Video is sexy. Video is lucrative. Video works on both the big screen and the smallest mobile screen. Video is also very hard to do, extremely hard to scale and highly unlikely to be much of a lifeline for VC-addled publishers desperate for growth areas.
Mashable, which laid off 30 staffers last week, is the just latest digital publication that believes video is the future. The layoffs, as well as a $15 million investment Mashable received from Turner Broadcasting, are intended to reposition the company toward producing more video content including TV shows. To varying degrees, publishers ranging from BuzzFeed to Mic, Elite Daily and Upworthy are all betting their futures on mastering video, with the belief that distribution deals and lucrative video-ad dollars will follow.
“Pressure is coming from the ad sales side, saying if they had more video, they could make more money,” said one industry source who consults media and tech companies. “Then there’s pressure from VCs who ask when they’re getting a return on their investment.”
Reality check No. 1: Video isn’t cheap or easy.
Yahoo put $1 billion toward video content in the past six or seven years, according to one former Yahoo content executive. This includes several attempts to do original web and TV series, producing daily news and lifestyle content in-house and syndication partnerships the company struck with the likes of NBC and Turner Broadcasting. A billion dollars over six or seven years, and all Yahoo is left with is a struggling media business that it’s now trying to sell.
Of course, with an assist from social platforms, video has become a lot cheaper to produce. For instance, an executive at a publisher that makes content for Facebook, YouTube and Snapchat Discover said his company is spending $500 per minute of video produced. Compare this to Yahoo, which spent several hundred thousand dollars to do an eight-episode short-form Web series, according to the former Yahoo executive. For publishers that do Facebook news feed content — videos featuring licensed footage and text — the costs are even lower. And with the way these platforms prioritize scale, it’s easy for these videos to capture millions of views very quickly.
“Everyone is dazzled by the millions of views they’re getting on lightweight content,” said Keith Hernandez, president of Slate. “They think if they’re planted on Facebook first, the money is going to hit them before it hits anybody else.”
Reality check No. 2: Facebook offers scale, but little in revenue.
No one is making money off of Facebook video. Many publishers are confident in Facebook delivering some kind of meaningful revenue. But outside of its Suggested Video product, which has yet to move the needle in terms of revenue, most publishers still don’t have a way of making money directly off of the content they publish to Facebook.
“We’re making money on Facebook, but it’s not enough to keep the lights on at almost any organization,” said Cenk Uygur, founder and CEO of online news network The Young Turks.
That might change as Facebook develops video ad products, particularly as it relates to its next big thing: live streaming.
And yet, there is no guarantee, if Facebook allows publishers to make money from video ads, that they will.
“There’s a stampede toward video because that’s where the high CPMs are,” said Bernard Gershon, president of GershonMedia. “But you get the high CPMs in high-quality environments like a scripted drama or live TV. You’re not creating that environment while someone scrolls through their Facebook feed with the mute on.”
Advertisers, while in love with video and bullish on Facebook and other social platforms, are not going to come to a publisher just because they are doing video now.
“I don’t think most media planners will bat an eye at the strategy of some of these guys,” said Alex Stone, director of digital at Horizon Media. “Prove that you can do it well. Prove that people are engaging and staying with the video. Even the larger players in the space — the New York Times, the Condé Nasts, Time Inc. — have to prove to advertisers that people are watching their content.”
Reality check No. 3: TV is a good dream, but most dreams don’t come true, especially the good ones.
Another route is for digital publishers to chase video-ad dollars where they are actually being spent: television. Vice now has a cable channel. BuzzFeed, Mashable and Vox are all selling equity to media companies in exchange for extending their brands to TV.
That might work, but they will be up against many media companies that have a longer history of producing and monetizing TV. Plus, the costs associated with building a show or an entire channel on TV far outstrips what many mid-tier publications are used to. For instance, one video producer who had conversations with Mashable last year about an original series said executives at the company were not expecting budgets to be in the $200,000 range. Some executives at other digital publishers have been surprised by per-episode budgets that range from $20,000 to $40,000, this producer said.
“It seems like all Web video gets bundled together when there are shows that cost more, are scripted and have real talent in it — and it’s treated the same as BuzzFeed-like content,” he said.
Ultimately, publishers interested in doing video have to think beyond just making content for content’s sake. A differentiated media brand that provides value for the user, whether it’s via video or text or any other content type, has a better shot at sticking around.
“The interchangeable, mid-sized mediocre brands are going to pay the price to compete in this space,” said one digital publishing executive.