by Ellen Stutzman, Research Director and Charles B. Slocum, Assistant Executive Director
It was recently announced in the trades that 60 Frames Entertainment, a new media production company, would be closing shop. 60 Frames was launched in July 2007 by talent agency UTA and online ad company Spotrunner and was primarily involved in the production and distribution of professionally produced, original new media content from the Hollywood community. The company had become signatory to the WGA MBA in late 2008. It joins a few other new media ventures that have recently shut down, mostly due to the recession and a difficult investment climate. While the announcement was unfortunate, most other signs point towards the continued growth of original professional content produced for the Internet.
Online video has had one of the fastest consumer adoption rates among any form of media distribution. It has transformed the Internet from an information source to an entertainment destination. In March 2009, Nielsen's reported 9.6 billion videos streamed by 130 million web users in the month. User-generated content (UGC) on sites like YouTube and others fueled the initial online video boom followed by the introduction of television content reused on the Internet.
Advertisers have also begun to flock to online video, spending $587 million in online video advertising in 2008, according to eMarketer. While this figure is tiny in comparison to the billions spent on television advertising, online video remains one area of advertising growth in this economic downturn. Advertiser preferences are also helping push the online video market towards professional content. Many advertisers have avoided running commercial spots along UGC videos and prefer to be associated with professional content. This has caused even YouTube to begin to change its focus in order to become a profitable, advertiser-supported operation. In addition to making deals with the studios for library content, YouTube is increasing its focus on professional content by planning to feature this content under its "Shows" tab.
While 60 Frames has not survived the economic downturn, many other companies have sprung up to produce professional online video. In the past year, 26 such companies have become signatory to the WGA MBA. We expect continued growth in professional online video content and employment opportunities for WGA members. Recently, Microsoft held its second annual Upfront presentation to advertisers. The company highlighted several new and returning series and emphasized the role of Hollywood talent in these productions. This demonstrates the importance of professional talent in this growing area.
There are several lessons from the 60 Frames experience. First, it's important to remember how young this sector of the industry still is. Start-up companies in a nascent industry will come and go in large numbers. Overhead is the enemy. "Dr. Horrible's Musical Blog," probably the most economically successful new media production, was birthed from a company with no overhead. The largest category of new media productions is comprised of those derived from existing television series. These productions are produced with little or no additional overhead.
That's the second lesson: publicity matters. "Dr. Horrible" and derivative content share marketability and a built-in fan base. Catching lightening in a bottle (think Susan Boyle) is not a business plan. While everyone hopes that their content will go viral, hope isn't a business strategy.
A third lesson is that production funds run out, so spend them wisely. The line between professional new media content and UGC has more to do with professional writing and performing than it does professional production values at this early, early stage of the medium's development. New Media is still where TV was before Uncle Miltie, Candid Camera and Guiding Light. Those were unthinkably high budget for the nascent TV medium in 1946 or 1947 (you couldn't yet call it an industry).
The New Media version of those will come, but for now the term "shakeout" is being misused in the wake of the 60 Frames closure. But their experience illustrates that it's an open field for those who can operate with an economy of means and a good idea.