Amazon Video Direct Lowers Prime Streaming Royalty

I’ve pretty much told everyone who will listen that if you’re a filmmaker doing short films, AVD, not Youtube, is the place to be. Especially since the new YPP policy at Youtube is about to take effect. I have made way, way more off a few short films on Amazon Video than I ever did off of Youtube.

Apparently Amazon woke up to how sweet the deal was, and has just announced that they are drastically reducing the royalty rate for videos watched through Amazon Prime streaming.

Previously videos watched with Prime got $0.15 per hour of video watched (In the US). Titles submitted through AVD had a maximum cap royalty of $75,000 per year per title.

Some people were upset about that cap. But to reach it your video had to be streamed for 500,000 hours. If you’ve got content that popular, it might be time to work with a distributor that can bypass the Amazon Video Direct system and go directly with Amazon.

The new royalty rates eliminate that cap. Which is good, I guess. And the new rates are for all territories. Not just the US. The new rate is what AVD paid for other territories outside the US. And while the rate drops a lot, you can earn higher rates if your videos are watched a lot.

The new rates are tiered based on hours of viewing PER TITLE. Up to 99,999 hours you get $0.06 per hour. That’s right, the rate drops by almost 2/3 in the US. This will put me right about the Youtube payment range. Most short films will never hit this amount of viewing time.

If you have 100,000 hours of viewing, the rate increases to $0.10 per hour. Over 500,000 hours and you’re back to $0.15 per hour. But cross 1,000,000 hours and you drop back to $0.06 again.

In order to reach the $0.15 per hour rate again, you have to have 500,000 hours of viewing. So the cap is gone, but it takes longer to hit $75,000.

($75,000 in royalties? Who are we kidding? How many indie filmmakers hit 500,000 hours of viewing on Amazon?)

A 5 minute long short film would need to be watched in its entirety 1,200,000 times in a year before that title could make $0.10 per viewing hour, which is still 1/3 less than the original royally. A 2 hour movie would need to be watched 50,000 times to hit that same royalty rate.

So, why? Why is Amazon doing this? Here’s what they say:

“The tiered structure allows us to align the Prime Subscription Access rate with the level of customer engagement generated by each individual title or season (more engaging titles earn a higher royalty rate). By doing so, we offer a few advantages for providers, including elimination of the title-level annual earnings cap and expanded earnings potential in territories outside the U.S.”

I get it. I’ve seen some bad videos on Amazon Prime. And even though I have short films on Amazon, I know most people don’t sit down at the TV and look for short films. So Amazon is making it less lucrative for creators who pump out bad or short content, and focusing on content that keeps viewers engaged for longer; because it’s good enough that people watch more of it and because it’s literally longer.

But, man it stinks for short film creators. Up to this point AVD was a good way to make a little extra cash for your efforts. Not major money, but better than the alternatives. Now that Youtube has put the clamp on casual creators, AVD is still the best outlet for short content. But the paycheck is about to get a lot smaller than it already was.

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Why Did Netflix Apologize Now?

Yesterday, I started my day off with breakfast and an apology. A few months after Netflix stirred up quite a bit of unhappiness, they finally got around to saying sorry, and trying to explain why they are raising the prices on their loyal customers.

Here’s the apology/explanation part:

“So here is what we are doing and why.

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service. [Editorial- Read:”We can’t get permission to stream our entire DVD catalog.”]

So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.”

OK, was that so hard? I still don’t like the increase, but we will keep our plans, for now.

But why did my new best friend Reed send this out now?

Well ever since the news that Netflix had lost about a million DVD subscribers, stocks haven’t been doing so well. It seems a million customers decided they really didn’t need DVDs by mail after all. And Netflix sent out a report showing a larger than expected drop. You see, long term this is what Netflix wants. They want out of the mailing business. Here is a chart from back in 2010:

They expect(ed) DVD mailing to peak within a couple of years. And then decline over the next decade or so.

Once they split the DVD and streaming businesses under the Netflix name, and saw a million people opt out of DVD by mail, investors saw their stock drop 14% or so. Uh-oh. Netflix means to phase DVD mailing out anyway, but the more this part of their business declines (which is what they want) the less solid their stocks are (which they don’t want). Netflix has a problem.

Up in the sky! It’s a bird! No, a plane! No, it’s a poorly named spin off here to save the good name of Netflix. Qwikster is here!

The second half of the apology letter announced that Netflix was distancing themselves even more from DVDs by mail. That’s what really makes a good apology, back end it with even more bad news for your customers. Now, if they want to keep DVD streaming, they need to log into a totally different website. Integration is so last decade.

Oddly, even after this new Quikster launch, stocks did even worse.

But does Netflix care? A few weeks from now people who do DVDs by mail will be getting them with the new Quikster logo. Netflix will continue to work on deals to stream more content. And people will adjust. Then next quarter when Qwikster shows another decline in subscribers, Netflix stock will not be affected. Because Netflix will be a video streaming site, and it’s perception will be that they don’t have anything to do with mailing DVDs.

I think that is why we got this email apology now. It would have made more sense for Mr. Hastings to have sent this months ago, but they used an apology to soften the extra bit of hassle DVD subscribers were going to have to endure.

“Hey, we are so sorry that we raised our prices by 60% and then ignored all the protest about it, but here’s another minor inconvenience for you. Maybe you won’t notice that we just fire walled ourselves off from the continued decline of DVD by mail subscriptions.”

It’s the last part of the quote above that’s telling:

“So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.”

They could just as well have said, “We realize that streaming is the future even if our investors don’t, so we have split the two businesses. Now we can let the DVD side die off without impacting our stock prices.” Remember the graph, back in 2010 they were projecting the death, not growth, of DVD mailing.

Long term this is probably a very smart move for Netflix. Sure, I won’t like going to Qwikster’s site to handle my DVD queue. But in a few years, I won’t need DVDs by mail, I’ll be streaming all my content.

Dear Netflix- An Open Letter From a Loyal Subscriber

Dear Netflix,

Today, after a few websites leaked the news, you officially announced a new pricing scheme for your subscriptions.

Before I get into the meat of this, let me acknowledge two things: Netflix (or something like it) is the future of video entertainment. Netflix, as a for profit company offering a non essential service, has the right to charge whatever they want and I can pay it or cancel my subscription.

That being said, what is the deal, Netflix? In less than one year you have almost doubled my monthly subscription cost? I’ve gone from $9 to $10, and now come September I will be paying $16 for the same service I once paid $9 for. Please don’t dress it up by saying:

“Since then we have realized that there is still a very large continuing demand for DVDs both from our existing members as well as non-members. Given the long life we think DVDs by mail will have, treating DVDs as a $2 add on to our unlimited streaming plan neither makes great financial sense nor satisfies people who just want DVDs.”

That is bunk. There is no need to eliminate the Streaming+DVD plans just to create DVD only plans.

To be fair, when I started paying $9 the streaming content was not as robust as it is now. And I did not complain when the modest $1 a month increase hit. I understand that acquiring new content for streaming is expensive, and some studios want a lot of money for the right to let us watch their shows and movies.

I know that’s why you are raising the prices. I think that you hope two things will happen. Either people will choose streaming only options, giving you more leverage with studios about the number of streaming viewers or they will pay more, giving you more money to buy the rights to more shows for streaming.

But there is a third thing that will also happen: people will cancel their subscriptions completely. If the comments on the blog I linked to are any indication, a lot of people are thinking about it. But you already know that don’t you:

“As always, our members can easily choose to change or cancel their unlimited streaming plan, unlimited DVD plan, or both…”

Here is my dilemma. I would rather just stream all of my content. I have devices on all of my TVs that can stream from Netflix. I normally maintain over 50 titles in my queue, mostly TV shows. I love it. But, I want the new releases as well. I want to get a new DVD release sometime within a few months of its release date. So we have the single disc plan as well. Now because you have seen fit to split their service, I get to pay twice for those services. No discount. If the streaming content was almost as much as the available DVD content, I would just stop getting the discs, but it’s not.

It’s not nearly as much. Thats why you need to raise money and grow their number of “only-streaming” subscribers, so you can increase the amount of streaming content. But that means making people mad, and you may lose subscribers. Which weakens your position with the studios and lessens the monthly income. People who don’t want to pay $16 are going to be mad that they are losing access to content they have had previously. They are not going to be satisfied with the current streaming catalog, which is why you need to take steps to increase the catalog… by raising revenue, etc… I get the catch 22 you are in.

I would not mind paying a bit more. I like the way the catalog of streaming content has been expanding. But you should offer a discount for people who want to keep both streaming and discs. At least until the streaming content catches up with the available disc content.

Meanwhile I’m going to sit back and hope you bow to the public pressure that’s coming your way. I’m going to console myself with the fact that in reality, even $16 a month is a fraction of what it would cost to go to a local store and rent the same content for viewing that I get from you every month. I’m going to continue to ignore the reoccurring issues with streaming to an Apple TV 2. And I’m going to relish the thought that if you mess this up, someone else will come along and provide the same service you do, better, for less.

Right now you’re leading the pack, today you stumbled.

—————————————————–

EDIT:

I received this form email tonight (Not in response to anything, I’m sure everyone got one):

“We are separating unlimited DVDs by mail and unlimited streaming into two separate plans to better reflect the costs of each. Now our members have a choice: a streaming only plan, a DVD only plan, or both.

Your current $9.99 a month membership for unlimited streaming and unlimited DVDs will be split into 2 distinct plans:

Plan 1: Unlimited Streaming (no DVDs) for $7.99 a month
Plan 2: Unlimited DVDs, 1 out at-a-time (no streaming) for $7.99 a month

Your price for getting both of these plans will be $15.98 a month ($7.99 + $7.99). You don’t need to do anything to continue your memberships for both unlimited streaming and unlimited DVDs.

These prices will start for charges on or after September 1, 2011.

You can easily change or cancel your unlimited streaming plan, unlimited DVD plan, or both, by going to the Plan Change page in Your Account.

We realize you have many choices for home entertainment, and we thank you for your business. As always, if you have questions, please feel free to call us at 1-888-357-1516.

–The Netflix Team”

At least this one sounds little more accurate: “separate plans to better reflect the costs of each.” Of course it would be probably more accurate if they just said, “To pay for buying more streaming licenses.”

Thanks, Netflix… I Guess…

I saw on twitter last night, and awoke this morning to find an email from Netflix offering compensation for the outage subscribers experienced the other night. I was a bit frustrated when I couldn’t stream my queue, but quickly turned to Airplay and watched video I owned instead of subscribed to.

Here was the email:

Yes that’s right, Netflix has offered a generous 3% of what their streaming only service costs per month. For you math whizs out there, that’s $0.24. Twenty-four cents.

I’m not really sure what the motive here is. I don’t need a quarter back. Is this intended to show me how little I pay for the service? Is it a well intentioned gesture of apology and good will?

If I assume that they gave this to every subscriber, which is a big assumption, that means they spent about $5 million.

The big question is why did the interruption happen? What failed? The email is silent on that, and there have been no explanations. I wonder if the $5 million wouldn’t have been better spent on what ever the issue was.

Giving me a quarter doesn’t impress me. A simple apology would have been just as effective. I’ll take the money, but I would rather know that they are improving on whatever broke.

Netflix and Streaming

I was a skeptic about a Netflix account. I was sure that it could not be as described. You just get movies that are at the bottom of the queue. The movies available for streaming must be ones you have never heard of. there is no way that $9 bucks a month get’s you more than a couple movies a month you actually want to see.

I own two blu ray players that can stream Netflix, and an Xbox 360, and have access to an iPad. A friend emailed me a link to sign up for a free month, so I decided to see what it was all about. At least I would watch a couple of movies for free.

I was unprepared for the selection; not just hundreds of movies, but hundreds of pages of movies to select from. Quite a few are available for streaming with pretty good video quality. I was able to link in my devices very easily. The iPad can both manage the queue and stream movies.

I started watching the Voltron series with my son. He loves it. (He did ask why the picture didn’t fill the whole screen of my HDTV.) We have also enjoyed several cartoon classics, as well as more recent movies. The selection of documentaries is pretty good, too. I loved “Lord, Save Us from Your Followers“, which I had heard about when they were filming it.

The dvds that are shipped have come quickly, a by product of having a Netflix shipping center in Orlando. And every movie they have sent has been the one on the top of the queue. I know that won’t always be the case, but so far it has been great.

Even the rating/recommendation settings have been pretty accurate. I got a couple of movies they said I would not really like, and they were right. I didn’t like them. I provided Netflix with answers to a quiz on my movie preferences, and rated a few films I had seen. Now, when I browse movies, they rate them according to what I said I liked or disliked.

So far, I have been very pleased.