Indie Film And The Transition To TV: A New Income Model

Posted on June 3, 2010

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We are currently in the midst of an amazing time for independently produced media of all types.  The Internet brought with it the ability to distribute music, film and books to the world audience, or at least that part of the audience that is connected to the web.  The opportunity’s are endless and the potential becomes greater as the web becomes incorporated into television sets themselves and factory supplied radios in cars.

I’ve been thinking about the potential of web to TV for a while now in terms of how it can be best capitalized on by independent media.  The impending launch of google TV and the fact that web to TV capability is now going to be built into new TV sets at the factory crystallized for me the various ideas that I have been playing with into a single model which takes into account all of the facets of what I think will ultimately be the future of entertainment.

Web to TV started out as being a way for the digital audience to put computer based programming onto a bigger screen.  Then services like Roku, Tivo, Boxee and others created set top boxes which started the process of bringing web media to the larger TV audience (those who weren’t particularly into computers).  The final step is the current inclusion of Internet based media and TV sets themselves so will be available to the entire U.S. television audience.

I think that there are obvious comparisons between what is going on with digital media now and how cable TV evolved.  Television started out being free.  All you needed was a TV set with “rabbit ear” antennas on top of it and you could watch your local TV station(s).  The programming on your TV was totally paid for by advertising.  Then came cable TV and with it a much wider range of choices in channels but also a monthly bill which went to the cable company for providing that service.  Then came subscription channels like HBO who charged an additional fee that enabled the viewer to watch recent movies commercial free.  This involved an additional bill on top of the basic cable subscription.  For those who didn’t want to pay the monthly subscription for premium channels pay per view was an option that allowed viewers to pay to watch specific movies on a one-time basis.

Consider the similarity between the evolution of television and the evolution of digital media.  Computers started out as simple information storage and data manipulation devices.  Then the personal computer came along and with it operating systems that allowed users to share all sorts of information over a globally interconnected network and the World Wide Web was born.  All that users needed to have was a personal computer and a connection to the Internet which involved a monthly bill much in the same way you paid your cable bill.

In the last 10 years or so that basic platform has evolved to the point where all of the information and programming that is available on TV can just as easily be stored and distributed via computer and can be created by anyone.  The web, just like TV, started out with all the content being free and to some extent supported by advertising dollars.  A lot of the problem is that a set amount of available advertising dollars are now being spread out across millions of sites.  The big media like newspapers, magazines, radio and TV stations used to essentially control all of the media and were the sole beneficiaries of all that advertising money.  Now everybody from CNN down to small bloggers like you and I have to fight for a share of those advertising dollars (or just work for free) and free media also competes with paid media.

While the U.S. internet audience is a huge one the general American television audience is exponentially larger and one that has been unavailable to independent media until now.  I think that web to television is going to change all that.  What matters most to independent media producers at this point is to very carefully watch how the web to TV and web to radio technologies evolve in the next two years so and to position themselves so that they can best take advantage of what develops.

As an example, look at Roku. Their featured channels are Netflix and Amazon video on demand. If you think about it from the perspective of television Netflix is very much like HBO, a subscription channel that allows you to watch movies for a flat monthly fee. Amazon is like PPV. Both delivery methods already exist on TV and have been successful so there is no reason to believe that these channels won’t continue to be successful as web to TV channels.

Both Netflix and Amazon, unlike their predecessors on TV are accessible to independent film but (also unlike their predecessors) both offer more features than traditional TV channels ever did.  Netflix will send rental dvds to your house and Amazon will sell them to you. 

Just these two channels alone may be the death of many subscription cable channels because they don’t restrict you to the same 10 movies all month long. So why bother with three or four different subscription channels just to get a variety of movies where you can have everything they offer and more from one or two sources?

For these reasons I think it’s crucial for independent films to be on both Netflix and Amazon. More so Amazon perhaps because they offer open access to anyone through their “Create Space” division. From this perspective indie filmmakers don’t really need distributors anymore as Amazon gives you the tools to essentially do it your self in many ways from within their catalog for about half the commission of what a traditional distributor gets.

Additionally I think that netflix and Amazon are going to be the choices across all all of the Web to TV platforms that are coming out now.  The main ones are going to be google TV and Yahoo. Yahoo already has position on Samsung, LG, Sony and Visio television sets and are (probably) going to be the second major provider after google. It is crucially important for indie media producers to have their products prominently available on these channels and services which seem poised to take over television.

“Channels” is probably the most important word to consider. Both google and yahoo are presenting their web to TV offerings as specific channels.  This is undoubtedly smart marketing because the TV audience, or lease that portion of it who isn’t particularly interested in the web, will probably accept web to TV programming more readily if it comes in the form of channels as that is most similar to what their accustomed to on TV. So obviously indie media has to be available on the right channels from the very beginning. 

Right at the outset we see that web to TV is going to be very much like traditional TV.  Netflix and Amazon will probably be available on all the service providers and, as I already pointed out, Netflix is pretty much like a souped up HBO while Amazon is a pay per view channel.  That only leaves out one type of TV programming, the free kind that comes with a basic cable subscription.

The Internet has hooked every one with the idea that consumers expect everything to be free.  That has always been the case with basic television but on the web "free" has been interpreted in a different way.  Even though television was always free to the consumer the broadcasters and the content producers still made a very nice living through advertising.  On the web though the advertising revenue available to the indie media producers has yet to equal that which is available to television.  This is what needs to be changed and I think that it can be changed fairly easily with the right approach.

The first thing we have to do is to differentiate between media that probably should be free and that which shouldn’t. For example, if I want to sit around all day long and watch videos of somebody’s wedding or vacation or uncle Bob’s unfortunate face plant incident when he tried to ride cousin Timmy’s new skateboard, that should be free.  I can already do that at home if I want to and I don’t have to pay a thing for it.  Advertisers see those kind of videos as low value and don’t invest very much per view in advertising on them.

Independent film is different though.  Independent film requires a substantial investment of time and money to create and should be rewarded accordingly. So the problem is developing a new sort of web channel (which will become a web to TV channel) that allows viewers to watch films free, like basic cable television, and at the same time makes enough money from advertising revenue so that both the channel owner and the filmmaker can make an amount of money that is fair and reasonable based on the audience that is reached by the film.

I think that YouTube is the obvious candidate for being this third type of channel. However I don’t think they have the right model in place to do it yet. Most everything on YouTube is free but they also are experimenting with movie rentals. Where they fall short is in the rental vs. free concept. It isn’t an either/or proposition. Movies can be “free” to the audience, just like on TV and still make money (just like on TV). If YouTube does this kind of a “free with commercials” concept then the future of TV is Netflix, Amazon and YouTube.

Traditionally advertisers paid for TV time based on the size of the audience. Neilson compiled figures on each channels’ audience size demographic makeup and assorted other things. But those figures were always somewhat generalized and based on an audience sampling of limited size.  Internet-based programs have the ability to provide a much deeper analysis of their audience across the entire spectrum of available information.  They can give the exact numbers in relation to audience size, demographics and even how much of the audience actually watches the entire movie or half to movie or a quarter of the movie.

Based on these facts I can pretty much see what the potential is for web based “freeview” TV. If if I were to set up such a channel the angle I would take on it would be to approach advertisers with the proposition of paying a set amount of money per viewer to run their commercials on the film. The data on which to base my figures would come from a third party metrics provider.

As far pricing goes I think $2 – $3 per viewer is pretty fair.  Out of that the filmmaker gets a dollar, the metrics provider gets paid, the hosting provider gets paid and everybody wins. To refine the concept a bit further I would have the pricing on a sliding scale based on how much of the movie each viewer watched. If you had three sets of commercials throughout the film, one near the beginning, one in the middle and one just before the end and base the advertiser costs on how many of  those commercials each viewer watched it might be something like; 30¢ for viewers who watched through the first commercial, and additional $1.20 for every one who watches to the second commercial and a final $1.50 for each viewer who watches to the end. 

That is perfect for the advertisers’ perspective as they will not be investing a ton of money into a film which doesn’t get any viewers.  Plus they don’t have to pay full price for “channel surfers” who drop in for 10 to 15 minutes of the film and then leave (except for the portion of the film that they actually watch).  Such a model would really challenge traditional TV from the advertisers’ perspective and allow web based media to compete head to head with traditional TV channels based solely on the quality of their content and the actual size of their audience.

The only thing the remains for the filmmaker at that point is to make the audience aware of their film.  That one thing though is going to be what determines the success or failure of the film from a financial perspective.  Finding ways to promote independent media and ways they compete with the methods that indie media has at their disposal is the challenge and what I’ve been working on the last year or so.  So there you have it, the future is wide open for indie media success for those who learn how to take advantage of the opportunity.

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