Publishers adopt model of entertainment
industry
by Joey Tamer
Multimedia developers to date have
followed a software developers' model in the creation and distribution of their
product as well as the structuring of their companies. In most cases their product
and company development has been self-funded. Product development costs have been
minimized, and any profit has been plowed back into the company. Overhead has
been kept low. Templates have been designed, and content selected and programmed,
to fit into those templates. And since the market has been so small and its future
unpredictable, distribution has been concentrated in the traditional computer
markets: mail order catalogs and software retail stores. These strategies have
been the best available to ensure the survival of a multimedia publishing company.
Now, however, the market is substantiated, and growing. And as the business of
multimedia has become more viable, the paradigm for developing, funding and distributing
consumer interactive titles has begun to shift from a software paradigm to an
entertainment industry paradigm. It is not precisely a film industry model, but
a hybrid of the film and record industries, with some elements of the book publishing
model thrown in.
Widespread distribution leadsto
a Hollywood hybrid deal
Before we can actually understand how development and funding for new media
will evolve, we must first look at how the distribution channel is expanding,
because it is the widespread distribution of these titles that acts as the catalyst
that creates the shift in the business model for interactive media.
Distribution is the linchpin.
We are now seeing the adoption of new media in software-only stores, consumer
electronic stores and computer superstores. By the end of this year, though,
consumers will be able to pick up interactive CDs in video and music retail
outlets. Not surprisingly, customers will find music/video titles, interactive
movies, film-type documentaries and other interactive media similar to these
stores' existing product lines. The stores will even offer racks of MPC- and
Macintosh-based titles for rental before this year is out. Bookstores, as we
have said in earlier columns, will be the last holdout, waiting until the 1994
Christmas season before really making a commitment to sell CD-ROM discs.
Expanded channels key to increased
funding for titles
In the traditional entertainment industry (books, videos and music) distribution
is second in importance only to good original material (the manuscript, the
composition or the script). The breadth of distribution represents a product's
potential value and indicates its return on investment. Often in the movie industry,
for instance, operating and development costs are not recovered until the film
reaches foreign or secondary markets such as cable, pay-per-view and video rental.
And it goes like this.
This is why the change in funding and development practices for new media is
so tightly bound to distribution. As distributors in the entertainment outlets
demand more "consumer-oriented" titles, i.e., compelling titles with
more video and more music, the cost of production for multimedia developers
is going to skyrocket. This increased cost in production will prohibit the self-funding
and isolated authorship that has been so much a part of the existing multimedia
development model, and it will in turn initiate the movement toward a film-making
model. And yes, you guessed it. Similar to the independent film model, distribution
rights for interactive titles will most likely be pre-sold to fund the development
of the title.
The end of the $50,000 prototype?
At that point (and this is already beginning to happen), titles will be developed
with writers, directors, producers, executive producers and agents. "Hyphenates"
will work as they do in film: the writer-director, the producer-director, the
writer-producer. Executive producers, agents and packaging agents will create
deals using talent and name-branding. These packages and deals will be constructed
prior to product development, sometimes prior to scripting or storyboarding.
And unlike today's new media market, money will change hands before a
single piece of code is written. We will see more use of original material,
for which royalties will be paid. As full-motion video becomes refined and cost-effective,
we will see more use of actors, musicians and writers, all of whom will work
under their union contracts. They will expect residuals, royalties or other
ongoing payment structures. The mindset of creating a "box office hit" will
take hold, driving decisions about funding potential "A" titles. This shift
will take place over the next few years and will solidify once the secondary
and international markets provide a significant source of revenue.
Know four industries to build
a new one
The new era begins now. We must watch the acquisitions of and investments in
the pioneering companies of multimedia. We must track the strategic alliances
among leading players in all the industries. We must watch for effective synergy
between sister companies such as HarperCollins, Fox and News Corp., or Paramount
and Simon & Schuster, or the various divisions within Time Warner. We must
become acquainted with the agents who control the talent, both in Hollywood
and New York. We must standardize our distribution agreements and packaging,
so that it is as easy to ship a CD-ROM title to software stores, bookstores
and audio/video stores as it is to ship the standard video or audio tape. We
must learn the language of all four industries, understand their payment and
royalty structures, and the cultures that form an acceptable deal in each. We
must become acquainted with the guilds that control the talent that will be
recruited to make the titles. We must understand their histories, their inter-competitiveness
and their power. It is only in understanding all the dimensions of distribution,
production and funding across all the industries touched by multimedia that
we will move successfully into the new world of entertainment this technology
will create.
Joey
Tamer refines the vision, strategy and success of companies --
Fortune 1000, capitalized start-ups and investment fund.
www.joeytamer.com
(310) 245 5310 joey @ joeytamer.com