Making Money In Multimedia Means Bridging The Gap Between Industries


Multimedia has the spotlight in both the computer and entertainment/publishing industries these days. Some of the biggest players in both industries are spending millions of dollars to acquire rights relating to the development of multimedia products, as well as forming consortia to pursue multimedia markets and setting up internal organizations dedicated to explore multimedia opportunities.

Names such as Apple, IBM, Dell, Microsoft, Sony, Disney and Time Warner recognize multimedia's potential to revolutionize both the consumer electronic and entertainment/publishing industries.

Yet while people in both industries recognize the huge rewards in multimedia, they have found it extremely difficult to finalize what appear to be mutually rewarding deals with prospective partners. Thus, despite the excitement surrounding the area, few pioneers in either industry have reaped the rewards they believe are possible in multimedia.

Many of the difficulties in achieving profitable contracts stem from a lack of understanding between strategically different industries. The key to making money in multimedia these days seems to lie in forming some common ground between the entertainment/publishing industries and the computer industry and its software developers. This common ground will be built by educating each industry about the norms and standards of the other.

Different Industry Cultures

From the perspective of the multimedia software developers, the entertainment/publishing industry tends to be overly cautious, slow moving, and somewhat arrogant. The entertainment/publishing industry is perceived as discounting the value of the computer industry's vision and expertise and viewing computer/software technology as little more than a new tool.

Those in the entertainment/publishing industry respond that although they are interested in this new multimedia market, they do not fully understand it and do not believe that the software industry does either. They express concern that in spite of the impressive technology, software people do not have the "production values" needed to create products for large Hollywood-scale productions, and that the software developers are constantly changing their vision of the market.

Multimedia - Different Definitions

These conflicting perspectives are understandable as "multimedia" means different things to different people. It may mean computer hardware that provides or emphasizes audiovisual capabilities (IBM's Ultimedia) or hardware add-ons (Sony CD-ROM players). It also can refer to software tools for creating or presenting "movies" or audiovisual presentations (Macromedia's Director); informational or educational software using music, video, photos, voice and text (Compton's Multimedia Encyclopedia); computer games (Software Sorcery's "Aegis"); virtual reality site-based entertainment; etc.

This diversity makes it hard for entertainment/publishing industry content providers to understand the needs of any particular multimedia company, which in turn frustrates multimedia companies and confirms their perception of the entertainment/publishing industry. And as content providers come to understand a particular multimedia product or market, they often realize that they must change the terms of the deal to reflect this new understanding. The multimedia companies often then believe that they are being manipulated, making it more difficult to achieve a result that both sides agree is fair and reasonable.

Different Industry Standards

To further complicate matters, each industry has established licensing and pricing standards that tend to be unknown in and inapplicable to the other industry. As a result, many deals either never get done or turn out to be economically unfair.

The entertainment/publishing industry custom of breaking up rights to a particular work into many components controlled by different people and licensed and priced in radically different ways is particularly confusing to computer companies. The situation is made more difficult by the fact that the rights for most existing content were allocated before multimedia existed.

Since a typical multimedia title incorporates many pieces of music, text and images, multimedia software developers often are shocked by the number of permissions they must obtain, the number of people they must contact to do so, the multiplicity of royalties and fees they may have to pay for those permissions (especially since the traditional royalty and fee schemes were not constructed with multimedia software in mind) and how small their shares of profits will be.

The differing industry standards have resulted in two trends. First, many multimedia title developers are independently creating (or hiring people to create) as much of the content that they need as possible. Second, other developers are focusing on projects where one other party is able to provide them with virtually all rights they need for each of their projects.

Finding Common Ground

Negotiations between computer and entertainment/publishing companies often stalemate because the mutual lack of knowledge of the other industry tends to create rigid bargaining positions. The only way a party can avoid this is to educate the other side and make few, if any, assumptions about the other's knowledge of that party's industry.

One excellent starting point is to demonstrate the proposed product. A good demonstration can create interest and enthusiasm for the project, assuage fears the other side may have regarding the potential scope of the project, and may make clear to the entertainment/publishing people what licenses the computer people need. Providing examples of similar products and the revenue numbers associated with those products is also useful. Each side must take the time to understand, and discuss with the other, the business realities of both industries as well as the specific product types being considered.

Summary

While not all issues can be easily and quickly resolved, with some flexibility and education, many of the problems of multimedia deals can be overcome. The computer and entertainment/publishing industries, driven by the huge potential of the multimedia market, are fortunately beginning to understand each other. As this trend continues, multimedia will begin to live up to its potential.