Los Angeles Business Journal

Big Picture Broadens for YouTube Players

Film firms buy into subscription model. By Jonathan Polakoff Monday, May 27, 2013

March, who left his job at Echo Bridge in February, was looking to do something entrepreneurial and called YouTube, since the site has become a hub for Hollywood. YouTube expressed interest and he started planning his channel.

YouTube vetted him and the other applicants, and the respective film channels shored up content and uploaded videos. Then, earlier this month, they were among some 53 subscription channels that were unveiled, with content ranging from ultimate fighting to Sesame Street.

Many of them carry recognizable brand names, such as National Geographic Kids. Not so for Gravitas. The company distributes a large catalog of independent movies to cable providers’ video-on-demand services and streaming services such as Netflix, but many viewers aren’t aware of the brand.

“It’s a new challenge because it’s more direct to consumer,” said Michael Murphy, president at Gravitas. “We’ve always been a B-to-B brand.”

To get traction, Murphy said he’s marketing the channel as a place to see a lot of movies for a price that is comparable with a single rental on iTunes. The channel launched with about 75 movies, with 10 to 15 more to be added each month.

Murphy said the channel offers curation and quality control. And because many films do not get distribution on Netflix or Hulu, Cinedigm and Gravitas can market their YouTube channels as another distribution avenue for filmmakers.

Cinedigm’s Docurama label has about 1,250 titles. The channel plans to make one-fourth of the movies new or recent releases.

“Netflix is being more selective about the content they’re offering,” Cinedigm’s Opeka said. “They don’t take every documentary that’s made. But these films should be seen and seen ad free.”

March built Screampix from scratch. He began by contacting film distributors and offering to purchase North American YouTube rights – a new category – for various films.

He secured those rights for about 150 horror films, such as “Mother’s Day Massacre” and “Deadly Karma.” The films can be viewed now by the channel’s subscribers in the United States and Canada. However, separate distribution rights are needed to make the programs available for viewing in other countries. March said he’s raising an additional $500,000 to fuel more domestic acquisitions and to purchase international rights.

Uncensored, unedited

He’s hired a handful of people to handle things such as acquisitions, social marketing and programming. It’s a big undertaking, but March believes he’s found a substantial opportunity, partly because graphic horror movies aren’t widely available on mainstream cable TV channels. Screampix advertises that its movies are uncensored and unedited. (For his part, March said he likes to be scared but not grossed out).

The idea for all of the channels is to supplement what is available on TV and it’s seen as a growing opportunity as growth rates stagnate for pay TV subscriptions. Some are even hopeful that Internet viewing could replace pay TV subscriptions on a large scale.

The potential is large, as YouTube boasts a monthly audience of 1 billion. But the site built its popularity as a bastion for free content.

However, March believes he doesn’t need huge numbers by YouTube standards to make his channel work. For example, it could take millions of individual views to generate substantial advertising money. But he said the subscription model can work if he can get tens of thousands of subscribers.

For example, 30,000 subscribers would gross about $90,000 a month. After YouTube took its reported 45 percent, he’d be left with nearly $50,000.

He’s taking the long view and hoping that by getting in early, his investment will grow in value as online video subscriptions become more popular.

“We’re well aware that this is a marathon, not a sprint,” he said.

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