Monetizing Social Media

These days, nearly every major brand and celebrity personality has some presence in the world of social media, whether a page (or multiple pages) on Facebook, a Twitter feed, blog or interactive section of their corporate or personal webpage. While it is relatively easy to gain a social media presence, it is decidedly more difficult for many brands to develop a cohesive strategy for leveraging social media. Questions like, “which social media outlets should we utilize?” are often overlooked in favor of a “quick, let’s get on all the social media platforms so consumers can see we’re on board!”

Finding ways to use social media to generate revenue has been even more difficult. New York Magazine had a cover story last week called “Inventing Facebook” about the upcoming movie The Social Network. Though mainly an overview of how The Social Network was developed, written and filmed, there is, in particular, this well-made point by author Mark Harris:

“The idea [of a movie about Facebook] captured the industry’s attention immediately. Hollywood has had the same kind of love-hate-fear-resignation relationship with Facebook that it’s had with almost every other Internet innovation – a downward spiral of enthusiasm from ‘We can exploit this to sell our movies!’ to ‘We can’t figure out how to exploit this to sell our movies!’ to “Has anybody else figured out how to exploit this to sell their movies?’ to ‘Let’s just post a link to the trailer and call it a day.’ But the possibility of bringing to the screen a brand with a fan base of half a billion was irresistible.”

A tongue-in-cheek e-card from Someecards.com poking fun at Facebook's dismay with The Social Network, right.

For many companies, a presence on Facebook is indispensable. They recognize the value of social media in building brand awareness, consumer interaction, and (if done right) consumer trust. However, some companies have also come up with innovative ideas for monetizing their presence on platforms such as Facebook. Back in June, Disney created a Facebook application called Disney Tickets Together that allowed users to purchase tickets to Toy Story 3 and invite their friends along to the same show (read about it here). It was an interesting and creative idea, though Disney does not seem to have used the app to promote any other movies, despite having a new feature film, Secretariat, set for release in the U.S. next week. Other companies sell (hopefully) large quantities of branded virtual goods for small amounts of money, known as microtransactions. These items, often purchased for about $1 each can be displayed on a user’s page within the applicable social media platform. In this regard, it not only generates some revenue, but also exhibits the user’s support of the brand and creates brand impressions with people within the user’s network.

Merely using social media to build brand awareness and consumer brand impressions is certainly valuable. Finding innovative ways to monetize the brand’s offerings through social media is invaluable. The Disney Tickets Together app seemed a natural extension of a key feature of Facebook: telling Friends what you are doing and inviting them along. Consumers are wary of efforts that don’t feel genuine. Regardless of the social media platform a brand chooses to leverage, the key to success is maintaining an organic feel to the program.

Premium VOD--Have Studios Found the Answer?

I am about to show my age. When I was a child, the movie business was a simple matter. Studios made movies and people like my brother and I went every weekend afternoon to one of the three movie theaters in the smallish industrial town in the U.S. in which we grew up. There were no other distribution platforms for the studios to screen their products (my son tells me there is at least one movie theater in Kolkata that still fits this bill.) Indeed, I suppose that the special Saturday matinee fare was the closest to thing there was to out-in-front marketing (get the kids into the habit of periodic movie-watching and you then own them for life when they are able to pay full fare).

As for the present--au contraire! If anyone needed to be reminded of that fact, the article by Brooks Barnes, "In This War, Movie Studios are Siding with Your Couch that appeared in the September 25, 2010 edition of the New York Times here graphically demonstates this point. The focus of the article is the "explosion in the movie business" that is expected to take place in the next few months.

The catalyst was a ruling issued by the U.S. Federal Communications Commisison in May 2010 that movie studios are permitted to activate technology that has the effect of preventing the copying of films sold though video-on-demand (VOD) systems. As a result, it is expected that the studios will soon launch a so-called premium VOD service. The article describes this service as "the [movie] industry's best hope of restoring itself to health." What, pray tell, is going here?

The most pressing challenge to the studios is that the bottom has fallen out of DVD sales. It is reported that such sales have declined 30% since 2004 (although how much of the decline is due to structural factors and how much is due to the cyclical downturn is not clear.) The proposed remedy is to adopt the premium VOD service.

Under the current system, the movie theaters enjoy a 120-day exclusivity period within which to screen movies. Only after the expiry of that period are the movies made available on a VOD basis, at an approximate price of $4.99. The proposed premium VOD service will shorten the exclusivity period to 45 days. After that time, movies will be made available on a VOD basis at an approximate price of $24.99.

The studios apparently believe that there is a sufficient mass of couch potatoes prepared to shell out nearly $25 for a movie that they can watch at home reasonably soon after the initial release of the movie in the local theater. When one factors in the fact that the studios earn up to 80% of the revenues from DVD rentals, the attraction of a premium VOD is clear. On a subsidiary level, the shortened exclusivity period promises to reduce the amount of promotional and advertisement costs as well as to attract viewers more generally to the concept of VOD services.

So how do we see the various actors in the celluloid melodrama faring under an premium VOD regime? Here are some of my thoughts.

1. Studios--They see this opportunity as a way to exploit new platforms of content delivery with the hope that it will make up for the decline in the DVD market, which has been a major driver of profits in recent years.

2. Cable and satellite producers--Their interest is two-fold: (i) another revenue stream; and (ii) a potential differentiater of their services vis-à-vis content delivery competitors.

3. Retailers of DVDs--Behemoths such as Wal-Mart have owned the DVD market and they appear to be dead set against the premium DVD service, which they fear will further cut into their DVD sales.

4. Movie theaters--In a word, it is reported that they are prepared to declare "war" on the studios' plans to launch the premium DVD service. Their reasoning is simple: reducing the exclusivity period to 45 days will cut into sales of theater tickets without any compensation for these lost ticket sales. In addition, they warn that the so-called anti-copying technology will sooner or later be cracked, meaning unlawful distribution at an early stage of the movie screening time-line.

5. Symbiosis--That said, there is a form of symbiosis here beween the movie theaters and the studios because the most desired television networks--such as HBO--pay the studios in part on the basis of domestic box-office revenue. This means that, if there is less revenue at the box office, the studio will receive a lower fee from these television outlets. Moreover, it is doubtful that any other distribution channel has the (current) ability of the movie theater to provide the catalyst for viral buzz about a new movie release.

Let me venture two final comments.

First, the potential dispute over premium VOD highlights the continuing debate over the importance of the viewing experience. A good deal of the cost differential to watch a movie in a theater is connected to the total ambience of the viewer experience. Home viewing offers a totally different ambience and price structure. The studios seem to be betting that they can narrow the price differential between theater and home viewing, despite this stark difference in the two viewer experiences.

Second despite the intimation of the New York Times article, I have my doubts that premium VOD my itself will mark a strategic rebalancing within the movie industry. At the most, it will mark another tactical move that may both enhance the revenues of at least of the dramatis personae in the industry as well as create a nuanced (or not so nuanced) reshifting of relationships. At the end of the may, we may look back at this move as one more of the "thousand cuts" that the industry is experiencing as it seeks to find more appropriate business models in an era of changing content delivery platforms.

Australia's new personal property securities regime affects IP from next May

In May 2008 the IP Finance weblog noted proposals for reform of the law relating to personal property securities and intellectual property in Australia. A recent piece, "Personal property securities reforms and intellectual property", by the Allens Arthur Robinson team of Diccon Loxton, Tim Golder, Rebecca Sadleir and Robyn Chatwood, brings the topic up to date, summarising the impact of new rules that come into effect in May 2011. You can read it in full here.

The new law is to be found in the Personal Property Securities Act 2009 (Cth), which establishes a single national law governing security interests and similar transactions with respect to almost  all tangible and intangible assets -- not just IP -- and is fairly similar to the law applicable in New Zealand. It will make it easier to securitise IP assets when raising funds, providing a single register of security interests for all registered IP rights. Among the many points to note is that existing transactions raising finance against projected licensing royalties or franchise fees will be affected by the reforms and will therefore need review.

Internet referencing... with a twist of squash.

When it comes to the field of online advertising services, Yahoo Search Marketing is not considered as a big player by media and advertising companies and neither is it seen as the main offender by trademark owners fed up with the unauthorized use of their trademark as keywords. Indeed with only 6% on the search engine market Yahoo rarely makes the headlines and its search engine marketing (or S.E.M) techniques are not carefully scrutinized by marketers and trademark owners compared to its competitor Google and its famous paid referencing service AdWords. However World Trademark Review reporter Adam Smith posted a very interesting blog item last week that will probably catch the attention of marketers and trademark owners alike and might even upset many of them. This blog post might also cast a light on a company that seems to be acting freely behind the shadow of a giant, which has been taking most blows for the whole internet referencing sector mostly given its hyper-dominance on the market.

According to Smith, who relayed an article originally published in 2007 by Yahoo! on its research webpage, the company developed of a method to “inject more competition” in Yahoo’s keyword auction system by handicapping users of their service whose ad click probability (otherwise known as Clickthrough Rate) is very high. At that stage the actual deployment of this method called “squashing” invented by Yahoo! Microeconomics research group into Yahoo’s paid referencing system remained unknown. However Yahoo! Chief Economist Preston McAfee admitted its use very recently in an interview given to the Register and stated that: "When someone has a really high ad click probability, they're very hard to beat, so it's not a really competitive auction. (…)So that they don't just win [every auction], we do squashing.”
It must be noted that whereas scientists of Yahoo Microeconomics research group were mentioning the idea of a better experience for users and advertisers as second underlying motive for the implementation of this squashing algorithm – "the idea is to explore other mechanisms to help us maximize our own revenue as well as maximize the value we provide to advertisers and users" as David Pennock, a Yahoo! Research scientist in the microeconomics group explained, Preston McAfee did not explicitly referred to user’s experience improvement as reason behind its implementation besides its proclaimed objective of increasing Yahoo’s revenue. He notably mentioned that "the bidders respond by bidding higher. The one who was destined to lose is now back in the race, so they bid higher trying to displace the number one, and the number one is trying to fend them off so they bid higher too. (…) We can make the competition a bit more fierce using squashing, even on keywords where there's not much bidding."

With his declarations Preston MacAfee might have open something of a Pandora’s Box, which could have some serious consequences for all the players of the market – with Google in first line – if were proved that sponsored links are not appearing in an order resulting from the strict application of a fair and neutral algorithm. Finally this twist of squash might not been appreciated by trademark owners already appalled by the use of their trademarks as keywords by competitors, which has been authorised by the ECJ in the famous Joined Cases C-236/08 to C-238/08 Google France and others v. Louis Vuitton and others. Squashing or not, the forthcoming developments of this story will be juicy.


For some orange squash: click here
For a crazy squash point : click here

Juries and IP damages: a random and unsettling factor?

In "Don Johnson profit payout doubled to $51.2m", the BBC reported last week on the decision of a Los Angeles court to increase -- by a factor of rather more than two -- the quantum of damages awarded to actor Don Johnson for his contribution as intellectual originator and actor in all 122 episodes of US police TV drama Nash Bridges. The original award, a paltry $23.2, was ordered after jurors confirmed Johnson's claim that he owned 50% of the show's copyright.  The defendants are reportedly going to appeal.

Contra Costa Times adds some further detail.  Documents filed by attorneys for defendant Rysher Entertainment say that the judge and not the jury should have interpreted the copyright ownership contract which, they maintain, entitled Johnson to half the show's profits only after deductions were made for distribution, production and other costs. More disturbingly for those of us who are not used to the way things are done in the United States:

"According to a sworn declaration by trial juror Jason Scardamalia, the panel originally decided to give Johnson $15 million. However, the majority of the jurors agreed with one panel member's suggestion that Johnson deserved interest because he had not had access to the money for many years, Scardamalia said".

"I disagreed and said that I did not know why we were calculating interest," Scardamalia stated.

After pondering an additional 10 percent interest, 11 of the 12 jurors finally settled on adding an annual 5 percent to the $15 million from 2001 - the year the show ended - until 2010, Scardamalia stated".

The notion of leaving either the construction of contract terms or the calculation of an award of damages to a jury is alien to most other jurisdictions.  Interpreting a contract is not so serious, since the range of options available to a jury is relatively close to the sort of things a trained judge might come up with.  However, the assessment of damages in US IP litigation appears to have a degree of randomness to it which, this writer respectfully suggests, must surely make it more difficult for the parties to assess best- and worst-case scenarios when considering whether and, if so, how, to settle without recourse to a court decision.

IP and Finance conference: a reminder!

Intellectual Property and Finance 2010: exploring and explaining the financial dimensions of IPRs is the title of a one-day conference, organised by CLT Conferences and scheduled to be held in Central London on 20 October. The day is chaired by IP Finance blogmeister Jeremy, and the speakers include three IP Finance team members past and present -- Anne Fairpo ("Taxation of IP: where do I start?"), Ian Hartwell ("Risk Management in IPR Ventures") and Louise O'Callaghan ("Insolvency: what does it mean for IP owners and those who do business with them?").

As is so often the custom these days, there's a competition attached to this conference, the first prize being complimentary admission to the conference, inclusive of a tasty lunch (thus saving you the trouble of forking out £495 + VAT for registration).

The competition is a simple one. We all receive scam emails Some are from people purporting to be in possession of funds which can only be released once the recipient has himself paid some cash over to the scammer, or which require the recipient to part with his confidential online login and password details. Your task, in entering this competition, is to compose a plausible scam email which seeks to entice recipients to invest money in an imaginary IP-protected business venture of your choosing. Entries should not exceed 500 words unless they're very good ...

Entries should be emailed to Jeremy here, with the subject line "IP begging letter". The competition ends at close of play on Sunday 3 October and the winning entry will be published on this weblog shortly thereafter.

You can read the conference programme in full here.

How nuts!

Many of you have written to blogger Jeremy about the recent article in the New York Times, "The Peanut Solution". The article describes an item that, by all accounts, is an easy-to-manufacture and easy-to-administer wonder treatment for malnutrition: a paste made of crushed peanuts and vitamins.

The vitamin-loaded peanut paste described as “the peanut solution” is the subject of various patents (in 38 countries) held by a French company called Nutriset. Nutriset also holds registered trademarks for the product name Plumpy’nut. The New York Times article recounts the creation and development of Plumpy’nut, as well as its successes in numerous poverty-stricken countries where childhood death rates soar in large part due to severe malnutrition.

The article also provides an interesting view of the struggles among Nutriset, humanitarian aid groups seeking more affordable and/or locally-produced alternatives to Nutriset’s Plumpy’nut, and numerous companies that would like to manufacture similar peanut-based pastes as humanitarian aid without running afoul of Nutriset’s patents. The food manufacturers that would like to produce competing “ready-to-use therapeutic foods” argue that Nutriset’s patent is overbroad, foreclosing the production of any nut-based pastes for nutritional uses. However, the fact that nuts are high in natural fats, proteins and vitamins, coupled with their ready (and inexpensive) availability in vast quantities throughout many countries, is precisely why they make such an attractive, and practical, base for a nutritional supplement to treat malnutrition. These would-be competing manufacturers are hoping to succeed in challenging the validity of Nutriset’s patents so they can begin distributing their own paste formulae.

With this information in mind, I’d like to pose a question as, ahem, food for thought: Should the patents protecting humanitarian developments such as Plumpy’nut be more easily subject to compulsory licenses in order to ensure that such products are available at cost-effective prices and able to reach those that need them most? Some countries’ governments may be able to satisfy the TRIPS requirements for compulsory licensing (see the requirements here). However, it doesn’t seem that this opportunity has been exercised in any country. Certain countries that would seemingly satisfy the TRIPS requirements may not have the manufacturing capabilities needed for local production. On the other hand, there are interested manufacturers in other countries, like the United States, that would probably not satisfy the current TRIPS terms (for example, that the license be used predominantly to supply the domestic market). But such manufacturers, given the opportunity, could help supply treatments to many more children in need in numerous countries.

Unlike other pharmaceutical inventions, Plumpy’nut is an example of a product that is truly humanitarian in nature. It wasn’t created to treat a condition that happens to afflict people regardless of socio-economic status despite being most prevalent in developing countries (for example, AIDS drugs, which are the subject of heated debates regarding their cost, and thus availability, in the developing world). And it is not the type of treatment that some of the affected patients can afford though some cannot. It is a treatment that was created purely to address a problem that plagues only the poorest communities, mostly in developing countries. In fact,

“[o]ne element of genius in Briend’s recipe was precisely its easy replicability: it could be made by poor people, for poor people, to the benefit of patients and farmers alike. Most of the world’s peanuts are grown in developing countries, where allergies to them are relatively uncommon, and the rest of the concoction is simple to prepare. On a visit to Malawi, [pediatrician and Plumpy’nut inventor André] Briend whipped up a batch in a blender to prove that Plumpy’nut could be made just about anywhere.”

And yet, two months of malnutrition treatment with Plumpy’nut costs $60 per child. Such a simple remedy made from ingredients that are readily available in the areas where the treatment is most needed remains cost prohibitive for many would-be recipients of Plumpy’nut – and for the governmental and non-government organizations that purchase Plumpy’nut and other medicines to include in humanitarian aid supply deliveries.

Surely if there is a product most appropriate for compulsory licensing it would be Plumpy’nut, which was developed by a humanitarian medical worker to treat the neediest among us. Navyn Salem, Nutriset’s exclusive United States-based Plumpy’nut manufacturer, put it best: “We’re trying to put ourselves out of business. That would be the best-case scenario.” If it were possible for other companies to supplement Nutriset’s output by distributing as many units of similar malnutrition treatments as they can manufacture, that seems like the best-case scenario to me. Or is that thought just nutty? Feel free to share opinions as comments to this post.