Digital Streaming Market Valuation Could Top $1.3bn This Year

by Paul William Tenny

The machine is idling this afternoon as both sides in the writers' labor dispute are not scheduled to return to the negotiating table until sometime Tuesday, though there is little hope of the work stoppage coming to an end in the near future.

The demands put forth by the Writers Guild of America have been consistently rebuffed by the big media corporations who insist on pushing across rollbacks, also complaining of what they claim is an uncertain market, one that NBC has been keenly pursuing extremely aggressively over the past five weeks. Since just before the strike was called on November 5th, NBC has launched a streaming video service in partnership with Fox, along with its own download service and a deal struck this week with Netflix, which would make NBC's shows available in one digital form or another on at least five different sites in as many weeks.

Amongst the shows running dry this week is Heroes, which will air its last new episode this evening at its usual time. Even if NBC decides to kick it back into gear the instant the strike ends, you can expect to wait at least a month - probably longer - given how long it takes from story conception to having a canned episode ready for broadcast.

An article in the Financial Times published last Thursday quoted the senior VP of Starcom, a firm involved in the buying and selling of digital advertisements, as saying this particular market is worth as much as $120 million to the networks today, while another firm estimates the advertising market "will be worth close to $1.3bn this year after doubling in size in 2006."

As of today, the big media companies who are collectively represented by the Association of Motion Picture and Television Producers - who ironically aren't producers - initially refused to pay writers at all for streaming video, whether it be full length television episodes, or even feature length films. AMPTP considers all streaming video, regardless of length, as "promotional" in a way that is good for both writers and the studios and networks.

As for downloads - though not necessarily "download to own" as the TV episodes available on NBC's download service actually expire after about a week - the AMPTP has insisted for much of the past month that writers accept the same residual formula as they have for DVDs, which often amount to less than five cents per disc.

If the numbers from Starcom are to be believed, then consider that the Writers Guild of America recently released figures it believes represent what the studios would have to collectively pay to meet their demands on new media. That number which is certain to be contested by the networks and studios amounts to about $50 million per year, or just about twice what the highest paid CEO of the AMPTP companies makes in a year, and about a third of what Disney paid Michael Ovitz during his short tenure.

In many ways, considering the extreme profit margin the studios have on DVDs, it makes more sense financially for them to trade the demands on new media for an increase in DVD residuals on a sliding scale until new media reaches parity with the old.

Oddly enough, the AMPTP companies are even cooler to that idea than they are ceding jurisdiction over new media to the WGA.

Paramount announced a joint program with Warner Brothers a few weeks ago whereby they would begin selling retail DVDs in China for as little as $3 per disc, severely damaging their claims that they can't afford to double the residuals that writers receive on such sales from four cents to eight.

Come to think of it, the big media companies have far more credibility problems that just these. Only time will tell if they'll be forced to face the music, or if they'll have finally succeeded in breaking the writers union for good.
in Labor


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