CBS Interactive (CBSI) is making a business development push to start white labeling its video and ad stack by adding premium video from small to mid-size digital studios. According to sources close to the deals, CBSI would provide the player, the subscription and pay-wall mechanisms and ad-stack for advertising-supported business models, as well as development work to ensure products are mobile-optimized. Content providers who sign up to use CBSI’s platform would also have an option to syndicate their content to CBS-owned and operated sites.
In exchange, content creators are responsible for maintaining a rigorous pipeline of content and driving viewership to that content. CBSI would control ad and subscription revenues with a rev share built in.
According to one CBS executive, the target customers for this are independent, digital video production companies who don’t otherwise have the resource or infrastructure to build their own owned-and-operated outlets, but, so far, CBSI hasn’t inked any deals.
CBSI has been white labeling its platform for a number of years in the sports market under the banner of CBS Interactive Advanced Media. They currently work with over 150 partners in the sports category. Now, the company is expanding that offering to include general premium entertainment targeting MCNs and digital video studios, as well as traditional linear TV producers.
“Our theory is that we have world class tech delivering all kinds of business models to 300 million unique [users] internationally,” said Marc DeBevoise, EVP and GM of CBS Digital Media. “Since we have this world class tech and service capabilities and marketing capabilities and distribution relationships, our view of supplying that to third parties makes total sense. We’re looking for very specific partners who have meaningful content and a certain amount of volume where we can take their [business] to the next level.”
The market for this offering — SVOD and AVOD as a service — is heating up. Start-ups such as Zype, which just announced new funding this fall, and VHX, which led the way in direct-to-fan sales for YouTube star-driven feature films such as “Camp Takota,” have ramped up efforts to serve as end-to-end solutions for independent content creators. Vimeo has also offered its platform as a service by allowing creators to sell direct to fans. Most recently, Amazon announced its own SVOD partner program.
Companies like CBS or Amazon operate from a slight disadvantage in that the revenue splits and deals are much more favorable for a software-as-a-service companies such as Zype, which allows creators to import any video player or upload natively to Zype’s, or Vimeo, which offers a 90/10 split favoring the creator. Those economics are hard to compete with from a creator perspective. On the flip side, mega networks like CBS or Amazon can offer built-in reach and scale, so content producers don’t have to start audience development from scratch.
And the margins are remarkable.
VHX client Black&SexyTV makes the $35,000 in ad revenue they made in a year on YouTube in a month on VHX, according to the company. Combined with subscriptions, Black&Sexy is on track to make $1 million on VHX alone this year. Zype clients see 10–35% growth in monthly recurring revenue for subscription and transactional video models and 500% lift in effective CPM’s for ad-supported video.
“This is a unique time,” said Zype CEO Ed Laczynski. “Cloud computing, ubiquitous bandwidth and near universal access to powerful consumer devices are ushering in the opportunity for creators and broadcasters to own their audience, their audience data, and their revenue streams without any middlemen. Significant cash flow and equity value is available in this new way of doing business.”
It’s a coin toss on which models work the best for the creator, but one thing is for sure — the creator economy and open distribution opportunities are not only plentiful but highly lucrative.
As for CBS Interactive, DeBevoise says, “We’re trying to grow the client base. And, ultimately, we think there’s a business here with folks who have great content for distribution using our platform and our technology stack.”