Thoughts on Web Video and Monetization

So, in submitting a somewhat fictitious version of what I intend my production company to be today in class, I apparently submitted a plan that was completely useless, just another normal business with a website, that was completely un-scaleable and would never attract a Venture Capitalist at all.  We’ll never mind for the moment that I’m not interested in VC funding anyway.  What I pitched was a company to create and distribute web video.

I, and I’m sure countless others in web video, have a problem with this assessment.  I personally believe web video to be monetize-able.  I proposed several ways in which it was:

  • Subscriptions to long-form content and sales of content through DVDs and channels such as iTunes – much the way The Guild has done
  • Distribution through paid model platforms, such as the rumored soon-to-be paid models of Hulu and Boxee once one is forthcoming
  • The sale of merchandise related to the show – DVDs, posters, t-shirts, and anything else relevant to the show
  • Recommendations on the website that monetize on a cost per conversion basis
  • Choice of ad options in the video: pre-roll, pop-up bar, contextual ad surrounding the player itself, or something I haven’t yet thought of (studies at Hulu have shown that customers tolerate ads much better when they have a choice in how they interact with them)

Also, all of these means of monetization can be pursued with one show.  Produced once, distributed to as many or as few consumers care.  If that isn’t scaleable, I don’t know what is.

Let’s also imagine for a second, as is true, that I really don’t need multiple infusions of VC money.  What is the point of VC money?  Why, to inflate the value of a company so it can have a successful IPO and make all of the investors, as well as the actual owner, filthy, stinking rich.  (Well, in the case of investors, more filthy, stinking rich than they already are.) Except that most production companies have no intention to ever have an IPO.  They know, rightly, that the minute the shareholder’s bottom line matters more than their ambitions, you can say goodbye to your artistic freedom.  Which is why most movie studios and television stations (with the exception of CBS) are owned by parent companies and are not publicly traded.

I’m frankly shocked at the shortsightedness of my professor.  He is so quick to trumpet the imminent demise of the newspaper industry, but when someone presents him with an actual new media plan – for a MEDIA ECONOMICS course – he denounces it as uns-caleable and unsellable to VCs.  I guess my central question for him is: who says VCs are the only way to start a business?  Maybe in Old Media this is how you did it?  But you know the guy who said “The medium is the message?”  Well, this medium’s message is to leave your old models at the door.

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  1. First let agree with you, your prof sounds like a bit of a dinosaur.

    But, he has a point, that may come from the same place as the dead tree media’s attempt to keep a grasp on what they know: where will you get funding to start this venture? If you don’t pursue VC, where do you go to get both the start up funding and continuation capital needed to keep this kind entity aloft long enough to get adequate cashflow?

    Just producing a show is going to run in the area of $500 to $1000 per finished minute. You can’t rely on altruism or getting cheap productions to build a network or viewer base. You need production value. That costs money.

    • Michelle
    • February 23rd, 2010

    Ben,

    I’m a bit confused at your quotes of money for producing a show. Several web shows are able to keep production value high while keeping the bottom line low. They do this by building skilled teams that create program for the love of creating, not for money.

    One thing I see in web video is that monetary compensation, while nice, is not what drives most teams to create programming. Rather, as elsewhere on the internet, reputation, prestige, examples of work, approval, and connections are all more powerful than money in the independent branches of this medium.

    However, in web video, you need to prove value to get funding. You do that by assembling teams that aren’t looking for money right now. You have to make the quality product first before you find financing. And that is the reality for independent production teams right now.

    • I don’t disagree that quality programming *can* be created for very little money. There’s no end to people who will give away their services in order to roll the dice of any given project being a success – that’s why there are waaaaay more bad independent films than good ones. I do disagree with your premise “that monetary compensation, while nice, is not what drives most teams to create programming.” Money is the *only* reason most of these things get made. I may be too much of a cynic about this, but, over the long run, nobody is in this for the joy of the craft – bills, mortgages, insurance all play too big of a roll for folks to expend the kind of effort required to keep an entity going. Money now or money later, but it’s all about the money and don’t let anyone fool you into thinking otherwise. And don’t forget that “spec work devalues the potential of design and ultimately does a disservice to the client.” (http://www.no-spec.com/).

      I think my price quotes are actually pretty low when you factor in all the expenses that it takes to get even 1 minute of video content out to a single viewer. Taking into consideration everything from overhead of the business operation, production and post-production costs, and delivery bandwidth – that doesn’t even really factor in the vertically integrated types of things you lay out in your post. Sure, you could produce a series of clips, post to YouTube, and do supporting products through CafePress, but at some point that setup would break down either through incompatibility or cost explosion (i.e. bandwidth charges if something gets too popular). Even what I’ve laid out above would still run in the hundreds to get off the ground (with premium accounts and administration costs.)

      The issue, and maybe this is where your prof. is coming from, is one of sustainability. You cannot build a profit making venture that is long lasting, on the goodness of people all by itself. (I really wish that you could). I think the trouble comes with the expectation that you are going to assemble a team of creatives who are doing this for the love of the craft or to create something now with a promise of some, undetermined future compensation. You end up churning through people. Invariably, there isn’t enough profit quickly enough – either for the venture (e.g. you’re paying all those folks you promised and struggling to stay afloat) or the folks (e.g. the venture gets a bad rap as something that isn’t sharing the wealth).

      I’m playing devil’s advocate to your frustration with your prof, I support the idea you lay out in the original post. I think it *would be* a good venture that could make a good showing as a revenue machine and that there are some VCs out there who would take a long look at it. It is scaleable: starting with the “volunteer-love-of-the-craft” creative teams would be small scale; going on to “real” productions that paid market rates would be larger scale. The Internet based nature of the venture would allow you to add or subtract as many of those vertical components depending on the interest/success of any project. There’s a bunch of good stuff in there. There some examples out there of similar things (funnyordie.com, current.tv). Keep plugging at it.

  2. I always laugh when I hear folks say that people only create to monetize and that you can’t sustain without money from your creation. We’ve been doing it for ten years now. We started by producing live theater in ’98, and we were one of the first truly independent groups to distribute content on the web. We’ve won plenty of awards, have had offers to be represented out on the west coast, had offers to sell, distribute, and monetize our content. We’ve turned them down for the most part because we just do it because we love to do it. We’re making content, we have an audience, and everyone who works on our projects is just there out of a shared love to create stuff. Nobody is rolling the dice on anything with us, because we’re very clear that we’re not in it to become monetarily successful, or popular, we’re just doing it to tell stories that we like.

    We seem to be doing okay, Ben. I’m not trying to be snarky, I’m really just trying to illustrate that there are folks out there (and if we’re the only group that this applies to then that’s sad but so be it) who aren’t in it for money at all.

    Matthew

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