Disney's CEO, YouTube's Founder, and Wired's Editor Debate the Future of Monetizing Content

"The Digital Chiefs," a lunch panel earlier this week organized by the Hollywood Radio & Television Society, was one of the best conversations about digital media I've been to in a long while.

That was primarily due to the organizer's choice of a moderator: Disney chief executive Bob Iger. Having Iger asking the questions offered a really interesting window into what's on the mind of at least one major media CEO.

And that was mainly how Disney and other media companies will earn money from their content.

Iger's panelists were Wired editor Chris Anderson, YouTube co-founder Chad Hurley, Hulu CEO Jason Kilar, and Jonathan Miller, chief digital officer at News Corp.

I'm posting some audio (a little quiet, but listenable) below, along with a few rough notes from the discussion.

My notes:

Iger opened by mentioning that TV took thirteen years to reach 50 million people. It took Facebook nine months to get 100 million members. 400 million videos were streamed on Hulu last month. YouTube offers more than 100 million videos (there are 526,000 search results for "Disney.")

Chris Anderson noted that iTunes succeeds in getting people to pay for content by selling convenience. While you can get music for free, the iTunes version saves you time, and ensures you're getting something of good quality.

Iger said he was "mildly encouraged by that -- not giddy, but encouraged."

Chad Hurley said YouTube is introducing more ad formats to help the site's partners earn money, so they can continue to create high-quality content. Iger wanted to know if there will be ad messages online that can sell a product as well as a 30-second spot on television. Hurley didn't have a forceful answer, noting that online there are multiple formats, from text ads, graphical ads, and 5, 10, and 15-second video ads. What's important, though, is that these digital ads can be targeted and relevant, unlike typical broadcast ads.

Iger said that monetizing social networks remains a big question mark. He asked Jonathan Miller whether MySpace fell prey to a "next-best-thing" phenomenon (being supplanted by Facebook), or just didn't stay on top of its game. Miller conceded that MySpace forgot that there is a continual need for reinvention.

Picking up the theme of targeting, Miller suggested that advertisers will pay more for online ads as behavioral targeting increases (targeting ads based on what you do online and interests you express), though he admitted that online ads may never achieve the same prices that network television commands.

Miller touched on the idea that the costs of content creation may need to go down in this new world, if advertisers aren't paying the prices they once did. (That's a point we discuss pretty frequently here at CinemaTech.)

Jason Kilar said that Hulu has been finding that people remember brands in the ads on its site better than they do on TV, even when it's the very same ad placed in the very same program. People are simply more engaged online, he suggested. They've made a conscious choice to watch that piece of content. By virtue of placing fewer ads in a show on Hulu (relative to the same half-hour on television), Kilar said, they can charge more for them.

Kilar also said that when Hulu's team designed the site, they didn't want it to look like "Tokyo at night," with lots of features and buttons and teasers. They very deliberately focused visitors' attention on the shows and the ads.

Miller pointed out that on Hulu, 70 percent of the ad revenue goes to the content creators. Iger followed up by saying that 70 percent of much fewer ad dollars than television generates may not be enough money for media companies to continue to invest in high-quality content.

Talking about paid rentals and downloads, Hurley said that YouTube will begin experimenting with both with its content partners.

Diving into some of the topics covered in his book Free, Chris Anderson suggested that for digital products, free samples are becoming a replacement for advertising. "The products sell themselves," he said.

Jason Kilar said that the content that will do best in this new world is stuff that is unique, totally original, and can't be substituted with anything else. He offered NBC's "30 Rock" as an example.

Toward the end, Iger asked his panelists what new things they're following. Anderson said he was watching videogames, iPhone apps, and "more granular social networks" like Ning that bring together groups with narrow interests. Kilar said he was following changing consumer tastes using search.twitter.com, mostly related to Hulu. He said that Hulu makes changes to its site based on what people are saying on Twitter.

I left a bit before the panel was over to head to a meeting, but here's more coverage of the panel from the LA Times' "Company Town" blog and from Variety. (Seems like I didn't miss much...)

And here's a 30-minute audio segment from the panel (just click play below, or download the MP3 file.) Bob Iger is the first and last to speak in this clip.



Photo of Chad Hurley and Bob Iger, above, courtesy of Getty Images.

In-theater Movie Commentary ... Apple & NBC ... Miller and Levinsohn unite ... Dolby digital cinema demo

- Screenwriter, director, and blogger John August has created a director's commentary for his new movie 'The Nines,' which is in limited release now. The idea is that you'd download it to your iPod and listen to it in the theater...the second time you go to see the movie. Kevin Smith apparently did the same thing for 'Clerks II.' (But Smith's commentary was never released, though, because theater owners worried it would be disruptive to other audience members.)

Peter Debruge has some thoughts on this strategy at Anne Thompson's blog. (IE, how loud will your iPod have to be to compete with the volume in the theater?)

- Apple's response to NBC's decision to pull its shows from iTunes is well worth a read. (Thanks, Andy.) Apple says it doesn't want to stop selling NBC shows in mid-season (one feature of iTunes is the ability to buy an entire season of shows as a package), so it is dropping new NBC content before the September season begins. The Wall Street Journal has a report that suggests that Apple is hoping NBC will change its mind; NBC is accusing Apple of caring more about iPod sales than the money it generates for content creators.

- Jonathan Miller, formerly CEO of AOL, and Ross Levinsohn, formerly president of Fox Interactive Media, have started a new firm to buy Internet companies, the Journal reports. (OK, now that the roll-ups are starting, this really feels like Bubble 2.0) From the piece:

The new entity, called Velocity Investment Group, is already actively scouting for acquisitions and has signed letters of intent with a few consumer-oriented Internet companies. Velocity aims to purchase start-ups in related content areas and boost their online ad revenue by selling across multiple properties. Velocity is also considering buying out companies that broker ads for other Web sites. It is being advised by the investment bank Allen & Co.

- News.com has some video from a digital cinema demo night that Dolby Labs held in San Francisco late last month. Two reactions: it's pretty funny to see film shown side-by-side with digital projection in a low-rez Internet video (obviously, you can't see the difference), and the reporter makes some broad comments about theatrical woes which don't feel all that relevant right now. (Regal Entertainment, the biggest chain of theaters, had net income of $52 million in the second quarter.)