As you know, I've been reporting for the past few months on how this whole thing got started. From the voting process to the meeting with Warners to the answer and finally the process of it being moved to the funding stage and it's release (currently it's just over $27,000). All these articles featured quotes from Dave, SMGO.tv's spokesperson. I was finally given the opportunity to talk to the man and have him fully explain to me the whole process of SMGO.tv and what makes them different than things like Kickstarter.
The Outhouse (OH): Can you give us an explanation of the SMGO.tv?
Dave: Sure we've been kind of describing it somewhere between Hulu meets Kickstarter, except it's a lot closer to the fans. We realize we're asking fans to save their show and empowering the fans. That's the best way to get to the core of us
OH: So how are you guys more fan friendly than Kickstarter?
Dave: Well, with Kickstarter, when you have a project, they don't take a vested interest in promoting that project - maybe they'll feature it - but mostly they put it up and wash their hands of the project. We take a vested interest in this, because, well, we're fans. One of my favorite shows was Firefly, and another was Jericho. One lasted one season, the other two, and it's such a bummer. And every time a show gets cancelled, we think, why is nobody doing this? So we're doing it!
OH: So why these certain shows?
Dave: You wanted to know more about SMGO and what SMGO really does is give these more niched shows - shows that have resonance with certain smaller populations - a REAL chance to compete with more mainstream shows. Traditionally, what "works" are shows that appeal to the biggest number of eye balls. If you know the the Nielsen Ratings system, you know that shows that tend to get renewed tend to be the ones that appeal to the mainstream, but other shows that appeal to more specific groups, or the wrong groups, get canceled. There was this show on CBS. It was the BIGGEST show they ever had. But because their target age group according to Nielsen was 35-65 instead of 18-35: they got rid of it. Even after a single season. And you're like: “WHAT? That doesn't make sense.”
So our idea was: we should allow fans to save a show if fans feel such resonance for that show. We should allow them an avenue, more than just a petition, and a real chance to have the show back, and make it a good business opportunity for the studio at the same time. We're not trying to make them change their model for TV. We're just saying if you come up with a niche show that's great, give fans a chance to save it. Produce three shows instead of just two shows.
OH: That's interesting, and I'm glad you explained it in full detail, since there's a lot of people who are stand-offish still about SMGO. You're the “new kids on the block,” and people are asking, “how is this going to work? Is this a scam? Why should I trust you with my money?” Questions that are very reasonable since SMGO is going into a territory that is foreign and completely new.
Dave: We want to be as open as we can and get the word out as much as we can to these core groups. We want to show the core fans of the show that we're really trying to help them. It's their campaign, they asked to use our platform.
There also were some comments about our rewards. Some people said they didn't want rewards. I don't think that's the right way to go about it. If you do that, then we start a precedent, and then maybe Hollywood comes back in a year and goes: “Well we want you to crowd fund for us, but you can't give out rewards EVER.” Others were critical about the realism behind the rewards… I dunno. This whole campaign has to be really flexible as a fan campaign. We're really confident that if we can raise a certain amount of pledges we can bring these guys back to the table and can really make something happen.
OH: Yes, it would be a first. The only show that comes close to what was done on this scale was Farscape. This was a show that was canceled and had a whopper of a cliffhanger, making fans of the show raise hell to Sci-Fi Channel. It wasn't fans' funding, but due to the fans we got mini-series that closed out the series. A much better ending then what we originally had gotten.
But tell us more about the funding.
Dave: What part of funding?
OH: Where does the funding go? Because people are wondering how this works compared to Kickstarter. How is this funding process different? How does the SMGO crowd-funding work? Will it be on your site, tumblr, or Twitter?
Dave: The general process is that there are more or less three conditions that make us entirely different than Kickstarter and they benefit the fans most of all. We developed our model for two years. We started by laying the old model out. We looked at the flaws you get when crowd funding media projects. For one, we're crowd funding larger sums, so we have to have a longer period - so we got that. We also don't charge accounts at all until we have a signed contract in hand. And basically, what people are doing in essence is, really, it is a "like" button, but with a hundred dollars attached to it: “If you agree to do this, I'll contribute this.” unless they come back to the table then it's no different than a better "like" button - with no money attached.
The thing with the last video posted were I briefly summarized it, my partner told me: “Dave don't bore them to tears.”
And I was like, “Are you sure? I think they would want to know.”
“No just give them the overview. If they need more… they can read the plan."
The idea is, you're not contributing money immediately. Your bank account doesn't get debited. Nothing happens. Unless they come back to the table and agree to bring the show back.
We'll handle the design cost for these prizes. We wanted to give fans back these really really cool stuff. That's why we tried to show this really cool stuff. We wanted to make people feel that they made out like bandits.
So our revenue model of how we make money. Nobody has asked this question, but how we make money is the other people who don't contribute. So we expect 5% of the Young Justice population to reach ten million dollars. It's totally attainable.
OH: I think it's attainable, but there are some fans who are hesitant because they're afraid this is a scam. They also ask the question: “why isn't this more like how Kickstarter does it?”
Dave: Heh, okay. Using Kickstarter, since people understand it. So we'll use Kickstarter as a basic model. Same basic thing. You go and pay for a pledge. You pay for a pledge for a certain amount. First difference is you're not actually paying at this point with SMGO. With Kickstarter they put an X dollar hold on your credit card. If you pledge a thousand dollars on Kickstarter they put that money on hold. And if you reach the goal its automatically charged.
We don't do that. SMGO enters into what's known as a billing agreement that states: Given two conditions (A) if a studio signs a contract to bring the show back in a reasonable amount of time AND (B) that they go through Paypal's underwriting, then and only then can someone be cashed out. It should be easy for a major motion picture studio to pass that underwriting check. Once we have a contract in hand, and they, the studio, are fully committed to bringing it back, then we will initiate.
As a side note, it might sound a little naive that we're relying on the honor system here with pledging, but the fans have everything to lose if they pledge more than they can actually pay. So why do that? We don't want fans pledging more than they can afford, since it doesn't help us and their cause - and if we get tons of cashbacks, these guys will just walk away.
So, back to the main point about our unique payment system - by entering into a billing agreement it gives ninety days as opposed to thirty days for our campaigns, which is amazing. Because we are trying to raise a lot more money, it gives three times more time to reach that goal. So that's why we aren't concerned with the time yet.
If it fails, all of the billing agreements automatically expire in ninety days. That is the longest a campaign can go period. We can't even trigger a payment without them (the studio) on the bank account.
OH: So basically, if this fails, nobody is losing any money? The money will still be mine?
Dave: Yep, exactly. It won't even be authorized to your account unless this thing happens. This a really great system. We want to help the fans - and we'll be vocal about the campaign. Even then, if you pledge say two hundred and fifty dollars and forget about it, then, if it succeeds, then we'll send a massive e-mail saying, “so they agreed to do this we're going to cash out on the 90th day. Make sure the money is ready for xxx day." Obviously here will be some chargebacks.
We don't ask for additional fees during this stage - it'd be silly to add an additional cost since you're raising such a large amount of money. Kickstarter charges five percent and an additional three percent for Amazon. So you'd be raising ten million plus eight percent on Kickstarter.
Dave: Yeah, that's A LOT of commission money. That's a lot more money so that's why we take a cut from advertising for people who don't contribute. We'll make our money on the other end. We know it's a good business model. Hulu is doing phenomenal. When we were making our model, we thought, let's do that instead. Make it as easy as we can to raise the staggeringly large amounts of money. So we nailed the cost down from raising ten million dollars to ten million dollars plus 1.5 percent (PayPal's payment fee). It's a lot more cost effective than ten million dollars plus 8%.
OH: Thank you so much for that full answer, since I know people wanted this answered in detail.
Dave: No problem at all.
OH: So how do you estimate what it takes to fund a canceled show?
Dave: It's based on industry averages. We've been researching for this company for the past two years. That's why the model is really polished. We have a lot of unique things. Live action shows? We're talking twenty-million. For Young Justice? It's ten. We originally were going to pitch five million, but we decided on ten to try and appeal to the Warner Brother executives. If we even reach five million? We can still bring them back to the table, approach them and tell them you can easily make a show to offset the cost for a cable network. For ten, we might be able to push the show to syndication, making it an offer too good to pass up.
OH: So what about the rights then? With a lot of cartoons, the value for corporations comes from merchandising, like for Young Justice it was toy sales. How big of a factor do you think the cost of producing a show really is when compared to the success or failure of merchandising?
Dave: Toy sales will always be important to them, but there's also more to what they're gauging than monetary stuff. If they're looking to engage a show from a business perspective: Hollywood is always looking for content to engage fans. What better way to engage fans than: “I want this show back so bad I'll pay for it.” For fans, they can look at it with a sense of ownership and say: “This is OUR show. We HELPED to bring it back.”
So just for the brand value alone, that's such a smart idea. Any loss from merchandising should be offset by a commensurate growth in brand goodwill.
OH: Is there a personal reason to bring back Young Justice? Are you a fan of the show? Since you said "we" can do this...
Dave: I'm more partial to Green Lantern: The Animated Series. I've gotten much further in that series than Young Justice. I haven't gotten far into that one. My partner loves Young Justice, though.
But the decision was merely a monetary one - if we can save YJ, we can save any show on our platform.
OH: Ditto. It took me a long time to get through Young Justice. It didn't help matters when Cartoon Network kept putting the show on hiatus to further kill my interest in fully caring for Season One.
Dave: Some people were under the impression that I was leading the charge, but really the community is. Some people came to us on wanting to run the show on this platform, and I was like, “OKAY.”
So we spent time with our counsel during the weekend, and he said that “this is okay as long as people know this is a fan campaign and there's no copyrighted images or anything like that.” That's how this started.
Do you want to hear how we got started?
Dave: So we came out about a month and two weeks ago. We basically went to a group of twenty people and used them as a focus group. Okay, test out the website and test out the functionality. Someone got really ambitious. We expected two hundred people on the test site. Someone posted on tumblr and the site blew up - quite immediately.
OH: Um oops, that's partially my bad. I found out via 4Chan's /co/ and posted the link to your test site on our front page, which lead even more people to your test site. I remember checking the site the next day after noticing the article had gotten some huge hits, and to see how close the voting was, and found that the site was down.
Dave: Yeah, it totally crashed our site. We were beta-testing this site. Our dev was like: “We don't need password protection.” We thought we'd be this little site no one would notice in a couple of months. Then, in just three days, they found us and crashed our site repetitively for eight hours.
Yeah, our dev was like, “WHAT THE HECK DID YOU DO?” We were super pleased.
OH: Yep, that's the power of the fanbase on the internet. If they find out about something, they will swarm something IN MASS until it gets done.
Dave: And that's why we think, with this campaign, there is a real possibility that this is gonna happen. I know there's some point that this thing is gonna get hugely massive. There won't be enough time for me to answer everyone's questions and spread the word better - and that's why we're making sure the core groups know about us first. I am all about making people comfortable and getting the word out.
That's the passion. That shows the demand is there though. Even if there are times the internet can be evil. Like, someone posted on April's Fool Day that the whole thing didn't work out.
OH: Um oops my bad again.
Dave: THAT WAS YOU?! *Laughing* That's the passion that shows the fans want this to happen. That shows the demand is there. That fans are going, “NOOOOOO!!!” so much to an april fools.
OH: That's the fun at times, playing with the fans and their expectations, getting them motivated. It's what I was trying to do with that article. In any case, thank you so much again for your time and for answering these questions.
Dave: It's certainly my pleasure, thanks for the opportunity Zechs!