Posts Tagged ‘free vs. subscription’

It was a big week in the world of online video, particularly among the biggest players. Amazon began posting information on new features it’s planning to add to its video-on-demand service, including a subscription plan. Netflix said it’s planning new features in conjunction with Facebook. And Hulu, a studio-backed site offering a limited range of television shows free of charge, said nearly 1 million people had registered for its relatively new subscription service.

All of this strikes me as clear evidence that more people are spending more and more time watching videos online, and want to integrate this viewing into the rest of their daily routines, which also include more time spent online.

It also reinforces our confidence that our FargoTube online video/music platform will continue to grow and thrive because FargoTube is an online video provider like these large media companies. FargoTube has an especially promising future because of its more extensive interactivity, which is aimed at independent musicians, video producers and their fans.

For me, the week’s most interesting piece of news was from NetFlix. The company, which dominates the U.S. DVD-by-mail market and has become one of the nation’s largest services for streaming Hollywood movies, hasn’t given much detail about the integration with Facebook, but I’m guessing it includes the ability to post movie ratings and comments to users’ Facebook pages, which NetFlix dialed back and then eliminated last year. It was a great feature and I hope it comes back, although it didn’t give users special access to artists the way FargoTube does.

A common thread in the news about these large online media services since last year is that they seem to be moving more and more aggressively onto each others’ turf. That makes me wonder whether any one of them will maintain the uniqueness it needs to retain customers, or whether price competition might hurt one or more of them.

In contrast, FargoTube’s unique format, the social networks centered on its entertainment content – and the resulting digital marketplace experience – are features that aren’t available anywhere else. As using the Internet and enjoying entertainment media become more and more synonymous, FargoTube is right at the intersection of creativity, commerce and fun.

A survey published last week by the Pew Internet & American Life Project found that 65 percent of internet users in the U.S. have paid for news, entertainment and/or other digital media.

That’s crucial for FargoTube because it strongly reinforces our belief that musicians, filmmakers and other content owners deserve to be compensated for their creations that are distributed online just as they’re compensated for tangible products such as CDs and DVDs. More importantly, this is evidence that content owners can profit from their works, which is the central premise of the FargoTube business model. Artists don’t have to post their videos and music for free consumption, merely as an attempt to steer fans to their discs and live performances, and they don’t have to rely on ad-funded sites like YouTube, which share a far smaller portion of their revenue than the 70 percent that FargoTube shares.

The Pew report has drawn extensive news coverage in the last few days, both on tech blogs and in the mainstream media.

This was the first time that Pew surveyed Americans’ spending on online media, but I think it’s safe to assume that 65 percent is a big jump from a couple of years ago. (Taking into account that a quarter of the people in the survey don’t use the internet, only 49 percent of Americans buy online content. That percentage has also surely grown quickly and will continue to do so.)

I think people are becoming more willing to pay for digital content for two main reasons. First, they’re spending more of their time online. It’s worth the investment to them because they know they’ll either be at their computer or have an appropriately equipped mobile device on hand at the moment they want to listen to the music, watch the video or play the game that they download.

The second big reason is that individual online content providers and distributors are differentiating themselves from one another, thanks partly to faster internet connection speeds. They offer a wide range of interactive features, including many that were impossible in the days of dial-up and even DSL. Internet users can no longer drift away to a different site that has exactly the same content and presentation.

I think FargoTube is a great example of this differentiation, especially in terms of presentation. FargoTube’s social-networking format is unique among online video platforms. Subscribers to a FargoTube fan site can interact with each other and with the bands, authors and filmmakers whose works they buy. Subscribers can share their own videos of concert footage with one another and even sell that footage, subject to the approval of the content owner behind the fan site.

I decided to tag along with F3’s sales team to NextBigNashville a couple of weeks ago. Paul Campbell, Stephanie Miller, and I busily attended conferences addressing the problems that independent artists — and even signed artists — are still having in distributing their creative works and profiting from them.

 


Performance at the famous Bluebird Cafe!

 

The Nashville scene is very unpretentious when compared to other music scenes I’ve been exposed to. I must admit to being more tuned in to the rock-music industry, but Nashville was a very comfortable place for me, probably because I play guitar and keyboards, and even played professionally for several years in the ’80s. (Look as hard as you want, you won’t find any pictures of me, my clothes, or my hair at the time; thankfully, the internet as we know it was not yet invented , and cameras still had film.)

As I settled in to the conference great room where everyone could meet, relax, eat lunch and socialize, I set out apart from Paul and Stephanie and plopped down at a table with what I thought was a BIG country star, trimmed ShoLo hair, boots, crisp jeans, he had the Country Star look for sure. Others were at the table, too, but I “knew” this was the right guy.

I sat down and introduced myself, which prompted the others at the table to begin introducing themselves; the guy I thought was the BIG country star was actually a BIG Nashville attorney who represents all your favorite country stars; however, the guy to my right, who looked like my last waiter at Chili’s, turned out to be the songwriter Chas Sandford. Admittedly, I had no idea who I was speaking with, but I am a musician and genuinely respect and admire all fellow artists.

 


Chas Sandford (courtsey of chassandford.com)

 

Remember, I told you country music wasn’t my strongest skill set? It turns out that Chas (yes, we’re on a first-name basis now) had not done so badly for himself. I later learned that as a hit songwriter and publisher, he won twelve ASCAP “Most Performed Songs” awards, including John Waite’s “Missing You,” Chicago’s “What Kind of Man Would I Be” and Stevie Nicks’ “Talk To Me.” His songs have also been recorded by Tina Turner, Rod Stewart, Melanie, Roger Daltrey, Berlin, Millie Jackson, Brooks & Dunn, Alison Krauss, Rick Springfield, Sammy Hagar, Jimmy Barnes, Don Johnson, David Wilcox, Tyler Hilton, Sheila B. Devotion and others.

So, I am now speaking with a couple of key people in the music industry – wouldn’t you agree? — and eating lunch (which F3 co-sponsored) with my new friends.  The conversation with Chas and the big Nashville lawyer would be the first of many — with artists from ALL genres —  lamenting over the same problem:

I own this entire library of my music, and I have no idea what to do with it, how to market it, or how to distribute it.

 

Ken Paulson, CEO, First Amendment Center; singer Caleb Folowill, Kings of Leon; Ken Levitan, producer and manager

 

I also attended several sessions of the conference that focused on the issues of digital distribution rights that face these artists and labels. I heard repeatedly that the record companies have not always kept up with the times: Some still do business like they did in the ’70s, and that can be cumbersome, time-consuming, and expensive.  I believe this is one of the reasons why 40 percent of today’s musicians are independent (including some huge players such as Garth Brooks, Kiss, and Kings of Leon). Independent artists organized a conference on their own initiative to try to solve some of the digital-rights issues.

Now, here came my epiphany, after attending the panel discussions and meeting IP attorneys and managers and musicians from the genres of hip hop, rock, country, and alternative. I realized that…

FargoTube solves 95 percent of the digital rights, distribution, and royalties issues that conference attendees had been chewing over for the past two days!

Wow! I was really excited, and since I’ve played music most of my life (yes, even at church as a kid), I had finally grasped the magnitude of F3’s opportunity.

Dozens of musicians at the conference — and indeed the conference itself — were broadcasting the message “Nashville, we’ve had a problem.”

F3’s response: “Don’t worry, Nashville, FargoTube is the solution!”

Coming Soon: Look for my next entries as I explain why 99-cent Itoons (sic) has not been the answer to digital rights management, sales, distribution and marketing, give my report on F3’s top-notch sales-team, as well as introducing you to more of the artists and bands I have met and spoken with. Till then…

Steve Haag handles investor relations for F3 Technologies. He is principal at SmallCap Support Services in Houston. He can be reached at (832) 201-7913 and shaag@smallcapss.com.

A slideshow of Steve’s photos from NBN is below:

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More evidence of FargoTube’s commitment to musicians, filmmakers, and video-based instructors: F3 is sharing 70 percent of the revenue generated by videos and other digital content uploaded to FargoTube between now and the end of the year.

The offer applies to revenue that the content generates between now and the end of 2011. The revenue split will then go back to something closer to 50/50. That, too, is a humongous improvement over what content owners get from the advertisement-supported sites where they post their videos, let alone from sites where their content is posted without their permission.

More details in this morning’s press release.

Counting our agreement with Broadcast Music Inc., which we announced this morning, we’ve formally pledged to compensate half a million copyright owners for their music that is uploaded to FargoTube. BMI enforces copyrights on behalf of 400,000 musicians and other owners, and a similar performing rights organization, whose signing we announced last week, represents a significant but smaller number of copyright owners.

This is particularly important for a feature of FargoTube that we haven’t discussed extensively: FargoTube lets users post and share videos in much the same way that free websites allow. While each content owner organizes his or her “tube” around the videos that he or she posts and sells, subscribers can post their own favorite videos to the tube, if the tube owner allows this feature. The feature is part of what makes FargoTube a social network, and not just a distribution platform.

Inevitably, in some cases a user will post a video without the explicit consent of its creator or copyright owner. We’re paying licensing fees to BMI and SESAC to ensure that the artists do get paid for those videos.

Just following up on yesterday’s press release about hip-hop choreographer and dance instructor Kelly Peters, who recently signed on to use FargoTube to sell his videos and stay in touch with fans.

Kelly’s been in the business for a while, and his first instructional video, “Make it Happen,” has sold more than 15,000 copies. It has been among Amazon.com’s 10 best-selling “dance and DJ” videos for most of the last couple of weeks (fifth when I wrote the press release, #4 last night, and now #8). Kelly’s working on several new videos that will probably be comparable in length to his first one, about an hour.

For us at F3, and probably for Kelly himself, the coolest thing is that FargoTube enables him to start making money on different kinds of videos. He’s been interviewing innovators and stars in various fields of dance — including Rhapsody, Luam and Mr. Wiggles — and offering the interviews free of charge as downloadable podcasts. He recently interviewed an early pioneer of one hip-hop subgenre — I’m dying to tell you who it is, but can’t until it’s uploaded. That’s one of the first videos he plans to upload to his tube, some time in the next few days.

Yesterday’s New York Times Magazine had a fascinating, fascinating article about performance rights organizations, which enforce music copyrights.

The article followed Devon Baker, a field agent for BMI, one of the three largest PROs in the United States, as she trekked across the Arizona desert in an effort to wring a few hundred dollars a year from bar after cafe after strip club. I guess you could call her a soldier in the ground war over intellectual property.

Up until yesterday, I had never wondered how many proprietors are out there buying CDs for $9.95 from Amazon and then playing them while selling $2.95 bottles of Bud Light, but I’ll bet it’s a lot, and BMI’s agents are apparently trying to find and charge all of them. It looks like an awfully tough slog.

BMI (Broadcast Music, Inc.) is organized like a nonprofit, and a representative told the magazine that it gives musicians and record labels 89 percent of the fees it collects on their behalf, after subtracting 11 percent for its own costs, including the salaries of Baker and other field agents. BMI employs several hundred agents like her and claims about $1 billion in royalty revenue each year, according to the article. I’m guessing that the other two majors, ASCAP and SESAC, are comparable in size. (The two names are acronyms for the American Society of Composers, Authors and Publishers and the Society of European Stage Authors and Composers, but all three organizations are equally focused on U.S. copyright law).

We at F3 Technologies have been looking at PROs because their mission is complementary and so similar to that of our FargoTube video and entertainment service: helping artists and content owners to regain control over their creations.

There are differences, of course: Whereas Devon Baker begins collecting revenue from heretofore illegal use, FargoTube is a completely new type of platform that can bring new fans to content owners while allowing artists to connect with existing fans more richly.

By “richly,” I mean more profitably, but also through richer content: FargoTube accommodates music, high-definition still images and videos, including exclusive interviews, short video messages, music videos, and movie-length features. And FargoTube is built like a social network, so fans of a particular artist can interact with each other, share videos subject to the artist’s approval, and get information about upcoming tours.

My favorite difference between PROs and FargoTube: F3 employees don’t have to negotiate with screaming bar owners in dusty parking lots.