All aboard the App Store

Friday, January 14, 2011 | Posted by: Alex Connock
Categories: Media sector, Technology sector | Tags: Alex Connock, media, finance, technology, digital, Ten Alps, business models, trends, funding, TV, ITV, Apple, rights, software, apps, App Store

The world is mutating into one enormous and non-hierarchical content supermarket, says the CEO of Ten Alps, Alex Connock. And that is having a transformational effect on TV business models and funding channels.

Alex Connock, CEO, Ten Alps: When George Osborne said “We’re all in this together”, what he could have been thinking about is … the App Store.

That’s because, in 2011, content- makers are more than ever financing their own output and distributing straight to the user – just as software producers have learned to do online.

Last week, years after using it to launch the iPhone, Apple rolled out its App Store for desktops as well as handheld gadgets. Intuitively a belated move, it still changes the way we buy software. Shopping for a CD in a box will be no more.

The business model is that developers risk their own capital, upload to the various app stores, and get a 70% cut of sales in a global market without going through any wholesaler, marketing budget or upfront distribution costs. When it works, it’s an ultra-efficient and scalable translation of investment into globally scaled return.

And now the same philosophy is finally starting to apply to UK content, too, and not just for second run rights on movies and TV shows. Investment is fundamentally shifting towards the producer and not the distributor to make that happen.

ITV are on to that. This week, it announced a restructuring of the commercial side of its business to become more “client-obsessed” and reduce its dependence on spot advertising. In other words: sell content direct to people and companies, and make money on that transaction, not just the advertising around it. It’s a model that owes as much to the App Store as ad-funded commercial TV.

And as Grant Thornton’s own recent overview of the fast-changing world of media investment (Where is the smart money going in media?)  pointed out, 88% of media business people think the growth is in new digital markets.

With the world mutating into one enormous and non-hierarchical content supermarket, the defining characteristic of any TV producer is becoming their ability to invest money, rather than their position on the independent versus broadcaster spectrum.

That has implications for programme-makers, in that owning rights capable of going to the user becomes that much more viable.

A simple example: Leopard is a standalone UK indie TV producer which topped up deficit-finance on a recent drama for ITV1 An Englishman in New York starring John Hurt and Cynthia Nixon. The funding sat alongside a pre-sale in the US and a New York tax break. “It meant we could make the show the way we wanted to and we knew we had a very saleable film for the global market so it was a calculated risk,” says CEO James Burstall.

Indies are greenlighting themselves with ever more robust financing schemes.

Drama guru Andy Harries did it on Wallander with a portfolio of funding channels so diverse that the ultimate decision to go ahead was his own, as he recounted at a Broadcast conference.

And lots of other companies, including our own, such as Brook Lapping are financially backing percentages of the rights to their programmes, or as in the case with our education business DBDA, producing content direct for a corporate.

For at least five years, producers have dreamed of selling their shows direct over the net, and cutting out all the middle men in the process. In 2011, with App Store business models truly breaking through, that could be about to happen.

Image: © ETC@USC

Alex Connock is the CEO of Ten Alps and regularly comments on the media industry for the Grant Thornton Elevate blog – read more posts by Alex Connock

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