The Strike's Impact On New-Media Economy

by Joe Marchese, Dec 18, 2007, 3:15 PM

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Last week's post on the writers' strike potentially leading to a boon of quality digital media touched off some great conversations. One commenter, David Jaeger, who had left a well-informed comment disagreeing with a structural shift toward new media, later came across a great article in the L.A. Times about VCs looking to fund professional digital content ventures. While this article really embodies the potential for change, it only suggests that there will attempts. VC and other funds follow the potential for revenue; whether there can actually be enough revenue generated to support systematic change will be a question of execution.

For real change, the writers will need scale of operations, distribution and monetization. Scale is needed because, as the saying goes, the more things change, the more they stay the same. Regardless of how complex the technology gets that distributes it, entertainment is still an art that requires people to respond. This is actually amplified in the new-media landscape. Sure, if you are a content producer, the digital world is your oyster, but instead of convincing a couple of studio executives to fund and distribute your content to millions, you now need tens of thousands of individual people to syndicate your content (or at least suggest it) to reach millions. It's harder than ever to predict what will make people do this, and it's changing every minute.

The only solution to this dilemma might sound a bit old-fashioned. Content shops need to produce enough choices to mitigate risk on their own. A couple of big hits will continue to support the content that doesn't "go viral." VCs, if properly supportive, can offer writers the proper scale of operations to make independent professional content ventures work. The benefit to digital distribution is that small successes can recoup their "pilot" cost, something that was always difficult with traditional media. Come to think of it, why can't studios look to digital distribution as their "pilot season," and see what takes, instead of reading the tea leaves? More thought is certainly required here.

Last week I made the obvious argument (it turns out I am best at arguing the obvious) that social networks would play a definitive role in supporting content distribution. The question being: Can Facebook and MySpace create the organization and viewing experience necessary to be considered a true substitute for television? I'll admit that a few weekends ago I sat and watched a couple hours of content on NBC Rewind. Loved it.

An interesting question might be: What would a Joost/MySpace or Facebook partnership look like? It would certainly take care of the viewing experience. Another key for content producers and social networks will be how social networks organize around and interact with the various independent professional content shops. The L.A. Times article mentions Facebook investor Jim Breyer of Accel Ventures looking at investments that rely on Facebook for distribution. This is potentially very encouraging for content creaters. If I were one (which, as you can tell by my writing, I am not), I would be looking for investment only from those VCs that could support my distribution efforts from their current or past investments in digital properties.

So you have set up operations where you can cost-effectively produce professional quality content. You have even formalized your distribution and audience reach through social networks and other online entertainment portals. The final piece of the equation is the billion dollar question: How do you monetize? By advertising and subscription.

I am looking forward to the first top-quality subscription service, the "HBO of online" --and if one was ever going to be created, now would be the time. But the real focus for most will be advertising. The key here is what we have been harping on for some time: brand integration into story/content and new types of "performance"-based deals. I am not talking clicks, but rather attaching brands to content types, with standing agreements based on the content's distribution.

On a side note: If I were a brand or agency, I would be down at the picket lines seeing if some of this top story-telling talent was available for freelance work. Branded content and telling stories about my brand that people want to share -- these are the real keys to social media. Might be interesting.

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