Now TV companies are questioning the ad-funded content model

By March 3, 2010TV

Last week I wrote about the growing unease at the major record labels with ad funded music streaming services, and now it looks like something similar is happening with Hulu.  The following is from a New York Times article dated Monday this week:

Unable to make the digital media dollars add up to their liking, Viacom will remove “The Daily Show with Jon Stewart,” “The Colbert Report” and other Comedy Central television shows from Hulu next week.

The Daily Show and The Colbert Report are two of the most popular shows on Hulu so this is a pretty big deal.  Viacom’s reasons for removing the shows are of course unclear and could range from the ad splits being too low to be interesting, through a short term bargaining position, to a desire to protect their existing cable subscription business – and only time will tell.

The other interesting thing here is that this move comes despite Hulu experimenting with a bunch of innovative ad formats.

I suspect that we are heading towards a world where production costs come down (including stars’ salaries) enabling production companies to make profits on shows with lower revenues, enabling them to distribute successfully on ad-funded sites – for a majority of shows at least.  Simultaneously innovation with ad formats will drive up the revenues achievable via this business model.

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