The Climate Has Changed

With the current economic climate at the degree it's at today, moving to digital media distribution is no longer just about speed, efficiency and security, it's about saving significant money, immediately. Just because things have been done a certain way since you first started distributing and syndicating your content around the world, doesn't mean it's the best way. If ever there were a time to embrace change and move from physical to digital distribution, 2010 is your year. This paper examines the many costs that are associated with physical distribution including the opportunistic costs.

The Hard Costs of Tape Delivery

Let's focus on the vanilla distribution of a pro video tape from one location to another - this could be for the production and editing process or for distribution of a promo or syndication of a TV show or movie. There are many factors that add up to the true figure of $100-$500 (all dollar references here are in USD).

Duplication Cost - The marginal cost to replicate a 30 minute DVCPro (or similar Beta-SP, DVCam) tape including the labor, stock and labeling will be about $75. If it is longer or HD the cost will easily approach $200. You are paying this for each tape produced each month (of those 10,000 per month!). In most cases, it is seen as the cost of doing business and is either fundamental to producing your product or is absorbed by someone else and is just an accepted practice.

Shipping - Consider the table below which details the cost to ship a 2lb package via FedEx today from New York to Los Angeles. It costs almost $100 to ship a tape overnight from coast to coast - and everything is an emergency in the entertainment world!

So the true cost to ship is not $15-20 but more likely $50 or more for each tape! In addition - there are people staffing the mail room at each end to box it, enter the address, receive it, check it in and deliver it to the intended person. While you could argue there will always be a mail room - when you look at the volume of tapes that you are dealing with - there are incremental heads in your mail room due to the large volume of tapes being produced and shipped.

Courier Cost - In the case where content is either so valuable that it needs to be hand carried internationally to ensure chain of control or where there are multiple local facilities involved in production and ultimately the airing of content (news, sports, episodic content) - couriers are used. Whenever you are involving air travel with a bonded courier - you are easily going to exceed $2,000.

Another example is if you produce content in Manhattan and your master control is on Long Island or in Southern Connecticut - using a courier to shuttle tapes between your facilities costs between $100-200 for each trip. Obviously this is spread over multiple tapes but the cost to delivery content for play to air in this case could easily approach $500-600 per day.

Ingest Cost - Thankfully, tape is becoming more and more of a transport and storage medium versus something that people actually work in. Once the tape is received it needs to be "ingested" as a file(s) into a system for editing or playout (or some other task). Ingest from tape and the associated QC process is a real time process (it takes 30 minutes to ingest a 30 minute tape) is estimated to cost approximately $50 for each tape. This cost includes the labor and tape machine cost including maintenance. In the case where a file is moved over a network and the data integrity ensured, the file can move seamlessly and automatically from one system to the next with no human intervention.

Tracking Cost - Data Wranglers are on staff to ensure that the hand off of these tapes goes smoothly and that all things are at the right place at the right time. A daunting challenge and often involves a "hand-shake" with someone on the other end with the same job. Good Data Wranglers make things go smoothly and there's usually none of the.... "the tape never got there" or "where's the tape, we're on deadline". However, it's a very detailed and labor intensive job to ensure that everything moves as it should. This does not come without cost. It is estimated that for each tape that is shipped there is $25 of overhead in people and systems to ensure that tapes are at the right place at the right time and that nothing slips through the cracks.

Total Hard Costs

The Intangible Costs of Tape Delivery

Environmental Cost - There are literally millions of tapes being produced and shipped each year in the M&E business around the world. Imagine the lifecycle of a single video tape cassette and the environmental impact.

• From Production of the plastic and metal tape - energy, pollution, waste material

• to the assembly and packaging - energy, packaging waste

• to the shipping to the warehouse - energy in the form of fuel for boats, planes and trucks

• to distribution to the end user - energy in the form of fuel for boats, planes and trucks

• duplication - energy to run tape machines, pollution in the form of heavy metal due to tape heads running across metal oxide tape

• shipping - energy in the form of fuel for boats, planes and trucks, more packaging waste

• ingest - energy to run tape machines, pollution in the form of heavy metal due to tape heads running across metal oxide tape

• disposal - thrown in a landfill at the end of its useful life

Multiply this environmental impact by millions of tapes each year and it is probably much worse for the environment than the explosion of a single nuclear bomb.

International Shipping Cost - Our examination of the "hard costs" did not factor in the impact of shipping internationally. The costs to ship internationally can be dramatically higher - this can be attributed to:

• Actual Shipping Cost

• Delays Due to Customs - in the world of iPods and IPTV, 1 year or 3 month delays from the time that a program is aired in the origination country to when it is available internationally is just not tolerated. Delays in customs can have a ripple effect on the repackaging for specific countries (format conversion, dubbing and subtitling) and ultimately unacceptable air dates.

VAT Cost - Historically, when importing a tape into a country, Value Added Tax (VAT) was charged on the stock cost of a tape. The tax would be charged at the rate of the importing country and range from 5% to 20%. So a Digibeta Tape costs $50. So to import it to Argentina for example would be 21% of $50 or $10.50. The price of doing business. Recently countries have wised up and realized that the Intellectual Content on the tape is worth much more than the tape in the company's ability to monetize it in the destination country and are taxing that revenue stream. For example, for one company, Argentina was going to charge them VAT on the Intellectual Content on the tape they were shipping. They were going to charge them 21% of the revenue that the content was going to generate. With margins in the 10-15% range, paying VAT is the difference between making and losing money.

Opportunity Cost - Kinetic Content - you all have it. But how do you get it now? Content stored on a tape on a shelf getting dusty that has value to someone is Kinetic Content. It has value to someone but that value is locked in a pile of dust and lack of movement. Just how much content with value is still locked on the shelf and not being monetized - representing lost opportunity cost? For now, the long tail content is sitting on a shelf with stored value. Distribution of physical media is not going to unlock that Kinetic Content and represents lost opportunity cost.

The shipment of tapes is going to end. Soon files will move seamlessly over networks, each one representing a dramatic incremental cost and environmental savings. When added up, the impact will be dramatic to your business.

Conclusion

Saving money is only one of the benefits of implementing a digital media distribution solution, albeit, perhaps the most important one today. The right digital media distribution solution can bring acceleration, management, automation and security to the movement of your digital assets as well as immediate cost savings. To learn more about how Signiant can help you implement a solution, contact us.

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File-Based Content Distribution Management Has Immediate ROI: The Real Cost of Physical Media Distribution