New HDTV Content: Who Pays?

Digital video recorders such as TiVo and equivalent services from many digital cable companies have made it you never have to watch a commerical again. Distributors of video content on the Internet are searching for business model that works. The changing landscape of video entertainment and information poses a difficult question: who is going to pay for the production and distribution of the content?

It can be expensive to create video content, even without HD resolution. Cameras, sound equipment, editing equipment, and storage are all costly. The time for people to use these tools are more costly still. And then there’s marketing the content so viewers know that it’s available. It all adds up to a lot of money.

Television as we knew it made it simple; in return for getting free programming, you just had to sit through periodic interruptions while sponsors promoted their products and services. Most people now pay something to get video content, but the monthly cable or satellite fee does not begin to cover the cost of all the content that those services make available. If sponsors can’t get viewers to watch the commercials, then why pay for them? And without sponsor revenues, the production and distribution companies have a huge deficit to fill.

The future of television funding may be foretold by the current video game market. A new research study by Parks Associates reports that advertisement spending in video games will increase from $370 million last year to more than $2 billion by 2012. That’s a significant hunk of change. “In-game” advertising will be the largest portion of this market.

Massive Incorporated is one company that promotes in-game advertising. According to their Web site:

Particularly compelling is the attitude of gamers towards the ads themselves. Independent research has shown that they see real-world ads and product placements as an enhancement of a game’s realism. An Independent Harvard Business School study shows that over 90% of ‘core gamers’ do not mind in-game advertising in their games. The attention they pay to their gaming environment translates to high brand lift and intention to buy.

We already see product placement in television shows; don’t you notice when the Dell or Apple logo appears prominently on the back of a notebook computer used by some character? That’s not an accident, any more than were Jack Lord’s big, black Mercurys on “Hawaii Five-O”. I’ve also noticed some creative efforts on some sporting event coverage, where computer-effects put billboards at the top of the stadium that weren’t really there. If the video game industry is any indication, you can expect to see a lot more of this in your video content in the future.