Thursday, October 1, 2009

Frederator Aggregator

Let’s get one thing straight: Paying artists is always a positive thing. But the manner in which the guys at Channel Frederator are doing it continues to reflect their lack of regard and respect for the filmmaking community upon which they’ve built their brand. Seriously, in what universe is $50 considered an acceptable fee for anything nowadays? Have they been misinformed that filmmakers can time travel back to 1964 to make all their purchases?

Here’s a reality check—the last time I went out to lunch with Channel Frederator founder Fred Seibert, our lunch bill ended up being over fifty smackers. In other words, this paltry amount isn’t even enough to fill up Fred’s tummy for one afternoon, yet somehow it’s supposed to represent a filmmaker’s reward for months of blood, sweat and tears. They’ve also announced that every month they’ll pay the filmmaker of the most viewed film a whopping $200. Guess what? That’s still less than what we pay every single filmmaker on Cartoon Brew TV.

-Amid Amidi on Cartoon Brew

As you can see from the above, Channel Frederator has started paying a small amount for animation it will host on its site. Amidi is somewhat outraged at the amount. I think that Amidi is missing a fundamental aspect of Fred Seibert's business model and I think that the animation community doesn't yet understand how to function in the online world.

If you want to understand what Seibert is doing, I'd recommend that you read three books: The Long Tail and Free by Chris Anderson and What Would Google Do by Jeff Jarvis. Seibert's Next New Networks is practically a textbook case arising out of these books.

The long tail occurs when shelf space becomes infinite. In a brick and mortar store, space is limited so the proprietor focuses on those items that sell the best. That way, each square foot of space produces the maximum amount of income. However, in the online world, space is infinite and the cost of servers and hard drives is continuously coming down. Therefore, it's possible to offer a much wider variety of merchandise. Items that might only sell once or twice a year could not be carried in a brick and mortar store because they wouldn't produce sufficient profit, however when shelf space is unlimited and the cost approaches zero, a retailer might as well carry everything. The long tail consists of those items that, individually, do not add up to much in the way of sales, but if you have enough of those low-selling items, they can add up to a profitable business. Online retailers of this type are aggregators. The gather up anything in their category and make money by tiny profits on thousands or millions of items. Examples of long tail businesses are Amazon and Ebay.

The cost of duplicating something digitally is close to zero. With servers and hard drives becoming cheaper, the cost of hosting things also approaches zero. This is the thinking behind the book Free. Free is the most attractive price, so if you can afford to make something free, you're sure to find interested customers. The trick is to find something that you can sell while you're giving away the free item.

Jeff Jarvis says that the way to succeed in the online world is to build a platform that other people can use to form communities or do business. Google is the obvious example, but so are Amazon and Ebay. Amazon is a platform for anyone who wants to sell a book, whether a multinational conglomerate or a hobbyist in a basement. Ebay has created a worldwide market for any item you can think of.

Channel Frederator, now part of Next New Networks, is a classic aggregator. They gather up anything they think has the potential to attract a viewer. They don't have access to libraries of material from Disney, Warner Bros, Nickelodeon, etc. so they'll take material that's in the long tail and try to gather up enough of it to keep pulling viewers to the site. As recommended by Jarvis, they've built a platform that animators can use to reach an audience.

The material is available to viewers for free. What Next New Networks does is sell the viewers to advertisers. This is exactly the model that broadcast TV and radio have used for years.

Amazon or Ebay don't pay you to list with them, because the expectation is that you (and they) will profit from that listing. Channel Frederator is paying, though a pittance, but the amount is besides the point.

What's missing is the animation community's understanding of how to take advantage of Channel Frederator.

What Channel Frederator supplies is a piece of internet real estate. It is worth exactly zero, as anybody can start a blog or upload to YouTube for free. The valuable thing that Channel Frederator supplies is an audience. People interested in animation will go there looking for something to watch. It's likely that putting your film on Channel Frederator will result in more views, at least initially, than putting your film on YouTube, because Frederator is more focused. YouTube has everything, but your video is the proverbial needle in the haystack without some other kind of marketing to direct the audience to it. At Frederator, the audience for animation is already there.

Rather than complain about how little Frederator is paying, animators need to work the system. They should be using exposure on Frederator to drive to the audience to their own sites, where they sell something. Free points out that you can't charge for things that are abundant, you can only charge for things that are scarce. Therefore, while the audience can watch your film for free, you want to sell DVDs of it and include an autograph and quick sketch with every purchase, giving your viewer something they can't download. You can also be selling T-shirts, coffee mugs, etc. And of course, there should be a "donate" button on your site.

If you've got a reasonably good film, you'll probably make more from selling swag than from what Frederator is going to pay you. Furthermore, you should be collecting email addresses from your buyers, so that every time you release a new product, you've got a list of people to notify who have already bought something from you. By definition, these people like you enough to pay something for your work. They are a valuable resource.

If Frederator is willing to gather an audience for your film, carve off as much of it as you can and then monetize it.

Now, before you do this, I suggest that you read Frederator's Terms of Use. In particular, I want to quote the following:

Ownership; Licenses

We do not claim ownership rights in your User Submissions. However, by uploading, submitting, emailing, posting, publishing or otherwise transmitting any User Submission to any of the Sites, you hereby grant us a non-exclusive, worldwide, royalty-free, sublicensable, perpetual and irrevocable right and license to use, reproduce, modify, adapt, prepare derivative works based on, perform, display, publish, distribute, transmit, stream, broadcast and otherwise exploit such User Submission in any form, medium or technology now known or later developed, including without limitation on the Site and third party websites, podcast, video game consoles and services, video-on-demand and television. You represent and warrant that you own or have the necessary licenses, rights, consents, and permissions to grant the foregoing licenses to us. We shall own all right, title and interest in and to all derivative works and compilations of User Submissions that are created by us, including without limitation all worldwide intellectual property rights therein. You agree to execute and deliver such documents and provide all assistance reasonably requested by us, at our expense, to give us the full benefit of this section.

If you can wade through what's above you will note that while they don't claim ownership of your work, they claim perpetual non-exclusive use of it. They also have the right to modify it and prepare derivative works from it. They can place it on game consoles and all of the above are without any additional compensation. So, they can use your film forever, they can cut it or add to it, they can ship it with the next version of the Playstation or XBox. They can do all that and more without asking you for permission.

Note that they can develop derivative works. In historical terms, imagine that you've created a film called Porky's Hare Hunt with the prototype of Bugs Bunny. Frederator decides that the core idea is a good one but you didn't make the most of it, so they turn around and derive A Wild Hare from your film, only now, they own the new version of Bugs Bunny (not you), and they continue to use your film as a Bugs Bunny DVD extra or as part of a package of Bugs Bunny cartoons they sell elsewhere.

Would Frederator do any of the above? I have no idea. However, they have the legal right to. More than the $50 fee they're willing to pay, the Terms of Use are the part of the deal that smells the worst to me.

Some artists will inevitably complain that they don't want to deal with selling stuff, they just want to create their work. While in the past you could sell that work to a studio and receive a reasonable paycheque, those days are rapidly coming to a close. The economic model for film and TV as it existed is crumbling. Fred Seibert (and Cartoon Brew TV for that matter) will not pay you enough to create your work. We may see the studio jobs in animation vanish the same way that journalism jobs are vanishing. If that happens, we may all be reduced to creating work for free and then selling something related to the that work. Certainly, if you want to retain ownership of your work, that's what you'll be doing. However, if you want to maintain control over your work, you won't be contributing to Channel Frederator.

(This article is about strip cartoonists, not animators, but the lessons it talks about are ones that animators should be thinking over seriously.)

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