Ad-Supported Streaming: Point/Counterpoint

From the emails we are receiving, there is no point in the proposed contract more controversial than the provision on ad-supported streaming. The two emails below were originally submitted to us unsolicited, but we have posted them together because they form such a useful point/counterpoint argument on this issue. See you in the comments! -JA

ONLINE STREAMING TERMS: PRO

Statement by Christopher Kubasik

Don't Be Down on the Deal Because of the Window for Ad-Supported Streaming

Some people see the streaming as “just like DVDs” and so payment should begin right away. And others see the streaming as just a new delivery of system of real time content (like TV). My guess is that this difference in perspective is really where the dispute lies. We’re arguing over which metaphor/model to use for streaming.

I side with those who see streaming as a whole new delivery system, and, as a result, I think having a window in which no residuals are paid is fair and reasonable. Here's why.

While the big bucks (and the obsession) is often about the money that a movie makes the first week or two (or a TV show makes on its first run), the real money -- and I mean, the real, real money -- is in libraries.

The music industry didn't fall apart because of MP3 players. It fell apart because the music industry was producing albums that had 2 good songs and and 12 lame ones -- and the consumers said, "Okay... well, I don't want the 12 lame ones, just the two good ones." The music industry didn't catch on, Steve Jobs did, and there we go. Because it wasn't about illegal downloads. It was about people getting the music they wanted. Once it was more convenient to just pay .99 cents a pop instead of pirating, people started paying.

As for film and TV content, yes, opening box office is great, and so are great ratings. But the truth is that this idea that studios and networks control WHEN we watch something is over. Just over. People want to watch when and where it is convenient for them to watch. And today's technology allows them to do exactly that. Now, the media company's are either going to meet that need, or piracy will continue to grow.

Digital media will offer what I call "perpetual syndication" -- all of MGM and NBC and who-all-else's libraries will be there all the time. It's no longer a matter of filling air time (which is only a limited number of slots) but of an infinite number of shows being available all the time.

I just watched Season One of "The Wire" this past week. (Which was fucking awesome.) I put off watching it, even though I'd seen a few episodes and had been wholly impressed, because I wanted to have the whole thing ready to go for my pleasure.

I mentioned this to a friend of mine last night, asking if he owned Season Two on DVD. He said no, but added the moment I got it to tell him so we could watch it together. So, YEARS after this thing aired, we're going to be watching hours and hours of TV.

And that's the way it's going to go.

There's going to be money coming in for years and years and years off of content. (My own view is that the compelling and niche stuff has the best chance in this model, where as the vanilla fluff of network -- um, won't... but that's another discussion.)

So the issue is how long is the initial window. (You'll note I'm not calling it a Promotional Window -- which is grotesque in its imprecision and assumes that the Internet is some fair-haired stepchild of TV and not simply another means of distribution -- which it is.)

So, that's the issue. Not whether there SHOULD be a window, but how long. We don't get paid for the first airing of TV. We don't get paid when movies play at a theater. Why? The companies own the content. They funded the show. Staffed it. Handled business matters, took the financial risk. Our residuals are based on CONTINUED interest in a piece of content. And that is when we start getting paid for reuse -- after the negotiated length of the window ends.

Since we're going to be building off of previous models (because that's how things work) the truth is there's going to be a window where the people who own the content get to do what they want with it. Should it be one week? Two weeks? Three?

That's simply a fight -- that's a negotiation. We do the best we can to make it short. The media companies do they best we can to make it long. A month would clearly be too long. Should it be one week? Two? That has to be decided at the table. But at some point there's going to be a window. Just like there's currently a window for TV and film distribution.

Christopher Kubasik was the Head Writer for "Stranger Adventures" which received three Emmy nominations for Broadband content. He is currently writing an online anthology series for Stage 9.

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ONLINE STREAMING TERMS: CON

Statement by Kristen Stavola

Two Percent of Nothing is Nothing

Before we head into these Saturday meetings, there are some concepts and viewing trends that we should all be familiar with where streaming media is concerned. We’ve given up the present for the future in these negotiations, so we owe it to ourselves and future content creators to get this right, even if only a little bit right.

The Initial Streaming window is a terribly dangerous precedent to set.

Here’s why. Think about the things that really matter in this industry:
*OPENING NIGHT BOX OFFICE
*PRIME TIME FIRST RUN RATINGS
*FIRST WEEKS’ RECORD SALES (and downloads)

Before long we will add the first week of online streaming to that list. I’ll try to make this as simple as possible.

WHO DOESN’T LOVE TiVo?
If you own a DVR/TiVo — how long do you wait to watch an episode of something you recorded? Same day? 3-5 days? 7 days at most? Well, that means you’re viewing habits are consistent with the rest of the DVR viewing public. You want to see your recorded episode before the next one airs. Research backs this up. Get in touch with the folks at Neilsen. ComScore. HitWise. Gartner. Harris Interactive. Forrester. You will be hard pressed to even find much research on viewing patterns beyond the 7 day window, I know I was. [Dig through the links of information I’ve attached below.]

ONLINE COPY CATS
Online viewers are comprised mostly of the lost broadcast audience. No one is even disputing this. At least no one I’m talking to or reading. Nevertheless, Internet streaming IS REUSE; this has already been established. The primary market for material created for Broadcast use is via broadcast/cable. So, we apply the DVR viewing trend to online viewing. If you are going to watch an episode, it’s typically something you missed and you want to catch it within the first week it’s broadcast, right? (esp. "appointment programming" like LOST!)

You try to catch it from work. Or you try to fit it in on the weekend. But you definitely want to fit it in while it’s still topical, before the next episode, etc. And, once again, you are consistent with the rest of the viewing public. And the numbers for online viewing of TV and feature films are expected to soar in the next several years. Again, something that no one is disputing. Check here to see traffic trends for the season premiere of LOST. Note the spikes and valleys.

AVAILABLE ON DVD NEXT TUESDAY
Have you noticed that the only show that seems to have an archive available of more than one season is LOST? That’s because the streaming episodes are pulled so that some value is retained when they are packaged as DVD box sets you are obligated to buy.

WE GAVE UP DVDS TO AVOID A STRIKE AND TO POSITION OURSEVES FOR A BRIGHTER FUTURE IN NEW MEDIA, GUYS!
That future ain’t lookin’ too bright right now. Adams Research wrote: “... DVD renting and purchasing are such ingrained habits... that we expect downloads will not have a major negative impact in the near term."

I’ve spoken exhaustively this week to data analysts, ad execs and most importantly web producers presently working with studios/networks. These viewing patterns were right on the money. I was assured that by the time your streaming media has been available online for a matter of DAYS, it is no longer receiving the promotion it received upon launch. It is that promotion which results in views.

This email was originally written before my knowledge of the 13-26 WEEK “first use” window for original online content. There isn’t much time to speak to this in detail. I ran this window by a web entrepreneur with 3 name brand technology/internet start ups on his resume. “You will lose nearly 90% of the property's value in that window. Just look at LAZY SUNDAY — a piece of entertainment content that created a 1.3 billion dollar company(YouTube). I’m not saying people made money. It’s an example of the kind of traffic a good piece of entertainment content can generate in a 30 DAY window. No one cares about it now, but in its first 10 days, seven million people checked it out. Why would you guys give up that much real estate so easily and quickly?”

Think about it. Why are we?

DISTRIBUTORS’ GROSS
Two percent distributor’s gross in the third year of the new contract? Initial streaming window? I hope by now you’ve realized that the 2% (the AMPTP has forced upon us) is meaningless. The big traffic numbers have already come inside of the promotional, Residual free zone -- and we’re left with 2% of the stragglers.

Don’t be fooled because my LAZY SUNDAY example above was a 3 min clip and not an entire episode of a broadcast series. Your episode will only get promoted from prime real estate like a network homepage for 1-5 days— TOPS!

Traffic is about promotion and virality. You need to hit that first 100k- 200k viewers in the first 1-3 days if something is to catch on virally with regards to original content. Think of that Sarah Silverman/Matt Damon video just last week! Its audience was on the decline within 3 days. However, its viewers online eclipsed Kimmel’s nightly ratings in 2-3 DAYS! Again, these are examples of how traffic views content. Something was promoting this content -- probably an email from your Striking writer pals. If there is no promotion -- viewers have to dig for your content -- and those numbers are not very sexy!

I’m pretty darn confident that the WGA’s research confirms all of the above. I’m fairly certain we will be told that Internet streaming and DVR viewing still only add up to the same size audience that traditionally watch the broadcasts.

That no one expects erosion of network reruns any time soon. . .

We may even be told that because of the erosion of traditional broadcast viewing audience there is no ad-based money being made by the media congloms on streaming media — that they’re giving away streaming media to advertisers to make up the difference! C'mon! I just spoke to three web producers who are making more money PROMOTING our content in the first 3 days then we'll see in the first three YEARS of this contract. I’ve listed many links to research at the bottom of this email, use them. By 2011, in-stream advertising revenue is expected to reach $3.89 billion dollars and revenue for downloads will contribute $850 million according to the Yankee Group.

We all know Neilsen ratings are less and less accurate. But that doesn’t mean the Companies aren’t aware of online traffic to sites, when it happens and for how long a viewer is engaged. What ads they sit through, when they tune out etc. Not to mention this is all quickly moving in the direction of sponsorship-driven co-branding.

And you better hold your hats because the number of sites that offer revenue sharing models (YouTube, Break, MetaCafe,Vio, Revver) will be on the rise this year and those deals are going to be about placement on their homepages in the first 1-7 days. If you think the episode of SAMANTHA WHO that debuted online 24 days ago is going to be getting any promotion from ABC/DISNEY...

Ask yourselves the following when you are presented with explanations for why you are giving up the most important piece of our online future...

WHAT DOES ANY OF IT HAVE TO DO WITH AN INITIAL RESIDUALS-FREE STREAMING WINDOW?! HAVEN’T WE ALREADY ESTABLISHED THAT STREAMING ON THE INTERNET IS REUSE?

Because once we give them this promotional window... There ain’t no getting it back! We’re setting precedent on Internet jurisdiction. VHS/DVDs anyone? Not only has the 4 cents never been revisited, it wasn’t even on the table for discussion! Why should anyone believe the promotional window goes away in 2010 just because Nick Counter goes away?!

A question was posed to me in email the other day by a Neg Com member: “What do you think the dollar value is between a 7-day window and a 14-day window? And how much extra time on strike do you think that's worth for this membership?”

I’m still not sure about the answers to those questions. It’s not easy. Never said it was. Yet, fighting for digital rights in the future while saddled with these windows that are based on an eroding business model is going to be even more impossible in the future. Just ask your favorite musician! I feel for our leadership, truly. I’m not a hardliner. I was prepared to take a sucky deal because I want this strike over as much as the next person. I need to get back to work...

But TWO PERCENT OF NOTHING IS NOTHING!

Think about it. Then show up tonight.

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"Bewkes also signaled he will stress pushing Time Warner's entertainment content onto digital properties. Bewkes said Time Warner -- and most in the industry overall -- need to be "a bit more revolutionary than evolutionary" in digital initiatives, that all linear TV networks should be available on demand via broadband and TV sets, and that TW will make its own networks available on-demand "aggressively" to "show the industry the benefits." -- Nikki Finke, DeadlineHollywoodDaily.com

"Video has hit a tipping point, much the way audio did a few years ago," said Michael Gartenberg, research director at the New York-based firm Jupiter Research. "Now we have access to good, meaningful content that's viable, as opposed to stuff as proof of concept."

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http://www.marketingcharts.com/television/2-trillion-in-global-entertainment-media-spending-by-2011-763/

http://www.webtvwire.com/video-advertising-opportunities-being-expanded-by-use-of-transcoding-technologies/

http://www.tns-mi.com/news/01072008.htm

http://www.emarketer.com/SiteSearch.aspx?arg=DVR+viewing&src=search_go_welcome

http://www.emarketer.com/Article.aspx?id=1005914&src=article_head_sitesearch

http://www.juiceanalytics.com/writing/2007/07/tv-ratings-and-online-audiences/

http://www.keynote.com/benchmark/issues/2007winterspring/article_streaming_1.html

http://www.jupiterresearch.com/bin/item.pl/research:concept/1211/id=100045

http://www.harrisinteractive.com/harris_poll/index.asp?PID=847

http://web-advertising.suite101.com/article.cfm/online_advertising_trends

http://www.choicestream.com/videosurveyresults/ChoiceStream_Survey-ViewerTrends-TV_OnlineVideo2007.pdf

http://weblogs.hitwise.com/

Kristen Stavola is a WGA member with a background in New media,
as well as film development and production. She very much wants to
get back to work!