The New Economics

Shall we dance?

Billionaire Mark Cuban asks the following question on his blog:

“Are content producers prepared to reduced production costs….by 88%”

Cuban asks this as a rhetorical question, trying to demonstrate the almost destructive economics of video and the web.

I think, however, the question deserves an answer, and the answer is yes.

Content producers are indeed prepared to reduce production costs by 88% (or I would rather say by as much as 88%). Just not the content producers that Mark Cuban knows.

Making television and video content used to be an incredibly expensive and complex process. It isn’t any more. It isn’t anymore because new technologies have made creating video content about as complex as word processing. That does not mean that there is no creativity attached to it. There is. Some novelists make millions, not because writing is so complex,but because the content they produce is so compelling. On the other hand, there are millions of people who produce ‘words’, and make a living at it. Millions of freelance writers worldwide.

Well now creating video on a desktop is pretty much on a par with creating text. It requires about the same amount of work.

In a world that consumes millions of hours of video, the days of ‘million dollar hours’ are over.

So are the days of paying a professional cameraman $1500 a day to carry around a camera on his shoulder and push the button. The numbers just are not there, as Mr. Cuban points out.

But we draw different conclusions.

Mark Cuban asks if content producers are prepared to take an 88% cut in production costs. (I think his number is a bit high, but let’s take it anyway).

When I started to produce cable shows for Discovery, they paid about $250,000 an hour per show. The show is 44 minutes. At $250 per 44 minutes, the rate then was $5681.81 per minute. If we take 12% of that, (call it the Cuban Conversion), we arrive at $681 per minute for video produced.

That, I think, is a pretty good rate, as any freelancer with a laptop and a camcorder will tell you. Current.com pays $250 a minute and places like CNN take it for free.

How hard is it to produce a minute of video with a camcorder and a laptop?

Last month, the NY Times reported that people are now uploading 10 hours of video to Youtube every minute!

Every minute!

At $681 per minute, the ‘value’ of that uploading is $409,909.00 per hour, $9.8 million day,

$68 million a week, and about $3.5 billion a year. And we are just in year 2 of Youtube.

Now, of course, not all of that is going to be worth $681 a minute. Some will be worth appreciably less. Some worth nothing. But some will be worth a lot more.

How much is a page of typing worth?

Well, if it’s the first page of Harry Potter, it’s worth quite a lot. The manufacture of writing is cheap. The market determines its value based on content. Now video starts to enter the same realm.

What does this mean in the long run?

First it means that Mark Cuban’s numbers are not so wrong and not so bad.

They are only bad if you have a career tied to the old economy – one in which the act of producing video seemed some kind of magical, difficult, secret, complex and expensive process.

It isn’t.

Oh, and by the way, at Mark Cuban’s numbers, a half hour of video would cost a network about $20,000. Anyone out there with a laptop edit and camcorder who wants to sign up to produce a cable half hour for $20,000? How about a series at that rate?

Hands down.

5 responses to “The New Economics

  1. Excellent post Michael🙂

    The democratization of video production and distribution has pushed the envelope and many of those who deride this massive paradigm shift are silently wondering what to do – and their only course of action it seems is to whine about it publically here and on other venues of discussion.

    Based upon your argument in favor, your last paragraph about producing a 30 minute series for $20,000 per episode is VERY reasonable. Of course the detractors will probably come back with some argument that solo vj’s don’t have the skills and equipment to do such a thing. From my experience in reading their responses, in their narrow world view, they have grown use to over inflated day rates for as you said – pushing a button on a shoulder mount camera locked down on a massive tripod.

    The new Solo VJ paradigm is about pared down equipment, laptop editing and producing content that requires alot more than pushing a button. Learning about good composition (Rule of thirds, etc), recording audio well, editing with flow, color correction, etc.

    The detractors say it can’t be learned in a short amount of time – what a load of crap. You can learn the essentials – then its a matter of going out and doing. But to do so without their guidance – well, we know how that ends up.

    Many of your TCA photo’s show the attendees using SONY HC7’s – great little camera. Add a good wireless lav (Sennheiser G2) and shotgun mic, a powerful laptop and let content producers develop whatever strikes their fancy. Not all of them will be successful – so what. That’s the power of this new way of producing video content – the new wave of solo video content creators are no longer constrained by the gatekeeper GOB’s who appear to have selectively repressed the desire and ability of other aspiring shooters – all because they didn’t meet their private membership requirements.

    …if you have a career tied to the old economy – one in which the act of producing video seemed some kind of magical, difficult, secret, complex and expensive process.

    It isn’t.

    Those who already have a solid foundation as still shooters have an even better chance with moving to video since they have additional skills traditional video shooters don’t.

    That’s the clincher – and one the detractors, it seems, avoid every chance they get.

    Again, I’m sure there will be those select regular detractors who will voice their opposition about anything that is solovj and will come back with some negative comment about anyone who doesn’t agree with their agenda – instead of participating in a constructive manner on the topic at hand.

  2. Just what skills do you, and other still shooters, have Cliff that you seem to think matters so much?

    What are those additional skills you speak of?

    Is one of them having a second job to pay the bills since you can’t make a living as a VJ?

  3. Reasons that it is currently not practical to produce a 1/2 hr show for cable or broadcast for $20,000:

    1) Liability, E&O and Workers Comp Insurance

    2) Legal Fees

    3) Network Executive Producers who require multiple re-cuts, changes in graphics and music, and switchups in creative direction throughout the production process

    4) Broadcast requirements for finishing on formats that will hold up to the technical rigors of satellite transmission

    Items 1 and 2 will stay with us as long as our society remains litigious. (Maybe I can sell E&O Insurance to bloggers!!!)

    If veiwership of internet video increases measurably, and someone comes up with a good way of monetizing it, item 4 will go away. This is already starting as there are thousands of “webisodes” and made for web programs around. Unfortunately, nobody makes any money on them.

    Eventually there will have to be a financial model where producers will be paid a reasonable rate for the time/effort/energy required to produce content and then benefit from the success of their product.

    Perhaps we should look to the music world for a financial model that works. Composers and lyricists can make whatever deal they want for the creation of their work, but if it runs on television they are paid additionally out of large funds administered by the performance rights societies. These funds are paid for by the distributors (i.e. networks).

    If the huge companies that we pay $49.99/month for isp service kicked in a small amount per subscriber to a fund that could be used to pay for content that is downloaded or viewed (easy to track), suddenly content creators would benefit as their content is viewed more.

    Of course, another model would be user subscriptions, but frankly, I think we pay so much for internet access, that the cost of popular content could be covered by the isp’s.

    …..just thinking out loud.

  4. Of course, most of these costs are remnants of an old way of working that will soon vanish due purely to economic pressure.
    Creating content for magazines is in fact no different than creating content for TV. Freelance magazine writers have for years worked at home, on their typewriters or computers, cranking out the content that fills magazines. That, in fact, is how they stay in business.
    If magazines demanded that each freelance writer take out liability and E&O insurance for each article the wrote, they would find precious few writers who would work for them. Likewise with legal fees. The networks have for years pushed off costs which were properly theirs (and which would be far less expensive if dealt with once, in an over-arching manner) onto indy production companies. This practice will not last much longer.

  5. Both Steve’s and Michael’s responses shed some light on the fact that those who are going to shoot as solo vj’s NEED to not only be content creators, but have a basic understanding of what it means to be in business for themselves – ie; take small business management courses. I did that and it has helped me deal with the mundane aspects of such things as business insurance, managing my financials, not running my business as a sole proprietorship, etc.

    Adding the skills of running a business to the skills needed for creating good compelling content can seem overwhelming – and maybe this is where the detractors use FUD about how they need to continue to be the gatekeepers of the profession and its craft which gives them a soapbox to stand on.

    Doesn’t mean they’re entirely accurate though.

    There are some expenses that need to be taken on by those wishing to shoot content professionally. That’s part of the cost of running a business.

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