Creating A Content Business Online: The Song Remains The Same

I recently spoke to someone looking into starting an online content venture.  He has an idea for a video/podcast series that would fulfill a gap in the market.  He comes from a 'traditional media' and production background and had questions on the monetization front.  To boil it down, he has 3 options:

1. Charge users: Given the type of content, this is unrealistic although there could be incremental revenue to be had via mobile and download distribution.  But it would be incremental at best.
2. Get sponsors to underwrite it: It's a concept that would do well in a sponsorship format.  The trick here is to get the sponsor.  It is tough to do so if one has no relationships, no audience (remember, this is in concept phase) and no track record in getting an audience.  He is very credible on the content front so advertisers would have no doubt on the quality of the content, but how would a sponsor know how much and what kind of audience they would reach?  Some sites sell content sponsorships on spec but these tend to have established relationships and a track record established their credibility.
3. Sell/license concept to distributor:  Like most production companies, he could bring in a distributor - everyone from a tv broadcaster to a portal like myspace or aol - to fund the production and, depending on the terms, license it outright or share risk/upside. 

Realistically, #2 will only work if he can somehow bootstrap his concept into life and prove the ability to attract traffic - no easy proposition.  So #3 may be the more feasible option for him, especially if he can retain control over brand, drive traffic to his site and share upside.  The good news is that, unlike 4 or 5 years ago, production costs have plummeted and technology is no longer a barrier to distribution.  But, in some ways, that makes it harder to build a business and be heard through the noise.  Companies/sites like Break, FunnorDie, NextNew and others are starting to figure it out.  I think companies that produce great content will continue to get rewarded but the dynamic will be different, which may be fodder for another post.