Niche Video Networks: Can Content Owners Make Money?

I get a lot of calls and e-mails from content owners of all sizes. Aside from the major broadcasters, many of those who contact me are smaller content owners producing their own online content and are trying to figure out their distribution, syndication and advertising strategy. In the past 12-18 months, niche video networks or micro video networks as some call them, such as For Your Imagination and Next New Networks have ramped up their offerings for small content producers trying to gain their business. At the same time, video platforms like Babelgum and Brightcove are also competing for these same content owners and the differences between a network and a platform continue to confuse people.

These types of aggregators and networks offer content creators a promising new vehicle for syndicating and monetizing content that would be hard to do on their own, but many of those content owners keep asking what exactly the niche video networks offer and how the business relationship works? Much more info is needed on how these services actually operate and whether they might be good partners for content owners looking for an effective channel for distribution and monetization. As an industry, we talk about the value the networks provide, but from a very high-level with few details. As a result, content owners don’t know where to start and I get the same frequently asked questions all the time.

To try and shed some light on this for content owners, I asked Revision3, Next New Networks and For Your Imagination amongst other, on how they explain their business model to content owners and how they set customers expectation properly on licensing, syndication and ad revenue.

The first question I am always asked is are these networks looking to license content, or are they primarily interested in acquiring and owning content? From those I spoke with, the consensus was that most networks look for a non-exclusive licensing type agreement that is based upon an advertising rev share, which is what most of the video sharing networks offer today. Some destination type sites may ask for an exclusive license for a fee upfront with no rev share, but those are less common. Another model might be the opportunity for a content owner to produce exclusive new content for a destination type site which works as a work for hire type of relationship.

Of course, content owners also want to know how is ad revenue generated and shared with content owners? Generally, rev share is some kind of a split of net revenues, maybe as much as 50/50 for on network and some three way split if it is on a publisher network. Net revenue is calculated by taking gross revenue minus any network costs for your content and the ad campaign, such as operations, management and hosting. Those costs usually amount to about 25% of the gross, with the remaining balance split with the content creator. While it sounds easy enough, the problem is that there is no "average" split of net revenues. The only true way for a content owner to know how much their split would be is to get an actual quote from the network.

Another question often asked is what demographics are networks interested in reaching? Only 18 – 30 yr. old males, or a wider audience? Each network has a different focus and target vertical, but for the most part, the wider and more generic the network the more broad the demographic reach is. The niche networks can get more specific and as a result should be able to offer better rev share models, but it may end up content owners get less revenue because the traffic is smaller. Targeted should mean better CPMs, but that’s not always the case and it’s nearly impossible to get the networks to tell you their CPM average across a certain type of content or niche vertical.

With all the talk in the industry of the costs to deliver video online, many content owners also ask if the networks pay for the bandwidth of delivering content from the website, or does the content owner foot the bill? If you are using a platform, like Brigthcove, the content owner foots the bill. If you are using a network, it can go both ways. For Your Imagination says that when they embed a video with blip.tv, Viddler or Revver player for example, those companies cover the delivery costs of the video in return for the right to sell ads on the videos and to share the revenue with For Your Imagination. For Your Imagination says this is super important because even though a show may not make a lot of money, at least they are no video delivery fees which for some shows can be expensive, easily over $1000 a month.

As for the question of what’s the duration of and standard provisions offered in a typical contract? All of those I spoke with said their is no "typical" contract as so many variables are taken into account. That being the case, I have yet to see any niche video network publish a list of all the factors that are taken into account that determine their contract terms with a content owner. I understand if you don’t want to publish your rates, but wouldn’t it be nice if content owners had some idea of what factors affect the revenue share numbers?

A lot more work is needed by the nice video networks and video platform providers to make their pricing and business terms easier to understand for content owners. If it was made easier to understand, content owners wouldn’t be so confused and the market would grow faster. We’d see more adoption and more usage of online video and we’d have a better chance of content owners not having to struggle to figure out what the pricing is, how it works and what their cost would be. And it’s just not the networks that have this problem, the platform providers as worse. Last week I was trying to help a content owner review pricing from both Brightcove and thePlatform and trying to decipher what the terms are that they use is confusing even for me. On one hand, many of these video platform providers say you pay one price to use the platform, but then charge you for "software platform fees", bandwidth, the number of media clips you have, storage, use of APIs and the number of "user accounts" you have. Come on guys, this needs to get easier.

  • Dan, Excellent article. There’s no doubt that navigating these complexities would be daunting for a content owner, especially if they’re a bit of a “creative type” that just wants to get distribution and advertising taken care of so they can get back to what they’re good at – producing content.
    I’d like to think that a lot of this complexity is just a symptom of a relatively young and quickly evolving ecosystem. The promise of online video is massive efficiency gains resulting in the ultimate meritocracy. Dollars should flow cleanly and easily to each party involved, consummate with their value contribution. I can’t wait for the day when the online video production, syndication and advertising system operates as smoothly as AdSense/AdWords in terms of its level of automation and proportional value allocation.
    Cheers, Shawn

  • Dan, you hit the nail on the head about contracts. My company is trying to compare pricing amongst many of the “platforms” and can’t figure it out. Forget one price for using their platform, they nickel and dime you for everything. And can someone please explain why they charge you more for each additional user of the system? You would think they would give me an incentive to put more content online and would want all of our employees to use it. Apparently not as they all charge per user.

  • Good article and comments. I believe as in the non-online business world, all small businesses account for more business than the corporations combined. I believe online niche content will collectively add up to more business than the big guys combined. And our niche audience is far more targeted for advertisers.
    I think the first “networks” and “platforms” that cater to the niche content sites will reign supreme. After all, people will always have specific interests which the internet can satiate and regular broadcast networks cannot.

  • Great piece. Very informative. Direct to the point. Mayb there is a place for a central online market-place to connect between content owners and delivery companies, as happened in many fields.

  • I agree with the points made in the blog, and throughout the comments as well. Through my research there is very little transparency and it’s a nightmare for web video creators trying to figure out who to use if they want to go it alone (i.e through Blip, Brightcove, etc.).
    Through sites like YouTube, Metacafe, Revver, and UnleashVideo (disclosure: this is my company’s video sharing site) it’s assumed that the hosting and bandwidth are covered and the revenue share is usually 50/50.
    If an Adwords/AdSense like model can be figured out for web video that’s when we will enjoy a simple yet lucrative model for all entities involved.

  • Michael Tapp

    “An Adwords/AdSense like model can be figured out for web video that’s when we will enjoy a simple yet lucrative model for all entities involved.”
    I completely agree Jeremy.
    I noticed that Next New Networks is syndicating their content across multiple third party hosting sites like Youtube, Veoh, Y! Video, MySpace TV etc… The sponsor’s instream video ads are in the videos posted on these third party video hosting sites.
    Couldn’t a content creator cut out the middle man(online networks) by directly contacting sponsors and using third party video hosting sites like YouTube and MyspaceTV?
    Do you think Revision3 & Next New Networks have different T.O.S. deals with third party video hosting sites?

  • Hei Dan,
    Very nice article 🙂
    Also, have a look to our new product developed to help video content publishers to monetize their content, layeredbrain.com
    Best regards