Revenue Sharing in Broadcasting
At its simplest level, the media business has three entities: the producer, which creates the programming; the distributor (broadcaster) which takes the work of the producer and disseminates it; and the consumer, who enjoys it. Content flows from producer to distributor to consumer.
The producer receives an income from the distributor. The producer sells the right to show the programme, for a certain number of times in a given period and geography. The more valuable the content, and the more markets the programme attracts, the greater the income for the producer.
The distributor recovers the cost from the consumer, either directly (subscriptions and pay-per-view) or indirectly (advertising and other commercial activities). Assuming the income is greater than the cost of the programme, they make a profit.
As I said, that is the simple view. If you want to understand the business modelling in more detail there is an excellent paper (15 years old but still relevant) by Kris van Bruwaene of VRT, which you can read here.
What is Revenue-Sharing?
What happens if a producer has the idea for a programme but does not have the resources to make it? If it is potentially of interest to a significant audience, how can the model be developed?
Take sport, which is always of interest to large audiences. The elite level of popular sports certainly have the resources to manage their role as producers, offering live coverage and related content either produced in-house or with a trusted partner. The rights to distribute this content are frequently hotly contested and highly valued.
Niche sports may crave the exposure that television coverage brings. Lower tiers of established sports have much to offer but so far have not been able to drive the rights pricing up to make it practical. Revenue sharing may unlock this problem.
How does Revenue-Sharing work?
Revenue sharing starts with a negotiated agreement between the producer and the distributor. The content and its intellectual property rights will be made available, not for a fixed fee but freely delivered. The distributor will deliver it to consumers, with all the quality and promotional support that would normally be associated with the genre.
The distributor agrees to complete transparency of its earnings from the audience (directly and indirectly), and pays a proportion of that income to the producer. There are obviously details to be agreed here, like covering production costs first, and of course the exact proportions of the share. The agreement will need to cover a reasonable period of time to allow the new content to establish its audience.
There should also be information flows alongside the payments. The distributor will have expertise in how best to present the sport, and when to show it: there is no point expecting an audience for junior football at the same time as the Champions’ League final (but there may be a potential audience for netball).
The producer might also accept subscriber data as part of the payment. This allows the sport to track who is watching and potentially market direct to them for live events and memorabilia, further developing engagement and sustaining audience growth. There are data protection issues here, but these can be covered fairly.
Live Streaming & Revenue-Sharing
Live streaming offers a lot of advantages in a revenue-sharing model. First, it allows channels to be spun up with little fuss to support new sports, or to extend coverage at busy times.
Second, using a powerful integrated solution like the PlayBox OTT Platform means that the distributor can quickly build a strong look and feel, schedule the playlist incorporating tailored advertising, and track subscribers. That gives the revenue-sharing partners accurate and timely information on the audience and the revenue from all streams, programme by programme.
As well as ensuring the financial reconciliations are accurate, it means the parties get a strong sense of where further investment in programming would bring results. If interviews with players or expert analysis are seen to be popular, then you can develop those strands.
Most important, access to all the functionality is completely intuitive, from designing the look and feel to interrogating the data. Channels and services can be established quickly, securely and without the need for specialist staff.
Revenue sharing is potentially a practical way to share the risks and rewards of adding new content. Sports bodies will certainly be interested, but it is equally valuable to other producers, like music events.
The technology exists to underpin it. The challenges to be solved are in the business case, determining what is a fair share of the potential revenue, and how to work together to achieve and exceed those goals.