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Bouncing off the paywalls
23 Oct 2009 | 21.11 Europe/London
American video-on-demand service Hulu, hotly tipped to be coming to the UK to partner with ITV, is the latest media outlet to announce it's considering charging for content. As the amount of money we're paying for our bandwidth continues to fall, could the cost of what we actually do with our broadband connections be set to rise?
Hulu says the amount of money it's making from advertising means isn't going to be sustainable in the long run - and it's considering putting up a paywall as soon as next year. If that sounds familiar, you won't be surprised to hear Rupert Murdoch's News Corp. is involved; under its Fox branding, alongside NBC and Disney, it's one of Hulu's co-owners. But this time it's not just another Murdoch doing the talking: its someone called Chase Carey, the Deputy Chairman of News Corporation. Speaking at the Broadcasting & Cable OnScreen conference, he said:
When it comes to the rumours linking Hulu to ITV, what's interesting is that ITV.com's not necessarily doing so badly without charging its users a penny. According to analyst Screen Digest, ITV may actually having greater advertising success than its overseas equivalents in relative terms, with its online revenue predicted to have tripped over 2009. At the same time, its chief executive Michael Grade is fearful of US dominance in the UK's nascent VOD market:
Rival broadcaster Channel 4 has shown it's not so reluctant to get into bed with an American partner, signing a contact that's married it to YouTube for at least the next three years. The Google-owned video-sharing site will host shows like Peep Show, Skins and Hollyoaks not long after they're first shown on TV, with Channel 4 positioning adverts around them. Meanwhile, three thousand hours of the broadcaster's 4oD back catalogue is also getting the YouTube treatment, including the likes of Brass Eye and Ramsay's Kitchen Nightmares.
With YouTube's reputation as a super-massive financial black hole, advertising revenue is set to be divided "on an agreed formula." And Channel 4's chief executive has a very different take on allying with US forces to Michael Grade. "Making our programmes directly accessible to YouTube's 20 million UK users will financially benefit both Channel 4 and our independent production partners and help bolster our investment in quality British content," Andy Duncan says. The non-exclusive Channel 4-YouTube deal kicks in early next year, perhaps just as Hulu is building paywalls.
But will people pay for web content anyway? After Rupert Murdoch started talking about the "malfunctioning" online business model that the newspaper industry wandered into more-or-less by default, researchers have been looking at whether we're happy to pay for news on the net. Up until now, the policy has to been to cannibalise on the material they go to print with and try and get as many users on board as possible; this week the likes of The Guardian have been celebrating having thirty million unique readers each month. But with ninety-one per cent of people saying they "would never pay" for online news according to a new survey, is the paywall really the foundation of a better model?
Introducing paywalls at this stage is like announcing at a wedding reception that the wedding's cost a bit more than you thought, and you'll now be charging people for the buffet. Those who're there just for the food will go elsewhere - there's always another wedding reception somewhere for them to gatecrash, after all - and others will just go hungry. Even if a few, perhaps around nine per cent, will actually pay for the buffet, is that really going to make it all worthwhile?
Hulu says the amount of money it's making from advertising means isn't going to be sustainable in the long run - and it's considering putting up a paywall as soon as next year. If that sounds familiar, you won't be surprised to hear Rupert Murdoch's News Corp. is involved; under its Fox branding, alongside NBC and Disney, it's one of Hulu's co-owners. But this time it's not just another Murdoch doing the talking: its someone called Chase Carey, the Deputy Chairman of News Corporation. Speaking at the Broadcasting & Cable OnScreen conference, he said:
I think a free model is a very difficult way to capture the value of our content. I think what we need to do is deliver that content to consumers in a way where they will appreciate the value. Hulu concurs with that; it needs to evolve to have a meaningful subscription model as part of its business.
When it comes to the rumours linking Hulu to ITV, what's interesting is that ITV.com's not necessarily doing so badly without charging its users a penny. According to analyst Screen Digest, ITV may actually having greater advertising success than its overseas equivalents in relative terms, with its online revenue predicted to have tripped over 2009. At the same time, its chief executive Michael Grade is fearful of US dominance in the UK's nascent VOD market:
I guarantee an American company will take the lion's share of our content in the UK very soon ... Google or Hulu. Hulu is looking to launch in the UK. As a result of the commission's decision, UK creative money will go to the Americans and not get reinvested in the UK.
Rival broadcaster Channel 4 has shown it's not so reluctant to get into bed with an American partner, signing a contact that's married it to YouTube for at least the next three years. The Google-owned video-sharing site will host shows like Peep Show, Skins and Hollyoaks not long after they're first shown on TV, with Channel 4 positioning adverts around them. Meanwhile, three thousand hours of the broadcaster's 4oD back catalogue is also getting the YouTube treatment, including the likes of Brass Eye and Ramsay's Kitchen Nightmares.
With YouTube's reputation as a super-massive financial black hole, advertising revenue is set to be divided "on an agreed formula." And Channel 4's chief executive has a very different take on allying with US forces to Michael Grade. "Making our programmes directly accessible to YouTube's 20 million UK users will financially benefit both Channel 4 and our independent production partners and help bolster our investment in quality British content," Andy Duncan says. The non-exclusive Channel 4-YouTube deal kicks in early next year, perhaps just as Hulu is building paywalls.
But will people pay for web content anyway? After Rupert Murdoch started talking about the "malfunctioning" online business model that the newspaper industry wandered into more-or-less by default, researchers have been looking at whether we're happy to pay for news on the net. Up until now, the policy has to been to cannibalise on the material they go to print with and try and get as many users on board as possible; this week the likes of The Guardian have been celebrating having thirty million unique readers each month. But with ninety-one per cent of people saying they "would never pay" for online news according to a new survey, is the paywall really the foundation of a better model?
Introducing paywalls at this stage is like announcing at a wedding reception that the wedding's cost a bit more than you thought, and you'll now be charging people for the buffet. Those who're there just for the food will go elsewhere - there's always another wedding reception somewhere for them to gatecrash, after all - and others will just go hungry. Even if a few, perhaps around nine per cent, will actually pay for the buffet, is that really going to make it all worthwhile?