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Payday: Ustream’s Pay-Per-View Online Entertainment

Will Ustream’s pay-per-view experiment forge a business model for live Internet video?

Payday: Ustream’s Pay-Per-View Online Entertainment
LAUGH STOP Comic Dane Cook's final Isolated Incident tour date served as a valuable experiment for Ustream in live pay-per-view Web video. LAUGH STOP Comic Dane Cook's final Isolated Incident tour date served as a valuable experiment for Ustream in live pay-per-view Web video.

“Fort Lauderdaaaaale!” screams dude-humor comic Dane Cook at the end of his performance, jogging around the stage and mugging for the 15,000 people who came to the last show of his 67-city Isolated Incident tour. “You guys were absolutely incredible!”

Were Cook’s shtick being broadcast live on HBO or Comedy Central, this would be fans’ cue to turn off the tube. But here, on the Webcasting site Ustream, the party is in full swing. A camera follows Cook offstage, where he goofs off with warm-up act Al Del Bene before his encores. Meanwhile, viewers excitedly chat about their icon.(“Anyone know if he’s single??”) The five-hour experience, they say, was worth the $5 surcharge.

The Dane Cook pay-per-view event represents a signal moment in the history of streaming video. “We’re letting people buy premium content that is realtime, social, and mobile,” says Ustream CEO John Ham. “That’s the future of live media.” The company, which has amassed almost $90 million in venture capital and more than 70 million unique viewers monthly, is trying to create a business model for a promising technology that has been plagued by amateurish content and quality-control issues.

Ustream has been working toward this goal for more than two years, aggressively partnering with everyone from Nike to Warner Music Group and upgrading its service to handle large audiences (more than 4 million people watched last fall’s The Twilight Saga: New Moon red-carpet premiere). Its Social Stream platform takes full advantage of each broadcast’s live component. Viewers can log on to Twitter, Facebook, MySpace, or AIM to interact with one another — and with the entertainers — and post comments as status updates, helping a video go viral. During Cook’s free preshow, viewer response to his dressing-room Q&A drove almost half of the event’s ticket sales. “Once you lower the barrier to entry, it’s easier to upsell people,” says Ustream president Brad Hunstable.

TV execs are salivating over the possibilities. Dick Clark Productions aired a free American Music Awards preshow on Ustream and lured 3.4 million viewers. Ariel Elazar, DCP’s VP of digital distribution and brand licensing, says the site was a “key component” in the ABC telecast’s 16% increase in viewers this year. “We were able to reach audiences we don’t normally talk to,” he says. Ustream has also worked with CBS, NBC, and several cable channels.

Getting users to pay remains a challenge. The Cook event attracted only 48,000 viewers — Ustream won’t say how many bought tickets. “There has to be a timely, unique experience you can’t get anywhere else,” says Deborah Schultz, a partner at strategy consulting firm Altimeter Group. Fans could watch Cook’s stand-up act on DVD and he’d already toured the country. And Ustream’s exclusive “VIP After Party” was a dud.

Despite the paltry numbers, Ustream is focused on lessons over revenue during this pilot phase. “We’re going to promote [future events] more extensively on Facebook and Twitter, and make it easier for users to enter their access codes,” Hunstable says. Ustream plans to try again with music and sports. Presumably it’s hoping less funny equals more money.


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