Thursday 30 July 2009

Sky earnings undermine ad-funded online TV

We can talk and talk and talk about online TV, Hulu, YouTube, BBC iPlayer and Zattoo. BSkyB, meanwhile, has picked up nearly half a million (net new) subscribers in the last year. There are now 9.4m Sky customers. Paying customers.

Sky takes £464 from each customer per year. If Sky operated an advertising model, to hit the same level of earnings per customer, the numbers would have to look like this:
CPM: £20
Impressions per viewer per year: 23,200
Impressions per viewer per day: 64
A CPM of £20 is achievable for video pre-roll but high and difficult to sustain as an average for all the available advertising inventory. Consider then that at a CPM of £20, you'd need 64 impressions per day per viewer. Most ad campaigns are capped in terms of number of impressions per day per viewer, often at around two.

So you'd need 32 advertising campaigns running the whole time with viewers glued to their screens 24/7, changing channel nearly three times per hour, every hour of the day. That's how to make £464 per customer from ad-funded online TV.

Sure, YouTube has so many more users. But BSkyB is making £5.4bn with an operating profit of £813m.

Sky doesn't bother to report how well it's online VOD service is doing. It's just not significant.

I'm not writing off online TV. On the contrary, one day, I believe, most TV will be delivered over the Internet (although satellite technology is pretty damned awesome). It's just that, right now, things aren't quite in place for it to really take-off. Broadband speeds need to increase. PC processing power needs to improve. Content rights need to be sorted. And a viable business model is needed.

For all the talk of online video, in the UK, we still watch nearly four hours a day each on the old TV set. That's where the viewers are and that's where the money is. Today.