Remember the Digital Video Disruptors? Now They're Mostly Just TV Suppliers

As YouTube and Facebook dominate the video ad business, smaller web video natives like Vice and Buzzfeed are now betting on their relationships with traditional broadcasters.

Four years ago, there was palpable excitement at the Digital Content NewFronts as executives at such would-be revolutionary businesses as BuzzFeed, Vice Media and Maker Studios boasted about how they were building brands that would someday rival those on TV. Events haven't exactly played out that way.

This was especially apparent when digital executives trekked to gloomy New York during the first week of May for a noticeably slimmed-down NewFronts showcase. YouTube was still there, with CEO Susan Wojcicki touting 250 million hours streamed on TV sets each day. But companies like Maker, Fullscreen and Machinima that once commanded prime slots were absent, having been swallowed whole by their big-media counterparts and either disbanded or subsumed.

Television networks have largely been able to stamp out those digital insurgents and maintain their foothold with Madison Avenue, which still prizes live and premium programming above nearly anything else. "It's almost universal that the first place you're going to spend is TV," says GroupM president Brian Wieser. "The question is whether it's the second dollar or the 62nd dollar you're going to spend on digital."

While TV ad spending is expected to decline over the next five years, it's not contracting as quickly as some digital bulls expected. By 2023, advertisers are projected to spend more than $69 billion on TV, topping the entire online video market by $11 billion. The ways in which people watch TV have changed rapidly, but broadcasters are evolving, too, and a depressed digital publishing world, still smarting from an ill-fated pivot to video, has yet to throw up a real challenger to legacy media brands.

Those digital publishers that were still present at the NewFronts made a tacit admission of defeat: They are now selling programming to the very industry they once hoped to overtake. Viacom touted Awesomeness content on Hulu (PEN15) and Netflix (To All the Boys I've Loved Before); and Vox Media execs were in the audience at the Hulu presentation for the reveal that they'd be producing the streamer's first slate of unscripted food shows. And then there was Vice, a company whose former CEO once boasted would become "the biggest fucking media company in the world."

Instead, mere days before one of its largest backers, Disney, would announce $353 million write-down on its investment, CEO Nancy Dubuc showed off projects for third parties like Netflix (Fyre) and HBO (Vice News Tonight). Vice might have to settle for being a provider of programming to the biggest media companies in the world. Not quite the same ring.

"Where digital is resembling TV has turned out to be in how the content is being produced and packaged," says Noah Mallin of media agency Wavemaker. "That wasn't the expectation."

Even Jon Steinberg, the former BuzzFeed executive who once claimed that "people in their 20s and 30s are never going to watch television," on April 30 made the ultimate admission that there's still power in legacy media when he announced that he'd sold business news startup Cheddar to broadband provider Altice for $200 million.

It's not that TV isn't being disrupted — just not by BuzzFeed or Vice. Netflix, the big bully of streaming, has forced every major media organization to re-evaluate its relationship with audiences. That's why Viacom spent $340 million on ad-supported streamer Pluto TV and why Disney and Comcast continue to fuel nearly $1 billion in annual losses at Hulu. "Streaming is TV," Hulu CEO Randy Freer told advertisers May 1. "It is simply better TV."

Now that NBCUniversal, WarnerMedia and Disney are all investing in direct-to-consumer plays to protect their businesses from the erosion of linear television, those once-brazen digital upstarts have little chance of competing. Their best bet is to hope that one of these larger media conglomerates takes them along for the ride — as Fullscreen and Awesomeness look to do now that they're owned by WarnerMedia and Viacom, respectively — or becomes reliant on them for their programming.

While humbling, it presents an opportunity for publishers willing to serve as suppliers. "We like the current marketplace," says Reza Izad, CEO of digital network Studio71, which in addition to its YouTube content has made a business out of selling shows The Toe Bro and a Mr. Mom reboot to cable and streaming networks. "We want to be firmly in both worlds."

This story first appeared in the May 13 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.