Once flush with venture cash and enthusiasm, the digital studio business is now falling on hard times. That's no surprise given the broader economic challenges the media industry and the global economy face. But web video was supposed to do better than every other sector. After all, media firm Magna recently forecast that the U.S. market for online video will grow by 32 percent this year, rising from $531 million in 2008 to $699 million in 2009.
What's wrong with 32 percent growth then?
Nothing.
It's the $699 million figure that's the troubling one because it's not enough to keep everyone in the digital studio business fed, clothed, and sheltered. That's why digital studios are tumbling down. The first to fall was Mania TV in March, followed by 60 Frames in early May. More will likely close their doors in the coming months, imitating the increasingly empty malls around the country where shops hang up their "out of business" signs.
On the flip side, digital and multimedia studios like Deca, Next New Networks, Electric Farm Entertainment, Revision3, MyDamnChannel, and others are still cranking out new shows and winning ad dollars while competing with YouTube and Hulu for that $699 million pie.
To make it through the inevitable weeding-out process, here are seven tips for digital studios.
1. Differentiate
Web studios need to differentiate. "There are still lots of players in the space, and everyone sounds the same," said Keith Richman, CEO of Break Media, a network of websites reaching more than 50 million global unique visitors each month. In addition to its distribution capabilities, Break also produces some original web shows.
His sentiment is echoed by Paul Kontonis, CEO of digital studio For Your Imagination, which produces niche shows for the web. "Everybody is in the web video production business. Every video production house now claims to produce web video and there are more on-going productions than dollars to fund them," he said.
So how does a seasoned professional stand out? Studios need to focus both on the ability to create and distribute content, Richman said. Making a web show is not enough. Access to distribution is vital too.
"We license content, but we also have distribution, so we can control our own destiny," Richman said.
2. Be picky
Most digital studios are constantly pitching new shows to portals and advertisers. But pitching all the time is too taxing on an organization, said Adam Kasper, senior VP and director of digital media at Media Contacts.
Some studios do well targeting a defined niche, as Revision3 has done with its tech and pop culture shows, such as "Tekzilla," "Totally Rad Show," and "Scam School." They appeal to specific segments and that gives the company a focus during development and ad sales.
Similarly, MyDamnChannel has been picky about the shows it produces, investing in inexpensive properties with celebrities attached such as Sarah Silverman and Isla Fisher. The company, now profitable, was one of the first digital studios to hit the black.
3. Diversify
Getting brands and media companies to step outside their comfort zones in this economy and embrace original programming for the web is tough, said Jordan Levin, CEO of multimedia production house Generate.
But advertisers and media outlets are more comfortable investing in shows that have legs and can extend across platforms, he said. "Developing shows that can easily migrate from one media platform to another (TV, web, etc.) and having the expertise as an organization to diversify your offerings to add value in other areas to support brands [is important]," Levin said.
4. Use metrics
Advertisers want metrics no matter the medium. But in this economy, they need proof that demonstrates the value of a sponsorship. Studios and web producers can demonstrate ROI to advertisers by self-funding research that shows purchase intent and other key metrics, Richman said.
Remember too that many advertisers have bad feelings due to deals done in the past where content was created, but seen only by a few people, Richman said. The solution? "Guarantee impression counts and create full media plan for brand campaign," he said.
Producers and studios should also bear in mind that while site traffic and basic display advertising are the blocking and tackling in this game, the deals for branded entertainment with customized distribution and guaranteed traffic on your site and across your network will lure more advertisers, said Rob Barnett, CEO of MyDamnChannel.
5. Syndicate wisely
The big video sites like YouTube have proven an audience exists for web video. But getting people to watch videos and keep watching them is now the big hurdle, Kontonis said. "Someone that actually clicks to start a video is more engaged and worth a lot more than a banner impression or household reach," he said.
To do so, studios and shows should syndicate wisely, said Ryan Barlow, who works with Michael Eisner's new media production firm Vuguru. "As we develop campaigns for our sponsors, having partners who can get behind a series, promote it and help us reach our target audience is critical to generating value for our series and brands. Our partnership with FoxSports.com for 'Back on Topps' is an example of this type of relationship," he said, referring to the distribution role FoxSports.com played in that web show.
6. Watch your wallet
The economics of TV and the web are vastly different. Those who mind their pennies will be better positioned to last.
The Denver-based digital network Jookt covers high school sports and recently shifted its business model to significantly reduce expenses. Last fall the network relied primarily on professional photographers and spent about $70,000 each month to create 20 stories.
Now Jookt is churning out about 100 pieces a month for about $20,000 by relying on high school and college students and less expensive crews, said Jeff Bennis, the company's CEO.
7. Hedge your bets
Next New Networks aims to operate like a cable network, and that gives the online studio some security because it can easily shift shows and properties, said CEO Lance Podell. "We build brands that are relevant to passionate, underserved communities," he said. "In our world, [Next New Networks'] 'Indy Mogul' is a network, and if one of the shows under Indy Mogul doesn't attract viewers, then the other shows will and new shows will be developed under the network brand."
Daisy Whitney is a multimedia reporter for The New Media Minute.
On Twitter? Follow Whitney at @DaisyWhitney. Follow iMedia Connection at @iMediaTweet.