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Digital Hollywood: Nagging Content Questions

At the recent, content-oriented Digital Hollywood conference, the new sober reality faced by producers of streaming entertainment content was best illustrated by who wasnot there. Pop.com's CEO was a conspicuous no-show for his scheduled appearance, and the Digital Entertainment Network - a high-profile content creator last year - had vanished into the ether months ago. Attendees noted that while last year's metaphor for producers and distributors of streaming entertainment content was "Who Wants to be a Millionaire?", this year it was "Survivor."

While the concept of "monetization" was an afterthought at last year's conference, this year it was the sine qua non. Discussions focused on a few central questions: What kind of streaming entertainment content are consumers willing to pay for; just how far "around the corner" is profitability; what are the models for the monetization of streaming content; and finally, what mechanisms will enforce the protection of digital media rights for content creators?

"Faith has been shaken - this is not Monopoly money."

Many streaming content providers noted the chilly reception they are now receiving from previously amorous VCs - a group not known for its commitment to the long haul. Even resilient - and well-funded - content aggregators like AtomFilms and IFilm are feeling the pressure. Heather Redman, senior vice president at AtomFilms, noted, "Faith has been shaken - this is not Monopoly money."

In his keynote address, Kevin Wendle, IFilm's chief executive officer, cautioned patience. He observed, "Today's Internet is the cable business 20 years ago. It took CNN eight years to reach profitability." Yet, when it was noted that today's college freshmen couldn't remember a world without CNN, Michael Stroud, founder of iHollywood Forum, pointed out, "It's no comfort to know that the freshmen of today will be watching your competitors after you've gone down in flames."

The feeling is that companies that don't minimize burn rates (i.e., spending of working capital) won't be around to see the promised land of profitability. Curt Marvis, chief executive officer of Cinema Now, a provider of long-form content, acknowledged, "The longer the film you're showing, the slower the burn rate you'll need to stay alive until long-form is accepted."

Monetizing Solutions

It was generally agreed at the show that advertising revenue alone would not provide enough fuel to run the streaming content production and distribution engine. Pay-per-view, subscriptions, and the online syndication of streaming content were most frequently discussed as alternatives or additions to the advertising revenue model. In her keynote address, Christie Hefner, chairman of Playboy.com, illustrated the success of the Playboy.com subscription model: 65,000 subscribers pay $6.95/month for full access to streaming video and other exclusive content on the Playboy.com site. It was noted that adult video streaming has long attracted more consistent revenues than any other streaming video sector to date.

"It's nearly impossible to monetize today on the Web alone."

Online syndication allows owners of media libraries (such as movie studios, television program syndicators, and content aggregators) to sell the right to access their streaming content to other Web sites for various lengths of time and under certain specified conditions. Online syndication can take advantage of one of the Web's most compelling characteristics - its potential for personalization. Content can be syndicated to, and then accessed through, niche sites that are frequented by the users who most value the content. A number of companies, including Context Media and Qpass, demonstrated their latest online syndication management software.

Creating and distributing streaming content that users want to watch is essential, but preventing that content from being pirated is also a major concern of content companies. Having seen the music industry rocked by Napster, Hollywood producers of streaming video were closely following new developments in digital rights management (DRM) technologies. A number of companies at the show, including Microsoft, exhibited DRM solutions.

Move It Offline?

With bandwidth restrictions continuing to limit the size of today's streaming audience, David Shulhoff, chief executive officer of the World Entertainment Network and producer of live music webcasts, noted, "It's nearly impossible to monetize today on the Web alone." Other producers of streaming webcasts agreed with Shulhoff that, at least for now, streaming will have to be one part of a multi-dimensional revenue strategy that includes broadcast television, cable, pay-per-view, and corporate sponsorship.

Ultimately, no matter how one looks at it, streaming content must be sufficiently compelling to attract viewers in order to pay for itself - with advertising, pay-per-view, subscriptions, syndication, or some other revenue model. The consensus at Digital Hollywood was that streaming entertainment content providers should proceed with caution, faith, and deep pockets if they want to remain standing for the broadband revolution. In his keynote address, RealNetworks chief executive officer Rob Glaser suggested that broadband content producers take a "Field of Dreams" approach - "if you build it, they will come." RealNetworks and other streaming technology companies are banking on Hollywood's content providers taking Glaser's advice.

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