With the television content distribution industry adding Internet and digital rights, we have to admit, we’re a little blurry on how it all works.
Irv Holender, of Los Angeles-based Multicom Entertainment Group, made us feel a bit better about our confusion. “It’s blurry for everyone. It’s very confusing. It’s a model that hasn’t proven profitability, because people aren’t necessarily sticking to a brand for too long. We’re all trying to figure it out,” he said.
But, can you explain the difference between digital rights and Internet rights?
Internet is your highway. It’s your ability to deliver. There are all forms of digital rights. iTunes’ download per-unit model is just one of them. We’re spending a lot of money digitizing and compressing television shows into different digital modes. The problem is that there is no standard.
How does the business model work for Internet rights — is it just about revenue-sharing or do you find minimum guarantee plus revenue-sharing models?
It’s mostly revenue-sharing, with very few guarantees. The companies that are the pioneers in the industry usually don’t guarantee.
The exception to that is subscriber-based services who will sometimes give minimum license fees on a certain amount of time.
The problem is that nothing is predictable, whereas broadcast globally is pretty predictable.
The amount of revenue for these rights is also much less than broadcast, representing just a few percent of what the broadcast market is now. It could eventually become more substantial, but it’ll ever surpass the broadcast market.
There are so many small players. Right now it’s like the early days of cable when you had thousands of cable operators — eventually they will merge, but it could be another three to five years before we see that.
What kind of windows are you seeing for Internet rights?
On some products — particularly primetime TV — it’s almost day-and-date, and it’s standardizing around the world. But it still takes about 45-60 days to have the product dubbed into the local language.
It all depends on multi-national companies, but many are requesting day-and-date to get a jump on the local market.
What you’re seeing around the world is that the normal house telephone is eroding, so the telephone companies are going into content delivery to make up for some of those losses. They have become very big clients and are growing very rapidly. They already control a certain number of subscribers, and are just adding on content.
Is the business model different for streaming rights vs. download rights?
It’s different because streaming can be controlled by the broadcaster as well for a later delivery.
Personally, I think the broadcasters will get more involved in the future and want a larger part of the streaming revenue. The people who will end up paying advances and guarantees for the content to be embedded are companies on the hardware manufacturing side. But its really too early to tell whether streaming or download rights will be more lucrative.
The download, or VOD, rights are replacing the DVD market. People aren’t going to buy the DVD in stores anymore. It’s cheaper for the person at home.
We all hope that the percentages lost at retail level will be made in household, because more people have access.
Are you selling download-to-own/download-to-burn rights too?
A lot of territories still don’t have the capacity. But with the phone companies, it’s happening faster, and they’re getting a piece of it.
We’re getting a percentage of whatever that download price is, but the price is lower than a DVD. For example, $14.99 DVD can be downloaded for $2.99 or $4.99, but we’re hoping that the price difference will be made up by how many more people can access it. Also, sometimes a film that is difficult to sell as a DVD does better as a download-to-own.
Oftentimes you won’t have any sort of minimum guarantee, or the service provider will cross-collateralize the entire library with a company. Some titles may sell more than others, so affectively you have to.
What are some of the most promising parts of the business?
The increases we’re seeing are in downloading television series on the international side. Television series bring more download requests than film because of all the other windows for films. There’s no longer a six-month interval — everything’s quick. A movie gets warn out much faster.
We have a vast catalog of material, and we’re finding a whole lot of interest from older people wanting to reminisce and be nostalgic. They’re beginning to use iPads, but with Smart televisions, major brands are embedding in the game boxes — like Nintendo Wii, Xbox, and that makes it even easier for every demographic.