Wednesday, July 29, 2009

The online video biz...

Just read this insightful post over on the TAG blog (TAG stands for The Animation Guild- which is the California union for animation artists).
In the post we read some thoughts from Jay Roth, the leader of the Director's Guild of America (the union that reps all the big film directors in Hollywood). He has some really interesting things to say about the business of content and the online trends. Some excerpts interspersed with my comments...

The DGA wasn't convinced, based on its research, that there were big profits coming from the internet. At the time of our study ('05-'06) most thought that the iTunes model was going to dominate. But since '05, Hulu has decimated iTunes. People are downloading 1/4 the content from iTunes that they were purchasing four years ago. Most individuals would rather watch content for free on Hulu than buy it on iTunes ...

I found this bit of data to be fascinating. When it comes to movies or video, iTunes has become basically irrelevant. It still dominates the online delivery of music in many ways, but for films? Pfft. Big media companies actually like this development. Why? Because they own Hulu and they always chaffed at the dominance that Apple held over iTunes. Roth again...
74% of the revenue earned from theatrical features comes after the features end their run in theaters. 50% of the money from television product happens after the initial plays on t.v.

This is another piece of data that I'd always suspected was true, but never had numbers for. Think about that 74% number for films. If you've ever wondered why studios keep making seemingly failed animated films after such disasters as Valiant, Space Chimps, etc. now you know why. If you spend $20million to make a low budget animated film and it pulls only $11million in theaters, it still a long term money maker because that $11million only represents 26% of the ultimate money the film will make. DVD, overseas markets, TV showings and other licensing deals make up that big 74% number. So that $20million 'flop' that only pulled in $11mil in theaters may have made upwards of $40million when it's all said and done a few years down the road. Really, really interesting info. Roth continues...

More television is being watched today than ever before, and it's being watched on televisions and computers. Yet even now, two weeks of viewing on Hulu equals one hour of viewing on network television of American Idol.

One hour of a single show on just one network has more viewer hours than a full week of an entire online channel, Hulu. Extrapolate those numbers across all channels, nations, networks and online sites and you'll see that the internet is still far behind TV when it comes to pulling concentrated audiences. This explains the cost structures of TV ads versus online ads. If you want to make a big splash (ie: recoup your significant investment costs for making professional content) then film and TV are still the ways to go. But the gatekeepers aren't out of the woods. Here's what Roth thinks will be the mortal wound to content creators...

Finally, the biggest issue out there as I see it is internet piracy. This is the biggest threat to the industry, Legal recourse is costly, time-consuming and ineffecitve, but if means aren't found to counter piracy, where content can be stolen with the push of a button, then it will mean economic meltdown for out industry, for digital theft destroys downstream markets (where most of the money is now made.) There are companies like Google who have an interest in keeping free access the way it is, but it threatens creators' rights and creators' product. We'll need to balance internet rights with on-line protections. This will have to be done legislatively, administratively, and through public opinion ...

Roth is absolutely on the money. This is one reason I think that online video as it currently is structured (YouTube, etc.) is unsustainable. The only question is when the tipping point comes. Professional content is the food that feeds the beast of free online video
, but if piracy and free content continues on its logical path into the future then free online video will mindlessly cut off its own food supply. The blood and guts of YouTube- the real revenue generating videos- are professional content clips. Even so, five years after YouTube started that's still not a profitable business model (YouTube has never made a single penny of profit- ever). Add in piracy and eventually you suck all the oxygen out of the system. Information is free, but delivering it to a lot of people at once costs money. It's been this way since scribes wrote out papyrus scrolls. Scribes gotta eat. If everybody demands professional content for free, then making professional content, with decent production values and professional level execution in every area, becomes practically impossible. Yes, the technology for making professional level content is cheaper than ever. Doesn't mean much, really. Pens & paper have been low cost for centuries and by now we've clearly learned that low cost inputs are no guarantee of worthwhile outputs. The low cost of inputs merely means the barriers are lowered to allow the occasional diamond in the rough to emerge, but by and large your trained, skilled professionals who have a lifetime career invested in mastering their craft are going to make the best stuff. Even the odd diamond like Nina Paley's film Sita Sings the Blues is what it is due to her career where she worked as a paid professional on bigger budget projects. For all the hype and hope of a new paradigm of production and distribution, Sita is the work of a professional animation artist, whose career and skill development was subsidized by "old media". It's not the random result of a thousand monkeys with Flash. Professional level content is the stuff that people actually want to steal or watch for free. It's just reality. What happens when the world of content is reduced to a giant collection of videos of people lighting their farts on fire or lipsyncing into a webcam? What will the world think of the free film and video utopia then?


The old adage still applies-- you get what you pay for.




8 comments:

Brian Roberts said...

Which all supports my premise that we are headed towards a sort of media based on polar opposites... The HUGE social events (LOST, UP, Spiderman 12, Harry Potter, etc etc) and mindless, amateur junk a'la Bubba blowing his balls off with a firecracker or an opinionated blowhard making fun of Jessica Simpson into his webcam. The majority of producers who make mid-level content for the purpose of filling airtime (Most Prime-time shows, reality shows, all cartoons, soap operas, judge judy, etc) are going to see shrinking audiences and find it hard to pay professionals to work on their projects, meaning the scope of their projects will have to scale down in order to find a business model, or go away entirely.

I had a scary meeting with an internet media consultant, where I asked if he had any inkling of any products that stood a chance of bridging the gap between the computer and television. His belief was that most consumers are going to be satisfied letting their cable companies fill that gap. And we all know how democratic those cable companies are going to be about what content they push across their fibre.

Brian Robinson said...

Hey... I worked on Space Chimps! oh wait... no... your right.

The film actually made its money back and a bit more in the theater. they say its budget was $37 million, and I am pretty sure they kept it tight to that. They were running out of money with many shots still to be animated, when over %75 of the animators were laid off. The worldwide gross for the film was over $60 million... then there is the income from DVD sales, books, merch, etc.

Its no wonder they are making Space chimps 2... though not in Vancouver.. It is in production, in India, as we speak... and Direct to DVD. The budget is smaller so they can skip the %26 income from theater viewings all together.

Its a shame... Many talented people doing less than their best work, so somebody can make a quick buck… but such is the life of the artist. It is really only the few that are trained in what "good" animation should be, or "good" story for that matter that care about the quality of those two things. I find more and more that people outside the industry, for the most part, will still laugh at a fart joke. In fact, they want to see as many fart jokes, pop jokes, sight gags as possible without having to wade through all the heavy "boring" story stuff.

As I see it there are two things animators that care about animation can do to stay sane.

1. Do the best with what you are given, ignore that you are working on what you think is a steaming pile… In fact embrace it.

or

2. Do your day work as fast as you can, so that it makes the people you are working for happy. Then you can come home at night and do something you enjoy.

Hopefully someone takes notice of your night work... and you can make some income from it. possibly even freeing yourself from the bonds of working for the man.

I am currently doing the second. If the client is happy with the quality, then you did your duty to them. I am working on a side project for myself, that I hope can someday make me a little income... if it is just supplementary to the day job, that’s fine with me. If it somehow hits and sets me free... even better.

I guess what I am saying is, I try not to dismiss stuff as crap as much as I used to. Someone out there likes it, it’s not crap to them. As was the case with my work on Space Chumps. Someone had $ to make it... and there is already a built in system to reach people if you have $.

on the flip side of the coin, your personal work, no matter how niche, also has an audience out there...

There are BILLIONS of people in this world. If you can find the way to reach people of like mind to yourself... you can make money doing what you like... it’s just reaching those people, and getting them to pay is the trick.

Thom said...

I don't think there's any stopping digital piracy. Every anti-piracy scheme that the big media companies come up with are irrelevant by the time they're released. And suing kids for downloading their stuff is counter-productive at best.

The solution is likely to come from rethinking the whole distribution process. Don't get trapped by the sunk costs of the old system. It's times like these that I wish I was a genius. :)

Brian Robinson said...

What are the chances that a Brian Roberts and a Brian Robinson would be the first two reply posts...

Graham Ross said...

Ever seen Idiocraty? Every day things on TV look like they're going more and more in that direction...

Alonso said...

http://www.tweakguides.com/Piracy_1.html

this is a good, well researched (somewhat dry) article on piracy with pc games, which strikes me as having a lot of parallels. If you make it to the end one of the conclusions is that games are changing to adapt, which raises the question of how watchable media will adapt to make piracy less damaging. An obvious example would be advertising going more and more towards product placement, in which case large scale pirating of your media would be a good thing from the money's point of view.

Interesting times

Femi said...

Ok lets look at the worst case scenario. I live and work in the worlds third largest movie market (by release volume)at about two thousand realses a year of straight to video extremely low quality barely viewable crap. Production budgets peak at forty thousand dollars and maximum sales at about fifty thousand copies per release. Each movie sells for a dollar and there is almost no piracy apart from the recent issue of compilation DVDs which is very low. Why? because piracy is about availability so its the person that gets to the market first a price point that the market wants to pay for at a quality that it can live with that wins the piracy race. All media businesses essentially really on either advertising or consumer payments to make money with the latter being the preffered because advertising needs large volumes of people to be in one place so the message can be delivered, its the reason why TV rates are higher than online rates its the "Captive audience" phenomenon. So what does all of this have to do with anything? I believe the answer to the question is good quality massive volume at low prices so the incentive to pirate is lowered. It will never completely stop piracy I reckon it will just make it seem pointless when the content is so readily avialable for cheap. I have no idea of this is an acutal solution more a belief than anything else and I am now trying to see if its even possible to sell maybe five hundred thousand copies of a single release in a market where content has been reduced to the basest form of being a commodity to be bought in traffic with bannans.
Femi
Lagos Nigeria

mike gargiulo said...

Great post, Keith.
But my opinion is that even if new professional content stopped being created at midnight tonight, there's enough media in existence to keep any human entertained until they die. Old movies, tv shows, arts recordings, and...wait for it... books!
All of which can be downloaded, traded, whatever, and even remixed and collaged together.
If new content disappears, some of us will survive. People will still tell jokes and write songs and dance after working in the fields. Some of us will even animate!
Also, I consider myself a well educated, tasteful, erudite fellow, and I still LOL at farts and people skateboarding into sewage. Just me?