Drake IP 2013: Jon Garon, “Digital Hollywood: Reimagining Film, Music, Television and Publishing Distribution”

Liveblogged from Drake IP Roundtable 2013.

Jon Garon begins by noting that Louis CK and other comedians started a movement of creating their own downloadable shows, liberated from traditional publishers. It was a relatively expensive production – a three-camera setup – but he was able to make about twice the amount of royalties he probably could have expected from a traditional publisher. He used social pressures to encourage people to pay what they thought was fair.

There are roughly 6000 feature length motion pictures available for distribution; 10% get picked up for theatrical distribution, the other 90% go to festivals or sit unwatched on some video platform (at least they’re not in the basement anymore). Distribution is changing – we don’t watch these in theatres or living room, but on all of our devices. A lot of companies are moving into the market. There are no clear winners yet. The bigger companies will eventually get back into the game, and they’ll be successful by buying or imitating the successful innovators.

A lot of the long-tail hypothesis is simply not true. People watch what’s popular in the last three months, and anything older is dead. Until that’s free, that is, until it is ‘libraried’.

The distribution business is a good business to be in; distributors get paid first, take less risks, and can control costs. Production is a bad business; producers take the greatest risk of non-completion or failure, and only receive net profit participation after exhibitor, distributor, etc, are all paid. Increasingly, media is purchased, so retailers serve as the primary distribution platform. Google and Amazon take very little risk, forcing producers to take on more risk.

There is something of an inverse correlation between budget and profit. Success can be thought of as 20% return on investment. Most big movies don’t have a 20% return on investment. Small budget movies, on the other hand, are much more ‘successful’; a $100,000 movie needs only to receive $120,000 in takings to be successful, and can often be wildly successful.

We talk about the ‘celestial jukebox’, but the reality is that being on the first page of the online stores is very profitable. The further you are down on the search results, the less revenue you receive. So we have exactly the same concentration we used to have; while there’s no barrier to access, there’s a barrier to audience.

United Artists was Indie Distribution 1.0. Indie Distribution 2.0 brings the audience into the pre-production process. This validates the artists – shows that a market exists, whereas there is no correlation between clicks and consumption. Paid customers, however, correlate very highly with paid customers. Integrating audience into the production stage also builds audiences, and builds audience investment in the product. Garon suggests that production must be integrated into distribution, so that distributors don’t push the risk onto producers. Garon envisages a just-in-time model that adjusts price according to demand, providing per-download pricing that will maximize revenue. Old content will be free.

Q: Like the idea that the world is changing, but what are the chances that the current players are not going to resist that change to the fullest of their resources? What is the timeline you see for this shift?

A: This model does not assume that the current model will go away. The destruction we see right now is that of traditional broadcast (TV etc) – those industries are struggling to find a new distribution model. If they can use a model like I have proposed to compete with Google, Netflix etc, then you might see some interest to get involved. But this is not necessarily a better model – it is just a different model

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