We've Got Hollywood Covered

Lessons From Life on the Internet

Do you think Hollywood is actively engaged in adapting to the changes posed by the Internet? 
I don’t think the industry is particularly on top of the changes. Every company is spending a lot of money trying to figure out what these changes are going to be. 
But I’m not sure anyone can understand what these changes will be, or if the companies are equipped to be the bellwethers. I have a feeling that the corporate structure as it manifests itself in Hollywood is too rigidified. 
Are Chicken Little-type predictions a problem?
I have talked to so many people, looked at so much research, my guess is TV as we now understand it as going to be here for a while, and will still be more profitable than the internet for a while – at least 5 years. It’s going to take a while to get a business model for broadband that makes sense. People truly do not understand the extent to which new media is not a business. It’s remarkably not a business. I’m speaking from painful experience. 
What did you learn from producing ‘quarterlife’?
MH: I learned so many lessons. You can break down TV advertising into cpms. It turns out advertisers pay the same cpm for TV as for the Internet. But the audience for any particular piece of video is 1/10th to 1/100th what you get on TV. If you take Nielsen numbers and advertising revenues you can get a cost per thousand, and it’s within the same range as on the Internet. And on TV you get to place 30 commercials instead of three. We’re headed for a moment where some piece of serialized video on internet will average 1 million. The highest average is ours – 300,000 unique visitors. No scripted video has ever done better. The moment of convergence is where you can create serialized video for 1 million viewers per episode. I don’t think we’re that far off from that. But no one knows how to do it. No one knows how to market that show. 
What was the cost of producing ‘quarterlife’?
MH: Around $500,000 per episode. We figured out how to make show for the least money possible, and still have the same quality as on network TV. And that was with a lot of sleight of hand. I made money from the TV show, but I lost it all on the website. 
Do you consider ‘quarterlife’ a failure?
People declared it a failure because they looked at it on YouTube. YouTube is the 10 million pound gorilla. But ‘quarterlife’ was on MySpace. 
The deeper question is what is the advertising industry going to do? Advertising is the petroleum that fuels the television business. It’s the petroleum that fuels corporate America. What’s beneath all these discussions is a deep anxiety over the power and reach of advertising today, and whether it’s worth it. I don’t know if corporations know what to do instead of advertising. And advertising doesn’t want its omnipotence destroyed. 
Fewer people are watching TV, more people are using Tivo, and ad rates are going up.
How will advertising change on the Internet itself?
The question of the Internet being the great democratizer may be on its way out. Because although it is still cheap to create and distribute stuff on internet, it’s not cheap to market on the Internet. And that may be where big companies win as well, because they’ll have money to promote on the Internet. 
                                                                      — Sharon Waxman