Amanda Palmer, recently dropped by her record label to her great pleasure, has been experimenting with different revenue models to fund her music. (Note I didn’t say “selling her music”.) She’s a big believer in the Techdirt formula of Connect with Fans and give them a Reason to Buy (something) and you have profit. Or at least a decent income for the work of making music.

From our view here at Bandcamp HQ, yesterday’s launch of Amanda Palmer Performs the Popular Hits of Radiohead on Her Magical Ukulele less resembled a record release than a coordinated strike of ravenous piranha. In one three minute period, her fanbase snapped up $15,000 in music and merch. It didn’t let up much from there: 4,000 digital EPs were sold, the vinyl sold out, most of the high end packages disappeared in minutes, and at the time of this writing, it looks like every other package will be gone in a matter of days

Different options giving fans different places to connect, including a “pay what you like” option. The money is there but artists have to “think different”. Remember, if you have 1000 real fans, who can be provided with something of $10 value a month (on average) in music, merchandise, tickets or participation, then that’s a comfortable $120K a year.

I also hate advertising for another reason: it’s an economic intrusion on my life. It costs me far, far more than the benefit that Hulu – or a network – gets from advertising even though they’re charging more than they would normally get from advertising.

Here’s why. Typically a major network TV show will garner 25-65c per viewer per show. Very occasionally a top-rating, network-leading show might crack 85c per viewer per show.

Now, an “hour” long TV is is 42 – 44 minutes, not 60. The other 16-18 minutes are advertising. My time to watch those ads has a finite value and it’s not an equitable one at all.

Hulu does not have anywhere near the ad load of a Network but there’s less inventory so the same ads keep repeating in a very annoying fashion. Let’s say that there are 5 x 20 second spots in each 45 minute show. At best Hulu will be getting 65c from those five ads, more likely they’ll be getting a fraction of that, but let’s be generous.

At my charge-out hourly rate, that 2.5 minutes costs me $6.25!!! At my nominal salary rather than charge-out rate that’s still $2.79!! An average plumber would have a $3.33 opportunity cost from the advertising!

So, Hulu Plus wants to charge me $10 a month and then cost me $2.79 for every show to cover my attention to the show. Every single show I watch. Since we watch very little TV, way under 2 hours a day, that’s an additional (using the extremely generous 65c per hour show figure) $78 in revenue to Hulu Plus, although given the size of Hulu’s audience I doubt they get even 20c per viewer per hour show making that closer to $24 in advertising revenue.

But that time has cost me $334.80 for the month in attention.

And that, Hulu, is why you can’t have it both ways.

And before you all start in the comments, watching any TV is an opportunity cost. I choose to do that but I choose not to watch advertising because watching the advertising adds an additional $335 in opportunity cost to watch the advertising.

The cost to me is 4.3 to 16.5 times higher than the benefit to Hulu. I guess I’ve just convinced myself that a Hulu-like service, that I can watch on my TV and covers all programming ever made, will be worth $20 a month to me. Without advertising. With advertising it’s just too expensive.

PS, the numbers supporting advertising still don’t make sense at even more modest salaries. AT $20 an hour, the five Hulu ads still “cost” 83c up against a maximum revenue at Hulu of 65c (and more likely 20c). Monthly opportunity cost at $20 an hour is $59.40 for Hulu’s $79 down to $24 in revenue.

When pay nothing is an option, there will be a group of people who will pay nothing, but like Radiohead found, the total revenue from pay-what-you-want can be (is always?) higher. This article is interesting because they tried a number of strategies that took average profit per person from 6-7c with the normal fixed price option, up to 20c per person.

According to the authors, the “pay what you want” strategy works because it allows companies to chare social responsibility with consumers. When buyers are able to set prices in a way that directly shows their support for a cause, everybody wins.

In this example, the author put her “young adult vampire novel” on document distribution site Scribd for free and the resulting publicity helped land a traditional book deal.

Now, just giving your content away for free and praying for a return isn’t going to work, but there are – according to my How to Grow and Monetize and Audience for your Independent Project seminar – 13 or 14 ways to use free distribution of content as a way of selling something else.

The rationale is that digital content is not scarce – it’s very easily reproducible for virtually nothing – then it’s hard to sell, because classic economics is based on scarcity. There are those who have tried to create artificial scarcity for digital goods, but those have generally failed badly. Where there has been success is where the infinite digital good is distributed free in order to promote something scarce: like concert tickets, merchandise and so on.

This is not that removed from traditional Record Label deals where the band makes nothing from their music but does from touring.

Kara Swisher goes to meet with Hollywood Executives who are all looking for a Golden Ticket (Willy Wonka reference) so that they can charge the same monopoly rents they did when they (used to be) a monopoly.

Michael Masnick deconstructs Swisher’s reporting and parses it for us. This is a worthwhile read, even if a little long.

From music to movies to television, the biggest minds here still sound perplexed as to what will finally be the golden ticket to carry them through to the inevitable next era of digital distribution.

That single sentence basically describes the problem. These guys are sitting back and waiting for someone to hand them a golden ticket that replicates the old ways of doing things. That’s not how it works. No one gave the buggy whip makers a golden ticket that let them keep their old lines of business going.

The unnamed executives even ask why the customer always gets to be right. Yep, that’s how far removed they are from any sense of commercial reality. The customer is always right because there’s always someone else that will meet the customer need if you don’t. (Where is my “any program, any time, any device for a fair price” service again? There’s a customer demand for it but the old guard won’t deliver.)

Final words:

The role of the disruptor is not to make life easy for the disrupted. Swisher and these execs seem to be confusing the role of certain folks in the legacy industry with the overall entertainment industry itself. As noted, the entertainment industry is thriving. More movies, music and books are being created. More money is being spent. It’s just that it’s going to different players. There’s no reason to “figure out a way to keep talent from being dragged into the future.” The opportunities and wide open path are there. The problem isn’t that tech leaders haven’t made it easy for them. They have. It’s that these guys are so myopically focused on the way they used to make money they don’t realize that the new opportunities are already there and have been embraced widely by others.

The post from CompulsionTV’s own site does refer to the excellent article by Pam Kulick but also adds some additional insights.

The points made in both articles are applicable to any independent project be it film,web video, tv or music.

If you want to learn about Web series marketing challenges and how to surmount them, then you will enjoy this account of launching the Web series, Compulsions.  As the marketing lead for Compulsions, I can attest that they were formidable:

• No brand sponsors or advertising partners
• No Web TV Network Partner or distribution strategy
• No marketing budget
• No launch strategy
• No clear-cut genre
• Mediocre Web site
• No previous Web series credentials for the creator
• Eight episodes
• Needed to launch by December 2009 for Streamy Award qualification (Holiday Season)

Scott’s been on both sides of the interviewer/interviewee equation so he knows his stuff. (He knows his stuff anyway!)

1. Be Open!
2. Be Seen
3. Be an unselfish resource
4. Create a dialog not a press release and
5. Never call to ask if a press release was received.

These are great basics for dealing with an interview and certainly parallel what I’ve been teaching in my various seminars.

Why should a brand rent someone else’s audience (on a network or website) when they can make direct connections with the audience through their own (branded) media.

This movement from buying audience indirectly to buying audience directly represents the effective merging of marketing and distribution costs. Rather than making one set of investments in marketing content and a different investment in distribution (through revenue splits), combining these costs into a single budget can yield substantial savings. This is why the costs of direct audience acquisition cannot be compared side-by-side with traditional marketing or distribution costs individually. The more that the costs of production, marketing, and distribution can be looked at as a whole with their cumulative impact on margin the better new methods of audience development can be assessed.

One increasingly popular part of social media is online video. Not only is video being used for marketing, but it’s also becoming a common method of communicating and sharing. I recently started experimenting with online video for my own business blog. Although I’m only a few videos in and have a lot of room for improvement, I can already see some encouraging benefits.

And then the author follows with 27 good reasons to use online video. For producers and production companies this is your marketing plan!

I’ve certainly noticed a trend in tutorial production. I maintain the BuZZdex for Larry Jordan and the trend has been away from the text-plus-images tutorial to more video.

First off iAds go in Apps for the iPhone/iPod Touch/iPad – or they will from early next month – and are an integral part of iOS 4. Any developer can add ads to their App simply and 60% of the revenue from ads goes to the App developer (or owner). That’s $36 million that’s going to be paid out to someone, why not your independent project?

I’ve long thought that the future of programming was Apps. An App, like a website, gives a single place for everything about your project: blog, previews, special content, upcoming events, merchandising etc. The advantage of not only having a website, but wrapping it an App is that the App will be a better fan experience, and it’s easy to add in-App purchasing of digital goods.

So, create an App for your project. This App will have:

• An area where you can read the production blog;
• Forums and chat around your project;
• The Twitter feed from your project;
• Connection into your Facebook presence;
• Previews of scenes or trailers of movies;
• The full project, with a little in-App purchasing (or not).
• Calendar for screenings, parties and other events around your project, including signup (filtered for just the geography of the fan if they want, thanks to GPS on most of the devices)

Having everything to do with your project in a mobile app on iPhone or iPad makes it much easier for your fans, friends and followers to stay involved and participate. Involvement will improve. (Connecting with Fans and giving them a reason to buy is a basic tenet of independent production in the digital era.) Plus fans will likely be clicking on some of those ads if they’re well targeted, bringing revenue to the project.

Plus, there a minor security advantage. There’s no download function in Mobile Safari and Apps can’t download very much. Plus there’s no way to actually get anything downloaded within an App out of the App to a computer. That means your finished, high quality version could be viewed in the iDevices without much risk of it being distributed without authorization. (Recognizing though, that it will get distributed unless you project just plain sucks!)

Who’s going to be the first to give it a try?