIVASAN: So, in this land grab, explain to me what the return on investment is, or how they measure success when Amazon and Netflix are going out and buying so much content? 

BRIAN STELTER: It’s pretty hard for to us measure success, especially for Netflix because they won’t release ratings. We don’t know how many viewers are watching these shows.

But, for Netflix, this is all about getting people not to unsubscribe. If they can just hold on to their subscribers, that’s a win. And if they can convince new people to sign up because they have heard about “House of Cards” or they have heard about “Arrested Development” and they need to see it for themselves, that’s an even bigger win for Netflix. 

And it’s true for Amazon as well. Amazon is in the business of keeping you subscribed to Amazon Prime. For something like YouTube, the model is a little different, because YouTube is only advertiser-driven. It’s not producing $100 million or $50 million dollar shows. But it is seeding the environment with lots of little investments. And over time, some of those could be subscriber services as well. 

You could imagine a future where some YouTube channels are behind the subscription wall and they’re going to be in the same business as Netflix, trying to convince you that it’s worth paying a few dollars a month to watch their programming. 

HARI SREENIVASAN: So, Lisa, let’s talk about the economics on that YouTube platform. Are the Madison Avenue advertisers convinced? Do you have a predictable, steady revenue stream? 

LISA DONOVAN: Well, I started on YouTube in 2005, before it was even monetized, so it’s come such a long way. 

In 2007, I think, we became a partner and we started monetizing. And the CPMs keep rising. And I think that’s the future, hopefully, is that the ad dollars will move over to online. And I think you’re already starting to see that. And I think it’s — it’s starring to become more and more predictable. I think we have a little ways to go before it’s completely predictable.

But we’re getting there, and you’re seeing a lot of content creators being able to make a living doing this and some very — a very good living. 

HARI SREENIVASAN: So, Lisa, when you say CPM, explain that briefly. 

But, also, are advertisers expecting the same kind of hit like when I, say, buy an advertisement on the Super Bowl? I know x-number of million people have watched it. 

LISA DONOVAN: Right. It’s different. It’s different online. 

I think that’s the thing. The value of a view online, I think that’s what we need advertisers to really understand. I obviously believe that it’s incredibly valuable and it’s as valuable as a TV ad, even more so, because we’re talking about people who are making videos with such an engaged audience that just love this person that is making the content, and that ad I think or if they’re doing a branded integration I think is so incredibly valuable. 

And I think, over time, advertisers are starting to really understand the value of that. And, hopefully, they will be willing to pay as much as you would see on a network television show. And it’s not there yet, but that is the goal is to hopefully have a lot of those ad dollars head over to online. 

And, as you see, you know, things are merging. We see a lot of things, mainstream moving to online, and the connected TVs, and I think that’s where it’s headed. 

HARI SREENIVASAN: Brian, when you look at the cost of production here, for a standard TV episode, maybe $1 million, $2 million dollars. For a small content creator that has their own YouTube channel, maybe they can make a show for $10,000, $15,000 dollars. Do you see networks going out and scouting for this and making lots of bets on these smaller experiments? 

BRIAN STELTER: I do. 

I think of a spectrum where shows exist, and I think what we’re seeing is a lot blurring happening, where traditional television looks more like the Web. And the Web can look more like traditional television. Recently, FOX Broadcasting took one of the YouTube channels that its parent company had invested in, called WIGS, brought it in-house, and said they’re going to start taking some of these short YouTube shows which most viewers probably never heard of and start to turn them into television shows, big, blockbuster television shows. 

That’s an example of the cross-pollination that I think we are going to see more and more of going forward.

HARI SREENIVASAN: And, Lisa, so, this is an odd question, but are you seeing any aspirational shift, in the sense that it used to be the goal was to get yourself on TV? Are you seeing content creators coming specifically to stay online? 

LISA DONOVAN: Yes.

That was — when we found Maker, too, we wanted to be working with content creators who really didn’t see it as a stepping-stone, but saw it more as a place to really find a home and really build an engaged, long-term audience. And, essentially, they’re building their own distribution, and that’s a very powerful thing that we want the content creators to take very seriously. 

So, I think we work with a lot of people that really do value what they’re creating online, and not that they won’t be doing traditional things or can, but it’s something where you don’t want to give up on your audience, and you want to make sure that you keep building that. 

And I think we’re starting to see a lot of mainstream celebrities or talent want to come online and start building their online presence. We signed Snoop Dogg last year, and that’s been really an exciting partnership with him. So …

HARI SREENIVASAN: So, Brian, are there enough Snoop Doggs of the world that are going to go on the YouTube platforms that will make the networks sit up and take notice? 

BRIAN STELTER: I think there is. I think we’re beginning to see it.

It’s a great time to be an actor or a producer or a writer because there are more outlets than ever. Jeffrey Tambor, who is best known for “Arrested Development” on FOX, this year, he’s on “Arrested Development” on Netflix, and he’s also on a pilot program for Amazon. And he has got more options than he used to have. 

It’s not going to replace TV. TV is not going away. But it is going to add to TV. And it’s going to add up to a better experience for consumers, I think. 

HARI SREENIVASAN: All right, Brian Stelter from the New York Times, Lisa Donovan from Maker Studios, thanks so much for your time. 

BRIAN STELTER: Thanks.

LISA DONOVAN: Thank you.

JEFFREY BROWN: Our next report looks at the city with the fastest Internet in the Western Hemisphere: Chattanooga, Tenn.