In just three years the revenue generated by the anti-piracy outfit reduced from $92.8 million to $49.6 million. The decreased budget is a direct result of the major Hollywood studios cutting back on their MPAA funding. In the same period membership dues dropped from $84.7 million to $41.5 million, more than a 50% decline.

“In financial terms, 12 million euros a year and 60 officers, it’s an expensive way to send a million e-mails.... As part of budgetary efforts, I will ask that funding of Hadopi is greatly reduced.”

Unfortunately, this is why investing in Spotify may not be wise and why firms like Andreessen-Horowitz may have passed. It’s a great service with a big lead on other music streamers. But as it scales and gains traction, the record labels will increase their tax. There’s no way Spotify will pay the same fees if it hits 15 million subscribers as it does now. That will make it harder for Spotify to return the multiple most investors want any time soon.

In most industries, if a partner charges you too high a licensing fee you can go to one of their competitors. That’s not how it works in music. You can’t get a cheaper equivalent to Michael Jackson or Lady Gaga like you could for enterprise software. If you want “Thriller” you have to pay whatever the labels ask. And even if it does, Spotify isn’t getting exclusive access to that content.

Though the specifics of the deals between record labels and music streaming services are secret, many details have been leaked over time, and it's long been known that they are onerous and one-sided. Last year, Michael Robertson of MP3tunes explained how the general structure of the deals make growth and innovation extremely difficult, while collusion among the labels eliminates any last shred of competition and ensures that a service like Spotify can never negotiate better terms. Investors know that music startups essentially live or die at the behest of the legacy industry, and investors are smart—they aren't about to bet millions on record labels making good decisions.

Economically speaking, none of this is surprising, because copyright is a monopoly and this is what monopolies do. They distort the free market and allow the monopolists to control the competition. Adding insult to injury, recording industry defenders like to tout streaming services as examples of how the industry embraces innovation, and RIAA CEO Cary Sherman recently said he was surprised that Spotify wasn't generating more revenue for the labels. To anyone who understands how difficult the labels have made life for these startups, claims like these don't pass the laugh test—and Spotify's difficulty securing funding is just more evidence of this fact. Its numbers would make it a hot investment property if it operated in any space other than music, but because it is shackled to a dying industry with a long history of technophobia, investors take their money elsewhere. Who can blame them?

There are a lot of good points both for and against Matter. For one thing, they've already doubled their $50,000 funding goal on Kickstarter, which at least demonstrates that people are willing to part with their money for something like this—but Kickstarter backers aren't necessarily representative of the broader consumer crowds they will need to court with the actual product. One of Salmon's key points is that since they are raising funds there, instead of going to venture capitalists, their business goals are less daunting: they just need to build something sustainable, not something that will make millions of dollars. The creators have said they don't plan to pull salaries unless the company is a massive hit. They've put a lot of focus on keeping their costs down, so, overall, their financial goals are very different, and a lot more attainable, than the average startup.

On the other hand, as Morse points out, there is plenty of great content out there for free. He doesn't believe there is truly an untapped demand for this kind of content, so Matter won't be able to compete. Salmon thinks the Kickstarter numbers say otherwise. Either way, the question is the same: can Matter produce content that is so good and so unique that people will want to pay for it?

I'm reminded of News Corp.'s iPad-only product The Daily, which launched last year to a lot of hype but quickly began losing engagement and talent. People were asking the same question: could The Daily manage to include such great content that people will need to read it in order to stay in the loop? Obviously, it couldn't.

Matter is more focused than The Daily and is targeting an entirely different audience with a higher standard of journalism, which gives it a leg up in that regard—but I still doubt its potential for one key reason that isn't getting much attention: the sharing barrier. The problem with putting a price tag on online content is that it actually reduces the appeal of that content, because one of the things people value most about good content is the ability to share and discuss it with their social circle. Exclusivity is a minus, not a plus, with most kinds of content (financial news being an exception, which is why most of the more successful paywalls online are on financial sites). Some people will be willing to pay 99 cents for an article, but a lot of them won't be willing to ask their friends to pay too by posting a link on Facebook, Twitter or their blog. Those who do are sure to get a lot of confused replies asking "wait, I have to pay?" Moreover, with a pay-per-article model instead of a subscription model, readers are going to have to decide each week if they want to keep paying. The mental transaction cost of 99 cents may be extremely low, but it adds up when you multiply it like that. These factors are going to make it very difficult to grow and retain their readership.

If Matter streamlines their costs enough, and their content is good enough, it's entirely possible that they can build a small core group of readers that keeps the one-article-a-week model afloat—but if that's the best possible outcome, is this really the best possible approach? Journalism online needs more than small-scale sustainable models, it needs ways to grow and expand, and that is never going to happen without advertising dollars. As Salmon says, Matter is trying to do "something which has historically been extremely rare, in the world of journalism: selling stories to readers, as opposed to selling readers to advertisers", and that means they are tackling the wrong problem. They still plan to include some advertising in the articles, but they should be putting a lot more focus on that side of the equation. There are companies out there that want to support this kind of content, and Matter's low-cost, VC-free model puts them in the perfect position to experiment with innovative sponsorship models—an approach that would be bolstered by opening up the content instead of locking it down, ultimately creating much bigger opportunities to fund quality journalism and turn a profit.

Pledge $15,000 or more:
Dinner with Tim Schafer and key members of the dev team.

Pledge $20,000 or more:
Dinner and BOWLING with Tim Schafer and key members of the dev team.

Pledge $30,000 or more:
Picture of Ron Gilbert smiling.

Pledge $35,000 or more:
Undoctored picture of Ron Gilbert smiling.

Pledge $50,000 or more:
Become an actual character in the game.

Pledge $150,000 or more:
Tim Schafer (that’s me) will give last four remaining Triangle Boxed Day of the Tentacles, in original shrink-wrap.” (Limit of 1) (Holy crap, what am I thinking? I only have four of those!)

"I want a vibrant Internet just like they do," said Rep. Lamar Smith, a Texas Republican. "Our disagreement is about how to achieve that. They say let the government dictate it...I urge my colleagues to reject government regulation of the Internet."

Per the AMPAS rules that govern the qualification for the Oscars, paid ads needed to run in conjunction with a seven day, official theatrical engagement. This was a bitter pill to swallow, as we’ve sold lots of Red State tickets all year long without running a single paid ad. But a rule’s a rule, so after the AMPAS folks signed off on the New Beverly for the home of our Los Angeles run, we spent $9,316 on newspaper ads.

It still makes me queasy – solely because it’s money not well-spent. We’d sold out all of our weekend screenings before the ad ever ran in either of the three papers we bought space in: the LA Weekly (six inch ad), the LA Times (same), and the west coast edition of the NY Times (1/2 page ad).

we ran the flick for a week at Quentin Tarantino’s New Beverly Cinema in Los Angeles (big thanks to Julia!), where we did two screenings a night, which I followed with 30 minute Q&A’s. Tickets were $20 for the Friday to Wednesday screenings and were followed by post-show Q&A’s with Fatty McNoFly, scourge of the skies.

Since few movie sites ever wanna include us in their box office wrap-up pieces (nor mention that we had the highest per screen average for the last two weeks), here’s the financials for how Red State performed that week…

Friday August 19th
6:30PM 215 – tickets sold $4300
9:00PM 215 – tickets sold $4300
Total for Friday, 8/19: $8600

Saturday August 20th
6:30PM 215 – $4300
9:00PM 215 – $4300
Total for Saturday, 8/19: $8600

Sunday August 21st
6:30PM 215 – $4300
9:00PM 215 – $4300
Total for Sunday, 8/19: $8600

Monday August 22nd
6:30PM 154 – $3,080
9:00PM 215 – $4,300
Total for Monday, 8/19: $7,380

Tuesday August 23rd
6:30PM 168 – $3,360
9:00PM 215 – $4,300
Total for Tuesday, 8/19: $7,660

Wednesday August 24th
6:30PM 215 – $4300
9:00PM 228 – $4560.00 (oversold)
Total for Wednesday, 8/19: $8,860

Friday to Wednesday total: $49,700

On Thursday, I didn’t Q&A after the screenings at all, as per AMPAS rules (regarding leaving filmmaker-free screenings open for Academy members so they can watch the flick without influence). Thursday’s ticket price was only $7 for the movie only ($7 is the normal New Beverly admission price, although usually that’s for a non-first-run double-feature). Even that did solid numbers…

Thursday August 25th
6:30PM 175 x $7 = $1225.00
9:00PM 191 x $7 = $1337.00
Total for Thursday, 8/19: $2,562

Friday to Wednesday total: $49,700
Thursday total: $ 2,562
New Beverly Total: $52,262

Of the 2,675 seats available from Friday to Wednesday, we sold 2,580. From Friday to Wednesday, over the course of twelve screenings, merely 95 seats ever sat empty. Had our start time been 7:30 each night, we likely would’ve sold those seats as well (it’s a bitch getting anybody out in L.A., let alone at 6:30 at night; folks are still getting home from work).

Like let’s say Red State is showing at your local multiplex. But then right after the movie ends, a live, interactive Q&A with the filmmaker starts, beamed into the theater via satellite. Even if you’re not there in the room, you’re Tweeting questions from your theater and getting responses from the guy on the big screen. And then, after three hours of movie and interactive Q&A? Boom: LIVE PODCAST! That’s four hours of once-in-a-lifetime entertainment for less than $20: a movie, a show, then another show.

Now, before some old dick like ol’ cranky Mr. “GET OFF HOLLYWOOD’S LAWN!” tries to make a beef with me and theatrical exhibitors in their ongoing war with the studios over the shrinking theatrical window and premium VOD’s role in decreasing box office revenue, let me remind REGAL and AMC, CINEPLEX or any other theater chain that I’m not the enemy. Please don’t lump me in with people trying to take money out of your pockets, Exhibitors. This is a (not-so) new way to make money and fill your empty buildings when there isn’t a Transformer to save you. On a fucking Monday night, no less.

Want fresh eyes and asses in your theaters? Try a one-night-only screening of a movie, a Q&A, and a live podcast: all for under $20 a ticket. The positive feedback you’ll receive from your paying customers alone will be worth it, but the concessions loot you’ll rake in that night will make you richer than the pharaohs (my people like to eat snacks). And if I can make this work? That means anybody can make this work. And that means more people coming to your theaters. Jump into digital bed with us: there’s not enough money going around anymore to quibble over restrictions that shouldn’t apply to a specialized film in the first place. I can sell these events out and make you money without spending money to do so – all while giving a normally slow night a massive shot in the arm. If not, no worries: there are lots of Mom & Pop single-screens out there who’ll welcome us warmly as well.

Over the course of the 15 shows of the Red State USA Tour, we made almost one million dollars from ticket and merchandise sales. A few times, we had the highest per screen average in the country. We started out with a record-making show at Radio City Music Hall and went on to average 1100 people per screening. Had we booked ourselves into smaller houses, we could’ve SOLD OUT every show; but being in the larger houses cost us nothing extra.

And apparently, we managed to pull 1100 a night solely from our podcasts: when asked nightly if they heard about the show from a show at SModcast.com, an overwhelming 85/90% of the audience indicated yes (Jon swears it was 100% in Seattle). That bodes well for SIR.

You take what we made on the tour, you add that to the $1.5mil we’ve pulled in from foreign sales thus far (with a few big territories yet to sell). Add to that $3mil we’re on the verge of closing for all North American distribution rights excluding theatrical (which means VOD/HomeVideo/PayTV/Streaming).

The flick cost $5mil to make, but $4mil after the California tax incentive. One of the only things Jon and I promised the Red State investors in exchange for letting us handle American theatrical distribution ourselves was that their $4mil would be covered as soon as possible – something very few other production entities can promise or even offer. Invest a million dollars in almost any production, and you rarely if ever get your money back within five years, let alone the one year it’s looking like it’s gonna take for our guys to make their money back.

Add up all those figures above and you’ll notice our gains are higher than our spending. And without any dopey marketing figures to have to recoup, once we close the aforementioned deals (which Jonn Sloss & LawCo are working to close as we speak), simple math dictates Red State is in the black – long before any wide release. That’s music to the ears of any investor who only put up their money in September.

The online payment provider PayPal has frozen the account of Courage to Resist, which in collaboration with the Bradley Manning Support Network is currently raising funds in support of U.S. Army Pfc. Bradley Manning. PayPal was one way people--especially international residents--were able to contribute to the grassroots effort supporting the accused WikiLeaks whistleblower. "We've been in discussions with PayPal for weeks, and by their own admission there’s no legal obligation for them to close down our account," noted Loraine Reitman of the Bradley Manning Support Network (Support Network). "This was an internal policy decision by PayPal."

[....] The Support Network repeatedly requested and was refused formal documentation from PayPal describing their policies in this matter.