Thursday, October 01, 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.)

14 comments:

Charles said...

Excellent analysis Mark, especially on the eceonmics of infinite goods.

I'd be willing to argue on the terms of service though, I mean, if you read Blogger's terms of service, you'd find that they you have accepted a similar perpetual, royalty-free agreement despite retaining ownership/copyright of the content you create. That's why I jumped ship over to Wordpress.com.

I think the main problem is that people rarely read such terms of service at all and then get upset when they finally do in the belief that they've been duped.

As for the way content creation is going, you're right, but I think it's going to happen slowly. I do think however, that we will begin to see creators being better compensated for their work although it may well take 20 years for it to reach the levels we're accustomed to, depending on how fast the markets develop. Channel Frederator offering $50 is only the (very) beginning of such a system.

Michael Sporn said...

I felt confident you would comment on Amid's column and would also have some interesting things to say. Consequently, I've been checking your site often since that initial piece was written. You didn't disappoint, nor do the smart things you have to say.

I've always felt that there are two types of people in world. The creators and the maggots - those who live off of the creators. This is one of the few articles about both groups. Your sense of clarity will help many.

JPilot said...

Unfortunately, the "Free" and "Long Tail" model does not translate well to banks, mortgages or other creditors.
This model, in the short term, only serves hobbyists or trust fund babies.

When the bills come due for the rest of us, it's all Channel Federline, a.k.a. life comes at you fast. You can't spit out a lot of content fast enough to cover your expenses.

Keith Lango said...

Excellent assessment. I agree that the User Agreement is the deal breaker, not the $50. I think it's a fair trade off. I've never heard of Next New whatever. All the people I know who look for some online video to waste a few minutes on go to YouTube or Hulu. The rest of the genre specific online video/content aggregators are sucker fish riding under the bellies of those whales. Why not just ride the whale and skip the middle-sucker-fish? Whether we like it or not, the world is shifting. If we cling too tightly to old business models we'll be like the RIAA, MPAA, newspapers and 17th century French button makers- punishing our customers/fans for sharing our stuff that they really like with their friends and insisting that government institute a system of entitlement for us. Thankfully it is being proven that viable business models exist that incorporate the reality of "free". Examples abound. Here's a good link to start with.... http://www.techdirt.com/articles/20090201/1408273588.shtml

Amid said...

Mark - I've read Anderson's "Free" and there's no bigger supporter of his ideas than myself. But the concept of "Free" does not give business people the right to take advantage of and abuse the goodwill of creators.

It's one thing if the creator himself chooses to freely distribute his content across all platforms. That's taking advantage of the model. When a businessperson surreptitiously licenses tons of films across all platforms with the intention of profit and giving nothing back in return to the original creators, that's just called being an ass.

Free is a pathway that allows for the empowerment of individual creators; it's not a free license for the implementation of shady business practices.

Amid said...

PS - I also disagree with your notion that animators don't understand how to function in the online world. "Simon's Cat" is a perfect example of a YouTube cartoon that became a viral hit leading to book and merchandising deals for the creator. Same goes for Charlie the Unicorn on YouTube. And don't get me started with the hits that have lead to mini-careers for artists on Newgrounds. Channel Frederator has never helped a property go viral like this and they've been doing it for four years. Their influence in the online world is minimal at best, which is why the rights they take are disproportionately out of whack.

roconnor said...

I'd like to make a point about the aggregation of content you describe, and to take issue with efficacy of the model you describe.

This works for Amazon, it works for eBay. Although it hasn't worked commercially yet for YouTube, it has as a brand.

The popular (but not profitable) success of YouTube has lead dozens of others to think they can do the same thing.

Frederator is not exactly that -but it shares YouTube's core programming problem and exacerbates its. It's loaded with junk.

The mass of junk on a site dedicated to animation goes counter to the eBay/Amazon argument. I avoid the site. It's the animation equivalent of Amazon that only sells basement mildewed Danielle Steele novels.

Their business model is not built on having lots of stuff and becoming a Nickelodeon/Cartoon Network style destination. Their model is to throw lots of stuff at the wall and see what sticks.

This has become the standard model for content sites -Funny or Die, SuperDeluxe, My Damn Channel, et c. The site itself is never a destination and the business model is to build a "viral" hit to secure more financing with no real plan to turn profit.

Anonymous said...

"Frederator is not exactly that -but it shares YouTube's core programming problem and exacerbates its. It's loaded with junk."

Gotta agree with that. I watched every episode of Frederator back in the beginning, but once they ran out of good stuff, I was no longer interested.

I'd rather find quality animation & cartoons myself.

allen mez said...

Once again you have pulled back the curtain to reveal a topic clearly. I too was lured by the "exposure" but then balked at the user agreement that nobody seemed to be talking about. Thank you Mark.

David said...

"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.

...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."


Exactly. You found the real pitfall of this scheme. This is very similar to the shady user agreement that the now defunct MyToons (remember them?) used . Even though MyToons is no more I wonder if anyone who signed over the "perpetual use" of their content to MyToons will find their work showing up in other forms in years to come.

So if you're going to get a mere $50.00 for your film at least don't sign away the rights for people to re-use, re-package, and re-vision your work without paying you another dime for it .

Anonymous said...

Hi,

I totally don't understand Sony and Frederator. Besides the terms under which a property is pulled onto the channel the fee is just too low. Even for industries like the casual gaming industry who also have small turnaround times for games. It typically it takes a month or two for a game to be made. Game portals that feature such work are Kongregate, Newgrounds and gamesgames. A short can be made in that time offcourse.

There are more examples but working in this industry I know a little bit about how it works. An internet game company buys of a property for a fixed fee which is way higher than the fee Frederator is offering. If a company is good they can make a living of it for at least a month if the company is one or two people. But then also the turnaround rate for a game is about a month or two months. Also the fee depends on how much quality the work has if it has quality it gets more money. The only thing a company know is that the game can be distributed by us indefinitely for about three years then a game often ends it's cycle and dies of and gets thrown of the server.
Secondly these portals make theyre money with clicks. Advertisers post theyre advertisements on the portals and every-time a player clicks past an advertisement the portal gets 0.002 cents. An advertiser buys like an X amount of clicks. But what he gets is very exact marketing because many of the game portals get exact demographics. Not every game does well if a shop keeps making bad games they are dropped. If they make good games the relationship grows and both parties prosper. Don't forget millions and millions of clicks add up! That's how big it is.

This is not what frederator is doing they are not being very constructive! They are grazing. And they are tearing apart the industry. They are keeping the old distribution system in place. Why you may ask... for more control over content. They bring to the surface what is interesting to them and for them to make profit of. A film maker can only dump they're work at frederator and they cannot become a partner. Not only them but all studio's are not using the internet at all. The only companies that are using the internet well these days are the internet game companies and all the big internet companies like google, yahoo etc. No one is watching them and learning from them. And no one absolutely no one is learning from Apple. Because there is one thing that apple has done well and that is create a platform they totally and utterly control. If a studio would do what apple did we could go back to the golden age of film making. Because low cost high turnaround is the way to go. Roger Corman knew this and so should we! Costs for films and animation are going through the roof. They are governed by rich people who don't believe in mistakes. They've lost sight of the fact that being creative is all about mistakes! And what executives should know is that bigger things build from mistakes. Thus someone will take the good ideas a film has and do something cool with them. Even though the original wasn't good at all. People like Quentin Tarantino have made a living of making those mistakes or pulp films into Cinema.

Also one wise painter called Bob Ross once said: "We don't make mistakes, we just have happy little accidents"

Besides all this it's weird Sony is partnering with Frederator because they do get online gaming. The new PSP has it's own store!!! Also Sony developed the 3d collada format for the Playstation that they gave to the open source community. This is now used in googles sketchup. But why oh why are they ripping of creatives with Channel Frederator!!! I absolutely scratch my skull.

By Anonymous

warren said...

the devil's in the details, innit?

Rick Roberts said...

I remember I was reading how Theguywiththeglasses.com started. The website hosted the videos on Youtube and that's how they got their attention. The attraction is the key and then linking your material to an exclusive site with the potential of mass advertising revenue.

Rick Roberts said...

So if Frederator does indeed make an effort to concentrate an audience to the video you put up, it's not such a bad idea to get payed just 50 bones for your work. The internet is saturated with countless many comics,cartoons, and, videos, to try and gey any real attention anywhere else.