Cinema vs Television vs Internet Video: Which Medium Holds the Most Opportunities for Future Filmmakers? (Part Two)

In Part One we defined the variables that tell us which medium is the most lucrative and promising for current and future filmmakers. We also looked at one of the variables, eyeballs. In this second and final part we’ll study the other six variables and finally we might have our answer.

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Which medium offers the greatest revenues?

The questions we need answered here are:

  • Which medium offers the greatest return on investment?
  • Which medium offers the most advertising revenues?
  • Which is the most sustainable business model?

Finding exact revenues is nigh impossible. Television income is fractured into advertising, various technologies (DTH, cable, Internet, etc.), bundling of plans, and so on; while film studios are notorious for cooking their books. Internet video is even worse, with CPMs and CPCs and ad revenues that even Einstein will have trouble figuring out.

However, one fact is obvious. Revenues (and income or profit to filmmaker) is directly proportional to the number of people watching the program. The more popular the video, the greater the income. What limits this, is the number of hours people have to watch anything over the course of a year. Here’s a breakdown:

Total revenue from subscribers (million) per year Revenue per hour watched per person per day Average running time Average revenue per show per day
Cinema $2,150 $5 2 $10.00
TV $60,000 $0.14 0.5 $0.07
Youtube $0 $0 0.08 $0.00
Netflix $3,240 $0.05 1 $0.05

If this were all television and Internet video would not exist, so we also have advertising revenue:

Advertising Revenue (million) per year Revenue per hour watched per person per day Average running time Average revenue per show per day
Cinema $880 $0.006 2 $0.01
TV $50,000 $0.11 0.5 $0.06
Youtube $5,600 $0.10 0.08 $0.01
Netflix $0 $0.00 1 $0.00

And here’s the total:

Average revenue per show per day Average revenue per show per day Total revenue per show per day per viewer
Cinema $10.00 $0.01 $10.01
TV $0.07 $0.06 $0.13
Youtube $0.00 $0.01 $0.01
Netflix $0.05 $0.00 $0.05

Obviously, you shouldn’t use these numbers as accurate indicators, but as broad (and probably incorrect) indicators of revenue potential per medium. In simple speak, cinema needs fewer viewers, because it charges more per show (a whole lot more, in fact, about 75 times more than television per show). Youtube needs its billions of views or it will go kaput.

Netflix avoids advertising, and depends entirely on subscriptions. It can afford to, because its overheads are less compared to the broadcast industry. Television has to have the greatest avenues of revenue because they have to pay for hardware costs, space, licenses, government fees, original programming, etc.

All these media also earn through syndication. If a show is popular, other channels, cinemas, etc. will want to license it for their audiences worldwide. The income from this arrangement is in the form of royalties, and can go on for years.

If you wanted to earn $1,000,000 per project, you’d have to earn that amount plus the expenses to produce it. If you spent $100,000 to produce a show, you’d need to earn $1,100,000. To recover this amount, you’d need the right combination of viewers and/or number of hours watched. If less people watched your show, they’d have to watch more hours of it for you to earn money.

This begs the question: Is there a deadline for each medium, before which the show is pulled? Sure, here are the stats:

Days/Episodes Viewers needed
Cinema 10 10,988
TV 10 869,414
Youtube 2 69,007,813
Netflix 10 2,200,000

Where do these figures come from? A movie is usually pulled from cinemas if it doesn’t perform well for a week plus a weekend. Televisions usually give a new show about 10 episodes before yanking it. Youtube gives a video 2 days to be on the most viewed page before it is kicked out.

If you wanted to recoup your investment, obviously, Youtube is a disaster. Where will you find 70 million viewers, and how do you know Google will pay? On the other hand, you only need about 11,000 tickets sold in a cinema to get your money back (roughly speaking, there’s still payouts and percentages).

These figures also tell you how much you can spend if you know the size of your audience. If you have your audience locked in, like in television or cinema or Netflix, then you can spend more. If you have almost no control over your audience or income, as in Youtube, you can’t afford to take big risks financially. Youtube allows subscribers to subscribe to your channel, but how many of them are real people committed to watching your shows? On the other hand, television and Netflix subscribers actually pay every month – you can bet most of them try to get their money’s worth. Cinema is in between. Most people fully watch a movie, but getting them into the theater is the hard part.

Based on these figures, one can see that, to sustain itself, a medium must offer the right balance between viewers and hours viewed. The medium that offers direct access to the majority of viewers is television and the Internet, no doubt. Most reports and studies claim Internet video will reach television saturation and even replace it as the dominant medium of transmission. Netflix seems to offer the better model, though sooner or later I feel they will introduce advertising. Lastly, Internet video offers the filmmaker direct access to revenue, while television channels will take a large cut to cover their overheads.

I will give this one to Internet video, not necessarily Youtube or Netflix, but a ‘television-like’ model – a combination of both systems of revenue, advertising and subscriptions.

Which medium is the most resistant to failure?

The questions we need answered here are:

  • Which medium is the most resistant to failure?
  • Can you test a product and improve it as you go along? E.g., you can write a play, have a rehearsal and keep making it better. Movies don’t allow that unless you’ve already shot enough footage. Therefore, the market should be tolerant of failure, and your business must be able to sustain a few without going kaput.

You don’t need to be a genius to figure out that cinema is the most risk-prone. You only get one shot. If you fail (chances are high you will) you won’t get the slot for a long time. Do it once too often, and cinema owners and distributors won’t return your calls.

Television and Internet video, on the other hand, offer a benefit. A few shows can flop completely, but you still have enough slots to try to recoup your investment and even make a bit of a profit. It allows one to test a product, and also conduct highly targeted market research that can be built up over the years to produce excellent programming. Netflix is the result of such enterprise.

I’m going to give this one to the Internet. You can start small, make a million mistakes, and still survive. Cinema and television won’t even allow you to start small. Case closed.

Which medium faces the greatest threats?

The questions we need answered here are:

  • Which medium is the best for long term archivability and data retrieval?
  • Which medium is in danger of becoming extinct itself, by nature of the technologies used?

They’re all the same, as far as archivability is concerned. You either store digital media on drives or tape. It’s fair ground for all future programming.

Which medium is in danger of becoming extinct? Hard to say, but I think (personal opinion) the death of television as we know it is certain. Many studies point to the declining trend of old television technologies like cable, satellite, etc. If and when the Internet can deliver a consistent signal, that will be the end.

Mind you, this does not mean the end of television networks or programming, but only applies to the medium. All the programming will transfer over to the Internet. Cinema is already traveling through the Internet for broadcast in some places.

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Which medium is the easiest to access and watch?

The question we need answered here is: Which medium offers the most painless and fastest ‘find and watch’ experience?

How easy is it to find a favorite show on any medium?

  • Cinema – next to impossible. Once a movie has played out, there’s almost zero chance it will see a theatrical release again.
  • Television – faint to unlikely. Even hugely popular shows have to fade into the sunset, sometimes reappearing when you least need it, at awful hours.
  • Internet video – highly likely. Once a video is made ‘on demand’, you can watch it whenever you please. You’re never at the mercy of ‘big brother’ or whatever. What’s more, you can also watch it wherever you please, as long as you have a device connected to the Internet.

On the flip side, once a video reaches a medium, finding it is another story:

  • Cinema – There’s only one thing playing. You can’t miss it!
  • Television – the programming is simple to read and understand. Prime time? No problem. Switch on the channel and you’re done.
  • Internet video – almost hell. It’s easy to search for movies on Netflix, but how about videos on Youtube? One wonders how many videos are never shown to the searchers for various reasons.

Further more, one has to ask this critical question: Do people really want to hunt for material, or would they like to be spoon-fed? My personal experience is the latter. People don’t really know what they want, until they have seen it. If you never knew a movie like the Matrix existed, you’d never know you wanted to see it. People are distracted by the grind of their daily lives. This means, somebody else will have to come up with the programming for them.

Therefore, I feel the ‘search for yourself’ model is too tough on the audience. What people really need is a television-like seamless experience that goes like this:

  • What’s on TV tonight?
  • XYZ Show
  • Set up a reminder
  • It plays when it’s time, and you sit comfortably on your couch to watch it
  • You don’t need a keyboard or mouse.

Cinema is similar, except you have to get your butt to the movie theater. Netflix offers something similar, though Internet connections continue to be the bottleneck to a seamless experience. It also looks like most of the world will be without a fast and secure Internet for another decade or so (optimistically speaking), so I’m going to give this one to television.

Which medium offers the greatest opportunities?

The questions we need answered here are:

  • Which medium offers to support every type of film and video making out there?
  • Which is the most democratic? Which has the least barriers to entry?

There is no doubt: Internet video can take any kind of video, from GIFs to Vine to Youtube to TV shows to news to live streaming to video chats and interactivity to movies. It is also the most democratic. Anybody can start making and publishing videos online, and can also directly monetize their projects.

Which medium is scalable for everyone?

The question we need answered here is: Which medium can become automated, diversified and involve more individuals?

Cinema is not scalable. You’d have to own every theater chain in the world, and then still you’ll hit a dead end. Television has similar space issues. Internet, on the other hand, is infinitely scalable, and is only limited by the number of humans and hours. You can collaborate with any person on the earth, and offer programming to any market.
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Conclusion

Let’s see who the winners are, shall we? Here’s the summary (total score for each variable is 3, divided in case of a tie):

Cinema Television Internet Video
Most Eyeballs 0 1.5 1.5
Most Revenue 0 0 3
Best for Testing 0 0 3
Least Threats 1.5 0 1.5
Easy to Use 0 3 0
Most Opportunities 0 0 3
Most Scalable 0 0 3
Total 1.5 4.5 15

Internet Video wins. If you’re a filmmaker looking for the greatest present and future potential to monetize your business, Internet video is where you should be focusing. Cinema is the riskiest business model.

We all probably have a soft spot for cinema, and I believe if the screens get bigger and we get 8K cinema will offer an experience like no other. Even if you match that experience at home, it will be tough to do so in a ‘social’ setting. I believe, for this reason, cinema will always offer a novelty that will find an audience, at least in the near term.

Television as we know it, on the other hand, is doomed to become extinct. It won’t go away, but it will become Internet video.

I’m not going to pretend this conclusion is any sort of a surprise, but at least you now have numbers to back it up. What do you think?

Sources:

Cinema:

Television numbers:

Netflix numbers:

Youtube numbers:

Internet Video:

  • IAB

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