YouTube's not the answer
"The big concern for video creators, which is what networks are, is this video-advertising-environment challenge. ... We have to figure out the video-advertising environment," said Ed Erhardt, president-customer marketing and sales at ESPN. Without that, he said, convergence "will not happen at the pace everybody thinks."
And online video sites such as YouTube "ain't getting it done," he said. "We're spending a long time with advertisers and agencies, trying to figure out a good advertising environment," whether it be on mobile or in commercial pods on TV.
According to eMarketer, online video is expected to be a $775 million ad business in 2007.
What kinds of online content offerings and how to make enough money off them to pay for them is something nearly every TV network is wrestling with. Courtney Holt recalled MTV Networks' video-heavy online strategy when he joined the company nine months ago to become exec VP-digital music and media.
"We had to hit the reset button," he said. Today, the philosophy is "let's do something really creative and figure out how to maximize it." An online property coming out of a TV company doesn't have to look like TV on the web. For example, MTV Networks has embraced virtual worlds, launching properties such as "Virtual Hills," based off an MTV show "The Hills."
"We've got hundreds of thousands of people sitting in these worlds for hours on end," he said. "We reached a new audience that loved virtual and loved that environment but might not have sat and watched the show week after week. ... [there are] lots of places to enter into a point of engagement without having to go through one giant portal."
Mr. Erhardt and his colleagues were addressing the role digital media would play in the upfront this year. Last year's upfront presentations were rife with the subject, as networks touted that digital components would be added to nearly all the upfront buys. In many cases, that turned out to be lip service, but TV networks feel more prepared to tout digital offerings this year, with new assets such as the News Corp.-NBC joint venture.
The gray area
The executives mostly agreed with a Merrill Lynch estimate that about 5% of this year's upfront would be accredited to digital, up from 2% or 3% last year. Last year broadcast TV networks wrote $9.1 billion in the upfront.
Eric Bader, senior VP-director of MediaVest Digital Connections, said the definitions aren't so cut and dried. It would be irresponsible to advise marketer clients to chop off percentages for digital, he said. And the shift of dollars varies from advertiser to advertiser, tending to be higher in categories such as auto, entertainment, financial and travel. Still, "there will be a surprising amount of money in next few years shifted from traditional media to digital even in categories like consumer package goods," Mr. Bader said.
There's the question of where that money goes. While projects such as MTV Networks' "Virtual Hills" sound intriguing, the jury's still out on how monetizable -- at least through advertising -- things such as virtual worlds are. Mr. Holt recognizes the delicate balance between usability and business. "People may start to build relationship with content outside of TV but it's TV-produced content," he said, and, thus, and it needs to be paid for somehow.
Taking care of cool
And when there is a good idea for monetizing something online, the question of how well it scales remains difficult -- especially when it comes to big integrated ideas, which everyone on the panel touted as having value.
"We can all come up with fantastic cool idea but how many people can take care of fantastic cool?" he asked. "If you want to do integrated, smart, intelligent ideas, everybody can do three a year but nobody can make money on three a year ... We need to figure out how to do 100, 200."
Amy Carney, exec VP-advertiser sales at Sony Picture Television, echoed Mr. Erhardt, explaining that her group had been hindered by "high-cost low-reward integrations." After a sales reorganization, it's now also going after deals not necessarily linked to TV. "Last year with strategic Alliances we were maybe able to bring three ideas to the marketplace," she said. Already this year, "we have a dozen and twice as many in the pipeline."
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