Online video is having a bad time with some of the largest media companies pulling out of streaming video, namely Stage6, 'voluntary' shutting down (after loosing 12 million USD in 12 months), Google Video halting uploading and some pretty major implosions such as Veoh burning through 70 Million USD and filling for bankruptcy, to name just a few.

The problem being that the video vertical is a very difficult one to make money from, given the CPM from advertising is almost worthless and bandwidth costs are so high.

Enter The New Flash 'Payer' Application:

The traditional approach which attempted to solve the 'free dilemma' has been to put premium content behind pay walls, this has resulted in piss poor results for all who have experimented as openly published by this New York Newspaper.

The reason for such miserable failures being simply that people don't miss what they never had and usually only pay for something once they are hooked on it (crack for example). This is where the 'Flash Payer' comes into the picture solving the most difficult problem, that of getting users hooked. The widget and application works by allowing viewers a limited amount of free daily viewing time (decided by the publisher), then once their free bandwidth has been used viewers are paused. At this point the system opens a new page where they can choose a payment option, 1 day, 7 days, 90 days, or 365 days. Viewers pay the price indicated (decided again by publishers) and then the viewers can go back and continue watching where they left off.

In my own trials with the Flash Payer on my popular documentary video porthole Doc-Film-Net sales increased by more than 90% over the pay per view (premium pay-wall model previously implemented). This is a site which has had many near death experiences and is now off death watch and is now being placed into the party ward with all the living, breathing and thriving with the help of the Karsa Flash Payer widget and application.

What this application does is take care of all the technical hurdles, building the Flash widget, the management system and taking the payments, making it possible for video publishers to profit from their content without having to set up their own complicated processing systems and who can now start profiting with no technical knowledge or investments and immediately implement this system on their own sites and start profiting with no costs or technical hurdles to overcome.

The other players in this space include the JW player by Longtailvideo who offer a flash player which can be used freely for GPL use and a licensed version is available for commercial use. Also there is the FlowPlayer who also offer a similar concept as JW player. Both of these latter players rely upon advertising as the source for generating income for video publishers.

We are in a strange era with some of the largest media companies pulling out of streaming video, namely Stage6, 'voluntary' shutting down (after loosing 12 million USD in 12 months), Google Video halting uploading and some pretty major implosions such as Veoh burning through 70 Million USD and filling for bankruptcy, to name just a few.

The obvious problem here is that the video terrain is a very difficult one to make money from, given the CPM from advertising in this vertical is so low (almost worthless) and bandwidth costs are simply so high.

I have personally had plenty of my own struggles in this sector with Doc-Film-Net (a documentary film streaming porthole for controversial documentaries) which has been put on death watch numerous times as one CDN after another pulled the rug from underneath it (having offered free bandwidth then relinquished). Ultimately in order to survive it had to pay its own way and hence I was forced to explore every possible payment method to pay Highwinds the new CDN.

In my trials I experimented for a long time with pay per view, which was extremely disappointing since I found when the content is behind a pay wall, viewers simply did not miss what they had never seen and would not pay even small fees. In this model there was no pain being alleviated, as this New York Newspaper discovered too!

This got me to thinking long and hard and inspired this post on my own blog: Painful Ways To Make Money Out Of Free which led me to experiment with a Megavideo style payment system, in this system viewers are allowed limited free daily viewing time (60 minutes) and are then cut off and required to pay for unrestricted access.

I then developed a similar concept for Doc-Film-Net where users where allowed limited daily viewing access but had to pay for more than 60 minutes and the results were extremely encouraging, so much so that sales increased over those pay-per-view trials by about 90%. The reason being simply that people didn't miss what they never had and only usually pay for something once they are hooked on it (crack). Needless to say with the new limited viewing system in place Doc-Film-Net is now no longer on life support and is accruing healthy profits!

Enter The New Flash 'Payer' Application:

This has led to the development of a third party plugin & application for all video providers with the same dilemma where they can offer this feature on their own sites, it has more features and is fully customizable. It's called the 'Flash Payer' and is now being provided by Karsa.co.uk. Video content providers can now use this widget and application to charge for their content in the same way, setting their own price points and limits.

I have been thinking about the psychologically of making money out of free online services largely as a result of having developed some services which have attained healthy traffic, yet failed - like many others to make any profits.

Using free!

Using free as a business model is easily one of the fastest ways to gain traction, However, if the solution provided is too efficient, no new pain will be created and thus there will be no opportunity to make any profits.

Unintended Consequences.

Rarely there are unintended consequences which arise out of new solutions. These ultimately manifest as a new pain for the users and oddly, it is precisely these events which need to be carefully considered during the planning stages of the new concept if it is going to be successful!

Intended Consequences

When providing considerable value to users and thus gaining traction with a free service, I argue the intended consequence should be to crate a new pain! Then one simply charges for the resolution of this new pain.

Interesting Case Studies:

Company : MegaVideo

Value : provides great value with reliable video streaming, a large library of content and good image quality.

Pain: limit of 1 hour free viewing, demanding payment (20 euros = 3 months access) to watch the last part of a film!

Company: Plenty of Fish

Value: provides free online dating networking service.

Pain: creates pain for competitors who then pay to advertise.

Company: Wordpress

Value: provides free blogging software.

Pain: spam, users invest considerable energy into the platform, then suffer huge comment spam issues, resolved with the askima plugin (cost 49 euros).

Summery

Each of the above are interesting examples of companies who have intentionally or unintentionally created services which have gained considerable traction out of free, which has then resulted in a new pain being experienced by either their competition or their users, many of whom have payed for that pain to be resolved.

Is it ethical and does this matter!

Maybe or maybe not (depending on the variables), but what matters more IMO is the resolution of problems and the advancement of technology. I'm sure some will cry foul and accuse thee of simply looking for ways to exploit others pain which is true, but before you can exploit the new pain you have to solve another problem and/or provide considerable value to the target which is the the primary hook, so the end justifies the means and as long as there is added value then most people should be happy...

Update

After being put on death watch about 6 months ago, my own site Doc-Film-Net has again been given notice by the content delivery network who kindly stepped in (after the previous one stepped out) to offer free bandwidth (1Tb per month for this baby), and again the site has been given 7 days notice before the lights will go out unless it pays its own way (fair enough really). Hence, I have just spent the weekend building a Megavideo style payment system, (i.e. you get to watch 30 minutes free per day but are asked to pay for unlimited access) and have just implemented this on Doc-Film-Net. It will be interesting to see how this experiment works out...

Techcrunch UK reports today that the UK government have a ridiculous proposal to waste yet another 15 billion GBP on a nationwide snooping database on the terrorists public.

Thankfully an easy way around this nonsense has already been developed! Privnote allows people to send information via a link in an email. Once opened the link (and message) will instantly self destruct and the sender will be notified that the recipient has received the message.

In a New World Order where paranoia is the emotion of the day, with many nations on DEFCON 3 alert, and secrecy being of paramount importance, there is clearly a need for messages that self destruct!

This is where Privnote comes in to allow anyone (not just the CIA and MI6) to send these self destructing messages. In the current economic downturn, imagine the scenario, you (your name being George Soros) have just been given a top tip (from your man on the inside) that Lloyds of London are about to declare bankruptcy, now of course you need get in quick and start to buy up as many short stocks as you can get your hands on, but secrecy is the only method which will save you from 'a good day for bad news' scandal!

So you head over to Privnote and within a jiffy you have sent your brokers the orders to snap up these stocks that you can offload for a fortune when the market collapses... Now I am sure you and I would not be using this service for any such activity but in a world where the slightest mistake can be reviled by leaving an electronic trail of evidence against you, no one is safe, only those who use Privnote!

P.s. Privnote was designed by one of the very few Startup hubs emerging from Uruguay Insophia.