If you want to make movies, start small

The movie business is going through a dramatic transition: The major movie studios are focusing on expensive action- and special effects-based productions that they can sell worldwide, and are giving short shrift to the kinds of smaller, more plot- and character-driven movies that independent filmmakers do best. On the other hand, the tools necessary for professional filmmaking are less expensive and more available than ever. Thus, the paradox: It's easier than ever to produce an independent film, but it's as hard or harder than it's ever been to get it distributed.

That hasn't stopped people from trying; one estimate is that as many as 5,000 independently-produced films are available for U.S. distribution each year. However, only a tiny fraction ever get any theatrical distribution. In 2012, the Motion Picture Association of America reported (based on Rentrak figures) that 677 movies opened in at least one theater, of which 128 were distributed and/or produced by one of the major studios. Some of the remaining movies were distributed to the home video market via DVD, Blu-Ray or streaming video--but there's not much demand for full-length movies that never got theatrical distribution.

Many, if not most, people who produce independent films do so in order to get the attention of a movie distributor. They neither plan to nor have the resources to distribute the film themselves. However, if they can't get theatrical distribution, there's very little chance of ever recouping even a fraction of the money they spent on production and post-production.

If you're thinking of producing your own movie, you should consider producing a short film rather than a full-length feature. Here's why:

• It costs much less to produce a short film that it does to produce a feature-length one, so you can spend less time raising money and more time producing your film.
• From inception of the project to completion, it can take as long as three years to produce a feature-length movie. On the other hand, you can produce a short film in a few months.
• A short film requires the same elements as a feature film: Writing, acting, directing, producing, cinematography, editing, special effects, etc. It demonstrates talent just as well as a full-length movie.
• It's much easier to self-distribute a short film; you can post it on YouTube or Vimeo, make it available to film festivals, license it to be included in short film collections, etc.

A short film is much easier to finance, produce and distribute than a full-length movie--and it's far more likely to be seen. 

Part 4: The end of barriers to entry and financial limitations

Publishers can afford to be in all kinds of media because the capital investment required has dropped dramatically. Almost everything that a publisher needs to do in order to create and distribute content can be done with a personal computer. Adobe will rent you Creative Suite 6, with all the software needed to create almost any kind of media, including books, audio, video and apps, for $50/month per person. You no longer need to invest millions of dollars in networks and distribution equipment in order to do live worldwide broadcasting—all you need is an Internet connection and an account with YouTube, Livestream or Ustream. With the right people, a $1,000 DSLR can create video comparable to a $65,000 camera, and a $2,000 camcorder has the features and quality necessary for broadcast television. Every significant device used for creating media—PCs, tablets, smartphones, cameras, camcorders, audio recorders and much more—includes (or is based on) a microprocessor that’s subject to Moore’s Law. Costs go down and capabilities go up like clockwork.

It’s widely believed that the reason that media became “mass media” was due to its dependence on advertising—advertisers wanted to reach the widest possible audiences. That’s partially true, but the original reason was that the capital investment needed for newspapers, magazines, radio, television and motion pictures was so high that media companies had to pursue big audiences. Today, however, there’s no reason to pursue mass audiences—capital requirements are low, technology is readily available at the consumer level, and infrastructure that media companies once had to own themselves is now available in the cloud, on contract or on a project basis.

There are no more technical or economic barriers to entry. The biggest remaining barrier is the attitudes of the people making decisions at publishers, and those of the people advising them. If you believe that your business is making and selling bound stacks of printed paper, and you’ve believed that for your entire career, it’s almost impossible to accept that you’re really in the entertainment, or information, or education business. It’s very easy to confuse the tools with the products that the tools create, but it’s the products, not the tools, that matter.

Patton Oswalt delivered a brilliant keynote at the 2012 Montreal Just for Laughs Festival in the form of two letters, one to his fellow comedians, and one to the “gatekeepers in broadcast and cable executive offices, focus groups, record labels, development departments, agencies and management companies.” Here’s a quote from his letter to the “gatekeepers”:

“In my hand right now I’m holding more filmmaking technology than Orson Welles had when he filmed Citizen Kane. I’m holding almost the same amount of cinematography, post-editing, sound editing, and broadcast capabilities as you have at your TV network. In a couple of years it’s going to be equal. I see what’s coming. This isn’t a threat, this is an offer. We like to create. We’re the ones who love to make stuff all the time. You’re the ones who like to discover it, patronize it, support it, nurture it and broadcast it. Just get out of our way when we do it.”

Oswalt is being overly generous when he describes what the “gatekeepers” like. The only thing they truly “like” is to make money. Everything else they do is necessary in order to obtain the talent and content that they need in order to make money. To them, the content that they create is a “unit of production,” just as cars are to Ford or boxes of cereal are to Kellogg’s. “Patronizing, supporting and nurturing” are nothing more than product development—the process necessary to get any creative idea from an outline on paper to a finished work that can be sold in order to make money.

Part 1: Birth, Death and Transformation

We’re in the midst of a massive shift in media consumption patterns. People consume more news than they ever did, but they don’t read newspapers anymore. Magazines, even on tablets, are slowly dying. And, as for books, The New Yorker published an article titled “Twilight of the Books”…on December 24, 2007, before eBooks were even a significant part of the business. Statistics in the article show that the market for books has been declining for at least 30 years. U.S. movie theater ticket sales peaked in the 1950s; the only things that have kept the industry going have been home video sales and higher ticket prices. But, home video sales are also dropping—they’re being replaced by rentals from Redbox, and online streaming from Netflix, Amazon and others.

Let’s be clear: Movie attendance has been declining for half a century, but no one seriously expects the movie business to disappear. The same is true for books; readership will continue to decline, but it’s hard to visualize a world without books, even if most of the remaining books are digital instead of paper. Nevertheless, the balance has shifted. Consumers want their media faster and cheaper. Readers want their news from the Internet, as it happens (if not sooner, leaked out via Twitter.) One can argue that attention spans have gotten shorter—look at the popularity of viral videos on YouTube—but videogames, both casual and complex, can engross players for hours or even days.

The transformation of media in the 21^st Century is being driven by three forces: The Internet, mobile devices and wireless broadband. The Internet provides a conduit for every kind of content. There’s no need to ever leave your house to purchase any kind of media, and it makes possible entirely new types and combinations of media that didn’t exist prior to the rise of the World Wide Web. Mobile devices and wireless broadband make that content available anywhere, anytime, and open the digital world to hundreds of millions of people who can’t afford personal computers or high-speed Internet connections.

Wishful thinking: "Silicon Valley Will Write The Next Big Check For Original Video Content"

At TechCrunch's Disrupt Conference today, Dana Brunetti, Kevin Spacey's partner in Trigger Street, a motion picture and television production company, said that "...Silicon Valley will likely become a major funding source for original content soon. For a company like Google, after all, offering a few million dollars to produce the next episode of a show like Mad Men and to put it on YouTube is pocket change." Perhaps, but that in no way means that it would be money well spent.

For decades, Hollywood producers and movie studios have solicited investment from people outside the entertainment business. The "term of art" for this kind of investment is "stupid money." Producers and studios go from country to country, convincing government leaders that tax breaks and credits for investment in films would results in thousands of jobs, not to mention great publicity for their countries. That's why you see credits for production funds you've never heard of and production sites far from Los Angeles in the end titles of movies. Germany, South Korea, Canada and the U.K. are just some of the countries that have been tapped for production money and tax credits over the last two decades. Almost every U.S. state has offered some form of movie production tax credits or incentives at one time or another. These programs dry up as lawmakers learn that the jobs created and revenues generated don't compensate for lost tax revenues. Producers look for more stupid money elsewhere, and the cycle repeats.

Individuals who invest in movies very rarely get a positive return on their investments. Entertainment industry accounting makes integral calculus look like simple arithmetic. Once money becomes available, a seemingly limitless number of hands reach out for it. Last week, for example, director Christopher Nolan had to file suit against his current and former talent agencies so that a court could decide which ones he must pay commissions to, as well as how much and on what projects. No one in their right mind would build a movie or television production system, or rules for employment, as they work today.

The approach that YouTube has taken with its channels makes sense. YouTube originally funded each of 100 channels with up to $1 million (some channels were rumored to have received as much as $2 million.) That's enough to "move the needle," but not enough for anyone to get rich on. The funding was an advance on advertising revenues, not an unrestricted grant. As YouTube gets actual performance numbers on each channel, it's offering additional advances to some, cutting others off and identifying new candidates for funding.

I have very real doubts about Netflix's original content strategy, which has funded House of Cards, a television series produced for Netflix by Trigger Street. The network television production model calls for hundreds of scripts, which are culled down into dozens of pilots, which are further cut to become the new shows for the next television season. Even at the most successful network, the success rate is pretty low. Netflix is cutting out most of the process and is going directly to production on the basis of scripts and the people involved. Choosing on the basis of name talent is far from a sure bet--for example, look at HBO's Luck, which had Dustin Hoffman in the lead and the directing/writing team of Michael Mann and David Milch. It was a disaster, and not just because three horses died during production.

If you want to invest in a movie so that you can rub shoulders with stars or see your name in the credits, and you have some "mad money" lying around that you can afford to lose, then by all means enjoy yourself. On the other hand, if you're investing in content in order to generate revenue, you've got to be a lot more systematic and much more hard-nosed.

Google announces new version of Android, new Nexus 7 tablet and Nexus Q media player at I/O Conference

Engadget reports that Google made several announcements at its Google I/O Conference today:

1) Android 4.1, also called Jelly Bean, will be released in mid-July for the Samsung Galaxy Nexus and Nexus S smartphones, and Motorola Xoom tablets. Other devices may be updated in the future, depending on whether the hardware can support the new operating system, and whether hardware vendors and mobile service providers decide to support it. A number of enhancements have been made to improve performance; the company now claims that the CPU and GPU run in parallel, enabling the user interface to run at 60fps (if the hardware supports it.) The on-screen keyboard has been improved, as has voice input, which now works in both online and offline modes.The design of the home screen has been updated, and it's now easier to add, move and delete apps and widgets. Improvements have also been made to the camera app.

2) Google is now supporting "Smart App Updates" that allow incremental updates instead of requiring entire apps to be replaced. It's also improving encryption in order to make it harder to pirate paid apps.

3) Google announced its new tablet--the Nexus 7--that also runs Android 4.1. There were no surprises--all of the specs and prices had been previously leaked. It's got a 7" 1280 x 800 display, a quad-core Tegra 3 processor, 1GB of RAM and a 1.2 megapixel front camera, for $199 for the 8GB model and $249 for 16GB. For a limited time, it also comes with a $25 credit for the Google Play content and app store. Its user interface is based on the design of the Google Play store. The Nexus 7 will ship in mid-July.

4) The new Nexus Q is a ball-shaped media streaming device for the living room. It can connect any Android device to a television set or audio/video receiver and stream music and video from the Google Play store, as well as YouTube videos from the cloud. However, it doesn't appear to support services such as Hulu, Netflix or other third-party content providers. It also has its own built-in 25-watt amplifier, so it can be used as a standalone device by connecting speakers to it. According to The New York Times, the Nexus Q is almost entirely manufactured in the U.S. The Nexus Q will be priced at $299 when it ships in mid-July; the price is three times as much as comparable products from Apple, Roku and Vizio, so it's not clear who's Google's target market or why it feels that it can justify such a high price.

Online Publishers Association releases survey of U.S. tablet users

The Online Publishers Association released a study conducted for it by Frank. N. Magid Associates: "A Portrait of Today's Tablet User, Wave II." Here's a summary of selected findings:

• Regular tablet users increased from 12% of the population (28.3 million people) in 2011 to 31% of the population   (74.1 million people) in 2012. 
• The OPA projects that in 2013, tablet users will increase to 47% of the population   (117.4 million people.) 
• The percentage of respondents using Android tablets increased dramatically: In 2011, the split was 72% iOS/23% Android/12% Other; in 2012, the split was 52% iOS/47% Android/14% Other, primarily due to the popularity of the Kindle Fire (percentages add up to more than 100% because some respondents own/use more than one type of tablet, but only one tablet per operating system was counted.) 
• The user base is getting older and richer: Tablet users ages 8-24 decreased 8% year-over-year, while tablet users ages 35-54 increased 8%. As for income, households earning $50K or more comprised 41% of the population sampled by the OPA, but 59% of tablet users. In fact, tablet users were overrepresented in every income bracket from $50K to $150K+. 
• 60% of tablet owners use their tablet several times a day; and addition 14% use it once a day. 
• The average amount of time that respondents spend using their tablet is 13.9 hours per week, with the most popular times for usage being between 5 p.m. and 11 p.m. 
• 67% of tablet usage is at home, 15% in school or at work, 14% when commuting or in a car, and 4% while shopping. 
• 94% of respondents in the 2012 survey use their tablet to access content/information, compared to 87% in 2011. 
• 69.7 million people use their tablets to access content/information in 2012, compared with 24.4 million in 2011. 
• 42% use their tablets to read eBooks in the 2012 survey, the same percentage as in 2011. 
• 31.1 million people use their tablets to read eBooks in 2012, compared with 11.8 million in 2011. 
• 35% of respondents have purchased at least one eBook for their tablets. 
• Videos are the most popular type of content accessed by tablet users, and the most popular type of videos are news and sports clips, weather forecasts, excerpts of TV shows, and other short-form news & entertainment. (Note that this doesn't include user-generated content on sites such as YouTube--that's the second most popular type of video.) 
• Tablet users prefer reading on tablets over reading on mobile phones, PCs, print newspapers and magazines, and dedicated eReaders such as the Kindle and Nook. However, the preferences for tablets vs. eReaders are the closest of all the options: 48% for tablets, 33% for dedicated eReaders, 19% "don't know." (By comparison, 71% of tablet users prefer reading on tablets rather than mobile phones, 23% prefer mobile phones, and 5% "don't know.") 
• Tablet users have downloaded an average of 22 apps over the last 12 months, of which 77% were free and 23% were paid. 

Stop SOPA

Many websites, including Wikipedia, BoingBoing, Mozilla, WordPress.org and Reddit, are going to go black tomorrow to protest the Stop Online Piracy Act (SOPA) under consideration in the U.S. House of Representatives, and the Protect Intellectual Property Act (PIPA) that's being considered by the U.S. Senate. Mashable has posted an excellent summary of SOPA, and rather than rehash those arguments, I've linked to it for your reference.

The stated purpose of SOPA is to cripple non-U.S. websites that distribute unlicensed copyrighted content, and to prevent U.S.-based sites from hosting, or even linking to, unlicensed content. The problem with SOPA is that it imposes a "death sentence" on websites that haven't been proven to have done any infringement whatsoever. SOPA front-loads the prosecution and punishment of copyright infringement cases. In the case of foreign websites, the U. S. Justice Department can request a court order to seize their domain name(s), order advertising networks and financial processing services to stop doing business with them, order search engines such as Google and Bing to drop them from their indices, and order Internet Service Providers to stop connecting to them. All of this is supposed to take place within five days after the court gives the order, and most importantly, without any notice given to the website. In short, the website can be put out of business before it has any opportunity to defend itself.

SOPA gives content owners the power to do the same things to domestic websites that encourage or facilitate copyright infringement. The Justice Department doesn't need to be involved at all. This part of the bill imposes the same "death penalty" on domestic websites, and doesn't require them to be informed until the penalty has been imposed. Even worse, the owner or operator of the site isn't required to have been the one who posted the infringing content. Infringing content could be in the form of a comment or an uploaded video posted to a user-generated content site like YouTube. It could even be a link to another website that posts infringing content.

SOPA means that every website that allows any kind of third-party content or comments would have to review everything before it's posted. It would make a service such as YouTube, which receives 24 hours of uploaded content every minute, impossible to operate. (Correction, January 23, 2012: According to its blog, YouTube is actually receiving 60 hours of video every minute.) Content providers would no longer need to give notice of infringement as required under the Digital Millennium Copyright Act, and websites would no longer be protected by the law's "safe harbor" provision if they don't knowingly encourage or participate in copyright infringement.

Let me be clear: I defend content companies' right to protect their property. However, SOPA effectively eliminates due process for website operators and creates a poisonous climate of prior restraint, where every post has to be considered infringing unless proven otherwise. An analogy would be if I, believing that a movie used some of my intellectual property, could get a court order seizing every copy of the movie from every theater playing it, or from every store and service distributing it, without giving notice to the film's distributor. By the time the studio answered the charges and got the movie back into theaters and stores, the financial damage would be incalculable.

SOPA would be fair if it required the Justice Department and content owners to give notice to the website operator before any action was taken. It would be fair if it allowed website operators to remedy the infringement, if it exists, without court action. It would be fair if it allowed website operators to defend themselves in open court before they lost their income, domain name and audience. As written, SOPA tilts the playing field decisively in favor of the content providers, most of which already have a massive advantage in legal and financial resources over website operators.

Vizio launches $99 Google TV set-top box

Dan Rayburn of StreamingMedia.com reports that Vizio's new Google TV-based Stream Player will ship in the first half of 2012, and will be priced at $99 (U.S.). According to Rayburn, the set-top box will only be sold directly by Vizio from its website, but I don't expect that to last--Vizio sells too much product through resellers such as Costco for the company to ignore that channel.

The VAP430 Stream Player uses the new ARM-based Google TV architecture, and Vizio has reskinned Google TV's user interface. It will have HDMI in and out (so it can be connected to a receiver or A/V amplifier in-line with another set-top box or other device without taking up an additional HDMI port), Ethernet and Wi-Fi interfaces, and a USB port that can be used to connect an external hard disk (only for playing, not recording, audio and video). It will also come with a universal remote control with both IR and Bluetooth outputs. The device will support 1080P video in and out, and Vizio claims that the device will have sufficient bandwidth to support 3D streaming.

Vizio has confirmed that the Stream Player will support Netflix, Amazon Instant Video, Hulu Plus, HBO Go (for existing HBO subscribers), YouTube, Pandora, Technicolor's new M-GO streaming video service, and others. Additional services will be announced by the time the device ships.

On paper, Vizio has hit all the right notes: The Stream Player will be priced competitively with Apple and Roku, it will run a more polished version of Google TV, and it can be connected in-line with the user's existing cable, satellite or IPTV set-top box, instead of requiring a separate HDMI connection. It remains to be seen how well the device works when it gets into the hands of consumers, and whether Google and Vizio have smoothed out the many rough spots in Google TV's user interface. If it works well, it'll help put Google TV back into the thick of the over-the-top set-top box competition.

Rifles vs. shotguns: The GoPro advantage

The rule over the years for camera and camcorder manufacturers has been to make a model for every need and every price point. Canon, Nikon, Sony and Panasonic sell everything from inexpensive point & shoots to DSLRs. All but Nikon do the same with camcorders--prices run from around $100 for YouTube-focused models to upwards of $100,000 for digital cinema cameras.

The "model for every purpose and every pocket" approach means that, as a manufacturer, you won't miss a sale because you don't have a model that a customer can afford or can use, but it has some significant downsides. One is that it's expensive to develop new camera designs, both in terms of money and time. Canon's new C300 digital cinema camera took two years to develop, and that was considered a "fast track" project that required adapting the electronics from an older camcorder design in order to meet its deadline. In addition, as development budgets get strained, it's necessary to "milk" designs by releasing cameras that are minor variations on each other. Not to pick on Canon again, but the T2i, 60D and T3i DSLRs are very similar to each other, with minor differences in areas such as LCD mountings and video settings.

There's another side-effect of having so many models--features are deliberately left out of some lower-priced models in order to avoid cannibalizing sales of more-expensive ones. Sony is famous for this; for example, a big reason that the FS100 only has a HDMI output instead of HD-SDI is to avoid cannibalizing sales of the F3 camcorder. There's no technical reason why the FS100 can't have HD-SDI--the less-expensive Panasonic AF-100 has it, and it was introduced a year before the FS100.

Some companies practice another approach--build a limited number of models (or even a single model) of camera or camcorder, with a very specific target market or application. That brings us to GoPro, a camcorder company based in Half Moon Bay, California. GoPro only sells two models: The HD Hero and the new HD Hero2. Physically, the two cameras are almost identical to each other, but the Hero2 has improved electronics and optics. There's about $60-$70 difference between the two models, and none of them sell for more than $300. According to company founder Nick Woodman, GoPro initially built ruggedized cameras for use by surfers and skiers, but they were designed to be used by two people--one to surf or ski, and the other to shoot the action. Woodman's revelation, and the core principle behind everything that GoPro sells, is that athletes want to take video or still pictures of themselves in the act, or from their point of view. That meant that GoPro's cameras needed to not only be ruggedized--they had to be tiny, operate automatically, and be mountable just about anywhere.

GoPro sells a suite of mounting kits that allow its cameras to be mounted anywhere from the exterior of a race car to a surfboard. The company has a library of incredible footage shot underwater, on skydivers, mountain bikes, snow skis, skateboards, even as the payload for a weather balloon at the edge of space. It also has accessories to make the cameras easier to aim, extend their battery lives, transmit their video via Wi-Fi and gang two cameras together for 3D video. Yet all of it is based on the same camera design, for the same fundamental application.



I was amazed by how crowded the GoPro booth was at the NAB conference last April. This is a under-$300 camera, yet broadcast professionals were packed into the booth. GoPro's cameras are used for shooting the contestants' points of view on reality game shows, for recording experiments on Discovery's "Mythbusters", and for use almost anywhere danger is involved. Two thoughts went through my mind:

• Someone is going to buy Woodman Labs, the parent of GoPro, and
• Surely one of the big Japanese camera or camcorder makers will jump into the market.

I certainly hope that Woodman Labs isn't sold--the scariest example of what could happen is what happened when Cisco acquired Flip Digital. Before the acquisition, Flip was the leader in the market for inexpensive, simple-to-use camcorders. Earlier this year, due both to competition from smartphones and mismanagement, Cisco shut down Flip completely. Whenever a big company buys a small, focused company, it's usually the small company that suffers. As for the second possibility, a Japanese competitor could try to copy GoPro's ideas, but they'll stumble on their need to be all things to all people. To build a viable competitor, you need to understand GoPro's markets and applications as well as GoPro does, and that's hard when you're also trying to build cameras for every possible market and application.

Had GoPro tried to enter the general-purpose camera or camcorder markets, it would have had its head handed to it. Instead, it dominates the point-of-view market, which it can effectively defend. There's a lesson there, not just for other small companies but for the big camera makers as well. It may be time to focus on a few markets instead of trying to compete in all of them.

The publisher bypass operation

I just read an article in the latest issue of Wired about the new breed of subscription music services--companies like Spotify, MOG and turntable.fm. The problem with these services (and for that matter, conventional purchase services like iTunes) is that artists get a very small share of the revenue. Most artists are now getting the majority of their income from live performances, not music sales. Where concerts once served to promote album sales, now digital music promotes live performances.

Online video distribution has had a similar impact on movies, television and original video. Most of the revenues from movies and television shows sold or rented by Netflix, iTunes, Amazon, etc., goes to the studios and distributors, not to the original producers. Original video produced for YouTube and other services is incredibly hard to monetize; only a few series, like "The Guild" and "Easy to Assemble", have sponsorship or distribution deals that directly compensate the producers. Most original video has to make do with a trickle of advertising revenue, modest sales from iTunes, or nothing at all.

That brings us to books, where the situation for independent authors is very different. Amazon will pay as much as 70% of the revenue from sales of eBooks to self-publishing authors, and other resellers will typically pay 35%. Compare that with the typical 10% to 12% royalty on wholesale price paid by publishers, and self-publishing starts to look very appealing. Yes, the self-publisher has to pay upfront for editing and design, but many publishers recoup those costs before they start paying royalties. In addition, unless you're a top author, publishers will do little or nothing to promote your title, so you'll have to hire a publicist or do the work yourself.

It's true that print still represents the majority of book sales, but the market is quickly shifting to eBooks. Some of the most popular titles are already selling almost as many copies of eBooks as print, and heavy book readers are adopting eBooks faster than any other group. The majority of book sales are likely to come from eBooks by the middle of this decade.

So, where does that leave publishers? Penguin, for one, is getting into the self-publishing business through its Book Country online service. In addition to charging upfront fees for formatting and designing eBooks, Book Country demands a hefty fee for distributing self-published eBooks to online bookstores--which self-publishers can do themselves. Other publishers are experimenting with "augmented" eBooks--containing audio, video and animations--which they believe are beyond the ability of self-publishers to create. There are two problems with that approach:

1. Companies such as Vook are launching eBook creation tools that will allow self-publishers to make augmented eBooks, and
2. Sales figures to date suggest that there's not a big market for augmented eBooks. For example, Vook's original strategy was to publish augmented eBooks itself, but the company couldn't sell enough to sustain its business, so it's now focusing on licensing its platform to others.

To be sure, publishers still provide valuable services, especially for top-tier authors--but book publishing is the first industry where creators (writers) can compete effectively with distributors (publishers). In the near future, the big publishers will likely find themselves focusing on two categories:

1. New releases from "A-list" authors that can command high prices and sell tens of thousands of copies in print, and
2. Milking their existing backlist for eBook reissues, bundles, and other ways of delivering "old wine in new bottles".

Some mid-tier authors may find a home with smaller specialty publishers, but almost everyone below the "A-list" will have to self-publish. We're likely to see some self-publishing authors join together in "United Artists"-like organizations to create "quasi-publishers" that perform some of the functions of existing publishers, such as design, publicity and promotion. The participating authors could serve as editors for each other.

By mid-decade, we're going to have far fewer and smaller "old-style" publishers. On the other hand, we'll have far more self-publishers and quasi-publishers that are performing most of the tasks previously done by publishers themselves. The industry power will reside with resellers such as Amazon and Barnes & Noble in the U.S., and their equivalents in other countries around the world.

YouTube's scattershot channel strategy

Earlier today, the New York Times reported that YouTube will launch more than 100 channels of third-party video programming. YouTube is said to be paying the producers of the new channels, which will begin launching in November and continue throughout 2012, as much as $100 million to create original programming. The producers who have signed on with YouTube range from well-known media brands such as The Wall Street Journal, The Onion, Lionsgate, Reuters, Rodale Press and the WWE, to companies that were entirely unknown until today. Celebrities such as Ashton Kutcher and Deepak Chopra are also involved.

YouTube's plan, which is intended to eventually produce 25 hours of original content each day, is to build the new channels into places where viewers will return day after day, and advertisers will be willing to pay substantially higher rates than they pay for user-generated content. It's a good idea, but YouTube is taking a very scattershot approach to implementing it.

In the past, I've written about YouTube's plans to attract more and better programming. Last December, YouTube gave $1,000 credits to 500 of its YouTube Partners. At the time, I wrote that there's not much useful that a video producer can buy for $1,000 that would make a significant improvement in their productions. YouTube would have been much better off giving $10,000 credits to 50 well-targeted producers.

I feel much the same way about YouTube's new plan. The channels selected are all over the board in terms of content, and are likely to be equally all over the board in terms of quality. Instead of starting with 100 channels, YouTube should have started with 20 or 25, and worked carefully with the producers to insure that the quality of the channels would be high. Then, they could roll out a second wave of channels, perhaps six months down the road. By greenlighting 100 channels at the outset and rolling them out rapidly, YouTube has almost guaranteed that it will end up with a confusing mishmash of shows.

YouTube's intention is to build up a big library of compelling original programming quickly, but they're just as likely to create an assortment of channels carrying junk that would have never been produced had YouTube not committed to pay for it.

New media has to break its addiction to old media

People have been trying to turn the Internet into a new medium that can compete on an equal footing with television, radio, newspapers, etc. since the Netscape days of the mid-1990s. So, fifteen years on, what have we accomplished?

• Netflix has more subscribers than Comcast, but it lives or dies based on which television networks, cable networks and movie studios are willing to do business with it, what shows they're willing to supply, when they're willing to supply them and at what cost.
• Hulu has much the same problem, even though it's owned by three of the four major U.S. television networks.
• YouTube is trying to cut distribution deals with many of the same television networks, cable networks and movie studios as Netflix and Hulu.
• Pundits spend an inordinate amount of time discussing how much The New York Times and The Wall Street Journal are charging for access to their newspapers online, whether paywalls work, how to circumvent paywalls, etc.
• Hearst, Condé Nast and Time Warner will offer their eMagazines on the iPad if they can only get a business deal worked out with Apple. Meanwhile, News Corporation's "The Daily" is on the iPad and is losing money.
• Clear Channel is building its own clone of the Pandora streaming music service and plans to launch it this summer.

The "new media" has largely become a repackaging of old media for Internet delivery: Old wine in new bottles. Almost all of the content on the Internet that's economically viable comes from old media companies.

In order for content to be economically viable, it has to have two key attributes:

1. It has to attract a large audience, and
2. It has to be repeatable--audiences have to be willing to come back day after day, week after week

Content that repeatably attracts large audiences can be sold to national advertisers, which generates the revenues necessary to create more content and make the business attractive to investors. Viral videos, like those found on YouTube, meet the first criteria: A popular viral video can get millions of views. The problem is that they're not repeatable. The vast majority of viral videos are "one-hit wonders". Google has found that it's possible, but very difficult, to sell advertising against viral videos. Many advertisers don't want their ads to run alongside "objectionable" content, yet it's that same objectionable content that makes many videos go viral.

On the other hand, webcast networks like TWiT and Revision3 get audiences that come back week after week for original shows, but the audiences aren't big enough to generate a lot of advertising revenue. They make enough money to make a nice living for a few people, but not enough to attract investors.

That's why new media companies keep turning to old media companies to get their content. The problem is that old media companies don't want to risk their existing revenue streams, even if those revenue streams are already being eroded. If you're an Internet company and your business plan depends on convincing old media companies to license their content to you, you're starting with two strikes against you. Even worse, your biggest suppliers are in a position to become your biggest competitors, if they aren't already competing against you.

New media companies have to break their dependence on old media, and the only way to do that is to produce original content in new forms that old media companies can't, or won't, duplicate.

Amazon and YouTube are trying to manufacture hits

Earlier today, YouTube announced its Creator Institute, a training program intended to teach "camerawork, storytelling, promotion, and new media skills" to a small, selected group of artists. USC in Los Angeles and Columbia College in Chicago have partnered with YouTube to provide facilities, educators and equipment. 20 writers and directors, selected in a competition by YouTube, the partner colleges and the YouTube community, will participate in all-expense-paid programs this summer at one of the two schools.

Late last year, Amazon introduced Amazon Studios, a competition that awards cash prizes to screenwriters and directors who submit scripts and "test movies" for review by Amazon and its customers. Amazon's program encourages participants to "improve" submitted scripts by adding to or rewriting them, effectively making anyone who contributes to or changes a script a credited co-writer.

Both Amazon's and YouTube's programs are intended to produce original content that they can distribute, and either sell to viewers or advertisers. The problem is that neither program is likely to accomplish what its sponsors intend. Pick up any copy of MovieMaker Magazine, for example, and you'll see that it's loaded cover to cover with ads for schools and seminars that teach movie and television production techniques. There's no lack of places that students can learn how to make movies, and there's scant evidence that participating in a two-month program is going to turn a novice into a hit-making director or writer.

In Amazon's case, companies have run movie and script contests for years, and they very rarely find scripts or directors of much note. You may remember Project Greenlight from a few years ago, which was sponsored by LivePlanet (Matt Damon, Ben Affleck and two other partners) and Miramax. The most interesting things that came out of the project were the television episodes chronicling the production of the three movies, which ran on HBO for two seasons and Bravo in the U.S. for the final season. The films that came out of Project Greenlight, on the other hand, were considerably less interesting: The first film grossed less than $140,000 at the boxoffice, the second less than $280,000, and Miramax refused to distribute the third one, so after one night in a single theater, it went directly to video.

If anything, Project Greenlight should have been much more successful than Amazon's project: It was backed by the most successful independent film distributor in the U.S. at the time, had active participation from Academy Award-winning filmmakers, and was publicized weekly on heavily-watched cable networks. Yet, all three films were financial busts.

The problem is that making a popular film or television show requires a combination of talent, timing and luck that can't be taught or identified in a contest. It's the basis of writer William Goldman's famous quote, "Nobody knows anything." It's why movie studios are much more likely to make sequels of a successful movie than they are to make a movie about an original topic, with an unknown screenwriter or director. It's also why U.S. television viewers get to watch "C.S.I.", "C.S.I. Miami" and "C.S.I. New York".

I applaud both Amazon and YouTube for encouraging and training talent, but their programs aren't likely to create the popular content that the companies want. The problem is that there is no systematic way to create hits, or even identify them before they're produced.

A year-end head-scratcher from Google

Last Wednesday, Google announced that it's giving $1,000 credits for purchases at B&H Photo to 500 of its YouTube Partners. I hate to fall into the "no good deed goes unpunished" category, but I'm scratching my head over Google's logic. Google's goal is to help its most popular partners improve the quality of their videos, but $1,000 doesn't go a very long way.

With $1,000, you can purchase a decent HD consumer camcorder, or a few lights, or a copy of Final Cut Studio, but not a computer to run it on. None of this is going to move the quality needle very much. Further, these grants are taxable, so the net value is considerably less than $1,000. The real value of the program seems to be to B&H--to get any real improvements, people will have to buy more than $1,000 worth of products, and they have to buy them from B&H. In addition, YouTube has 15,000 Partners, yet only 500 got the grants. That means that more than 96% of YouTube's partners are angry that they didn't get any money.

Google would have gotten a lot more value for its money if, instead of giving $1,000 to 500 partners, it gave $10,000 to 50 partners. With $10,000, you can buy much better camcorders (two Panasonic AG-AF100s, for example), or a complete editing and color-correction system. You can buy much better audio equipment. In fact, if you're careful, you can buy enough hardware and software to dramatically improve the quality of your videos, which is the point of the program.

If I received $1,000 from Google, I wouldn't complain, but this program seems like a waste of money.

Putting the videoblog on hiatus

I've decided to put the Feldman File videoblog on hiatus. Viewership increased nicely for the first three episodes, but it dropped for the most recent two; this week's episode has only had 14 views so far. Clearly, the content and production style aren't finding an audience, so I'm going to consider some other approaches, including a conventional audio podcast. For those of you who watched my videoblog, thank you! I hope to come up with something that's still informative but is more entertaining.

Google and Facebook: More similar than you might think

Google and Facebook are physically located fairly close to each other, in Mountain View and Palo Alto, California respectively, but they do very different things: Google is primarily a search engine, and Facebook is a social networking site. Dig beneath the surface, however, and you'll find that the two companies are actually very similar: Both of them sell your personal information in order to make money.

Google uses your search queries to feed you targeted advertising. If you use Gmail, Google displays ads based on the subject and contents of your emails. It targets ads to you on YouTube based on what you watch. If you use a Google location service, such as Google Maps, it points you to advertisers in your area. Google claims that it doesn't warehouse or mine the information that you give it, but it sucks up enormous amounts of data, and it's nonsensical to believe that Google isn't correlating that information.

Facebook, on the other hand, gets you to give it as much personal information as it can so that it can send you targeted advertising. The company also sells your information to its partners so that they can send you advertising and target their sales messages to you. Facebook correlates the information that users provide with that of their friends to build a comprehensive demographic and psychographic profile of each user. Most of Facebook's "initiatives" over the years have been attempts to convince its users to give it more of their personal information, changes in policies to make more of that information public, or programs for monetizing that information.

Whenever either company introduces a new product or service, it's important to ask: How it will generate more salable information or offer more opportunities to monetize that information? At their core, that's what Google and Facebook are all about.

The first Feldman File videoblog is live!

I've posted the first episode of the Feldman File videoblog to YouTube! Let's put it this way: It can only get better from here. I should have taken that scholarship to the Columbia School of Broadcasting when it was offered to me.

This week's episode covers the following news:

• Barnes & Noble's NOOKcolor eBook reader (and Android tablet wannabe)
• Sprint, T-Mobile and Verizon have all set prices and availability dates for their versions of Samsung's Galaxy Tab Android tablet
• News from Adobe's MAX Developers' Conference
• Sencha Animator, a timeline tool for animation using HTML and CSS3, goes into beta
• Roku licenses the hardware and software behind its Internet set-top boxes to consumer electronics companies
• IDC reports that Apple has become the world's fourth-largest mobile phone manufacturer, passing Research in Motion

Apple TV: A lost opportunity?

When you were a child, did you ever annoy your parents into buying you a toy for Christmas or Hanukkah, only to find that once you unwrapped it and took it out of its box, it wasn't exactly what you were expecting? I felt that way after Steve Jobs' introduction today of Apple TV Part Deux. For months, there were rumors flying around about what the new Apple TV would be able to do. Jobs himself specified the problems with the old Apple TV approach in an interview with Kara Swisher and Walt Mossberg at the D8 conference last June:

"The problem with innovation in the TV industry is the go to market strategy. The TV industry has a subsidized model that gives everyone a set top box for free. So no one wants to buy a box. Ask TiVo, ask Roku, ask us... ask Google in a few months. So all you can do is ADD a box to the TV. You just end up with a table full of remotes, a cluster of boxes... and that's what we have today. The only way that's going to change is if you tear up the set top box, give it a new UI, and get it in front of consumers in a way they're going to want it. The TV is going to lose in our eyes until there is a better go to market strategy... otherwise you're just making another TiVo."

The new Apple TV doesn't solve any of these problems. It's not a replacement for any existing set-top boxes, especially the ones from cable, satellite and IPTV operators, because the only content providers that have signed on are Disney/ABC and Fox. So, to use Apple TV, you're adding a set-top box and remote. Jobs said that the solution was to "...tear up the set-top box (and) give it a new UI...", but Apple TV is simply a smaller version of the original Apple TV, with a slightly improved UI. In short, it doesn't do what Jobs correctly said had to be done in order to change the game.

Further, Apple TV is closed. It apparently doesn't use iOS, it doesn't allow developers to create apps that extend its functionality, and it doesn't have a web interface or other means to access content on the open Internet. Many people, myself included, were hoping that the new Apple TV would be iOS-based and would run iOS apps. Apple may have decided that the living room TV would stretch the iOS user interface so much that it wouldn't make sense to try to run phone- and tablet-based applications. They may have also believed, as Jobs said today, that consumers don't want to deal with a computer when they want to watch television. However, they still could have opened up Apple TV to content from third-parties. With the exception of Netflix, YouTube and Flickr, Apple TV is a walled garden and other content providers need not apply.

The only real improvement that Apple TV brings to the table is price. The box and the content are less expensive than in the first version. However, much of that same content is available for free from other sources, and other solutions provide far more content overall.

At the end of the day, I don't know why Apple and Jobs bothered to release this iteration of Apple TV. It doesn't do what Jobs himself said that it had to do in order to be viable, it doesn't have a critical mass of content partners, and it provides only small incremental improvements over the product it replaced.

Apple's opened a hole wide enough for Google TV to drive a truck through...if Google has the talent to take advantage of it.

Busting the DAM (Distribution/Attention/Monetization) Problem

No matter what kind of media you're producing, if you're looking for a financial return, you have to accomplish three things:

1. Distribution: You have to get your book, music, movie or video to the people who are likely to be interested in it.
2. Attention: You have to let your audience know that your media is available and get them interested in reading, listening to or watching it.
3. Monetization: You've got to figure out a way to get your audience to pay for your efforts.

That's the DAM problem, and you have to solve it in that order. You can't monetize media that your audience doesn't know about and can't find. You can get your audience excited, but if there's no way for them to get your work, you've wasted your effort.

It used to be that as a creator, all you really needed to do was solve the distribution problem. If you could get a record company to sign your band, a publisher to publish your book, a movie studio to distribute your movie or a television or cable network to distribute your video, you were golden. The distributor would take responsibility for getting your work into stores, theaters or networks, promoting your work, and getting paid for it. (Actually collecting money from the distributors has been, and remains, an ongoing issue.) However, getting a company to distribute your work could take years of effort, and you might never get past the distribution stage.

Today, distribution is the easiest part of the problem to solve. If you're an author, you can easily self-publish your books in print or electronically, through companies like Amazon and Lulu. If you're a musician, you can distribute on CD or electronically through Amazon, CD Baby and many other companies. If you've produced a movie, Amazon will distribute it on DVDs or electronically, as will Netflix and many others. And if you've created a video, from a two-minute short to a two-hour epic, you have many distribution choices, including YouTube, Vimeo, Livestream, Ustream, Kyte, etc. In most of these cases, it costs little or nothing to get your work into distribution; you pay a portion of your revenues when it's sold.

The real price for doing your own distribution is that there's no big company to handle the attention and monetization parts. You've got to figure that out yourself, and do it without the big budgets that the "old media" companies have for advertising and promotion. Movie studios spend hundreds of millions of dollars promoting blockbusters like "MacGruber" (and see how well that went?) You'll have to get out the word using social media, local events, and whatever guerilla marketing tactics you can use to get attention without spending much money.

The monetization part of the problem is also going to be your responsibility. If you're working with Amazon, for example, it'll process and fulfill orders for you, but you may be limited in where and how you can sell your work outside Amazon's network. Apple is also an option for electronic distribution and monetization, but only for its population of devices and software. Netflix doesn't fund production and does limited revenue sharing based on the number of copies of your movie or video that its subscribers view; it may bring in some money, but not much.

Your distribution and monetization options for video depend a great deal on what you're doing. If you're producing a series, and you're very talented (and somewhat lucky,) you can do what Felicia Day and Kim Evey did and get Microsoft to underwrite production and distribution of "The Guild," what Mark Gantt did and get Sony's Crackle to do the same for "The Bannon Way", or what Illeana Douglas did in getting Ikea to sponsor "Easy to Assemble." (Please note that these are extremely unlikely outcomes.) You can also produce a video for a site like Funny or Die, in order to get exposure. In this case, your video is a stepping stone to other opportunities. (This is also fairly unlikely, unless you're Zack Galifianakis.)

I realize that I haven't solved the attention or monetization problems at all, which is why it took me three attempts to write this blog entry. My point (and I had one, at least when I started writing) is that distribution is now the easiest problem to solve. Standing out from the crowd. and especially, making money from your efforts, are the real problems.

Gutenberg's miscalculation: A lesson for big media?

In Clay Shirky's new book "Cognitive Surplus", he discusses a lesser-known aspect of the achievements of Johannes Gutenberg. Gutenberg invented the movable-type printing press, which changed the way that knowledge was distributed and forever changed education, religion, government and commerce. The Gutenberg Bible is by far his best-known work, but it wasn't his biggest, or even most important work.

Prior to printing Bibles, Gutenberg received permission from the Catholic Church to print and sell indulgences on its behalf. (Gutenberg borrowed the money he needed to build and operate his printing press based on the anticipated revenues from selling indulgences.)  Indulgences were a way for Catholics to "neutralize" their sins and thus move from Purgatory to Heaven much faster, or even skip Purgatory altogether.

Priests and pardoners (authorized agents of the Church) would sell the indulgences and write them down on pieces of paper. Gutenberg saw the opportunity to bring mass production to the process. By pre-printing batches of indulgences, he could sell them much faster and make more money for himself and the Church. The plan backfired, however, when other pardoners got their own printing presses and flooded the market with printed indulgences. The entire practice of selling indulgences (among other things) so angered Martin Luther that he wrote his "Ninety-Five Theses" in 1517 and nailed them to the door of a church in Wittenberg, Germany. The Theses were, in turn, reproduced on printing presses and widely distributed, which helped to bring about the Protestant Reformation, which in turn broke the hold that the Catholic Church had over Europe, and eventually, caused the Church to end the practice of selling indulgences.

The introduction of Gutenberg's printing press was an early, excellent example of the fact that it's impossible to predict the true impact of a discontinuous innovation when it's first introduced. Gutenberg thought that his printing press would make money for himself and the Church, but it instead led to revolutionary changes throughout European society that still resonate today.

When the Internet became a commercial reality in the mid-1990s, established media saw it as a sideline at best, but certainly no threat to their primary businesses, be they newspapers, magazines, music, books, television or movies. What they didn't foresee was the radical impact that the Internet would have on all of their businesses. In the case of newspapers and magazines, the Internet cannibalized their audiences and sources of income, replacing paid content with free services. Record companies nearly collapsed before they came to an uneasy truce with online distributors. Broadcast and cable networks found their shows scattered all over the Internet and worked desperately to get distribution back under their control.

Now, established media companies are grasping at apps as perhaps the last chance to keep their historical business models alive. They can sell apps, as well as subscriptions to the content made available by apps. That strategy works so long as apps are the only way to get to the content that people want to access, but it's a strategy with a limited future.

Earlier this week, Google released a new version of its mobile website for YouTube, written in HTML5 and far superior to the YouTube app supplied by Apple. It takes two clicks to put the YouTube site on the iPhone home screen, and from that point on, it's indistinguishable from an app. Eventually, all the content that's available on the Web will be available via HTML5, at which point the walled garden of apps will no longer provide any protection for established media companies. Apps may postpone the day of reckoning for media companies, but they won't eliminate it.