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Friday, September 11, 2009

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, 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.

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  • The million dollar issue, "show me the money in the post-DVD, post-theatrical, post-cable, post-* world..." one path that I predict will become more common is the model I've followed with my current documentary: get funded up front.

    The key is finding funders who are on the same wavelength as you are, you can spend the energy writing grant proposals, you can spend the energy raising money from people who want a return, or you can spend the energy pitching your project to people who for one reason or another want you to make your film and are willing to fund you without expecting a return in the financial sense. There are many intangible benefits of getting a film made and out to an audience.

    The return, the rewards, are in getting the film and message out there. And if you don't have to focus on the money coming from distribution, you can focus on finding an audience and give the film away. And in the process of building an audience, you might even find people to help you fund your next project. Inverting the model, finding the funding in the development stage without an expectation of a return, rather than working with investors that expect a return from the distribution phase, which puts pressure on finding a "buyer" rather than an audience.

    A large scale example of this is Yann Arthus-Bertrand's "Home" which is being distributed for free, for the message is more important than making money from theatrical and DVD sales. Media is about messages, and if you get a message out there, that may be profit enough. Thinking only in term of financial return on investment closes off many novel ways to finance, produce and distribute films.

    By Blogger David Tames, at 5:32 PM  

  • For the lead guys in the industry it is surprising that they are spouting memes that they found on the web. No new insight from the guys who make the big bucks. Most of the stuff they are saying can be found in articles that are many months old.

    I guess this is more about nobody really knows the future of monetizing content more than any specific idea.

    I agree with David with the modification- the money will eventually come directly (not indirectly) from the people who appreciate your content the most. They will buy merchandise straight from you- whether it be the DVD release, poster, shirts, or sex toys branded with your movie icons. They will finance your film from pre-sales of such items. IMHO, I don't think advertising in the traditional sense will support much more than the actual bandwidth it takes to deliver your content. The rest of the money has to come from your fans and subculture you create around the movie.

    By Blogger GBH, at 11:40 PM  

  • I have and continue to believe that people will pay for quality. To that end, when the ad dollars prove insufficient to support the creation of quality content, and when the makers stop making it, and there is no quality content to be gotten for free, the wallets of the consumers will open and the new model will be born.

    By Blogger Unknown, at 11:45 AM  

  • Great discussion on this topic, HRTS enjoyed putting the panel together. By the way, the entire video of the event may be seen on our website, free.

    By Blogger DaBlogger, at 5:46 PM  

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