Crazy that a few years ago, Rupert Murdoch was toying with the idea of setting the WSJ.com website totally free… and now with ad revenues plummeting, it’s all about subscription sales.
Advertising? WTF is that? Read more. I wrote about how this sudden aversion to positioning their companies for ad revenues will come back to haunt them by the time they implement these subscription initiatives.
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Esquire profiles Ryan Kavanaugh, Relatively Media’s CEO, in its Best & Brightest feature. I had heard about Relativity but didn’t know much about the people or story behind it. Esquire does a great job of diving into the company that finances movies for the likes of Sony, MGM, Universal, Time Warner, etc.:
“What separates Kavanaugh from most producers is not just that he’s making movies, it’s how he’s making movies.”
(…)
It’s All About the Numbers
People sometimes criticize me for taking a very analytical approach to content creation for the Web, but I don’t make apologies. Reading the profile on Kavanaugh, I won’t lie, I almost feel vindicated:
“What I first see is a bunch of numbers,” says Ramon Wilson, Relativity’s thirty-year-old executive vice-president of business development.
(…)
Before Relativity commits to financing a particular movie — either through its slate deals with Sony and Universal or on its own — it’s fed into an elaborate Monte Carlo simulation, a risk-assessment algorithm normally used to evaluate financial instruments based on the past performance of similar products.
Enough variables are included in the Monte Carlo for Wilson and his team to have reached the limits of their Excel’s sixty-five thousand rows of data: principal actor, director, genre, budget, release date, rating, and so on. After running the movie through ten thousand combinations of variables (in marathon overnight sessions), the computers will churn out a few hundred pages that culminate in two critical numbers: the percentage of time the movie will be profitable, and the average profit for each profitable run. The computers will also calculate the best weekend for the movie to be released, whether Russell Crowe will earn his salary or Sam Worthington will be good enough, and the box-office effect of an R rating versus PG-13. But for Kavanaugh, those are secondary considerations: Unless the movie shows the distinct probability of a return — no one at Relativity will reveal the precise green-light figure, but it’s something like 70 percent — the script gets shredded. “Everything has to run on the principle of profit,” Kavanaugh says. “We’ll never let creative decisions rule our business decisions. If it doesn’t fit the model, it doesn’t get done.”
Ok, we don’t quite have that system. In fact, so much of it is straight from the gut. But the approach, or rather, the belief that you cannot be self-indulgent when it comes to producing things is paramount at WatchMojo.
If You Create It, Will They Watch? (It Depends.)
Yet today, we’re the only company that is in a position to adopt and maintain a ”Field of Dreams” approach to creating entertaining and informative content. Of course, we do so based on a set of criteria and editorial and marketing guidelines. It’s not a free-for-all where I green light every idea. Or rather, while I am willing to entertain any idea from anyone, it has to fall within the parameters that have proven successful.
We create content people watch; the results speak themselves: nearly 100,000,000 streams since launching in 2006.
The definition and measure of success is of itself debatable and subjective, I am well aware of that. But we’re the only new media company that gets paid guaranteed licensing revenue from other media companies… that is not a grey matter and explains why unlike many video companies (not just content companies) we actually experience the odd month where we’re in the black.
You Want People to Think You’re Crazy
Another thing I particularly like reading about Kavanaugh is proving the naysayers wrong. In Malibu Mag’s Ryan Kavanaugh: The Fall and Rise:
“I was told every day by the biggest people in the industry that I would never make it; they were laughing at me,” Kavanaugh said. “They don’t want to believe that someone can do something different. But I put my blinders on, fought hard, stuck to my plan and never gave up.”
(…)
Kavanaugh couldn’t afford the rent initially posted at the office he wanted, so he struck a deal with the landlord to pay half the rate in the first year and double it the second year. Relativity now has multiple floors in the same building with 65 employees, all of whom Kavanaugh calls his greatest strength. He took a mortgage out on his house at the time for $300,000 and put all of it into the company. There were times, he said, when he didn’t know if he could make payroll.
I know the feeling. Continues Malibu Mag:
That was 2004. Today, Relativity has major dealings with almost every key studio in Hollywood.
I also know the feeling. Back in 2006, people thought:
- I was crazy for investing in premium video content, they felt that I was at risk from both the bottom (UGC) and the top (super premium). Nearly four years into the venture, UGC has fallen flat on its face as marketers reject the medium, and super premium producers see a lack of ad dollars on the Web (relative to offline and traditional outlets) so they shun to publish on the Internet.
- I was insane for producing everything from automotive, to business, entertainment, lifestyle, music, sports, travel and video games. Today, we’re ubiquituous. Who else, do you know of, that supplies content to both mass market aggregators (such as Hulu and YouTube) as well as vertical content producers (such as Thomson Reuters and IGN).
I don’t frequently publicize my plans to venture in super premium content. I won’t today either. But all I will say is that once you have enough data on what kind of content works and you have built a distribution network across multiple platforms, it becomes almost too easy to move from producing premium content to super premium content.
As a small aside, the Esquire article refers to his favorite movie. I actually recall watching it and to this day, the last scene from the movie haunts me:
But there’s a poster on the wall of Kavanaugh’s office, a tattered one-sheet from what he says is his favorite movie, a movie so unpopular that he could find the poster only in Spanish: En algún lugar del tiempo — Somewhere in Time. It’s a 1980 tearjerker starring Christopher Reeve and Jane Seymour as unlikely lovers separated by a half dozen decades, until Reeve learns to close his eyes and open his mind and convince himself that he can travel through time. It was a critical and commercial failure, and yet something about it worked for Kavanaugh. Maybe it was the physics behind it. Maybe it had something to do with where he was when he first watched it or the lens he saw it through. Whatever it was, even he can’t explain why, exactly, Somewhere in Time caught hold of him. “It’s just an insane love story,” he says, his hands held out at his sides. “Titanic was an insane love story, too.”
It is insane, I won’t give the ending away… all I will say is after watching that movie, you never see a penny on the street(or any coin for that matter) the same way.
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