The David versus Goliath battle faced by Australian creative industries and what they might do to win (Part 4: The Needs of the Australian Creative Industries Sector)

In this next section, we examine the needs of the Australian creative industries, with a particular emphasis on the arts and cultural sector.  We do this with a view to seeing how the business models explored in Part 3 might fit with the needs of our sector in Part 5 of this series.

This is the fourth section in a series of blogposts that examines ramifications of the small size of most Australia creative businesses and explores strategies for resolving issues raised here.

In the previous blogs, we explored:

Part 1: We’re Tiny. The tiny size of Australian creative industries

Part 2: New vs Old Paradigms

Part 3: Business Models for the New Paradigm

In future blogs, we will look at:

Part 5: How a new media model solution might look in the arts and cultural sector

 

Part 4: The Needs of the Australian Creative Industries Sector

Needs of the Australian creative industries with a particular focus upon the arts and cultural sector.

At BYP Group, we research and consult extensively with the Australian creative industries including the arts and cultural sector. We hear perspectives from the funders as well as from the artists and arts organisations that create the art.

Below we outline some of the major issues most frequently raised to us by members of this community over recent years.

  1. Sustainable careers for artists at all stages of practice including related issues e.g.:
    1. Business skills especially
    2. Marketing and communications skills to grow and access audience
    3. Awareness of technology and its impacts on their practice
    4. IP monetization
  2. Affordability of space especially
    1. Space for developmental and experimental work
  3. Professional and creative networks that endure beyond a funding grant or period
    1. Difficulty in career progression from early to mid, mid to established.
    2. Cross-over into the private sector for
      1. ‘Embedded’ work
      2. Service contract work e.g. design, innovation, branding, production skills
  4. Diversity of access to the arts especially target groups such as
    1. Gender
    2. ATSI
    3. CALD
    4. Disability
  5. Funding for multi-disciplinary arts that may fall between traditional funding criteria
  6. Increased Strategic impact of funding through e.g.
    1. Increased co-ordination and collaboration between government entities
  7. Lack of economies of scale and the problems associated with this e.g.
    1. Lack of creative clusters and hubs to help increase scale
    2. Activation of the night-time economy
    3. Too much time spent on non-creative activities e.g.
    4. Office management and space maintenance
    5. Marketing and promotion
  8. An environment that generates collaboration, peer learning and cross-pollination
  9. Creative spaces which creates a sense of community and has its own identity
  10. International engagement frequently due to
    1. Lack of scale to overcome e.g.
    2. Tyranny of distance
    3. Insurance and coverage costs (lack of scale)
    4. Lack of familiarity with foreign cultures
    5. Lack of Australian arts industry ‘brand awareness’ in the international marketplace
  11. Public visibility of the arts, especially at the independent and small organisation level especially
  12. Showcasing opportunities, preferably before an international audience

The above is by no means a conclusive list of the sector’s needs.  There is also some double-up in needs, which illustrates the pervasiveness of the issue of scale described in earlier sections of this blog.

Comparison of independent screen media content creator to independent artist

In the independent screen sector we see many overlapping issues.  Some interesting exceptions include:

  • Awareness of technology and its impacts on their practice
  • Diversity of access to the arts especially target groups such as
    1. Gender
    2. ATSI
    3. CALD
    4. Disability
  • An environment that generates collaboration, peer learning and cross-pollination
  • International engagement frequently due to
    1. Lack of scale to overcome e.g.
      1. Tyranny of distance
      2. Insurance and coverage costs
  • Awareness of technology and its impacts on their practice

As discussed earlier, media was like the ‘canary in the coalmine’ of Disruption.  Consequently, it tends to lead those arts and cultural sectors that are not easily digitized in nature.

This is a generalization and it is common for incumbents and independents alike not to understand the new paradigm.  Bob Iger, the CEO of Disney mentioned in Part 2, appears to have made a sudden and drastic strategic turn-around in recent times. He has decided to pivot his multi-billion dollar organisation into become an online aggregator and distributor to rival Netflix.

The bottom end of the screen sector has benefitted the independent screen practitioner to get their work produced and seen, frequently before an international audience e.g. on Facebook, YouTube

  • Diversity of access to the arts especially target groups such as
    1. Gender
    2. ATSI
    3. CALD
    4. Disability

We have observed in our research the success of YouTubers from CALD backgrounds such as Rackaracka, Superwog, Natalie Tran, John Luc (MyChonny), et al.  We have also seen the success of Aboriginal Australian dance group, Djuki Mala (formerly the Chooky Dancers) which rode off the back of their viral dance clip.  The Katering Show is an example of an all-female cast YouTube hit that has ‘crossed-over’ onto broadcast television.

The above suggests to us that the new media paradigm has been beneficial to diversity and access for these target groups.  This is probably due to the way the Internet has allowed smaller, independent creatives to bypass traditional chokepoints of production and distribution.

  • An environment that generates collaboration, peer learning and cross-pollination

The Internet allows rapid transfer of ideas and collaboration especially in digital-only content.  We note the example in games of Australian sound designers, KPow! Audio who collaborated with content creators around the world to help make the award winning Banner Saga game series.

Still, there may be even more benefits to be had from physical spaces for collaboration, especially across disciplines.

  • International engagement frequently due to
    1. Lack of scale to overcome e.g.
      1. Tyranny of distance

There are clearly still issues of scale that we have identified for independent screen practitioners above. However, the international nature of the Internet has enabled independent Australian screen practitioners (such as those mentioned above) to reach international audiences.  Whereas in the past they may have served only a small, unsustainable audience within Australia, now a small percentage of a global audience can prove sustainable.

 

Comparison Thought Experiment

At this point, we invite readers to consider the online profile of an Australian artist you know to that of the example OOCC’s above.

Even the unscaled OOCC example we show above has over 60,000 YouTube subscribers.  Are there many Australian non-screen artists you know of with that kind of online reach?

Regardless of obvious reasons for this disparity – it is a full-time creative pursuit and enterprise in itself to produce any type of art at the highest levels, (this is also true of the amount and quality of video content to become a successful YouTuber) – wouldn’t it be good if Australian artists couldhave this kind of online reach?

In the next part of our series, we seek to apply the new paradigm screen business model in a manner that might assist Australian independent artists.

The David versus Goliath battle faced by Australian creative industries and what they might do to win (Part 5: How a ‘new paradigm’ business model might help Australian artists)

This is the fifth and final part of our blog series in which we explored the David vs Goliath battle faced by the Australian creative industries, and what they might do to achieve success in the face of international competition.

In this section we attempt to apply the ‘new paradigm’ screen business models explored in Part 3 above, within the context of the Australian arts sector.  We do this with a view to seeing how the business models explored above might fit with the needs of our sector, explored above in Part 4 of this series.

As a reminder, in above sections, we explored:

Part 1: We’re Tiny. The tiny size of Australian creative industries

Part 2: New vs Old Paradigms

Part 3: Business Models for the New Paradigm

Part 4: Needs of the Australian creative industries with a focus upon the independent arts and cultural sector.

 

Part 5: How a ‘new paradigm’ business model might help Australian artists

Taking the business model of the Online Original Content Channel (OOCC) from Part 3, we look now to see how this might look in the context of the Australian arts and cultural sector.

 

A proposed Arts OOCC similar to other OOCC's

A proposed Arts OOCC similar to other OOCC’s

Diagram: Where an Online Original Content Channel for the arts would fit into the new paradigm ecosystem.

Above, we see the OOCC occupying the layer above the independent artists who now occupy the bottom layer in place of the YouTubers, or technically, alongside them.

The Australian Arts OOCC (purple lettering on the left) operates in a similar fashion to the OOCC entities we examined earlier – DanceOn and Geek & Sundry.  On the one hand, in the diagram below, it operates as a ‘digital layer’ above the artists that aggregates content from independent artists who occupy ‘sub-channels/programs’ as we saw on DanceOn and Geek & Sundry in Part 3 of this series.

Diagram-15-oocc-differentiated

On the other hand, in the diagram below, it may additionally have a digital production capability including studio space, permanent crew/staffing etc.  This would make it similar to the two OOCC’s we saw earlier.

Diagram-15-oocc-differentiated

 

Diagram: 1. Differentiated content model, like an OOCC. Artists and partners benefit from scale of digital production, output and distribution, so long as they collaborate to produce content within the NAOOCC’s niche. Examples of niches that might be addressed include e.g. Indigenous Australian content, experimental and developmental content, multi-disciplinary, 

Digital output does not equate to artistic output

Note, the digital output onto the NAAOOCC does not have to be the artistic outcome for any underlying creative hub facility, per se.  Rather, the digital output is used in a way that suits the new paradigm – distribution and marketing of digital content (e.g. interviews with artists, retrospectives, podcasts, short ‘sizzle’ reels of music and/or dance). This raises awareness and interest, driving prospective audience/consumers to non-digitally replicable artwork e.g. live performances, digital media installations, exhibitions etc, that the artist can monetize on their own terms. It is envisioned that the artists collaborate with an on-site digital producer to determine the best type of digital content that will support the artist achieve sustainable practice in a manner suited to that artist.

Partnership Models

Partner organisations to the NAAOOCC could collaborate in one of three optimised ways:

 

  1. Differentiated Content – This is the model in the earlier diagram (“Diagram: Differentiated content model, like an OOCC“). Where the content fits into the NAAOOCC’s niche, the content can be placed on the NAAOOCC’s own digital content aggregator channel e.g. ‘The Multi-disciplinary Art Channel’, ‘The Indigenous Australian Art Channel’, etc. If the niche content falls outside the NAAOOCC’s niche, this is an opportunity for a new, separate niche OOCC e.g. A disability arts channel.
  2. Undifferentiated Content – Where the content produced is undifferentiated the optimization strategy tends towards the Multi-Channel Network (MCN) model described in Part 3 (e.g. similar to the Channel Frederator Network MCN). See diagram below.
  3. Hybrid model – There is also potential for a third model, where the NAAOOCC has a service arm for partners and clients to create digital content more suited to the client e.g. a festival, a corporation, a funding body’s broader remit, etc. The revenues generated from this service facility help sustain an entity like the Niche Australian Arts OOCC, as well as providing alternative income streams for artists and creatives in the space.

 

Undifferentiated 'Multi-Channel Network' model

Undifferentiated ‘Multi-Channel Network’ model

 

 

 

 

 

 

 

 

 

 

Diagram above: 2. Undifferentiated Content model, similar to a the ‘Multi-Channel Network’ (MCN) example described in Part 3 of this series.

 

This model uses aspects of both the differentiated model and the undifferentiated model

This model uses aspects of both the differentiated model and the undifferentiated model

Diagram above: 3. Hybrid Content Model. The OOCC remains niche, but provides services to partners who may wish to create undifferentiated content e.g. advertising for their own organisation, policy need, etc.

 

 

Discussion for deciding between new paradigm business models – Niche OOCC vs Undifferentiated MCN

Strengths and weaknesses of the different models

  1. Differentiated Content Model

Pro: Achieves ‘cut through’ in the crowded content ecosystem (See ‘Example: Importance of the niche strategy’ below)

Pro: Offers more aggregation benefits for content that falls within its niche

Pro: Suits funders addressing a niche area such as a policy gap area, e.g. diversity, experimental work

VERSUS

Con: Requires content made and aggregated to be in the same content niche, reducing the potential for partner collaboration

Con: Reduced size of aggregation benefits across some aggregation categories

 

2. Undifferentiated Content Model

Pro: Increased size of aggregation benefits across some aggregation categories

Pro: Allows more diverse collaboration partners

Pro: Suits funders with broad (undifferentiated) funding priorities

VERSUS

Con: Offers less ‘cut through’ in the crowded content ecosystem

Con: Offers fewer aggregation benefits for (undifferentiated) content on it

 

The above strengths and weaknesses are roughly indicative.  For example, one may find that the overall benefits of ‘cut-through’ of an MCN exceed those of an OOCC even for differentiated content if the size of the MCN is large enough and efficient enough in passing on scale benefits.

 

 

Example: Importance of the niche strategy

As a quick (and by no means conclusive) demonstration of the importance of a niche strategy let’s look at the two OOCC’s we saw earlier in Part 3: DanceOn and Geek & Sundry.   Both of these OOCC’s started around the same time and received the same funding from YouTube’s Original Content Initiative.  To recap, ‘DanceOn’ is a channel that provides popular dance music and purports to find new ‘up-and-coming’ talent. Supported by the likes of Madonna and other high-profile music stars, it came with clear mass market appeal.

Left: DanceOn has content of broad appeal. Right: Geek & Sundry has content of niche appeal

Left: DanceOn has content of broad appeal.
Right: Geek & Sundry has content of niche appeal

Diagram: OOCC’s with different levels of differentiation

 

The other OOCC is ‘Geek and Sundry’, which is very much about what it says it’s about – a collection of nerdy/geeky content. Suffice to say, Geek & Sundry is definitely occupying a narrower niche. How many people like popular dance music compared to … errr … Dungeons & Dragons?  Obviously, a lot more people like popular dance music – otherwise it wouldn’t be ‘popular’.  Here’s where it gets interesting ….

 

DanceOn subscribers vs Geek & Sundry subscribers

DanceOn subscribers vs Geek & Sundry subscribers

Diagram: DanceOn subscriber numbers (1.3M) vs Geek & Sundry subscribers (1.7M)

One might expect the OOCC with the more popular content to be way ahead:  Both organisations  were created as part of the now defunct YouTube Original Channel Initiative. This means both organisations are of similar age and had received the same resources – advanced payment of US$1 million by YouTube “against future advertising revenue to jumpstart production”.

Instead, the opposite is true (although again, not definitively so):  DanceOn has 1.3M subscribers at the time of writing, compared to 1.7M subscribers for Geek & Sundry.

Why?

I speculate that what is happening is that, in the new media paradigm, it is not simply about size of demand, but also about the size of supply. Unlike broadcast media, the Internet is good at finding content to match more niche tastes.  On the flipside, the Internet has an abundance of popular dance music content. Go to any online media splash page and you will find similar images to that of DanceOn. This may be what keeps subscriber levels below that of a true niche offering, like Geek & Sundry. Fans of things geeky have less choice for finding content providers of their niche tastes, consequently, the niche geek channel gets more subscribers than the pop dance video channel.

 

We speculate that areas of market failure in the cultural economy may represent opportunities for a niche OOCC should government choose to fund that gap.  Market failure, for example in providing affordable experimental and developmental space for artists, represents a barrier to entry. Already in screen, we have seen two products with strong female lead casts get picked up overseas, namely Wentworth, and Mrs Fisher’s Murder Mysteries.  With Screen Australia and other state agencies funding the gender gap, content can be made that fills an under-served market for strong female leads.

 

The David versus Goliath battle faced by Australian creative industries and what they might do to win (Part 3: New Media Business Models)

In this section, we will look at some examples of ‘New Media’ business models that are being employed to harness the Internet to allow scale for small creative businesses.

This is the third of a series of blogposts that examines ramifications of the small size of most Australia creative businesses and explores strategies for resolving issues raised here.

In the previous blogs, we explored:

Part 1: We’re Tiny. The tiny size of Australian creative industries

Part 2: New vs Old Paradigms

In future blogs, we will look at:

Part 4: Australian creative economy needs, especially those in the arts and cultural sector

Part 5: How a new media model solution might look in the arts and cultural sector

 

Part 3: New Media Business Models

Business Models for the Small Creative Business in the New Media Paradigm

But what business models are the small content creators – similar to our independent artists and small arts organisations – employing to survive?

The sector saw a 'hollowing' out of the middle tier

The sector saw a ‘hollowing’ out of the middle tier

Diagram above: Old vs New Paradigm. What is happening down in the bottom right, between the independent creators and ‘middle-tier’?

Before we answer this question, we need to take a closer look at what’s happening in that gap between the middle tier and the bottom.

Independent (micro) screen content creators now

Independent (micro) screen content creators now

Diagram above: Virtually anyone can post content to the Web now. A few may make a living from it. A small percentage of YouTubers generate an income from their YouTube channels.

At the bottom of the above diagram, we see very few people make a viable living from their content.  This is not new.   Very few people as a percentage of the population ever made a living from the traditional TV/Film industries.  What is more, these YouTube content creators experience much greater creative freedom in what they do and create than most of the traditional TV/Film industry workers who tended to be crew, or producers making content for a broader mainstream audience e.g. broadcast content, international film productions.  In fact, we argue that finding one’s ‘authentic voice’ (an artist’s unique selling point, or USP, if you like) is imperative to the small, online, content creator.

 

Still, it’s undoubtedly difficult for individual content makers to make a living from an aggregator like YouTube. Successful YouTubers generally require investing 50 to 60 hours a week on content production, and even then, it usually takes years to build a subscriber base (‘audience’) sufficient to make a living.

 

Their problem, as it is in the independent arts scene, is one of scale.  It takes them so long to make content that they have little time to spend on other monetization activities such as merchandizing, spin-off services (e.g. consulting) and experiential content (live, ticketed performances), or other audience development work e.g. marketing, conference attendance etc.  They frequently also need to focus upon just one aggregator or platform (in this case, YouTube) to create enough scale to draw an audience.  This makes financial sustainability ever harder for the independent as others flood in due to low barriers to entry, and also very vulnerable to the platform on which they choose to concentrate their activity (to achieve ‘cut-through’ amongst the noise).  We saw this recently with the ‘Ad-pocalypse’ decimating YouTube ad revenues and that of YouTubers who had chosen to monetize their content through YouTube.

 

What has the market done to find solutions to this problem of scale in the new paradigm?

The answer lies in two overlapping business models:

1) The Multi-Channel Network (or MCN) and

2) The Online Original Content Channel (OOCC).

 

Multi-Channel Networks and Original Content Channels

New business models have emerged to solve the problem of scale for independent screen content creators, especially YouTubers.

New business models have emerged to solve the problem of scale for independent screen content creators, especially YouTubers.

 

 

 

 

 

 

 

 

 

 

Diagram above: Where new screen business models fit in the new ecosystem. Notice how they occupy a new ‘lower-middle’ tier between the old paradigm ‘middle’ (e.g. broadcast networks, national newspapers) and the bottom.

 

Two business models have emerged to offer scale to YouTubers: Multi-Channel Networks (MCN) and Online Original Content Channels (OOCC)

Two business models have emerged to offer scale to YouTubers: Multi-Channel Networks (MCN) and Online Original Content Channels (OOCC)

Image above: On the left, the Multi-Channel Network. On the right, the Online Original Content Channel

Note these definitions are not precise as the sector is undergoing disruption and transformation.  In fact, the Online Original Content Channel is my own name and definition for one of the new business models. For the time being, let’s outline the two different approaches:

1) Multi-Channel Networks (or MCN’s)

The first – MCN’s – aim to provide marketing and advocacy scale, whilst generally not becoming involved in content production. i.e. They have no ‘skin in the game’.

A good example of an MCN operating in this mould is The Channel Frederator Network: http://www.channelfrederatornetwork.com/

Note the splash page of the Channel Frederator Network’s (in the above diagram on the left).  It emphasises the big numbers it attracts – without even a reference to the type of content on its site.

Its business model is one of undifferentiated content aggregation.

 

2) Online Original Content Channels (OOCC’s)

OOCC’s on the other hand, do create their own content, or at the very least, seek to contribute to the production of the content and curateit, by offering economies of scale in things such as, production crew, social media campaign managers, booking agents, studio facilities etc.  Whilst an MCN as large as the Channel Frederator Network (above) might also offer these things, the OOCC seeks to aggregate and offer scale in a niche.

Note this latter model differs from the YouTube Spaces model in that the OOCC is not simply a ‘neutral’ or ‘objective’ provider of resources on plainly economically rational grounds.  Whilst an OOCC may, of course, measure its ‘sub-channel’ content according to rational measures, it bears substantially more risk than YouTube or an MCN does by investing in the content production.  YouTube Spaces is like a ‘macro’ model of an OOCC, with YouTube benefitting overall from the improvement in production values and capabilities of videos posted on its site. Because YouTube owns the aggregation site, it does not need to differentiate in content.  MCN’s are like ‘mini’ YouTube Spaces.

OOCC’s, on the other hand, almost always pursue a niche strategy. As we described in Part 1 of this blog series, niche strategies are important to survive if you are a small plant or animal in the big jungle.  It is the orthodox business strategy for small players within and outside the creative sector:  Where competition is fierce, and you are small, you must make sure what you do provides unique value in that ecosystem, or you will quickly find your margins eroded by another competitor e.g. a competitor from a country where costs are lower e.g. India, Nigeria, China etc.  We describe more on the niche strategy below as it applies to two different OOCC’s in Part 5, ‘Example: The importance of niche’.

 

What does an OOCC look like?

Starting from the outside looking in, generally, an OOCC will occupy multiple platforms and aggregators (e.g. website, iOS, Twitch, Facebook Live, YouTube, podcasts, etc) to maximise distribution of its content – one of its advantages over a small YouTube operation.  Within an aggregator, such as YouTube, the OOCC will have many ‘sub-channels’, visible on its ‘Playlist’ tab (right hand side of the screen shot below).

 

OOCC's tend to occupy multiple aggregators and platforms. They can have sub-channels or 'programs' under their banner.

OOCC’s tend to occupy multiple aggregators and platforms. They can have sub-channels or ‘programs’ under their banner.

Images above: What an OOCC looks like from the outside. Top: Home page on the web of an OOCC. Bottom left: Splash page for the OOCC on YouTube. Bottom right: The OOCC’s sub-channel menu with each of the images representing a sub-channel of content, like a television program on television.

 

What do they look like from the inside? Here we’re going to focus on the OOCC called Geek & Sundry. Some features to note:

 

The content is produced in the studio of the OOCC using (initially) the OOCC’s generic set, production crew (producer, camera, audio and social media manager). One might wonder how they can afford the staff and crew.  The answer is that these same crew and resources are scaled across the large number of sub-channels (see the above diagram in the bottom right image), likely using the same crews and resources across different sub-channel productions. ‘Sub-channels’ are defined here as channels of content that have been curated by the OOCC and exist under the banner of the main online channel – here, a YouTube channel. Similarly, the sub-channel might exist on the OOCC’s website under a separate tab or link.

 

So what are the consequences of this scaled approach at the micro-level? In the next few diagrams we’ll look at one of the sub-channels – Critical Role (which exists on the OOCC, Geek and Sundry) – and watch how it benefits from scale, starting from its humble start as a very bare-bones production.  Later, we’ll compare it to an unscaled YouTube sub-channel, and also compare it to an unscaled artist or arts organisation approach.

 

Each sub-channel or program can share resources from the OOCC

Each sub-channel or program can share resources from the OOCC

Example: Critical Role Sub-Channel. Critical Role is a sub-channel on the Geek & Sundry OOCC. Note, the Geek & Sundry logo appears on the bottom right of the screen, visible in the images at the top left, top right and bottom right.

 

The Benefits of Scale for an OOCC

The first thing to note below is the title sequence of the same sub-channel at different times in its journey: For Episode 1, there is no visual title sequence – just voice over. After approximately 40 episodes we can see elaborate make-up, wardrobe, CGI, location shoot etc.

Production values can increase as the program earns it

Production values can increase as the program earns it

 

 

 

 

 

 

 

 

 

 

Diagram above: The first episode title sequence is nothing but a blurred screen with voice-over. By episode 40, the program/sub-channel has earned enough subscribers, monetisation or engagement (the OOCC sets the Key Performance Indicator) to afford a video production with CGI (provided by a sponsor), make-up/wardrobe and a location shoot.

As the sub-channel grows, it has attracted more sponsors. Note below the hand-drawn diagram/map in the left picture compared to the ornate models and figurines being used on the right. These products have been provided by sponsors, demonstrating one of the advantages of scale (and success).

Sponsors find ways of supporting the program

Sponsors find ways of supporting the program

Diagram above: Product placement advantage for an OOCC sub-channel. On the left props and set are generic or cheaply drawn. On the right, as the sub-channel grows, it attracts sponsors, in this case, figurines and elaborate models.

Also note above, the use of the OOCC’s generic set in the early episodes has been replaced by a customised set build as the sub-channel has earned the resource allocation through subscriber growth and views. Note too, some of the talent are wearing t-shirts and other paraphernalia branded for the sub-channel.  They are able to produce, promote and sell merchandise and promote sponsors much more easily due to their scale, probably through a dedicated sponsorship manager and/or online community manager. In the first instance though, before the sub-channel has proven itself, the online community and campaign manager was probably the producer and their (the talent’s) own efforts, as with a normal unscaled Youtuber’s channel.

 

Comparison of a scaled OOCC sub-channel versus an unscaled OOCC sub-channel

Now we compare an unscaled OOCC sub-channel (below image, on the left) to the scaled sub-channel (below image, on the right, which is still the Critical Role example from before). Although the lone YouTuber on the left has strong graphic and video production skills (he came from the video production industry) – possibly even better than for the ‘Critical Role’ sub-channel – he cannot beat the better production values over time or the access to a wider talent pool.

Left: Typical unscaled (successful) YouTuber. Right: Scaled YouTube operation

Left: Typical unscaled (successful) YouTuber. Right: Scaled YouTube operation

Diagram: Comparison of unscaled sub-channel versus a scaled sub-channel

In fact, we are also seeing another benefit of the scaled operation.  In the above example, the OOCC was using the popularity of one sub-channel to cross-promote and publicize the launch of what would become a new sub-channel on the OOCC: D&Diesel.

Audience engagement and development

 

In the image below, on the left, the lone (‘unscaled’) YouTuber is able to gather his friends together for a livestream with his audience. In the image below, on the right, a professional ‘gig booker’ has taken the Critical Role talent around the United States before live audiences of hundreds, sometimes thousands.  These are opportunities to either further monetize e.g. paid tickets, or develop new audience and engage more deeply with existing audience.

Left: Unscaled operation uses home webcam and lounge room Right: A professional gig-booker provided by the OOCC has booked gigs before large audiences

Left: Unscaled operation uses home webcam and lounge room
Right: A professional gig-booker provided by the OOCC has booked gigs before large audiences

 

 

 

 

 

 

 

 

 

 

Diagram above: The scaled program on the right is before an audience of hundreds. This audience can be monetised (selling tickets to the event – a live-before-an-audience performance of what the program streams) or used to build audience and deepen engagement.

 

Comparison of Spin-off IP monetization

Below, both the sub-channels being compared have ‘spin-off’ intellectual property (IP) they wish to monetize. The ‘Z-Land’ content from the unscaled OOCC is based on their original IP for a new game system.  But with viewer numbers only in the dozens, it is probably not selling anywhere near as well as the IP generated by the other ‘scaled’ sub-channel, Critical Role.

Below, one of the talents on the ‘Critical Role’ show, the Chronicles of Exandria, due to its audience of millions: https://geekandsundry.com/the-chronicles-of-exandria-the-tale-of-vox-machina-available-now/ (and also likely due to the fact that the critical role IP to serve an already well-known IP asset, Dungeons & Dragons).

 

Left: The unscaled channel's crowd-funding program raises c.$8K Right: The scaled program has a subscription base of 1.7 million from the OOCC from which to help monetise.

Left: The unscaled channel’s crowd-funding program raises c.$8K
Right: The scaled program has a subscription base of 1.7 million from the OOCC from which to help monetise.

Diagram above: Comparison of spin-off IP monetization capabilities between unscaled sub-channel and scaled sub-channel

 

Monetization ratios

A key performance indicator (KPI) to examine is the comparison between monetization ratios of scaled OOCC operations and unscaled OOCC’s.

 

Much higher monetisation ratios are likely for a scaled OOCC than an unscaled YouTube channel

Much higher monetisation ratios are likely for a scaled OOCC than an unscaled YouTube channel

Image: Comparison of monetization ratios between unscaled sub-channel and scaled sub-channel. Very rough estimates for monetization per YouTube subscriber.

Unfortunately, this is a difficult exercise from where we stand.  It is difficult to specify precise monetization ratios for YouTube channels because:-

1) It is a confidential stipulation of YouTube that content creators using its services not disclose monetization rates

2) The KPI monetized by YouTube is the amount/duration of ads viewed by viewers (‘Clicks per 1000 views’ or CPM). This will vary even within a YouTuber’s own channel as content length and type may vary

3) Many OOCC’s are privately held and keep data to themselves

 

BYP Group estimates – very roughly – that the average successful YouTuber (say, >10,000 subscribers – it’s what YouTube itself uses as a gauge for access to resources at its YouTube Spaces) monetizes at a ratio of around $0.33c per subscriber from YouTube ad revenue alone (the YouTuber gets 45%, and YouTube keeps 55%).  If they actively undertake activities such as merchandising and spin-off services, they may reach $1 per subscriber and possibly higher.  For reasons of scale mentioned above, we suspect few lone YouTubers ever achieve this higher threshold.

A scaled OOCC is likely to generate a much better monetization ratio.  To put that in context, recall Geek & Sundry had 1.7 million (now nearly 1.8M) subscribers.  We roughly estimate G&S’s revenue is around $8-17 million p.a.

 

In the next section, we examine the needs of the Australian creative industries, with a particular emphasis on the arts and cultural sector. We do this with a view to seeing how the business models explored above might fit with the needs of our sector.

The David versus Goliath battle faced by Australian creative industries and what they might do to win (Part 2: Old vs New Paradigm)

In this section, we look at the impact of the digital disruption and implications it has for the creative sectors.

This is the second of a series of blogposts examining ramifications of the small size of most Australia creative businesses and exploring strategies for resolving issues raised here.

In the previous blog, we explored:

Part 1: We’re Tiny. The tiny size of Australian creative industries

In future blogs, we will look at:

Part 3: New media models for harnessing the Internet to create scale for creatives

Part 4: Australian creative economy needs, especially those in the arts and cultural sector

Part 5: How a new media model solution might look in the arts and cultural sector

 

Part 2: Old vs New Paradigm

The advent of the Internet saw a paradigm shift in media that the World economy is still working through.  Broadly known as ‘Disruption’, we went from a world of content scarcity (Anyone remember having only one TV channel in Wollongong?), and difficulty in distribution (e.g. newsagents and video rental stores), to almost the opposite.

Media: The Canary in the Coalmine of Disruption

To begin with, we will look to the world of media, because these are the industries that were first to feel the effects of disruption caused by the Internet.  Consequently, many of these industries have had more time to develop responses to the new paradigm – or even more interestingly – have started their business model with the Internet in mind – so-called ‘digital natives’.

We argue these ‘new media’ businesses are better designed to leverage the strengths and minimize the weaknesses of the digital disruption.  These developments in the media industry have ramifications for our later discussion considering many artists and creatives receive most of their income either employed by the media industries, or ‘embedded’ in other industries employing new media techniques.

The sector saw a 'hollowing' out of the middle tier

The sector saw a ‘hollowing’ out of the middle tier

Diagram 1(above): Old vs New Paradigm. The sector saw a ‘hollowing’ out of the middle tier.

Many media forms saw a ‘hollowing out’ of the ecosystem, e.g. print publishing saw national newspapers (e.g. Fairfax Media) eroded by a handful of larger international papers (e.g. NYT, Guardian) and new paradigm media outlets (e.g. Buzzfeed) towards the top. Broadcast television saw plummeting profits in the commercial networks leading to the acquisition of Network Ten by a large, foreign media company, CBS. Computer games saw ‘mid-sized’ firms like local companies Blue Tongue and Team Bondi displaced by only the very large content aggregators such as Zynga, Steam or ‘AAA’ developers such as Rockstar Games (e.g. Grand Theft Auto), and replaced by smaller games companies who had success in the new paradigm such as local firms Hipster Whale (Crossy Road) and Half Brick (Fruit Ninja) with much lower production-value games.

Differences in the impact of disruption upon different creative sectors

It is important to acknowledge that each of the media industries has experienced disruption in slightly different ways.  The recording industry experienced years of eroding revenues before recently having renewed success with the subscription model e.g. Spotify and Apple iTunes.  Likewise, the book publishing industry were successful in litigating, with the result being that the aggregator, Amazon, maintains high prices for digital books.  Interestingly, Amazon still wins from this, as it is the main aggregator for books.  Where it loses is that it is more restricted in accelerating the popularity of books in digital form.

In both cases, the respective ‘old paradigm’ media powers were able to successfully leverage intellectual property (IP) laws.  This is not surprising as IP laws came about to protect powerful interests that were wealthy enough to own the production (or the means of putting things into ‘producible form’) e.g. Emperors of China – China had invented the printing press prior to the 8thcentury CE and quickly saw imperial decrees similar to modern copyright laws; and later in the West, industrialists who had sufficient capital to invest in printing machinery.

Changes to the Screen Sector

For the purposes of this series, we will focus upon the screen sector due to its interesting parallels to the arts and cultural sector in Australia.

In screen, we’ve seen the top filled by aggregators such as Netflix, YouTube and ‘orthogonal’ businesses such as Facebook and Amazon. At the bottom end of the content production spectrum we see individual YouTubers posting millions of hours of content a month – frequently people sitting in front of their ‘face-cam’ on their desktop computer at home or shooting from their mobile phone.

At the ‘bottom end’ of content, where production values are cheap and barriers to entry are low, the viewer is now inundated with so much content, the power has shifted. No longer is it with the distributor – e.g. the broadcast networks, newspaper publishers and their newsagents – the power now actually goes to the organisation that can sift through all the content and find relevant content to the viewer’s tastes – e.g. Google/YouTube search, the App Store (arguably a ‘platform’), Facebook. The new ‘large’ players are the aggregators – by aggregating content, they become desirable to the audience/consumer, in turn becoming more desirable to the content creator who then places more content on the aggregator, the audience turns to the aggregator ‘where all the content is’, and so on and so on, in a ‘flywheel’ effect dubbed ‘Aggregation’ (sometimes known as ‘the network effect’).

Content scarcity now only exists in the screen sector at the top end of production values and quality, like Game of Thrones, House of Cards, etc where the makers of the content can be ensured there are restrictions to distribution. In this context, large content providers like Disney and HBO are similar to large book publishers in the old paradigm and new paradigm ‘aggregators’ like Netflix analogous to Amazon’s book store.

One should note too that the screen content has to be so compelling the audience is willing to pay a price for access to it, for example, by subscribing to a Subscription Video on-demand service (SVOD).

It is interesting to note that Disney – formerly a content maker and ‘old world’ distributor (to cinemas, TV etc) – has recently decided to ‘pivot’ from being a content creator to moving up the supply chain to becoming a content aggregator.  Disney’s CEO Bob Iger recently flagged they are to start a subscription video service in 2019.

 

In the next part (Part 3) of our series, we examine what is happening in the screen sector at the bottom end of content production with a view to drawing insights that may inform Australian creative industries who have similar economic properties of being small in scale.

The David versus Goliath battle faced by Australian creative industries and what they might do to win (Part 1: We’re tiny!)

Recently, BYP Group came across a statistic:  Ninety-nine percent (99%) of NSW creative businesses are freelancers and small businesses.[i]  An overwhelming majority of these small businesses had fewer than 5 or 6 employees.

This is the first part in a series that will examine some of the ramifications of this and explore strategies for resolving issues caused by this widespread lack of scale.

In future blogs, we will look at:

Part 2: The impact and implications Disruption has for the creative sector

Part 3: New media models for harnessing the Internet to create scale for creatives

Part 4: Australian creative economy needs, especially those in the arts and cultural sector

Part 5: How a new media model solution might look in the arts and cultural sector

 

Key Points

  • Australian creative industries (CI’s), artists and arts organisations are predominantly very small
  • Being small, most should concentrate on niche strategies and/or strategies that offer them the benefits of scale
  • Disruption has changed the media landscape with implications for the small CI or artist
  • This ‘new paradigm’ has created new business models to achieve scale for independent screen creators or ‘YouTubers’
  • These new business models also address many of the needs of independent Australian artists
  • We explore two business models, the Multi-Channel Network (MCN) and the Online Original Content Channel (OOCC) and imagine how they might apply to the Australian arts and cultural community

 

 

Part 1: We’re tiny!

 

There are several inferences we draw from the preponderance of micro-businesses in the NSW creative industries:

  1. The rest of the Australian CI’s are similarly small
  2. Australian creative industries (CI’s) predominantly exist in a ‘gig economy’
  3. Australian CI’s are likely to face problems of ‘scale’
  4. Conventional business strategy for dealing with being small is to ‘go niche’
  5. Australian CI’s will need to think hard about their unique selling points (USP’s) to compete

 

  1. The rest of the Australian CI’s are similarly small

We will infer that the rest of the Australian CI’s are similarly small, and where they are not, they are likely to soon follow.  This is a common trend for the larger centres of a sector to lead trends across the sector.

  1. Australian CI’s predominantly exist in a ‘gig economy’

With the overwhelming proportion of Australian CI’s being freelancers or micro-businesses (below 6 people), it is safe to assume that Australia has an agile creative workforce, responsive to the needs of the economy.  One suspects too, that many are ‘tele-commuting’ from outside of the expensive Australian capital cities.  The Illawarra (roughly 1.5hrs south of Sydney), Blue Mountains and Central Coast regions all experienced a rapid jump in creative roles between the 2011 and 2016 censuses.

One potential negative of this ‘gig economy’ (and there are several) is the volatility in workflow this can cause, and lost efficiency in needing to spend much of one’s time winning business.  At BYP Group we are very familiar with this issue…

  1. Australian CI’s are likely to face problems of scale

The above issue is essentially a problem of scale.  ‘Scale’ is short for ‘economies of scale’.  For those not familiar with the term, it means the efficiencies and cost-savings gained by being larger.  For example, if you are a lone freelancer designer and you need a large format printer, a lot of its time is spent idle.  More can be gained from that asset if it were used more, e.g. by others in your business, or businesses nearby like in a shared workspace, perhaps reducing the price of access to the printer.

The problem of scale is not unique to Australian CI’s.  Australian businesses in general, except perhaps in mining, banking and superannuation, frequently have difficulty competing internationally because they are so small and have reduced efficiency and competitiveness across several fronts.

  1. Conventional business strategy for dealing with being small is to ‘go niche’

The conventional business strategy to deal with this issue is to focus upon a niche.  If you are not in a niche, there will be many competitors who will outbid each other on cost in a ‘race to the bottom’.  The people that win these types of races are those with the lowest costs.  In the creative industries, the main costs are generally labour and office space.  Being in a niche means you can avoid this issue by competing on a narrower front.

  1. Australian CI’s will need to think hard about their unique selling points (USP’s) to compete

However, being in a niche means you have to truly understand what it is that makes you different in a way that is meaningful to the marketplace (your audience, viewers, patrons or consumers) – i.e. something the market is willing to pay for (thus the ‘S’ for ‘selling’).  Marketers have long worked out that the thing to try to identify is what makes your business truly unique, such that your market cannot go anywhere else to get what you offer.

One traditional problem with the niche has been that, frequently, the niche is too small to provide a living to the creator.  You make the best silver and orange toed socks for ferrets in the world?  It’s just a shame that it has a market of only 30 people in the country.

Of course, the Internet has revolutionised things in two important ways:

  1. The Internet is international, expanding the potential market for the niche creative content, making many more niches viable for creators.
  2. Through improving communications between buyer and seller, reducing costs of distribution and replication (especially of digital goods), the world has gone from one of relative scarcity, to one of relative abundance (at least in First World Nations), especially for goods that are not differentiated. (There’s that idea again – ‘different’).

 

With the above points in mind, in subsequent sections, we will look at:

 

 

[i]BYP Group estimates based on ABS Counts of Australian Businesses, including Entries and Exits, Jun 2012 to Jun 2016.