Broadcasters look to exploit online video

The short answer is no. The BBC iPlayer, which has been heavily marketed since Christmas, and is now the 47th-most-visited website in the UK, according to Hitwise. By comparison, YouTube is the eighth-most-visited site. But the iPlayer is funded by the licence fee and doesn't feature advertising.

The commercial broadcasters' VoD services, ITV.com, 4oD and Five Download, have varying degrees of take-up, but cannot claim to make significant revenues as yet, according to Arash Amil, head of broadband media at Screen Digest. The VoD offerings from BSkyB - Sky Anytime - and Virgin Media - Virgin Central - are attractive add-ons, but are not revenue streams in their own rights.

Second phase
"We're in the first of two phases in terms of how consumers interact with video online," says Amil. "(At the moment) the PC is the primary platform for watching video online, while people are multitasking. The second phase will be broadband to set-top boxes when the internet will become another means of distribution to the TV set." Amil says the current phase involves streaming video to PCs, while in the next phase of VoD development people will be more likely to download programmes over the internet to their TV sets.

Meanwhile, online video services such as ITV.com, which the broadcaster plans to relaunch, continue to evolve. Improvements to the service will include introducing the ability to search for programmes in different ways, such as by genre. ITV head of online sales Gary Cole says: "It's a minor facelift for the site to make it easier on the eye and easier to navigate."

He says VoD is an important part of ITV's sales strategy: "While demand is quite nascent, it has high potential. The primary reason for people to go online now is to seek information or communicate, but in the next four or five years the biggest reason for going online will be for entertainment."

Channel 4's 4oD service claims to have received 100 million streams or downloads since it launched just over a year ago. But Amil doesn't think ITV.com or 4oD have worked particularly well. "We see them as comparative failures to date. ITV has a lot of idiosyncrasies. 4oD went for downloads when its most prized property was Channel4.com and it's still caught between strategies," he says. He predicts that Five will launch a more compelling online video service this year, with the benefit of development by owner RTL Group, the pan-European broadcaster.

But Five isn't part of the planned combined VoD service backed by the BBC, ITV and C4, codenamed Kangaroo. Although the service will feature advertising, it is not yet clear how revenue will be divided between the partners or how the new service will work alongside catch-up TV on the broadcasters' own websites. "There are a lot of issues that need to be resolved," says Amil. Cole will only say: "We're all very pleased with the progress."

Media owners hope to generate significant revenue out of online TV by either charging people to view premium content or from advertising. Such new revenue streams are vital as broadcasters look to offset declining advertising revenues, caused by the audience fragmentation wrought by rising multichannel TV take-up.

Commercial opportunities
So where is the money to be made? Pre-roll and mid-roll ads or messages before or during a programme are the most obvious commercial opportunities. Neil Walker, digital buying manager for Zed Media, says post-roll ads don't work, although short clips on Channel4.com do have post-rolls from firms such as McDonald's.

Walker says the challenge is to find advertising that works with short-form programming. "The next big thing is how to monetise the huge volume of YouTube-style video," he says. User-generated content will therefore only really be of interest to advertisers if they crack this challenge.

For now, Walker reckons advertiser demand for online video is fairly low and is lumped in with other advertising. "Online video is still seen as a nice add-on to other online activity," he says.

Whatever the story on advertising, consumer demand for online TV is set to continue growing. Sky director of on-demand Griff Parry says 1.2 million of the 1.9 million customers with access to Sky Anytime TV have already used its service.

So, regardless of how VoD services are distributed - via PC or TV - they are here to stay and will become increasingly important for broadcasters seeking to diversify beyond the ad-funded TV model.

BROADCASTERS' ONLINE VIDEO SERVICES

ITV: ITV.com launched in July 2007, offering a free catch-up TV service and archive programming under a "Best of ITV" banner. The service attracts six million unique users per month.

Channel 4: Channel4.com offers short clips, while 4oD, which launched in December 2006, offers free catch-up TV and premium content from 99p per view. 4oD claims to attract 3.3 million unique users per month; one million via PCs and 2.3 million combined via BT Vision, Virgin Media and Tiscali TV.

Five: Five Download service launched in October 2006, offering archive episodes of CSI and Grey's Anatomy for around £2 per episode.