Sunday, October 05, 2008

Marginal Error

With the odd exception, little real money has been made by Internet TV platform companies; the original vendors, theplatform, were reportedly profitable when sold to Comcast, and Narrowstep were at break even in the UK before being .

Move Networks managed an exit to Microsoft, but others such as Roo/KIT, FeedRoom, WhiteBlox have all trundled along.

One venerable exception seems to be Entriq, who, ironically, benefited from a misfounded belief in downloads over streaming when major broadcasters' services were originally established.

In a totally unscientific estimation, I would say that the North American and European Internet TV platform market has a potential value of around $500m in 2008. However, more than two thirds of this will have been spent on in house teams, systems integrators and web agencies, leaving around $165m to the pure play market. With around forty to fifty players in the market with a turnover of $500k to $10m, that's the market more than saturated.

So, is this a flawed market ?

When I formed Narrowstep, I saw a mixed revenue model based on licences, CDN costs, revenue share and advertising share. But, it turns out that the long tail in this industry had a very large head and a very long tail. That is, only a handful of clients are likely to turn in the volume of business that's profitable to VC funded or public businesses based on this business model. And the competition for this handful of clients has been vicious.

But, what has been forgotten in this land grab is what the internet has done for video.

It has brought distribution.

Running production companies in the 'old days', a client would spend a fortune on a corporate video, but then wouldn't know what to do with the resulting VHSes and DVDs.

Entertainment has only ever been one part of the market for Internet TV services: education, training, information and help, shopping, corporate communications, the potential list goes on and on.

The failure of the Internet TV service market to date has been the over-emphasis on the few big entertainment players and neglect of other, potentially larger and more lucrative markets.

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