[M4IF Discuss] Ad supported MPEG-4 Content & use fees

[Rob Koenen]

Discuss list,
I tried to find some data that shows how realistic the use
fees are in cases where remuneration is indirect, e.g., with
advertisement-supported content. The only example I could find
so far comes from a JP Morgan Report (Initiating Coverage of
Real Networks, JP Morgan, San Fransisco, CA, 18 October 2001,
page 15, table 7)
The assumption is doing a 5 mintute song supported by 
a 30 sec. ad at 44 kbps. Let's assume 'song' means
'MPEG-4 clip. The numbers are then as follows:
---------------- begin quote ---------------------
File duration (seconds)       330
x
Encoding rate (Kbps)           44
= File size (Kb)           14,520
/8 bits (bytes)              1815
Total file delivered (MB)   1.815
Delivery cost/MB ($)         0.01
Cost to deliver one song and 
      one ad ($)          0.01815
Ad revenue/song* ($)         0.02
Gross profit/song          $0.002
Gross margin                 9.25%
Source: JPMorgan estimates.
Note: Calculations are rounded.
Assumes $20 cost per thousand impressions (CPM).
---------------- end quote ----------------------
So far the report's example. 
Let's now add the MPEG use fees:
MPEG Visual use fees ($)  0.00183
MPEG Audio use fees ($)        PM
MPEG Systems use fees (4)      PM
By some coincidence, the use fee is here virtually equal to the
gross margin, assuming that MPEG-4 Systems and MPEG-4 Audio come
without use fee. (I do not consider this a reasonable assumption
by the way. If we assume the Visual use fee is reasonable, we also 
need to assume that some use fees are equally resonable for access 
to the licenses needed to use the other parts of MPEG-4.)
If the figures in the example are accurate (I'd love to hear comments)
then the example shows that MPEG-4 is not an option, and one would 
need to look at alternative solutions for this business model.
Of course the example also shows that ad supported content is 
difficult to being with, but that is not the issue here - people are
doing it, and MPEG-4 should provide them with a reasonable solution.
More such examples are very welcome.
Best,
Rob Koenen