Pay Per View: The Enemy of Growth

DNN’s First-Person September continues with something even more unusual for us than narrative: Opinions! Please enjoy our first ever Editorial.

Edit: this editorial originally appeared under the headline “Pay Per View: The Enemy of Success.” Upon further reflection, it’s clear that “success” has a wide range of definitions within the derby community. The headline has been changed to more precisely reflect the point of the editorial.

This year, for the first time ever, the live online broadcasts of roller derby’s top competitive events are viewable only for people who are willing to pay to watch. Many (many) people in the derby community have expressed dissatisfaction with this course of action. We agree; we think it’s very shortsighted and counterproductive to place obstacles between the sport and its potential audience.

The rationale that led to the adoption of a Pay Per View-only model, as best we understand it, went something like this:

How expensive is broadcast?

Network-caliber broadcast production is an exceptionally expensive proposition. For a sense of scale: to broadcast 8 events in 2012, WFTDA.tv budgeted a reported $270,000 — more money than DNN has consumed in total, for our full menu of services, since our launch five years ago.

And yet, by network standards, this is an extremely frugal sum. For example, when MavTV broadcast the 2008 WFTDA Championship Tournament, they invested roughly $500,000 in the effort.

TV is expensive.

a) “We want to grow roller derby until hundreds of thousands play, tens of millions are fans, and the top players can quit their day jobs and skate professionally;”

b) “Sports that are on TV have millions of fans, therefore the way to achieve the above goal is to get on TV;”

c) “To get on TV, we need to make it look like a TV sport, with TV-level production values;”

d) “TV-level production values cost more money than we can figure out how to make — unless we implement Pay Per View.”

This thinking is flawed. Here are 6 reasons why:

1) Pay Per View doesn’t get roller derby onto conventional television.

TV doesn’t choose to broadcast sports because the sport “looks ready for primetime” and they think they can build an audience for it. That’s a textbook causation fallacy. TV chooses to broadcast sports when they have already aggregated a proven, bankable audience. For a lot more detail, see the comment thread from our 2010 Fund Drive announcement, and in particular Mercy Less’s description of WFTDA’s prior TV negotiations.

In short: TV is not a medium for growth. TV is a medium for monetization. Once enough people already care about a sport, TV provides the avenue through which millions of eyeballs can be sold. By attempting to monetize very prematurely, WFTDA has cut some actual, viable growth avenues off at the knees.

In shorter: Field of Dreams is a great movie, but a terrible business model.

2) Pay Per View reduces the audience, rather than growing it.

The second you put a paywall in front of any service, you decrease consumption of it. WFTDA.tv doesn’t release their numbers, but similar examples in other sports suggest a 50% audience reduction as a starting point, with many precedents for 90% or more.

Again in our 2010 Fund Drive comment thread, several examples surfaced. Even businesses that have managed to build a successful PPV business, such as perennial example UFC, are struggling to maintain audiences in recent years.

3) Pay Per View dramatically reduces sponsor value.

When you sell sponsorship and advertising, the value you’re selling is exposure. The more people you aggregate into your audience, the more revenue you can generate through these nondestructive avenues.

By severely reducing the broadcast audience, Pay Per View cripples the broadcast’s ability to sell advertiser exposure (further stunting options for non-paywall financing of future broadcasts).

4) Pay Per View deprives derby’s best training tool from the people who most need it.

Roller derby continues to grow across the globe, with participants in a fast-growing number of relatively remote locations. From Montana, to Melbourne, to Munich, to Manitoba, to Medellín, derby people outside of major US metro areas face significant financial obstacles to participation.

Travel costs more, so access to experienced trainers costs more, and getting gear can cost a lot more depending on trade and tariff issues; even venues can be harder to come by, in locations with no tradition of roller skating. It’s expensive to be in derby, for anyone, but all the more so if your home is out of the way.

We hear from them all the time. For these members of our community, internet media is a lifeline. It’s the next best thing to actually being there, or to someone with experience actually visiting. London and Victoria, to name a couple of notable exceptions, have very specifically told us “without the free resources on DNN, we’d be lost.” These people, who are the vanguard of our growth, who most need access to these resources, can least afford to pay for them.

Archived video, while valuable and essential, only addresses a fraction of this issue. People who are “active learners” will seek it out, but for every active learner in the sport, there are several passive learners — people who might not think to go hunt down some top-teams video, but who will get caught up in a live broadcast experience and see some mind-expanding performance that gets their gears turning. When that population learns without even trying, everybody in derby benefits.

5) Pay Per View deprives derby of its best community-building opportunity.

Community is built through shared experience. Second only to (costly and time-consuming) travel to major events, live broadcasts provide a shared experience around the very purpose of this community.

Live broadcasts allow us to all enjoy an event together, to talk about it in person and online together, to get excited about a common experience. In the process, we get to know each other better, and those bonds fuel our further growth and mutual support.

But only if we’re all afforded access to that common experience.

6) Pay Per View isolates participants from their personal support network.

Derby participants make many sacrifices to take part in the sport. So do their friends and family, as discretionary time and money are diverted to roller derby practice, travel, and gear, and away from other social opportunities. Sometimes this leads to friction.

Broadcasts can provide these friends and family with the opportunity to experience the fruits of all those sacrifices. When they’re able to see the intensity of tournament competition, it helps them to understand why so much time and energy goes into getting there. But these friends and family, who may already feel neglected, are far less likely to watch a broadcast if it requires yet another sacrifice (of the Pay Per View fee).

Many in the derby community bemoan the fact that we can only seem to get our friends, our family, and other derby people to attend our bouts as spectators. That’s not a flaw; that’s a feature! Sports have always grown in this organic way. Derby is no different. We should provide every possible opportunity for participants to engage their friends and family in our shared passion.

There’s another way

For us — immersed in the realities of the broadcast business, attentive to the historical growth patterns of other sports, and with long experience as actual participants in the sport — these drawbacks have long been evident, which is why DNN has never placed a paywall between the sport and its constituency.

In DNN’s 2011 Big 5 Broadcast Bid (PDF), we outlined a model to provide paywall-free broadcast quality comparable to the current production. We were able to offer this option because we’d aggregated a substantial, coherent, 365-day audience, and built a sound and growing finance model on that foundation.

We’ve since moved away from our previous focus on DNN-produced internet broadcast, preferring to instead work with broadcast partners and focus on our many other services. We’re not looking back — we have new directions on the horizon, which we’ll describe in our imminent 2012 Fund Drive launch. We’re engaging this topic because we think the conversation is important, and we want to show the community that there are realistic alternatives to Pay Per View.

Excerpts from DNN’s 2011 Big 5 Broadcast Bid

On audience service (from page 8):

The broadcast will be carried on a private, secure, high quality stream that will be available to all viewers free of charge, in order to support Derby News Network’s mission of nurturing the sport worldwide by bringing it to any and all interested potential fans and aspiring skaters.

(from page 7):

We believe widespread exposure is a critical ingredient for modern roller derby’s continued growth. It is DNN’s mission to create and grow new exposure opportunities, which offer new and potential fans more ways to experience and engage with the sport, while providing developing skaters and leagues with no-cost opportunities to “see how it’s done” and learn by watching veterans in action.

On finance model (from page 7):

We’ve developed our production and finance model to harmonize with the derby community’s goals, priorities, values, and resource constraints.

While others have struggled to cover the costs of production, DNN successfully finances our broadcast productions through sponsor and advertising sales, as well as voluntary contributions from our viewers. We have a proven track record of delivering value to live coverage sponsors, which in turn has led to robust growth in our sales efforts.

Notably, our funding model does not include pay-per-view, either in the form of a mandatory paywall or an added-value upgrade. We’ve carefully examined this approach, and we’ve determined that it runs completely counter to our accessibility mission. Rather than compromise the audience experience, we’re setting out this year to provide the highest possible quality, highest possible definition stream, to make it available to viewers at no cost, and to finance it through methods that are consistent with a good viewer experience.

Furthermore, after careful examination, we believe the hybrid model (offering a free stream alongside a pay-per-view, higher quality stream) represents a moral hazard for the broadcaster, by potentially allowing the broadcaster to benefit directly from bad audience experiences. For example, if the free stream suffers technical problems, some fraction of its audience will upgrade in order to maintain access to the event. The broadcaster gains revenue, while the rest of the audience loses access.

We think it’s essential to keep the broadcaster’s interests directly aligned with those of the audience. DNN’s finance model accomplishes this goal.

On content ownership:

We’ve been surprised in the past few days to hear some Pay Per View defenders claim (groundlessly) that this model was necessary in order for WFTDA to retain ownership of its content. That’s simply not true.

Copyright can be assigned in the terms of a broadcast contract. We requested only the right to provide live broadcast and internet archives, with all other uses reserved for and owned by WFTDA (with the caveat that we be compensated for excess production costs, should WFTDA find a revenue-generating future use — reasonable, since we proposed to take the entire business risk for the venture).

(from page 10):

DNN is happy to share all other broadcast rights with any other provider or distributor of video content; we only wish to hold the Internet broadcast rights exclusively. This is a technical necessity, because in our experience, most tournament venues have only enough Internet capability to carry one live video stream robustly and without interruption. More than one stream would compromise the ability of any provider to broadcast a quality stream.

(from page 16):

We also propose to share ownership of all produced content with the WFTDA, and come to an agreement on a fair revenue share in consideration of DNN bearing the sole burden of funding the production, in an amount that covers our production cost only, in the event that WFTDA chooses to sell the content in the future. Any profit beyond our recouped production cost will be donated to the WFTDA.