Zucker has no grasp of this “new world”

There is so much to pick out of Jeff Zucker’s comments at HBS Conf, I’m going to have a stab at a bunch of them.

Firstly, in the video he states he is not an expert in all this new world. Well, as the CEO of NBC Universal, I think he really needs to grasp the fundamental economic concepts. Don’t you?

On piracy – “…If you come up with an idea and it gets passed around without you getting paid for it or credit for it or whatever you’re interested in, then you’re the loser. “

People are predominantly pirating because of huge nuisance costs. (sorry to link to my own stuff but here is a previous post on Dan Fawcett at Fox talking about piracy). In summary, people pirate because; they don’t know if they will like something, advertising sucks, distribution windows suck, pirated stuff is easier to move across devices.

On the internet as a distribution platform – “What we know historically is every time there’s a new avenue of distribution, that’s good for the consumer. I think it’s additive to this whole process, I don’t think that cannibalizes what we have.

He’s right, it probably doesn’t today, but the internet is not a distribution platform. If he thinks it is (he talks about ubiquitous content in the video), he will end up spending money like Rosenblum at Warner on marketing. The cost of production is falling. The cost of distribution is zero. There is so much competition, the signal wont be heard through the noise. On the internet the experience demands to be different.

On revenue models – “Embedded ads, product integration, “

Is that the best you can do? You are talking about the most interactive video experience platform ever created and you are going to do what you did in oldteevee?

On cost of streaming – “Frankly there’s one person interested it — there’s streaming costs, you have to cover it — but that’s more than we would have had before that.”

[Mostly] it’s not streaming, it’s progressively downloading [that’s me being picky]. The economics quoted aren’t really important. The marginal cost of adding one download is $0.0025 = free. Again, I think as the CEO he should really understand the fundamental economics of this new world he talks of.

The irony of ill-advised strategic thinking

“[Warner’s] Rosenblum sees a future in which studios spend heavily on marketing to bring consumers directly to their doors”

I’m sorry, don’t they do that already? That’s the way TV works today. The cost of marketing is always the largest ticket item in any film/show budget. It is a market that due to spectrum scarcity and the 24hr clock, can be dominated by spending money on marketing to influence demand at specific times of the day and create a blockbuster.

The game is different now. There aren’t 5 major studios any more, there are millions of individuals not to mention all the new independents created through the WGA strike. Long-term, can Warner Bros (or anyone acting like a studio) spend enough on marketing? Can they create enough blockbusters? Can they live with the losses?

On the internet, the playing field is level. Zero cost distribution rewards good quality content. Warner should invest in production.

The irony is that Rosenblum isn’t forecasting the end of network TV, he is forecasting the end of Warner Bros!

ZenGarden accepts day of judgement

Interestingly, if you do a little research, key members of the stage6 team (operating under the name ZenGarden) moved on to other things in late Jan/early Feb.

With 19MM uniques, and a management team including ex DivX CEO Jordan Greenhall, they had no problems bringing $$$ to the table! They had a VC lined up with $25MM ready to go

For some reason, the spin-out didn’t work.

So why didn’t it work? Did DivX not get the valuation they wanted? Was there a condition that couldn’t be worked out? What was so important to kill off 19MM members of a community and to tick off a huge number of fans?

Searching for video online

Interesting discussion out of a panel at the Digital, Life, Design conference from Munich a month ago. Mahalo, Wikia, Google (in the audience) and others were discussing search and how to best go about it.

The final punch line;

Short Head – Powered by Humans

Fat Belly – Powered by Social

Long Tail – Powered by Algorithms

There’s something really neat about this. That’s not a reason to believe it is the right model, but I really think it warrants further analysis.

My interest is how does this concept apply to video discovery/search?

Also worth reading Chris Anderson’s comment on the post.

Opportunities for talent in TV2.0

There hasn’t been much news on the writers strike this week, and the WGA still has control.

The general consensus is that the Studios and the WGA are likely to agree a deal, but I think they are both arguing at the expense of the most important person in all of this mess, the Viewer.

What the WGA and all the other unions should realise is that by renegotiating, all they are doing is messing around while the towers they and the Studios have built are crumbling down.

The new value systems, enabled by cheap production and almost zero-cost internet distribution will enable all Talent to thrive. With the right financing models, it will give them;

A) creative and storytelling freedom

B) an opportunity to co-own media and to see significant return of value from their efforts

C) protection from needing to pursue alternative employment, i.e., a viable long term career opportunity

Most producers, actors, directors, make-up artists, writers, THE TALENT, have a huge opportunity at their feet.

The problem is, all the new players like Film 7, 60Frames, Jackson Bites, and Virtual Artists, are just trying to recreate the Studio model for the internet. These nouveau Studios still cover the financial risk, so inherently, the TALENT will still be dominated by these new firms, the firms will centralise and hold control of decision making, investment and allocation of people to projects.

This is a model that we all want to move away from, it cannot and does not scale. Unfortunately it looks like TV 2.0 will be more like TV 1.1

Rethinking the Fundamentals of Media Investment – Part 1

Publishers [Studios, Broadcasters, Networks] currently constrain the whole media value system by absorbing the financial risk of investment in media supply, controlling media demand by ensuring distribution scarcity [controlled by them and possibly by regulation]. In return they take a lions share of the value, financial and otherwise. This strategy works.

However, when there is no distribution scarcity and an abundance of media supply, i.e., on the Internet, the model is blown. The current value system can no longer efficiently [and effectively] allocate financial resources to invest in the right Talent to ensure a blockbuster. In fact, the blockbuster can no longer be realised using todays methods.

Any change to the existing model means shifting who participates in the risk of funding media, without guaranteed returns. Looking across the rest of the value system, there are candidates who can take this of investing in supply; the Viewers, the Marketers and the Producers.

A. Viewer Funding. One or more Viewers fund the production of for-profit and non-profit media. The Viewers take the risk, and could have an option and desire to participate in the return. However, funding with an expectation of a return is likely to be treated as a security, limiting the options for how this model works due to regulation.

B. Marketer Funding. One or more Marketers take the risk and fund the production of media (This was how soaps were originally created). The current ROI revenue model for video entertainment, in-stream advertising, is driven by marketer money and this model flips the investment to the beginning of the production process. By committing marketing money up front, and by participating early in the process, marketers have an opportunity to be significantly more involved and relevant to the experience and therefore more than just an interruption to the experience. This however should not mean branded programming and heavy product placement. This is an opportunity to innovate how marketing experiences are created for video.

C. Producer Funded. One or more Producers take the risk and self-fund production. This gives Producers complete control but the only people that can do this are the ones that have funds at their disposal; These are a) Producers with existing revenues to reinvest (high up in current Publisher funded hierarchy) b) Producers with VC backing who are trying to establish a pedigree in the market (there are so many of these today), and c) Producers of user generated content, mostly a labour of love from people with financial and/or time freedom. However, producer funded systems are not financially or creatively scalable as they are inherently limited by reinvestment of revenues. A series of failures, and a Producer could fall just like the Studios today.

So, which will it be? or will a combination of two or all three of the models above?