January 21, 2009
As we begin 2009, the opportunity for major media and entertainment companies to make digital video into a profitable business effort has never been as promising, or important. Online consumption of top programming is expanding exponentially, digital video content management and media rights management (also known as DRM) are widely available and maturing, and CDN distribution costs for high quality and near-HD content are continually decreasing.
Today’s economic climate, if viewed properly, actually makes moving new business opportunities, such as digital video, toward profitability simpler. Why? During periods of free-spending economic conditions we have the tendency to spend money on anything that sounds plausible. During tighter economic times, however, budgets are reduced and options are fewer, so resources need to be focused on achievable and profitable goals. If new businesses and their teams focus on the basics of achieving profitability in stringent economic conditions, business units will be positioned to accelerate profitability through sound expansion as economic conditions improve. Solid business practices built around simplified operations, sustainable revenues, low costs and a positive ROI approach with limited investment capital typically win and sustain long-term.
So if the goal of a major media and entertainment company is to build a sustainable, profitable digital video business unit, then how should management approach this challenge? First, it’s critical to develop strategies that can be achieved and measured in just a couple of quarters that build profitability with relative straightforwardness. Strategically, this means shooting for wins that may seem basic but in fact create a successful foundation upon which expansion can be built. An example of a strategic goal might be to develop an ad sales operation flush with a rich (but not unlimited) number of ad products, avail capabilities and avail types that can be sold against all content on a fixed number of properties. A tactical execution plan that pursues a simplified approach for allowing different teams (ad sales, ad ops, player engineering) to function cohesively yet autonomously will create that solid foundation for future growth. As profitable results are achieved, ad products and avail successes can be measured and fine-tuned, allowing immediate expansion to more properties with a cohesive offering and streamlined low-cost operations.
Syndication will naturally follow — and, similarly, developing a strategy that becomes tactically repeatable is the key. Instead of focusing on fewer syndication points, the plan should be to concentrate on tactical ease that becomes “clone-able” and immediately profitable for each partner rather than trying to distribute everywhere. If your syndication strategy doesn’t take on a cloning feel after completing three to four syndication deals, step back and determine what you need to do to develop a turnkey process. If the tactical execution of your syndication practice can’t become turn-key, then your syndication business won’t become profitable.
Often it is said the best time to pursue new business opportunities is when your only option is to focus on achievable, profitable business milestones. The time to turn digital video business units into profitable foundations for growth is today. Building a longterm, sustainable business through multiple short-term successes and profitable measurement points is the right approach in today’s business environment.
Steve Robinson is CEO of Panache, which offers an ad-insertion platform that provides major media and entertainment companies with the infrastructure to generate and increase revenues in their movement of video to the Internet.