Net gains

Wireless and digital rights are an increasing part of the digital equation

Digital and wireless rights trading is generating a lot more talk than actual revenue, but industryites say deals are being made.

One of the few to actually place feature film product in the wireless realm is Lionsgate’s exec VP of TV distribution, Jon Ferro. He sold features to MSpot, which goes out via Sprint. The titles, including “Larry the Cable Guy: Health Inspector” and “Akeelah and the Bee,” are to appear on MSpot in the video-on-demand window and will generate returns through what Ferro termed “a traditional, shared-revenue model.”

Although the deal was “a first step in an evolutionary process,” according to Ferro, certain aspects of handling the new rights are already clear. Most basic to a distributor, he says, is ownership of all rights. “(Wireless and digital) rights are additive, of course, but they all influence each other. Strategies have to be created that take all of these various rights into account. Mobile rights influence other channels.”

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Indeed, recent events in Italy have proved that mobile releases close to or overlapping the theatrical window can significantly affect revenues. It’s a lesson that has not been lost on Munich-based international distrib Beta EOS.

“We’re not yet seeing the potential of this market,” Beta EOS managing director Dirk Schuerhoff explains, “but it already can disturb free cable and pay TV. People are asking for Internet rights when we sell features, and we usually agree as long as certain safeguards are in place — something along the lines of, say, German iTunes, which works only with a German credit card. On the wireless side, when we do sell those rights, it’s on a 50-50 revenue-share basis.”

For smaller sales agents, dealing with Internet and wireless rights can prove particularly troublesome.

“We prefer to do all-rights deals because there is a major conflict between, especially, broadcasters and DVD distributors as to who should have the various rights,” says Julie Goldman of New York-based Cactus Three, a producer and sales agent that deals primarily with documentaries.

“Television (buyers) won’t do the deal without wireless rights,” adds Cactus Three’s Krysanne Katsoulis. “It makes it particularly difficult, because the TV component is really important to us.”

At the moment, companies best positioned to exploit the new wireless channels appear to be those with significant libraries, such as Classic Media, which owns video, merchandising and associated rights to more than 3,000 titles, the majority of which are classic children’s fare. According to Classic Media’s VP of digital media, Andrew Perlman, Internet and wireless channels have given new life — and revenue streams — to icons of decades past.

“Felix the Cat, a cartoon that hasn’t been produced for decades, has proven immensely popular on Google Video,” he notes. “It’s generating significant revenue in a new medium.”

Classic Media also has a deal with MobiTV, which goes out across multiple carriers, for a variety of classic animations. MobiTV is a service for which consumers pay $9.99 a month on most carriers for a bundle of linear channels. Classic Media receives revenue based on total subscribers, similar to a cable model. Classic Media also has a shared-revenue arrangement for advertising that appears on the channel. The company also has a premium VOD channel on Sprint, which is offered to consumers for $3.95 monthly and has no ads.

As buyers and sellers increasingly pursue wireless rights, one of the major obstacles is definition. The Independent Film & Television Alliance has already published a Wireless Guide, which proposes specific definitions, corresponding windows and royalties for emerging channels. It also is proposing a wireless rider to its Internet rider.

“When you have a new-media right,” says IFTA VP and general counsel Sue Cleary, “you have to define it and make clear what the window is. Otherwise, each group will define the right in a slightly different way, and that’s a problem that could be very costly down the line.”

The rider, according to IFTA prexy Jean Prewitt, will present Internet and wireless on an “either-or-both basis. Internet and wireless can be bundled as one or dealt with separately.”

Even so, Prewitt says, negotiating these rights requires a new mindset. “People have traditionally sold in terms of wholesale,” she says. “It’s a bit of a struggle to think in terms of head count. It creates difficulty in market and difficulty in accounting.”

Additionally, despite all the strategizing, it’s still unclear exactly what wireless will bring to the industry.

J.P. Blunck, senior VP of digital content at Bunim-Murray, has had success selling mobisodes of the company’s hit “The Simple Life” to Verizon. But the company has spent lots of time and money doing R&D in the mobile realm, determining what will work best.

Even so, Blunck admits the digital-delivery future is still a fuzzy picture. “After all,” he says, “who would have thought that the fall of Napster would beget iTunes?”

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