From Y2K to Financial Apocalypse. Why Wall St.’s Loss is Content Owners’ Gain
September 30th, 2008
All of the apocalyptic headlines screaming at me that the world is falling apart remind me of the hype of Y2K. But while that stunt ended up being little more than an innocuous exercise in hysterical fear mongering, this crisis de jour isn’t just exponentially more historic, it will prove to be a catalyst that increases the value of premium content.
For too long, free content and services have been the economic default of the web. Give it away for free to build scale and sell that audience to advertisers. Build traffic, chase advertisers and resist the stigma of paid subscription models at all costs. Build a destination site, but live in fear of the Friendster effect - one wrong technical step and your user base will ditch you for the next shiny new social network. Loose credit, cheap money and overflowing liquidity markets meant that every startup with a lickable logo and a glossy web 2.0 name could raise funds and enjoy its day in the media darling spotlight.
Today’s market shakeup means those days are over. And that’s a good thing for anyone who’s invested in the value of content. Credit tightening ultimately means a new set of business themes that put a greater focus on real profitability. That means an increased incentive for smarter development, risk aversion, rights management and effective distribution. Less free and more premium. Specifically, good for Hulu. Bad for Youtube.
Does that mean that Facebook will announce that they’re charging an optional subscription fee for premium services? I wish. They’re not there yet, but, but as the pressure mounts they will when their $455M in financing starts to squeal for a path to profitability.
Digital is paving the path for the new model of premium entertainment content. The types of film financing deals that we’re seeing increasingly resemble those of the digital world rather than of the traditional entertainment model: keep above-the-lines costs at a minimum to hold production budgets low in order to get the project made, but offer a large ownership position to the talent involved to align interests and incent them to market the project to their fanbase. Partner with established content creators who have a built-in, online audience and task them to promote their property like their life depends on it. Then enjoy the upside when you pick a winner.
Most importantly, like Hyman Roth, always make money for your partners.
This model works. It doesn’t work for everyone and it granted, it’s a home run business, but a diverse slate of low-cost unique content wrapped in an effective digital distribution windowing strategy is the post-Wall St meltdown mode.
As Fred Wilson eloquently put it in his post on Startup Depression:
the web and information technology is one of the few bright spots in an overall gloomy economic outlook. So if you are working on a web technology company, be happy that you aren’t working for a bank, a brokerage firm, an automobile company, or in many other industries. The tools and services that are made in the web technology business are only going to increase in demand over the next five years. But we are going to have to service that growing demand with leaner and more focused businesses and it’s time to start thinking more about profitability and how you are going to get there.
Tags: digital model, economy, facebook, finacial crisis, fred wilson, hyman roth, startup, turmoil, wall st
Posted by: jake Posted in Business, Legislation, MegaPhone, RegulationYou can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
September 30th, 2008 at 7:05 pm
Love the Hyman Roth reference;o) But seriously I completely agree and the old cliche “content is king” will ring true is this economy once again.
October 1st, 2008 at 5:21 pm
As a content creator, I’ve noticed that the culture of free has distanced consumers from the threshold fascination necessary to engage one’s imagination to consume artistic product.
“Free” makes you cynical.
And it makes one more likely to be fickle, flighty and never brand loyal. “What’s my favorite networking site? The next one!
I think that you are right. We can perhaps see Wall Street’s meltdown in lighter-than-air reality shows, disappearing comedies and dramas which are clones of one hit show, “cinematic derivatives,” you might say.
I hope missdma is right because a true king will conquer.