Peter Kafka

Recent Posts by Peter Kafka

TV on the Web: Growing Fast, Still Small

Here’s a quick way to describe the state of TV on the Web, via two graphs from a new research report from Screen Digest analyst Arash Amel.

Graph one: Look how fast this business is growing! Broadcast and cable shows on the Web will generate less than $600 million in ad dollars in the U.S. this year, but four years from now that number will be close to $1.5 billion (click to enlarge).

online-tv-ad-growth

Graph two: Look how tiny this business is! That $1.5 billion will be a drop in the bucket for TV advertising as a whole, which is a $70 billion business, give or take a billion. (It’s so small it’s literally almost impossible to find, but if you squint hard you can see a tiny sliver of dark green on the top part of the chart below.) And crucially, it will be smaller than the $2 billion that Amel predicts will flow out of conventional TV advertising.

tv-ad-revs

Amel is the same analyst who cause a bit of a stir last year when he predicted that Hulu, the joint venture owned by News Corp.’s (NWS) Fox, GE’s (GE) NBC and Disney’s (DIS) ABC, was on track to eclipse Google’s (GOOG) YouTube in gross profit. This report is less pointed–it’s basically a landscape piece–but there are still some good nuggets.

Such as:

  • Apple’s (AAPL) iTunes dominates the market for paid TV shows delivered over the Web and controlled 60 percent of the market last year. Amel figures iTunes will hold on to 43 percent of the market by 2013. But he thinks that market will be significantly smaller than advertising on free TV shows delivered over the Web: $800 million vs. $1.5 billion in four years.
  • Web TV purveyors like Hulu and CBS (CBS) have been reluctant to run as many ads online as they do on conventional TV. But Amel says that will change. Web TV shows carry an average of five ads per hour, but he figures distributors can eventually boost that number to 12 ads an hour.

One big caveat here: Amel’s report only addresses TV shows on the Web, not video on the Web. Amel doesn’t spell this out, but I assume that’s because he’s most concerned here with the fate of existing players like NBC, ABC, et al. And, I’m guessing, because he doesn’t think that video on the Web that isn’t TV has much value.

There’s a whole ecosystem of players creating and distributing Web-native video who would argue with that. But they’ll have a stronger case when they can show significant revenue of their own.


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