AdGrinder

Over on NewTeeVee the post Video Ad CPMs: It Pays to Be a Pro appeared last week. Although I commented on it, I think there should be more discussion around video ad CPMs, and what type of content such CPMs will lead producers to create. According to The Diffusion Group, the following should occur over the next few years:

• CPMs for professional long-form video are about $40 now and predicted to rise to $46 by 2013.
• CPMs for professional short-form video are roughly $30 now and expected to hit $34 by 2013.
• UGC vids currently get $15 CPMs and are seen rising a little, to $17, by 2013.

Now, let’s break those numbers down to what a producer (or studio) is likely to see. I’m going to assume numbers for Daytime Network programming, as I think that’s the initial point most internet-distributed shows will aim to become financially successful. YMMV. So, from Daytime Ratings for July 14-18 we get:

Daytime Lineup averages - Week of July 14, 2008:

       Total Viewers          Women 18-49 (Rtg/000s)
CBS    3.47 million        ABC    1.3/841,000
ABC    2.88 million        CBS    1.1/725,000
NBC    2.31 million        NBC    1.0/669,000

Top 5 Daytime Programs in Women 18-49 (rank based on rating)

Program                    Net                 Rtg/000s
The Young & the Restless   CBS              1.6/1.02 million
General Hospital           ABC              1.4/945,000
One Life to Live           ABC              1.3/843,000
The View                   ABC              1.3/843,000
All My Children            ABC              1.1/733,000

Source: NTI, Live + Same Day via ABC Press Release.

Nielsen TV Ratings Data: ©2008 Nielsen Media Research, Inc. All Rights Reserved.

Given the above a “Decent” show should anticipate about 3 million viewers.

Long Form: With a $46 CPM, an episode of “Decent” will bring in $138,000. If we assume that an advertising network, video distribution site, et. al., will take 30% of the revenue, we wind up with roughly $97,000 being placed into the hands of the production team for long-form content (30-60 minutes in length). Most cable-tv shows — those that appear on Spike TV, CMT, TLC, etc. — cost at least(!) $75,000 to produce an episode. Therefore, a production company can anticipate making roughly a $12,000 profit per episode with a single ad placement. We can safely assume that there will be three to four video ads played during a 30-60 minute episode, which would increase the profit to roughly $290,000 per episode (using three ads; $386,000 for four).

Short Form: With a $34 CPM, an episode of “Decent” will bring in $108,000. If we assume that an advertising network, video distribution site, et. al., will take 30% of the revenue, we wind up with roughly $76,000 being placed into the hands of the production team for short-form content (3-10 minutes in length). Most online producers have spoken about $1,000 to $3,000 per minute to produce a show. Therefore, if we assume an average length of 6 minutes 30 seconds and $2,000 per minute, we wind up at $13,000 per episode to produce, and a $64,000 profit per episode.

UGC: I’m willing to go so far as to include in UGC high-quality online production, such as Epic-Fu and TikiBar TV, which I think is a stretch…but so be it. With a $17 CPM, an episode of “Decent” will bring in $51,000. If we assume that an advertising network, video distribution site, et. al., will take 30% of the revenue, we wind up with roughly $36,000 being placed into the hands of the production team for UGC content (1-5 minutes in length). As mentioned previously, most online producers have spoken about $1,000 to $3,000 per minute to produce a show. Therefore, if we assume an average length of 3 minutes and $2,000 per minute, we wind up at $6,000 per episode to produce, and a $45,000 profit per episode.

When looking at video ad CPMs, you must also take into account the cost to produce and distribute the content, as well as your means to produce. If you have a $100,000 budget to produce content, which would you choose? One (possibly two) Long Form shows? That’ll net you between $386,000 and $772,000. Eight (possibly ten) Short Form? That’ll net you about $575,000. Seventeen UGC videos? That’ll grab you $765,000.

In the end, there is more than likely a business model in each category, it’ll just be up to the producers to create compelling enough content for the allotted time in order to gather a decent viewership. What do you think?