Monday, April 25, 2005

Creating media franchises

Before investing in the next media franchise creation, you should consider how its licensing opportunities will fare. If the property does not demonstrate its attractiveness against a checklist of potential license suitors, then you should reevaluate whether to invest. Well-run franchises have multiple and diverse income streams that extend their brands into several complimentary markets, enriching the consumer experience. This allows franchise owners to maximize revenues while the property is still hot and of interest to the market. Sometimes properties become so well known that they can perpetuate their value indefinitely, such as Disney's Mickey Mouse and Sanio's Hello Kitty.

The checklist of potential license extensions include:

1) film/tv/video (live-action or animation)
2) video games
3) books/magazines
4) comics/graphic novels
5) action figures and other toys
6) trading cards
7) apparel
8) promotions and tie-ins
9) snacks
10) tchotchkes

Most successful franchises can license their creations to at least four of the above outlets. George Lucas can say he licenses Star Wars to all of them and more.

Friday, April 22, 2005

Oops..there goes the neighborhood

Both Jeff Jarvis and Alan Mutter link to an article in AdAge that forecasts newspapers could lose $4 billion of classified revenues by 2007, 9 percent of the $46.6 billion of total newspaper ad revenue, because of internet sites like eBay, Monster.com and craigslist are providing greater value than traditional newspaper classifieds. What newspaper companies need to do, both to help themselves and listers, is to fund a rival to eBay.

I know that every attempt to crack eBay's monopoly has met with failure, but that is because the competition did not have the money or expertise like newspaper industry does. The venture could allow buyers and sellers to locate the site either from its own web address or through the newspapers' own sites. eBay has gross margins upwards of 60 percent and I think that another competitior can steal some business away from it and give listers another venue to place ads.

Thursday, April 14, 2005

Pounding a cube into a circular hole

The NY Times Magazine has a fascinating article this week about how rating companies are trying to find out what people are watching on TV by using ever more sophisticated technologies. Instead of just measuring a person's recollection of what he watched on TV during the week through the use of diaries, technology has allowed companies like Nielsen and Arbitron to record what shows are being watched or heard as they happen. They then use this data to assign ratings which are the currency used to set advertising rates that underwrite the programs. Advertisers then know what programs attract which audiences in how large a number.

Jon Gertner, the writer of the piece, explains how even newer technologies are being developed to track individuals outside the home and respond to any audible broadcast of programming and advertising. As we are bombarded with marketing pitches 24/7 these devices will be able to precisely know when, where, and how frequently a message is received by that person. I fear that instead of reducing the amount of advertising in our lives, these technologies will encourage companies to inundate us with pitches that we cannot easily retreat from.

I do not think that the Holy Grail rests in marketers finding the right audience for their product, but rather the Holy Grail allows technology to help consumers find the best marketer selling right product.

Tuesday, April 12, 2005

Why merit pay for teachers is flawed

Proposing merit pay in secondary education will get you in trouble with the teachers unions. Reformers say that the public school system needs to look to the private sector as a model for educator compensation. Paying for performance it is said gives teachers and administrators incentives to improve student performance and reward teaching excellence.

However, reformers overlook a fatal flaw in comparing schools to businesses. Firms choose who is hired and can readily fire mediocre performers, replacing them with better motivated workers. Public schools have to take all comers and cannot easily rid themselves of students who are lazy or disruptive. Moreover, as long as students receive marginal grades they are permitted to hang around to graduate even if some of them drag down the overall class grade.

Instead of incentivizing teachers to improve their students' grades, why not go directly to students and figure out a way to reward them for high achievement beyond the ubiquitous gold star stickers?

Sunday, April 10, 2005

We need cheap IP

What developers need is a cheap source of IP that originates from a medium which is consumed by a significant proportion of the target market. Also, the cheap IP should come from a lower cost base than the developed project unless it is an extension to an already successful line of products. George Lucas can license his Star Wars property for toys and games, but a maker of toys or games should license IP from an animated blockbuster movie at their own peril because Disney will extract a significant license fee for the privilege.

UPDATE: Hollywood gets this model right. There is a fierce competition by screenwriters and authors of successful books to get their ideas translated into film. Sometimes studios pay a large amount for a script but it usually represents no more than a small fraction of the overall production budget. However, there is enough cache attached to the project to get big name stars on board who then lure their fan base to see the movie.

Video game production lacks this essential aspect of creativity. Publishers rarely look for lower forms of IP, but instead attach themselves to high-profile licenses which cost them an arm and a leg. If they looked beneath themselves, instead of up, more ideas could be developed and greater profits achieved.

Nashing for money

Greg Costikan, a respect veteran game maker, delivered an incredible rant at the Game Developer Conference in which he complained of how the game industry is killing itself, despite record revenues since the home game console was introduced more than a quarter century years ago. He vents that publishers have become too cautious and risk-averse to seek out new ideas that are the engine of any creative process. With rising costs associated with new platforms and technology, publishers seek out only the safest and most secure projects, which often means licensing deals from Hollywood or major professional sports leagues and associations. What the industry needs, says Costikan, are a few courageous publishers or other investors to fund independent developers that will try out new kinds of game projects.

However, where Costikan fails is that he asks the wrong question. Not, why aren't risky projects funded more often, but rather where is there a source of cheap, market proven ideas to test out new games? Here is where most companies go astray and do not follow the independent film model. Most publishers pay through the nose for a license whether that be a Harry Potter or the NFL. This is akin to a studio paying Bruce Willis to star in another Die Hard movie, rather than recruiting him to star in the independent Pulp Fiction. Yet, the producers of Pulp fiction did not have to pay Willis millions of dollars to land him for there picture. Rather for stars like him they might negotiate a percentage of the gross, making the film affordable to produce for the type of movie it is.

Video games are rarely able to negotiate such an agreement because most of their costs are tied up in developing the game itself, not paying an exorbitant amount to any one person. Therefore publishers and developers have to find sources of cheap IP to exploit. Unfortunately modern American culture has few sources of ideas that can be had for a song and yet attract a dedicated following of fans who are in the market for games. When something does become popular like Harry Potter the license often becomes too expensive for an independent game company to make a bid. What is left is a hodgepodge of ideas which have an itinerant fan base and that often have no angle to be developed into games.

Should we look to the land of the rising sun for inspiration? Perhaps.

Sunday, April 03, 2005

The future of TV

Is there one competent, implementable vision of the future of digital TV?