Money, money, money, money
There are two ways to float the boat: financing and revenue generation. I am happy to talk about money from both ends.
In general, digital deal-making is like the wild west. Business models are so varied that it may not even be obvious who is buying and who is selling. For example, is a portal going to pay a producer for a content license or charge a producer for a content placement? The first way sounds like a standard TV deal, the second way sounds just like an ad-buy.
Is digital content intrinsically valuable or is it an advertisement for a brand, a toy or a video game? If you own the rights to it all, you’ve created a golden circle.
The current standard ways to generate digital revenues are:
- Revenue sharing with your digital distributor (for example Youtube or a game portal like MSN Casual Games); revenues generally come from advertising dollars and are paid out according to CPMs
- Licensing original content to a digital distributor (for example Atom); revenue comes direct from the distribution channel and is negotiated in advance
- Subscription fees: unless you own the destination (for example Disney’s Club Penguin) you will share the subscription fees with the Internet service provider, portal or mobile aggregator
- Microtransactions: In the virtual environments of Second Life, Club Penguin and Habbo Hotel, consumers are encouraged at every turn to purchase virtual goods to pimp their islands, their igloos and their bedrooms.
When it comes to advertising, the numbers are on the rise.
- JP Morgan Sterns estimates that YouTube will earn $100M in revenue this year – $20M will come from overlay ads; the rest from display ads on the video pages.
- Disney expects to collect $1B in revenue from online content in 2008. This online revenue comes from things like: advertising on ABC.com around reruns of hits like Grey’s Anatomy and Lost, subscriptions to online games, downloads of movies and music, and ecommerce not related to theme parks.
- Big brands and advertisers are re-directing ad spend to interactive projects; this will impact traditional film and television budgets and the old media business model.
Stay tuned for my next FanTrust Blog, which will look at digital entertainment financing.