Docs: Pay Per Transaction Output Agreements

http://www.rentrakppt.com/content/services/output_programs.html

Actual PPT output agreements for Warner Home Video, Sony, 20th Century Fox, Lions Gate and First Look / DEJ.

Article: Rev-Share Still Lives

Rentrak's Graham doesn't see studios budging much on selloff restrictions, since they don't want to risk cannibalizing their new sellthrough.

On the studio side, sources say three of the six majors — Buena Vista Home Entertainment, Universal Studios Home Entertainment and 20th Century Fox Home Entertainment — have opted not to enter into any long-term deals with the chains.

All the major studios have PPT deals with Rentrak, with variations. Most offer output deals for DVD and videocassettes, with Buena Vista's and Universal's PPT involvement limited to VHS. Upfront fees ranging from nothing to $1.50 (Universal and Buena Vista charge $3.75 and $6.75 for VHS). On average, retailers then keep 60 percent of the rental proceeds, and all but $1.25 to $3.80 of the selloff take.

Last March, Warner Home Video tweaked its revenue-sharing program to include a back-end minimum guarantee back to the studio.

Rentrak also has deals with a variety of smaller suppliers, including Wellspring, Ardustry and MTI. PPT programs also are available for some video games, with upfront fees averaging $8.50 to $12.50 and participating retailers getting 54 percent of the rental proceeds.

http://www.rentrakppt.com/content/news/news_09-16-05.html

Article: Netflix discusses downloadable movies

Barry McCarthy, CFO of online movie rental company Netflix (ticker: NFLX), presented at the Morgan Stanley Small Cap Conference on June 15th. (That means that Morgan Stanley hosted small cap companies, not that Morgan Stanley is becoming a small cap stock...) Here's his argument why DVD rentals will not be displaced by movie downloading:

The studios make all of their money selling DVDs and almost none of their money theatrically. And they make practically no money at all on pay-per-view...

So, if you're a studio and you're trying to decide whether you're going to license content for electronic downloading, the decision is pretty simple. Two bucks electronic downloading, 18 bucks wholesale. Before you're going to license content for electronic downloading, you have believe that the market at two bucks of incremental revenue is so elastic that it's going to overwhelm the revenues you already generate from DVD and grow your business.

And no CEO is going to make that bet, which is why there's virtually no content licensable, on a subscription basis, for downloading. And that's the reason downloading is not the technology of the 21st century. Technology can do it. There will be a box in your home, that you can afford, that's going to drive that technology to the TV set. And there will be consumer demand for it. But there will not be content for it; not in abundance. And so that concept, I think, is DOA.

What is on the horizon is HDVD.

http://internet.seekingalpha.com/article/1408

Article: Viacom Snubs Web TV

By Tim Beyers June 19, 2007

If you want your MTV, parent company Viacom (NYSE: VIA) is there for you. But if you want your Web TV, go see Apple (Nasdaq: AAPL). Viacom wants nothing to do with you. Not yet, at least.

Who wants Web TV?
It's not that Viacom dislikes the Web -- CEO Philippe Dauman would just rather hog the remote. Here's how he explained it to attendees at a recent Deutsche Bank conference on media and telecommunications:

... We're very careful not to provide our content in a way that is competitive with the 24-hour channel offering that we have ... The "Joost" platform has a lot of content on it that hasn't appeared on air in many years. We now have a way to expose Beavis and Butt-head to audiences that haven't seen it in many parts of the world. I don't know if that's good for humanity or not.

Oh, come on, Philippe. What have you got against The Great Cornholio?

Actually, he has a point. Viacom derives nearly all of its profit from licensing and distribution payments from Comcast (Nasdaq: CMCSA), Time Warner (NYSE: TWX), General Electric (NYSE: GE), and other network operators. Competing with them is bad for business.

And it's not like Web TV is a big business yet. Netflix's (Nasdaq: NFLX) "Watch Now" library includes more films I'd rather avoid than see, though it's been fun to spend recent lunch hours with Lee Marvin and the rest of The Dirty Dozen.

Dauman knows that, which is why he's boosting Joost, which was created by the same guys who brought you Skype. Joost is similar technology in that it promises high-quality, free TV programming, using the Internet to deliver video.

Content is king, and it travels first-class
What's the allure for Viacom? Advertising. Beavis and Butt-head have been off the air since the '90s. They're dead as an advertising platform. Unless, of course, they earn an audience through Joost.

But Dauman is thinking even bigger, citing PepsiCo (NYSE: PEP) in his presentation at the Deutsche Bank conference:

They are [a] charter advertiser on our mobile deal with Sprint Mobile, where we are selling advertising for the first time on mobile ... We have a "Laguna Beach" virtual world where one of the prizes in that virtual world is to get a can of Pepsi. So it's really cool on that virtual site to be walking around with a can of Pepsi. That's a fantastic promotion for them, and they love it.

But will consumers' thirst for all things digital translate into a real thirst for sugar water? Everyone seems to think so. An online campaign -- even in virtual worlds -- contributes to online ad spending, which Jupiter Research predicts will exceed $19.9 billion in 2007 and rise to $35.4 billion by 2012.

The business of channel surfing
And yet the Web may be a bit player in Dauman's ultimate strategy: to create as much content as possible and cross-market it everywhere.

Sure, that sounds obvious, but don't underestimate the commitment it requires. MTV has suffered from lower ratings lately. So has BET, Viacom's channel aimed at African-American viewers.

But Dauman is investing in each, hoping to profit from a handful of hits that can produce licensing and advertising revenue for years to come. BET, in particular, has his attention:

BET [has] had very little original programming. So we've approved a three-year plan to dramatically increase the proportion of original programming on BET across many genres. We have 16 new shows launching this year. Most of them in the third and fourth quarter.

Smart move. Creating original programming will up ratings, create long-term value, and present licensing opportunities.

A Foolish finale
Dauman doesn't have it easy. A courtroom brawl with Gootube seems inevitable. And, with Tony Soprano gone and American Idol slipping in the ratings, TV isn't exactly the hang-on-the-edge-of-your-seat experience that it once was.

Fortunately, none of that should hurt Viacom. Not much, at least. Dauman is right. Between MTV, Comedy Central, BET, and Paramount Studios, Viacom has more than enough star power and plenty of distribution power ... for now.

What remains to be seen is whether Dauman can deliver more than classic recyclables like Beavis and Butt-head. He'd better. Today's investors are betting on it.

Article: Kellogg Move Bodes Ill for Ads to Kids

More Than a Billion Food Marketing Bucks in Limbo as Companies Try to Satisfy the Critics

By Ira Teinowitz

Published: June 18, 2007
WASHINGTON (AdAge.com) -- Saturday morning will never be the same again.

Legions of kids who start their weekends with the boob tube and a bowl of sugary cereal won't be seeing Snap, Crackle and Pop. Instead, they'll soon be seeing ads for more-healthful foods -- or none at all. By agreeing to market to kids only the 50% of its brands that meet certain nutritional criteria, Kellogg has kick-started an industry trend expected to throw into play some $1 billion or more in marketing dollars.

Turning up the heat
It's a move that ratchets up pressure on the other 10 marketers in the so-called Children's Food and Beverage Advertising Initiative, which account for more than two-thirds of the food and beverage ads kids see. They are feverishly working to meet or beat a July 18 deadline to announce responsible-marketing pledges of their own at a government kids'-obesity forum.

Titans in the initiative, such as Hershey, McDonald's and General Mills, have already committed to devote at least half their TV, radio, print and internet marketing to kids under 12 to furthering "the goal of promoting healthy dietary choices and healthy lifestyles."

Each marketer will set its own individual standards, so it's impossible to say just how much spending will be affected. But judging by the breadth of the Kellogg plan -- which alone involves more than $200 million -- it's going to be a significant sum, particularly if you're a kid-focused media owner.

Healthy ad diet
Kellogg said it would advertise only foods that fit a particular nutritional profile in any medium that gets more than 50% of its audience from kids under 12. Products that fit the criteria will have no more than 200 calories per serving, no trans fat and no more than 2 grams of saturated fat. There are also limits on sugar. Some 30% of Kellogg's cereals don't meet the standard; oddly, Rice Krispies doesn't (too much sodium) while Frosted Flakes does.

According to President-CEO David Mackay, 27% of the company's ad spending in the U.S. is directed toward children under 12. According to Advertising Age estimates, Kellogg spent $765.1 million on total marketing in 2006, so a potential $206 million could be affected. Kellogg said it would no longer spend on kid-directed TV, print, radio and internet for the affected brands and would ditch "website activities directed to children, promotions/premiums, product placement and in-school marketing" for brands that don't meet its criteria.
Brand Identity


"Wherever possible, implementation of Kellogg commitments will begin immediately," Kellogg said in a statement. "For example, certain brands will feature better-for-you options in their advertisements. We will be making content enhancements to our child-directed websites, including adding automatic screen-time limits and healthy-lifestyle and nutrition messaging, plus limiting depictions of foods that don't meet our nutrient criteria in interactive activities like games, downloads and wallpaper."

Half Kellogg's products
But even Kellogg isn't sure whether it will be redistributing those ad dollars or not. Mark Baynes, chief marketing officer for North America, said about half of the company's products marketed to kids under 12 don't meet the new nutrition threshold, and it's still not clear which ones can be reformulated to meet the guidelines and still appeal to kids. "The challenge now is: Can we reformulate without too much a trade-off in taste?" he said. "If we can, we will, and [continue] advertising to children in much the same way we do now. If we can't reformulate our product and there is too much of a trade-off, we have to find a new target audience to make the brand relevant or, if we can't, stop advertising it all together."

Though kids' TV programmers are staying cool publicly, the winds of change are buffeting networks such as Viacom's Nickelodeon and Time Warner's Cartoon Network. Kellogg alone spent some $44 million on Nickelodeon advertising last year, according to TNS Media Intelligence (excluding Nick at Nite) and $22 million on Cartoon Network.

The groups that pressured Kellogg into its agreement, the Center for Science in the Public Interest and the Campaign for a Commercial-Free Childhood, also had threatened to sue Nickelodeon, but they've put that on hold. With the Kellogg settlement and an expected flood of similar efforts from other marketers, the groups appear to feel Nick will be punished enough.

Nick will be like "a used Edsel no one is buying," said Steve Gardner, chief litigation officer at CSPI, before hastening to add that kids' food marketers could still advertise on the network -- just with more-healthful products.

Nick 'thrilled'
Cyma Zarghami, president of the Nickelodeon/MTV Networks Kids and Family Group, said, "As a company that's been at the forefront of encouraging our partners to provide more balance in their offerings, we are thrilled that companies like Kellogg are taking initiative to provide us with opportunities to introduce healthier food options to kids." Cartoon Network had no comment.

One thing is crystal clear: Big Food is expected to almost universally step up to meet the challenge of Kellogg. Sen. Tom Harkin has called this the "defining moment in our nation's fight against childhood obesity."

Article: Markey Demands McD's, Other Marketers Follow Kellogg's Lead

Congressman Tells Five Food Titans to Implement Kids' Advertising Limits

By Ira Teinowitz

Published: June 19, 2007

WASHINGTON (AdAge.com) -- The chairman of a congressional panel is ratcheting up pressure on McDonald's, Coca-Cola, General Mills, Kraft Foods and PepsiCo, demanding they follow Kellogg's lead and commit to kids' marketing limits -- or else.

Rep. Ed Markey, D-Mass.


As part of a lawsuit settlement last week, Kellogg announced that in any medium that has a large audience of children under age 12, it would market only foods that meet new nutritional criteria. The marketer also went beyond rivals' initiatives, saying it would alter product ingredients to meet minimum health standards or quit advertising them to children.

Investigating impact of ads
Rep. Ed Markey, D-Mass., in letters to five of Kellogg's competitors, told those companies to implement similar limits, and announced new plans for a House hearing on the issue. Mr. Markey, who chairs the telecom panel of the House Energy and Commerce Committee, said his panel's hearing this Friday on the impact of violent and tobacco-smoking images children see on TV will now also look at repercussions of the food ads children view.

The letters ask the companies to respond by June 29.

Mr. Markey cited a report from the National Academy of Sciences Institute of Medicine that said marketing could have an effect on food choices. "I am concerned that the prevalence of advertisements on children's television for junk food, fast food and other foods wholly lacking in nutritional value is one of the root causes of America's childhood obesity epidemic," Mr. Markey wrote in the letters.

"I would like to know whether your company will commit to implementing the same marketing restrictions Kellogg has announced. Such information may inform the subcommittee and the public as to additional steps that may be warranted to safeguard kids from junk-food ads during children's television programming."

An aide to the congressman said the five companies were selected because of their extensive use of marketing to kids. At press time, a witness list for this week's hearing wasn't yet available.

Could bring in FCC
In an April 16 letter to several Federal Communications Commission commissioners, Mr. Markey said the FCC would need to play a more active role in limiting food advertising on kids' shows if marketers don't act voluntarily.

"There is no question that the commission has both the affirmative obligation and the statutory authority to examine whether placing limitations on certain food advertising to children would further the public interest," he wrote then. "If a 'core' educational program tells children to eat healthy foods and exercise, but the advertisements aired during the program encourage them to eat Twinkies and Fruit Loops, the ads have the potential to undercut the educational and informational value of the program."

Images

Article: Content is King for Telcos; Entertainment is a Luxury.

In their efforts to gain a piece of the cable TV pie, telecom company strategy’s should consider -- entertainment is a luxury, not the commodity phone service has become.

http://www.ascertain-ment.com/pages/Entertainment%20is%20a%20Luxury%20an%20article%20for%20TelcoTV%20by%20Lou%20Volpano.pdf

Study: An Analysis of Pricing: Cable Pay-Per-View Broadcast Events

Pay-per-view events appear haphazardly priced, naively presuming that cost determines the price. It doesn't have to be so.

http://www.ascertain-ment.com/PDF/An%20Analysis%20of%20Pricing%20Pay%20Per%20View%20by%20Ascertainment.pdf

Article:What Apple TV Costs to Make

Analyzing and pricing out the components of Apple's new set-top video box reveal uncharacteristically slim profits

by Arik Hesseldahl

When Apple CEO Steve Jobs called Apple TV a "hobby," he wasn't kidding.

By typical Apple standards, the new set-top video box may as well be a hobby given how unprofitable it is in its current form. That's one conclusion you can draw from research firm iSuppli's analysis of the innards of the device, which connects a TV to videos stored on a Mac or Windows computer.

Having taken it apart, iSuppli estimates that the components and materials used to make Apple TV cost $237. Since Apple sells it for $299, that would leave a gross profit of $62, or about 20%, before marketing costs.
Big Departure

That would be a big change from Apple's penchant for gross margins in excess of 50% outside its computer lineup. That's been the usual case with the iPod music player family (see BusinessWeek.com, 9/20/06, "The Skinny on Apple's New Nanos") and appears to be the case with the iPhone, the release of which is now less than four weeks away (see BusinessWeek.com, 1/18/07, "What the iPhone Will Cost to Make").

Apple TV's slimmer-than-usual gross margin is also interesting when set against the fact that Apple plans to book the associated costs and revenue over a two-year period. So for every Apple TV sold, the company will split the revenue into chunks reported over eight quarters, at a rate of $37.375 for each period. Dividing iSuppli's cost calculation similarly, $7.75 of that total will be profit.

"This is certainly a departure for Apple, or at least it's approaching a departure," says Andrew Rassweiler, analyst with iSuppli. "We made some very aggressive assumptions with this device, and by that I mean we assumed low prices on the components." If the costs were much higher, "we'd be looking at a device that Apple was subsidizing," perhaps in hopes of making up the difference with video content deals, Rassweiler says.
Intel Inside

Such a business model would contrast sharply with that of the iPod, for which device sales generate far more profit for Apple than music sold on the iTunes online music service. Notably, last week's announcement by Jobs that Apple would offer videos from Google's (GOOG) YouTube suggests that third-party partnerships might be part of the long-term strategy to boost its profitability.

Analyst Wendy Abramowitz, who covers Apple for Argus Research, says that a lower gross margin on Apple TV probably won't have much effect on Apple's financial picture. "I wouldn't even look for this product to be a substantial part of the revenue base initially," she says. Yet Abramowitz also points out that Apple has warned analysts that overall gross margins will drop somewhat in coming quarters, in part because of new products.

The most expensive component inside the Apple TV, Rassweiler says, is an Intel (INTC) microprocessor iSuppli valued at $40. The chip, he says, is a variant of Intel's mainstream Pentium M for personal computers, but runs at a slower clock speed than the regular M processor, thereby lowering the cost. "If it were one of the mainstream chips Intel is selling Apple now for the Mac, there would be no room left for a profit margin at the $299 retail price," Rassweiler says.

Accompanying that Pentium is a $28 Intel chipset, which connects the main processor to memory and other parts of the device. That brings Intel's material share of Apple TV's cost to $68, or 28% of the total, the biggest of any supplier.
Cheap Chips

The graphics chip is an Nvidia (NVDA) GeForce Go 7300 costing $15. This card gives Apple TV the ability to deliver true high-definition video, suggesting that Apple may offer HD television shows or movies for download in the near future. At present, the video content for Apple TV that's available through iTunes plays at a lower-end flavor of HDTV.

Apple TV's 40-gigabyte hard drive from Fujitsu, Rassweiler says, costs $37. But once Apple starts offering HD content, 40GB of storage capacity will quickly prove insufficient. Intriguingly, Apple appears to be seizing on this reality as an opportunity to boost its profit margin. Last week, the company unveiled a build-to-order option for Apple TV that includes a 160GB hard drive for $399, or $100 more than the basic model (see BusinessWeek.com, 5/31/07, "Higher Hopes for Apple TV"). The 160GB hard drive costs $73, according to iSuppli. The relatively modest price difference between the two drives boosts Apple's profit margin on the higher-capacity model to more than 30%, Rassweiler says.

Other Apple TV suppliers include Broadcom (BRCM), which supplies 802.11n Wi-Fi components costing $19 per unit. Cypress Semiconductor (CY) supplies two chips worth a combined $1.65, and Silicon Storage Technology (SSTI) supplies a $1 microcontroller. The cheapest part? A 75¢ audio chip from Taiwan's RealTek Semiconductor.

Hesseldahl is a reporter for BusinessWeek.com

http://www.businessweek.com/technology/content/jun2007/tc20070606_984317.htm?campaign_id=yhoo

Study: An Environmental Scan of Children's Interactive Media from 2000-2002

This report represents an in-depth scan of the children's interactive media environment. The objectives of this scan were: (1) To create a strategic and practical analysis of trends, actors and forces at work in the children's interactive media space over the past 18-24 months; and, (2) To offer a better understanding of how those trends and forces are impacting the lives of children between the ages of two and twelve.

Download Environmental Scan (102K)

Study:Distinctive Roles For Children's Public Service Media In The Digital Age

One Mission Many Screens - A PBS/Markle Foundation Study on Distinctive Roles for Children's Public Service Media In the Digital Age: Executive Summary
David Kleeman, executive director of the American Center for Children and Media. This study was conducted for the Public Broadcasting Service and supported by the Markle Foundation.

American youth are growing up with near-ubiquitous media at home, at school, and with increasing wireless services everywhere in between. At the same time, children's media companies are merging into larger global companies. Given these conditions, how can we ensure that the public media serves the interests of children? "One Mission, Many Screens" outlines six fundamental principles to guide and govern public service media for children.

Download Executive Summary (40K)
Download One Mission Many Screens Report (376K)

PBS Kids Mission Statement

PBS Kids educates, enriches and entertains all of America’s children, employing the full spectrum of media to build knowledge and critical thinking; to empower children as citizens of their communities, nation and world; and to welcome parents, teachers and caregivers as learning partners.

Partner: Childrens Digital Media Center

The Children’s Digital Media Center (CDMC) is a five-university consortium uniting a national community of scholars, researchers, educators, policy-makers, and industry professionals in a community whose goal is to improve the digital media environment in which children live and learn. Funded by the National Science Foundation, CDMC is working to gain a greater understanding of how interactive digital media experiences affect children’s long-term social adjustment, academic achievement, and personal identity.

http://cdmc.georgetown.edu/

Article: Don't Starve Kids TV

By David Kleeman -- Broadcasting & Cable, 6/4/2007

Late in 2006, the British regulator Ofcom announced a ban on commercials for foods high in fat, sugar or salt during any program with substantial viewership under the age of 16. In this country, Rep. Edward Markey (D-Mass.) has asked the FCC to evaluate that law as a model for the U.S., so it's important to explore its immediate effects.

The UK independent producers' trade association, called PACT, estimates the ad restrictions will cut £39 million from children's-TV budgets in its first year (roughly three times PBS' annual spending on kids programming).

As the ad ban went into effect, ITV—one of the UK's unique “commercial public service” channels—closed its children's-production arm and slashed its free-to-air children's hours. ITV spent £35 million for children three years ago; in 2007-08, it will spend about £5 million,mostly on operations. ITV Chair Michael Grade says it's irresponsible to shareholders to transmit children's TV instead of more-profitable fare.

This isn't just a public-service issue. Specialty children's channels will take the biggest-percentage revenue hit. Worldwide, corporate advertising or underwriting is the fuel of most children's TV, and when that fuel runs scarce, carefully crafted programs suffer more than easy-to-market series with multiple revenue streams, like international sales and merchandise.

As revenues plummet, producers take innovative proposals off the table, substituting ideas that imitate financial successes or are cheap and easy to make. Ofcom research notes a sharp drop in what is now spent producing kids shows. Producers are making less programming and making it cheaper.

This is relevant to Markey's proposal to strip “educational/informational” status from programs supported by food advertising. A further-diminished financial model will only induce broadcasters to air cheaper shows.

In kids TV, “good enough” isn't. No amount of money can rescue a bad idea, but cutting corners will ruin every good one. Markey has fought for years to advance excellence in kids TV. Following Ofcom's lead could devastate the very programming he advocates.

Childhood obesity is a serious, complex issue in need of thorough and thoughtful solutions. Starving creativity and quality would be a hollow victory.

http://www.broadcastingcable.com/article/CA6448611.html

Article: VOD and DVD Revenue numbers

Warner Bros. Reports Successful Simultaneous VOD, DVD Releases
Tuesday June 5, 7:23 am ET

At an investor conference Monday, Time Warner's Warner Bros. Home Entertainment Group said it is considering broader simultaneous releases of VOD and DVD movies based on successful trials with Comcast. The results of six-month trials in two markets show demand for VOD jumped 50%, while DVD sales rose 10%, and there was only a "marginal impact" on rentals. Warner Bros. president Kevin Tsujihara said studios take home 60% to 70% of revenues from sales of video on demand titles, but get only 15% to 20% for rentals. Coverage of the conference by The Hollywood Reporter said a Blockbuster spokesman reiterated his stance that studios will be cautious about cannibalizing rental and retail channels, which represent their largest revenue stream at around 70%. Tsujihara of Warner Bros. said he sees the move to VOD as "incremental", but recognizes the potential for improving profit margins over the next 12 to 24 months.

http://biz.yahoo.com/seekingalpha/070605/37368_id.html?.v=2

The Children's Television Charter

The Children's Television Charter
Drafted at the World Summit on Children and Television,
Melbourne, March 1995
Approved at the PRIX JEUNESSE Round Table
Munich, May 1995

Children should have programmes of high quality which are made specifically for them, and which do not exploit them. These programmes, in addition to entertaining, should allow children to develop physically, mentally and socially to their fullest potential.

Children should hear, see and express themselves, their culture, their languages and their life experiences, through television programmes which affirm their sense of self, community and place.

Children's programmes should promote an awareness and appreciation of other cultures in parallel with the child's own cultural background.

Children's programmes should be wide-ranging in genre and content, but should not include gratuitous scenes of violence and sex.

Children's programmes should be aired in regular slots at times when children are available to view, and/or distributed via other widely accessible media or technologies.

Sufficient funds must be made available to make these programmes to the highest possible standards.

Governments, production, distribution and funding organisations should recognise both the importance and vulnerability of indigenous children's television, and take steps to support and protect it.

Review: AppleTV Not ready for PrimeTime

The set-top box that syncs with a computer is simple to set up but doesn't deliver the audiovisual quality or all the features consumers may want.

Read more:
http://www.businessweek.com/technology/content/may2007/tc20070531_054330.htm?chan=search