How big an audience is needed?

I was reading this post at Video Insider and something struck me as really, really wrong with the numbers. Not that the math was wrong, just the return from the audience seems incredibly bad.

An audience of 15 million people (impressions) brings in the grand sum of $330,000! The top rates network show last week America’s Got Talent has an audience of under $12 million. Now I don’t know the budget of America’s Got Talent but it’s probably over $330,000.

The top rates hour-long production is apparently CSI Miami. Again I don’t know the income or production numbers, but typically the budget for “high production value drama” is usually $2-4 million an episode.

The difference is, of course, that we’re not looking at a 44 minute “hour long” production on the web. But even so, there’s something to be learnt from the numbers. That short video on the web is getting about $20 for every thousand people who are exposed to the ad. If we work on the long term average for hour long shows – about 65c per viewer – and convert it to CPM equivalent, we get a CPM for Primetime on CBS of about $650!! That’s approximately $5,322,200 in gross revenue (plus reruns, DVD distribution and foreign sales.)

Now Smallville manages to have high production values with a relatively small audience of just 1.736 million. Obviously that’s not costing as much to produce with estimated total revenue (let’s say a $500 CPM) of $868,000. Heck Jim Kramer’s show remains on air (on cable) with an audience of around 160,000. Even if the “CPM” held at $500 (unlikely), the total revenue for that show would be well under $80,000 per show.

On the other hand you have shows like The Guild rely on donations from their audience of around 30,000 to fund their (roughly) $250 an episode hard, physical, must-pay-out costs. (Cast and crew currently come for nothing.) No advertiser has been forthcoming.

Or consider Break a Leg, a high production value comedy produced with full crew in HD. With audiences on YouTube (2 million views as a partner), Blip.tv (500,000 views) and Metacafe (front page and a contest winer but only 100,000) the show grossed $2,500, or a CPM of $0.96 – 96 cents per thousand views.

Advertising works to fund video production on TV – networks and cable – with varying degrees of success, but it does not appear to work for web shows. Even Hulu, considered to be a success these days, is only getting CPM of $25 for the same content they’re getting $400-650 CPM on broadcast. I can understand why their emphasis not on Internet distribution!

Does this mean that the whole “democratization of distribution” is a over? That only big media will do at all well. It does if we are going to continue to put new wine into old wineskins. Advertising was absolutely the way to fund “free to air” television, which most people now pay for additionally with cable or satellite. But it is incredibly unpopular.

According to Yankelovich Research,

“Seven in ten Americans would pay money to block or skip advertising and marketing messages.
Almost six in ten consumers go ‘out of their way’ to avoid brands that overly market their products and services.”

Even if you find an audience…

In an online survey of 2,600 respondents, about 53.6 percent of online video viewers recall seeing in-stream – either pre-, mid-, or post-roll – ads attached to some form of web programming. That’s the good news. Not too surprisingly, more than three-quarters (78.4 percent) of respondents said in-stream ads are intrusive and fully one-half (50.4 percent) say these ads disrupt their use of the internet.

And from that same survey:

When it comes to streaming ads, half (50.7 percent) of the respondents said they stop watching an online video once they see an in-stream advertisement. Two-out-of-five (43.2 percent) do stay on to watch the rest of the online video. While only a small percentage – 15.3 percent – said they immediately leave the site once they encounter an in-stream ad, about half (49.7 percent) said the such ads’ presence alone makes them less likely to view other online videos.

The only good news for advertisers was that the 18-24 year olds surveyed didn’t mind the advertising…

Over one-half (57.6 percent) will watch an an online video ad and not become too annoyed to finish viewing. However, the report says younger viewers also have fairly low recall rates.

I’ve always wanted to either turn my audience away, and annoy them with ineffectual advertising. That sounds like a winner. Not.

If Break a Leg got only a single cent each for those 2.6 million views over nine episodes, they would have banked $26,000. At a more-reasonable 10c, that’s starting to cover expenses with $260,000 (about $29,000 an episode). If the audience were fans maybe more, maybe 25c an episode then the show would likely be profitable with $72,000 an episode. That’s a much bigger audience than Jim Kramer and higher production values!

With all the research at my disposal, I cannot find a single instance of where new media (podcasts, online, etc) is producing a good return for its producers from advertising. Like 70% of Americans I’d prefer to pay to get rid of advertising, assuming the cost to me (and return to the producers) is the same as it is now. We just need to get rid of the middle men – the network programmers – who are only interested in the advertisers, not the show, the producers or the audience.

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