Monetising Digital Platforms & Rights

I went to an excellent 1/2 day session on Monetising Digital Platforms & Rights on Wednesday at Vision & Media. The day was led by two top flight guys in this sector, Justin Judd - director of i-Rights Ltd and formerly ran Granada TV's digital division and Peter Cowley from Spirit Digital Media, who I heard at the Nations & Regions Media conference earlier this year.

These are some notes of things discussed that appealed to me. But it is by no means an accurate record of everything that was discussed!

I Pay, You Pay, Some else Pays
We looked at these 3 business models.
The I Pay obviously isn't a viable long term business model as putting your own money into a business for ever will end up in certain failure, but it may be necessary to get a business going.
You Pay - is where the consumer pays you for a product or service, in this context subscription models are a good example.
Someone else Pays - this is usually some form of sponsorship or advertising funded model which usually means the product or servie is free at the point of use.

The best model is probably the I Pay turning into You Pay. The problem with the Someone else Pays is that to get advertising funding you need proven scale before advertisers will support your product and as a new start up proven scale is hard to come by!

Scarcity is important
You can't make money from anything that is easily available. The music industry has learnt this the hard way and now puts the product out  but makes money from the live experience where they can control the scarcity factor. The news industry is in the process of learning this. A number of newspapers have put most of their content behind a pay wall. The FT may be able to make it stick because they have a niche market in financial related news, but The Times is going to find it harder. The Guardian is producing excellent free content but it still isn't clear how they will make money. The Daily Mail is making a go of the Someone else Pays model by producing news people want,  like celebrity news and gossip, which drives traffic to their site and they get a income form the advertising they can sell on their site because they have 'proven scale'. So simply put don't try and monetise a product which isn't scarce.

You need to understand the digital world.
This includes the scarcity issue because it is largely the digital world that has made things like music and news freely available but also the digital world has produced new routes to the market place. We were given the example of John Locke who was able to publish his book direct to the market without a conventional publisher by producing a digital version of his book using Amazon's Kindle platform and Amazon's site. He sold 1 million copies in 5 months priced at 99 cents, even based on the Amazon business model he still cleared just over 1/3 million dollars, he now has many more titles and has even written a book on how he did it, but remember no publisher, no marketing, but he will have got a major free publicity push from being an early adopter which is another thing you need to understand about the digital world. Being an early adopter brings you scarcity.


So if you can bypass the big guys and get your product or service direct to market and avoid the middle men you can make a good return. Now harness some key middle guys like Amazon or Apple and you can really make some money but you still need a good product!

Strictly Sexual was another example. It was a movie made for $100,000 and distributed through Hulu in the US, so no DVD or broadcast release, direct on line and then have cleared $200,000 already. But again it had to be a good product, with a good story, clever plot and title angle etc and despite the title isn't a porn movie. I haven't seen it because unfortunately Hulu is only available in the US . It is geo-blocked elsewhere just as our iPlayer service is blocked outside the UK.

Facebook Games
Games on Facebook is another example of making money in the digital world and often use the Freemium model. The game is free to download and use, but the free version runs slowly. So you can buy add ons that make the game run  faster and also buy add ons that help you play it. A typical example was one of the more popular games which has been downloaded 7.5 million time. If only 1% buy anything, a typical pickup ratio fror the freemium model, then then 750,000 people pay $5 brings you in a lot of money, to carry on supporting that 99% of your market doesn't pay for. Again it is much easier for the early adopters to make money.

Apps
We were shown some examples of the iTunes App chart and it was interesting to note that there were a number of audio related Apps doing very well in the chart, like Keith Lemon's Mouthboard and also an app called Fonejacker which is an app based on the radio spoof prank phone call model, but people are paying good money to listen to prank phone calls.

The ABCD of media revenue options
A for Advertising - a 'some else pays' model
B for Broadcasting revenues - the traditional broadcaster conmmisions and pays for you to produce a product but you probably won't retain all the rights to. Again 'some one else pays' either through the license fee or advertising revenue.
C for Consumer - this is the 'you pay' model, and includes services that are funded using the subscription model like Sky. One interesting fact is that in the TV world the value of Subscription TV worldwide far out values the value of advert funded TV. So the 'you pay' model is the way to go.
D for Data - this is becoming a fourth business model where you can provide a product free at the point of use but the data you collect has value which you can monetise. The new buzz phrase is 'Data is the new Oil'. This can include data like email addresses, Facebook likes and Twitter followers.

It was interesting that in the discussion of projects people were looking at, Justin & Peter were strongly recommending that a Mountain Sports Film Festival didn't set up and expensive web site to promote and sell the films that were presented at the festival. They were suggesting they use the data to make money.

Thoughts after attending Media & Digital Futures workshop at Salford University

I have just taken part in a very interesting, simulating and thought provoking workshop where as industry representatives we were asked to work through and comment on two scenarios as to how the Manchester city region might look in 2017. One had a positive slant and the other a more negative one. I was in one of two groups looking at the more negative scenario which was called the 'noise' scenario.

In a nutshell this scenario says that the UK will still be in recession, technology has advanced but businesses are struggling to make good use of it. The lack of variety of industries and decline of manufacturing has made the region unsustainable with the emphasis being on service and knowledge based.  It is difficult to generate revenue on line as consumers expect it to be free and although there are a large number of digital startups the business models are generally unsustainable.  There is a skills gap with the education system not geared up to produce students with the skills needed and so young people are not making the transition from education to employment. Digital technologies have disrupted rather than helped our everyday lives and people have become overwhelmed by the amount of information, communication and 'noise' coming at them. On top of that the city's digital infrastructure cannot handle the demand with rural areas only having limited access. Finally the region is over regulated, public transport is unreliable and expensive and although everyone is talking about the problems there are no radical strategies being put forward.

I have to say this scenario is not to far from where I feel we are now.

So to start with we were asked as a group to come up with 5 key points from the scenario to start the discussion. I came up with 4 which were..

1. There is no space for the little guy.
2. Education is not delivering equipped young people.
3. 'Free' is stifling innovation as it hard to produce a return on investment. Which is why we no longer make anything.
4. Both the transport and digital infrastructure are failing.

Others thoughts included a negative impact on families and society. We discussed how the use of computers smart phones and other devices has continued the impact on family cohesion, that eating in front of the TV, had started. Family members occupying the same space but back to back looking at screens rather than face to face round the dinner table. Another point was the lack of a 'ladder' structure where larger companies support and provide small businesses with work and then we started to explore more sustainable business models. The current funding cuts are already causing the social businesses to revisit their mix of commissions to social work proving free or subsidised services, with the need to make  a profit to replace the grant funding to support the social work.

Next we looked at placing these issues, as well as a number from a previous group, onto a matrix made up of more or less likely to happen against being harder or easier to resolve. These other issues generated some debate including one about people not able to understand the technology they were using which got us into 'digital natives' versus 'analogue grans'.

Then we looked at how some of the 'easier' & 'likely' issues might be resolved with the suggestion that the tech one would get resolved without too much intervention because more and more of the population will be digital natives. I made the point that although more and more people have access to the technology they don't necessarily have the skills to use them creatively.  However it was interesting to note that most of the points we placed in the 'likely' and 'hard' quadrant of the matrix and we didn't really have an opportunity to discuss how some of those could be resolved other than a consensus that education is key. One comment was our education system is still based on victorian principles and when you consider Carole Vorderman's report on Maths recently and the need for two different maths qualifications,  if you extend that out to all the other subjects we have a major issue with not preparing our young people for a life in a 'post modern' society, our education system at best is still turning out 'moderns'. With my apprenticeship assessors hat on I am only too aware that most of the graduates from the mountain of 'medja' degrees aren't ready to work in our industry, their degrees haven't given them the skills to work as new entrants but has generated the expectation that they can come straight in as directors or producers. So the industry has set up an apprenticeship scheme to take on 16 to 22 year old and give the training and experience to become valuable team players in the industry.

I then brought up the whole collaboration issue and coined the phrase 'collaborate or die". One of the repeating threads in all my research into how our industry is changing is the mantra of 'you must collaborate'. Unfortunately although we encourage our children to collaborate at an early age, once they hit primary school the concept of collaboration is pushed out and so we now have several generations that just aren't interested in collaborating on creative or business projects which is a real shame.

Then we were given the opportunity to identify 5 issues for our own business, again I came up with 4...

1. 'Free' on the internet makes developing viable business models more challenging!
2. How do I get above the 'noise'?
3. I need to create links with other businesses and collaborate.
4. The challenge is to persuade potential clients to buy my skills, as they feel more and more that they can do it themselves or they just don't value them. Just look at most corporate videos, the sound is rubbish!

Finally we all came back together and we shared the findings of all 4 groups and although we had been looking at two different scenarios the findings were remarkably similar.  One comment that struck me was we live in a 'greed economy' where the aim is to make as much money as possible so I can have the latest this that or the other, instead of the motivation being, doing what is best for the community whilst making enough money to be OK with my lot, going from a 'me based culture to an 'us' based one. In the light of the recent riots etc this really hit home with me.

I found the whole morning a very enlightening experience and I look forward to the outcomes of this research and hope that Salford University can take it further.

BBC cuts in licence fee deal 'brutal but realistic', say corporation executives

John Plunkett and Maggie Brown have covered the BBC response in an article in The Guardian.

Senior BBC executives admitted today that staff would be stunned and baffled by the scale of the cuts in the licence fee settlement, which they described as "clearly very challenging". Peter Salmon, the director of BBC North, said it was "tough, but it is tough all round". "These are pretty difficult times. This is an exceptional settlement and it's going to be difficult for the BBC but it's difficult for everyone in the whole UK economy," he added.  "On the positive side the stuff that we are taking on board are a collection of related responsibilities, a lot of which make sense given what the BBC does and what the BBC cares about – programme-making, content-making, news," said Salmon. "The most important thing for the BBC is the fact that it maintains the BBC's independence. We are very keen on multi-year settlements, on having the kind of financial security we need over a period of time so that we can plan, and also stay at arm's length from the government and government politics. It's really important to us, it's important to licence payers, it's what's kept the BBC brave and independent all these years. It's a tough day. The staff are going to be stunned and probably quite baffled by the news. You get a sense on lots of fronts you are not immune from all the big and difficult things happening in the world. The pension gap was another difficult part of the story. These are tough times."

The BBC Radio 5 Live controller, Adrian van Klaveren, also speaking in Salford today, said the corporation had been surprised at the speed of the licence fee settlement and described the cuts as "clearly very challenging". But Van Klaveren added that there was a positive side to the deal, which guarantees the future of the licence fee for the next six years. "Clearly these numbers are very challenging and will need a lot of work," There's a process that is going to take time. It's complicated and there are a lot of options. Changes need to be made over a period of years. I think all of us have been surprised at the pace of things over the last week. Numbers have moved around and each number clearly has different consequences. It will be felt more and more as years go by. We are not talking about something that has to be achieved by April 2011. There is time to work it through sensibly."

 Go to the Guardian web site to read the rest of the story.

BBC offers to pay for World Service to avoid licence fee raid

How this is a real turn up for the books and clearly shows if nothing else that the BBC is running scared that the government will start to eat away at its funding.

Dan Sabbagh has written about this in The Guardian.....

The BBC director general, Mark Thompson, is prepared to meet some or all of the £300m annual costs of running the World Service, in a last-ditch attempt to prevent a £556m raid on its finances to fund the cost of free TV licences for the over-75s, MediaGuardian.co.uk can reveal. Embroiled in crisis talks over BBC financing in the hours before the government's comprehensive spending review is agreed, the corporation's negotiators have been told that ministers are also considering whether to force the BBC to meet the costs of the World Service, which is currently paid for by the Foreign Office. That would be an alternative to making the BBC pay out £556m to fund the costs of free television licences for anywhere home to an elderly person – a bill that may force existing television and radio budgets to be slashed.

To read the rest of this article go to the Media Guardian web site.

Skillset announce more than £1 million earmarked for TV training

From the Skillset press release dated 17th June 2010...

Skillset’s TV Freelance Fund (TVFF) will spend almost £1.2 million on television training in five priority areas over this financial year.

The TVFF is made up of voluntary contributions from the BBC, Channel 4, Five, the Indie Training Fund (via contributions from member companies), Sky and other cable and satellite companies, and is designed to invest in training for the entire television workforce.

The opening up of a global market, technological changes in how content is created and consumed and reduced commissioning budgets have all resulted in seismic shifts to traditional business models. Skillset argues that to remain competitive, both companies and individuals need to embrace new skills, techniques and business practices. Therefore, investment will be directed into five priority areas:

• Multiplatform: £300,000
• Management and Leadership: £300,000
• New Entrants: £300,000
• Craft and Technical: £50,000
• Health and Safety: £25,000

Read the rest of the press release on the Skillset web site.

According to Broadcast the Multi-Platform budget has been increased by £50,000  which is good news. However yet again Broadcast + Television. Where is the equivalent radio programme?