The present and future of post production business and technology

In a January article “Apple pushing TV Networks to slash prices on iTunes” and more recently “Apple to offer $1 TV shows in April” Business Insider/Silicon Alley Insider suggest Apple are pushing the price of programming through iTunes down, with the goal of selling “some shows” for 99c.

This is absolutely a step in reality’s direction but it still prices individual programs at well above the traditional income-per-viewer that networks have traditionally received, and way above what it would cost for an average viewer via a cable or satellite subscription.

At 99c, the content owner would get 65c per download as Apple take 35% and pays for the bandwidth (at about 10c a GB).

65c per viewer per show is right at the top end of what the big four networks have been able to command from advertising: per show, per viewer. (Even the Superbowl only gets 85c average per viewer per 3 hours show).  At the other end, the big four get a low of 25c per viewer per show.

But not all television is “big four” nor is it always worth the network premium. Take one of my favorite shows: The Daily Show with Jon Stewart. The best research I can find is that Comedy Central pays Stewart’s company about $5 million a year or $32,000 each for the 160 shows a year that are produced. The Daily Show has an audience of around 1.5 million viewers according to Wikipedia and other sources. Cost of production to Comedy Central is just about 2c per viewer.

Presumably Comedy Central are turning a profit between the 60c per subscriber per month they get from cable carriage and whatever advertising revenue is generated across the 5 or so showings of each episode.

And yet, through iTunes that show is currently $1.99 or 99c per episode if you buy a season pass for 20 episodes. (One of the few cases where a season pass gives significant savings). It’s still too much.

If Jon Stewart’s company sold direct through iTunes at, say, 10c an episode (because once watched it has little future rewatching value, unlike episodic drama or comedy) then gross revenue would be $150,000 per show or $97,500 after Apple’s cut. (Apple’s bandwidth cost would be around .6 of a cent in SD, or $8550 leaving Apple $43950 gross profit on the sales.)

On the other end of the equation, the content creator (Stewart) gets $97,500 or three times the income for the same show as working for Comedy Central brings.

So, while 99c TV shows are a step in the right direction there’s still a long way to go before Internet, on demand, video reaches fair price parity with traditional revenues. This is not an opportunity for the existing entrenched players to dramatically increase their margins: it will kill the nascent future.

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.

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.

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.

I was once an avid reader of newspapers – a three-paper-a-day man: the local paper for local news; the capital city daily for national and international news and the national Financial Daily for business news. I now read none and think that the whole industry has the stench of death about it – not financially (although it certainly has) but the quality of work was what sent me away.

Newspapers (and television news) is notoriously inaccurate. There are exceptions. Occasionally a paper will do a great job of investigative reporting and team it with great writing, but this is not the “norm”. Most newspaper content is filled with slightly rewritten press releases, information easily found elsewhere (movie start time, tides, weather, TV program guides, etc) and copied from the real source to the newspaper) and some hastily written article about an event that is full of inaccuracies because the reporter hasn’t a clue about the content.

Do you think I’m judging too harshly? Consider this. Have you ever watched the TV news report, or read a newspaper article, of an event you were part of or participated in? Has that report been 100% accurate? I can honestly say that, of the dozen or so appearances I’ve made in newspaper or TV media, or those associated with other family business where I’ve been privy to the facts, not one report was 100% accurate. Not a single one.

So I have to assume that every article is written with the same sloppy adherence to the facts of the story.

The average newspaper adds very little value. Most of the content is not original reporting – between the previously-mentioned press releases and Associated Press and/or Reuters and fact-based content sourced from elsewhere there’s not much original, true news gathering.

The little there is is easily reproduced elsewhere. For example, local news site Pasadena News outsources the writing to Indian writers. If you’re only rewriting a press release, or reporting the outcome of local council meetings, which are placed online anyway, then the desk could be in Pasadena or Mumbai. Fact checking (if anyone actually does that) is an email or phone call away wherever you are in the world (as long as you’re prepared to deal with time zone issues).

Newspapers, in their current dying form, are not adding a whole lot of value. Instead it’s nostalgia that’s keeping them going – the nostalgia of lazy Sunday mornings with paper, family and coffee, not the delivery of well-researched original reporting.

If we have Associated Press – who have a very useful RSS feed to deliver relevant content directly to me – why do I need the LA Times to print it for me? If they added a local angle, maybe.

Journalism won’t die with newspapers. In fact, contrary to the opinion of some journalists, the blogosphere – the sheer number of people fact checking – has led to some real stories breaking. Remember the Dan Rather/George W Bush faked papers scandal? Or how the citizen reporter who videotaped (and shared) George Allen’s “macacca” moment that lost him re-election in 2006? It seems in many, many recent cases, citizen journalists have out-performed (in aggregate) the established media in uncovering stories.

So, I’ve gone from a three-a-day habit to a zero newspaper life and am better informed about news than ever. I keep track of Australian news and am better informed than my Australian-resident mother. I scored very highly ion the Pew Research Test Your News IQ with a better score than my newspaper-reading, TV news watching friends and associates.

I won’t be dancing on the graves of newspapers, but their failure to adapt and their high minded refusal to see the log in their own eye makes me indifferent to the failure of the whole industry. Let it be replaced with new forms of news-gathering where some accuracy might slip in.

See also: We need a Fifth Estate and Will “amateurs” save democracy from the “professionals”?

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).

In his latest column, The Future of Internet TV (in America) Robert Cringely talks about the success of Hulu and the two dominant modes of distribution: streaming (RTSP) or download (HTTP). Hulu is firmly in the streaming camp while Apple and iTunes are in the download camp. (YouTube acts like streaming in that no download is left that’s easily accessible, but in fact it’s a download mechanism, not streaming.)

Now, I’ve been a long term fan of the download model, being very taken by the efficacy of RSS for this type of distribution. So much so that I helped invent a technology for doing commercial distribution through RSS feeds. Cringely tells of the unsatisfactory experience attempting to stream from Hulu – with rebuffering needed several time, even after they dropped the quality of the stream. RTSP is hard to do well because so much of the delivery channel is beyond the control of the “broadcaster”. But like established business models, they try and shovel their old model into the new channel. Rarely works like that.

By the way, Chris Albrecht has a column on the topic over at NewTeeVee.com with the clever name, Hiccups in the Stream, That Is What They Are.

Hulu is undoubtedly getting very popular, and will become more so now that Disney are joining the group (with Fox and NBC-U). However Cringely looks at what is a viable business and Hulu, YouTube et al fail. RTSP is expensive, but more importantly, advertising supported media on the Internet has no possibility in covering the cost of production any time soon.

In other words, the model that has sustained television for its life is probably not going to sustain whatever we’re going to call the same thing delivered via the Internet. Funding will have to change. Personally I’d prefer to pay the equivalent to advertising-revenue-per-viewer for a show (because it’s a relatively low 25-75c per viewer per show) and skip the advertising.

Cringely’s suggestion is that Apple, or Google, could easily chip in say $3 billion or so a year for programming production and commission the same shows as are broadcast now (or, in Fox tradition, the same shows with different names) from the same producers that produce the best entertainment now.

This is something I’ve hypothesized on myself so when Cringely is on the same page, I have to go re-examine my thinking. It worries me to agree when so often I don’t.  

Let’s say a 13 episode half season costs from  $32.5 milliion (Friday Night Lights or Mad Men) to say$ 60 million per 12 episodes. There can be some substantial saving if these series were made outside the Hollywood Studio system – probably halving the real cost, but let’s not go there right now.  After all Cringely’s problem is that we can’t pay all those folk in the value chain from non-existent advertising revenue, while they do all get a small, slice of an iTunes Store sale. 

For easy math, let’s say the average hour of “television” is going to cost 50 million per 13 week season, or 200 million for a year’s programming. As we saw in my earlier post about how the numbers stack up for new media, programming in that price range rates 4-5 million viewers (or it’s produced more cheaply or cancelled). Some programming, like the Daily Show, is very viable at 10c per viewer per show.

There is cheaper television. The Daily Show’s $5 million a year deal with Comedy Central buys about 80 TV hours a year. (161 half-hour shows in 2008) so Apple or Google  pick up for $5.5 million or so per year. But the Daily Show is not Prime Time.

$200 million per Prime Time hour per year. $3 billion buys you 15 hours a day or Prime Time Television, with Network standard production and the expectation of Network size audiences. Keep in mind that Prime Time for the networks has been considered 22 hours a week, or an average of around 3 hours a day, not 15 hours a day.

Scale those numbers to Cable size budgets and audiences and an Apple or Google, putting in just 10% of their available cash-on-hand could create the equivalent of a five new Prime Time channels each.

It still seems that NBC-U, ABC-Disney, Fox and CBS need downloadable sales and rental channels more than ever. Clearly they don’t have the power in the argument.

Do I think Apple would ever go directly into the production business? Probably not “willingly” – as a first preference path – but as a bargaining ship against any network that wanted to withhold content….? It’s a very interesting thought. If Apple felt that commissioning the content themselves was in their best interest, they’d do it in a heartbeat. They have the money, it’s only a matter of a decision.

OTOH, I don’t think that will qualify for being ‘new media’ any more than I think Hulu does. My definition, What is New Media anyway?, came to the conclusion that new media is where there is a direct connection between the viewer and the producer. Having Apple commissioning shows would have Apple as the gatekeeper, rather than the network and their advertisers. I suppose getting the prissy advertisers out of the loop might improve the programming by allowing to be more real.  

I’m so pleased you asked

The Ken Stone Sessions: Recorded at Ken Stone’s Studio in January 2009, these two interviews feature founding members of the LAFCPUG talk about what the digital video scene was like at the time. We relive the excitement of what can be described as a technological and creative revolution, and give insight into where we’ve been and where we’re going. As well as myself, the interviews feature Andrew Balis, Michael Horton, Ken Stone. Produced by Rick Young.

The Ken Stone Sessions Part 1

The Ken Stone Sessions Part 2

Sync-N-Link for Final Cut Pro demonstrated at the Editor’s Lounge Jan 30, 2009

Online Video: Codecs, Encoding and Compression for Debra Kaufman’s summary of my Codecs, Compression and Encoding presentation for the Digital Cinema Society, Feb 7, 2009. The video is available for Digital Cinema Society members.

The  original presentation of The Assistant Editor: taking the work out of editing (which became First Cuts upon release) at the NAB 2008 Supermeet. 

There is another interview with me by Rick Young from NAB 2009 where I talk about the philosophy of Assisted Editing and my history, called Philip Hodgetts: Digital Video Pioneer.

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.

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.