Online Video Market: Taking a turn at bat

When I was a kid playing Little League baseball, I remember my coach telling me: “Don’t try to swing for the home-run, just try to hit the ball.” My coach advice seems more relevant than ever when you apply it to how to build businesses in today’s media landscape.

Before the spread of online video, traditional TV networks in Latam operated within an oligopolistic local market structure: charging high prices to advertisers to reach captive audiences in each country. The “telenovela” format was born from the combination of captive audiences of millions of viewers and high CPMs that delivered production budgets that easily top $1,000 per minute of content.

Online video is challenging this cozy arrangement because local audiences are no longer captives, and online CPM rates are no longer monopolistic in nature. Local audiences now consume content on multiple devices coming from multiple sources. As online content transcends local frontiers, content becomes more abundant driving advertising rates to become more competitive across the board.

Approaching the online video market from the traditional TV network cost structure is the equivalent of trying to swing for the fences. A strategy like that requires hit-driven content that delivers millions of views coupled with a financial muscle to absorb strikeouts. A second approach is to enter the online video market with the attitude of a batter who wants to just hit the ball for a single and then get as many at-bats as possible. This translates into creating vast amounts of very low-cost content. A strategy like this requires devising creative ways to bring down the cost of producing content by orders of magnitude while finding multiple sources to extract value from content created.

The first approach of swinging for the fences requires lots of capital while the second one of going for the single requires lots of brains. This is a classic showdown of an industry ready for disruption.