Webcasting Large Entertainment Events Still Unprofitable

I love webcasting more than any other facet of this industry as it’s how I got my start fourteen year’s ago and it’s what I use to do for a living. But it’s sad to see that so many year’s later, there is still no successful business model in place for large-scale entertainment based webcasts.

In the year’s between 1997-2001, there was at least a couple of large music and entertainment webcasts each night on sites like SonicNet, Rocktropolis, MTV, Pepsi.com and many others. Back then, no website was making any money from the traffic or from the content, but they didn’t need to. In those times all that mattered was getting eyeballs to your site and growing your page count while showcasing content available for free. Since the bubble burst in late 2001, there have been very few webcasts trying to reach a wide mass audience with entertainment based content.

The problem is that no one has yet to find a way to monetize the content. While this is nothing new as it’s a topic we talk about every day in the industry in regards to on-demand content, producing live content is even more expensive and requires more in the way of resources and time. Some have tried doing pay-per-view events with no success as consumers are not yet willing to pay for something that has always been free.

And when it comes to the content rights, entertainers want huge payments as they think this stuff is worth a lot of money online thinking as if this is some sort of PPV event on TV. They quickly learn however that there is no money to be made with PPV on the web and they always end up scraping the webcast when they realize this is not a cash cow. How many large entertainment webcasts have you seen in the past 5 years?

It is a lot of work and money to put on a webcast and even more when it’s goal is to reach a global audience all at the same time. But that is exactly what MSN is looking to do with it’s LiveEarth series of concerts that kicks off today at 9pm EST. The Al Gore-promoted series of concerts will have close to 40 video feeds from countries all over the world for a span of 24 hours. The cost to produce something like this runs into the tens of millions, especially since some of the content will also be broadcast via traditional TV on NBC and Bravo amongst other channels. Since it needs to be TV quality and not just web quality, that means even more cost in the way of audio and video production. Throw in the cost to license the content, pay the artists, pay for audio and video production services, satellite time, encoding services (which one article says consists of a team of 80), not to mention distribution costs to deliver this via the web and you’re talking serious dollars.

Now this event may make back some of it’s money since it has a traditional broadcast component on TV and NBC can sell advertising around it, but even with that, this is a loss leader. And without the TV broadcast, I bet this would not even happen unless a sponsor, or MSN, was willing to kick in millions of dollars to cover the webcasting and productions costs.

The worst part about this whole thing is that it’s just going to play into the hype about millions of people watching video on the web as if it is the TV. It’s not. Remember Live 8 over two years ago? How did that make money? Where are the ROI articles saying how successful the Internet medium was for webcasting to big audiences? Most of the revenue generated from that event came from DVD and content licensing deals after the webcast for mediums other than the Internet.

Already, the hype is starting. ""We expect it to be the most highly watched entertainment event online," MSN senior director Lisa Gurry said in an Hollywood Reporter article. The article also says that "MSN, predicts Live Earth will be a record-breaker." Come on. Is that the best that MSN can say? How about telling us how many sponsors you have? Or how you plan to cover your costs? Or if this is a loss leader for MSN to create awareness for the brand? Or better yet, what metrics MSN is going to use to determine the success or failure of the event? And stop with the "record-breaker" comments. There is no such thing as a record breaker webcast or "largest webcast ever" as no one makes their logs available for review and everyone measure "viewers" differently. And many large webcasts never ever give out numbers or the numbers are inflated. I know. I use to give customers numbers of viewers after a webcast only to see them make the number a lot higher in press releases, sometimes by a few million. And if IF it was the largest ever, so what? Does that mean it’s successful? No.

One other thing to note, unlike the Madonna event or the Live 8 event which was only on the Internet, much of the content of LiveEarth will be on TV. So why would I go to the Internet to watch it?

It’s a shame this has not all been figured out by now. Like many, I love the webcasting medium. It’s fun to webcast, brings its own set of challenges and is a technology that allows anyone to communicate without any geographical boundaries. And while the application has been successful in the enterprise, government, education and other verticals it still does not work for the large-scale entertainment events.

  • http://www.Talk-Show.TV Grant Sutherland

    Quite true.
    One of the few formats that should work is the Talk-Show genre – if done properly and efficiently.
    But as you alluded to – will advertisers ever adopt these audiences with the belief and dollar that traditional electronic media had in their day.

  • steve courtney

    if the content owners and webcasters use internap network services as their content delivery network which offers ad insertions directly into the live broadcasts which is the only cdn that offers this service, the ad revenue would pay for their cost and make it profitable

  • http://www.onlinevideowatch.com/ Ben Homer

    It works, but there needs to be a shift in the ways ad-buys for these types of events work. I’ll give you two examples:
    NCAA March Madness on Demand – Profitable free-to-user model based on custom sponsorships, and those little flash-banner game widgets people seemed to enjoy during breaks.
    MLB.TV – They make serious bank by offering live webcasts online for subscription model. Ad-insertion when they begin that will make it even more of a cash cow.
    For webcasts to be successful/(profitable) they need either have:
    1. A monopoly on content many people want to see live but otherwise can’t. Or
    2. Additional online content supporting TV coverage which can be monetized as an add-on to traditional media buys – valuable because the people going online to see this extra content are more engaged – and hopefully generate higher ROI than TV spots.

  • http://www.danrayburn.com Dan Rayburn

    In reference to Steve’s post about Internap, it sounds like a sales pitch by an Internap sales rep. I called Internap HQ and they said no one by that name works there, so either it is not from a sales rep, or the person who sent it in with an IP that traces back to Dublin Ohio didn’t use their real name. So I won’t delete it but will respond by saying that Internap is not the only CDN to be able to offer video ads into live streams. Other CDNs work with ad delivery networks to be able to do this as well.
    Also, even if ads were placed in streams, that does not guarantee that the event would be profitable and it would not cover the costs. On a pure CPM model, you will spend more on the bandwidth to deliver the stream with the ads than you will ever make back in revenue.
    On Ben’s post, I would love to see proof that the NCAA was profitable. Yes, lots of traffic, but how much did they get from those sponsors and what did they spend to produce it? No one is willing to share those numbers, and if they were profitable, why not share them and set an example?
    Yes, MLB is about the only company making money on this. But then again, how many companies have content that is as exclusive and wide ranging as MLB does, very few. But you have to love what they are doing.

  • http://www.indycar.com Adrian Payne

    Dan – As always, great Blog. I want to quickly dispel any belief that large or small online entertainment events are unprofitable. Online entertainment can be a very profitable venture. For whatever reason, most companies continue to apply traditional business models to this new medium and you can’t. This topic could be discussed endlessly so I will keep this short and only discuss our online events.
    I produce the online shows for the Indy Racing League and the Indianapolis Motor Speedway. The Indy Racing League puts on 17 events. This includes one in Japan and the largest single sporting event in the world the Indianapolis 500.
    The first thing is to realize this medium is not like traditional TV so get that out of your head. When you hear the word ‘video’ stop thinking of TV. The internet is a user participation medium. The more the fans get to participate in the show the more they will be involved with your product. Wrap your video with user controlled applications so your fans can communicate and share content with each other. While video is a key component it is just part of the bigger application. Participation makes for a better experience and keeps the users coming back.
    Another important piece is to make sure the advertisements DO NOT interrupt the show. Advertisement is best when it compliments the show. Customers will engage in relevant advertisement. For example, IndyCar is a racing series so for the most part our customers are interest in autos related products. They also live a lifestyle that includes iPhones, XM Radios, etc.. Our fans typically watch on average 67 minutes of video during our live events. That is an enormous amount of streaming media. During that time, fans will be engaging in chats, polls and advertisement. Yes advertisement. When advertisement is presented as part of an event, fans respond positively and purchase those products. Online advertisement is the best investment an advertiser will get. They will be able to track everything from traffic to the sale. The entertainer has to give them this platform.
    Here is the current revenue model I use. Remember, all revenue models must be flexible and will always keep evolving. The best model so far is the per viewer minute ad rate. In other words, the advertiser only pays when the customer is watching. This way the advertiser doesn’t feel like they aren’t getting their money’s worth. They are paying for active users.
    I know this was an oversimplified explanation but I just wanted to point out that online entertainment is profitable. Yes, profitable in terms of making money. We have been profitable for over a year now and haven’t even touched the real potential of this medium. We are just one of many that turn a profit on online entertainment.

  • http://www.danrayburn.com Dan Rayburn

    Hi Adrian, good to hear from you.
    I agree, niche content like yours or cycling or cricket etc… has a real business model. But large scale entertainment events, music in particular, so far have not found a way to be successful like some of the niche content players like yourself.
    Like MLB, you have content that is extremely unique and you’re also in a very unique position because you have the tie in to TV. Can you disclose how many people you are reaching on average with the typical webcast?

  • http://www.indycar.com Adrian Payne

    Dan – For our race last week at Richmond we had 138,787 viewers. Which is an increase of over 400% compared to last year. For this weekend at Watkins Glen, I anticipate over 150,000 viewers. We have millions of unique visitors for indycar.com and my goal is to hook all of them to participate in our live shows.
    Currently we are a niche market but our goal is to be bigger than MLB and NFL. We will achieve this by engaging a younger audience who will grow up with our sport and have their friends socialize with them during these shows.
    I also want to point out that you don’t need a tie into TV to become profitable. We have several shows that are online only. Many times we use just one camera. For example, in two weeks the Indianapolis Motor Speedway will broadcast another online only show and I expect to draw in excess of 100,000 viewers for this. I don’t think we will have more than two cameras. We sell an experience that hopefully you will talk about the next day to your friends.
    The key for any company or individual is to know what content rights you own. If possible, do not sell your content rights exclusively to anybody! I have run across this issue with a number of companies and you wouldn’t believe how many can’t showcase anything online until they can get their rights back. What a nightmare for these companies. In the meantime, their competitors are passing them up. Whoever owns your content rights controls your future and that’s a tough pill to swallow.
    I am fortunate enough to work with the music industry and it has been very interesting. I believe you will see new artists start aligning themselves with various online entertainment companies. There are some unique and very cool ideas coming out. The current music industry won’t change but new companies are emerging that will distribute artists content online. That is going to be the catalyst that will change the industry.

  • http://www.tvworldwide.com Dave Gardy

    Dan- After thousand of webcasts, since 1997, I’d have to agree with you completely. That’s why we make our living on niche-focused, enterprise, government and association events at TV Worldwide. We’d rather serve 300 lawyers with 300 streams at 300kbps for $300 Per view while collecting ancillary revenue from 3 sponsors who are willing to pay to gain presence with the highly-distilled laser-focused audience we’ve rounded up (those 300 lawyers) because that’s exactly the audience they’re after. It boils down to a simple ratio of total revenue generated /cost of streaming bandwidth. Obviously this ratio goes in the wrong direction when the number of streams increase, jacking up the bandwidth costs, especially if there is no commensurate increase in revenue because of those added streams. In traditional broadcast TV, every new person tuning in isn’t costing the broadcaster anything, as it does with webcasting and this is something the entertainment community can’t seem to fathom. The key is to produce content that will generate the high-end revenue professionals are willing to pay for relevant highly targeted info they can’t get anywhere else (participating in a community interactively that they can’t find anywhere else) to get the margins you need. It’s not to say it can’t get done with a big event, but it has to be along the lines of MLB or IndyCar where the content and the medium are used intelligently. Yes, we’ll do the occasional big event such as 4th of July National Fireworks from the Capital with the National Park Service, as we did last week, and serve a ton of streams, but even the marketing and PR around that is directed to our troops overseas to boost viewing on our highly targeted USVets.TV channel for military vets which is where we attract the sponsorship. Strong Blog …keep up the good work.

  • http://www.TakeOneDigital.com Troy Witt

    Dan and others – I’m glad that you made this argument localized to the large scale entertainment event. As we all know, there are thousands of specialty webcasts every day that ARE profitable in many ways. Most of our clients have some educational aspect to them, and live and on-demand web video has been a huge hit for them. Not only are they able to reach geographically, they can reach across time for those who can’t attend due to a busy schedule.
    Many of your points are well-taken, though. The idea of exaggerated viewership numbers is a big problem. I have to do a giant PR song-and-dance when I tell a client that they had 50 viewers. That’s a major deal! I tell them to imagine 50 more people in their room… sometimes that means they doubled their LIVE audience, not to mention the on-demand viewership that occurs for months after.
    One of my most financially successful clients has been having a sole sponsor for each “episode”, ala 1950′s TV. They have literally seen profit margins of 100%+ on their webcasts.

  • Hamzeh

    very useful ideas

  • http://www.whnn.com Johnny Burke

    I’m a veteran commercial broadcaster, looking to the future, and beginning to explore the possibilities online. Thus, I’m very new to this discussion, but it seems to me that webcasting could be more successful if short features of the material it produces were offered to traditional media for free. Traditional media, in spite of a 93% penetration, currently finds itself cutting back, and many would welcome free entertaining features. Valuable, free publicity for long-form webcasts and podcasts could be secured with a tag line included in the pre-packaged content given to traditional media to use as they see fit, only requirement for that use being the attribution. Monetizing the webcast should then be easier with the increased traffic coming from the use of the features.