The Next Trend: original programming (Imagine That)!

Welcome to November 2006. Anyone notice that it’s starting to smell a bit like November 1999?

The announcement of Google acquiring YouTube has signaled the trend for the media and the industry pundits to discuss whether or not we’re entering into a period of inflating another Internet bubble much like the one we saw go “pop” in 2000. When that bubble burst, we saw money run away from technology–and more paper millionaires became mere mortals than anyone could possibly have imagined. However, I think this spending spree may have another outcome and one that is much the opposite of the previous bubble.

I think the acquisition of YouTube will actually signal the beginning of the end for financing in the user-generated content space. As many of you know, I’ve been a huge proponent of this category since it first gained steam about two years ago, but I think the investment in YouTube may signal to many people that the ship has sailed and it’s time to focus on the next wave of companies: the ones who are producing quality original programming and delivering it to niche audiences. I think we’ll see the “long tail” programmers begin to garner the attention of the VCs instead of UGC, because few people are going to want to invest their money in a category with such a clear winner, or at least such a clear favorite.

Let’s face it; when investors began to see the rise in Google’s value a few years ago, they rushed to find the “next Google.” Prior to that, when they saw the value of Yahoo start to increase, they all rushed to find the “next Yahoo.” The natural prediction would be that with the value of YouTube being high, investors would rush to find the “next YouTube”–but I think conventional wisdom will lose here, because investors are afraid to inflate a bubble that may already be gaining steam.

I think investors will acknowledge the lead YouTube has in UGC and focus attention on the kinds of companies where no clear winner has emerged. The market for quality, highly produced, original content is high–and the audience is clamoring for it. That’s why so many people turned to UGC in the first place; to find an alternative to traditional television programming that satisfies their need for entertainment by providing exactly what they’re looking for.

I think consumers are interested in quality original programming that can’t be found on the traditional networks or the cable networks, and the Internet evolution of television represents the most significant growth opportunity there is. Plus, original content can command a higher CPM for advertising, and it is safe for an advertiser– which is something that Google will help YouTube to figure out, but will still take some time.

Most of the original programming that’s being developed is targeted to the elusive, and valuable, male 18-34 demographic. Heavy.com has been doing a good job over the last couple of years, and recently we’ve seen the launch and/or funding of companies like Ripe TV, KushTV, and Concert TV. All of these folks have cross-platform plays and are putting together some really quality content. These are important in that they are inexpensive to create and inexpensive to distribute, but easily create loyal audiences and become viral in some cases. This is the most likely response, in my mind, to the trend of UGC. UGC lets us know what the audience wants–and smart producers take this information and create similar content, but with higher production values.

Of course, I could be wrong and VCs will jump on the UGC bandwagon, but I don’t think so. I think 2007 will be the year for Long Tail programming, or at least the year we see the definition of “Critical Mass” evolve, as the size of the audience is no longer what matters. Rather, we’ll be shifting our focus to the quality of the audience.

By Cory Treffiletti
Courtesy of http://www.mediapost.com