Hyped Web Video Sector Starts to Hurt

Companies ranging from 60Frames and Revision3 to Break.com and Veoh have all had layoffs

Nov 17, 2008
-By Mike Shields

The suddenly hyper-saturated market for online video is facing an imminent, recession-induced shakeout.

In recent weeks, companies ranging from pure Web production firms like 60Frames and Revision3 to branded video sites like Break.com to aggregators such as Veoh have all had layoffs. At the same time, several high profile original Web series have disappointed.

While layoffs may indicate prudence rather than panic, many predict that further casualties are on the horizon as venture capital and ad support are likely to become constrained by the recession. Insiders say that simply too many companies rushed into the space before business models and viewership patterns were firmly established. “There was a lot of cheap money out there,” explained Jake Zim, COO Safran Digital Group, who added that last year’s writers strike accelerated the flood. “It created more product than there is demand for.”

And while most of these firms continue to peddle new Web series, digital buyers are finding it harder to convince clients to underwrite unknown projects, particularly before they prove they can deliver an audience—a change from just a few months ago, say observers.
So as deals get tougher to land in a medium that is still finding its business model, can all these companies make it? “I believe the answer is no,” offered Jordan Levin, CEO of Generate, which just completed a modestly successful run for its politically-themed Web series Republicrats on MSN. He predicts: “Original online video companies that do not have a diversified revenue stream will not all survive.”

Levin added that major TV players are likely to scale back on Web production. That might be the case for ABC/Disney’s digital studio Stage 9, which previewed sci fi series Trenches during the Four A’s media conference last March. That series still has yet to find a home. Stage 9 execs did not return calls seeking comment.
Hyped Web Video Sector Starts to Hurt

Disney delays Stage 9 - 1/17/08