The present and future of post production business and technology | Philip Hodgetts

Archive for November 2009

Clearly Distribution U and the “fantasy” of my last post about starting over with a clear slate have been continuing to weigh upon my thought process. Just yesterday we broke down the challenge into four problems that will need to be solved. Each is complex but there are already indicators that the problems are solvable.

1.     How do we reduce the cost of production without noticeably reducing the quality (so that shows can be profitable with smaller audiences)?;

2.    How do we build audiences for our shows (in the absence of network or cable marketing)?;

3.    How do we take the audience that we’ve attracted and recover the cost of producing the shows (and a little profit, thank you)?; and

4.   How do we fund the whole thing (because the income comes long after the expenses start)?.

1. How do we reduce the cost of production?

Not a new subject for me – in fact there’s a whole section in The New Now on that very subject, some of which I posted here in How to Produce more cheaply back in March. But beyond those then ways of reducing cost without reducing quality, we also have to consider the inefficiencies if inventing workflows again for each production; setting up facilities anew for each project and not taking much advantage of efficiencies that could be derived from new production tools and techniques.

I also think there are huge opportunities for more efficient production and post-production by embracing metadata-based intelligent workflows, such as the Assisted Editing tools my day-job company Intelligent Assistance is working on.

Change will come slowly (unless there is a cataclysm) because most projects have a lot of money on the line and people are reluctant to embrace change if it means there job and reputation might be on the line. Ultimately though, lower production budgets, with increased efficiencies are coming – whether we like it or not, really!

2.    How do we build an audience for our shows?

Many of us are in this business because we love being involved in the process of production, but ultimately if we’re only making shows for ourselves, we’re not going to be able to continue for very long. We need to build an audience. Traditionally this was done by spending a lot of promotional dollars on advertising and a PR/marketing blitz. Plus, of course, networks and cable channels use their own air time to promote new shows.

Without money or a compliant channel, how do we build an audience? I see a lot of good signs from what Independent Filmmakers have been doing to build audiences and I think a lot of that will translate to building audiences for independent television.

It will help, though, if we know there is an audience for a show before we start production! Right now some research is done but ultimately the decision to “go or not” with a show is up to the “gut feeling” of some executive. By making sure first that there is an audience before committing to production (using similar techniques to Demand Media) we introduce more efficiency into the process.

Plus, of course, every social media tool can be turned into audience building tools, as long as people are treated as part of a conversation, rather than a “targeted demographic”. This is going to be  a hard lesson I suspect, because we can also use social media to influence the direction of story lines:  if an audience is reacting badly to a story it can be changed before becoming damaging to the show. (I’m thinking of the strange murder subplot in season two of Friday Night Lights.)

3.    How do we monetize the audience we’ve attracted?

Frankly, I don’t think there is any one answer to this question. Instead independent television will be funded by a wide variety of methods. We’ve already seen how this pans out with independent film.

Here’s some ideas:

  • Single sponsor shows where the sponsor’s message is integrated into the programming;
  • Product placement;
  • pay for program – a non-advertising alternative that could be attractive to some audiences;
  • live events around program themes (Glee, a current season hit on Fox, undertook a 10 city tour to promote the show back in August 09);
  • merchandise of all kinds, associated with show themes;
  • and a whole lot more ways yet to be discovered.

A key point is that the revenue may not come directly from the content as part of a more complex business model where the content may be free, but revenue is raised on the back of the content in other ways. Traditional advertising is this kind of model but I’ve already expressed my thinking that traditional advertising – interrupt a program with mass-blast ads – isn’t a viable path in the future.

4.     How do we fund independent television?

Oddly enough, I think this is the easiest part of the equation once we have the first three in place. Funding businesses that have a track record, and a model that leaves little to guesswork, is already a proven model. Lots of projects require advance funding before they generate revenue. If the model works, the funding will be available.

Are these huge challenges? Every one of them is and the answers are complex and mostly unknown. That doesn’t mean they can’t be solved. Creating a new model of independent television is a much easier challenge than fixing the economy, putting a man on the moon, or even creating an operating system. Human ingenuity solved those problems and I dare to believe we can solve these four to create a model of independent television.

Note: I’ve shamelessly appropriate the term “independent television” from Matthew Weiner, producer of Mad Men who used it during a presentation to the TV Academy in 2008. His usage, as is mine, essentially adapts the approach of an independent filmmaker to television production.

One way or the other I’ve been thinking of what a “new media studio” would be like; how will people be paid; what would drive consumer demand; and all the rest that goes with a theoretical construct of a “replacement” for what we have now. Practically speaking, it’s more likely to evolve with many ideas in parallel, than come in one sudden upheaval that creates a new greenfield.

Although, as an aside from my main theme, I look ahead two years to when the actors’, writers’ and directors’ contracts come up for renewal. My feeling is that they’ll either have negotiated a settlement before the contract runs out, or we’re in for an apocalypse.

Remember that this a purely theoretical construct so I’m forgiving myself for not having every detail covered. What set me thinking, horrible-though-it-is was Demand Media. Wired’s article The Answer Factory: Demand Media and the Fast, Disposable, and Profitable as Hell Media Model is really a nasty kick in the mouth for production skills: essentially “quality” has no place in this (highly profitable) production line, where costs have been driven down by competitive pressure. It is probably the dystopian future we were warned against when the industry became “democratized”.

Fortunately I don’t think it’s feasible for television-like content. (I’ll just call it Television, but I mean the sort of content that people watch on networks, cable channels, or off a satellite or even via Hulu.) For a thousand reasons I’ll bet at a minimum a more complex production process and higher demands for writing skills. Even relatively successful Internet Shows often have underdone production values from lack of quality writing, lighting or sound. (And some are excellent in all three because they have been made by “old school” folk.)

But let’s step back and apply some of the principles and see what might come of it.

Based on audience demand

Instead of basing program ideas on  some ‘gut feeling’ of a producer or executive we can take a lesson from the Demand Media case and design shows tailored to specific audience demands. Demand Media have algorithms that watch search terms and derive future “shows” as answers to questions people are asking ‘now’.

I’m sure there are ways of tackling similar challenges for TV shows. Monitor social media interactions for the types of comments being made about shows; use that data to derive algorithms to direct existing shows and find ideas for shows that will have an audience, and the business model for that audience would also be known. (See below, Funding it All)

Production Line

Everything becomes a production line. It’s going that way now, but the whole process needs to not be recreated anew for each show. In a greenfield model, employment is constant with people moving from show to show as they come and go; moving from one creative grouping to another.

Everything is standardized: production gear, cameras, record formats, etc. Standard workflows, controlled by the studio.

Talent

Talent would be mostly staff – from writers, production crew, actors, editors, audio post – paid decent salaries and with good benefits. Everyone would get a decent salary with a flat salary structure (instead of the enormous salaries for some) but would also share in the studio profits. Everyone is motivated to make it work.

Talent (across the board) is nurtured in their craft advancement based on merit. (Implicit in advancement is the concept that people will leave, unless the studio always grows.)

Production

Put production in inexpensive facilities, either purpose built (long term) in inexpensive locales (low cost counties) or in excess facilities from a declining (declined) old industry.

I see a lot of standing sets and green screen, and frankly a lot of synthetic sets.

Again with standardized production gear, all matching grip and common set modules for set construction. Work on the model of Southwest, JetBlue and Virgin America: one standard service, in standardized aircraft with much simplified maintenance and costs for spares.

Standardizing on common equipment, workflows, formats and outputs would save production and post huge amounts of money. Equipping with modern gear that has great quality at affordable prices taking advantage of all the cost reduction of the last decade.

Production will require talent. We need it to “look and sound like Television” because that’s where a large market is at (if we’re in a greenfield remember). It will still need to be lit well; recorded well and finished to a high standard, but I would argue that the most profitable approach would be to go to the least expensive “good enough” solution. And by “good enough” I do mean that it has to be good, but maybe for this type of content, shooting with a Viper might be “more quality than we need to pay for”. But AVC-I or direct ProRes acquisition with a KiPro makes for high quality and efficient pipelines that maintain “good enough” quality.

Apply that concept across the range of production departments: good enough, but not luxury.

Promotion and Audience Building

I think there are a lot of lessons from the independent film producers who have learned how to build audiences, and it’s something I’ve presented on before. It will be more building and nurturing fan bases and involving them in the process as much as possible.

Funding it all

Ah yes, the million dollar question. Or multi-billion dollar question if we’re talking an alternative to the current Television industry. Of course, I don’t have any definitive answer because, well frankly, there won’t be one. As was obvious at Distribution U, there are many avenues to funding a program:

  • some audiences will want to pay directly, and that’s a viable business model as I’ve demonstrated before, for even quite small audience sizes;
  • less expensive productions make it easier for one advertiser (a.k.a. brand in recent discussion here) to sponsor the whole show (Mark Pesce’s Hyperdistribution model)
  • use the show to promote merchandise, live performances, or other scarce good.

In one part of my mind I think a model like this could actually work. In fact I’m sure some variation on this is part of Jim Louderback is attempting with Revision3 and Kip McClanahan is attempting with On Networks. I suspect that no-one is going as radical as Demand Media, and I hope no-one ever does.

Kip McClanahan
CEO, On Networks

Although I attend a number of conferences a year – often as a speaker – I mostly find that they go over ground that I either already know, or have heard the panelists/speakers go over before. In fact in 2008 there was one conference that I found extremely valuable – The Conversation organized in part by Scott Kirsner, who’s CinemaTech blog should be on everyone’s reading list.

So, naturally when Scott teamed with Peter Broderick on the Distribution U conference I signed up immediately. The conferences, held last Saturday, Nov 7, was a one day overview and summary of what people are doing to promote their independent films. While my primary interest is in the (as yet undeveloped) field of “independent television”, there were a lot of lessons from Distribution U (link is to Scott’s wrap up).

For me, the concentrated day helped me consolidate a lot of the thinking I’ve been doing on distribution over the last 3 or so years and helps me build on some of the thoughts I’ve been sharing via the (free) Supermeet 2009 magazine (How to grow an audience for your independent project) and via sessions at Digital Video Expo and other places.

Trying to summarize my eight pages of notes (a new conference record for me).

Scott Kirsner’s “scene setting” session started by pointing out how all technology innovation is immediately rejected by “the established players” – Edison hated projected film because he feared (accurately) that it would kill his profitable Kinescope business. We still see this happening today. His primary point is that “participation and engagement” with audiences is a crucial tenet of modern audience building – a term I prefer over “distribution”.

Another primary theme, from both Scott and Peter, is that the distribution for every project will be different, because the primary (or starting) audience will be different and what attracts one audience will not attract another. In modern distribution the “primary” audience for any project is one that is already engaged, in some way, by the topic or content. That helps get word-of-mouth buzz going and the audience can spread. Targeting a specific audience is easier (and cheaper) than trying to build a generic audience.

Another primary theme is that revenue comes from all sorts of places, not just “traditional” ones. A revenue mix seems to be the new normal for independent projects.

For example, the audience (and revenue) for Brian Terwilliger’s One Six Right has come from pilots, because the film is really about the romance of flying small planes and should appeal to every pilot in America. One Six Right has made money: (corrected after comment from Scott Kirsner)

  • selling DVDs directly (9,000 in the first 9 days it was available);
  • selling the soundtrack on CD (30% who buy the DVD also buy the CD of music unknown other than in the documentary);
  • selling posters signed by the 24 year old filmmaker (so far $30,000 from sale of posters)
  • listing (and selling) the DVD and merchandise through a catalog for pilots (Sporties);
  • selling through Amazon (where apparently the tip is to keep supply to Amazon low, which keeps them from deep discounts and keeps the sale price high);
  • selling a calendar (people pay to have the project’s promotion on their walls);
  • deals with local general aviation airports for local premiere’s;
  • giving the show to public television while retaining 4 x 15 second spots before and after the show to promote the DVD and merchandise;
  • creating a half hour “making of” special that builds the documentary out to a 2 hour or 90 minute package and selling that to Discovery channel. This sale apparently covered the original budget, on top of all the income from all the other revenue-generating activities, which is substantial.

I don’t know the budget for 161 right but some quick math shows that the initial DVD sales and calendar sales account for about $210,000 in revenue alone.

In fact, engagement with the audience starts at the very beginning of the project, rather than after production is complete: build an audience as you build the project and neither is more important than the other. Starting early builds an audience for the project and it builds anticipation.

Peter Broderick focused on “Hybrid Distribution” – don’t throw out all the “old” methods but adapt them and slice up the rights to the filmmaker’s best advantage. Never give anyone more rights than they need, and always retain direct sale rights for DVD and digital downloads. Although Peter gave a lot more examples at the seminar, his 10 Principles of Hybrid Distribution article provides an excellent overview.

I really appreciated the depth of examples that Scott and Peter provided, and the willingness to “talk numbers”. In most cases we got specific examples of the revenue from each type of activity surrounding the production.

Scott Kirsner will be speaking on “Building Big Audiences and Generating Revenue in the Digital Age” in San Francisco on Tuesday Dec 1 and I recommend you go if you have any interest in the subject – it’s based on his book Fans, Friends, and Followers (my copy is on the way and I’m looking forward to reading it).

I think this quote from Lisa Seward of Mod Communications summarizes the changes best:

You used to use your budget to buy an audience. Now you have to invent ideas to attract an audience.

The quote comes from an excellent presentation, referenced by myself and Larry Jordan already, The Audience is always right.

In The New Now I made the point that, whatever your promise in business, that you’d better be able to keep it, because when you make a promise or offer and don’t keep it, you usually do more damage to your brand than if you’d never made offer in the first place. By way of example, here’s my experience from this last week and how a company that I had fairly neutral feelings toward has turned me completely against the company, simply because they failed to follow through on a promise – a promise they didn’t have to make, but did.

Last Monday, Oct 26th TV Pro Gear sent out their regular newsletter (which I signed up for) with an offer for a free entry to the SMPTE show exhibition last week. I duly signed up for that free entry, figuring I’ll go if it’s free (normally $25).

I heard nothing Monday, nor the next day. So now I’m feeling like TV Pro Gear has let me down, particularly since there was no email or any follow up other than an acknowledgement that I had successfully filled out the form.

When I finally rang I was told (by their receptionist “Crystal”) that “Oh yeah, something happened and we couldn’t do that”. There was nobody else there to find out what had gone wrong and the only “solution” would be for me to go down to the show (and pay $25 for an exhibition of unknown quality). Crystal promised to take my number and someone would get back to me. I also sent an email to their general contact address asking what had gone wrong and requesting both an explanation and an apology.

No email and no phone call a week later, I decided to call. First call gets dropped by the receptionist; second call I get put through to “Bill”. Bill declined to tell me what went wrong and why I wasn’t contacted by phone or email. Basically, the company apparently simply doesn’t care about potential customers or their public reputation or they expect a simply “we’re sorry” – without explanation – to be enough. Bill, that is NOT enough!

Let me be clear: making promises to your customers (or readers of your newsletter) that you cannot or do not follow through on is very bad for your reputation. It certainly makes me think I’d never buy anything there because, how would I know what is true and what they are just saying to get me in, like the false promise in the email newsletter.

So, be very careful when you make promises: you better have the resources to follow through or you damn well shouldn’t make the promise because it will just backfire on you. Like this has.

Deal with TV Pro Gear, Flower Street Glendale at your own risk. It seems to me they don’t care. Of course, they could care, but simply not be competent enough to deliver.

There are lots of great Value Added Resellers in Los Angeles (Keycode, Advantage Video, New Media Hollywood come to mind immediately), deal with them and make a note to not create a disaster for yourself when you make an offer or promise.

I’ve had an inordinate interest in how the news industry, particularly newspapers, are faring in the Internet age. It’s only relatively recently I realized why I thought that was even relevant to the fields I study – among them what is going to replace (or grow in parallel with) the current model of “Television”. Then it struck me…

Television is to newspapers and magazines what movies are to music.

In the music and movie models we’ve been used to, there is a direct transaction – payment is made to buy music (on disc or download) or to pay to view a movie (in a theater or by buying a DVD). This is a fundamentally different model than Television, where the content is “free” in return for your “attention” to advertising. Advertising supports both Television and newspapers and magazines.

Yes, people pay a small amount for newspapers and magazines, but that is nowhere near the cost of producing the magazine. Newspapers and magazines (I’ll just say “newspapers” from here but I include magazines) are heavily subsidized by advertising or they can’t survive. (Consider how many magazines have been closed in the last year all attributed to the “loss of advertising revenue”). Given that I don’t believe advertisers are coming back, what are the implications of the music experience for movie distribution, and the newspaper experience for television distribution. Without distribution there is no production.

The music industry has found that “infinite goods” – those that can be produced for close-to-zero (a digital copy) – has changed the market. Classic economics tells us that the sale price will trend toward  incremental cost of a sale. For music that’s zero or close to it because there is no scarcity. Scarcity, again classic economics tells us, is what drives up price: no scarcity and the price drops toward the marginal cost of producing the copy. (Yes, classic economics ignores the cost of production.)

The movie industry is finding some of the same dynamics happening, except that the movie industry has an advantage: the primary product is not the movie, but the “going to the movies” experience. Clearly the movie-going experience is more important than the movie otherwise attendance would have dropped dramatically as the quality of picture has dropped. Instead movie attendance is up despite audiences being treated like criminals with bag searches and, in some theaters, full body, airport-style scanners.

The smart people in the music industry have also realized that the business model they grew up with – where Record Companies actually had a role to play – is no longer viable. (When you have to sue your customers to “keep control” of your product, you have acknowledged a total failure of business model and you should be allowed – encouraged even – to go out of business.) So they’ve been deriving new business models that use the non-scarce good (the recorded music) to promote scarce goods – like concerts, experiences and merchandise.

Music, and movies, will continue to have “direct pay” models but they won’t be the same as in the past. (Nor should anyone who has two working neurons think the models can remain the same.)

It is newspapers and television that I’m worried about. The current models for both are unsustainable. Advertising revenue has dropped dramatically partly because of the current economic conditions, but long term because advertisers have better alternatives than renting some irrelevant eyeballs for 30 seconds at a time with a message that’s irrelevant to 99% of the audience who aren’t ready to buy your product right now.

Newspapers once provided a valuable service(s) that have been replaced by better models online. Craigslist has effectively killed the cash cow of classified advertisements because it’s a better model (free, instant). No-one really needs a newspaper to learn the session times for the local movies (available online) nor really, to decide what car they’ll buy next.

People, by and large, don’t need newspapers for news either. Not that most newspapers did that much “reporting” anyway. Surveys of typical local newspapers showed that they often have as few as five or six “real” stories (researched and written by staff reporters) not sourced from elsewhere. Most “news” comes from Associated Press, Reuters, people-in-foreign-countries, press releases, etc.

Worse, most newspapers (and television news) do not really vet their stories, taking away one of the major claims that we “need” professional journalists because, unlike bloggers, they “fact check”. (Really CBS? Who “fact checked” last night’s industry-lacky piece full of major errors on 60 Minutes?) It’s hard to make the case that the majority of professional journalists actually fact check anything. (Quick quiz – in any news story that you’ve been involved with and then seen the reporting, has it ever been completely accurate? Never in my experience, never.)

So, when the impetus for “demand” drops, and the money to produce evaporates because even the advertisers have a better way to do things, newspapers will, of necessity, die. That does not mean that great journalism will die, but it will be funded differently and have very different forms.

Television, including basic cable, is facing the same challenges: advertising revenue is drying up and unlikely to come back to previous levels, meaning the whole model is probably broken. Not this week, not next year, but long term Television as we know it is being destroyed by this lack of advertising revenue; the failure of the “players” to adapt business models, and that audiences for any given show are much smaller because there are so many choices.

What we’ve known as Television will have to evolved into a model that allows for “any program, any time, any device for a fair price” (i.e. a return that is similar to the return from advertising, not an attempt to get a 4x return as the Networks currently do with iTunes et. al).

I suspect that will, like with the Record companies and Movie Studios, leave the Networks out of the picture as middle-men imposed between producer and audience.

I don’t (yet) know what that model is going to be, or indeed if there will be only a single model, but the transformation of a nearly-70 year old business model based on scarcity (broadcast licenses) has to evolve when that scarcity no longer exists. And it no longer exists.

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