A panel of Gotham Internet leaders quickly found themselves participating in a spirited game of “justify your existence” at a New York New Media Assn. roundtable in the East Village on Tuesday night.
“Entertainment Online: Are We Having Fun Yet?” came on the heels of the recent meltdown of the Internet sector in U.S. equity markets. After the markets’ heavy drops in April, a few high-profile sites sputtered, including content aggregator DEN and retailer Boo.com, and a bevy of pundits began to prophesy some serious consolidation.
It was amid this backdrop that several hundred of Gotham’s Web professionals gathered for reassurance from a panel that included MTVi helmer Nicholas Butterworth, Pseudo.com founder Josh Harris and Jason McCabe Calacanis, founder of the Silicon Alley Reporter.
Blues over the black
They toed their share of the party line, touting the Internet’s ability to revolutionize the way people entertain themselves, but they were frank about the notorious issue of finding a way to operate in the black.
“Without a critical mass of users, you’re going to have a hard time drawing advertising,” Calcanis said.
That critical mass may be a few years away, he cautioned. Calacanis noted that MTV Networks wasn’t profitable for almost six years after its inception. Viable online content sites, by comparison, have only been around for a couple of years at most.
However, the industry and its investors have grown accustomed to operating on Internet time and expect profits to come apace. If they can exercise a little patience, it will be rewarded. “When these companies do turn profitable, they will be very profitable,” he said.
Pseudo’s Harris observed that Web content to date has been a hodgepodge of mainly small artists, putting together simple short films and other modest fare with only moderate success at best. But if the medium manages to generate even one major success that draws users in the millions, it could turn the tide for the whole industry.
“This is a hit-driven business,” he said. If DEN would have had one hit they would still be there.”
In sketching out a solution to that problem, Calacanis invoked the holy grail of Internet content: the widespread adoption of broadband access, which would allow users to receive things like full-motion video and CD-quality songs in a fraction of the time it takes on a sluggish 56k connection. That advance, he argued, would mean not only tremendously improved programming, but also far more effective ads.
“Advertising is living in an anemic bandwidth world,” he said. “When you add broadband, emotion comes to the Internet, and emotion is the ally of the advertiser.”
Hugh Panero, CEO of XM Satellite Radio, took a more hard-boiled approach. He predicted that the online content sector, regardless of technological advances, will face a shake-out, just like every industry moving out of its nascent stages. The companies that survive will be those that plan carefully and, perhaps more importantly, align themselves with large and deep-pocketed media partners.
“We’re at the same time as the auto industry in the early 1900s where there were hundreds of companies,” he said. “Some people have very passionate ideas about where they want their business to go, but they are still going to need a business plan.