Last week, I was watching Adrian Wojnarowski (or Woj, for short) do a Facebook Live stream with his reporters from The Vertical on the night before the NBA Trade Deadline. Any NBA fan knows that Adrian is the dominant reporter for scoops. So, he has been a must follow on Twitter in the days leading up to the deadline and I gobbled up any Facebook (FB) Live Stream or podcast he pushed out in the days leading up to the deadline.
The live stream I watched ran from about 10 - 11pm Eastern. I was busy and only tuned in for the last 15 minutes. While I was watching, I noticed there were 4,500 concurrent viewers on the stream. There weren’t any ads while I watched or at the end of the live stream. The numbers were likely higher at the start of the stream.
The first thought in my head after the stream was: is 4,500 concurrent viewers a "good" number for a live stream? That's puny for cable networks but Facebook Live is apparently the future, so maybe it's judged by a different set of standards. I reached out to about 10 tech/digital people I know asking this simple question. What amazed me was how all over the map their responses were. Some said this number was amazing, especially at that time of night. Some said it was surprisingly small.
What’s the right answer for what's a "good" number for a live stream? No one seems to know, and that perhaps tells you we’re still very early in the development of these Over-The-Top (OTT) services.
Jon Steinberg launched Cheddar about a year ago as a new kind of channel delivering business and lifestyle news to a millennial audience in a mobile-friendly and live format.
It’s one of the first pure play OTT networks I’ve seen launch since Facebook Live appeared. Cheddar is now also available on Twitter (TWTR), Sling, Pluto and other services. It's also venture-backed.
Jon wrote a recent Medium post in which he discusses why “Post Cable Networks” like his are going to win in the long-term. Basically, Jon argues that even if his service stays “niche,” it can still be a big financial success.
The most memorable quote in the whole piece to me was:
Further, this explains why existing cable networks with audiences that seldom surpass 100,000 to 200,000 concurrent viewers, make hundreds of millions in annual revenue, while video producers pulling in billions of monthly views make very little.
Jon seems to be saying, if the cable guys - like CNN or CNBC - can make hundreds of millions of dollars in annual revenues, why can't services like Cheddar if it eventually gets up to 100,000 - 200,000 concurrent viewers? He's also saying professional services like his will attract more brand advertising dollars than an exploding watermelon video can.
To understand if this is true, let's look at how the old cable channels make money vs. these upstarts.
The Cable Networks make money in 2 ways:
- Affiliate revenue, which is subscription-based revenues from the old cable bundle and;
- Advertising revenue, which is from 30 second ads.
Jon thinks the new OTT channels can make money in the same two ways:
- Affiliate revenue, if they sell subscriptions directly to consumers and/or if other bundlers (e.g., Sling, Pluto, DirecTV Now, Sony Vue) sell bundles and;
- Ad revenue which could be brand placement ads like podcasts or YouTube stars do or some pre- or mid-roll ads.
The most important thing to remember about when thinking about what companies are going to make the most off of the Facebook Live platform is that Facebook is going to ultimately make the most. That's why they're buying the billboards to promote it. That's why they're paying the New York Times (NYT) and others to start building content for it. The more people are putting video services on the Facebook platform, the more Facebook can make money off of ads they place around them. They’ll probably capture the vast majority of the economics of this, just as they did with text and display ads. And if Facebook can tip some of the TV ad budget dollars their way too, it’s a huge win.
Now from a Cheddar perspective, they need to sell subscriptions directly and through partners, as well as integrate ads into their service over time. If Facebook handles the ads, Facebook will likely keep most of the money. Therefore, Cheddar will have to (and already has) experiment with branded advertising that mixes in to their content to supplement that. How many viewers will they need to get enough subs and enough ad dollars? I’m not sure the number of concurrent viewers is going to be the right metric to judge them on. It's more likely going to be the total viewers of the video content - watched live or later on demand.
If they can amass a large and affluent audience (live or delayed), advertisers will want to be there too.
As we move forward with these services, here are the big questions I’m interested in - and which the whole burgeoning ecosystem will have to answer:
- When do people want to watch live vs. on demand? We know we want sports and awards shows live but what else? I’m not sure how much people want ambient noise of whether the market is up vs. specific info on stocks they own.
- Beyond Twitter’s fire hose of information, when do I want ambient live video in my life?
- Is a video viewer on the Internet more valuable more valuable to an advertiser than a TV viewer because they can’t be distracted by their phone? If so, when will the brand ad dollars start moving faster over to digital from TV?
- Does video in video work on mobile since the form factor is so much smaller? When does video really work on a phone with other content around it? Are we going to look back on today's OTT services on our phones and think they were like the ugly first websites in 1996?
- What’s an example of a video OTT service that’s completely unique to the mobile form factor and not just a facsimile of an old cable network? What can you do with an OTT service that you can't do watching CNN passively?
- When will people subscribe to an OTT service directly? How did Glenn Beck fail? Which OTT services will work? Did Beck not sell enough subscriptions or were his overhead costs too high?
- What are the economics going to be for the Glenn Becks and Cheddars of the world from the Slings and DirecTV Now’s selling their content for them instead of direct? Are they going to make enough money from being in someone else’s bundle?
- Is 4.5k concurrents for a Woj livestream good? Or is it more about 200,000 viewers of that livestream over a 2 week period? What CPMs will an OTT service make on that? And should Cheddar or Glenn Beck be using Facebook Live (or Twitter or others) or shunning it in order to monetize their stream 100%?
This area of new OTT video services is entirely new. As a result, no one knows the answers to these questions. But the folks who figure out the answers to these questions are the ones who will make the most money from them.
