In the first of our new format for discussing management issues, Hannah Rudman explores new contracts for digital content.

Over the past 18 months, the resounding questions from arts organisations and artists have been about how they should contract or be contracted for working on producing digital content. May 2008 saw 21 million requests for content downloads from BBC’s iPlayer. Also in May, Apple launched iTunes Film in the UK with 700 download-to-own (DTO) or rental movies, priced at £10 DTO and £3.49 rental for a new release. Hollywood’s business models have altered dramatically over the last year. This has created new contractual models surrounding digital content, negotiated by US talent unions and now emerging in the UK. I explore these new models as a precursory case study – we will soon see these and contractual changes in the UK’s arts sector.

Physical markets for the movie industry’s current content (cinema tickets, DVD sales) are still huge, but they are levelling off. However, in 2007 in the US there was growth of 462.5% in online sales of movie content, which includes DTO and video-on-demand (VOD). By 2011, US consumers are predicted to spend $560m a year on online digital movie content. Magnolia Pictures release movies as VOD a few weeks before theatrical release. Two to three million downloads happen before the theatrical première, or a festival run. Two-thirds of revenue is generated by VOD, one-third via theatrical release, and then on top of that there’s DVD, DTO and rental sales. Film makers and distributors are also experimenting with different business models. These range from charging cheaper rates for lower quality movies to offering the new movie for free, paid for by the embedded ‘advert breaks’.

The indie film sector reports that people still want to buy the DVD as well as having purchased the DTO, or having even watched a pirated copy. The extras (out-takes, the ‘making of’, directors’ commentaries, etc.) are still wanted, as is the best quality experience of the film. DVD runs are printed on demand. The team behind ‘Four Eyed Monsters’ (13 film episodes and a music CD) had a different distribution model – they released the whole film for free via YouTube and MySpace. They gave the film away, then secured theatrical releases through using Google Maps to show the locations of digital cinemas, and getting people to pledge $5-6 to see the better quality version of the film at those venues. The production team turned up in the cities where enough people had pledged to see the film. They stood on stage before the presentation and asked the audience for a $1 donation (via their website) to cover the cost of the production of the film, and their own debts. They weren’t avaricious – the website was set up to take only up to $100,000, which it took.

Film-makers and producers at the Edinburgh International Film Festival in June reported writing clauses for ‘new media’ revenue shares. The Writers Guild of America dropped their demand for increased DVD residual in return for new media revenues, thus ending the high profile screen writers’ strike. The contractual model is a 0.36% share of distributors’ gross receipts for the first 50,000 downloads, rising to 0.7% thereafter. VOD and ad-supported streaming of events sees revenue shares of 1.2% of distributors’ gross receipts. The Directors’ Guild of America arrived at a similar arrangement: 0.36% of distributors’ gross receipts for the first 50,000 downloads and then rising to 0.65% thereafter; ad-supported streaming sees 3% residual after a 17-day window. The American Federation of Television and Radio Artists have proposed 5.4% of distributors’ gross receipts for the first 100,000 downloads, 10.4% thereafter. The Screen Actors Guild is holding out for a ‘better’ deal1.

Arts sector performers obviously need be contracted for any digital media elements they are asked to record – supplementary rehearsals and performances for podcasts, mobisodes (TV episode for viewing on mobile telephones), computer games, webcasts and other internet-only productions need contracts as would any rehearsal and performance for a live event. Equity has just released a new set of template contracts which reflect the moves already made in the film and broadcast industries2. The templates make huge strides to protect their members’ interests in a new media age. These suggest what fees should be paid to performers for the work to produce digital recordings, and what royalties should subsequently be shared for downloaded content. Obviously, the technology landscape – and the sort of artistic content that is created in response to it – will continue to change rapidly, but the contractual frameworks are now here.

Hannah Rudman is an IT, digital content and environmental sustainability consultant. t: 07971 282261;
w: hannah@hannahrudman.com
1 Thanks to Neil Gillard, Partner at ReedSmith’s Media Group, for sharing his knowledge of the US’s contractual models.
2 The template contracts can be found at http://www.tvischanging.com/newmedia.htm

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