Flannigan pointed out at Digital Media Summit that the most important video content on AOL is now free; paying for AOL is being positioned as a premium service. Membership on AOL is down, but revenue is up because of advertising support, he told me during a fireside chat. The key here is that the sum of the "fragments" is worth more than one individual piece.
Wall called Jib Jab the exception rather than the rule. Hollywood will still produce the most desired, premium content. For every Jib Jab or My Space or Blair Witch, you'll see the most desired content still originating, for the most part, from the studios. Again, I'll try to get you guys some of the audio tonight or tomorrow. (www.ihollywoodforum.com)
The overwhelming opinion here is that pay models for media must be radically rethought. Fascinating that this comes from the major networks and rights holders. Free is the name of the game: if it's free, piracy gets bypassed.
We had the Slingbox Marketing VP Rich Buchanan crossing swords with the Major League Baseball Exec VP George Kliavkoff over rights; ;but notably no one was talking about suing anybody. Everybody seems determined not to repeat the mistakes of the music industry.
All this was followed up by an amazing presentation by Jib Jab about how two guys with an idea for online comedy created a phenom that attracts hundreds of millions of hits. Major media companies should be so lucky. They're getting major advertisers now like Anheuser Busch. The irony: isn't that how the big broadcast networks got their start? Remember free, ad-supported content?
I'll have an audio podcast of some highlights available tonight. I'll post details here and at www.ihollywoodforum.com
The broadcast networks, alarmed by the music industry’s hemorrhaging from Internet piracy, aren’t about to make the same mistake.
Fox is selling downloads from Tuesday’s American Idol finale at $1.99 a pop and garnered more SMS votes for its final two than the last American election. ABC launched news podcasts last week. CBS is selling episodes of shows like “Survivor” for 0.99 and launched its innertube broadband network last month.
So far, these efforts aren’t more than a rounding error in the networks’ bottom lines. But that will change dramatically over the next two years as viewers warm to watching their favorite shows on video iPods and cellphones.
The networks’ launches are historic because they largely bypass piracy by using the unique features of the web and mobile to their financial advantage. Their approach exemplifies how I believe music, films and other rich media will be monetized in the Brave New Digital World.
How are the networks accomplishing this? Let’s look at some examples. Take ABC’s decision to allow fans to view hit shows like “Desperate Housewives” and “Lost” for free online. Traditional thinking is that such largesse would hurt TV viewership and thus ad sales. But ABC convinced advertisers such as Toyota and Procter & Gamble to add short ads to the online episodes. Arguably, these companies get better brand recognition by hitting fans into two mediums, rather than one – especially since you can’t click on your TV to buy Folgers.
Of course, you can also pay to download “Desperate Housewives” from iTunes or buy or click on Susan’s James Perse T-Shirt to buy it from Nordstrom’s.
Toyota, by the way, is also creating 10-sec spots to air before “mobisodes” of its hit show “Prison Break.” How big could that be in a world of 1.5 billion handsets?
These tactics would have been ineffectual a few years ago, when the broadband Internet was still used by only a fraction of the population and Web ad rates were dismal. But the Internet is now capturing a significant percentage of the prime time viewing audience.
Note how these efforts are largely immune to piracy. Who wants to steal a show that’s available for free? Why rip off a baseball broadcast airing simultaneously on TV and the Internet? Would you rather wait a few days to catch “Desperate Housewives” from a pirate, or get it for $1.99 from iTunes?
I’m not suggesting that the path to TV on multiple platforms will be easy. ABC’s announcement of free Internet airings of its top shows angered some affiliates, who worried that they wouldn’t be compensated for local viewers who fled to the Web. Fox sidestepped that issue by promising to cut affiliates a piece of the profit from shows it airs on the Internet.
Sports, in particular, presents sticky issues. How do you negotiate rights clearances for a Red Sox baseball game when anyone can view it streaming for free on the Internet or on a cellphone?
One answer: lock up rights to all platforms. ESPN, for example, negotiated the rights to air baseball games on TV, online and on its ESPN cellphone. Fox negotiated similar rights for the NFL.
“Consumers like to see a game retain the same brand when it moves from the TV to the web or mobile,” said one TV executive. “It creates continuity.”
With some imagination, you can see how the TV industry’s digital innovations could have parallels in film and music. Movie piracy would have less relevance in a world where theater goers could pay to watch it on the Internet or their mobile phones before it was officially released. Delivering movies by satellite and broadband Internet at the same time to movie theaters around the world would also help fight piracy.
Even for the music business, hope abides. Online sales are picking up. You can imagine simultaneously selling consumers rights to a U2 CD, hearing the music in their own online locker, downloading it to their iPod, or downloading a music video to their cellphones – and throw in a 25 percent discount to the next U2 concert and a fan magazine to boot.
You can quibble with me about these examples or how long it will take before TV shows, music and films become platform-independent. But it’s hard to deny change is coming.