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Snatching Digital DNA

Cue video: Cuddly bunnies sing, dance, burp and have sex with each other. A graffiti artist hosts “an intense lesson with stencils and old T-shirts.” Souped-up Ford Mustangs peel out, tires burning huge clouds of white smoke, against a speed-metal soundtrack.

Each vignette runs under five minutes — less time than it takes to, say, establish the exposition in an episode of HBO’s The Sopranos.

Is this the future of video entertainment? It is to Herb Scannell.

Scannell, of course, is the guy who launched the nostalgia-fueled TV Land and brought shows such as SpongeBob SquarePants and Dora the Explorer to cable as president of Nickelodeon at Viacom for 10 years.

Since leaving Viacom last year, Scannell founded a company that’s a horse of a different color, size and shape: Next New Networks, a 16-person Manhattan-based startup whose mission is to create some 101 “micro-networks” broadcast over the Internet. The venture has raised $8 million in funding. It’s a respectable sum for an early-stage content firm but not even a rounding error for Viacom, whose 2006 revenues tallied $11.5 billion.

So far, Next New Networks has seven nascent micronetworks that serve up video clips about, for example, people who make their own clothes (ThreadBanger.com), offbeat user-generated animation (ChannelFrederator.com), hot rods (VODCars.com) and comic books (PulpSecret.com).

To Scannell, such exceedingly targeted fare represents the next phase in the evolution of television. Here’s his polished elevator pitch: “Broadcast TV is about broad audiences, cable was about niche audiences, and the Internet is about communities — people who share a common interest. That’s what we’re targeting.”

He also believes some cable networks have hit a plateau at this point and are starting to lose their original points of differentiation. “The cable business is just a mature business,” he said. “Everyone’s trolling for hits. It’s a natural, logical thing in a mature industry, but cable networks are starting to steal share from each other.”

Scannell, who just turned 50, finds the primordial soup of broadband TV exciting — maybe as exciting as the emerging cable networks were more than two decades ago.

“For me, I decided I wanted to kind of be part of a group that was going to be innovating in this space and not dependent on incumbent brands,” Scannell said. “We thought this space was wide open.”

And, after having “managed a lot of managers,” Next New Networks gives him an opportunity to stretch his wings. “I’m closer to the ground,” he said, “and I can get my hands a little bit more dirty.”

NEW WAVES

Scannell isn’t the only former cable programming executive planting a flag in the burgeoning world of broadband video.

Others include Jason Hirschhorn, who last year left MTV Networks as chief digital officer and in December joined Sling Media, where he’s putting together a YouTube-like video-sharing site with officially licensed content; and Nicholas Butterworth, once in charge of MTVN’s music-related sites, who founded niche broadband-video content startup Diversion Media.

But this street runs in two directions and the reverse phenomenon is happening, too. Digital virtuosos from Internet and interactive-TV companies — including, most conspicuously, AOL — are coming to cable networks. MTVN, for example, last fall hired Erik Flannigan, who launched several AOL entertainment sites, as senior vice president of digital media for Comedy Central and Spike TV.

Flannigan, for one, said he wanted the chance to make the online side of a vibrant cable network into a real business. “The huge opportunity for the big content holders is, How do you take this professionally produced content and layer on Web 2.0 interactivity?” he said, bringing in material contributed by users and providing other ways to share content.

Cable has tended to regard the Internet as a one-way medium, Flannigan said, treating online visitors as “the same captive audience they have on TV.” But “you can’t just shout 'we have content’ from the hilltops and expect people to come running,” he said.

MTVN now understands how to take its brands to the Internet, in Flannigan’s estimation: “It was really important to me that it was an equal seat at the table. I didn’t want to be just the 'digital guy.’ ”

So where are the growth opportunities and hotter career tracks: at online video ventures, or within cable’s own multiplatform initiatives? The answer depends on where you sit.

To former MTVN digital chief Hirschhorn, cable has topped out and the pure-play Internet media and technology companies are where the action is. “There are only so many channels on a cable system. They’re very expensive to launch,” he said. “Online, your ability to create and distribute are way easier — by a factor of infinity — than in the world of cable.”

Hirschhorn also pointed out that the innovators in online video have been the likes of Google, YouTube, Joost and Brightcove — not the traditional media companies.

That said, in his new gig, Hirschhorn will largely rely on old-line media conglomerates as key partners. As president of Sling Media’s entertainment group, he’s signing deals with CBS and other large media firms to distribute “SlingClips,” bits of video snipped from TV shows by users of the company’s TV-to-computer SlingBox device. The SlingClips will be available to anyone on a community-oriented Web site, scheduled to launch at the end of summer.

“There isn’t a channel on the dial I haven’t visited,” Hirschhorn said. “I want to do deals with everyone,” adding that he calls on the relationships he made in his seven years at MTVN daily.

To others, the cable-vs.-Web question boils down to Goliath-vs.-David differences. On one side are established media companies, with vast resources and powerful brands, although with all the layers of management and process that go with them. On the other are fleet-footed startups, with tremendous potential — that, most likely, no one has heard of.

“When I worked for ESPN, I found that just those four letters bring a lot of wind into your sails,” said Manish Jha, who in February was named CEO of Vantrix, a 65-person mobile-video infrastructure-services company. He previously ran ESPN’s mobile-content business unit.

On the plus side, Jha said, a small, privately held company can move fast. “We need the appropriate blessing from the board, but we can do deals and figure out compensation plans without going through a whole process, which you need when you’re running a big company,” he said. “It’s nice to be able to make quick decisions.”

LESSONS FROM THE WEB

Huge media companies also tend to be risk-averse, which is not everyone’s cup of tea. “A big company would rather spend $500 million on some sort of assurance that a business is going to be a viable business than spend $5 million on a bet,” Hirschhorn said. “I’m 36 years old. To me, it’s all about the bet.”

For their part, programmers are tapping experienced Web hands as they launch broader efforts to spread content beyond linear TV. Increasingly, they don’t see themselves as joined at the hip to cable. In the new digital mosaic, they feed content through multiple distributors, and they need folks who know how the nonlinear side of content creation works.

Black Entertainment Television CEO Debra Lee reached into the digital world to fill the network’s top two marketing positions because, she said, the Web touches everything the network produces.

Enter Janet Rolle, AOL Black Voices’ former vice president and general manager, and Alvin Bowles, the African-American portal’s former publisher. Lee recently hired Rolle to be BET’s chief marketing officer and Bowles as senior vice president of strategic marketing.

With more viewers using the Web and their mobile phones to watch their favorite shows or download music videos, Lee said its imperative that cable networks have executives in place who understand and can take advantage of those platforms.

“We’re no longer a traditional cable network — we’re a multimedia company that’s involved in many platforms,” she said. “It’s not just about traditional marketing; it’s about how you’re going to do it online, via [mobile] or whatever platform your audience is on.”

Other Web veterans pointed to specific skill sets and competencies cable programmers can apply from the online world.

Flannigan said there’s a fundamentally different way of interacting with viewers online. An online audience of 18-to-24-year-olds expects to contribute content into the brand, in the form of parodies and other “mashups,” and expects to be able to comment on shows. That, Flannigan said, was something Comedy Central had “left to happen everywhere else except our own site” — namely, on YouTube.

A programmer needs to enable its audience to be evangelists, Flannigan said, “to wrap their own content around your content and know that’s not something to be afraid of.”

How does that square with the billion-dollar copyright-infringement lawsuit Viacom filed earlier this year against Google and YouTube? To some observers, the legal play was emblematic of protectionist, old-style thinking.

Flannigan said Viacom wasn’t trying to prevent fans from sharing their favorite bits from Comedy Central or other networks. Rather, “we just didn’t want one entity to take 100% of the eyeballs and the revenue,” he said.

To that end, Flannigan’s big project is to meld Spike TV’s site and MTVN’s iFilm video-sharing site into a yet-to-be-named new destination that will provide a “two-way street” between so-called viral videos and the network’s own clips. “We’ve realized we don’t have monetize every single piece of content,” said Flannigan. “It’s always going to be a hybrid of promotion, marketing and revenue.”

Fox Reality vice president of operations Ed Skolaurus is also a believer in harnessing the energy of a loyal online fan base. “People will follow a show on any platform,” he said.

Skolarus spent six years at ITV software company Gold Pocket Interactive, before it was acquired by Tandberg Television for $78 million in 2005. Now, he oversees a growing Web outlet for hard-core fans of Fox Reality’s shows, delivering upward of 30,000 video plays per day and 1 million podcasts per month.

“We found that although the ratings may not have been high for some shows, the fans were really, really passionate,” he said. “These platforms start to take a life of their own.”

TAMING THE CHAOS

So, what can the Web guys learn from cable? In a nutshell, how to create an identity. “Online video is kind of random right now,” said Next New Networks’ Scannell.

Consider YouTube. The site’s name recognition is fantastic, but it hasn’t built any particular association with a genre or target audience. To be sure, the Google-owned site is trying to change that. For example, it recently launched “YouChoose ’08,” which aggregates video clips from presidential candidates.

“Internet video has a lot to understand about having a voice, and what a brand stands for,” MTVN’s Flannigan said. “Every show at Comedy Central has an audience in mind. You don’t have that on the Internet, except for maybe 'I’m the ferret guy.’ ”

The major Web portals might be considered programmers in the sense that they choose how to present and package content. But “they don’t really create content — they just go out and do a deal,” said Turner Broadcasting System vice president of business development Jeremy Legg, who previously handled business development for AOL’s broadband unit. “At a portal, the content just sort of appears. When I want a piece of new content at Turner, I have to go out and make it.”

In that context, Scannell’s planned micronetworks are a departure, a deliberate attempt to impose cable-like personalities around video collections. The business model is snitched from the Internet, with Scannell envisioning Next New Networks being able to sell ads both vertically targeted to specialized advertisers (like Royal Purple motor oil on VODCars.com) and horizontally across groups of related sites (e.g., automotive).

Financially, the differences between cable and broadband TV are in the cost and revenue models. “The cable game is about collecting dollars,” Scannell said. “The Internet game is about collecting nickels and dimes and quarters.”

As for production costs, Next New Networks will spend “hundreds of dollars per minute” on programming instead of thousands of dollars.

Indeed, cable producers who have moved to the Web are discovering they can do the same style of TV shows on a much smaller budget. Jennifer Usdan McBride, a former series producer for Discovery Health, launched Savory Cities a year ago with her husband Chris. The concept was simple: provide a restaurant guide geared around documentary-style profiles of top New York chefs.

The company now has banked 100 videos for restaurants in New York, Chicago and San Francisco. Video equipment needed: a Sony PD170 camcorder and a Macintosh computer. “I learned everything that I learned in television, and I’m now applying it to video on the Web,” Jennifer said.

At Diversion Media, CEO Nicholas Butterworth is hoping to grow from two to 25 lifestyle-oriented video sites in next four years. He brings from cable a bias for professionally produced content. For a broadband-video channel, job No. 1 is to have great content, Butterworth said: “On the Internet, you can’t rely on your channel position to bring you great ratings.”

NOT 'US VS. THEM’

Some maintain that it’s a false dichotomy to discuss traditional TV in opposition to “the Web.” After all, established content producers are already extending their reach online.

“You see a lot of people who look at these businesses as zero sum, and that’s unfortunate,” said Patrick Keane, who joined CBS Interactive as executive vice president and chief marketing officer in February, after more than four years in Google’s advertising division.

The heart of the CBS enterprise, he said, is video content — everything else is figuring out how to get it to TV sets, PCs, wireless devices or whatever else, and how to make money from it. The different platforms “need to be programmed in different ways, but there’s no such thing as the Internet being that 'other’ sort of media,” Keane said.

Earlier this month, CBS announced content-licensing deals with 10 partners, including Comcast, to make broadcast and cable fare available free-of-charge to viewers on the Internet. The company will sell ads and give distributors a cut, à la the joint venture pulled together by NBC Universal and News Corp.

“In a lot of ways we are building things from scratch,” Keane said. “I feel like CBS Interactive is a nimble startup within a large, well-funded media company.”

For Turner’s Legg, perhaps the most important factor in his decision to join the network was that, one way or another, its video will continue to find an audience no matter who’s distributing it.

“I don’t know who’s going to win,” he said, meaning content will be delivered by cable, satellite, telco, wireless and Internet service providers. “But what I do know is strong content brands are going to be on all of those platforms.”

R. Thomas Umstead contributed to this article.