Adjusting Royalty Models for Emerging Technologies


As technology evolves, new avenues open up to monetize your content. However, with these opportunities comes an increase in the complexity of rights and royalty management. The recent writers’ strike is a case in point, bringing to light concerns about the use of AI and its impact on compensation. Immersive technologies such as virtual and augmented reality are another example of new revenue prospects, but these also add layers of complexity that require management.

Here, we look at how new technologies in immersive content, virtual production, and even data analytics are changing and what you need to consider as a content owner or distributor.

Immersive and Interactive Content

cereal ad in virtual game"Lean-In" Participation

Immersive and interactive content is continuously improving and attracting a larger audience. And in-content interaction is a popular element that allows viewers to "lean in'' and become active participants. This opens the door to in-experience purchases, interactive brand placements, and highly targeted advertising—a potential revenue gold mine.

Research shows that young adults and teens spend about half of their media time on lean-in activities, with forecasts that immersive platforms will grow 20%+ by 2030

Virtual and Augmented Reality 

Virtual and augmented reality allows for immersion and 360-degree storytelling where viewers become active participants in the narrative, blurring the lines between fiction and reality​​​​. 

As a content owner, immersive engagement requires you to consider such things as:

  • Upholding contractual obligations with talent and partners in digital content use and compensation.
  • Developing dynamic pricing and monetization strategies.
  • Adhering to privacy and data protection laws when collecting personal information to avoid potential litigation. 
    • With more interactive content, there's often a collection of personal data, requiring compliance with privacy laws and regulations like GDPR or CCPA. 
  • Navigating international regulations for global content distribution and compliance.

Immersive Environments

It is important to note there are different types of immersive environments to be aware of:

  • Walled Gardens - Walled gardens are tightly controlled platforms where a single company provides the content, curates the user experience, and manages data, mixing proprietary and licensed content to generate revenue through various channels like ads and subscriptions.

  • Broad Entertainment Platforms - Broad entertainment platforms offer a more open ecosystem, hosting content from various producers. The platform owner maintains the technology infrastructure, controls user data, and generates revenue through multiple streams, including ads and creator fees. 

These differences in ownership, content provider models, and data capture impact revenue generation models and complicate revenue sharing, IP rights, and royalty calculations. This diversity presents various implications for content owners, creators, and distributors.

Virtual Production

Virtual production has significantly impacted film and TV content, with real-time rendering and virtual sets transforming media production methods. Digital avatars, synthetic voices, AI-generated videos, and visuals are progressing rapidly.

Virtual production has the potential to be as innovative as it is disruptive. One major media producer recently shut down an $800 million studio expansion over growing concerns about AI video creation — an evolution that goes well beyond CGI.

Regardless of whether AI or other virtual techniques are used in content creation, managing rights and royalties of such content can get very complicated, with issues such as these to weigh:

  • Securing rights for virtual assets and developing royalty models that reflect their added value.
  • Evaluating legacy content for adaptation to new technologies while renegotiating contracts to include necessary permissions.
  • Implementing transparent compensation structures for creators and technicians in virtual production.

Data-Driven Content Analytics

Integrating sophisticated data analytics in content creation allows media companies to predict audience preferences more accurately — helping to refine content creation and marketing strategies. 

At the same time, this shift is influencing how royalties and licensing are structured. 

With movies, box office revenue used to be easy to track. Network and cable television provided viewing numbers. Streaming video, however, created additional challenges.

In theory, streaming’s attribution models should provide more granular data. In reality, however, reporting is often inconsistent across platforms and, in some cases, non-existent. This makes downstream revenue sharing and royalties exceedingly difficult to track accurately.

For immersive and interactive content, tracking royalties can be even more complex. Interactive content doesn’t always follow a linear path from start to finish or episode to episode. There are important questions to answer, including:

  • How are royalties calculated when there are multiple storylines? 
  • Are royalties based on total minutes watched, or per scene? 
  • What happens to background actors who may appear in some paths but not in others?

Virtual and augmented reality experiences may include elements from source material—for example, apps or video games based on entertainment titles. There can also be rights, royalties, and residuals to manage from artists based on re-use or additional content.

Taming the Complexity of Rights and Royalties 

Entertainment deals have always been complex. Royalties vary significantly by project and often include complicated formulas based on domestic and international box office revenues, on-demand viewing, network and cable TV, and streaming. Rights windows, exclusively, and revenue-sharing further complicate deals. Episodic content may have escalating or declining rights over seasons or windows. On and on it goes.

Rights Management Tools

With a flexible platform to manage new monetization avenues and your rights and royalties, you can avoid leaving money on the table or failing to compensate artists fairly per agreement terms. 

You can learn more in our guide, Implementing Rights Management and Royalties Software, which includes an enterprise strategy for maintaining business continuity and exceeding revenue targets through modernizing and integrating your rights management methods.

FilmTrack is an RBC Company and subsidiary of City National Bank Member FDIC. City National Bank is a subsidiary of Royal Bank of Canada.

This article is for general information and education only. It is provided as a courtesy to the clients and friends of FilmTrack. FilmTrack does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of FilmTrack. Please cite source when quoting.

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