Wednesday, February 08, 2012

Demand Economy

From C21Media:
Demand economy

Independent video-on-demand services in North America might lack the marketing spend of the majors but they offer indie suppliers audience data and a route to bigger deals. Sean Davidson reports.

Four years is a long time. Back in 2008, oil still cost less than US$100 a barrel, George W Bush still lived in the White House and streaming broadcast-quality video into people’s homes – or laps or palms – was a tricky and expensive undertaking.

Which is why when kids’ video-on-demand service Ameba TV launched that fall, it was set up so subscribers would first download shows on to set-top boxes rather than streaming them, bit-by-bit, straight to their TV sets.

It seemed like a good idea at the time – the BitTorrent-powered boxes allow for fast downloads and good picture quality – though Ameba president Tony Havelka admits the market took a dim view of the hardware nonetheless. “We met some scepticism from some of the rights holders. They wondered how many of those things we would sell,” he recalls.

About a thousand, as it turned out, before the ground changed under the feet of the Canadian company and other VoD outfits. “There was a tipping point” towards late 2009, Havelka says, when streaming was suddenly cheap and Ameba was forced to rethink its plan – partnering with box maker Roku and in late 2011 with TV set maker LG in favour of streaming. Smart TVs, once dismissed as a dead-end, were suddenly a key ingredient of the company’s operations, though it continues to market set-top boxes.

Since linking up with LG, Winnipeg-based Ameba has expanded its reach to some seven million homes in Canada and the US. Another 25,000 have downloaded its Roku app, though Havelka won’t reveal how many paying subscribers are onboard. “It’s growing,” he says of the subscriber base. Ameba programmes include Busytown Mysteries, Roboroach and Dudley the Dragon. “Streaming really popped it right open.”

Unlike other new digital media offerings, which tend to come on strong only to fizzle out or prove themselves later, independent VoD services aimed at kids faced a hard march in their early years. This was down to ever-changing technologies and competition from heavyweight kids brands such as Disney, Cartoon Network, Nickelodeon and ascendant over-the-top services like Netflix and Hulu, all of which offer their own takes on VoD for two- to 12-year-olds. Netflix had some 23.6 million subscribers by last spring, around the same time that Hulu’s paid subscribers passed the one million mark.

Harder still has been the tepid response from rights holders who would rather knock on the door of a known brand than roll the dice with lesser-known players like Ameba and US-based Kabillion, which carries titles including Wild Grinders, Bobby’s World and Totally Spies. Suppliers grouse that such services tie up rights while paying only pennies.

“There are a number of VoD and SVoD services that have launched over the past couple of years and they’re basically going out and aggregating whatever content they can find,” usually by striking revenue-sharing deals, notes Richard Goldsmith, executive VP of global distribution at The Jim Henson Company. “But because they have no acquisition or marketing budget, the content they’re able to aggregate is often bottom of the barrel.” (Goldsmith did not single out any particular service and it should be noted that Henson’s own Sid the Science Kid is carried by Ameba.)

On paper, the large and well-regarded Henson library – which includes Fraggle Rock as well as Sid the Science Kid – would be a good fit for long-tail, parent-approved services. But the US studio has shied away, preferring to stay close to iTunes and others, says Goldsmith.

“The future is Netflix,” he says, while also nodding to Comcast’s infant-aimed VoD service Baby Boost and BT Vision in the UK. “Major media players – whether Netflix, BT or Comcast – will be the drivers of on-demand services for kids because they have the marketing power, the distribution platforms and the financial resources to acquire content that’s actually the best in the world.”

Others remain sceptical. “I wonder how well VoD services will do against traditional services like Cartoon Network, Disney and Nick,” says Ira Levy, executive producer of Toronto-based Breakthrough Entertainment (Jimmy Two Shoes, My Big Big Friend). “I assume they’ll bring independent content but there’s less and less of that around,” because of increasingly aggressive outreach from the established children’s brands, he notes.

Like Havelka, Kabillion president Nicolas Atlan concedes that his company got off to an uncertain start following its launch in 2007, in part because of lagging ad revenue. “It was very hard the first year because the model is based on ad sales and it wasn’t really working out,” he says. “But in the past year, year-and-a-half, there’s been a shift and little by little revenue is starting to come.”

Again echoing Havelka, Atlan says Kabillion recently crossed a tipping point. The US-only service in late 2010 launched on Time Warner Cable – after debuting on Comcast – and now reaches some 45 million households. It is estimated that the service connects with six million children a month. “This shows we’re here, and we’re very established,” he says.

However, there is still some fine-tuning to be done. Kabillion plans to re-launch its under-used website and will drop most of its social media elements in favour of straight game and video content that will better support the service’s dual role as both a broadcaster to kids and a marketing tool for animated properties.

“There will be much more connection between the VoD and the online,” says Atlan, driving viewers to the main service and its corresponding YouTube channel. The site may also drop its K-Cash – virtual monetary units bought with real cash, that subscribers use on the current site to unlock special items.

Drawing cash out of young viewers/users has cast other content producers in an unfavourable light recently – most notably the now-infamous Tap Zoo app – and Atlan admits the issue has been “part of the conversation” about the site’s future.

Havelka concedes that programme suppliers are, broadly, right to complain about lack of revenue and rights tie-ups. Both are problems that need to be fixed across the sector, though he adds that Ameba does not take exclusive rights to its programmes.

“We tell people all the time, ‘Never give away your rights,’” he says, an approach also embraced by recent arrival Toon Goggles. Both companies cite the need for rights holders to selectively push their titles through all available services, such as a YouTube channel, without getting tied up by exclusivity.

“YouTube is critical for kids’ content but it’s also very difficult,” says Havelka, because of its low return on views. “You’ll get an audience, you’ll get 100,000 hits and you’ll get a cheque for US$2,” he quips. “Or if you get a million or hundreds of millions of hits you will get paid. But look at the standard VoD profit shares. If you bring that same library [to VoD] you will get that money back.”

Looking forward, indie VoD services remain at pains to distinguish themselves from the majors. Ameba and Toon Goggles see themselves as the VoD equivalent of indie cinema, bringing foreign and lesser-known content to North American kids. Kabillion is also well-stocked with European content thanks to its part-ownership by French animation powerhouse Moonscoop Group. But Kabillion also sells itself to suppliers as a marketing tool.

“You can’t compare us to Nickelodeon,” says Atlan. “If we started to compete with them we’d never win.” Kabillion is more of a marketing platform for brands in the US, he adds, such as Bratz, Wild Grinders or Cosmic Quantum Ray, the 1x26’ CGI sci-fi toon that was picked up by The Hub following its debut on VoD. Other shows have sold to PBS Sprout and Nick Tunes thanks to the visibility gained by their runs on Kabillion, he says.

Toon Goggles’ VP of new media Stephen Hodge – who likens his catalogue to the discounted DVDs sold in grocery stores and other shops – also offers his clients viewership data that can be used to wrangle other broadcast and licensing deals. “Content on Netflix is already licensed. We’re not licensing content and we’re not standing in the way of any deals,” he says.

Hodge notes that the otherwise obscure Asian import Origami Warriors (“Unfold the power!”) has caught fire on the site, setting the stage for bigger things on other platforms and channels. “This cartoon has potential and now we can prove it,” he says.

Back at Ameba, Havelka suggests the power of brands like Disney and Nickelodeon could actually work in the favour of indie VoDs. “A lot of our user base is not overexposed to that content but already exposed through cable or other distribution. So they’re looking for alternatives, which puts us and rights holders in a good position because now we can take stuff to market that they’ve been sitting on and doing nothing with. The revenue might not be high, but it’s higher than zero which is what they were getting before.”

So the argument seems to be: hand over some of your content to these indie VoD players, get a little revenue back, use the audience data to land a bigger, more lucrative deal elsewhere. Given how hard it is getting slots on the majors, it might be the only way into the US for some.

Sean Davidson

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