Ad-Supported Streaming: Point/Counterpoint

From the emails we are receiving, there is no point in the proposed contract more controversial than the provision on ad-supported streaming. The two emails below were originally submitted to us unsolicited, but we have posted them together because they form such a useful point/counterpoint argument on this issue. See you in the comments! -JA


Statement by Christopher Kubasik

Don't Be Down on the Deal Because of the Window for Ad-Supported Streaming

Some people see the streaming as “just like DVDs” and so payment should begin right away. And others see the streaming as just a new delivery of system of real time content (like TV). My guess is that this difference in perspective is really where the dispute lies. We’re arguing over which metaphor/model to use for streaming.

I side with those who see streaming as a whole new delivery system, and, as a result, I think having a window in which no residuals are paid is fair and reasonable. Here's why.

While the big bucks (and the obsession) is often about the money that a movie makes the first week or two (or a TV show makes on its first run), the real money -- and I mean, the real, real money -- is in libraries.

The music industry didn't fall apart because of MP3 players. It fell apart because the music industry was producing albums that had 2 good songs and and 12 lame ones -- and the consumers said, "Okay... well, I don't want the 12 lame ones, just the two good ones." The music industry didn't catch on, Steve Jobs did, and there we go. Because it wasn't about illegal downloads. It was about people getting the music they wanted. Once it was more convenient to just pay .99 cents a pop instead of pirating, people started paying.

As for film and TV content, yes, opening box office is great, and so are great ratings. But the truth is that this idea that studios and networks control WHEN we watch something is over. Just over. People want to watch when and where it is convenient for them to watch. And today's technology allows them to do exactly that. Now, the media company's are either going to meet that need, or piracy will continue to grow.

Digital media will offer what I call "perpetual syndication" -- all of MGM and NBC and who-all-else's libraries will be there all the time. It's no longer a matter of filling air time (which is only a limited number of slots) but of an infinite number of shows being available all the time.

I just watched Season One of "The Wire" this past week. (Which was fucking awesome.) I put off watching it, even though I'd seen a few episodes and had been wholly impressed, because I wanted to have the whole thing ready to go for my pleasure.

I mentioned this to a friend of mine last night, asking if he owned Season Two on DVD. He said no, but added the moment I got it to tell him so we could watch it together. So, YEARS after this thing aired, we're going to be watching hours and hours of TV.

And that's the way it's going to go.

There's going to be money coming in for years and years and years off of content. (My own view is that the compelling and niche stuff has the best chance in this model, where as the vanilla fluff of network -- um, won't... but that's another discussion.)

So the issue is how long is the initial window. (You'll note I'm not calling it a Promotional Window -- which is grotesque in its imprecision and assumes that the Internet is some fair-haired stepchild of TV and not simply another means of distribution -- which it is.)

So, that's the issue. Not whether there SHOULD be a window, but how long. We don't get paid for the first airing of TV. We don't get paid when movies play at a theater. Why? The companies own the content. They funded the show. Staffed it. Handled business matters, took the financial risk. Our residuals are based on CONTINUED interest in a piece of content. And that is when we start getting paid for reuse -- after the negotiated length of the window ends.

Since we're going to be building off of previous models (because that's how things work) the truth is there's going to be a window where the people who own the content get to do what they want with it. Should it be one week? Two weeks? Three?

That's simply a fight -- that's a negotiation. We do the best we can to make it short. The media companies do they best we can to make it long. A month would clearly be too long. Should it be one week? Two? That has to be decided at the table. But at some point there's going to be a window. Just like there's currently a window for TV and film distribution.

Christopher Kubasik was the Head Writer for "Stranger Adventures" which received three Emmy nominations for Broadband content. He is currently writing an online anthology series for Stage 9.



Statement by Kristen Stavola

Two Percent of Nothing is Nothing

Before we head into these Saturday meetings, there are some concepts and viewing trends that we should all be familiar with where streaming media is concerned. We’ve given up the present for the future in these negotiations, so we owe it to ourselves and future content creators to get this right, even if only a little bit right.

The Initial Streaming window is a terribly dangerous precedent to set.

Here’s why. Think about the things that really matter in this industry:
*FIRST WEEKS’ RECORD SALES (and downloads)

Before long we will add the first week of online streaming to that list. I’ll try to make this as simple as possible.

If you own a DVR/TiVo — how long do you wait to watch an episode of something you recorded? Same day? 3-5 days? 7 days at most? Well, that means you’re viewing habits are consistent with the rest of the DVR viewing public. You want to see your recorded episode before the next one airs. Research backs this up. Get in touch with the folks at Neilsen. ComScore. HitWise. Gartner. Harris Interactive. Forrester. You will be hard pressed to even find much research on viewing patterns beyond the 7 day window, I know I was. [Dig through the links of information I’ve attached below.]

Online viewers are comprised mostly of the lost broadcast audience. No one is even disputing this. At least no one I’m talking to or reading. Nevertheless, Internet streaming IS REUSE; this has already been established. The primary market for material created for Broadcast use is via broadcast/cable. So, we apply the DVR viewing trend to online viewing. If you are going to watch an episode, it’s typically something you missed and you want to catch it within the first week it’s broadcast, right? (esp. "appointment programming" like LOST!)

You try to catch it from work. Or you try to fit it in on the weekend. But you definitely want to fit it in while it’s still topical, before the next episode, etc. And, once again, you are consistent with the rest of the viewing public. And the numbers for online viewing of TV and feature films are expected to soar in the next several years. Again, something that no one is disputing. Check here to see traffic trends for the season premiere of LOST. Note the spikes and valleys.

Have you noticed that the only show that seems to have an archive available of more than one season is LOST? That’s because the streaming episodes are pulled so that some value is retained when they are packaged as DVD box sets you are obligated to buy.

That future ain’t lookin’ too bright right now. Adams Research wrote: “... DVD renting and purchasing are such ingrained habits... that we expect downloads will not have a major negative impact in the near term."

I’ve spoken exhaustively this week to data analysts, ad execs and most importantly web producers presently working with studios/networks. These viewing patterns were right on the money. I was assured that by the time your streaming media has been available online for a matter of DAYS, it is no longer receiving the promotion it received upon launch. It is that promotion which results in views.

This email was originally written before my knowledge of the 13-26 WEEK “first use” window for original online content. There isn’t much time to speak to this in detail. I ran this window by a web entrepreneur with 3 name brand technology/internet start ups on his resume. “You will lose nearly 90% of the property's value in that window. Just look at LAZY SUNDAY — a piece of entertainment content that created a 1.3 billion dollar company(YouTube). I’m not saying people made money. It’s an example of the kind of traffic a good piece of entertainment content can generate in a 30 DAY window. No one cares about it now, but in its first 10 days, seven million people checked it out. Why would you guys give up that much real estate so easily and quickly?”

Think about it. Why are we?

Two percent distributor’s gross in the third year of the new contract? Initial streaming window? I hope by now you’ve realized that the 2% (the AMPTP has forced upon us) is meaningless. The big traffic numbers have already come inside of the promotional, Residual free zone -- and we’re left with 2% of the stragglers.

Don’t be fooled because my LAZY SUNDAY example above was a 3 min clip and not an entire episode of a broadcast series. Your episode will only get promoted from prime real estate like a network homepage for 1-5 days— TOPS!

Traffic is about promotion and virality. You need to hit that first 100k- 200k viewers in the first 1-3 days if something is to catch on virally with regards to original content. Think of that Sarah Silverman/Matt Damon video just last week! Its audience was on the decline within 3 days. However, its viewers online eclipsed Kimmel’s nightly ratings in 2-3 DAYS! Again, these are examples of how traffic views content. Something was promoting this content -- probably an email from your Striking writer pals. If there is no promotion -- viewers have to dig for your content -- and those numbers are not very sexy!

I’m pretty darn confident that the WGA’s research confirms all of the above. I’m fairly certain we will be told that Internet streaming and DVR viewing still only add up to the same size audience that traditionally watch the broadcasts.

That no one expects erosion of network reruns any time soon. . .

We may even be told that because of the erosion of traditional broadcast viewing audience there is no ad-based money being made by the media congloms on streaming media — that they’re giving away streaming media to advertisers to make up the difference! C'mon! I just spoke to three web producers who are making more money PROMOTING our content in the first 3 days then we'll see in the first three YEARS of this contract. I’ve listed many links to research at the bottom of this email, use them. By 2011, in-stream advertising revenue is expected to reach $3.89 billion dollars and revenue for downloads will contribute $850 million according to the Yankee Group.

We all know Neilsen ratings are less and less accurate. But that doesn’t mean the Companies aren’t aware of online traffic to sites, when it happens and for how long a viewer is engaged. What ads they sit through, when they tune out etc. Not to mention this is all quickly moving in the direction of sponsorship-driven co-branding.

And you better hold your hats because the number of sites that offer revenue sharing models (YouTube, Break, MetaCafe,Vio, Revver) will be on the rise this year and those deals are going to be about placement on their homepages in the first 1-7 days. If you think the episode of SAMANTHA WHO that debuted online 24 days ago is going to be getting any promotion from ABC/DISNEY...

Ask yourselves the following when you are presented with explanations for why you are giving up the most important piece of our online future...


Because once we give them this promotional window... There ain’t no getting it back! We’re setting precedent on Internet jurisdiction. VHS/DVDs anyone? Not only has the 4 cents never been revisited, it wasn’t even on the table for discussion! Why should anyone believe the promotional window goes away in 2010 just because Nick Counter goes away?!

A question was posed to me in email the other day by a Neg Com member: “What do you think the dollar value is between a 7-day window and a 14-day window? And how much extra time on strike do you think that's worth for this membership?”

I’m still not sure about the answers to those questions. It’s not easy. Never said it was. Yet, fighting for digital rights in the future while saddled with these windows that are based on an eroding business model is going to be even more impossible in the future. Just ask your favorite musician! I feel for our leadership, truly. I’m not a hardliner. I was prepared to take a sucky deal because I want this strike over as much as the next person. I need to get back to work...


Think about it. Then show up tonight.


"Bewkes also signaled he will stress pushing Time Warner's entertainment content onto digital properties. Bewkes said Time Warner -- and most in the industry overall -- need to be "a bit more revolutionary than evolutionary" in digital initiatives, that all linear TV networks should be available on demand via broadband and TV sets, and that TW will make its own networks available on-demand "aggressively" to "show the industry the benefits." -- Nikki Finke, DeadlineHollywoodDaily.com

"Video has hit a tipping point, much the way audio did a few years ago," said Michael Gartenberg, research director at the New York-based firm Jupiter Research. "Now we have access to good, meaningful content that's viable, as opposed to stuff as proof of concept."














Kristen Stavola is a WGA member with a background in New media,
as well as film development and production. She very much wants to
get back to work!


Jake Hollywood said...

Here's the thing: Internet ad rates INCREASED 78% over last year--who thinks those rates aren't going to increase even more as the networks begin streaming shows?


NBC expects to have revenues of OVER 1 billion this year from internet alone...

I think those numbers alone would be cause enough to speculate that allowing a "window" of any sort plus a "fixed payment" in this OFFER (it's not a tentative deal, it's an offer--a starting point in my opinion. One that should've been at the beginning of this "negotiations" and not the end.

The Phone Call Is Coming From Inside The House said...

My sticking point with the tentative deal is the lack of movement on DVDs.

Almost everything else, I like or can live with. Must live with, by the sounds of things.

But how pitiful that the guild couldn't get action on DVDs, a huge segment of income for writers. (Didn't the DGA get an increase?!)

With pirated dvds saturating the market and free rips available online (often poor quality, but still), to me, an improved DVD deal (by a few pennies!) would have illustrated to me the guild "had my back."

I applaud them for all their work, I want to take nothing away from that. But I was walking the line for three months and in the back of my mind I was thinking, "Hey, it'll be nice to see the DVD numbers go up...finally...after 22 years.

Ah, hell.

Can someone explain why this shouldn't be so upsetting?


J. said...

I think the 17 day streaming window is how the companies will avoid piracy problems for themselves.

They (not us) make as much money as they can right way in the first two and a half weeks. Then, after everyone and their brother can get it for free from BitTorrent, they offer to share any remaining revenue from the people willing to purchase it

I still want to know what is considered downloading and what is considered streaming. The potential overlap seems ripe for abuse. For instance Netflix signed a deal to offer current episodes (not back episodes, current ones) to its LG users. Are they downloading it or streaming it when it is available on their site to watch??

Also, if we wait a week, we will find out more about the Apple 2.0 which is supposed to be revealed in greater detail this week.

The terrain is changing all the time. We should be very careful about accepting anything that the AMPTP is so gleeful about. They are up and down excited and ready for us to come back to work. This is a rare moment in history, which is why we shouldn't rush to judgement on the offer.

J. said...

The more I learn about this deal the less I like it, which is exactly what the AMPTP wanted I'm sure. No time to realize that while there are some gains, the losses greatly outweigh them.

The things they refused to budge on are the things we need to examine with the deepest suspicion.

40B dollars of revenue, projected to grow and we're willing to take caps??

I hope that the membership won't stand for this.

stuiec said...

the phone call is coming from inside the house: "Can someone explain why this shouldn't be so upsetting?"

I think if you're to find any comfort with respect to that point, it will be in the thought that DVDs won't be around for another 22 years -- so at least the source of the irritation will eventually dissapear.

J. said...

One last thought...

The Negs have been put in an amazing position from the backlash against this deal. They can go back to the AMPTP and say that the membership will not ratify unless XYZ are done. They have an angry membership on their hands, so they can blame the membership and still be the good guys while they are in the room with the AMPTP.

The analysis I've read on HuffPo and in private equity reports indicates that the companies need to settle sometime in the month of February to avoid disaster.

This is just their first February offer. It's what they were willing to give us on Tuesday the 4th. If are membership calls for better terms, we will get them before the end of February.

Please someone convey this at the meetings as I am out of town.

JimBob said...

Here's another example of what looks like an easily-exploited weakness in the proposed deal:
Writing for new media is covered by the
MBA if:
(1) it is written by a “professional writer” (anyone with a single TV or screen credit, 13
weeks of employment in TV, film or radio, a professionally produced stage play credit or
a published novel) or
(2) the program is derivative of an MBA-covered program or
(3) if the budget is above any of three thresholds: $15,000 per minute; $300,000 per
program; or $500,000 per series order.
Under this arrangement, a new young writer (no TV/movies, no novels, no plays) who originates non-series (who defines what is a "series"?) material for New Media, with a budget well OVER that of any soap opera on the air today, and does so for years and years, reaping zillions for his employers, need NEVER be considered a "professional writer" under these terms. Nor does his work EVER come under the Writers Guild MBA, nor does he get Health or Pension. Am I wrong? Please explain.

Michael said...

jake hollywood- where are you getting the 78% increase in internet ad rates from? Most of what I've seen suggests that CPM prices have been basically stable for the past two years.

JimBob said...

Still like that $15,000 a minute budget? A studio hires a big star to be in this cheap show. Pays him/her a zillion dollars to do a bit part in one of their movies, then "pays" them scale for appearing in the New Media content. Way to keep that budget down, guys!!
This deal has too many moving parts to be absorbed and its consequences judged in a weekend. We must have more time.

Luzid said...

As regulars here know, I am not - yet - WGA.

But if I were at this moment, I'd reject anything that allows for revenue to be collected through ad-supported streaming that doesn't include a percentage for the writers.

If the studios make money, the writers - those who create the revenue stream in the first place - deserve to make money as well.

There is no honest ethical argument that can be made against this idea.

WGA members, please do your best not to get screwed, for yourselves and for future members like me. You have the leverage, and I support a fair deal for you all (and for SAG, and in reality for every member of every production, someday).

bacci40 said...

wga members dont understand the new media yet??? once content is on the internets...its on the internets...its nothing like watching reruns or syndicated programs

if the studios decide to pull the program after a short window, that program is now on a torrent or some site in asia for everyone to stream and download to their hearts content

this is already what happened to both lost and heroes epis, and in a small way to jericho

and no matter what laws you write to protect this content, someone somewhere will find a way to get it up, get it in, get it all the way

if you accept that provision (and it appears that most of you will) dont come crying in 3 years when you find that you have made nada and the studios still amazingly made huge profits from the net

btw, whoever is the sag or wga member who has been uploading all the screeners...thank you

occamsrazor said...

I just wanted to say that while you guys were out there picketting, I (your audience) was watching old tv shows on the internet. Do not underestimate the power of the internet shows, even with the window!

DLJ said...

Welcome to the era of flat-rate residuals.

We approve this deal, we won't just have flat-rate residuals for 3 years. We'll have them for 20 and beyond. You thought the DVD rate was bad? At least it was a percentage of something. This is a precedent for flat-rate residuals forever. We give this one up, we're never getting it back.

Think about that. Then vote no.

filer said...

I don't think the online streaming window is such a big deal. I often discover shows later in their seasonal run or even seasons later and then decide to go out and buy or rent the DVD set. If I could easily stream it from the net I would do that instead - often going back a year or more so I could start with episode 1. I doubt I am the only one who would use "new media" in this manner.

ama said...

Before the strike I was sort of soft core downloader. I downloaded here and there, but now since the strike, I've been downloading every show I can. In support. Kind of.

What I will tell you as a person in the tech industry is that to give up revenues for the streaming window is not a good idea. I live and work in France - the main French channel, TF1 sells Greys and Ugly Betty and Heroes episodes online for 4 euros a pop. You have the option to stream it or download it. You are allowed a certain time period for viewing the episodes without a limit to the number of times. It is the same on our "TV" boxes, sort of the French equivalent to TiVo, but still you pay for the episodes you've missed.

As a downloader, I know if I want a show I've missed I have a very limited time to download it. The show is usually uploaded the next day or within 5 days max. In order to get a fast download (based on the way torrents work, it's a bit more complicated but it's just an example), I always chose the file uploaded latest. The window of when people want to rewatch the shows is rather small.

The ONLY advantage and the ONLY weapon networks have against pirating is STREAMING. Are you going to stream something that you can watch right away and be done with in the normal time it takes to watch an episode or are you going to wait 3 or 4 days for your torrent to download? I've shelled out my 4 euros to see if Meredith broke up with McDreamy AGAIN. I'm sure I'm not the only one.

This is their cheapest way to effectively to combat piracy and still get some revenue. I'm sure the execs see it as "well at least we get something". I think the WGA should see it that way too.

I don't like that this blog is making your deal sound so wonderfully delightful. It reeks something awful. If you understand the internet (that would be non-plural btw), you wouldn't be in such a hurry to sign.

Have you thought about the day when people won't watch television not on the internet? When the amount of content on the internet will be just as marketed to the masses, have just as big budgets as the shows on tv, and the same beautiful faces and flawed characters one USED to find on television?

Again, think about it this way. How much do you think Nissan paid to NBC for all the ads they had running while you read the Heroes online graphic novel? For a moment there, I wasn't sure if I had typed the URL for Nissan by mistake. Viral marketing at its finest is not cheap.

I sincerely hope the WGA members tell the execs to go f*ck themselves because if you don't they are taking you for fools.

And seriously, the brilliant writers who came up with the character that ended my 2 decade drought of Patrick Dempsey are not idiots, but rather men and women who are to me near god-like entities.

Stay strong. Make them suffer. See how desperate they get towards the end of February. I imagine it will be of frat boy with hard on at the end of the night proportions.

Jason said...

How is it that people think DVDs (or now, Blu-ray/BD-ROM) are going away anytime soon? It sucks for you guys (I'm not a writer) that there was no change on the DVD rate. Internet pipelines can only send so much bulky video content, and plenty of people don't have high-speed access, or even a computer, or have a hard time learning anything about them other than a little email and writing some letters in a word processor.

Plus, many who are well-connected digitally (I am) don't want to watch their movies or TV seasons on their computer...they want to watch it with friends/family on their couch looking at their TV. Apple TV 2 will do that, but how many people are buying Apple TVs (or some future revision or competing product)? I MIGHT, but how many others?

And if you do have Apple TV...how good are you about backing-up your bulky media? When's the last time you backed-up your iTunes purchases? If you don't burn a DVD of what you purchased & downloaded, what happens when your system crashes or you buy a new one? And remember, the ease-of-use backing-up that will be designed for end-users will likely be around a DRMed BACKUP copy, not a simple Blu-ray that you could share or copy. So when your system crashes or you buy a new one, YOU have to deal with restoring that content and getting it authorized to play again (just like songs now on iTunes).

When do Blu-rays go away? When 90% of the DVD-watching WORLD market has a cheap, capable computer, with cheap high-speed access, with ultra-high-capacity Internet pipes (will that EVER happen?), with a dirt-simple way to buy content, a dirt-simple and cheap way to send it to your TV (a free Apple TV in every house with free installation, cabling, & configuration...customized to your own peculiar mix of computer and networking hardware and A/V equipment, of course), and a dirt-simple way to backup (to DVD) and restore your content. How long until that happens?!?

I could design how such a system should work, but that doesn't mean it's happening anytime soon, or would be cheap (yet). And even when it does...plenty of people still won't want to deal with all those "cheap" fees and "dirt-simple" steps. iTunes is wonderful, but to the person who couldn't ever set the time on their VCR, iTunes probably isn't dirt-simple.

I think for a very long time to come people are still going to be thrilled to be receiving physical little boxes on their birthday containing something with a colorful cover and a low-materials-cost disc containing gigabytes of video in a permanent, easy-to-use format.

Zac said...

As long as you've got guarantees from the networks that the content will be still be there, you'll be fine. But if I was the networks, I'd take it down once the window has passed. Or as was noted, when the DVD is going to be released. Why would the network leave years of streaming content online if they could take it off in order to get someone to buy the DVD?

Luzid said...

@ Zac:

Hardly fine! The studios have shown over the decades, through everything from shady accounting tricks to this most recent retraction of the MFN clause, that they simply cannot be trusted - especially when billions of dollars are concerned.

Are people here who previously noted this fact suddenly forgetting it?

D S said...

The comparison to the music industry is almost completely wrong. In order to believe that "the industry" which includes independent bands on their own labels as well as deceased superstars suffered because with each cd they put out there included only "2 good songs" then we'd have to believe there was collusion including dead people.

The percentage of people paying for legit mp3s is nothing compared to similar cd sales pre-napster. I personally know a band who sold 50,000 records in the 1990s who are selling about 200 mp3s on iTunes each year. Sure, they aren't a current band, but I think their check from iTunes is about $50 to split among the 4 of them. $0.99 per song is NOT being adopted by ANY large audience. Look at the numbers.

Simply put, when given the option of not paying for ANYTHING college students decided not to pay for it. The majority of music was bought by teenagers and young adults. They stopped buying any music.

I have a good friend who decided to not record his current batch of songs and instead just focus on soundtrack work because he knew that his new songs would just be raped by teenage "fans" who secretly hate musicians.

I'm sorry, I just could not let such ignorance be passed off as the truth. It's not. The music industry was ravaged by kids. The writers took a stand. It is only fair that the writers look at musicians as their brethren who are also screwed in this online game that only makes the internet billionaires rich.

D-Dub said...

Christopher Kubasik, you don't seem to understand the issue of free windows and why writers have a problem with it. And your analogy of using the first airing of television and first run in movie theatres is off the mark.

"We don't get paid for the first airing of TV. We don't get paid when movies play at a theater. Why? The companies own the content. They funded the show. Staffed it. Handled business matters, took the financial risk. Our residuals are based on CONTINUED interest in a piece of content. And that is when we start getting paid for reuse"

This is about reuse of material. Not first run. When television programs or reused, the writer gets paid, regardless of whether it is on the original broadcast or cable television network, in syndication, on home video, during a clip show, etc. Likewise with theatrical movies, reuse of the material, on home video, television, foreign markets, etc, the writer gets paid for the RE-USE.

Now we come to the internet. The reason why the studios called the showing of writer's material on the internet is because they weren't contracted to re-use the material on the internet. But in contract with writers, they are allowed to use the material for promotional purposes without paying.

And where you say, "Since we're going to be building off of previous models (because that's how things work) the truth is there's going to be a window where the people who own the content get to do what they want with it."

That's not so. Under the previous model, there is no period where the content owners can do what they want with the REUSE of the writer's material. Taking anything in the studio's library or material currently being produced for initial distribution on traditional platforms and then using on the internet is REUSE.

Then, if like you said, if we are building off of previous models, then there should be no free window for any REUSE of products on the internet.

Jason said...

Re: d-dub saying "Taking anything in the studio's library or material currently being produced for initial distribution on traditional platforms and then using on the internet is REUSE."

Perhaps the AMPTP will want to make the case that that initial web distribution window is another form of initial "broadcast" that should be classified together with "traditional broadcast" as the 1st time airing. Which doesn't seem so nuts to me.

Still sucks you guys are getting no movement on the DVD issue though. How can the AMPTP defend the DVD rate? I guess they just figure, you've accepted it for so long, it must be live-able for you guys, even if you don't like it. But it's not fair.