July 19, 2012

Why Laugh Factory Live Will Be A Colossal Failure

This week, the Laugh Factory, a staple of the Los Angeles comedy club scene, has announced the launch of their very own live stand-up streaming service. The first “app” of its kind which will initially be exclusive to Playstation 3 owners, users will be able to watch an extensive library of footage from the clubs archive on-demand as well as comedy sets live as they’re happening on stage at the club. While completely free through December, the app will then cost a price of $3.00 monthly afterwards.

Instead of plunking down a cover and a two-drink minimum, I can catch a live comedy show in the comfort of my own home, one which regularly features well-known acts, celebrity performers and the occasional unnanounced stop-in by a mega-famous comedy star? On the surface level, this does indeed sound enticing and definitely a innovative endeavor in a comedy club industry which can be resistant to change.

As a stand-up comedian and comedy nerd myself, if I actually owned a PS3, I would surely give the app a solid run-through, Soaking up the archives in a binge to watch early career sets by some of today’s most recognizable faces, I’d revel as well in seeing them workshopping jokes in front of an fairly average Tuesday night club crowd. Am I in the majority, though? Is it worth it enough to pay for? And even more important, will there be enough of a paying audience as a whole for the long-term continued viability of the platform as a business?

The answer is simply, no. This app, albeit well-intentioned, is dead on arrival.

Factors against this endeavor rack up on all sides and from all parties that intersect on the platform. Some are because of a laggard’s mentality. Some are simply ego. Some revolve around the content’s value and some are oriented in the business model itself. With a partaking such as this which can only truly succeed when all avenues are aligned and working smoothly, there’s way too many points of failure that can derail it completely.

Point of failure #1: Access, availability and awareness

The power of broadcast and cable television comes in its mass and its ability to spread a message to a large audience in a very short timeframe all at once. New shows gain awareness through promos placed within existing shows and being able to leverage a specific demographic to launch upcoming content is a tried and true technique.

While Netflix, Hulu, etc. are significant consumer-enabling platforms that are quickly rising to some mainstream adoption, they still remain siloed off from the masses. Especially with traditional cable broadcasters battling against them for control of the future of content, there is little cross-channel promotion that exists outside of these individual fragmented platforms. If you don’t have it, it’s hard for you to even find out about it.

Since the Laugh Factory app is launching on the PS3 exclusively, having such a limited audience who can even access content surely curtails the potential userbase. That’s obvious. It’s also understandable for a “test run”, so no fault on them for starting small and scaling up. But the press doesn’t work this way.

When you’ve got limited shots for a earned media, it’s a lot of wasted effort when 90%+ of the reach doesn’t even own the equipment to utilize your service – and the Laugh Factory is not offering something of such high value where people will purchase a PS3 just to access it. Past the initial launch, the platform you’re on (The Playstation Network in this instance) will then be the only true gain for exposure unless you plan on an ad spend of some type. Just as with Hulu-exclusive programs, If you don’t have it, it’s hard for you to even find out about it.

While it’s apparent by the recent press coverage that the Laugh Factory is targeting gamers, who are likely owners of a PS3, will such a small net reap enough downright awareness the app even exists at all for consumers to access?

Point of failure #2: Quality of service

Just like the phone service and cable television, internet connectivity has become as ubiquitous of a utility that its expected uptime is 24/7 in every consumer’s mind. Same can even be said of free social networks like Facebook and Twitter. Look at what happens when any of these services go down for even five minutes and you see massive vocal wrath aimed towards the providers.

Streaming services such as Netflix spend multiple millions of dollars annually just to maintain data centers to drive all the bandwidth of video uninterrupted. The concurrent demand can be so great that figures state that up to 32% of all internet bandwith in the country at night is originating from Netflix. No matter how much content, they know that if the service is known as being shoddy, unreliable and of low picture quality, users will leave in droves and potential new subscribers will balk in signing up at all.

The Laugh Factory is no Netflix. It’s not YouTube or even Funny or Die. But the expectation from consumers will still be the same. Do they have enough of an infrastructure to handle the usage of their app? This is an especially important question when it comes to their exclusive value proposition – the live streaming video straight from the stage. You can’t just attach a webcam to a wi-fi network and expect to deliver hundreds or thousands of independent streams of any quality or consistency.

I’m pretty positive this exact issue was addressed and planned for by the Laugh Factory in the launching of the app, but how well will it actually work in practice? That first time paying subscribers have tuned in live to see [insert famous person] and are met by choppiness, buffering and undistinguishable audio, most will be in an uproar and rage quit. Welcome to the internet, Jamie Masada!

Point of failure #3: Market potential and desire

Live stand-up comedy is a very unique experience. Similar to sporting events, going out to the comedy club to see a comedian is so much different than watching the same act from home on television. With its spontaneity and intimacy, that’s essentially the only value proposition a comedy club offers. It’s why people will pay a premium for it. It’s why they can exist as a business to begin with. Replace the stage with a big-screen TV and they’ll all go under.

Your living room doesn’t have this same dynamic environment. Plus the supply of quality stand-up comedy performances there at your fingertips is abundant. You can live a hundred lifetimes and still not have watched all of it readily available on Comedy Central and other TV networks, cable on-demand, Netflix, YouTube and the multitude of DVDs. While it may not exactly be the same content in the Laugh Factory archives, it’s still content that is widely expected by the general public to be easily available and of little monetary value.

Just taking a look at the 2011 annual ratings released for Comedy Central, their top five programs with the most viewership involve no stand-up content at all. Their top airing stand-up specials only garnered a 1.0 average rating in the key demographic – which is less than half the viewership of any given episode of shows like Tosh.0 and South Park – and these exclusive “world premiere” specials are from Jeff Dunham, Daniel Tosh, Christopher Titus and Weird Al Yankovic. No mention of their Comedy Central Presents series, Live at Gotham, John Oliver’s Stand-Up Show or any of the other double-digit number of hour-long comedy specials they produce or air.

Obviously, as an aggregate, it’s still clear that people have some demand for quality stand-up comedy on the boob tube. But these ratings show it’s widely and freely available, yet even for the well-known names, there isn’t so much of a clamoring for more of it, let alone a regular flow of content from mid-range comedians, no matter how talented they might be. It’s free to access and they’re still not watching it.

Is there really a demand then for yet another platform of stand-up comedy content? Even more questionable, one that people would be willing to pay for on a monthly basis? It doesn’t look to be the case.

Point of failure #4: Content creator rights

When I say “content creators”, I really mean “bitchy and whiny comedians”. I am one myself, so I speak from experience. While I might not be the type to vocally protest (but then do nothing actionable about it anyways) over any perceived slight, mildly improper treatment or vague criticism, there are surely enough stand-up comics to carry that load on my behalf.

Most comedians are creative control freaks and justifiable or not, exist perpetually under the notion they’re getting screwed by someone. Their agent. The comedy club. The audience. Their wives. In an industry which trumpets “exposure” as valid payment for services rendered, you can’t blame us for being disgruntled over the dynamic of the business-performer relationship. Almost always, we have to put up with whatever shit goes down, no matter how unjust, and even then it has us coming back for more.

Earlier this year, Patton Oswalt had a controversy over an audience member filming his set at a small room in California. The notion, which is shared by a large contigent of widely-known comedians, is that the clubs and small venues are where they can test out material without being judged for it by the masses. It’s the year-plus prep work comedians venture out doing that results in a finely-tuned hour TV special, CD or DVD which properly represents their act.

The value exchange between them and the clubs is that they get quality stage time for this process and the 150-or-so customers in the audience get a unique look at it, half-completed though, plus a story to tell to their friends who missed it. Having this type of set readily accessible for public consumption on a wide scale defeats its value for the comic. Do you think comics are going to stop in to workshop jokes at the Laugh Factory when they know tons of people could be watching them live at home and more so on-demand shortly thereafter?

But that isn’t the only issue. Money and rights may be an even greater hurdle. Similarly to what the Laugh Factory is trying to build, Rooftop Comedy is a regular staple in the Midwest recording comedians’ sets in multiple clubs for clips on their website, most of the time unbenownst to the performers themselves and definitely not paid for it. Who owns this content? What rights do comedians have from the clips which are used for the Laugh Factory Live platform? Can they opt-out of having their video being available or being filmed on stage at all? With the app being a paid service, even at a marginal $3.00 monthly per user, is any of the income going to the comedians themselves? Trust me, it could be a royalty check for 13 cents, but comics still will demand it.

One of the core value propositions to consumers through this streaming comedy platform is access to the performances of name comedians. Celebrities. If the Laugh Factory alienates many through disputes over the content, what happens to the subscriber numbers when people don’t see this exclusive access which they’ve likely expected and just mid-range, fairly unknown comics who don’t mind the arrangement?

Point of failure #5: Sustainability

Building a platform such as Laugh Factory Live is not cheap. Even taking the marketing budget out of the equation, the operations and infrastructure to offer on-demand and live streaming video is quite hefty in the pocketbook. Content-driven sites such as College Humor and Funny or Die rely predominantly on leveraging advertising on top of eyeballs as their profit center. Due to the fact both offer a completely free viewing experience, they can generate enough traffic in mass quantities looking at said ads to satisfy the resources required to maintain the platform sustainably.

Facebook, Twitter, YouTube, the list goes on and on of destinations which are attributed to the same business model. But what if one day these platforms decided to charge users for access – how many people would actually pay to use them, even for a measly buck a month? Not many. Even 5% of the exisiting userbase willing to pay would be an extremely liberal number. While it could still add up to multiple millions of dollars in income, it still dwarfs the cost in maintaining and developing the platform. This is why you don’t see many, if any, going this route.

Besides bandwidth usage, the Laugh Factory app will still have roughly the same fixed costs regardless of how many subscribers are signed up whether it be 30 or 30,000. If it ends up being closer to the latter, then sustainabiliy likely won’t be an issue. But what happens if it’s closer to the former? I can guaran-damn-tee you that they’re not doing to drop thousands of dollars into the abyss every month to maintain a service that only a few hundred people pay three bucks for.

With the app exclusive to the Playstation Network, limited press and promotion, and all the other obstacles hindering success as I’ve mentioned previously – will there even be enough paid users in order for it to be sustainable long-term? Or will this experiment, albeit innovative, get shut down by this time next year when the balance sheet turns dark red due to the lack of enough subscriptions to remain financially viable?

Negative oulook. Positive outcome.

Yes, I’m a pessimist at heart. I believe, though, that the rational and logical outlook on the success of this new media endeavor is heavily weighted on the down slope. There’s just too many points of failure and too many things that need to go just right. But as a comedian as well as a web marketer, I’m still rooting for its success.

The Laugh Factory has continually been on the forefront of new media, new distribution, new models and new technologies in an industry which constantly fails to embrace them. No matter if it succeeds, fails or somewhere in between, I consider it to be a much needed advancement that will likely spur more innovative ideas by others in the comedy and entertainment fields. Jamie Masada, I’m wishing you the best of luck!