Online video viewing is growing rapidly, there is no doubt that majority of Global Internet bandwidth in the near future will be used to stream video over many different Internet connected devices like smartphones, tablets, PCs and connected-TVs. According to a recent report from Gartner Research,online ads are now more engaging than most other ad forms and are projected to rise 22% within the next 12 months. Online ads are predicted to gradually surpass every other form of advertising including TV which is now the biggest. This shows that online media including online video is evolving and will soon stand to compete with the video we watch on our TV sets.
As far as Nollywood’s (video) business is concerned, their main distribution channels are CD and DVD sales, other smaller channels are sales of rights to African movie channels and lately some movies are being shown in cinemas first before being released on DVDs and CDs. With every business, the distribution reach and number of distribution channels can ultimately affect the bottom-line. Nollywood should pick up online streaming as a small revenue source to bring in some extra sales for now, because in the future, online streaming could turn out to be the major revenue source for the movie industries around the World.
Online video streaming/downloading used to be the threat to major movie studios and TV networks and is still so till today, but with the rise of Netflix, Hulu in the US and iLoveFilm in the UK, also with Youtube getting into the professionally produced video content business, so many producers are thinking twice about fighting this unavoidable shift. Hulu for example, is on-course to pay around $300 million to its content partners in 2011 alone, and the amount is bound to increase next year. Youtube which started as a small startup project with short free user generated videos during the days when online video business seemed not be commercially viable due to cost of bandwidth and scaling (before cheap cloud data services like that of Amazon) is now Google’s cash cow after search advertising. They have now shown many aspiring online video businesses the way to make money from online video.
A recent Forbes article by Mfonobong Nsehe estimated Nollywood to be a $800 million industry. So, if Hulu could pay $300 million to content owners in a year, then, there is enough money in online streaming to take care of Nollywood. Well, I know Nollywood for now can not generate as much money online as Hollywood makes, but we are looking at margins here. Compare costs of producing a Hollywood movie and that of a Nollywood movie and you’ll find out that Nollywood doesn’t have to get close to Hollywood in revenues in order to earn bigger profit margins, in percentage of course. The major problem studios in Hollywood have with online streaming is the question, “if the web and digital would ever replace the huge money they make from video sales and payments from networks?” Online video has been stigmatized as a money losing business. Online ad sales couldn’t match the big amounts TV networks charged for placing ads. As far as Nollywood is concerned though, cost of production is relatively low as stated by the same Forbes article by Nsehe, therefore the revenues from online ads that seemed meager to Hollywood (Although they are now beginning to embrace online TV, at least in plans for the future), the same amount could be a huge bump up to Nollywood’s revenues.
The point I am trying to make here is, Nollywood is going to have a much easier time switching to digital streaming than Hollywood. The main problem is revenue and revenue from online ads wouldn’t be so bad for Nollywood due to cost of production compared to that of Hollywood, just compare the prices original DVDs of Hollywood and those of Nollywood sell for. With the rise of ecommerce in Africa, soon many Africans would be able to buy a movie or TV show episode with a simple click of the mouse or through their mobile phones and they would feel comfortable making such a transaction digitally since the amount isn’t so high.
Whenever I try to pitch my online video service to content owners, I find them reluctant to try online streaming, and those that have tried it tell me how disappointed they are with the earnings. Well, At a small scale, the compensation you get as a content owner may be small, but if you produce content good enough to be viewed over and over again and even be shared with the viewer’s friends through email and social media, then your views will explode and so will the earnings.
All in all, the good news is, even online ads will earn more in the future and more money making innovative online video startups will be created thanks to the likes of YouTube.
One thing content makers need to keep in mind is, quality is key.