Wednesday, 6 April 2016
Tuesday, 13 April 2010
Twitter revenue stream
Twitter Has a Business Model: 'Promoted Tweets'
Search Ads For Twitter That Split Difference Between 'Earned' and 'Paid' Media
NEW YORK (AdAge.com) -- In the four years since Twitter launched, two questions have hung over the micro-blog service: Can it make money? If so, how?
Twitter is expected an answer to both questions on Tuesday in the form of "promoted tweets," which will put ads on Twitter, first in search results and later in user feeds both on Twitter.com and the myriad third-party clients that access the service, such as TweetDeck, twhirl, TwitterBerry and Tweetie, the last of which was just acquired by Twitter last week.
Initially, Twitter's version of keyword ads will appear only on searches conducted on its website; users will start seeing those Tuesday afternoon. A single ad will appear at the top of a search. That ad is itself a tweet, and users can "re-tweet" the ad to pass it around, make the ad a favorite or reply to it.
Tweets as ads
Not surprisingly, Twitter's first advertisers, Starbucks, Bravo and Virgin America, are also heavily into Twitter as a communications medium. "We wanted to do something that just enhances the conversation that companies are already having with their customers on Twitter," said Twitter Chief Operating Officer Dick Costolo, who is a keynote speaker at Ad Age's Digital Conference opening Tuesday in New York.
Promoted tweets also have the potential to scale revenue quickly for the company, backed by $160 million in funding from a coterie of elite VC firms including Union Square Ventures, Institutional Ventures Partners, Benchmark Capital and Spark Capital.
Twitter recently said the service handles 50 million tweets, or 140-character-maximum messages, a day. Mr. Costolo didn't say how many search queries Twitter gets, but did say that "a lot of people use Twitter for search; the volume is huge."
No rush for revenue
That said, Mr. Costolo cautioned that quick profitability is not the goal, and that the ads would be rolled out slowly to see how users react to them. "We are not in a rush to make a certain amount of money this year," said Mr. Costolo, who is also, incidentally, one of Twitter's earliest investors. "We want to get this right. We don't want to force a model on people that is based on incorrect hypotheses."
Twitter is also not the first to try to build an ad model around Twitter search results. Search-ad pioneer Bill Gross unveiled TweetUp on Monday, which allows marketers to promote their own tweets by buying keywords.
Twitter has been testing promoted tweets internally for months, and once they're released to the public, Twitter will closely watch how they perform. Initially, advertisers will bid on keywords on a cost-per-thousand basis, but Twitter is developing a performance model that could be the basis for pricing based on a metric called "resonance" -- impact judged on how much a tweet is passed around, marked as a favorite or how often a user clicks through a posted link. Ads that perform well will stay in the system; ads that don't rise above the resonance score of a typical tweet from a marketer will fall out. Ultimately, Mr. Costolo wants marketers to pay for ads based on the lift in resonance over a standard tweet.
Twitter is rolling out promoted tweets slowly over the course of the year; initially on Twitter.com, and then to Twitter clients, which can include the ads and get a cut of the revenue. Ultimately, Twitter could syndicate results to Google or Bing, though no deal is close to making that happen.
Ads in timeline?
During this roll-out, Twitter will study how resonance works and decide in the fourth quarter whether -- or how -- to take ads beyond search and into users' Twitter feeds. "Is it great in search and horrible in the timeline? We are going to test and test and test," Mr. Costolo said.
The promoted tweet is one of three streams of revenue Twitter will have available, including a data fee from search engines indexing Twitter in real time, such as Google, Yahoo and Bing, and the coming "professional accounts." Professional accounts will include the ability to have multiple users on one account -- much like some of the clients such as CoTweet do today -- plus a dashboard that shows what's happening with a brand on Twitter and integration with promoted tweets.
Sunday, 11 April 2010
New media, new economy...
« Secretary Clinton’s Internet Freedom Speech, Abridged
The Collapse of Complex Business Models
I gave a talk last year to a group of TV executives gathered for an annual conference. From the Q&A after, it was clear that for them, the question wasn’t whether the internet was going to alter their business, but about the mode and tempo of that alteration. Against that background, though, they were worried about a much more practical matter: When, they asked, would online video generate enough money to cover their current costs?
That kind of question comes up a lot. It’s a tough one to answer, not just because the answer is unlikely to make anybody happy, but because the premise is more important than the question itself.
There are two essential bits of background here. The first is that most TV is made by for-profit companies, and there are two ways to generate a profit: raise revenues above expenses, or cut expenses below revenues. The other is that, for many media business, that second option is unreachable.
Here’s why.
* * *
In 1988, Joseph Tainter wrote a chilling book called The Collapse of Complex Societies. Tainter looked at several societies that gradually arrived at a level of remarkable sophistication then suddenly collapsed: the Romans, the Lowlands Maya, the inhabitants of Chaco canyon. Every one of those groups had rich traditions, complex social structures, advanced technology, but despite their sophistication, they collapsed, impoverishing and scattering their citizens and leaving little but future archeological sites as evidence of previous greatness. Tainter asked himself whether there was some explanation common to these sudden dissolutions.
The answer he arrived at was that they hadn’t collapsed despite their cultural sophistication, they’d collapsed because of it. Subject to violent compression, Tainter’s story goes like this: a group of people, through a combination of social organization and environmental luck, finds itself with a surplus of resources. Managing this surplus makes society more complex—agriculture rewards mathematical skill, granaries require new forms of construction, and so on.
Early on, the marginal value of this complexity is positive—each additional bit of complexity more than pays for itself in improved output—but over time, the law of diminishing returns reduces the marginal value, until it disappears completely. At this point, any additional complexity is pure cost.
Tainter’s thesis is that when society’s elite members add one layer of bureaucracy or demand one tribute too many, they end up extracting all the value from their environment it is possible to extract and then some.
The ‘and them some’ is what causes the trouble. Complex societies collapse because, when some stress comes, those societies have become too inflexible to respond. In retrospect, this can seem mystifying. Why didn’t these societies just re-tool in less complex ways? The answer Tainter gives is the simplest one: When societies fail to respond to reduced circumstances through orderly downsizing, it isn’t because they don’t want to, it’s because they can’t.
In such systems, there is no way to make things a little bit simpler – the whole edifice becomes a huge, interlocking system not readily amenable to change. Tainter doesn’t regard the sudden decoherence of these societies as either a tragedy or a mistake—”[U]nder a situation of declining marginal returns collapse may be the most appropriate response”, to use his pitiless phrase. Furthermore, even when moderate adjustments could be made, they tend to be resisted, because any simplification discomfits elites.
When the value of complexity turns negative, a society plagued by an inability to react remains as complex as ever, right up to the moment where it becomes suddenly and dramatically simpler, which is to say right up to the moment of collapse. Collapse is simply the last remaining method of simplification.
* * *
Dr. Amy Smith is a professor in the Department of Mechanical Engineering at MIT, where she runs the Development Lab, or D-Lab, a lab organized around simple and cheap engineering solutions for the developing world.
Among the rules of thumb she offers for building in that environment is this: “If you want something to be 10 times cheaper, take out 90% of the materials.” Making media is like that now except, for “materials”, substitute “labor.”
* * *
In the mid-90s, I got a call from some friends at ATT, asking me to help them research the nascent web-hosting business. They thought ATT’s famous “five 9’s” reliability (services that work 99.999% of the time) would be valuable, but they couldn’t figure out how anyone could offer good web hosting for $20 a month, then the going rate. No matter how many eventual users they assumed, $20 didn’t even seem to cover the monthly costs, much less leave a profit.
I started describing the web hosting I’d used, including the process of developing web sites locally, uploading them to the server, and then checking to see if anything had broken.
“But if you don’t have a staging server, you’d be changing things on the live site!” They explained this to me in the tone you’d use to explain to a small child why you don’t want to drink bleach. “Oh yeah, it was horrible”, I said. “Sometimes the servers would crash, and we’d just have to re-boot and start from scratch.” There was a long silence on the other end, the silence peculiar to conference calls when an entire group stops to think.
The ATT guys, part of a company so committed to the sacred dial tone it ran its own power grid, had correctly understood that the income from $20-a-month customers wouldn’t pay for good web hosting. What they hadn’t understood, were in fact professionally incapable of understanding, was that the industry solution, circa 1996, was to offer hosting that wasn’t very good.
This, for the ATT guys, wasn’t depressing so much as confusing. We finished up the call, and it was polite enough, but it was perfectly clear that there wasn’t going to be a consulting gig out of it, because it wasn’t a market they could get into, not because they didn’t want to, but because they couldn’t.
It would be easy to regard this as short-sighted on their part, but that ignores the realities of culture. For a century, ATT’s culture had prized—insisted on—quality of service. Their HR Department worked to identify potential employees who would be willing to cut corners, but the point of identifying those people was to avoid hiring them. The idea of getting into a business where those would be the ideal employees was heresy. ATT, like most organizations, could not be good at the thing it was good at and good at the opposite thing at the same time. The web hosting business, because it followed the “Simplicity first, quality later” model, didn’t just present a new market, it required new cultural imperatives.
* * *
About 15 years ago, the supply part of media’s supply-and-demand curve went parabolic, with a predictably inverse effect on price. Since then, a battalion of media elites have lined up to declare that exactly the opposite thing will start happening any day now.
To pick a couple of examples more or less at random, last year Barry Diller of IAC said, of content available on the web, “It is not free, and is not going to be,” Steve Brill of Journalism Online said that users “just need to get back into the habit of doing so [paying for content] online”, and Rupert Murdoch of News Corp said “Web users will have to pay for what they watch and use.”
Diller, Brill, and Murdoch seem be stating a simple fact—we will have to pay them—but this fact is not in fact a fact. Instead, it is a choice, one its proponents often decline to spell out in full, because, spelled out in full, it would read something like this:
“Web users will have to pay for what they watch and use, or else we will have to stop making content in the costly and complex way we have grown accustomed to making it. And we don’t know how to do that.”
* * *
One of the interesting questions about Tainter’s thesis is whether markets and democracy, the core mechanisms of the modern world, will let us avoid complexity-driven collapse, by keeping any one group of elites from seizing unbroken control. This is, as Tainter notes in his book, an open question. There is, however, one element of complex society into which neither markets nor democracy reach—bureaucracy.
Bureaucracies temporarily reverse the Second Law of Thermodynamics. In a bureaucracy, it’s easier to make a process more complex than to make it simpler, and easier to create a new burden than kill an old one.
In spring of 2007, the web video comedy In the Motherhood made the move to TV. In the Motherhood started online as a series of short videos, with viewers contributing funny stories from their own lives and voting on their favorites. This tactic generated good ideas at low cost as well as endearing the show to its viewers; the show’s tag line was “By Moms, For Moms, About Moms.”
The move to TV was an affirmation of this technique; when ABC launched the public forum for the new TV version, they told users their input “might just become inspiration for a story by the writers.”
Or it might not. Once the show moved to television, the Writers Guild of America got involved. They were OK with For and About Moms, but By Moms violated Guild rules. The producers tried to negotiate, to no avail, so the idea of audience engagement was canned (as was In the Motherhood itself some months later, after failing to engage viewers as the web version had).
The critical fact about this negotiation wasn’t about the mothers, or their stories, or how those stories might be used. The critical fact was that the negotiation took place in the grid of the television industry, between entities incorporated around a 20th century business logic, and entirely within invented constraints. At no point did the negotiation about audience involvement hinge on the question “Would this be an interesting thing to try?”
* * *
Here is the answer to that question from the TV executives.
In the future, at least some methods of producing video for the web will become as complex, with as many details to attend to, as television has today, and people will doubtless make pots of money on those forms of production. It’s tempting, at least for the people benefitting from the old complexity, to imagine that if things used to be complex, and they’re going to be complex, then everything can just stay complex in the meantime. That’s not how it works, however.
The most watched minute of video made in the last five years shows baby Charlie biting his brother’s finger. (Twice!) That minute has been watched by more people than the viewership of American Idol, Dancing With The Stars, and the Superbowl combined. (174 million views and counting.)
Some video still has to be complex to be valuable, but the logic of the old media ecoystem, where video had to be complex simply to be video, is broken. Expensive bits of video made in complex ways now compete with cheap bits made in simple ways. “Charlie Bit My Finger” was made by amateurs, in one take, with a lousy camera. No professionals were involved in selecting or editing or distributing it. Not one dime changed hands anywhere between creator, host, and viewers. A world where that is the kind of thing that just happens from time to time is a world where complexity is neither an absolute requirement nor an automatic advantage.
When ecosystems change and inflexible institutions collapse, their members disperse, abandoning old beliefs, trying new things, making their living in different ways than they used to. It’s easy to see the ways in which collapse to simplicity wrecks the glories of old. But there is one compensating advantage for the people who escape the old system: when the ecosystem stops rewarding complexity, it is the people who figure out how to work simply in the present, rather than the people who mastered the complexities of the past, who get to say what happens in the future. Clay Shirky
« Secretary Clinton’s Internet Freedom Speech, Abridged
The Collapse of Complex Business Models
I gave a talk last year to a group of TV executives gathered for an annual conference. From the Q&A after, it was clear that for them, the question wasn’t whether the internet was going to alter their business, but about the mode and tempo of that alteration. Against that background, though, they were worried about a much more practical matter: When, they asked, would online video generate enough money to cover their current costs?
That kind of question comes up a lot. It’s a tough one to answer, not just because the answer is unlikely to make anybody happy, but because the premise is more important than the question itself.
There are two essential bits of background here. The first is that most TV is made by for-profit companies, and there are two ways to generate a profit: raise revenues above expenses, or cut expenses below revenues. The other is that, for many media business, that second option is unreachable.
Here’s why.
* * *
In 1988, Joseph Tainter wrote a chilling book called The Collapse of Complex Societies. Tainter looked at several societies that gradually arrived at a level of remarkable sophistication then suddenly collapsed: the Romans, the Lowlands Maya, the inhabitants of Chaco canyon. Every one of those groups had rich traditions, complex social structures, advanced technology, but despite their sophistication, they collapsed, impoverishing and scattering their citizens and leaving little but future archeological sites as evidence of previous greatness. Tainter asked himself whether there was some explanation common to these sudden dissolutions.
The answer he arrived at was that they hadn’t collapsed despite their cultural sophistication, they’d collapsed because of it. Subject to violent compression, Tainter’s story goes like this: a group of people, through a combination of social organization and environmental luck, finds itself with a surplus of resources. Managing this surplus makes society more complex—agriculture rewards mathematical skill, granaries require new forms of construction, and so on.
Early on, the marginal value of this complexity is positive—each additional bit of complexity more than pays for itself in improved output—but over time, the law of diminishing returns reduces the marginal value, until it disappears completely. At this point, any additional complexity is pure cost.
Tainter’s thesis is that when society’s elite members add one layer of bureaucracy or demand one tribute too many, they end up extracting all the value from their environment it is possible to extract and then some.
The ‘and them some’ is what causes the trouble. Complex societies collapse because, when some stress comes, those societies have become too inflexible to respond. In retrospect, this can seem mystifying. Why didn’t these societies just re-tool in less complex ways? The answer Tainter gives is the simplest one: When societies fail to respond to reduced circumstances through orderly downsizing, it isn’t because they don’t want to, it’s because they can’t.
In such systems, there is no way to make things a little bit simpler – the whole edifice becomes a huge, interlocking system not readily amenable to change. Tainter doesn’t regard the sudden decoherence of these societies as either a tragedy or a mistake—”[U]nder a situation of declining marginal returns collapse may be the most appropriate response”, to use his pitiless phrase. Furthermore, even when moderate adjustments could be made, they tend to be resisted, because any simplification discomfits elites.
When the value of complexity turns negative, a society plagued by an inability to react remains as complex as ever, right up to the moment where it becomes suddenly and dramatically simpler, which is to say right up to the moment of collapse. Collapse is simply the last remaining method of simplification.
* * *
Dr. Amy Smith is a professor in the Department of Mechanical Engineering at MIT, where she runs the Development Lab, or D-Lab, a lab organized around simple and cheap engineering solutions for the developing world.
Among the rules of thumb she offers for building in that environment is this: “If you want something to be 10 times cheaper, take out 90% of the materials.” Making media is like that now except, for “materials”, substitute “labor.”
* * *
In the mid-90s, I got a call from some friends at ATT, asking me to help them research the nascent web-hosting business. They thought ATT’s famous “five 9’s” reliability (services that work 99.999% of the time) would be valuable, but they couldn’t figure out how anyone could offer good web hosting for $20 a month, then the going rate. No matter how many eventual users they assumed, $20 didn’t even seem to cover the monthly costs, much less leave a profit.
I started describing the web hosting I’d used, including the process of developing web sites locally, uploading them to the server, and then checking to see if anything had broken.
“But if you don’t have a staging server, you’d be changing things on the live site!” They explained this to me in the tone you’d use to explain to a small child why you don’t want to drink bleach. “Oh yeah, it was horrible”, I said. “Sometimes the servers would crash, and we’d just have to re-boot and start from scratch.” There was a long silence on the other end, the silence peculiar to conference calls when an entire group stops to think.
The ATT guys, part of a company so committed to the sacred dial tone it ran its own power grid, had correctly understood that the income from $20-a-month customers wouldn’t pay for good web hosting. What they hadn’t understood, were in fact professionally incapable of understanding, was that the industry solution, circa 1996, was to offer hosting that wasn’t very good.
This, for the ATT guys, wasn’t depressing so much as confusing. We finished up the call, and it was polite enough, but it was perfectly clear that there wasn’t going to be a consulting gig out of it, because it wasn’t a market they could get into, not because they didn’t want to, but because they couldn’t.
It would be easy to regard this as short-sighted on their part, but that ignores the realities of culture. For a century, ATT’s culture had prized—insisted on—quality of service. Their HR Department worked to identify potential employees who would be willing to cut corners, but the point of identifying those people was to avoid hiring them. The idea of getting into a business where those would be the ideal employees was heresy. ATT, like most organizations, could not be good at the thing it was good at and good at the opposite thing at the same time. The web hosting business, because it followed the “Simplicity first, quality later” model, didn’t just present a new market, it required new cultural imperatives.
* * *
About 15 years ago, the supply part of media’s supply-and-demand curve went parabolic, with a predictably inverse effect on price. Since then, a battalion of media elites have lined up to declare that exactly the opposite thing will start happening any day now.
To pick a couple of examples more or less at random, last year Barry Diller of IAC said, of content available on the web, “It is not free, and is not going to be,” Steve Brill of Journalism Online said that users “just need to get back into the habit of doing so [paying for content] online”, and Rupert Murdoch of News Corp said “Web users will have to pay for what they watch and use.”
Diller, Brill, and Murdoch seem be stating a simple fact—we will have to pay them—but this fact is not in fact a fact. Instead, it is a choice, one its proponents often decline to spell out in full, because, spelled out in full, it would read something like this:
“Web users will have to pay for what they watch and use, or else we will have to stop making content in the costly and complex way we have grown accustomed to making it. And we don’t know how to do that.”
* * *
One of the interesting questions about Tainter’s thesis is whether markets and democracy, the core mechanisms of the modern world, will let us avoid complexity-driven collapse, by keeping any one group of elites from seizing unbroken control. This is, as Tainter notes in his book, an open question. There is, however, one element of complex society into which neither markets nor democracy reach—bureaucracy.
Bureaucracies temporarily reverse the Second Law of Thermodynamics. In a bureaucracy, it’s easier to make a process more complex than to make it simpler, and easier to create a new burden than kill an old one.
In spring of 2007, the web video comedy In the Motherhood made the move to TV. In the Motherhood started online as a series of short videos, with viewers contributing funny stories from their own lives and voting on their favorites. This tactic generated good ideas at low cost as well as endearing the show to its viewers; the show’s tag line was “By Moms, For Moms, About Moms.”
The move to TV was an affirmation of this technique; when ABC launched the public forum for the new TV version, they told users their input “might just become inspiration for a story by the writers.”
Or it might not. Once the show moved to television, the Writers Guild of America got involved. They were OK with For and About Moms, but By Moms violated Guild rules. The producers tried to negotiate, to no avail, so the idea of audience engagement was canned (as was In the Motherhood itself some months later, after failing to engage viewers as the web version had).
The critical fact about this negotiation wasn’t about the mothers, or their stories, or how those stories might be used. The critical fact was that the negotiation took place in the grid of the television industry, between entities incorporated around a 20th century business logic, and entirely within invented constraints. At no point did the negotiation about audience involvement hinge on the question “Would this be an interesting thing to try?”
* * *
Here is the answer to that question from the TV executives.
In the future, at least some methods of producing video for the web will become as complex, with as many details to attend to, as television has today, and people will doubtless make pots of money on those forms of production. It’s tempting, at least for the people benefitting from the old complexity, to imagine that if things used to be complex, and they’re going to be complex, then everything can just stay complex in the meantime. That’s not how it works, however.
The most watched minute of video made in the last five years shows baby Charlie biting his brother’s finger. (Twice!) That minute has been watched by more people than the viewership of American Idol, Dancing With The Stars, and the Superbowl combined. (174 million views and counting.)
Some video still has to be complex to be valuable, but the logic of the old media ecoystem, where video had to be complex simply to be video, is broken. Expensive bits of video made in complex ways now compete with cheap bits made in simple ways. “Charlie Bit My Finger” was made by amateurs, in one take, with a lousy camera. No professionals were involved in selecting or editing or distributing it. Not one dime changed hands anywhere between creator, host, and viewers. A world where that is the kind of thing that just happens from time to time is a world where complexity is neither an absolute requirement nor an automatic advantage.
When ecosystems change and inflexible institutions collapse, their members disperse, abandoning old beliefs, trying new things, making their living in different ways than they used to. It’s easy to see the ways in which collapse to simplicity wrecks the glories of old. But there is one compensating advantage for the people who escape the old system: when the ecosystem stops rewarding complexity, it is the people who figure out how to work simply in the present, rather than the people who mastered the complexities of the past, who get to say what happens in the future.
Film Piracy on a Global Scale
How to Thrive Among Pirates
Shangri-La is the official name of a small Chinese town in a mountainous valley on the edge of the Tibetan plateau. Formerly called Zhongdian, the town was renamed Shangri-La by local businessmen with the blessings of the national government in order to spur tourism. Who would not want to visit Shangri-La? I’ve been twice, and sorry to say, it is no Shangri-La. But on my last visit there a pristine 6-inch layer of snow in April covered the normally dusty and dilapidated old town, and in this clean robe it actually looked picturesque.
Old guy on the main street of Shangri-La.
For hundreds of years this frontier town has been an overnight stop for travelers along the winding road from the agriculturally rich highlands of Yunnan to the dry wind-swept lands of Tibet. The shops along the main street of Shangri-La today sell an exotic assortment of household goods to a steady stream of Tibetan and minority farmers trudging in from the countryside. A hundred one-room shops along a drab main street offer sturdy leather boots, brightly woven carpets, farm hardware, rugged horse blankets, hot water thermos bottles, solar battery rechargers, cheap iron tools, and fancy striped fabrics and ribbons. Mixed among this traditional ware were dozens of shops that sold nothing but DVDs for thousands of movies. A few of the shops had a greater selection of movies for sale or rent than your local Blockbuster. Some of the thousands were Hollywood hits, some were Hong Kong kungfu episodes, or Korean series, but most were Chinese-made films. Almost all of the discs were cheap (less than $3) pirated copies. The new digital “freeconomy” where copies flow without payment is not just a trait of cosmopolitan cities; information wants to be free even in the most remote parts of the globe.
I was in China, in part, to answer this simple question: how does the China film industry continue to produce films in a land where everything seems to be pirated? If no one is paying the filmmakers, how (why) do they keep producing films? But my question was not just about China. The three largest film industries in the world are India, Nigeria and China. Nigeria cranks out some 2,000 films a year (Nollywood), India produces about 1,000 a year (Bollywood) and China less than 500. Together they produce four times as many films per year as Hollywood. Yet each of these countries is a haven, even a synonym, for rampant piracy. How do post-copyright economics work? How do you keep producing more movies than Hollywood with no copyright protection for your efforts?
This question was pertinent because the rampant piracy in the movie cultures of India, China and Nigeria seemed to signal a future for Hollywood. Here in the West we seem to be headed to YouTubeland were all movies are free. In other words we are speeding towards the copyright-free zones represented by China, India and Nigeria today. If so, do those movie industries operating smack in the middle of the cheap, ubiquitous copies flooding these countries have any lessons to teach Hollywood on how to survive?
The answers uncovered by my research surprised me. My first surprise was the discovery that in each of these famously pirate-laden countries, piracy is not really rampant – at least not in the way it is usually portrayed by copyright police. Piracy of imported (i.e., Hollywood) films is rife, but locally produced films are pirated to a lesser degree. The reasons are complex and subtle.
Most Nollywood films are completed in two weeks.
The first consideration is quality. Nigerian films are a unique blend of a soap-opera and a Bollywood musical; there’s a bunch of talking then a bunch of dancing. To call some of the Nigerian films low-budget would be to insult low-budget films. Many of the thousands of Nigerian movies are more like no-budget films. But even big-budget Bollywood films are cheap compared to Hollywood, so the total revenue needed to sustain their production is much smaller than Hollywood blockbusters. Naturally the smaller the costs, the less needed to recoup the expenses. For some films even a trickle of revenues may be enough.
Posters on the Lagos street (via Esquire)
But more importantly, low quality is not just a trait of illegal stuff. In Nigeria, particularly in the poorer north, a vast network of small-time reproduction centers serve up copies of films for an audience of many millions. Originally an underground network of copy centers replicated VHS tapes; now the network pumps out optical disks. In the former days of VHS tape copies, the official versions had much better printed covers. These readable and brightly colored covers were their chief selling point, and printing the covers was the bottleneck at which the film industry exerted their policing. But these days in Nigeria, as in the rest of the developing world, movie disks are usually VCDs (video CDs) rather than DVDs. Although lower in resolution, VCDs are easier to duplicate, with cheaper blanks, and in a quality that is “good enough” on a cheap TV screen. These copies are rented out for a few cents from small dusty shacks. But often the cheap VCDs which rent for pennies are “legitimate” – duplicated under an arrangement with the movie producer. The filmmakers and the duplicators have cleverly reduced the price of legitimate discs near to the price of pirated disks. In fact the same operators will usually duplicate both. Since the legitimate disks aren’t that much more expensive than illicit ones, distributors have less incentive to bother with lower-quality pirated versions.
In addition the financing of films in Nigeria is closely aligned with the underground economy. Investing in a film is considered a smart way to launder money. Accounting practices are weak, transparency low, and if you are a thug with a lot of cash “to invest” you get to hang around movie stars by bankrolling a film. In short the distinction between black market disks and official disks generated with black market money is slim.
Nigerian filmmakers look to two other sources of revenue for their trickle of money: theaters and TV. Theaters in Nigeria offer a very precious commodity for very cheap ticket: air conditioning for several hours. The longer the film the better the deal. Theaters also offer a superior visual experience to watching a tape of VCD on an old television. You might actually be able to read the subtitles, or hear the background sounds. The full theatrical experience of a projected film is simply not copyable by a cheap optical disk. So box office sales remain the major revenue support for a film. As Nigeria’s nascent TV industry grows, its appetite for content means there is additional revenues for broadcasting films on either airways or cable systems.
Bollywood wall poster in Rajastan (via Meanest Indian)
Bollywood is likewise supported by air-conditioning. Few Indians have aircon in their homes, fewer own air-conditioned cars. Mid-afternoon in the summer you really don’t want to be anywhere else except in a cool theater for several hours – which is why Bollywood films can go on forever. You can sell a lot of movie tickets this way, even though someone could get the same movie for almost free as a DVD on the steaming hot, dusty street one block away.
Like Nigeria, India has a similar mixture of piracy and legitimacy in its film industry. Bollywood and mafia money are famously intertwined. In terms of money laundering, tax-avoidance, and covert money flows, the entire film industry is a gray market. The behind-the-scenes people making illegal copies of films also make the legal copies. And prices for legit and pirated versions are almost at parity.
So why even bother with pirated movies? Because India has had a very draconian censorship policy for official studio films. Their famous “no kissing” rule is but one example. This censorship has pushed niche films to the underground where they are served by the piracy network. If you want something independent, racy, out of the ordinary, or simply not in the mainstream, you are forced to patronize the pirates. This includes the filmmakers as well as the audience. If you produce an avant-garde film how else to get it seen? Cheap duplication on the street is the way a filmmaker will get his art out, further blurring the distinction between legit and illegal. As in Nigeria, this convergence means the purchase price of an official VCD may not be much more than a pirated version, about US$3. In effect Indian filmmakers see these low disc prices as advertising to lure the masses into cool theaters to see the latest releases on the glorious big screen. The hi-touch factor of the theaters is the reward for paying, and the pirated versions are the tax or costs for getting attention.
China also has a censorship problem. Big budget films are subsidized by the government, and live off theatrical release. In fact getting screen time in theaters is heavily politicized. Independent films can’t get booked in the limited number of theaters, so they get to their audience on optical disks. And if a viewer wants to watch a film not produced by state-sponsored studios they have to find one on the streets. As in India and Nigeria, the price of legitimate copies are close to pirated, so for consumers there is no difference between the two. You can rent a copy of either type for about 25 cents a night.
The third leg supporting indigenous film industries in lands without copyright enforcement is television. Particularly cable television. Television is a beast that must be fed every hour of the day, and the industry insiders I spoke to in India, China, and Nigeria all saw a television spot as a legitimate destination for independent artists. The sums paid for work appearing on cable TV were not large, but they were something. Because television runs on attention and is supported by ads, the issues of piracy are sidestepped. For some producers pirated discs on the street create an audience, which might translate into a call to run their work on TV, or else prompt an invitation to produce something new.
Where indigenous filmmakers feel the sting of piracy is not within their own countries but in the very active export market. Nigerian films are watched throughout African and in the Nigerian diaspora; likewise Indian films are early sought out throughout South Asia and the Mid-East and in deep Indian communities in the West. Chinese films are watched in East Asia. Most of this market is served by pirated editions, depriving the filmmakers of potential international income. In this way these ethnic film industries share the same woes as Hollywood. But in their home turf, where the success of a film really lies, piracy is a different animal than the specter predicted by Hollywood.
Back on the gritty streets in Shangri-La I went looking for that utopian dream: a DVD of a first run movie for a dollar. That dream was too optimistic, even for Shangri-La, but I did find a copy of the latest Harry Potter movie (with Chinese subtitles) for $3, and upon close inspection it sure looked like a legit version. Clean design, Chinese style, crisp printing on the box, no typos, official looking holograph seal, etc. It was most probably illegal, but who knows? It would take a lot of research to determine its true origins, and for most consumers, like me, a moot question since every DVD vendor in town seemed to have the same inventory of mixed goods, all priced about the same.
What do these gray zones have to teach us? I think the emerging pattern is clear. If you are a producer of films in the future you will:
1) Price your copies near the cost of pirated copies. Maybe 99 cents, like iTunes. Even decent pirated copies are not free; there is some cost to maintain integrity, authenticity, or accessibility to the work.
2) Milk the uncopyable experience of a theater for all that it is worth, using the ubiquitous cheap copies as advertising. In the west, where air-conditioning is not enough to bring people to the theater, Hollywood will turn to convincing 3D projection, state-of-the-art sound, and other immersive sensations as the reward for paying. Theaters become hi-tech showcases always trying to stay one step ahead of ambitious homeowners in offering ultimate viewing experiences, and in turn manufacturing films to be primarily viewed this way.
3) Films, even fine-art films, will migrate to channels were these films are viewed with advertisements and commercials. Like the infinite channels promised for cable TV, the internet is already delivering ad-supported free copies of films.
Producing movies in a copyright free environment is theoretically impossible. The economics don’t make sense. But in the digital era, there are many things that are impossible in theory but possible in practice – such as Wikipedia, Flickr, and PatientsLikeMe. Add to this list: filmmaking to an audience of pirates. Contrary to expectations and lamentations, widespread piracy does not kill commercial filmmaking. Existence proof: the largest movie industries on the planet. What they are doing today, we’ll be doing tomorrow. Those far-away lands that ignore copy-right laws are rehearsing our future.
As one examples for early adopters of “copyright free environment” I’d like to mentionhttp://www.ironsky.net/site/
Posted by Slaists on April 6, 2010 at 12:47 PMI don’t agree with your assertion that pirated copies in the US have costs associated with them. I’m sure I could use bittorrent to download any movie released so far this year, in many cases even the ones still in theaters. Granted I have to pay for an Internet connection, but I’d do that anyway, or maybe I’m going to an Internet cafe or something.
Piracy is just plain a lot more high-tech here in the US. We’re not going to street bazaars with tables full of pirated VCDs and DVDs stacked up; we’re downloading from the Internet and in many cases we are making no compromise on quality. In fact, I would argue that pirated movies are often much higher quality than the DVD simply because there’s no ten unskippable minutes of trailers, FBI warnings, and adverts on the pirated copy.
I think the movie industry in the US faces a much higher challenge from piracy than its counterparts in other countries. I disagree with a lot of the stuff the MPAA does, but I’m not sure they would see much of a benefit by selling discs at bargain-basement prices to compete with the pirates.
Posted by Nathan on April 6, 2010 at 3:40 PMNathan, you’re missing the point.
He’s not talking about pirate DVD’s compared to legitimate DVD’s.
What he’s talking about is theater experience vs. DVD experience. In his future, it doesn’t matter whether a DVD is pirated or not. He’s conceding the recorded (and downloaded) media ground to the pirates, as indefensible, and staking out the claim to the theater. Theaters will need to provide a better experience than the home (not all do) and the movies need to be made to cater to it.
Posted by Nobilis Reed on April 6, 2010 at 4:17 PM@Reed: You have it correct. @Nathan: Copies are free, and not worth “protecting.” @Slaists: I looked at the Iron Sky site and don’t see what the copyright free angle is. @vanderleun: You lost me on “defining digital down.” What means?
Posted by Kevin Kelly on April 6, 2010 at 4:40 PMNot entirely comparable because these consumers are poor and thus captive audiences, they cannot dvr most of their content. More advanced economies can simply by pass any middle men
Posted by fred on April 6, 2010 at 8:37 PM“Piracy is just plain a lot more high-tech here in the US. We’re not going to street bazaars with tables full of pirated VCDs and DVDs stacked up; we’re downloading from the Internet and in many cases we are making no compromise on quality. In fact, I would argue that pirated movies are often much higher quality than the DVD simply because there’s no ten unskippable minutes of trailers, FBI warnings, and adverts on the pirated copy.”
In fact they are making it worse. Netflix and other rentals seem to be getting bonus stripped copies of films now, which lowers the incentive for going with legal material even further
Posted by fred on April 6, 2010 at 8:45 PMWhat he’s talking about is theater experience vs. DVD experience. In his future, it doesn’t matter whether a DVD is pirated or not. He’s conceding the recorded (and downloaded) media ground to the pirates, as indefensible, and staking out the claim to the theater. Theaters will need to provide a better experience than the home (not all do) and the movies need to be made to cater to it.
This is not going to be easy. Projectors are getting better and cheaper - a decent LCD projector and a large flat wall easily rival a traditional movie theater. A large screen HDTV is not bad either. 3D is an interesting gimmick but it can also be distracting - I wouldn’t count on 3D alone to entice people to go to the theater (and, if I’m not mistaken, there are already 3D televisions on the market). Avatar made a lot of money off of 3D but that might have been a kind of one-off thing that others have trouble replicating.
Also, the entire notion that film producers will be able to continue profiting from sales in theaters still rests on copyright protection being enforced (the assumption is that the theaters cannot show pirated movies).
So yet another argument for how content providers will thrive in an age of unpunished privacy falls flat on its face…
Posted by Reader on April 7, 2010 at 12:23 AMAlso, on the subject of piracy, I would like to ask if you plan to write anything about Jaron Lanier’s book You Are Not a Gadget, or if you have already done so?
And I am also curious how you feel about the piracy of your own works. Do you plan to put your new book online for free? Would it bother you if someone scanned it and uploaded it to Rapidshare and BitTorrent?
Posted by Reader on April 7, 2010 at 12:29 AM1) Price your copies near the cost of pirated copies. Maybe 99 cents, like iTunes.
This is how I’ve been thinking for a while… at present I would bit-torrent films because the price and accessibility of DVDs is too high… but if a download cost 50p/75c I’d do that every time, for lots of films, some of which I would probably forget to watch… likewise with pirated music, if it was 25p per song, I’d pay every time…
lots of small payments for downloads to music/film producers adds up to more than few high payments and lots of free, pirated downloads…
Posted by csquirrel on April 7, 2010 at 4:44 AMBut is this “thriving?” It seems to me that all of the examples have much lower production values than what we’re used to in the US. Blurryvision, unreadable captions, poor scripts. Want better quality? The government is financing those, but how much propaganda is included? How much truth?
One thing not addressed is the living standard of the filmmakers (writers, actors, stagehands, stuntmen, editors, etc). Are these people cranking out poor films as fast as they can simply to stay afloat? Are they able to put anything aside for retirement?
Is this really a model we’d want in the US? A dramatic lowering of quality in return for low/no cost?
Posted by Bryan on April 7, 2010 at 7:02 AMSanity!
AllOfMp3.com was so successful (until it was shutdown) because it was so cheap no one could be bothered to pirate. You where really paying for the service (no duplicates, high quality, easy to find things) not the music itself.
Like free software, the money is made from the service, not the goods themselves.
Music will always make money at live concerts. Film will always make money at the theater. (Games should bring back the arcade with tech no-one could afford/fit at home! ;-) ) TV, well they are free now anyway.
Posted by Joe Burmeister on April 7, 2010 at 8:43 AMIt really does seem like the continued survival of Nollywood, Bollywood and the Chinese film industry is more a symptom of inefficiencies in the market for pirated films than anything else.
In the developed world we have effectively frictionless trade in intellectual property. They do not. The fact that there is any price at all for the illegal goods means studios still have a place to compete, and that’s how they’re doing it.
A world with 100% AC and broadband penetration doesn’t have a film industry anymore.
Posted by Corey on April 7, 2010 at 10:13 AM@Reader: I don’t have a problem with “piracy” or copying of my work. All of my books have been put on the web for free from day one, the first in 1994. I assume the books’ PDFs, which I produced myself, are BitTorrented. I consider it a type of advertising. (The publisher of my new book probably has a different idea.)
I have not seen Jaron’s book yet.
Posted by Kevin Kelly on April 7, 2010 at 11:09 AM“Nigerian filmmakers look to two other sources of revenue for their trickle of money: theaters and TV. Theaters in Nigeria offer a very precious commodity for very cheap ticket: air conditioning for several hours.”
Ummm. Nollywood is well known to be a video, not theatrical, industry. There are few theaters left in Nigeria (just a couple of new ones opened in Lagos in recent years). Nigerians have told me that is hard to persuade theater owners to show Nigerian films because of the lower production values—they show mostly American and Indian films. Lancelot Imasuen just premiered “Home in Exile” in theaters, but that was news because it was an unusual event. Imasuen and others are advocating a move to the cinema, but it’s a very new development and not typically how money is made.
Film-makers more typically partner with or sell the rights to a “marketer,” who then distributes VCDs via centralised, physical marketplaces without a cinema run.
That’s not the only point in this blog post that deviates from the general understanding of how things work on the ground.
Posted by MS on April 7, 2010 at 11:53 AMI use my library for films and music. DVDs of films and TV, I watch within the week of borrowing I get and music CDs I copy to my computer to listen to over time. Am I a pirate? Even if my watching and listening lead me to buy music and films that I can’t get from inter-library loan?
Posted by gmoke on April 7, 2010 at 12:26 PMKevin,
I’ve enjoyed reading your technium articles for some time and generally find them insightful and spot on.
I take a lot of issues with this one however.
First, to say these are the most prolific film industries in the world and then say most if the films (especially those of Nigeria) are no-budget films with poor quality does not line up. You only use the numbers of ‘Hollywood’ films. If you are going to include low and no budget production over ther then you have to do it here. Add all the Jo Americas making indie and nobudge. Films and our numbers would blow them away. On the lower end of these films - the ones only on someones site, only on YouTube, never seen at all I would bet the filmmakers would be happy with a pirated version seen by millions, hell thousands. If you notice most of the people backing the idea of piracy are not making money on their films now, so piracy would be a good thing.
Second, the houses in those countries do not have big HD tvs, or the quality and quantity of tv content that we have here. So a no-budget film industry can get by. Especially if the theater is a haven of AC in a hot part of the world where most houses have no AC.
Third, less disposable income means a few things… No HD tvs or AC as mentioned above with less (or zero) TiVo ability, so the home tv experience is not competition. The average person is not capable of being a filmmaker like they are here, so the numbers of ‘industry’ films seems inflated. But you said yourself most of these lack any kind of quality. Lastly, no disposable income means they were never going to pay $15-20 for a legal DVD in the first place. You might as well get whatever you can.
Do you really see any way that Hollywood films can survive all that in a land of AC, HD home theaters pumped full of endless amazing content that we can record legally? Then add to that pirated copies good enough to watch on our amazing home theaters?
-Marty
Posted by Marty Thornley on April 7, 2010 at 12:38 PM@MS; Yes, when I said theaters in Nigeria were another source of revenue besides video I should have emphasized that it was supplimental to video.
@Marty: I had in mind commercial films —those supported by the audience — not just no-budget films. Most of the no-budget videos made in the west are not financiallysupported by audiences.
Posted by Kevin Kelly on April 7, 2010 at 1:56 PM“I had in mind commercial films —those supported by the audience — not just no-budget films. Most of the no-budget videos made in the west are not financially supported by audiences.”
Well, that’s kind of my point, isn’t it? There is no support for that level of film making here. We want bigger and better and that costs millions of dollars. A film that costs millions can not survive the conditions you describe in Nigeria or India or China.
The fact that no-budget stuff here has no market is proof of that very thing.
Also - you describe their industries being supported by dirty money and government subsidies, with censorship like ‘no-kissing’ in India. Is that how we survive piracy? No thanks.
I am open to real solutions that are relevant to this market but these countries only offer a glimpse at a VERY dismal future if that is the only answer.
Posted by Marty Thornley on April 7, 2010 at 4:51 PMKevin, I would like to ask you give the permission for publication of Russian translation this article in Russian online magazine chaskor.ru. Our magazine is licensed under Creative Commons. Now in Russia there are discussions about copyright and intellectual property, and your article would be good material for proponents of mitigation of crude restrictions in modern Russian law.
—Vladimir Haritonov
Posted by Vladimir on April 8, 2010 at 2:31 AM@KevenKelly: “I looked at the Iron Sky site and don’t see what the copyright free angle is.”
That movie, and its predecessor Star Wreck: In the Pirkinning, are/were both being released under a Creative Commons license. Iron Sky takes that one step further and allow fans to submit their own content to help contribute to the movie via a website called “Wreck-a-movie”, a sort-of open source movie process. Despite lower production values, these movies have proven to have great quality in terms of story, visuals, and audio. Furthermore, the creators have gotten revenue from selling DVD copies and merchandise. This proves that doing the complete opposite of traditional, Hollywood-dependent-on-copyright approach is a sound choice, with further benefits in creative freedom and community involvement.
Posted by Eric L. on April 8, 2010 at 6:16 AMEven in the rich west, there’s still merit to the argument that cheaper DVDs will cut down piracy.
Downloading isn’t free, even though you don’t pay cash for it. There’s still the time involved, bandwidth usage, disk storage, and general hassle factor. If DVDs are cheapenough nobody will bother downloading. The question is: what level is enough? In Nigeria it might be 25 cents for a rubbish-quality VCD, but how much would people here pay for a decent-quality DVD, just because it’s easier? $1? $2? $5? $10?
Maybe more important, downloading isn’t great for movies which you want to keep around. You can build a “movie machine” PC with ten terabytes of storage but it’d take forever to fill it up with downloads and you’d want to RAID it to avoid losing all that data, so while it can hold lots of movies it’s not as much as one might think. You’ll probably still want an offline backup anyway, and DVDs come with those extra features movie buffs love, so DVDs win again.
Those two points together suggest a direction in which things will evolve. First, they’ll drive better quality films: the advantages of downloading increase dramatically if you’re only likely to watch the film once, so B-movies become much less viable. It also means movie-makers need to start thinking of films as being long-lived resources, rather than judging them by the money they make the year they’re released. And, maybe most important of all, it gives low-budget films a bigger advantage than they’ve ever had before.
You can see some of those trends emerging already, but on the other hand there are still fossils in Hollywood who just can’t adapt and keep bungling their ventures into new media. As pointed out above, nobody wants to see ten minutes of ads, trailers and piracy warnings at the start of a DVD. Getting rid of that removes one more incentive for people to download. They could also learn from the iTunes experience; if you make legit downloads really cheap, a large segment of the audience will pay for them just because they know they’ll get a good-quality guilt-free copy.
Posted by Steve B on April 8, 2010 at 9:18 AMExcellent post in particular showing that a copyright free environment need not “kill of cinema” as Hollywood would have us believe. However your 2nd point about cinema exhibition stay ahead by offering more and more tech enhancements like reformed 3D. This only ups the price of a ticket. When THX sound was introduced we did not pay 30% extra in ticket prices. As you say cinema theatre prices need to come Down and this might drop the incentive for “pirated copies”
Posted by Shane on April 8, 2010 at 3:27 PMWhat struck me was the fact that these “success” stories wouldn’t exist without crime.
Here are three excerpts from the article.
NIGERIA In addition the financing of films in Nigeria is closely aligned with the underground economy. Investing in a film is considered a smart way to launder money. Accounting practices are weak, transparency low, and if you are a thug with a lot of cash “to invest” you get to hang around movie stars by bankrolling a film. In short the distinction between black market disks and official disks generated with black market money is slim.
INDIA Bollywood and mafia money are famously intertwined. In terms of money laundering, tax-avoidance, and covert money flows, the entire film industry is a gray market. The behind-the-scenes people making illegal copies of films also make the legal copies. And prices for legit and pirated versions are almost at parity.
CHINA Big budget films are subsidized by the government, and live off theatrical release. In fact getting screen time in theaters is heavily politicized. Independent films can’t get booked in the limited number of theaters, so they get to their audience on optical disks. And if a viewer wants to watch a film not produced by state-sponsored studios they have to find one on the streets.
Posted by Suzanne Lainson on April 8, 2010 at 8:06 PM@kevin2kelly Your first-hand observation of the movie industry in China, India and Nigeria tends to reveal the presumption in the first world that an industrial paradigm of large scale, mass-production film-making should be a model for the world. In the U.S., independent (indie) film production was originally an alternative to the large studios. Now, many of the indie films are just as big as the planned blockbusters.
I see lessons to be learned, not necessarily by the giant movie studios premised on the Henry Ford model, but in the new Internet era where an individual or small groups with a camera and PC-based editing software can create local productions that can reach a mass audience. Oh, wait, that’s already been done … on Youtube, and equivalents.
Posted by David Ing on April 8, 2010 at 11:59 PMA very interesting post, although I don’t necessarily agree with your conclusions. I’ve written a lengthy response (from the point of view of a Canadian film producer) here:
http://www.bradfox.com/blog/2010/04/lessons-from-pirates/
Posted by Brad Fox on April 9, 2010 at 8:35 AMThough few points may be correct; IMO you are wrong about the current Indian film industry… lots of things have changed. Maybe you should recheck; censorship has changed, quality of films are better now, etc.
Well you should check out stats of Indian films like Fire, The Terrorist, Taare Zameen Par,… these were not mainstream but had good reception.
Posted by Ramki B Ramakrishnan on April 10, 2010 at 8:30 AM
Defining digital down.
[Strangely, this comment has been dubbed by the Captcha Oracle as “The Nichie “]
Posted by vanderleun on April 6, 2010 at 12:02 PM