Thursday, December 08, 2005 - Verizon Wireless to deliver CBS clips to phones

CBS is joining the move to send video clips to cellular phones. Are consumers going to pay for video clips over cell phones or pay much less to get them over the internet?

Consumers do not generally realize that video on demand is going to come to the internet. That is unless consumers agree to over-pay for these services over cell phone networks. A similar dance is playing out in the music business. Apple sells a tune for $.99 and Sprint charges $2.50 for the same tune. Consumers should hold out to make these available over the internet for the at least the $.99 price.

The providers of content, such as CBS, are avoiding making content available over the internet until they can assured they will get paid for each viewing. When Google and Yahoo have much independent content available and this content starts to win market share because it is a relative good value (much of it free in exchange for advertising) then the pressure will be on the media networks.

Take weather as an example. It does not cost a fortune to set up a studio to produce one weather report after another for one community after another. A company could produce 3 minute weather reports for 20 communities? non stop. On demand, any interested party in the 20 communities could view a current report.

Take high school sports as another example. A local company could focus on all teams in a county and keep a backlog of sports reports on file. The night that Joe hits a three point shot at the buzzer to win the big game might be replayed tens of thousands of times over the next 50 years. The long-term advertising revenues from that one shot would go along way toward paying for the production crew (maybe just one camera man and one announcer) to follow those teams.

One might say that the demand for high school sports is not strong enough to support video. That would be a wrong assumption. The theory of the "long tails" is a valuable reality to understand. The fact is that entertainment demand has been shown to be a very widely distributed one. In other words the bell curve is a flat looking curve. This means that, although the most popular shows will attract a large audience, the sum of the audiences for all the other shows is greater than the sum of the audiences for the most popular shows. Another way of saying this is that TV reruns get a lot of viewing year after year.

CBS, ABC and NBC are being forced to consider new ways to distribute their shows. Cable TV no longer has the solid lock on the consumer. Per person time on the internet has grown dramatically and is projected to grow dramatically. Right now, total time spent is up to 30% but advertising revenues is still only 5%. Smart marketers can save a lot of money by advertising over the internet.

It has taken Google 7 years to gain 1% of the total advertising market. The last half of one percent only took them 1 year to gain! Is it possible that Google will gather 10% of all advertising revenues one day? Of course it is.

The key is going to be video. I very much want to be able to watch what I want when I want without having to spend 40% of my time watching advertising. A good 30 minute stock market show could gain a large audience quickly if it was available on demand. As a 55 year-old who is ready to slow down, I am not ready to build a media business, but others will. Assuming that I successfully sell my resort property rental business, I would be willing to back the production of such a show.

The world we know is changing. CBS joins others in feeding clips to cell phones. Joy will come to Mudville when huge amounts of content are available over the internet on demand.