In Depth

Lining Up Funds First Pays for Producers

New-Media Creators Shy Away From Making Content on Spec

The slumping economy is forcing the new-media business to grow up fast.

New-media producers and creators at last week’s NATPE conference in Las Vegas said they’re shedding some of the more speculative financial practices that defined the early days of digital production.

Translation: They’re not going to make shows unless they secure the funding first.

The financial crisis and the consumer shift in viewing behavior to the Web, DVRs and alternate devices has intensified the pressure on both old and new Hollywood creators to hammer out fresh business models. That means creators are less apt to produce shows on spec in the hope the advertisers will follow.

Brands need to get on board first, said Jordan Levin, the CEO of television and new-media production shop Generate.

His firm produces and distributes the Web show “Pink: The Series,” which has been popular but doesn’t have an advertiser attached. Though Generate will look to make some money on the back end with a DVD deal for “Pink,” Mr. Levin said he’s going to stay away from putting up money for shows if advertisers aren’t on board from the get-go, he said.

Generate inked a deal last week to develop scripted TV shows for 20th Century Fox Television. That’s more akin to a traditional TV deal, and it also means Generate will be paid upfront.

The creators of the iconic “LonelyGirl15” series are striking similar deals these days, said Greg Goodfried, one of the founders of EQAL, the digital studio behind that Web hit.

Mr. Goodfried and partner Miles Beckett self-financed “LonelyGirl15” and own the intellectual property rights. That business model is less appealing in a recession, which is one of the reasons EQAL now has a production and development deal with CBS to create shows for the Web, such as “Harper’s Globe,” a companion Web program for CBS’ midseason replacement series “Harper’s Island.”

To land advertisers in advance of production, new-media producers and distributors are working together more to present the right mix of content and audience reach to potential advertisers, said Keith Richman, CEO of Break Media, an online video property targeting young men. “This year it’s all about making money, and people aren’t taking bets on things that won’t sell and won’t attract advertisers,” he said.

Advertisers are cautious, too. “We’re not sure if the Web is scalable. It’s very segmented,” said Donna Speciale, president of investment and activation at MediaVest Worldwide.

But she also believes that “niche needs to be the new mass.”

“We have to test online and experiment, and clients are willing to do it,” she said. “They’re more particular this year, but agencies have to keep pushing and it’s not going to be easy.”