Premium online video content could siphon TV ad money, analysts say

Online video content creators could see an increasing share of the money advertisers spend on TV spots if the amount of time consumers spend watching video on mobile devices continues to grow. That was one of the many salient points made by Needham & Co. analysts Laura Martin and Dan Medina in a report they published this week on the future of TV.

"We are optimistic about the ability of the nascent premium-video online ecosystem to take share from the TV ecosystem over time," they wrote.

Still, the industry will not be without challenges. Needham's tally includes the risk that online-video-ad inventory will become commoditized, just as it already has for the rest of the text-based Internet. Beyond that, online audiences tend to be fickle and change taste quickly, the analysts said. Viewers don't always stick around to watch an entire online clip--even one that lasts just a few seconds--and that could make it difficult to sell ads. 

Companies already are investing to take advantage of this opportunity, the analysts noted. They estimate YouTube spent about $350 million during the last two years to spur the creation of high-quality video for its site. Netflix (Nasdaq: NFLX)--though it sells no advertising--spent an estimated $1 billion to license traditional TV and movie content in 2012 and another $200 million on original programming, they said. And Hulu spent about $500 million to make online video programming last year.

For more:
- see the report
The Los Angeles Times had this story

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