Saturday, June 6, 2009

Compensating Content Producers

As I explained in Getting TV Shows into Your Computer/Media Center "The Dark Side", there's a whole new media distribution system emerging on the Internet.

The BitTorrent + RSS recipe promises democratization of television distribution. But it also enables rampant pirating of copyrighted works.

Obviously, this isn't fair to the content producers. No system will succeed where the content producers aren't compensated for their effort. So let's look what's currently working, and how producers might get paid in the future.

The primary revenue stream for television network is advertising. There's well-established methods for quantifying audiences and selling advertising.

Programs that "stream" from a server can be tracked and counted. That's why and the new network sites are showing streaming video. They have a quantifiable number of impressions they can take to advertisers.

But digital files distributed via peer-to-peer or cloud networks don't have such tracking. It's nearly impossible to count how many times a particular file is downloaded, much less viewed.

I believe many publishers would be willing to including some sort of tracking/advertising mechanism in their files, but that would mean an change to media players to support such a mechanism. I think many media player authors would be willing to include such tracking as well, but I suspect privacy concerns will prevent wide adoption of such a system.

So "eyeballs" are out. There's no way I can see to count eyeballs or impressions or exposures. Of course, the ratings system used by broadcast television can't accurately count viewers either, but advertisers seem to be comfortable with that.
This could mean that the advertising-supported model is out for now. Let's come back to that in a moment.

We DO know that it is viable for consumers to directly support their content producers in this system. There's been a number of successful "shareware" style projects in the last year that demonstrate this.
The musician, Jonathan Coulton, writes in his blog that he no longer tries to analyze the numbers. That, "Now I sort of think of the whole engine as a special genetically engineered cow who eats music and poops money - I have no idea what’s going on in its gut, and I have the luxury of not really caring that much about the particulars.."

The Guild and Dr. Horrible's Singalong Blog are both turning a profit. The top podcasters are making a good living.

I personally purchased DVDs and CDs from these people to encourage the creation of more programming that I like.
I can afford to do this because I'm not paying a Cable bill for a thousand programs I don't want.

If I could have paid the producers of "Chuck" $40 to compensate them...
Oh wait.
I did.
I pre-ordered a DVD on Amazon for a program I already watched. I'll probably just loan out the DVD to help grow the fan base for Chuck.
Would it be possible for a bigger budget show like Chuck to exist purely on direct user payments and product placements?
Not with Internet-only distribution at this time.

But we'll see an Internet-connected video player in the living room within a few years and then the numbers will shift.

But this article is about compensating those who produce the content.
And that includes the music.
Right now, the music industry uses a convoluted and mind-boggling-ly error-prone system of performance royalties to compensate the creators of the music.
In the broadcast world that we're looking at here, every show submits a Cue Sheet that calls out how many minutes a piece of music plays.
The broadcasters pay a general fee and the royalty management groups divvy up that pie and eventually the creators get a bit of something.

If we remove the broadcasters from the picture and the producers are distributing directly to audience, then this model would have to change.

Combine this with the silly contracts the AFTRA, Screen Actors Guild, and Writer's Guild impose and the current models simply don't work in a new medium.

I suspect we're looking at the end of royalties for performance.

So what sort of model could work?
Already, most large projects (movies, TV series, etc.) form a corporation or other legal entity to manage and collect the payment for the project.
Just make this standard operating procedure for most projects.
If a performer is contributing in a way that merits more compensation than a simple work-for-hire agreement, then give them shares in the LLC.
That way, everyone gets paid if the project gets paid.

How to license music in this model?
I think the same way: either a one-time payment for a perpetual synchronization right, or give them a slice of the pie.

Does Advertising have a place in this sort of model?
I believe it does.
Advertisers can pay the producing corporation and everyone gets paid.
Currently most advertisers aren't willing to support programs with this sort of distribution, but that appears to be changing.

This doesn't solve the dilemma of mashups and remixes, but that's another topic.

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