Let’s Make a Deal
How to get the most from a CD-ROM publishing contract
Almost everyone agrees that the digital media convergence is a positive movement toward new forms of communication and entertainment, but it is not a process free of growing pains.
Some of that pain came through loud and clear during the session called “Leveraging the Deal: Content, Rights and the Law,” where interactive media producers questioned a group of experts on how to stay alive in a marketplace that to date has no established business model but promises to be extremely lucrative for those who can survive.
As CD-ROM distribution specialist Joanna Tamer, president of SOS Inc. and comoderator of the discussion, said in her opening remarks, “In the film, record, book and software industries everyone knows how the deal goes down. It is established and settled. What is not understood is how to handle the hybrid product that comes from [combining the media of] these industries. There is no model, and in fact, the confluence of these four industries — and all the different cultures of those industries and all the different deal-making structures and laws from those industries — are (actually) in collision.”
The panel, which agreed with Tamer, included Jessee Allread, vice president of sales and marketing for EBook, Inc.; Michael Kapp, president of Warner Special Products; Richard Thompson, managing partner of Silverberg, Katz, Thompson & Braun; and comoderator David Baron, program director of Digital World.
NEW MEDIA PUBLISHERS IN THE EYE OF THE STORM
According to Tamer, it will take two years to establish the business model for how interactive media titles are created, published and distributed. Until then, publishers in the new media market “must walk a rocky road.” To alleviate some of the burden, Tamer and her fellow panelists offered advice on how to navigate the deal-making process based on their past experiences and understanding of this emerging marketplace. (Tamer covered the art of negotiating a distribution deal in Vol. 3, No. 1, p. 19.)
I’ve got the power.>> According to Tamer, success in this industry is really about controlling the copyright to your content and having successful leverage in your distribution deal. “If you can do this,” she said, “you will survive whatever is coming and you will come out in the end as one of the key players.”
The panelists encouraged new media publishers to keep their production costs low — about $100,000 for a CD-ROM title and $200,000 for a game — until the market is better established.
Make your own content.>> To reduce costs, said Allread of EBook — a content developer, acquisitions and licensing company for CD-ROM titles (with distribution in 25 countries) — new media publishers should create their own content as much as possible. He pointed out that the cost of licensing intellectual property, especially excerpts from a hit movie or best-selling song or book, could potentially create so much overhead for the publisher that he or she cannot afford to produce the disc or sell it at a price that the market can sustain.
When EBook cannot create something on its own, he said, the company uses material that’s in the public domain — reworking it so that in its new form it becomes EBook’s intellectual property and EBook can then sell the rights to the newly created piece in different ways.
YOU MUST KNOW WHAT YOU CAN’T KNOW
You must also know what you can’t know — what’s coming down the road in the next two to ten years in terms of new computer and consumer devices or new kinds of delivery systems such as interactive TV. “The code [the content in digital form] is your key asset,” said Tamer, “and you need to leverage it as much as you can.”
According to Allread, EBook always tries to acquire rights to as many facets of the content as possible. In other words, if the company is negotiating for digital rights to a piece of intellectual property, the EBook team would try to negotiate the rights to include all of the existing computer and consumer devices (and those that don’t exist yet), even though initially the company plans only to make an interactive CD for the Macintosh or MPC platform. If the disc is successful, then EBook can repackage that content for another delivery system and increase its profits without having to go back and renegotiate the licensing agreement.
Turn an idea into a series.>> Thompson, an intellectual property lawyer, suggested that new media publishers develop story ideas that can generate a series of products. It makes the distributors and/or affiliated label that might be marketing a title feel more confident about carrying the product if they understand that the author is invested in the market long term. “Also, you should consider negotiation for one property, as well as future spin-offs from the property whether it is merchandise or another product, early on, because negotiating these things after a smash hit is difficult,” he said.
HAVE PASSION FOR WHAT YOU CREATE
There is no question that the new media publishing market is tough. It will be survival of the fittest, and it is unlikely that all of the interactive publishing houses creating titles for the market today will still be around when the dust settles in two to five years.
The hurdles are too many and too high. In reality, publishers must invest heavily in a development process — make a prototype — before they can even pitch an idea, as opposed to writing a treatment for a film, TV show or record project. In addition, publishers generally cannot gain distribution leverage until at least their second title and that’s only if the first one they produced was a smash hit. Access to content is difficult at best and creating your own requires a stable of talented designers, musicians, videographers and writers. As Warner’s Kapp pointed out, there are no guarantees in any creative profession that someone is going to make it. But, he said, passion for what you do is a good foundation to build on.
“This all sounds so complicated,” said Kapp, who has been in the record industry for more than 30 years. “But the people who have passion to create stuff don’t typically know all of this other stuff about distribution and business plans.
“Have an idea, acquire the rights, and you’ll get the distribution if you make the best product coming out on the market. That’s where the energy has to be. The filmmaker doesn’t start out by solving all the problems of how many sequels there are going to be to a film or how he is going to merchandise it before he makes his film — that’s the movie studio’s job. The filmmaker’s (job) is to make a great movie.”
Janice Maloney