NATPE 2012: Web Will Turn to Premium Content in 2012, Say Miller, Levinsohn

Digital chieftains say quality video will turn online platforms into businesses that can boast dual revenue streams
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Complete Coverage: NATPE 2012

The digital battle in 2012 will be waged over premium content, said News
Corp. Chief Digital Officer Jonathan Miller and Yahoo! executive VP Ross
Levinsohn during the opening panel at NATPE, taking place this week at South
Beach's Fontainebleau Resort.

"We've narrowed our focus on video to premium," Levinsohn told
moderator Michael Nathanson, managing director of equity research for U.S.
media at Nomura Securities. "The notion of scarcity no longer exists. What
there is scarcity of is good video. I like watching a cat chase a laser pointer
on a skateboard like everyone else but it's impossible to monetize. If I were a
big premium brand advertiser, I'm not sure I would want my name next to that
kind of content. As a result, we've narrowed our focus around premium
video."

"The premium space is up for grabs, it's a battleground, and it's a
battle worth fighting. [Google-owned] YouTube is getting very much
‘channelized.' I see ‘channelization' of the Web being a big event for
2012," said Miller, repeating an idea he also posited at last week's
Consumer Electronics Show in Las Vegas. By ‘channelization' Miller means
watching the Web like watching TV, with online channels populated by programs
and supported by advertising.

"This year is a bit of a tipping-point year," said Levinsohn.
"The cable companies can enable a Netflix or an HBO like they did two
decades ago."

A company like Yahoo! has a lot to offer content providers: namely 702
million or so visitors, according to Comscore's most recent count.

"We now have these enormous global platforms that you never had
before," said Miller. "You shouldn't think that one platform is old
and one is new, it's all just eyeballs. That can have an extraordinary impact.
You can make a deal that gets you to 700 million people around the world. You
can do that in a few, not too many, other places besides Yahoo!. You have to be
mindful of that, and consider how you produce stuff that goes into that, and
how do you maintain the terms of the trade that goes into that."

What the global platforms are seeking is a way to turn their massive reach
into money. And like TV networks, they seek to do it by creating the dual
revenue stream of subscriptions and advertising. That's why companies like
Netflix have opened their checkbooks for Hollywood
in the past year.

"He who can pay the most money has the advantage [in this
battle]," said Levinsohn, "and Netflix has the pole position."

In the past two years, Netflix has made several big-ticket deals, acquiring
such properties as Lionsgate's Mad Men and The CW's primetime dramas, among other
things. That's opened up a lucrative new revenue stream for Hollywood
studios.

While no one is going to walk away from the kind of license fees that
Netflix has been willing to pay, both Levinsohn and Miller cautioned companies
to look to the long-term, instead of how their businesses are doing from
quarter to quarter, as demanded by Wall Street.

"In Jon's case," said Levinsohn, who's been both a coworker and a
competitor to Miller, "he has an asset in Hulu that's truly an asset. Do
you want to take the check or do you want to build the asset?"

Hulu is the joint venture created by NBCUniversal and News Corp. and joined
by Disney-ABC that streams current series online. It also offers Hulu Plus for
$8 a month that allows viewers to stream current episodes of series in high
definition on tablets, smart phones, gaming consoles and other platforms.

"[Former NBCUniversal CEO Jeff Zucker is credited with line ‘I don't
want to turn analog dollars into digital dimes.' It's all about the market
timing of it - I don't think we're yet to the point where you walk away from
your existing model and only do this," said Miller. "The interesting
thing about Hulu is that it not only works, but it has a dual revenue stream
that's different than Netflix. Hulu is both ad-supported and
subscription-based. That comes the closest [of any online video platform] to
replicating the models that have sustained the industry so far."

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