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352_Web Video Industry - Exec Summ

352_Web Video Industry - Exec Summ

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The made-for-broadband video industry

A report analysing the production of original, web-series videos in America and Europe

Publication date: February 2010.

No part of this document. or by any means. who have over a decade’s experience analysing the European television industry and who possess global contacts and exceptional strategic insight and analytical intelligence. cannot accept liability in respect of errors. If you wish to stay up-to-date with the sector. dynamic team.ContentEconomics. Every effort has been made to ensure that the information contained in this document is accurate but Content Economics Research does not provide a guarantee of its completeness or accuracy and. which provides insight into the latest news. including its data. weekly email newsletter. 2 .com. estimates and forecasts in the document are based on judgements made at the time of publication and are subject to change. EXECUTIVE SUMMARY ALL RIGHTS RESERVED. © 2010. Legal notice All rights reserved. Its market research reports are crafted by a small. Content Economics Research. may be reproduced or distributed in any form. specialising in analysis of the television content production and distribution sector. without the written permission of the copyright holder. developments and trends in the business of TV content. please sign-up for this email at: www. The opinions. Content Economics Research publishes a free.THE MADE-FOR-BROADBAND VIDEO INDUSTRY About Content Economics Research Content Economics Research is a European market research and consulting company. as such.

The market shrunk during the downturn that followed but. financial institutions and regulators. investors were not interested in supporting the nascent MFB industry and many companies were forced to close. the industry has slowly emerged again. It is estimated that in 2009 approximately $50m was spent producing MFB content in Europe and the US. However. It does not investigate the similar. but different. While this market is forecast to grow to almost $150m by 2013. in the years following the collapse of the technology stock market. budgets reduced and some production companies closed down. as the penetration of household broadband internet connections has sky-rocketed over the past few years. Companies such as the Digital Entertainment Network raised over $60m from investors and produced 26 original web-series before it entered bankruptcy. the credit crunch and subsequent recession brought the industry to a halt. © 2010. However.THE MADE-FOR-BROADBAND VIDEO INDUSTRY CHAPTER 1: EXECUTIVE SUMMARY The beginnings of the made-for-broadband (MFB) video content market can be traced back to the days of the dot. INTRODUCTION This report analyses the MFB content production market. Nor does it analyse the production of content for the adult industry. It is intended to be of interest to both production companies already active in the market and curious observers alike. questions about its business model remain unanswered. It focuses solely on the development of MFB content in Europe and the US.com boom market at the end of the 1990s.com boom during the latter part of the 1990s and early 2000s. Commissions were stopped. branded-content production industry. the MFB industry slowly began to recover. including consultants. MARKET CONTEXT An industry with a turbulent history The MFB market experienced both the highs and the lows of the dot. 3 . EXECUTIVE SUMMARY ALL RIGHTS RESERVED. just as the industry was beginning to make an impact. Spurred on by the general economic recovery and the rising penetration of broadband internet connections. Hollywood studios established production units that were focused purely on producing MFB content and the venture capital industry became more supportive as well.

the market is dominated by America – particularly the amateur/ low-budget segment of the market. The industry began in America and it is still the focal point of developments. MFB content has yet to materially develop its own identity. some come close to matching DVD production values. The availability of talent and financing in America is second to none. The quality and scale of these productions vary widely. Many of the higher-budget productions embrace the interactive and social nature of the internet by creating forums. some old In its early days. Some new production companies. EXECUTIVE SUMMARY ALL RIGHTS RESERVED. © 2010.THE MADE-FOR-BROADBAND VIDEO INDUSTRY An American industry While MFB content is being produced across Europe. who were solely focused on producing MFB content. by far the largest number of MFB productions are produced on shoe-string budgets by max-ing out credit cards and borrowing money from friends and family. including: Big Balls. it is believed that the BBC commissioned Signs of Life from Endemol UK for $1. web-blogs. In general. etc. New productions arriving each week It is estimated that over 100 MFB productions are being released on the internet each week. Sony’s Crackle regularly commissions projects with budgets rumoured to be in the region of $1m each. Drama tends to be the most popular genre. with horror and science-fiction productions surprisingly common. much of the content is surprisingly similar to traditional TV series. A number of start-up production companies are at the forefront of the industry today.6m in 2007. Production budgets: from down the back of the sofa to $$$m Producers are notoriously shy about stating exact budgets for their projects. Europe is very much its poor relation. 4 . each of which will be 3-5 minutes long and the new episodes will be released on a regular basis. with which the audience can interact. the MFB content production industry was dominated by start-up producers. only shorter. which was produced by Milchan/Van Eyssen and Paramount Digital Entertainment for a rumoured $2m. MARKET DYNAMICS What type of content is being produced? MFB content comes in all shapes and sizes. but the majority do not. The highest budget production in 2009 is understood to have been Circle of Ei8ht. In the UK. a series will have 10-15 episodes. In fact. However.

who are expanding their online presence and web portals (Bebo. the production company will have the final say in all decisions and any product placement will not be overt. In addition to ad-funding or sponsorship. For many projects with small-to-mid sized production budgets. it will be taken down from the web servers and re-edited into a feature length film. for free and episodically but. sponsored content can deliver a profit. Electric Farm Entertainment. Monkey. the simple reason for the continued immaturity of this industry is that the participants have struggled to put together a business model that delivers profitability for all parties. In this business model. Paramount. such as: Endemol.THE MADE-FOR-BROADBAND VIDEO INDUSTRY Big Fantastic. The arrival of larger production budgets has also seen the traditional film and television heavyweights arrive on the scene. etc. etc). Consolidation likely As this market matures. Yahoo!. albeit a low-budget one. the series is released as normal. EXECUTIVE SUMMARY ALL RIGHTS RESERVED. MySpace. This is not to be confused with brandedcontent. a process of consolidation is likely. More appealing and successful is the sponsoring of content by a brand or brands. who are seeking to drive traffic and loyalty to their sites. Sony. it is the deep-pocketed public broadcasters who are likely to drive this market forward as they further experiment with the online opportunity. and is certainly not profitable. with the broadcasters in a distant second place. Traditional film and television production companies are likely to expand into the industry by acquiring existing production talent for their experience and contacts. Despite there frequently being a close relationship between the brand and the production company. Pure Grass Films and Vuguru. The clients: broadcasters and web portals There are two main client groups for MFB content: traditional TV broadcasters. in Europe at least. 5 . The web portals are driving the MFB production market in most countries. after the series has completed its online transmission. Relying on banner ads or pre-rolls is simple but questionably effective. © 2010. particularly in the more developed territories of the UK and the US. The business model still needs work Despite existing for over a decade. However. Horror genre content is particularly successful with this approach. UFA. producers of larger budget productions will also seek to strike DVD distribution deals.

Figure 1: Forecast of expenditure on MFB content production in Europe. it is forecast that the overall market will grow by 31% CAGR (compound annual growth rate) to almost $150m in 2013. US Source: Content Economics Research EXECUTIVE SUMMARY ALL RIGHTS RESERVED. many years away. many years to come. Consumers are now watching ever increasing amounts of video online and this trend is only likely to continue growing – although of course the numbers will still pale in comparison to the amount of time spent watching television for many. Awareness of online video has been significantly raised by the recent availability and marketing of online catch-up TV services (Hulu.THE MADE-FOR-BROADBAND VIDEO INDUSTRY Consumer behaviour increasingly supportive The dramatic growth in the penetration of broadband internet services at home and also in the office has seen consumers increasingly viewing online video content. These forecasts are likely to prove conservative. MARKET SIZE It is estimated that approximately $50m was invested in producing MFB content in Europe and the US in 2009. The potential to obtain viewer ratings on a par with television channels would transform business models. iPlayer. SVT Play. this scenario is many. Such televisions and set-top boxes. M6 Replay. © 2010. True IPTV services to change the game? Arguably. is the MFB content production industry any different to the television content production industry? Whether the answer is yes or no. At this stage. Driven by web portals and European public broadcasters. with their ability to access a wealth of online. 6 . on-demand content should open the door for the MFB industry to transition from the computer screen to the television. the mass-market adoption of broadband-connected televisions and set-top boxes will completely change the dynamics and market opportunity of the MFB industry. etc) from traditional TV broadcasters.

some old Consolidation likely The clients: broadcasters and web portals The business model still needs work Consumer behaviour increasingly supportive True IPTV services to change the game? MARKET SIZE CHAPTER 2: INTRODUCTION What is the subject of this report? What is outside the scope of this report? How was the information gathered for the report? How is this report written? Who is the target reader? Currency CHAPTER 3: MARKET CONTEXT An industry that began in the late 1990s Slow re-emergence during the early 2000s Boom again. . 7 . © 2010.THE MADE-FOR-BROADBAND VIDEO INDUSTRY INDEX TABLE OF CONTENTS Title CHAPTER 1: EXECUTIVE SUMMARY INTRODUCTION MARKET CONTEXT An industry with a turbulent history An American industry New productions arriving each week MARKET DYNAMICS What type of content is being produced? Production budgets: from down the back of the sofa to $$$m Some new production companies..and bust again An American industry A couple of new series released each week CHAPTER 4: MARKET DYNAMICS What type of content is being produced? The market is already developing and adapting Page 3 3 3 3 4 4 4 4 4 4 5 5 5 6 6 6 11 11 11 11 12 12 12 13 13 13 14 14 15 16 17 17 17 EXECUTIVE SUMMARY ALL RIGHTS RESERVED....

$100-500k. via taxation Sponsorship Sponsorship only stretches so far Case study: KateModern. $500k+ A trend towards larger budgets America has the highest budgets The producers The amateur market: dominated by ‘CV’ postings A strategy that can be successful: Big Fantastic Talent going direct to consumer An example of the opportunity: Ashton Kutcher The dominance of the big name players Dominance likely to be long-term More consolidation to be expected Indies vs. 8 .de Case study: Crackle Broadcasters to represent the future? European broadcasters to out-spend their US counterparts Commercial broadcasters will embrace MFB in time International client opportunities The pitch process Business models Ad-funded Free Free. In-house: a battle not yet begun Web portals are divided Ad agencies: an expansion too far? Case study: Pure Grass Films (PGF) The clients Web portals have driven the market Case study: Bild. to $$$m A three tier budget system: $100k. © 2010.THE MADE-FOR-BROADBAND VIDEO INDUSTRY Targeting formats. a big-budget success story Pay DVD/ digital distribution Pilot for a TV series International exploitation Video games The consumer Rapid broadband penetration growth is the key 18 19 19 19 20 21 22 23 23 23 23 24 24 25 25 25 26 26 27 28 28 28 29 29 30 30 30 31 31 31 32 33 33 34 34 34 35 36 36 36 37 37 EXECUTIVE SUMMARY ALL RIGHTS RESERVED. especially in Europe Embracing the internet’s interactive and social nature Just like normal programmes – but shorter? Production budgets: from down the back of the sofa.

9 . © 2010.THE MADE-FOR-BROADBAND VIDEO INDUSTRY Increasingly accustomed to watching video content online The longer-term impact of true IPTV services CHAPTER 5: MARKET SIZE An industry of ups and downs 2009 – a year of survival Deficit-financing disappeared The US will dominate the industry Hollywood studios the key players The UK: reliant on BBC and Channel 4 for growth Commercial broadcasters will eventually arrive Germany: broadcasters not interested Web portals the critical clients France: some first tentative steps Broadcasters yet to fully commit Italy and Spain: markets waiting to happen A difficult period for Spain Regulation set to hamper Italy? Rest of Europe: dominated by Scandinavia Australia (not modelled) A base case with upside CHAPTER 6: CONCLUSION Industry matured during the recession A bright future for the big players A public broadcaster future for Europe True IPTV: the great leveller APPENDIX 38 38 40 40 40 40 41 41 42 42 42 43 43 43 44 44 45 45 45 45 47 47 47 48 48 49 EXECUTIVE SUMMARY ALL RIGHTS RESERVED.

2009 Household broadband penetration rates in major territories A broadband-connected TV service: Yahoo! Connected TV Forecast of expenditure on MFB content production. 1 2 3 4 5 6 7 8 Title Estimated budgets of recent. US Estimated share of total MFB expenditure by segment in US. © 2010. US Estimated share of total MFB expenditure by segment in US. notable MFB productions Budget segmentation of MFB production Estimated MFB production budgets in major territories The financial challenge of making profitable. 2009-13 Page 20 21 22 32 49 49 49 50 EXECUTIVE SUMMARY ALL RIGHTS RESERVED. 2009-13 Page 6 21 37 39 46 LIST OF TABLES No.THE MADE-FOR-BROADBAND VIDEO INDUSTRY LIST OF FIGURES No. 1 2 3 4 5 Title Forecast of expenditure on MFB content production in Europe. 10 . ad-funded content Forecast of expenditure on MFB content production in Europe. 2009 Household broadband penetration rates in major territories Forecast of expenditure on MFB content production.

ContentEconomics. W12 7ET.com. Its market research reports are crafted by a small.com. © 2010. Its head office is based in the UK: 24 Abdale Road. 11 .  Content Economics Research publishes a free. developments and trends in the business of TV content. England.THE MADE-FOR-BROADBAND VIDEO INDUSTRY About Content Economics Research  Content Economics Research is a European market research and consulting company specialising in analysis of the television content production and distribution sector.ContentEconomics. If you wish to stay up-to-date with the sector. weekly email newsletter that provides insight into the latest news. who have over a decade’s experience analysing the European television industry and who possess global contacts and exceptional strategic insight and analytical intelligence. London.  Content Economics Research is part of the Valued Insight Limited group of companies. please sign-up for this email at: www. EXECUTIVE SUMMARY ALL RIGHTS RESERVED. Telephone: +44 (0) 203 287 7432 Email: sales@ContentEconomics.com  Further information about the company can be found on its website: www. dynamic team.

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