Situation
On Wednesday, August 9 Viacom announced its intention to purchase Atom Entertainment for $200M. The announcement propels MTV ahead in the race to distribute content online while providing Atom Entertainment with the marketing muscle and brand name to add new viewers.
State of the Market
Viacom’s purchase of Atom Entertainment furthers its objective to offer greater cross promotional outlets while adding new distribution points for its content. Content owners are trailblazing on the web and as they evolve their current appeal and long term strategies become evident. A ranking of how each studio stacks up in the hierarchy of online video distribution is necessary to fully understand a studios appeal today, and where they are going today.
- Walt Disney (ABC). While Viacom is attempting to become the top web property, Disney currently resides in that spot. Disney’s early partnership with iTunes in October 2005 indicated that new CEO Robert Iger was willing to experiment with digital distribution. iTunes was proceeded by the launch of a two month trial ABC Broadband video player in May 2006 which featured full length free streams of hit programming such as Lost, Desperate Housewives, Alias, and Commander in Chief . After evaluating the results of the trial which served over 16M streams, ABC announced intentions to move the broadband service out of trial in the fall and make it a part of its distribution plan. ABC.com appealed to the adult demographic. In order to appeal to youth, the company launched DisneyChannel.com featuring full length streams of popular children’s programming. The site immediately resonated with its audience and experienced over 11M streams its first weekend from June 2 to June 4. The streaming of youth content did not hurt broadcast as popular shows online remained popular in broadcast. The combination of offering a robust library of full length hit programming, high quality video, an intuitive and attractive user interface resonated with viewers. ABC represents the best in class. Disney’s strategy is fixed around offering full length content through various viewership opportunities such as broadcast and digital distribution including free streaming on broadband and download to own on broadband.
- Viacom (MTV Networks). Viacom became a pioneer in digital distribution when it launched the broadband channel MTV Overdrive in April 2005. The channel initially offered full length programming but has since evolved to focus on exclusive content such as outtakes, reality show follow-ups, cast interviews, etc. Since its launch, MTV Networks has continued to incorporate broadband distribution into its other properties. New sites include Comedy Central’s Motherload, VH1’s VSpot, Nickelodeon’s TurboNick, TVLand.com, and others. The only drawback for Viacom is their decision to not offer more full length content on their broadband channels, instead focusing on additional content. However, Viacom benefits by having a wide range of demographics, from children to adults that it appeals to. Additionally, recent acquisitions give Viacom access to a library of user created content and the ability to create games based on popular series. Viacom’s current strategy is to develop through partnerships and acquisitions the most cross promotional opportunities to extend its brand. Doing do will help viewers develop a deeper relationship with their favorite programming while exposing them to new interesting content.
- NewsCorp (Fox). The MySpace purchase is already proving to be a brilliant move for Fox’s parent NewsCorp which has nearly generated enough future revenue after a partnership with Google to offset the acquisition cost. Fox on the other hand may have a difficult time infiltrating MySpace to promote its programming and has not made significant strides in online distribution, being one of the last major studios to license content to iTunes. The network seemingly has no extra advantage over any other brand interested in putting up a branded page on MySpace. This could be troublesome for Fox but the nearly 100M users of MySpace will be too appealing for Fox to not make a MySpace play. Such a move could include MySpace offering virtual Fox goods that users could legally share including clips from a favorite program, premiers of an episode, wallpaper, music, etc. However, this approach could allow other studios to follow suit. Another option is recommendations. If MySpace gets into the business of recommendations based on user preferences Fox programming could top the list. The most realistic opportunity exists in the recently announced Google deal. If 100M users are using Google’s MySpace search engine, Google’s ad network could promote Fox programming. This is the least intrusive entry point for Fox and still offers significant eyeballs. Even if Fox cannot effectively integrate into MySpace much of Fox’s content such as The Simpsons, Family Guy, and others are ideally suited for repeat viewing. Thus, Fox should consider opening a broadband channel that features much of its available content.
- NBC Universal. NBC has found great success with its partnership with Apple. Broadcast editions of The Office actually saw a ratings increase as viewers warmed to the show online. Since offering programming on iTunes, NBC has worked to develop interesting content for its site. Such content includes webisodes of The Office, an online interactive sub-program to Last Comic Standing titled Last Comic Downloaded, and partnering with YouTube to offer promotional content. These innovations are useful in keeping an audience interested in a program and even driving viewers to a site, but they are not enough. NBC’s biggest issue is it doesn’t own much of the content that is broadcast on the network, making digital distribution a murky proposition filled with contract renegotiations. This led to NBC becoming the first network to offer an NBC branded show, Scrubs, which it did not wholly own (it is produced by Disney’s Touchstone Pictures). Even if it proves painful NBC must continue to investigate its options in this arena to avoid falling farther behind its competition. Distribution has also been a problem for NBC even though the company has experimented with various options, including mobile. Ultimately the various distribution points seem to have little synergy evidenced by the purchase of iVillage and its difficult integration into the NBC community. For NBC to find success it must decide if it wants to digitally distribute its content and if so, how does it acquire the rights to do so. In the interim developing sub brands around popular programming may continue to drive traffic but as a long term play, NBC must evolve their strategy, find or acquire better cross promotional partners, and begin to offer some of its content online.
- CBS. In an attempt to keep pace with ABC after it launched its broadband video trial last spring, CBS introduced its own broadband player, Innertube. With some content developed specifically for the service, Innertube lacks the ability to build off the popularity of CBS’s programming. In lieu of developing content completely devoid of a connection to CBS programming, the network should focus on offering better content and improving the channel. The interface is lacking ABC’s flair and the content is lackluster. Viacom’s broadband services, which often do not feature full length programming offer extras that are ideally suited to the many reality series that pervade MTV networks. CBS has a few reality shows but not nearly enough that offer extras from a show would provide an adequate library. Outside of Innertube, CBS has made key decisions over the last year when it comes to internet video. Popular shows such as How I met Your Mother and Two and a Half Men made two episodes available for free streaming on Yahoo! The partnership featured content directly related to CBS’s programming and was adequately timed to promote the shows. Innertube however is a patchwork of clips that would otherwise never have found the light of day. Even the popular CBS summer reality show Rock Star: Supernova calls MSN its home. It is this type of integration that CBS needs with its content. While clips of how Kevin James of The King of Queens lost 40 pounds in 2003 may interest some, little traffic will be intrigued enough leave other broadband properties to view that clip. As the top broadcast network, CBS clearly has focused on developing hit programming, which has aided its success. However, it must now begin to evaluate its online strategy or risk others utilizing the web to increase their network’s popularity and rival CBS for the top market spot.
Viacom’s Purchase of Atom Films
As outlines, every network is taking a slightly different approach to the market. The purchase of Atom Entertainment is an important next step for Viacom. Atom Entertainment which is one part video (Atomfilms.com) one part gaming (Shockwave.com) presents two excellent opportunities for Viacom to further its strategy.
◙ Cross Brand Advertising. MTV has the benefit of having specific core audiences that it can cater to. Nickelodeon appeals to the children, MTV to young adults and twenty somethings, and Nick at Nite to Adults. Amongst the activities that these groups enjoy include casual gaming, viral videos, and social networking. Purchasing Atom Entertainment helps MTV cater to two of the three aforementioned interests of its core demographic gaming and viral videos. Gaming appeals to those in every age group, assuming the appropriate type of casual game is targeted at the right demographic. Viral videos appeal more to the MTV generation.
◘ Shockwave – Atom’s gaming sites, Shockwave and AddictingGames will help MTV develop branded advergames based on various MTV properties. MTV can create games that appeal to the key demographic group they are seeking to attract. Doing so further extends the brand and allows players to interact with a property that is of interest to them. Owning the site will allow MTV to prevent Shockwave from developing advergames for its competition if it so chooses. This will remove a promotional outlet for others. Shockwaves other expertise revolves around an In-Game Network which adds advertisements into games that are not branded around a specific property. This allows MTV to promote properties more organically. If a user is playing a game sports game, MTV can place a billboard in the game’s stadium promoting upcoming programming.
◘ Atom Films – Viral videos are the ultimate niche audience content because they need not appeal to a wide swath of people to find success online. Owning Atom Films provides MTV another opportunity to target key demographics. If an Atom Films user watches a lot of a specific type of content, MTV can recommend a program that may be appealing to that user. This program can be on the many Viacom sites or broadcast. With viral videos often passed around amongst friends who share a similar interest or sense of humor, MTV can create a grassroots campaign for certain programming by advertising on viral videos.
◙ Multiple Platform Marketing Campaigns. The purchase of Atom Entertainment allows MTV to offer its advertising partners unique cross platform marketing packages. With CPMs for online video in the $25 range MTV could develop very profitable packages of marketing that include broadcast, user created content, and in game advertising. Or an advergame. Or commercials on Overdrive. In the short term, the advertising opportunities MTV can offer its partners will exceed its competition while offering very targeted marketing camapigns. Even ABC and its broadband player cannot match the distribution points MTV will offer and the focused demographic marketing campaigns it could offer.
◙ More Content. MTV has already innovated by bringing the show Web Junk 20 to television. The show, which features 20 interesting clips from around the web is just one example of how MTV can utilize the library of iFilm and Atom Films content. Since Atom Films has strong relationships with its content creators, and even runs its own Atom Studio, MTV could actually use the site as a breeding ground for new talent and ideas. MTV could alter the user agreement that would ensure MTV first look rights to content uploaded to Atom Films. This would allow MTV to develop popular ideas without worry about competitors using Atom Films to poach talent. MTV should also obtain rights to various platform distribution for uploaded content. This would allow MTV to develop new series for broadcast, Overdrive, and other properties based off the most popular, interesting, or innovative content uploaded to Atom Films.
◙ Promotional Tool. With Atom now a company property, MTV could provide development kits to content creators. Basically, MTV would provide specific clips, song rights, sounds, etc. to content creators to allow them to create legal mash-ups of MTV content. This legitimate use of copyrighted content could then be played on iFilm, Atom, or broadcast to build interest and promote MTV content. Initially, MTV could offer limited distribution of development kits to prevent piracy but could expand the offer if it is successful.
Atom Entertainment also stands to benefit greatly from the backing MTV offers.
◙ Marketing Power. Atom Entertainment has found success by word of mouth promotion and the viral nature of its games and videos. With MTV it can be expected that MTV will cross promote the site amongst its various services helping drive additional traffic. With a library of content at its disposal, Shockwave can begin developing more branded games which will find intereste1d niche audiences. MTV will also afford Atom a larger marketing budget outside of cross promotional opportunities.
◙ Additional Content Outlets. MTV has already proven it is willing to innovate with Web Junk 20. More recently, the company introduced Flux in Europe
, a social networking/user created content site that will provide the backbone of content to a television station of the same name. Acquiring Atom will help build MTV’s library which can be added to its Flux service in Europe and to one if it launches in the US
.
◙ Atom Filmmakers. MTV offers filmmakers distribution they could not have otherwise achieved, whether it be on a more promoted Atom Films, iFilm, MTV broadcast, MTV broadband, and Flux. Recognition will help users creating content generate more money for their content while providing greater exposure to Hollywood
and MTV executives who could then provide an opportunity to break into the business of making studio content.
Guidance
As studios continue to develop their online strategies it is clear that there is ample opportunity for everyone to succeed in the eyes of the consumer. Those that act quickly may find greater success by finding additional distribution outlets for their content making them more appealing to advertisers. Moving forward studios should remember a few key points to ensure success:
◙ Move Your Content Online – This is easier said than done, as networks must secure digital distribution content rights. ABC, MTV, and others that move top tier content online and offer it for free may stand an advantage when it comes to a network of choice. Viewers may opt for new programming they know they can view even if they miss a broadcast episode. While broadband services haven’t been available for a full season in such a capacity, this season will demonstrate if consumers want flexibility when picking their shows. It is unlikely this will have a major impact this season but in future seasons it very well could prove a differentiator in the broadcast as well as the online space.
◙ Define Your Strategy – There will be divergent strategies for every studio. It is important to decide what strategy works best for the type of content a studio owns and the audience said content appeals to. CBS may not have content that is particularly appealing to the MySpace generation and thus may not want to invest in Social Networking regardless of the allure. Matching the type of content a studio has to its distribution outlets is imperative to find success.
◙ Develop Partnerships – A studio’s site will be useful in attracting viewers that are interested in new programming that is easily connected to the network. For older content, studios may have a harder time reminding users where a particular show aired making users search to find programming. This is where Yahoo!, Google, MSN, and AOL should be considered as content aggregators. Content owners will not run the risk of a consumer thinking Yahoo or AOL produced a show. The extra traffic driven by licensing content to an aggregator should help to offset the revenue lost because a studio will have to share with said aggregator. It will also provide a promotional outlet to drive traffic back to a studios site to watch current day programming.
◙ Don’t focus on unique content – While the allure of developing new brands for the online world is appealing, it should not be a primary focus. Studios have great brand equity in the content that is already available. While only providing clips is not an ideal broadband offering, it will resonate more with fans than having to involve themselves in an entire new series online. Unique content can be offered as long as it build on pre-existing brands and utilizes the relationship a viewer already has with a program or network.
