SPECIAL: Syndication Survey Results - Revenues, Complaints Galore!

(((((((((( From MarketingSherpa.com
ContentBiz July 12 2001 Vol II, Issue 25
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Free subscriptions at http://www.contentbiz.com

SPECIAL REPORT: SYNDICATION SURVEY RESULTS

Introduction
Part I: Publishers & Content Owners Survey Results
- Working with 3rd Party Syndicators
- The Truth About Content Syndication Revenues
- Sales Predictions for the Next 12 Months

Part II: Syndicators Survey Results
- The Reality of Publisher Relations
- Revenue Predictions for the Next 12 Months

Conclusion: New Opportunities in a Slowing Marketplace


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INTRODUCTION:

Last year at about this time, syndication was the hot topic in
the content industry. ScreamingMedia was about to go public,
iSyndicate was lining up speakers to proclaim the joys of
syndication at its third annual summit that fall, and Factiva had
just celebrated its first anniversary. Plus, most of the
publishers we spoke to back then were excited about doing their
own one-on-one deals with Web sites.

Then things began to sour. Publishers who'd been hoping for a
silver bullet got disenchanted with the reality of syndication
income. Online ad sales were down so Web sites couldn't buy as
much content. Newbies learned selling to the corporate
enterprise took a harder and longer sales cycle than expected.
And everyone's eyes turned to other income streams to save the
day (most notably, subscriptions.)

However, nowadays most people in the content industry are waking
up to the fact that there is no silver bullet. No single
magical, easy, revenue stream for a successful content company.
Profitable business models are a patchwork of many different
revenue streams, including ancillary products, ad and sponsorship
income, single article micropayments, subscriptions, affiliate
income ... and yes, syndication and licensing fees.

In June 2001, ContentBiz surveyed its readership, using two
separate surveys (one for publishers and one for syndicators) to
learn exactly how much publishers are really making from
syndication, what their expectations are for the next 12 months,
and how syndicators and publishers can work together better.
The results were fascinating, and in some cases surprising even
to us!

Below you'll find a summarized report on the results. We'll
publish further information - including detailed charts - in the
"ContentBiz Practical Guide to Syndication for Publishers", a
100+ page report due out later this summer. (If you'd like to
sign up for a $25, no-obligation, discount certificate for this
report, you can do so quickly and easily at:
http://www.zoomerang.com/survey.zgi?T8XJ4T7LVAX4MW9XK4XH5MDX )

Please note: throughout the following, we use the word
"syndication" in a global sense to indicate all forms of content
reselling for the purpose of publication, including licensing,
cobranding, redistribution, 3rd party aggregation for resale,
etc.


PART 1: Publishers & Content Owners Survey Results

154 publishers and content owners answered our 10-question online
survey. They were roughly divided between 54% niche publishers
of B-to-B , technical, professional and scholarly content, and 46%
general interest publishers of daily news, current financial and
consumer feature content.

We expected the answers of these two groups would substantially
diverge. THEY DID NOT. In fact different types of content
publishers were remarkable for the uniformity of their answers to
almost all questions.

-> Working with 3rd Party Syndicators

One might expect the readers of ContentBiz (which frequently
covers making money through syndication deals) who responded to a
survey on syndication might be highly likely to have deals in
place with well-known syndicators. This was not the case.

Although more than 66% of ContentBiz readers are from publishing
companies with more than 10 employees (and 21% are from
"household name" companies), only 24% of survey respondents were
working with online syndicators such as ScreamingMedia, just 16%
had deals with corporate enterprise sellers such as Factiva; and
a measly 10% were working with educational and library resellers
such as Gale Group. A total of 59% of respondents said they
weren't working with any 3rd party syndicators whatsoever!

These figures held roughly true no matter what type of content
respondents published -- from general daily news to scholarly
journals.

To us this indicates a tremendous opportunity for the syndication
industry. However, the industry is notable for its lack of
publisher recruitment efforts. In general unless you're very
famous name-brand publisher, the onus is on you to hunt down and
harass syndicators until they agree to a deal. Is this because
syndicators don't see a marketplace that's particularly hungry
for more varieties of content? Or, is this because syndicators
don't know how to market additional content properly?

The majority of publishers voicing their biggest complaint about
working with 3rd party syndicators definitely felt the latter was
true. 54% of respondents complained that syndicators are
focusing on easy low-hanging fruit -- selling general content
cheaply to whoever will take it -- rather than valuing and
marketing content as publishers feel it's worth. Sample
complaints:

"Really don't care what content is worth. They act like used car
salesmen."

"There is a lot of great publishers and content out on the
Internet. I believe they don't have enough people exploring new
business developments, instead they are focusing on what they
currently can distribute."

"Pompous rude sales people who don't 'get' the value of our
content and don't return calls."

"They do little or nothing to promote our content to the
appropriate audience."

"Bad splits, not great volume."

"The salesforces for the big syndicators seem to only deal with
the quick and easy 'brand' names. No one is interested in taking
time to develop a 'farm' group of up and coming compelling
content providers."

"They are diluting our content. They are commoditizing on our
niche content and do not value it as much as they should."

"Royalties too low. Inappropriate weighting of our material
along with PR Newswire for example."

"Do not go out of their way to get me business."

"Not premium news, everyone has it."

"They depress price of product; don't make buyer aware of value
of branded content."

The other complaints publishers had concerning syndicators were
as follows:

- 14% worried about control over their content's final
destination. Typical comments were, "Can't track what their
clients do with our content. Some resell against contract and we
can't track that." "Tracking sublicensing of content." "When
syndicators sell to other syndicators. We lose the opportunity
to sell to them direct and the revenue is split so many times
that we don't make any money. We also fear losing control with
larger syndicators. They don't provide accurate information
about exactly who gets our content."

- 11% voiced a dislike of syndicators' publisher-relations,
saying "They are slow to respond", "Time it takes them to pay",
"Most of them think they are doing you a favor and have little,
if any, knowledge of the importance of customer relationships,"
and "Very slow in replying to all communications. Not up front
in negotiations and move the goal posts whenever possible. Go
bust or people leave without handing over your case!"

- 10% were under-whelmed with syndicators' technology. "Delivery
format", "Technical integration", "Slowness of their servers,"
"Slow implementation," and "Unreliability" were all cited.

- Other comments included fears of brand dilution.

Given those feelings, no wonder only 4% of respondents relied
100% on 3rd parties to bring in syndication revenues. In fact
out of the four major methods we listed to make syndication
sales, 3rd party syndicators ranked third in terms of cash
receipts for publishers.


-> The Breakdown in Content Syndication Revenues

We asked publishers to name the percent of their syndication
revenues they got from each of the four main syndication methods.
Their answers:

1. 77 generated revenues from ongoing cash-for-content deals they
themselves had negotiated directly with the end user. Of these
51% relied on this method for 50-100% of their syndication
revenues.

2. 49 sold single-article re-use rights (such as iCopyright
deals.) This was not an enormous revenue stream for most - 77%
who used it said it accounted for less than 30% of their
syndication revenues.

3. 47 of respondents to this question sold through 3rd party
syndicators. Again hardly anyone made much money this way, 66%
who used them said they accounted for less than 30% of total
syndication revenues.

4. 42 publishers admitted to receiving cash through advertising
or affiliate revenues made on their content appearing on 3rd
party Web sites. However, 79% of these received less than 30% of
their syndication revenue this way.

We also asked what percent of their total overall revenues did
publishers receive from syndication specifically. 47% of
respondents said they currently had zero syndication revenues --
however many of these added comments such as "Not yet anyway"
that lead us to believe syndication is definitely on their
horizon.

The remaining publishers who are making money from syndication
broke down into the following groups:

1. 51% make 10% or less of their overall revenues from
syndication. Of these roughly 1/3 were at 1%, 1/3 were at 5% and
1/3 were at 10%.

2. 28% make 11-49% of their overall revenues from syndication.
The average for this group was 23% of revenues.

3. 13% make 50-79% of overall revenues from syndication. The
average for this group was 65%.

4. 8% made 80-100% of their revenues from syndication. The
average for this group was 90%.


-> Publishers' Sales Predictions for the Next 12 Months

Most publishers were moderately optimistic about the next 12
months syndication revenues. 43% believed their revenues would
stay about the same or rise by less than 10%. 19% hope for a 10-
25% rise in syndication revenues. 20% expected substantial gains
of more than 25% ... and a solid 16% think their revenues will
skyrocket by more than 50%. A measly 2% think they'll make less
on syndication this year than they made last year.

Where will the gains come from? Many respondents told us they
are definitely planning to start syndicating in new ways over the
next 12 months, including (Note: these numbers are in addition to
the publishers already syndicating in the formats below):

28% - content to appear in email newsletters
26% - e-content to appear in print publications
25% - single article re-use rights
24% - text-content with graphic components
22% - content to appear on wireless platforms

BTW: Unfortunately for the hopes of technology sellers, of the
respondents who had their technology budgets set forth already,
44% are not planning on spending any money on syndication-related
technology in the next year, and 18% are planning to spend under
$5000. The remaining 36% trickled in at various amounts mainly
around $7,500 and $35,000. And just over 2% have a budget in the
low-six figures.


PART II: Syndicators' Survey Results

37 third party syndicator employees answered this 10-question
online survey. (We suspect there was some overlap with several
staffers from the same company answering, but because the survey
was anonymous we can't say how much overlap there was for sure.)

They represented a good spread of interests. Syndicators
carrying all types of content were pretty evenly included. For
example, 65% said they carry technical and scholarly content, and
68% carry newsfeeds.

Very few relied on a single marketplace such as Web sites or
corporate enterprises for 100% of their income. It seems
syndicators are learning to spread their revenue streams out too.
However, only 36% made revenues from print syndication (and even
then it represented a slender portion of their total income) and
just 24% sold advertising against content distributed online.


-> The Reality of Publisher Relations

Syndicators answering the survey who share proceeds with
publishers (some headlines-only distributors do not) claimed to
share an average of 44% of their total revenues with publishers.

In terms of hard cash per publisher, this amount greatly varied.
As one syndicator said, "Huge range $200 to $50,000." The
majority said the average size of a publisher's monthly income
from them would be around $1000. A few said that monthly income
would be around $10,000. The average was $3,150.

68% send out checks every month, 32% pay by the quarter.

83% of syndicators said it takes less than 60 days from the date
the contract is signed for a publisher's content to begin being
distributed by their system. (We suspect the Web-based
syndicators may have weighted the scales on this answer, because
some of the more traditional content distributors are infamous
for taking longer.)

Plus, 66% of syndicators said publishers could realistically
expect to receive their first royalty check within 60 days or
less of the date their content started being distributed in the
system. Not bad - but we fear overly optimistic. (For example
ContentBiz itself just received its first check from a major
online syndicator that began distributing it 140 days ago.)

Yes, we also gave syndicators the chance to complain in their
turn about publishers. Their most common problems when working
with content owners were:

55% of problems arise over the financial terms of the deal. Most
syndicators believe this is because publishers just don't
understand the costs or the reality of pricing for a syndication
business model. "Explaining costs involved in implementation and
syndication", "Lack of knowledge about digital syndication."
"Understanding our exact business model." "Making licensing
deals work for both of us."

Some syndicators were simply fed up with what they perceived as
content owners over-inflated prices. "Little 'product'
sensibility - believe their content is manna from heaven and is
priceless. Don't seem willing or able to accept that they are in
a business." "They want too much money to license it. It's
difficult to set up relationships." "Unrealistic sales
expectations in too short a time frame." "Ego."

One syndicator complained about the opposite, "Publishers selling
content at a lower prices than syndicator does."

Technology was the next problem after pricing. A full 26% of
syndicators had problems with publishers' technical capabilities
or set-ups. "Do not have an effective content management system
in place. No organization." "Data conversion issues."
"Compatibility issues."

The remaining 19% of problems included several worries about
control, "They are too controlling over their content", and
rights management, "Knowing who has the real rights to content."

It's interesting to note, nobody complained about not being able
to locate good content, reach publishers, or a lack of available
content.


-> Syndicators Revenue Predictions for the Next 12 Months

Syndicators are also moderately optimistic about growth over the
next 12 months. A full 59% do not expect content prices to rise
at all. In fact 11% think they'll fall.

Everyone pretty much uniformly is distaining last year's great
white hope -- sales to Web sites and email newsletters -- in
favor of this year's -- sales to corporate and government
enterprises and intranets. 49% expect to see the most revenue
growth in enterprise sales, while only 8% are hoping to grow
sales to Web sites in a big way. Absolutely nobody thinks
libraries are a growing market. However 12% of respondents are
hoping technology products and services will be their area of
greatest gain.

44% of syndicators predicted market demand will grow fastest for
wireless content in the next 12 months. 36% saw text-based
content still running strong, and 34% were gung ho for video.
The loser? Just 14% of respondents said demand would grow fairly
rapidly for graphics such as cartoons and photos.


CONCLUSION: New Opportunities in a Slowing Marketplace

It's obvious that both publishers and syndicators believe the
other side desperately needs educating about business models,
pricing, marketing, and value. Instead of yet another conference
with pundits droning on, we'd like to see somebody put together a
content syndication university. Professors would carefully
explain each side's points to the other, and then help them play
more profitably.

There's clearly a bigger opportunity than either side can have
working alone. Publishers have a wealth of experience in how to
position, package and market content for the highest possible
price in their niche. Syndicators have superior technical know-
how and a far broader market view.

In addition, it's also obvious that the publishers who are
investing in an in-house staff (or expert consultant) to
specialize in doing their own one-to-one content licensing deals
are the real winners. Content is just like advertising --
relying on an outside rep to sell all your ads is never the way
to go. The problem lies in figuring out exactly how much content
inventory you need in order to make investing in an in-house
person (or consultant) worth while.

We suspect there's also a substantial opportunity for niche
publishers to band together. If your content is too niche or too
infrequent (i.e. less than 10-20 stories a day) to appeal to
syndicators, and you're too small to hire a licensing specialist
in-house, perhaps you should reach out to some of your
competitors to form a bigger entity in order to sell effectively.
Yes, technical and political hurdles could be major, but so could
profits.

Last note, yet again, if you're interested in learning more about
this survey (yes there are results not revealed above) or in
getting practical knowledge on syndicating content on your own or
through syndicators, be sure to sign up for your $25 discount
certificate for our new Report coming out later this summer. It
takes less than a minute at:
http://www.zoomerang.com/survey.zgi?T8XJ4T7LVAX4MW9XK4XH5MDX

Thank you!

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