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

[Kevin Marks]

In other news today, the CARP said that any webcaster streaming songs 
would have to pay $0.0014 per song to the record label. (It is also 
hedged around with complex conditions that seem designed to  nullify any 
advantages that the web has over FM radio for the listener, so this can 
be regarded as the absolute minimum royalty fee, audio only, no video 
involved).
Adding this to the MPEG-4 license and our putative broadcaster is now 
losing money on every song, even if he alternates songs and adverts.
On Thursday, February 21, 2002, at 10:14 AM, Rob Koenen wrote:
> Discuss list,
>
> I tried to find some data that shows how realistic the use
> fees are in cases where remuneration is indirect, e.g., with
> advertisement-supported content. The only example I could find
> so far comes from a JP Morgan Report (Initiating Coverage of
> Real Networks, JP Morgan, San Fransisco, CA, 18 October 2001,
> page 15, table 7)
>
> The assumption is doing a 5 mintute song supported by
> a 30 sec. ad at 44 kbps. Let's assume 'song' means
> 'MPEG-4 clip. The numbers are then as follows:
>
> ---------------- begin quote ---------------------
> File duration (seconds)       330
> x
> Encoding rate (Kbps)           44
> = File size (Kb)           14,520
> /8 bits (bytes)              1815
> Total file delivered (MB)   1.815
> Delivery cost/MB ($)         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.