Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Newswatch: 8.22

Posted by Richard Koman - August 22, 2006

By Richard Koman for SiliconValleyWatcher.com

Guba is trying to find the sweet spot for on-demand online movies, cutting prices to $9.99 for a same-day-as-DVD-release, $4.99 for catalog movies, 99 cents for a 24-hour rental and 49 cents for a TV show. "“Nobody knows what the right price is for this stuff online,” Guba CEO Tom McInerney tells Red Herring. “The studios don’t know, even Apple doesn’t know.” Well, I may not be the typical movie viewer, but I could tell Tom to look to Netflix for guidance. Why do I want to buy movies for $10 a pop when I'm renting five a week for $25 a month? How many movies do I want to watch more than once? (Some I can't even watch once.)

99 cents for a movie rental, though: that actually starts to undercut Netflix for rentals. If the selection came anywhere close to what I can get on Netflix, I'm interested. No waiting, no scratched disks? And they don't have postage costs. But when the market appears, how does Guba compete with Apple?

A final thought here: Why do movies have to be flat-rate priced? There are movies people want to see and movies no one wants to see? Why not charge more for immediate access to "good" movies and discount prices for crappy stuff? Based on box-office take or ratings, of course, not actually quality.

ParisTube

In other video news, YouTube announced that it will join the heights of modern culture with the launch of branded advertising channels. First up: The Paris Hilton Channel, sponsored by Warner Bros. "Advertisers will be allowed to customize the channels and create subscriptions so viewers are alerted whenever a new video is added to the channel," reports Reuters. Another bizmod idea is called the Participatory Video Ad, where users rate, share, comment and embed advertising content.

YouTube says many more revenue ideas will be coming out in the coming year. I'm not sure I get participatory ads - at least not from that brief description, but neither of these products sounds like they really tap into the YT zeitgeist, which is user-created content. Money flowing to YT will eventually have to flow to the actual creators out there. To my mind, that means: 1) embedding ads in video (yuk); 2) sponsors paying the new universe of video creators to create video ads; or 3) product placement.

These are traditional models, but they have the virtue of including the creatives in the flow of money, which is crucial; and because they are traditional, Hollywood will know how to structure the deals. Which brings up a new revenue model for someone: agents. YT could play this role, negotiating for its creators, but since they have a vested interest in the deal, an independent agent would be better. (An auction model to place ads in the most popular video of the moment is also possible.) But since few individual videographers would be worthy of an agent's time, perhaps there's a role for someone like FederatedMedia to aggregate top talent and negotiate with YT. Or a confederation of creators who would take that 40% and put in a fund to pay for lawyers' bills and other professional services.

Just some thoughts on some possibilities, since the idea of Paris Hilton as YT's first shot doesn't inspire a lot of confidence in YT as a force for the video revolution.

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