If 2008 was a boom year for Web video, then 2009 looks to be a bust. While advertising dollars directed to Internet television are projected to grow 45% this year, experts nonetheless expect the recession to considerably thin the ranks of digital studios, online video destinations and Web video technology firms. For TVWeek's comprehensive coverage of how the recession is affecting the Web video industry, visit the Economic Crisis Navigator page. The handicappers TelevisionWeek consulted wouldn’t specify which companies they think will go belly up, but most are betting that this year will be strewn with Web video wreckage. Anywhere from 20% to 30% of the online video sector likely will disappear in the next 24 months, said Ross Levinsohn. The former president of Fox Interactive Media now is partnered with new-media investor Velocity Interactive, which has invested in online studio Next New Networks and online video ad network Broadband Enterprises. “There are dozens of companies that mushroomed and gained funding during late 2007 and 2008 which I think will not survive the downturn because funding has dried up,” he said. Companies with business models predicated on landing a second or third round of financing will be especially challenged, since venture dollars are tight this year. “Those companies with capital, a clear business model and a brand, I think, will survive if not prosper,” Mr. Levinsohn added. “I doubt whether many will hit numbers that were projected six or 12 months ago, nor do I believe there will be too many who are profitable.” Attorney Jeff Sanders has a bleaker view. “Most early- and midgrowth-stage companies in the online video space will fail,” said Mr. Sanders, a partner with Roberts Ritholz Levy Sanders Chidekel & Fields, a New York law firm specializing in media, entertainment and technology. That’s because this year is the make-or-break point for startups to prove they can generate sales. “If a service cannot make a measurable contribution to facilitating revenue-generating transactions between advertisers and sponsors and their customers, or provide a less expensive way to manage existing customer relationships, that service or company is a good candidate for failure,” Mr. Sanders said. Web programmers will face the toughest time because content is a big gamble in any economy, said James McQuivey, analyst with Forrester Research. “People who produce original content will always struggle to generate an audience for that content without a tie-in to some kind of franchise. ‘Dr. Horrible’ was a hit because of who made it and who starred in it, not just because it was a brilliant idea,” he said, referring to the Web show starring Neil Patrick Harris that television creator Joss Whedon crafted last summer. To avoid ending up in the graveyard, digital producers should aim to partner with large studios and Web services that have distribution muscle, said Will Richmond, analyst with VideoNuze.com. Aggregators also will have a tough time this year; Web video portals that fail to differentiate themselves will likely go under, he said. But sites that provide some level of editorial guidance and audience preference are better positioned, said Tom Guida, a new-media attorney with Loeb & Loeb. “Case in point is Metacafe, which claims to post content based on audience preference and give its audience the ability to find content it is most likely to be interested in quickly,” he said. “The net result is the eyeballs watching its content are more appealing to its advertisers because the people behind those eyeballs are more engaged with the content and likely to tolerate ad messages to get to it.” But the poor economy also is an opportunity for winners to make big leaps in digital media ad spending, Mr. Sanders said. “The media businesses we know will experience tremendous disruption that is marked by a migration away from traditional quasi-measureable inventory in favor of less expensive, ROI-calculable digital inventory.”

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Posted Sun, Feb 15 2009 9:40 PM by News