Category: Business

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Business & Marketing Distribution Item of Interest

Why Waiting Until A New Business Model is Proven Doesn’t Work.

Why Waiting Until A New Business Model Is Proven Doesn’t Work http://bit.ly/bcybin

Technology changes business models. That’s a given. The problem is, the business models that are being disrupted are often very big businesses, with good profits and the company doesn’t want to disrupt those nice, regular, current revenue streams in order to accommodate a new one. The new revenue is (at least during these phases of disruption) very much below what they are now. No doubt you recall NBC CEO Jeff Zucker’s fear that that the Web will turn “analog dollars” into “digital pennies”.

The examples quoted include Netflix (who innovated and disrupted because they had no stores to protect) and Blockbuster (who had stores to protect; and Kodak who saw digital coming, new it was important but failed to act in time leading to massive layoff and factory closures.

The problem with waiting until you see a clear path forward to the sorts of profits that will be available in a disrupted industry, it’s almost always way too late for the disrupted to catch up. This is why disruption does not come from the major players in an industry, but rather from the small innovator who has no legacy to protect.

There are a few reasons for this:

  1. Companies always misjudge the speed of trends, especially the rate of change. Things like digital revolutions start out slowly, and the quality seems bad. So companies in legacy businesses figure they have a long time to make the change. But the rate of change increases rapidly, especially once it “tips” and reaches a critical threshold. At that point, if you’re not fully invested in the new business, you’re, way, way, way behind.
  2. It’s difficult to really understand the new technology/market unless you’re playing deeply in the space. This is the same thing we noted with people who claim that patents are necessary because once a good idea comes along others will just copy it. In many cases, that’s not possible. That’s because the truly innovative ideas require some real hands-on experience. Watching others do it is not the same thing.
  3. It’s very difficult, culturally, to build up businesses that cannibalize your existing cash cows. The skill sets may be different, and people begin to recognize that these “new” people may be working on projects that replace the “old” people. That leads to a lot of resentment and makes it really difficult to actually hire the good new people — since they recognize they’re going to face those kinds of institutional restrictions. For them, it’s just easier to go to a “native” company that has bet entirely on the new offering.

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Distribution Item of Interest

How Many Times Will Content Industries claim the sky is falling…

How Many Times Will Content Industries Claim The Sky Is Falling Before People Stop Believing Them? http://bit.ly/bUNPOi

I think we’re ready to stop believing them now. From Jack Valenti’s infamous comparison of Betamax/VHS to the Boston Strangler to today’s complaining about unauthorized distribution, the content production industries have fought every technological change. And every time that technological change has opened new markets for them. Instead of VHS/Betamax and DVD being the death of the MPAA studios it’s been the salvation.

It may, in fact, be the case that the sky is falling. But, if you claim that the sky is falling whenever a new technology threatens an existing business model, the rest of the world can be forgiven for not believing you when you claim that this time around it’s going to be different than all of the other times. Now, let’s be clear, each one of these technologies changed the business model of the industry. They caused certain revenue streams to decline. But they also opened up new ones.

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Distribution Item of Interest

Piracy Is Promotion, Says CEO of Porn Multinational

Piracy Is Promotion, Says CEO of Porn Multinational http://bit.ly/aAqEFN

Not your usual CEO approach to piracy but one that is consistent with his conclusion:

Milton believes that entertainment companies should look beyond piracy, and explore alternatives business models as the battle against piracy is one that can’t be won.

“I think it’s a lost battle,” Milton said, adding: “I look at my own kids, because that’s the best way to know where the market is going. It doesn’t matter if I tell them that it is illegal to download. As soon as they close the door to their room, they download.”

“They are not afraid of someone who’s tracking their IP-address. They just don’t care, Milton said. “It’s a new world and we have to accept it.”

So instead of following the RIAA and MPAA down useless fan-tagonistic approaches he suggests:

In the video Milton says that his company will focus more on selling the ‘private lifestyle’ which includes luxurious vacations with an adult theme, and toys and tools that may come in handy while reenacting pirated videos.

With slow progress on human cloning and the 3D-printer, Milton’s bet on selling the sex ‘experience’ rather than videos seems to be a safe one for now.

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Distribution Item of Interest

Rather Than A Record Label, How about a Musical Affinity Group?

Rather Than A Record Label, How About A Musical Affinity Group? http://bit.ly/bKibhF

If the Record Labels have a future maybe it needs to be a different future?

I was reminded of this a bit, two years ago, when Topspin’s CEO, Ian Rogers, penned an open letter to Guy Hands, the head of (struggling) EMI, suggesting that rather than think of itself as a “record label” focused on promotion and distribution (two things that are easier and cheaper than ever before), it could instead focus on being the smart filter for music listeners today, struggling to find the music they love amidst so much musical abundance in the world. The suggestion was to take some of the key, iconic, bands under the EMI roof, and put them under affinity-based “mini-labels” with other less well known bands, that would appeal to people who liked the more well known band. It seemed like a great idea, which, of course, EMI has not done.

Then again, isn’t Apple’s new Ping in iTunes heading in that direction, but with a more social component that doesn’t really require the record labels?

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Item of Interest Monetizing The Business of Production

Does Steven Levitan Also Want a cut of every TV Sale?

Does Steven Levitan Also Want A Cut Every Time You Buy A TV? http://bit.ly/cpJzpK

Ahead of a Hulu IPO Steven Levitan – a well respected and talented writer/producer – claimed that he and other content creators should get a cut of Hulu’s IPO. Funny I didn’t realize he got a cut of ABC’s profits when he provides them with content. Oh right, he doesn’t, but he’s effectively looking for the same thing.

What I found interesting though is this part of the article:

The more he argues, the deeper a hole Levitan seems to dig in his reasoning. He complains that if we don’t figure out a way to make his shows profitable, the only thing left to watch will be “sneezing pandas.” This is a version of the movie industry’s “$200 million myth.” It’s the “well, it costs me $x to make this, so if we can’t make that back, no one else could possibly make quality content for less.” It’s incredibly elitist and wrong. Not only is there good content made for less money out there (beyond the sneezing pandas), but if there’s really demand for his shows (and there appears to be), then there are smart business models you can pursue that don’t involve pissing off your fans or demanding an equity pay out from a company you didn’t actually invest in.

The emphasis is mine.

Categories
Apple Media Consumption Monetizing

Why 99c rentals are still too expensive

Apple’s new Apple TV and 99c TV show rentals are definitely a step in the right direction but the cost is ridiculous.

Peak, premium, the best there is, content on major networks gets between 25 and 65c per viewer per show in revenue. That’s the top, highest end. So yes, the top of the top could conceivably rent for 99c, but the lesser shows? No way I’m spending 99c to watch a Daily Show (10 to 25c tops).

Last October I did a detailed tracking of what we watched and priced it out in the Apple store of the day. We watched that month an average of an hour and a half a day and the “best price” (taking advantage of Season Pass discounts) was $112.55. With rentals that would drop to $85.14.

Now, Dish (or Cable or whatever) 100 channel plan is around $65 a month, but I can watch up to 640 hours in that month (or record it for time shifted viewing). That’s about 10c an hour, not $1 per show. Of course, no-one can watch or record 640 hours in a month. The American Average is 135 hours a month of viewing (depending on who you ask, this is the conservative, lower end) or around 43c per hour, not per show.

An HBO subscription, with 32 hours of original programming a month equates to about 31c per hour, not show.

Part of what I find egregious about Apple’s new pricing is that it’s 99c for a 22 minute show, 99c for a 44 minute show or 99c for an extended episode. No allowance for the fact that some shows are worth more than others.

I’d cheerfully pay 10c per Daily Show. If I did and Apple took their 35%, that’s roughly 6.5c per show per viewer by 2 million viewers or $130,000 revenue per episode against approximately $35,000 per episode in cost. That’s an improved deal for the Daily Show producers and a fair deal for viewers.  The absolute maximum I’d pay for a Daily Show is 25c and at that I think it’s a rip off.

Friday Night Lights, Mad Men, Burn Notice et al. I’d be happy to pay 50-65c but not 99c. Even at that these shows would be better off with this revenue model.

So, nice try Apple but until watching 4-5 hours a day, every day for a month has to be under $60 a month in total for it to be considered a cable replacement. Of course, this may not be Apple’s doing at all. It’s much more likely that the content owners have some ridiculously outsize estimate of the “value” of their content.

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Apple HTML5 Item of Interest

Video: Flash on Android Is Shockingly Bad

Video: Flash on Android Is Shockingly Bad http://bit.ly/bHaKkM

And yet, people think it can be done on an iDevice and even want it!

While in theory Flash video might be a competitive advantage for Android users, in practice it’s difficult to imagine anyone actually trying to watch non-optimized web video on an Android handset, all of which makes one believe that maybe Steve Jobs was right to eschew Flash in lieu of HTML5 on the iPhone and iPad.

So, to be clear. There is no working version of Flash running on any smartphone, but somehow Apple should magically make it work on their devices with no access to the source code? In what reality is that reasonable?

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Distribution Item of Interest New Media

Viral Video bad for producers and advertisers

Viral Video bad for producers and advetisers http://bit.ly/dqgBKi

Jim Louderback is one smart guy. Revison3 is doing well, building strong audiences and yes, getting enough advertising support to make a business. In this article he debunks the idea that going for “viral video success” is the wrong strategy for producers:

Let’s start with producers and show creators. Media is all about building habits. Successful producers bind an audience to their creation, building an insatiable hunger for the next installment, next episode, next post. But when you focus on viral success, you throw that focus on repeatability out the window. By its nature, viral videos are designed to surprise, titillate and entertain. They are, by nature, unique…

They do nothing for the producer long term (with some exceptions) but worse they’re not good for advertisers either:

Viral videos may be bad for creators and publishers, but they are actually worse for advertisers. Your typical viral video gets passed around, yes, and drives a lot of views. And yes, those can translate into impressions for an advertiser. But as we’ve seen at Revision3, advertising associated with viral videos has only a small fraction of the impact of an ad that runs inside, or alongside, an episodic video program. We’ve seen tremendous results from putting brands next to our long-running episodic programs — those with real communities, high comment-to-view ratios and predictable views. We’ve seen terrible results by associating the same brands and services with the few viral-focused shows we’ve tried out over the last five years. And if you try creating those viral-focused videos yourself, you are in for a real surprise. It is overwhelmingly likely that you’ll end up with closer to a thousand views than a million.

Concentrate on building an audience? What a concept.

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Apple Item of Interest

Connecting the Dots (AV Foundation and QuickTime)

Connecting the Dots (AV Foundation and QuickTime) http://bit.ly/9CEpCo

It seems increasingly likely that the reason that QTkit hasn’t had much work, is because the focus has gone into recreating what QuickTime does, in iOS, with a plan to move it back to OS X with 10.7.

Remember, Final Cut Pro can’t be “Pure Cocoa” and 64 bit before “QuickTime” is.

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Apple Item of Interest

iTunes at 99c per series per month?

iTunes at 99c per series per month??? http://bit.ly/cINIzR

Right now it’s a single-source rumor so it can hardly be taken seriously, but the price point is “right”: about the same net revenue to the network as from advertising. We watch about 10 shows in any typical month, and $10 would feel very right to me.

I guess we’ll know next week.