Peter Kafka over at the Wall Street Journal's "All Things D" blog claims that Prospect Park chief Jeff Kwatinetz "has yet to win over enough financial backers, which is why he’s now talking to people like me, hoping we’ll help him make his case." Kafka goes on to outline the pitch he heard from The Online Network (TOLN). Here, we boil it down to three salient points.1. Prospect Park doesn't have the money yet.
In a nutshell, every episode will continue to cost $160,000, whether on TV or on TOLN, leading to the need for $80 million to produce both soaps for a year. Kwatinetz wants $65 million in hand to start off. He doesn't have it. We can probably infer from this point, by itself, that we won't be seeing any new episodes in January 2012 after all. After that, what is PP's game plan?
2. PP projects that only 250,000 web views will make an episode profitable.
For the sake of argument, say ONE LIFE TO LIVE and ALL MY CHILDREN were both capturing 2.5 million viewers each for an average episode in 2011. According to Kafka, Kwatinetz thinks if just a tenth of those fans will watch on the web, he'll be set. In a sense, that's great news--after all, some of the posts on our little site can get over 60,000 views. Surely a new episode of AMC can triple that?
However, the article says it's hard to escape the fact that the whole premise of transferring an audience from one medium to another is almost entirely untested (there were similar rumblings in the late 1940s and early 1950s when shows moved from radio to television). We're actually not sure that 10% will continue to the web (especially when they can wait a week and see it on cable) and we're also skeptical about being able to break even with the same costs, but one-tenth of the first-run audience. Magical thinking?
3. Thankfully, when we see the revenue projections, it all seems possible once again.
The key, we surmise, is that PP is planning to establish many discreet revenue streams. Let's start with the first "airing": online, streaming at TOLN. Apparently, Hulu can charge $40 for every thousand people that view an ad (during programming of similar appeal). If TOLN charges advertisers the same rates as Hulu (in other words, market rates), then (bear with us here!) the math actually works out fine: 250 thousand viewers x $40 per thousand views = $10,000 per ad per episode.
Going back to the original cost of $160,000, looks like more than half of that could easily be generated from web viewers. Maybe even more, let's be realistic. It's possible to cram 16 commercials into an episode of AMC or OLTL, even on the web. In which case, TOLN breaks even on that first "airing" and all the other revenue streams, such as cable, pay per view, on-demand, iTunes, DVDs, and so on would be, as they say, pure gravy.
As it turns out, We Love Soaps started out skeptical, but we actually think TOLN is a good investment. So does Kafka: "Still, compared to some pitches we’ve seen win funding in the last couple years, this one seems almost conservative," he concludes. So what's the hold-up with investors?
"While we feel that it’s obvious that convergence is here, we’ve met with an unusual amount of skepticism," according to Kwatinetz. "So now we’re going out to Silicon Valley, and they seem to get it.”
Here's the rest of the Magid research, as presented to Kafka by Prospect Park.
What do you think of Prospect Park's investors' pitch for TOLN? Would you invest? Tell us in the Comment section, below.
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- ABC Confirms AMC/OLTL Licensed to Prospect Park
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- PRESS RELEASE: Prospect Park Names Technology Pioneer Stratton Sclavos as Partner & Member of Executive Team in Company's Online TV Venture
- REPORT: Susan Lucci Turns Down AMC Offer; Will AMC Continue Online After All?
- THE Online Network: Ron Carlivati Stays With ONE LIFE TO LIVE; Archer, Missal, Trishcitta, VerDorn Sign On
- Peter Kafka's post at "All Things D."
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