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Hidden Fortune

By Dennis Kneale

Fifty. Billion. Dollars. That is how much extra revenue content companies could be collecting every year but leave on the table because of lapses in how they manage content rights. That is equal to the total annual revenue of Walt Disney Co. (#57 on the Fortune 500), and almost $10 billion a year more than the revenue of Time Warner and CBS combined.

This hidden fortune, elusive even to some of the biggest entertainment companies in the world, may be even larger than $50 billion a year, say the rights experts at RSG Media. They studied the global $600 billion-a-year market for common practices and missed opportunities and conservatively peg untapped revenue at up to 10% of the market, so let’s say 8% or so for good measure.

This digital pile of uncollected revenue comes to light as investors fret over the breakup of cable subscription packages and as channels have started offering Net-only services “over the top” without going through the local cable systems that had been their partners. They include HBO Now, an ESPN NBA feed, CNN, CBS, Univision, Showtime and CNBC, and more OTT entrants are imminent.

Internet disruption is coming soon to the TV business, and even the strongest media giants will need every trickle of revenue they can collect. Yet the industry gets only a grade of ‘B’ in rights-management, says Greg Fioravanti, a vice president at Discovery Communications. “Rights management on its face is pretty simple, it’s really about managing your inventory and reducing your risk, and doing it in the most effective way,” he says.

“These companies have archives of old content just collecting dust,” says David Hoffman, a vice president at RSG Media, which makes rights-tracking tools and is the sponsor of this series on the problems and promise of rights management. “We’re like treasure hunters, we help [content companies] mine the gold that’s hidden in the basement,” he says.

The industry overall is doing only a so-so job of managing the exponentially complex patchwork of thousands of different rights that bind to every TV show, movie, song, video clip, sports highlights, and more. Now, however, powerful new tools are turning the mundane housekeeping task of rights tracking into a streamlined and profitable operation that generates revenue. Newer technologies include machine learning, prescriptive analytics and Big Data algorithms.

“We help our clients see their content not as a cost center, but as an investment portfolio delivering profits,” says RSG Media’s Thomas Siegman, an executive vice president. RSG Media began developing a system two decades ago to let companies switch from old by-hand, people-intensive methods to an automated platform.

When Discovery implemented its rights management system, developed with RSG Media, it was a gargantuan undertaking, tracking a library of over 100,000 hours of shows and video clips, shown to 3 billion subscribers on more than 200 channels in 220 countries. Now, when Discovery wants to start a new channel in an overseas market, the platform can determine within a few hours whether enough programming is available and authorized to support the venture. This used to take weeks or months, says Fioravanti, who is the “business lead” on the project. The system has been especially useful now that new OTT channels are popping up like crazy. “It has been an invaluable tool for determining rights to assets as new platforms are launched in a rapidly changing media environment,” he says.

Discovery does “as good a job a anyone, if not better” at managing its huge inventory, Fioravanti says, but much of the process remains too manual. The next goal is to knit together systems for rights, royalty tracking, finance, and scheduling. “The ultimate goal is getting in place ROI,” and the ability to instantly assess return on investment, Fioravanti says. “What the inventory is, how much it costs, how much advertising we’re generating out of it. They can do it by hand now,” he says, but “ultimately, long-term an end-to-end-system will automate all of it.”

For content owners and networks, getting the most out of their rights should be a consultant’s cliché: low-hanging fruit. But the complexity and volume of rights have exploded exponentially in the digital age. Two more obstacles: the separate silos that operate without regard to one another at multi-tentacled media giants, and the fact that many digital businesses started out as skunkworks and still are run separately from the linear-TV businesses, even today.

In the 1960s, rights management could be done with a pen, pad and clipboard. Now the landscape encompasses thousands of cable channels and thousands more websites zapping real-time, on-demand streams to millions of flat-screen TVs, smartphones, tablets and laptops, PlayStations, Xboxes, Roku and more, across dozens of global markets.

It is a dizzying and daunting array of overlapping, multi-pronged and sometimes contradictory rights for such items as: territory or region, time & date, number of plays, language & dubbing, format (high-def or standard), platform (old TV, video-on-demand, web), outlets (one channel or many, broadcast or cable or, say, an airline network), editing, and more.

“Elemental” rights cover small, granular underlying items such as music in the title sequence, songs in-episode, photos, and video clips. Attention—and money—must be paid or swapped or otherwise bartered and bargained for tracking all these thousands of attendant rights.

Thus content creators lose track of all they own, terms of usage and shelf life, and the restrictions that can render a piece of content frozen and unsellable. More can be lost than just the rights fees that go uncollected: a network wastes unaired episodes it could have burned off at no extra charge; or a distributor stops short of offering a movie in one European market because a single song in the opening credits isn’t approved there.

A good rights system lets a content company reap an upside—but also avoid the downside of violating the rights of other providers, running afoul of restrictions on how many times a program can air and where. “Violations hurt our relationships and put us in a litigation situation,” says Discovery’s Fioravanti, “yet you want to march down the path of global TV.” The key is having detailed knowledge of your entire inventory, he says.

“We find a lot of companies have all this content, and they don’t even know what they have,” says Siegman of RSG Media. “They could be going into foreign markets and they lack one simple clearance that’s stopping them. We show them that needle-in-a-haystack that suddenly opens up millions of dollars in revenue.”

Content creators no longer afford to take a lightweight approach to tracking the thicket of rights entangled in every digital packet. Firms today have two new drivers: fear and greed. They should fear missing out on millions of dollars in fees they could be collecting if only they would invest in the capability to do so; they should get greedy about using new tech tools to manage their rights libraries like a profit-hungry hedge fund. Success at one will ease the downside of the other: The better they are at greed and reaping rights revenue, the less they will have to fear.

Kind of interesting how that works.    

Dennis Kneale, a former anchor at CNBC and Fox after two decades at The Wall Street Journal and Forbes, is a media strategist in New York.

Jessika is content engagement director of Broadcasting + Cable, Multichannel News and NextTV. She has been with the brands in various roles since 2013. In her current role, she works primarily behind the screen, keeping an eye on the website and fixing any site bugs. A graduate of USC Annenberg, Jessika has edited and reported on a variety of subjects for NextTV, including profiles on industry leaders and breaking news.