Parks Associates Blog

Wednesday, February 14, 2007

Content owners should call the shots!!!

The Internet video marketplace is still in its infancy. Although YouTube has been getting all the traffic and attention from the press, most of the professional content it is distributing still has a shade of gray color. In addition, as much hype as long tail content gets, most of the revenue derived from online video content, either through user-paid models or ad-supported models, still comes form professional content. In this high-stake poker game, why should content providers show their cards voluntarily? Why should they collaborate and foster a monster who may suck their blood one day? Doesn't it make more sense for the major media companies to build more direct-to-consumer channels and relationships and just treat Youtube as one of the affiliate networks, instead of "the" online video destination? The difference is profound. Media companies probably perhaps will share only 30% of their revenue with an affiliate, vs. 50% with an "online video destination". The Internet is an open platform after all and media companies should leverage this characteristic to their own advantage. Content providers should call the shots, instead of handing over their negotiation power to Googtube or any other aspiring online video distribution site.

This is a paragraph we wrote in the online video report we published in Dec. 2006.
"Partners are important, but do not get tied up in exclusive deals with one dominant player. In this early stage of the game, it is to the content providers’ best advantage to build their negotiation leverage and foster channel diversification and competition, in order to avoid the conundrum they already face in the retail market (with Wal-Mart and Target being the dominant players)."

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