Budgeting For Internet Video (You Get What You Pay For)

Reader Adam H. had a couple of questions about what I thought about the Fast Company / Robert Scoble / Shel Israel thing that’s been going on now for about a month. The first GlobalNeighbourhoods.TV video was dropped on March 19th… Actually, the first FOUR episodes were released on that date and since then, post-production of that show has essentially been non-existent during a virtual metalstorm of criticism of nearly every single aspect of that show.

I commented five days ago on Shel’s site here and here. I thought I’d say something today about budgeting for internet video, with the focus being essentially that you get what you pay for, and if you don’t pay for anything it’s not only the content creator that’s going to be ridiculed, it’s YOUR brand.

Here’s the problem with internet video. I’ve been saying this for probably over a year now, and nothing’s different today. The way television works (which I know, because I’m a broadcast editor) is that the money comes from advertisers. The reason the money comes from advertisers is because they want to take advantage of *you*… the viewer. They know that 2 million people are going to sit in front of the television and watch this show, so they’re willing to pay the network to get their product in front of that many potential customers. Television is ALLLLLLL about sales. That’s why they call them “soap operas”. The point was to sell soap. ACTUAL soap.

This model doesn’t exist with internet video. Not only do you generally have a smaller audience, but you can’t prove demographics. This means you can’t convince an advertiser to give you big money to do an internet show. Since there’s no real revenue stream, it’s spawned a mentality of individuals and companies trying to do or get something for nothing. The less they can spend and still have a video to put on youtube or wherever and try to get hits, page views and revenue shares, the more they like it.

That’s the internet video formula. Spend little, get a garbage product, have people click on it anyway, split the revenue with the host. As we’ve seen with people that have gotten millions of hits on a video and pulled in maybe a couple of thousand dollars worth of revenue, it’s just not worth it. The odds are low that you’re going to get that many hits, and the fact of the matter is that time is money. Unless you have a sponsor, making video on the internet is a money-LOSING situation.

For example… If you work in NYC, and you’re the slowest, least-knowledgeable nonlinear video editor with his/her own system, you can still get $30/hour. Using that insanely-low number as a base, let’s look at the time that it would take to do the Shel Israel show. Actually… Let’s kick it down to McDonald’s wages… What do they get? $10/hour? Is that minimum wage at this point? Let’s say you could get someone to work for $10/hour to make Global Neighbourhoods Television.

The first thing you have to do is shoot the show. Assuming the company you’re going to talk to is local to you, you have to get paid for the time you spend at that company plus the time it took you to travel there. Let’s say you spent 5 hours at a company, traveled another two hours to get there and back and shot 2 hours of footage while you were there (I have no idea how long they actually take or how much they shoot to do their show).

Off the bat, your show has now cost you $70 in time and $15 in tape if you didn’t buy bulk. That’s assuming you already own a camera. That’s assuming you already own a microphone. That’s assuming you already own lights. That’s assuming you’re going to run the camera yourself WHILE you do the interview. If you want to have a cameraman follow you around, let’s say you were able to find someone else that was willing to work for my version of minimum wage, $10/hour. That means that your show is infinitely better, but that it now costs you $140 to shoot. It also means that most likely, the person that you hired… SUCKS, so there’s a good chance that you won’t get anything good for your no-budget production.

Now you have a show “in the can”, meaning you have the elements, but you don’t have a finished show. This means that you have to find someone that’s willing to edit your show for $10/hour. Off the bat, there’s going to be a two-hour loading fee because if you used tape, it has to be ingested into the system in real-time = $20. If you didn’t hire a producer for $10/hour to make sense out of the footage that you shot, that means that the editor has to play through ALL of your footage to extract the best parts = another two hours = $20. Now, the editor is either charged with making your show him/herself, or it’s a supervised edit, meaning someone is telling the editor what they’d like to see happen. Let’s assume it’s going to take four hours to edit the show. That’s another either $40 or $80 depending on the number of people involved. That also doesn’t take into account Suite Fees and Equipment Fees.

So… Adding up this bunch of $10s, we end up with a base price of something like $165/episode for a show that’s shot in one day, by one person and edited during a four hour time span. No revisions. No changes. No more work done on that show past one day. Now… How does that money come back? Revenue-sharing? Let’s say you can get a $7 CPM (cost per mille) for your videos. That means that for every ONE THOUSAND TIMES that someone clicks on your video, you receive a whopping $7. And that’s AFTER you accumulate enough of those thousands to make it over the low limit which the host has agreed in their ToS that they’ll write you a check. That might be $25 and it might be $100, so you don’t get paid JACK unless you get 25/7×1000 views. Let’s call it 4,000 views gets you $28 and THEN you get paid.

$165/$28 = 5.892. Multiply that by 4,000 views, and you’d have to get over 23,000 views to break even if you’re working for $10/hour. Sure, you can do other stuff like have banner ads on your page and google ads, but basically, you can see that without sponsorship, Shel’s not only doing a show for free, he’s actually LOSING MONEY doing the show. SOMEONE’S got to come up with that $165/episode. If it’s a weekly show, that’s $660/month.

PLUS… Unless you’ve got it like that, and you have a business that makes money without you being involved, you have to factor in the opportunity cost of not being able to make money during those hours that you’re shooting and editing your show. You also have to factor in downtime on your computer while videos are being rendered, compressed or uploaded to the internet.

So, even with this hypothetical minimum wage example, we’re looking at $800/month to produce Global Neighbourhoods Television…. in its CURRENT state.

So now, you’d have to wonder WHO you could get to pay you $800/month as a sponsor of a no-budget show. You’re not going to be able to sell “numbers” unless you’re popular for some reason. You’re not going to be able to sell page views either.

Apparently, what happened in this particular case is that Shel Israel’s show has been submitted for editing. Today is April 10th. The show, which was originally announced as a daily… was kicked back to being a weekly… and now hasn’t been updated since March 28th, which will be two weeks ago, tomorrow. If it actually becomes a weekly show, tack on that four hours of minimum wage editing for another $40/week = $160/month and now, the budget is approaching $1,000/month, including shipping tapes to the editor.

So now, I can get to Adam H’s questions:

Adam H: What is Bill’s opinion on this? What are his thoughts on why the videos are lag coming out, why they are long and boring, about FastCompanyTV in general?

My guess is that the videos aren’t coming out on schedule because Fast Company’s in between a rock and a hard place. They only have two choices… Release videos of the same ‘quality’ or get the videos worked on. It seems like they’ve chosen to get them worked on. Neither solution “works” for them.

If they release videos similar to what they’ve already produced, they’re going to be the subject of even more ridicule than they already have been. “They”, being the entire crew involved in this: FastCompany, Robert Scoble, Shel Israel… in that order.

If they get Shel’s videos worked on, the minimum wage editing money is going to have to appear out of thin air. As far as I know, there’s still no sponsor, even though that Seagate advertisement is STILL on fastcompany.tv/global-neighbourhoods-tv. Actually, they could virtually “pay” for Shel’s show to get edited if they have a staff editor and just tack it onto his/her list of duties for fastcompany.tv. That still incurs the opportunity cost of that editor taking time away from doing edits that were originally in their job description.

The other problem with getting the shows edited is that they’re already shot incorrectly. This means that the 4 hours (plus 2 hours for loading, plus an hour for encoding, uploading, tagging, etc) that I estimated for the edit will probably be more like 8 hours and probably spread out over several days, including running the show by an EP (more minimum wage $$/episode) and making several revisions until it’s deemed worthy to be released.

Why are they long and boring? Their focus is on “content” and not entertainment. Basically, what they do is bring you along as a fly on the wall while they hang out with business people and ask questions. Their goal is to archive these Q&A sessions. Basically, as an editor, I can tell you that watching their shows is like watching raw footage. It’s what you would see if you opened up the viewfinder on the camera they used to shoot it and pressed play. The credit that I can give them is that the only show of theirs that I’ve listened to end-to-end was the Jason Calacanis interview, which was broken up into a 20 MINUTE SEGMENT and a *24* MINUTE SEGMENT with a third segement still to be released. I probably watched the first 5 minutes’ worth, then let it play in a background window like a radio program while I did other things. So I can guess that if the niche that they report on consistently has topics/guests that someone’s actually interested in, then their long, boring videos are consistently useful to someone. I’d love to see stats on how many people are return viewers and what percentage (time-wise) of these 44-minute and counting videos are actually being watched.

What about FastCompany.TV in general? hahahaha Interestingly enough, I said what I had to say about FastCompany.TV when I heard about it through the grapevine. I left my comment on Robert Scoble’s announcement post, three months ago, on January 16th, 2008. Video quality isn’t based on a website… It’s based on a team. Bring the same team and you get the same videos.

Meet the new boss….

Same as the old boss………

8 thoughts on “Budgeting For Internet Video (You Get What You Pay For)”

  1. Thanks for a thoughtful post. Just want to point out that we did post a new clip 10 days ago on Measuring results of a new ride at Seaworld. Today, we plan to post a new one on my interview with GM Vice Chairman Bob Lutz.

    The slowdown was caused more by start up glitches and a spam attack that took away my production resources.
    Jeremiah was my first interview and I think and hope my worst. I do think I am getting better. When sponsorship comes in we will be more frequent and hopefully the quality will continue to improve.

  2. Thank you Bill for answering my reader’s questions….and with an article! I appreciate it. I’ll try to keep their questions to a minimum. :)

    Very good article. It really helps understand what is involved and how costs add up.

  3. I can attest to the challenges in producing video for web. As a former Creative Director for Vibe magazine’s online department during the time of it’s sale, the initiative for web was to be heavy with video from artist and cover shoots. At first we looked for and found a guy who had presented himself as a producer editor. We where initially impressed with his demo reel and the fact that he came with his own Avid system was a plus. Things started out good at first, but having to overlook that your video guy doesn’t bath on the regular and sometimes slept in the office where things that we hadn’t foreseen going into this. The first couple of events I assisted with the camera work and then he took on more of the role by himself. The more video he’d would shoot the more video we’d have in the can waiting to get edited or even placed into the system. The more pressure we’d put on him to deliver the slower the process got until we where forced to sit with him while editing in order to get something out. Vibe Magazine typically had at least 5 – 7 opportunities a month to capture content (Artist QA, Behind the Scenes, Special projects ETC) but due to our camera guy editor being consistently late delivering video (and late to events & shoots) we had to stop him from shooting just to get him to edit video that was already shot. I left Vibe shortly after he was hired and he stayed on with them a total of 8 months after I left. To date the video he shot. maybe 30 whole pieces of it maybe 10 of them has ever seen the light of day. And Vibe today cannot produce any quality video on a consistent basis to save their lives. I see these people’s dilemmas and yes it’s damn hard to be consistent in a no budget situation. I have my own small editing set up now cosisting of Final Cut Studio 2 a Sony V1U HD digital camcorder Senheiser wireless system with all the lights I need. I find that while I want to shoot my own content and edit for web and even though I have a work flow established It’s hard to make time to do these things when they aren’t being monitized which means I either have to do an OK edit of my material because I still have to grind to pay bills. Or it just doesn’t get done at all. So I feel Scoble’s and Mr. israel’s pain. Knowing that FC will most likely not put the required money into these video productions (Scoble has indicated they wanted this done cheap) makes me wonder how long can they continue to run business as usual. These guys may need to scale back tremendously and plan these interviews out a bit more carefully possibly having the interviewee’s come to their locations to cut cost. Consider maybe even doing it bi-weekly. Turn around times for web video are fast paced, not everyone can handle the pressure. If you are familiar with the Video podcast Tikibar those guys just could not deliver the quality of their productions fast enough to meet the need which sucks. Tikibar was brilliant. I wish Scoble & Co. luck because if they fail it’ll be much harder for the next guy to convince companies that this model works.


  4. Thanks for the comment. :)

    The first problem with that Vibe situation is not allocating the proper budget to hire people that knew what they were doing. The second problem is that filming and editing are two entirely different disciplines. In general, you want to hire ONE shooter and ONE editor, not ONE PERSON to do both.

    Also, having a system means nothing. Hiring a button-pusher is only one step above the content creator learning to edit him/herself. Quality editing is done by feel and understanding. You can’t buy that in a store. It doesn’t come standard with a Macbook Pro. It’s not included in the FCP instructions.

    Unfortunately, the more someone claims to be able to do for less money, the more likely it is that they’re a hustler and just trying to get your dollars. According to what you said, Vibe trapped themselves by wanting to do more than was probable with their low budget. There was no way out, except to fire that guy and hire someone who costs more, but will actually provide them with well-shot, well-edited content. If that had been an option, they would have gone that route from the get, so they got what they got.

    It’s kind of funny, but mostly pathetic how companies don’t/can’t differentiate between UGC and video commissioned to be produced. It’s the difference between “America’s Funniest Home Videos” and “Diff’rent Strokes”. Do NOT try to make a sitcom on a UGC budget.

    As far as Fast Company, Robert Scoble said:

    “Fourth, after we joined up Shel’s sponsor pulled out because of the recession. That was right before we started shooting and that significantly hurt our ablity to hire people (FastCompany made it clear that this effort had to stand on its own two feet and not be subsidized by Fast Company).”

    So… No. Fast Company is NOT going to put money into these video productions, because this is actually a SCOBLE production, which for some reason, FC has agreed to run under their brand name.

    He also mentions:

    “11th, I funded Shel’s shows out of my own pocket once he lost his sponsor.”

    So, pretty much, we can take Fast Company out of the equation altogether.

    I didn’t know this before I wrote my post, so I assumed that a company that would have something under its brand would be PAYING FOR IT, affording them creative control over the product. It’s even funnier *now* that I entitled this post “you get what you pay for”.

  5. Exactly my point Bill, Vibe had a budget (somewhat) and couldn’t pull it together. Seeing that FC is just letting Scoble use the name there probably means they have an out clause. Especially since he approached them. It would look really bad if they exercised it.

    PS: wouldn’t it be funny if he pitched these videos as a Trojan horse senerio to pitch new biz (open doors) for FC? Would explain why they seem to be an afterthought instead of why they’re there 😉

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