This post was contributed by Daniel Hofbauer. Scroll down for Daniel’s bio.
Pop Tok has re-invented itself over the last few months. Re-branded as “AnyClip”, the company hired Internet entrepreneur Aaron Cohen to run the company as well as New York-based Nate Westheimer as VP Product. They have an ambitious plan to turn the movie clip download business on its head. AnyClip aims to become the iTunes for movie clips.
Pop Tok was founded in July 2007 as “My Hollywood” and backed by Illi Edry and Erel Margalit’s JVP Studio as well as Mickey Schulhof of GTI Group (ex Sony Chief). The company launched its Beta version in May 2008 as Pop Tok, “toks” being “video clips of scenes, gestures and great lines from the hottest entertainment Hollywood has to offer”. The idea is for consumers to be able to share famous clips with each other – remember that scene? – as “a fresh form of expression”. They launched Casting Couch recently, a Facebook app where users can tag friends in video clips.
New management sees huge potential in this “clip economy”. CEO Aaron Cohen, who spoke at the IVA Annual Hi-Tech Conference on May 19th, said he sees AnyClip as his biggest opportunity to date and he has done a few interesting things in his career. Cohen was most recently CEO of menupages.com where he took the company to a successful exit, selling to the New York Magazine. He was CEO of bolt.com, a founding partner of Tech Aviv and is working on a new documentary movie “The Aaron Cohens”. Cohen brought in Westheimer, the 26 year old “boy wonder” (New York Observer) who organizes the 7,500 member strong NY Tech Meetups. AnyClips’ new model involves stringing together licensing deals with the major Hollywood studios, aggregating clips and either distributing directly or through platforms like YouTube, Hulu, Joost and Netflix. (Disclaimer: I am not sure if they plan to distribute only through others or direct also)
The dollars and cents potential
The market for movie clips is huge. A recent TechCrunch post said that every minute over 20 hours of video are uploaded to YouTube. Cohen estimates that YouTube shows 1-2BN movie clips per month. So how does this translate into revenue earning potential for AnyClip? A back of the envelope calculation: if consumers paid 20 cents to AnyClip for 10% of all clip downloads, the company would split $150M in revenue annually with the platform (YouTube for instance).
[If you are intrigued how I came up with that number, well below I spell it out my assumptions but bear in mind I haven’t spoken to the company and I don’t know their exact business model.
Clip downloads/month (YouTube and others) = 2BN
Consumers willing and able to pay for legal clips = 10% or 200M clips/month
Fee/clip download = 20 cents *
= $40M in gross revenue (70% to studios)
30% = $12M/month or $144M/year
§ I don’t believe they will be able to charge 99 cents (iTunes style) for a short video clip and use 20 cents instead
§ On the cost side, Cohen quoted the costs of making each clip as $100/clip in the past. Assuming this can be brought down to $40/clip, and each clip is downloaded 10K times on average per month (total guess), 200K clips will be made and costs will amount to $8M, for 200K clips, and thus the company will see healthy margins. Thought of another way, each clip breaks even after 1,000 downloads.]
A successful AnyClip would be good for both users and the studios. Good quality legal clips would be available at a reasonable price, while the alternative of downloading free (unlicensed) clips would remain. For the studios it would represent a new and much needed revenue stream – AnyClip plans to pass on 70 percent of revenue to studios. They would also be saved the hassle of negotiating deals with all the platforms separately.
Can they pull it off?
But AnyClip isn’t in business to revive the studios’ fortunes and the question is can they carve out for themselves a profitable place in the clip economy. They face some steep challenges in what they hope to do. They are well aware of the red tape they will face in striking deals with the studios. Studios have complicated rights and residual issues and some directors retain “final cut” rights over their films and may not agree to their movies being sliced up.
But even if the company manages the studios deftly, which this management is capable of, I believe they have two more major barriers to overcome. First, they have to convince users to pay for clips. Over the last few years we have not only witnessed the democratization of information on the Internet but also of access to media (whether legal or not). Consumers are getting used to not having to pay for certain things and it will be a challenge to create perceived value in the mind of the user and to convert them to the old-school “paying” mindset [Chris Anderson’s upcoming book “Free” demonstrates how to compete and sell your products for a price when competitors are offering it for free]. The parallel of movie clips to iTunes song downloads is not precise. I don’t think people will be willing to pay 99 cents for a 10 second movie clip. Furthermore, the age demographic is probably lower and narrower than iTunes music (teenagers with less disposable money send clips to friends).
Second, do YouTube need AnyClip as an intermediary? Google have not yet been able to monetize the YouTube business properly with all the critical mass it has. Credit Suisse estimates the site will lose $490M in 2009. They may adopt a “freemium” model in which case they will work to expand their offering of pay-per-download licensed content. The company has, in recent months, struck deals with studios like Sony, LionsGate and MGM. They hold most of the market for clips and users may go direct to YouTube for both free and paid clips. AnyClip would have to convince both studios and YouTube that they are needed in the middle or otherwise simply compete with the latter.
As a potential user (admittedly not part of the MySpace crowd)
I think the concept has potential. The company is definitely moving in the right direction by offering developer tools for users to create their own applications. Some interesting apps could go a long way in creating enough reason for users to pay for clips. They face major challenges though and the big boys may crowd them out of the picture. If they do pull it off and turn the industry on its head, this Israeli start-up could prove to be very interesting. Let’s wait and see how the clip economy plays out.
Daniel’s background is in business development and finance. He loves anything internet/digital media related and is a budding entrepreneur. Originally from London, Daniel spent 5 years living in the Big Apple and recently re-located to Israel.