I’ve long agreed with Techdirt that connecting with fans and giving them a reason to buy something (at a reasonable price) is the model for indie financing of project.

For years, we’ve talked about this concept of Connect with Fans + Reason to Buy (CwF + RtB), and too frequently have assumed that the really difficult part is the RtB side of the equation. But it’s really amazing just how many artists have trouble with CwF as well. And this is a great explanation of why. We often hear from artists who say, “well, I have a Twitter and a Facebook feed, but it doesn’t work.” And then you go and look at the feed, and all it is is them announcing, “I just released this work,” or “I’m performing at such-and-such on December 10th,” or whatever. It’s not just that there’s little interaction, but that there’s little that’s interesting.

It wasn’t until I found a way to use Twitter to share news items I found interesting (which, btw, get reproduced back here, where I write more) that I even got on Twitter.

I think branded video – where a company or brand puts up all the production money in order to present their brand.  This article from VideoInsider.com jumps from an “interesting” statistic, to examine what brands want, or need ,out of their investment in video.

Our research has shown that consumers are not typing brand names into Google to download commercials to their PCs.  They’re searching for information.  Through our research for a large electronics company, we learned that consumers weren’t searching for information about how to choose a camera, but were searching for information on how to use one to take pictures of babies, weddings, kids, etc.  That insight was invaluable in crafting our branded online video strategy for the company, which focused on providing consumers with information on how to take the best pictures — using their brand of cameras, of course — rather than a commercial about which of their cameras consumers can buy.

Good statistics and background in the article.

A terrific article by Nancy Scola at Salon goes into detail why SOPA/PROTECT IP is such a bad idea for the Internet. I strongly recommend you read the whole article as it’s hard to excerpt just part, but I thought this was important:

When it comes to talking about SOPA, it is important to remember this: You can think that “intellectual property” infringement (not only of movies and music, but knockoff Nikes sold online) is bad for the American economy and still think the legislation is a disaster. Not only would the bill likely do little to address the problem of online content fraud and counterfeiting, but it takes aim at the core features of the Internet that have contributed a great deal to the American economy.

The rankings go from just over $100,000 a year up to $300,000 a year. Even for team productions that’s still a decent income from online video. And just like the traditional market, a few people are making good money, and a whole lot more people are making little to nothing from their online video efforts.

But at least it can be done, and young Lucas Cruikshank (a.k.a. “Fred”) with an estimated $149,000 income this year, probably doesn’t have to worry about college tuition fees, if he even wants to go to college.

In other news, Goodnight Burbank has secured a “real” TV deal with Mark Cuban’s HD Net. That’s in addition to the Hulu distribution that they’ve already had. Don’t know what sort of money is involved in the deal, but it’s a long way from the first Goodnight Burbank episodes.

Trivia item: My interview with Hayden Black on the Digital Production BuZZ in October 2007 was his first media interview about the show.

The question of how to fund our various independent projects is a constant question in an era of democratized production. I’ve already written (and done a Terence and Philip Show about) branded media, because I believe that will be an important part of the funding future. But at the grassroots level, fan funding has proved successful for many artists, and in the case of Kickstarter, for projects other than music and video based.

So what kind of “creative projects” does Kickstarter enable? Well, a couple of artists raised $2,181 to send funny handwritten letters to every household in Pittsburgh’s Polish Hill neighborhood; someone pulled in $8,441 to help finance the creation of “a searchable ethnographic databasebuilt from the lyrics of over 40,000 hip-hop songs”; a couple of people got $30,030 to publish a version of “Huckleberry Finn” that replaces Mark Twain’s use of a notorious racial epithet with the word “robot.” At times the sums have been a good bit larger: $67,436 to build a statue of Robocopin Detroit; $161,744 to make a computer-animated adaptation of a Neil Gaiman story; and nearly $1 million in pledges to finance a band to wear iPod Nanos as wristwatches.

It’s a long article but if you care about fan funding, it’s well worth the read.

You may have heard the announcement that All My Children and One Life to Live (cancelled ABC Soap Operas) are heading to Internet distribution. (In this context “app” means use not literally a software application). He runs the numbers on whether or not this could work financially – something I’m always interested in.

Fifty million dollars is $192,000 per episode or $4,370 per finished minute based on 44 minute shows. That’s a lot of money but a lot less than primetime TV budgets. It’s also the absolute most any soap has ever cost with most costing less. Certainly there are some savings to be found in there. Let’s claim a 20 percent labor savings from moving to the Internet, bringing per minute costs down to $3,496.

Actually, there are plenty of additional savings. Some savings will come from lower labor costs as actors accept smaller paychecks as an alternative to retirement or unemployment. But an even greater savings will come from any Internet soap’s ability to offer online every episode ever broadcast — the long tail — at an effective production cost of $0 per hour.

If a third of Internet viewers are watching old episodes that drops the effective cost of new episodes by a third, so we are down to $2,342 per finished minute.

With sponsorship he brings it down to around $2,000 a finished minute and then compares it with the (rumored/reported) budgets for YouTube’s future professional channels.

According toVariety, YouTube will shortly bring some professional channels to its service with budgets of $1000-$3000 per finished minute.

My biggest concern about this particular example – not about the trend to Internet delivery and alternate funding in general – is that the target market for the Soaps may not be technically savvy enough to pick up and continue on the Internet.

As regular readers will know, I’m a big fan of branded media. Like soap operas of days gone by, branded media is a single sponsorship of music, film or web video projects. Of course, one of the problems with any media investment by a brand – be it with branded media or advertising – is measuring the effectiveness.

Wilson Cleveland of CJP Digital who has made a name for himself as a producer of branded content has a formula for assessing monetary value of the media to the brand:

And in working with brands, he’s created a formula by which the actual monetary value of a branded web series can be measured for the brand. “We’re in a position to calculate a different kind of ROI than ad plays and impressions,” Cleveland said via phone. The basic purpose is to evaluate things from an earned media perspective.

Branded media is at least only giving us one brand message, and one presumes it’s done in a way that is at least sympathetic to the media’s content.

Jonathan has been at the forefront of those connecting with fans, and it’s working out pretty well for him. He sells his music with a Creative Commons (Some rights reserved, i.e. licensing and making money from it) so it’s impossible to pirate what’s freely exchangable.

And yet, he’s making really good money selling music, merchandise and concert tickets.

More to the point, he’s doing better than the vast majority of music acts that get picked up by the major record labels. If Coulton had signed with them, he’d be hundreds of thousands of dollars in debt!

Of course, defenders of the old system will insist that he’s an “exception,” but, really, just how many exceptions do we need until people realize that the market is changing rapidly, and those who embrace new models and new methods of distribution are finding that they can make a lot more money than they did in the past.

The comments are as interesting as the article.

Big Media pretends to speak for artists but in reality they are only in the business for themselves and frequently take money out of artists pockets, quite deliberately.

Now we have a stud y of 4000 artists have shown a contrary opinion forming. At least they’re not hypocritical about it as they generally download other artists works without permission:

One of the results that stands out directly is that artists are pirates too. Not all of them of course, but a healthy percentage. Of all the respondents surveyed on the subject, 22% indicated that they had downloaded copyrighted works without the owners’ permission in the last 12 months. Another 71% told the researchers they hadn’t downloaded anything without permission during this period, and the remaining 7% didn’t know, or didn’t want to answer the question.

Even so, a relatively low percentage think that unauthorized download have harmed them:

One of the questions dealt with whether the artists think they are being financially harmed by file-sharing. Interestingly, only about 12% of artists completely agree with the statement that file-sharing hurts them (~16% agree). The majority of the artists are not convinced that file-sharing is doing them any financial harm, and some actually think the opposite is true. What’s worth nothing is that higher educated artists in particular believe that file-sharing is doing them no financial harm.

So if it’s not hurting them, what is it doing??

Instead of hurting their wallets, the majority of the artists believe that file-sharing helps to promote their work. Little over 50% of those questioned responded affirmatively to the question of whether file-sharing helps to get their work known among the public, while only 5% completely disagreed with this statement. In particular the younger artists (< 25yo) recognized promotional benefits, as more than 80% thought file-sharing increases the popularity of their work

Kevin Smith announced that he would auction off the rights to Red State after a Sundance screening and then infamously sold them to himself, leading to a rant about the state of distribution for independent movies.

He planned on doing a series of screenings-with-director events leading up to an October theatrical release.  Well, according to reports he’s already close to, or achieved, payback of the $4 million budget.

Kevin Smith’s latest passion project Red State has already paid for itself, six months before it actually sees full theatrical release. Thanks to an ambitious multi-city road trip in which Smith traveled to screenings of the movie and spoke with audiences afterward, Red Statehas already made back the $4 million budget production company SMODcast Pictures invested in the film.

Now Kevin Smith comes with a built-in fan base that he’s cultivated over the years (and that is indeed part of any success in this new paradigm – first Connect with your Fans) but it’s not only working for Smith:

That said, Smith isn’t the only filmmaker experimenting with new types of distribution. Edward Burns, for instance, distributed his latest feature film, Nice Guy Johnny, direct to iTunes, VOD and DVD last year, skipping theatrical release altogether. Indie filmmaker Sebastian Gutierrez distributed his Girl Walks Into a Bar directly to YouTube. And Pixar CTO and independent film producer Oren Jacob used a mix of social media and food banksto boost the profile of his documentary Ready, Set, Bag!

This is a really good read by Jeff Steele that starts with how production has been democratized through the use of less expensive tools. That ignores a whole lot of costs associated with quality production that aren’t associated with less expensive tools of production, but let’s allow the point for the moment.

His primary point is that, while production is democratized, financing and distribution are not. Again, I wouldn’t argue.

Generally speaking, if you’re not planning on spending at least $25,000,000 to market your film to national audience, then you probably shouldn’t spend anything at all. But for smaller independent films, social networks like Facebook and Twitter are giving filmmakers unparalleled access to millions of followers who can hopefully be converted to viewers and fans.

….

It’s only a matter of time until legitimate alternative forms of distribution rise and perhaps coincide with alternative forms of financing, thus ironing out the bumps to reveal the new, fully, and irreversibly democratized film industry, whose entire lifecycle will be comprised of ones and zeroes.

Although the article tells more of the problem than moving toward a solution I do like his conclusion:

The digitalization and democratization of the filmmaking process has the ability to bring the power to the people and cultivate new and fresh voices in film that deserve to be heard. The film producer is soon to be the everyman. No experience required. Sure, it will make it easier to make movies. But it won’t necessarily make it any easier to make good ones. It still requires drive, determination and perseverance to complete a film. And even with every tool in the toolbox, you can’t construct a quality film without vision, passion, and talent.

The Wild West is making its return not to the big screen, but to the offices and home computers of anyone shrewd enough to navigate their way into the Film Biz and come out with a high-resolution Quicktime in hand. Hollywood’s borders are stretching into the wild beyond. And in this new frontier, there are no rules. Only laws.

You’d think that when you’re selling access to an invite-only conference giving away the content would be counterproductive – at least with classic economic thinking. But in an era of infinite reproduction of digital assets for “free”, the TED conference learnt that giving the talks away, increased the value of the conference, and revenue from their main conference has increased 35%.

Plus, because the brand became more powerful, they’ve spun out more conferences, bringing in more revenue, as long as people want to pay to go. Because they’re aware of the high value of the content, they pay to go.

A classic example of Techdirt’s Connect with Fans and give them a reason to buy is the path to prosperity. If you can connect with fans beyond one way communication that is.

By “giving away” the infinite for free, and helping to spread it and syndicate it as far and as wide as possible, TED was able to massively boost its brand awareness and interest, and increase the value of the seats. And that’s increased in almost every way. They moved the conference to handle more people and increased the price and introduced a (only slightly) cheaper “simulcast” conference andadded additional events. And an awful lot of that is due to the publicity generated from the free TED talks. In the past, TED was well known only in very specific circles. But by opening up and freeing the infinite goods, it’s become massively well-known throughout the world… and it’s also made the event itself able to earn a lot more money (which it then uses to further the core mission of disseminating ‘ideas worth spreading.’)

And I, for one, thank them, because the videos are great. And if ever invited I’d probably go, because I know how good the content will be. That would not have been the case because it sounded rather “stuffy” back before I knew anything about TED.

It seems strange to me that the various movie company players continually bleet how piracy is killing their industry and yet – even without changing business models – they still have record year after record year. Something just doesn’t add up.

“The average cinema ticket price increased by 39 cents in 2010, consistent with the past few years, even as attendance to premium screening has increased (e.g. 3D),” says its new report on worldwide revenues. “Moviegoing remains the most affordable entertainment option — costing under $50 dollars for a family of four.”

I guess those kids don’t get popcorn!

“Though innovation and technology continue to be a positive force for the theatrical business, driving moviegoers towards higher value 3D entertainment,” said Pisano, “the continued theft of movies online will have a sustained adverse impact on movie attendance in the coming years.”

Pisaro concludes with the familiar, tired mantra, “It’s impossible to compete with free.”

To which I will respond “If you cannot compete with free, you cannot compete.” A downloaded movie – licensed or not – is not the same experience/product as going to the movies.

As for slightly falling attendance in US theaters – when you keep making the experience less and less pleasant, that’s the inevitable consequence of what the movie theaters are doing and not external factors. Torrentfreak.com – a somewhat “pro” modern realities site – expands on the concept with their article Evil Piraes: Movie Industry Tops $30 Billion Box Office Record:

Does the MPAA chief truly believe that a shaky camcorded version of a movie is somehow depriving movie theaters of visitors? Are there millions of people who prefer watching a low quality camcorded version of a movie over a theater visit simply because they can save a few bucks?

Pisano is comparing apples and oranges here – and he and his buddies have nearly 32 billion reasons in their back pocket to prove it.

It would be the same as saying that a fan of band X won’t go to a concert because he can download a bootleg copy on the Internet instead. Movie piracy is hardly a threat (or competition) to movie theater attendances. If anything holds people back from spending a few dollars on a movie it’s probably the insane security measures that have been implemented in recent years.

I’m still waiting for the RIAA or MPAA or any of their international associates publish a peer reviewed (that is, using proper Scientific Method) study that establishes loss by any record company or movie studio directly attributable to unuorthorized distribution. Conversely, we do have the US Government Accounting Office saying that the figures from the MPAA/RIAA are inaccurate and not factually based. (A polite way of saying “they lie”.)

And yet, mainstream media repeats the press releases without any critical analysis or even review. And they wonder why I don’t bother consuming the second rate product of the mainstream news media.

As we all wonder how we’re going to fund our production jobs, the independent series Venice (spun out of Guiding Light as it turns out) ultimately decided to fund the $60K per season budget by charging a subscription of $10 a season.

While the 50-60 people working on a season do get paid, they all have “day jobs” between the limited income from the series.

The total cast and crew for a season ranges in the 50-60 person range, but Venice isn’t paying anyone’s rent year-round. Everyone has day jobs, including Chappell, who has returned to Days of Their Lives as Carly Manning. But things are looking good for Season Three, which is currently in pre-production and may include, among other things, an all-musical episode with original music. “If we can cover expenses and have rollover for season four, that’s fantastic,” Chappell said.

Currently, subscription fees cover at least 80 percent of the show’s $60,000-plus budget per season, Chappell says, with merchandise sales and product placement making up the remaining amount. And for many of those subscribers, especially the daytime soap fans, this is their first time watching web content.

It would have been much easier for them to sell the season via klickTab.com via a standard RSS feed and save on all that tech support expense:

This has made tech support a must, with the five-person IT staff working overtime to help users who have lost passwords or are having problems using the site,

There’s not tech support issue with klickTab – if you can subscribe to a podcast, you can subscribe to a klickTab feed. And yes, I helped develop klickTab.

I think it’s true to assume that the world is moving toward an on-demand world with viewing done on the viewer’s schedule and device of choice. Program growth will come from personal recommendations – by computer-based recommendation engines and human social networks.

So where’s the role for a distribution channel that forces viewers to watch on the broadcaster’s schedule? The whole article is a good read but the core paragraphs are:

We’re already seeing the erosion of programmers’ influence in the way viewers watch TV through DVRs and online, with some shows getting nearly 40 percent of their viewers after a show airs. More than 5.5 million viewers of ABC hit Modern Family, for instance, watch the show on-demand or on their DVRs. It’s not as important today that a show has a particular time slot when so many of its viewers aren’t actually watching it live.

Personalizing recommendations, and allowing for new means of content discovery, takes that one step further. When content is discovered, through recommendation engines or by other means, it doesn’t matter to the user who made the show, what channel it’s on, or even whether it’s new or not. Perhaps the best example of this comes from Netflix’s recommendations engine: its streaming service doesn’t thrive because it offers users the hottest new releases, but because it consistently serves up content that is relevant to the user.

For users, the result is a steady stream of new and fresh content, and also content that’s more relevant and engaging than what one might find by purely channel surfing. And for content creators — especially independent content creators — personalized recommendations serve as a way to level the playing field. No longer does it matter whether a show appeared on broadcast, cable or online; the only factor that matters is whether or not a user might be inclined to watch it.

Economic reality is that if something can be reproduced for zero cost (digital copies) then the price paid will trend toward that marginal cost. Economics says we can only directly monetize scarcity, which is what Kevin Smith is doing in his self-distribution plan.

For the months leading up to (from memory) the October “release” he will be taking RED STATE on the road in “four walled” cinemas (hiring the venue for the film). These events will be “scarce” because they happen in a very specific time and place. If you’re a Kevin Smith fan, you’ll be at those screenings if you can.

This will likely work to bring in the expected $1.5 million (of a $4 million budget) because Smith already has a very strong connection with his fans thanks to his long term social media activities.

In other words he has CwF and he’s giving them a RtB – He’s connected with his fans, and the events give them a reason to buy.

I believe that this social component will be crucial to any independent project, and needs to start when the project is in pre-pre production.

And I think “eventize” is a new term that probably shouldn’t be allowed to continue being used, despite being very descriptive.

One of the inevitable human tendencies is to want certainty. We “know” how the traditional film and television businesses operate, or at least the way they have operated. Now with changing distribution there are no certainties and yet that’s what we naturally crave.

This leads to situations where a producer/musician/filmmaker observes how others have built an audience and then follows through with the same actions, even though the specific actions are not truly building a real connection with fans, and that’s the important starting point for obtaining a monetary return for your work.

This form of “going through the motion” has been named a “cargo cult” and the history of that term is explained in the article.

But if you just look at this as a paint-by-numbers answer to “what is the business model,” you’re going to fail. And that includes even some of our favorite tactics, such as using “free” as part of your strategy. As we’ve said time and time again, give it away and pray is no business model. Nor is just setting up “tiered” offerings. Those can work amazingly well also… but, again, without the connecting, who’s going to buy. Taking a movie on tour is great… but without the fans clamoring to see it, then that’s useless as well.

Instead of a paint-by-numbers approach we have to truly connect with fans before they have any reason to buy anything from us.

Our longest show ever!

In this episode Terence and Philip, with Greg Huson from Secret HQ, look forward to what we can expect in 2011.  You might want to pace yourself on this one as we’ve set a new record for show length.

What will the Microsoft Kinect be used for? Who’ll be releasing new software this year – will we see new versions of Media Composer, Final Cut Pro or Adobe Creative Suite? Will Avid open up to 3rd party hardware? What will be in those releases? Is this the year Metadata (finally) takes off?

How many movies have to not make money from 3D before the fad is over? Or will 3D TV spark 3D production? Will we see RED Epic this year and will it be a success? What will develop with large sensor cameras?

How will the collapse of State Governments affect production subsidies? Will runaway production come back to LA?

When will the tipping point come when distribution breaks out of broadcast and cable channel models? Is ivi going to be ruled legal? What’s the future of Netflix? Is a social network a replacement for channel guides?

What do we wish we could predit for this year? More use of metadata for production automation and where it comes from? What if we didn’t do a first string-out manually? This leads to a discussion of the philosophy of editing.

What will be this year’s surprise? Another DSLR? Another daVinci/Smoke on Mac?

What will happen in distribution? What’s the future of DVD Extras?

What isn’t going to happen that needs to happen?

Long term readers will know I’m not a fan of advertising: it’s usually intrusive and irrelevant. That is to not to say that I hate the idea of sponsored media. It is just that, when I’m watching a program, I don’t want to be interrupted every 8-10 minutes with something irrelevant to the program. That should also disturb content creators who are trying to invoke a mood or emotional feel because every ad break disrupts the very intent of the creator.

That’s why, if we’re going to have to continue with sponsored/advertising supported media (instead of a simple and fair payment mechanism which would be my preference) then at least let it be in the form of branded media, or sponsored product. That way the “advertising” component will at least be relevant to the programming content and integrated with it in an non-disruptive way. These are both net positives.

However, the story here is the future of advertising. You may have seen a few advertisements that disguise themselves as short films in the pre-roll at your local movie theater. There is a popular one currently running that explores the history of Barilla as a staple in family kitchens for decades. It is a beautiful shot short film with a great sense of history.

ShapeShifter takes an even more subtle approach, by only briefly showing a car at the beginning and end of the film. The rest of the short is an atmospheric journey through nature as exhibited through a series of CGI animals. All the adjectives a car company would hope to supplement their latest vehicle with are present – elegance, power, speed and grace. But new media has given us an unprecedented look at what engages audiences from an advertising perspective.

I loved the Disney example in the article – it’s a perfect attempt (a good one) at creating artificial scarcity. It’s easy to take a physical good off the market – like the MacRib – but with Snow White, I wonder if the artificial scarcity will be as successful when beautiful digital copies get “out there”.

And that’s the problem with artificial scarcities on digital goods: they don’t work. DRM is an attempt to force artificial scarcity and it’s cracked time, after time, after time. If your customer and hear and see your product, it can be reproduced infinitely for little cost.

So the ultimate question is: what are the real scarcities surrounding a film or TV project and how do we monetize them?