Category: Distribution

Digital Distribution issues

Categories
Business & Marketing Distribution Media Consumption New Media

What will replace advertising?

Over the last two years I’ve been thinking extensively, and speaking on, about funding new media. (Want me to come speak on the subject at your group – email me!) It’s become increasingly obvious that advertising probably isn’t the way the majority of media will be funded in the future.

In the (relatively brief) period of mass media – Television, newspapers, magazine and radio – the publisher or license holder built an audience and then sold that audience to advertisers to push unrelated products and services to the audience who mostly didn’t care. With 70% of Americans desirous of paying to avoid advertising (counting me among them) you have to wonder how long the tedium of irrelevant advertising will be tolerated by audiences.

Even the web is a horrible experience unless you are smart enough to enable ad blocking and Click2Flash (Flash blocking in webkit displays system wide – OS X only afaik). With those two add-ons enabled the web doesn’t burn my eyes with the pain of flashing, jumping, irritating distractions. If my failure to ruin my experience of a site by blocking the ad sends the site off the net, so be it. I didn’t ask for the advertising.

Technically, of course, it’s not all advertising that’s horrible, just irrelevant advertising. Like watching a 45 minute show on Hulu and seeing the same fabric softener ad five times!!!! And Hulu has the temerity to complain that I’m using ad blocking! People don’t really mind relevant advertising, but so little of it is! In fact, for me about 99.9% of advertising is irrelevant. In maybe 200-300 hours of in-car listening to KNX1070 (LA News radio) I’ve heard one ad that was relevant (Windscreen chip repair). That is the only ad that doesn’t carpet KNX wall to wall! (Figures!)

So, I have a fairly hard-and-fast rule that I don’t buy from anyone who advertises to me. Send me junk mail, go out of my purchase consideration list.

Anyhow, I’m not alone. Not only is advertising losing its effectiveness, it turns people off (and yes, I have references for every assertion I make, I just don’t want to clutter the blog) and that’s just not going to be a way to build an audience.

But there’s a much bigger problem. There’s not enough advertising for any “new media” and “old media” is losing advertising support in dramatic amounts.

But most relevant of all. Advertising in someone else’s show makes no sense. The biggest advertising brands would be much better off with branded entertainment, where they would pay for the content and integrate the advertising. American Academic Mark Pesce, now at the Australian Film, TV and Radio School, coined the term “Hyperdistribution” where a single sponsor integrates ads relevant to the show’s audience and in the style of the show, and then it’s distributed anywhere and everywhere it can be. P2P and Bittorrent distribution is welcomed!

My friend Cirina Catania worked on a very successful series of branded media (online video) for Chivas Regal and I believe that this is the direction of the future: useful, interesting content that is, in some way, relevant to the brand and hooked back to the brand. Why torture audiences with irrelevant advertising when you can entertain them and still get the brand message across in a relevant way?

I’m clearly not the only one that thinks this. I recently found a great presentation called (correctly) The Audience is always right. Check it out and then make a comment.

Categories
Business & Marketing Distribution Item of Interest

Why do I have two inconsistent positions about copyright?

Just lately I’ve been dealing with a content aggregation site (or two) that had articles from this blog listed in their articles directory. Worse still is that the site is designed to distribute articles to other sites. I don’t mind the idea: if a writer wants wider distribution, then it probably makes sense to syndicate the article there, than have it sit in obscurity.

I had to fight fairly hard to get my articles out of their system because I had not put them in that system and didn’t want the articles syndicated wildly. Now I do have some syndication organized (if you’re reading this on Toolfarm, thanks) but I don’t want this content distributed anywhere I haven’t directly authorized.

The articles were removed but only after I re-served the DMCA takedown notice on the owner of the domain name, as the normal site admins were not acting in according with the provisions of a DMCA Takedown notice. (I actually thought I’d have trouble when I realized, from the domain registration, that the company was actually in Israel, which isn’t actually covered by US Copyright law! Fortunately they did the right thing.)

We were talking about this over dinner and I realized I had a double standard going on. Not necessarily a bad thing but any internal inconsistency is alway s worth examining.

I was remarking that I am fairly certain there’s at least one school or college that’s using my HD Survival Handbook as a class text, which is not exactly being used in accordance with a single-user license that is the normal purchase. (BTW, we’re always happy to do very attractive bulk pricing for anyone that wants to reuse in a school or commercial organization, as we did recently.) But the thing is I wasn’t particularly upset by it. Sure, I would prefer that they made an arrangement with us for official distribution, but the thing is, I didn’t have any proof that they were doing something wrong. There may be a way that just the teach uses the work as a reference.

If I had actual proof put in my face – such as a student saying that the HD Survival Handbook was actually on a student-accessible server at her college – I would have to act. (In that case I sent a nice email to the original purchaser at that college stating what the student had said and he immediately made it right.) When I say “have to act” I actually mean it. Should an author not act on flagrant breach of the licensing conditions, there are circumstances where the author can lose the copyright exclusivity.

So I was struck with my apparent double standard. I am less worried about meticulously keeping the commercial writings only to those who purchased, than I am about these thoughts being widespread.  Partly that was because the instance with the aggregation site did not have link-backs to this site – the uploader had substituted links to their site, and the content was misused – wrong tags and confusing descriptions. My name even appeared on an article I didn’t write! But it’s also because a lot of what I write here are the beginnings of my thinking about something, or they’re going to be (or have come from) commercial writings.

Mostly, I think, it’s because the commercial products were written to be distributed widely. Plus, if there is a whole class or two that are using my work as their textbook, I’m still being compensated with reputation building. I’m not unhappy with the thought that a whole generation of student will grow up thinking that I provide accurate, understandable and useful information. I figure that will lead to some compensation some day. The portion that does pay for the downloads, and I like to think that’s the majority, make the project well and truly worthwhile, and frankly, I don’t think those students would have paid anyway! Whatever money a student has should be kept for the truly important things… 😉

Here though, I’m writing as much to clear my thinking or have a record of something I’m fired-up about as anything. I don’t have advertising on the site and don’t expect it will be a commercial return. I do hope that it’s reputation building, and when you reproduce this work without authorization, you’re taking my reputation and using it for your own purposes. And I don’t like that.

PS

What I consider highly appropriate is to make reference to a post, summarize the main points – perhaps quote a paragraph or two – and then link to the permalink for the article here. (Click on the article headline and the URL will be the permanent link.) That type of use is a compliment.

Categories
Business & Marketing Distribution Random Thought

What if there was no copyright on “music and the arts”?

Over at Techdirt, Mike Masnick wrote an interesting article suggesting that copyright on “art or music” may be unconstitutional. Now, I don’t expect the Supreme Court to rule that way any time soon – there’s not even a case before them – but it did make me wonder what would be different if copyright didn’t exist on film, television, music, architecture and other creative arts.

I thoroughly recommend reading Mike’s article, but the gist of the argument is that the Constitution provides for a “Limited Period” (originally 14 years, not 50 years past the death of the author) for “authors” (only, no descendants or corporate owners) “To promote the Progress of Science and useful Arts”. Useful Arts apparently being the business of invention in the language of the day. No mention of almost all our current copyright system.

We wouldn’t have the RIAA suing its best customers. The RIAA, MPAA and their kind around the world would have to work out how to compete, which is simple: provide a good product at a fair price and provide it conveniently. Without the crutch of copyright to protect a dying business model (and a highly profitable one, so it’s understandable they don’t want to adjust to the new reality) they would have to compete.

After all, television has been giving its content away pretty much since day one. Of course others (advertisers) pay for the privilege of interrupting the program with something irrelevant, which is why I’d rather pay a fair amount for my ad free copies, thanks.

If there was no copyright, then digital copies would abound, and content creators would either have to add value to their official (paid) version; or bundle advertising so closely with the show that it doesn’t appear like advertising. (In fact I believe the future of advertising is branded media, but that’s a post for another day.)

Of course, it can be done. iTunes and Amazon’s music store sell music that is fairly readily available via various P2P mechanisms. Every one of the 4 Billion songs Apple has sold has been available free.

Perhaps content could be free after a period of time, and people will pay for immediacy. This is the strategy the Direct TV hoped would give them more customers by showing Friday Night Lights on Direct TV before their outing on NBC. (See my earlier article on how the numbers stack up for new media, on how that program is being funded and what a fair price would be for a viewer.)

People will pay for convenience and simplicity – both reasons why iTunes has been such a successful model, despite charging way too much for television and movie content.

There are dozens of ways that television, and new media production, could fund itself if there was the necessity and they couldn’t fall back on copyright. In fact in my “Making a living from new media” seminar, I outline 13 different ways that free media can lead to a decent middle class income.

If “Hollywood” wasn’t covered by copyright, how different would it be?

Categories
Distribution New Media

Why is fighting piracy a losing battle?

A couple of days ago I talked about why a “three strikes” law is such a bad idea. It’s also a bad idea because it’s pointless and bad for the content creators and/or owners’ businesses.

On the other hand, even the threat of a three strikes law in France (ultimately struck down by their highest court as against human rights) immediately created a business opportunity for encrypted Virtual Private Networks (VPN). Not only that, but the Pirate Bay folks are also setting up an inexpensive VPN service for anyone that wants it. These services disguise the IP address of the downloader, so even if copyright owners tried to get an IP address to sue (not that you can sue an IP address, as many have found out in non-US jurisdictions) everyone using the service has the same IP address, not correlateable to any individual location. 

If that should ever become “broken” as a workaround, something else will be found. In fact there’s a move afoot to update the bittorrent protocol to a new form that resists seeders being identified.

It’s a pointless exercise. Whatever horse there was has long bolted the stable and the only reasonable response from an intelligent business person is to find new business models. Andy Kessler, writing at Forbes.com, discusses The Inevitability of Internet Pirates: 

Hand out as many guilty verdicts as you like, but folks on the Internet will copy away–because, really, who can stop them? Google won’t do it, Internet providers like Comcast ( CMCSA –news - people ) and AT&T ( T - news - people ), who can block a lot of this stuff, can’t do it without Network Neutrality proponents squawking, “Interference!”

Even authoritarian regimes fail. (The Great Firewall of China is quite leaky.) Plus, it is so easy to create a Web service to download copyrighted material that, like that arcade game Whac-A-Mole, if you take one culprit down with your mallet another five pop up in the next few nanoseconds. Sad but true, there is not much anyone can do.

Blocking sites does not work because it’s relatively trivial to find a proxy server to log into the “blocked site”. DRM has been an abject failure inconveniencing those who actually paid for the product without doing anything to reduce “piracy”. 

Piracy is such a daft word for infringement – a civil or business problem, not a criminal one. With theft of property, the original owner is deprived of ownership because the thief has taken it. Not so with a digital copy where millions can be produced without anyone being deprived of anything (other than potential, not actual, income). The copyright industry likes to use the word “theft” or “stealing” but it’s disingenuous at best and an outright lie in all likelihood. (As are the outrageous guesses at “losses” that make the ridiculous assumption that every download is a lost sale at a premium price, none of which is supportable by fact.)

Not only is it inevitable, but it’s not in the best interests of the content industry. As I’ve noted before, those who do pirate music are also the music industry’s best customers. Apparently the pirating is a way of testing new music that otherwise would never have been heard, appreciated and ultimately purchased. 

Not only that but a new Harvard study shows clearly that it’s in societies best interests to have weak copyright. Remembering that the writers of the Constitution of the USA reluctantly granted “limited” exclusive copyright in return for encouraging creative work.

Copyright law was never meant to protect the music business in the first place—instead, it’s intended to foster creative production in the arts. It seems that goal is fostered by weak copyright and file sharing. 

The idiot copyright industry keeps saying that nothing would be created without ever stronger, and longer, copyright. This is another lie that bears no relationship with any fact or research, but that doesn’t stop the IRAA and MPAA making the claim. (Heck, they simply change their story to suit whatever action they’re currently taking to prop up outdated business models – every action that is, except updating their business models.)

The Harvard Study, analyzed by Michael Geist (the original is a pdf and harder to link to or quote) has found that file sharing has significantly increased cultural production. 

The paper takes on several longstanding myths about the economic effects of file sharing, noting that many downloaded songs do not represent a lost sale, some mashups may increase the market for the original work, and the entertainment industry can still steer consumer attention to particular artists (which results in more sales and downloads).

And this:

The authors’ point out that file sharing may not result in reduced incentives to create if the willingness to pay for “complements” increases.  They point to rising income from performances or author speaking tours as obvious examples of income that may be enhanced through file sharing. In particular, they focus on a study that concluded that demands for concerts increased due to file sharing and that concert prices have steadily risen during the file sharing era.  Moreover, the authors’ canvass the literature on the effects of file sharing on music sales, confirming that the “results are decidedly mixed.” 

It’s time the MPAA, RIAA and their international associates, who do NOT really represent artists, simply realized they were flogging a dead horse and the only chance they have for a future is to adapt. Ever more draconian laws that turn almost every citizen into a civil offender (or worse a criminal) is not only stupid, it’s not in the best interests of those who create the content. Something many musicians have realized already.

Any chance of at least one politician understanding the argument? I didn’t think so.

Categories
Distribution Media Consumption

What is the future of broadcast and cable TV?

The catalyst for this post was Henry Blodget’s provocative post Sorry, There’s No Way To Save The TV Business. There’s a lot in the article I agree with, but also a lot of good counterpoints in the comments. Clearly it’s not yet universally agreed upon!

That article alone would probably be worth commenting on, but add it to a whole bunch of other articles I’ve been holding for comment:

TV: The Next to Fall by Jeff Jarvis at Seeking Alpha (i.e. strong/good) Media

We’ve been wringing hands over newspapers and magazines, but TV and radio aren’t far behind. Broadcast is next.

It’s a failure of distribution as a business model. Distribution is a scarcity business: ‘I control the tower/press/wire and you don’t and that’s what makes my business.’ Not long ago, they said that owning these channels was tantamount to owning a mint. No more. The same was said of content. But it’s relationships (read: links) that create value today.

Why Television Needs a Reality Check on Sustainable Business Models by Diane Mermigas

Time for a reality check. You know your business model is in trouble when …

Revenues and free cash flow recede and profits evaporate

The TV Industry Is Terminally Ill by Bruce Everis, also at Seeking Alpha

The demise of TV is because it is old technology. Quite frankly I find it pretty boring these days. They just cannot compete with computing, the internet and gaming. And they cannot compete because they are not interactive (except in a farcically limited way), they do not connect the user with other users and their content is purely linear. Their main market now is the educationally subnormal, geriatrics and babies, because these are the only people left who aren’t online.

Broadcast TV Faces Struggle to Stay Viable in the New York Times by Tim Arango

For decades, the big three, now big four, networks all had the same game plan: spend many millions to develop and produce scripted shows aimed at a mass audience and national advertisers, with a shelf life of years or decades as reruns in syndication.

But that model, based on attracting enough ad dollars to cover the costs of shows like “Lost” and “ER,” no longer appears viable. Network dramas now cost about $3 million an hour.

The future for the networks, it seems, is more low-cost reality shows, more news and talk, and a greater effort to find new revenue streams, whether they be from receiving subscriber fees as cable channels do, or becoming cable networks themselves, an idea that has gained currency.

For Television, It’s a Whole New World again by Diane Mermigas

Anyone expecting television advertising–including network upfront spending that could decline more than 15%–to rebound to former levels is in serious denial of the deep-set economic changes underway.

Systemic shifts in how companies and consumers make and spend money could throw media and other commercial players into a death spiral if they are unwilling to alter behavior and expectations. Advertising is not going away, but its fundamental economics are changing. That makes widespread media market deflation and deterioration (the worst being local media) much more than a cyclical glitch, according to a new Goldman Sachs report.

There are others but it’s too depressing for a Monday evening!  For an industry that’s still making money and still incredibly popular – latest figures show the average American viewing about 310 minutes a day (just over 5 hours) – that’s an awful lot of doom and gloom.

And probably unjustified. New technologies have never wiped out any preceding industry. Film did not destroy stage. Radio did not kill film. Television killed neither radio nor film. It’s unlikely that Internet Video or Internet TV (call it what you will, I still like New Media with the caveat that it’s unmediated) will replace Television.

What has happened is that the role of different media has changed. Radio has few panel or game shows and very few drama programs anymore. These have migrated to Television. A lot of film production is dedicated to Television distribution so, instead of replacing the Film Industry, Television helped it grow.

So, it’s likely that Broadcast Television will remain – the big four networks will have a role. But I think we’ll see it change to feed the few mass markets remaining: sports (definitely); news (although most TV news is pre-recorded and edited before the broadcast); reality television, talk and game shows (because they’re relatively cheap to produce).

Pretty much everything else will migrate to on-demand consumption. There’s little loyalty to a channel, but there is loyalty to the programs. What a lot of TV executives haven’t yet realized is that people don’t care about their network or channel, just the individual programs that they carry. Increasingly – since the Betamax in 1976 – that has been consumed on the viewer’s schedule. The only thing I’ve watched real time in the last three years has been the Superbowl, because I’m at a Superbowl party! (And to be truthful, I’m there for the party and people first, the ads in the broadcast second with little interest in the actual game.)

As the audience for drama and comedy splinter, the advertising supported model is almost certainly unsustainable. Advertising online isn’t going to match broadcast revenues per viewer leaving only subscription or direct pay to support quality programming.

Not that any of this is going to happen overnight. Still, I have to agree with the doomsayers: the traditional advertising supported broadcast model (aped by most cable channels) is unsustainable long term for most programming.

Categories
Distribution Media Consumption New Media

Why is “three strikes” such bad idea?

In case you haven’t heard, The RIAA/MPAA and their international equivalents, are working desperately to make ISPs kick people off the Internet if they are accused of file sharing more than three times. (Three strikes and you’re out.)

There are so many things wrong with this idea it’s hard to know where to begin. Firstly, there’s no current legislative support for file sharing P2P being illegal and the RIAA, despite suing thousands of  people, hasn’t obtained a conviction. (It obtained one conviction but the judge himself overturned it when he discovered that “making available” was not a crime, contrary to his comments to the jury during the trial.)

Then there’s the methodology. These organizations are seeking to implement three strikes merely based on their accusation. No legal due process, no right of appeal. We already know that these same clueless organizations have been very, very wrong in the past, attempting to sue people who had no computer (but may have paid for an account) or other blunder. No other place in law, particularly in a “innocent until proven guilty” legal system, allows – effectively – conviction upon accusation. There is no right of appeal.

Finally, there are already copyright laws in place that provide the protection that the copyright owners feel they need. They have it. It just has this teeny tiny shortcoming that the copyright owner has to prove   that the accused actually committed the “crime”. They’d have to actually prove the case to a suitable legal standard.

Fortunately, although France’s ruling body enacted three strike legislation. That legislation was rendered Unconstitutional by the French Constitutional Council (their highest court). This is in line with the European Parliament who also ruled against three strikes laws as has the UK.

The real problem isn’t file sharing because it turns out file sharers are also those industries’ best customers and the piracy can actually help sales, but rather there’s an industry that’s changing in a way that means there is less and less need for the role that the RIAA or MPAA’s members once played.

Instead of doing the hard work of trying to find a new business model they expect governments, ISPs and just about everyone else to help maintain the one that is heading for obsoleteness. Of course it doesn’t help when the make up totally bogus numbers to support their contention as to how much is being lost to “piracy”. (I’d call it free promotion.) 

Even actually studies manage to be spin-doctored beyond control, even exaggerating the number 10x, and yet no reporter or journalist checked them for accuracy, leaving the thorough debunking of the numbers to non-professional journalists. (This is why I don’t care about the news industry as it is; they’re notoriously inaccurate.)

The solution isn’t to try and prevent piracy, because it’s not possible. It’s time to realize that you can sell abundant goods at premium prices. What you have to do is to find where there’s scarcity that can attract premium prices. The role of abundance and scarcity is the subject of another post.

Categories
Business & Marketing Distribution

What is the future of publishing and what does that have to do with production?

On Wednesday I more than doubled the sales of the paperback edition of The New Now. Since the paperback has just gone on sale, that’s not surprising. This is our first foray into publishing via paperback and we’re not certain how it’s going to go. We’ve had great success (for a book) via our PDF publishing efforts, but are only now giving paperbacks a go.

Apparently we’re not alone. Publisher’s Weekly has an article where it notes that there were more books published “on demand” last year than by traditional publishers. On demand is the method we use, via Amazon’s CreateSpace, and is most commonly used by self publishers.

It’s not hard to understand why. The deals being offered by publishers in our space are, frankly, insulting for the amount of work that goes into creating a book. By self publishing – and giving people a choice of an information-only PDF or the same information in a solid book form (well, paperback) – the author gets a larger slice per book. It’s not unusual for an author to make more money from the Amazon Associates commission on the sale than from the publisher. Seriously.

That means that books break even for the author much faster and the author retains the copyright. While in theory the author owns the copyright for a book through a traditional publisher, in practice, while there’s any outstanding balance due to the publisher, the publisher owns the rights.

The way a book deal works is that the author is paid an advance, based on the expected sales of a book. That used to be based on 5,000 units selling at full retail (because author’s don’t get a penny from remaindered and discounted copies). While there have been one or two breakout successes in the space, most books never reach that level of sales so the advance is never fully repaid from sales, and consequently the publisher owns the work. Since the standard contract also allows them to publish new editions with new authors (if the original author declines), effectively the author has lost control of their work.

Self publishing the HD Survival Handbook we reached the level of the currently offered advances with just 375 sales. The book became profitable (i.e. it returned a reasonable return for the amount of time that went into it) at about 600 copies and sales have been way above that.

It’s all possible because new printing technology prints soft-cover books very, very quickly (about 6-8 minutes) and remarkably cheaply, without having to commit to a large pre-order. This technology is going to get twice as fast for half the cost in the generation of printing/binding machines just announced. The cost of printing the book is almost inconsequential.

This is what digital technologies do when they disintermediate an industry. Like the record labels and (to a much lesser degree TV and Movie studios) the role of the publisher – the intermediary who traditionally made the most money – has faded.

An author would have gone to a publisher to: a) fund the printing of the physical books, b) give the book an ISBN, c) get the book into “the channel” – the bookstores where people can buy it, and d) promote the book. Through CreateSpace the paperbacks are printed as they’re ordered (a.k.a on demand) and CreateSpace assigns the ISBN so the book can be found by any reseller. The book is automatically listed in Amazon because Amazon owns CreateSpace. While, in theory, a publisher would promote the book, in practice for most books on production and post-production, that meant sending out a media blast to the usual suspects and from there it was up to the author to promote the book.

CreateSpace gives me all of those. I own the copyright; books are printed on demand inexpensively enough that the return from an Amazon sale is only slightly less than the return from a PDF sale (so the knowledge carries the same value). It’s listed in the only bookstore my customers are likely to use, although it can be ordered in by any bookstore – online or physical. Better still, I directly benefit from new sales, rather than simply promoting the book to recover money I’ve long spent (the advance).

The author is an independent in the disintermediated world. Similarly, digital video technologies allow writer/producer/directors to make their project without needing the backing of a studio. Budgets can be shrunk considerably when you take out the middle man. The most expensive part of an Amazon sale is the Amazon commission, which is more than double  the cost of producing the physical book.

Even using that third party distribution channel, the return per sale is way higher than from a publisher.

Similarly owning the copyright for a reasonably-budgeted production leaves margin to offer producers or allows the creator to go direct to the viewer. (The only thing I call New Media!)

When more money goes back to the producers more production gets done, because shows can be supported by smaller audiences, in the same way that a book can sell many fewer copies but still make a better return for the author than through traditional channels.

Categories
Distribution New Media

Why do people have no sense of perspective?

The article “Original Web Video Still A Bust” by Dan Fromer really made me smile. Web video – not year five years old – has not yet replaced programming from the major networks and studios. Who’d have thought!

It’s not like the early days of cable. Where articles written “Original Cable programming still a bust” in the mid 70’s and the very early days of Community Antenna/Access TV, the precursor to modern cable. It took more than 20 years of cable, and more than 10 years of the Telecommunications Act of 1996, which is when modern cable really started to take off before we got Mad Men or Breaking Bad or any of the current crop of high quality drama and comedy now available on cable. 

We are much further advanced with Internet TV than we were at an equivalent stage of development for cable. Product equipment is much cheaper and much more accessible compared to limited access to a studio provided by the cable network as a condition of their franchise on a city. One studio that was a limited asset. Nowdays, pretty much anyone with an idea can create it. I’ve interviewed guests who made movies for under $500. Matthew Winer (in the Spring edition of Produced by magazine from the Producer’s Guild) says that he made his first film for $20,000.

But like cable the growth to quality programming will be slow and gradual. It won’t take 10 or 20 years but I do expect that it will be five to ten years before we get million dollar budget for programs specifically for Internet distribution. The numbers do add up if the distribution channels are handled right. (Hint: it won’t be advertising supporting it this time round, at least not in the annoying intrusive formats we’ve seen on television.)

So, it’s a little premature to say that original web video is a “bust” just yet. Get back to me in 2020 and I’ll be very surprised if we don’t have a vibrant new media creating great drama, comedy and other formats we haven’t seen yet for Internet distribution that is viewed primarily on TV screens (however the big set in the corner evolves).

Categories
Distribution New Media

How do the numbers stack up for new distribution channels?

For the last year or two I have been trying to get solid numbers for the budgets for two of my favorite programs: Friday Night Lights, and Mad Men. These two shows are produced less expensively than traditional budgets – that much I knew – but what the budgets actually are seems to have been a State Secret. Until Friday that is, when Variety provided the information I was after in Networks look for low budgets by Cynthia Littleton.

Friday Night Lights‘ budget is:

“about $2 million and change per episode, compared to $3 million-plus for many network skeins (or just under $3 million on the low end)”

For Mad Men:

“Given the scope of the period drama, production execs say they’re amazed “Mad Men’s” second season came in at about $2.5 million an episode. That was up by a few hundred grand from the first, and a princely sum by the standards of AMC and “Mad Men” producer Lionsgate TV.”

FNL has around 4 million viewers on NBC in Season 3, (down from nearly 6 million for Season 1 and 2)  plus the 4-500,000 viewers who saw the show on DirecTV. The drop off NBC was nearly 2 million – 500,000 of whom may have seen it on DirecTV. I suspect the other 1.5 million viewers saw the show via Bittorrent soon after it aired on DirecTV.

Mad Men’s second season rated about 1.5 million per episode.

So, how do the numbers stack up if we were to forget network and satellite delivery and simply sell the show directly to viewers? Let’s start with Mad Men because it lacks the DirectTV complication.

Mad Men

AMC is an advertiser supported network, although it would seem that Mad Men is a loss leader for the network. With costs around $2.5 million a show and an audience of only 1.5 million, the average cost per viewer is $1.67. To deliver that is about 350 MB for an SD version and 1 GB for a good quality HD version. Bandwidth cost per viewer (for Internet delivery) would be about 4 cents for SD and 12 cents for the HD version. The producers would have to net at least $1.71 for SD and $1.79 for the HD version beyond any partner commissions paid (like Apple’s 35% or Open TV Networks’ 15% – although Apple include the bandwidth for delivery).

So, Mad Men would be viable at $1.70 (SD) and $1.80 (HD) if sold direct by the producer. Through iTunes AMC would need to sell for $2.57 per purchaser to cover the production cost if the audience stayed static.

The numbers for Mad Men are so dramatically different from other shows (as we’ll see in a minute) that the hypothesis that it’s primarily viewed as a way to raise AMC’s profile, rather than be profitable in itself. I doubt AMC cover the cost of production from advertising, instead seeing the show as profile building and reputation building, which it certainly has been.

Friday Night Lights

The numbers work out much nicer for FNL. FNL has production costs of $2.1 million (“$2 million and change”) with an audience of approximately 4 million on NBC. Remember, NBC considers this audience to be insufficient to cover the cost of FNL alone, so it did the deal with DirecTV.

According to the Variety article:

For “FNL,” the license fee that DirecTV pays to producer Universal Media Studios for the first window on episodes before they air on NBC covers about half of the show’s production budget, which makes “FNL” financially feasible for the Peacock even as it generates cable-level ratings.

Decoding that we get DirecTV paying around $1 million for 500,000 viewers (net cost per viewer to DirecTV, $2.00). On DirecTV the show aired without commercials, so again this is a loss leader for DirecTV being made up by higher subscriber numbers to the satellite service overall.

What is interesting is that NBC cannot fund the show’s $2.1 million budget from an audience of 4 million. NBC’s net return per viewer has to be well below 52c per viewer per show. (And yet, a net of $1.29 a viewer wasn’t apparently enough when NBC were arguing with Apple over iTunes selling price, despite it being many times higher than their advertising revenue per viewer!)

If DirecTV are paying $1 million, that means the show is viable on NBC at $1.1 million production cost per episode or at 27.5 cents per viewer. That makes the selling price through iTunes look truly usurious at nearly 5x the net revenue per viewer than the revenue from network broadcast. Is it any wonder they lost 1.5 million viewers for FNL to bittorrent?

At 27.5c per viewer the show is viable. Let’s allow some profit and say the network considers the show profitable enough to continue for two more seasons at 30c per viewer per episode. Add the same 4c and 12c per episode delivery cost and the Network should be selling the show, with iTunes margin added in SD for 52c and in HD for 65c. That would be fair pricing in this deal.

Assuming, as we do for new media that new media requires a direct connection between the producers and the viewers, then viewers would need to pay producers for the whole budget of $2.1 million. Working on the total audience of 4.5 million that equates to 47c per viewer per show. Add in bandwidth and that becomes 51c in SD and 59c in HD for direct sales by the producer, or through Open TV Network, 60c for SD and  70c for HD. With iTunes margins (but including bandwidth) the SD version should sell for 72c and the HD version for about 8c higher for the larger file, or 80c.

I would pay 60-70c for FNL in SD and I’m sure HD enthusiasts would happily pay 70 – 80c for the HD version.

Note: These are download-to-own pricing, not rentals!

We can fund high quality production using a new media model of direct connection between producer and viewer, and we can do it without resorting to the outrageous amounts currently being charged for download versions.

Categories
Business & Marketing Distribution New Media

What is ‘new media’ anyway?

On Saturday (March 14) I was invited to be part of a panel presenting on “Marketing New Media” as part of the Los Angeles Brazilian Film Festival. My fellow panelists were much more experienced in the “traditional” (or old) media business than I. Most have spent their careers at WB, Discovery, et al.

It struck me that we were all using the term “new media” but for those coming out of the traditional production businesses – cable, network, broadcast – “new media” meant new outlets for their existing and future content. With some “webisodes” and social networking added on top. Indeed some of the webisodes are great stories on their own, but overall, ‘new media’ is just an outlet for the properties and brands created by old media.

Indeed, one of the panelists suggested over lunch following that the current conglomerates will simply buy up any ‘new media’ ideas or companies that might get traction and will therefore keep the hegemony going.

Since I don’t come from that background, I see new media as being something different from old media, but until Saturday had not been pressed to define how new media is different.

It’s not production values as some new media has very high production values and some cable shows have very low. Budget alone doesn’t seem to be a distinction. A lot of cable content had very low production values in the earliest days, but now, some 20 years later, cable is winning Emmies for quality drama production because audiences are now too small for network.

To simplify it to “reach” would mean that old media will always have the lead because it has already got the lead. New media could not exist.

To my mind ‘new media’ is the distribution corollary to democratized production and therefore has a distinct flavor difference than old media. After spending the weekend thinking about it, the distinction I would like to draw is that old media’s customer is the advertiser, and there are many layers between producer (creator) and viewer.

In new media there is a direct connection between producer and audience, and shows are made for the audience, not for the channel, network or advertiser.

New media is unmediated. It sinks or swims on the attitude of the viewers, not advertisers or executives.

What do you think? Tell me in the comments.