All eyes on Google for signs of online ad slowdown

Asked what the biggest problem was for the online portals, Disney-ABC’s Rick Mandler quipped, “Asking us to remove the restrictions.”

On a serious note, Fox’s Ron Berryman said the lifting of such restrictions raises serious business questions. For example, “Who controls the advertising in it.

“There are a number of questions that come up depending on which player it is played on,” he said, noting that indigenous online video players don’t seem to be making a very good go at it yet.

Berryman noted that the free-spirited nature of indigenous online video services has yet to prove economically successful from an advertising point of view, and implied that was a big factor in the reluctance of major networks and studios in giving up control.

“It’s very difficult to monetize. I would say that both YouTube and MySpace in their areas are very difficult to monetize,” he said.

Disney-ABC’s Mandler said the networks are wrestling with other economic issues related to their burgeoning online video businesses, and that they are challenging traditional economic models. He cited two specifically.

The first one concerns bandwidth, he said, noting, “Unlike traditional broadcasting, the more people that watch your programming, the higher the costs. That’s an interesting dilemma. There’s all sorts of solutions for attacking that problem, but it won’t go away.”

While Mandler did not elaborate on ABC’s solution, it presumably has something to do with how Disney-ABC prices its online video streams to advertisers.

The other technological issue concerns how video on the “public Internet” gets viewed on the large TV screens in the typical living room.

“There needs to be a technological solution for that gap for the industry to grow rapidly,” Mandler said.

The traditional TV executives implied their online video operations were profitable, but they demurred when asked to characterize exactly how, and how much money they were making from online video.

Disney-ABC’s Mandler described “success” in terms of volume, noting that since ABC.com began streaming its TV shows online more than a year ago, it has generated more than 107 million “episode starts.” But he declined to say how much revenue was associated with those showings, stating only that, “Yes, we have a very profitable business in online video going on.”

Last fall, CBS said it would distribute news, sports and clips from prime-time shows like “Survivor” on a CBS-branded YouTube channel, while Sony BMG and Warner Music were going to distribute ad-supported music videos on Google. NBC had several months earlier come out with its own plan to harness YouTube to promote TV programs.

But today’s Wall Street Journal reports that Google-CBS talks faltered when the companies couldn’t agree to terms for distribution of shows like “CSI,” even though Google reportedly promised CBS more than $500 million in ad revenue. The Journal also reports that NBC’s general counsel dashed off a letter to Google griping about copyright infringement on YouTube.

These signs of trouble come several weeks after Viacom took a dispute with Google to a new pitch, ordering the company to remove 100,000 clips from YouTube.

Earlier this week, Viacom said it was going to distribute on upcoming YouTube rival Joost, founded by the same people who created peer-to-peer company Kazaa — which itself was a longstanding bane to media companies.

Of course, whether Joost will be able to keep pirated video off its site remains to be seen, since the service hasn’t even launched yet. In fact, Viacom’s decision to support Joost seems at least as much a rebuke to Google as a vote of confidence for the Kazaa creators.

Viacom and other media companies seem to believe that Google, with all its technological innovation — and cash — could prevent copyright infringement if it really wanted to. Or at least that it could compensate the companies for their clips.

Meantime, it’s hard to see whom this impasse is helping. Consider, just two months ago, after CBS placed more than 300 clips on YouTube, the TV network unveiled a study showing that ratings had increased. The company said “The Late Show with David Letterman” drew 200,000 new viewers, a 5% increase, after CBS placed clips of the show on YouTube, while “The Late Late Show with Craig Ferguson” increased its viewership by 100,000, or 7%.