Valuing Fans

Why work toward a model for valuing fans?

The U.S. media industry has run into some significant economic problems in recent years. Study after study suggests that Americans are watching more television and consuming more movies, music, and information than ever before, but, at the same time, it is neither as captive nor as concentrated as before. New ways to discover emerging artists and projects, as well as increasing choice in media platforms and content, are challenging how ad-supported media is bought and sold and rendering direct funding for some media content much harder to come by.

It was this situation that gave rise to the popularity of “engagement” a few years ago, a tactic to sell advertisers audiences whose enthusiasm is believed to translate to more awareness of and receptivity to product placement and commercials. How much more “engaged” and receptive this new audience is than the older, bigger one was considered crucial in setting a price for the advertising that supports media production. Conspicuously absent from these discussions was the role that fan communities (groups whose various interests in a media property may range widely) play in contributing economic value beyond paying attention to commercials.

In this piece, I propose the building blocks of a more holistic methodology for valuing a fan community, with the goal of helping producers, creators, and advertisers assess how to increase the effectiveness of their investments of time, money, talent, and reputation. For fans, having a model that moves toward quantifying their contribution to the bottom line will help foster a better understanding of how they can function effectively in the media ecology and may ultimately help to better align the interests of the media industry’s decision-makers with theirs.

Fans and Economic Value—Direct and Indirect Sources

Many of the activities within the broad spectrum of fan behaviors that contribute economic value fit into four categories:

1. Watching, listening, or attending
2. Purchasing primary and secondary products
3. Endorsing
4. Sharing and recommending

The first two sources of economic value are “direct” and are thus generally easier to quantify and track than the latter two. Direct sources are already components of how we measure and value audiences. “Watching, listening, or attending” are already in general use, measured by numbers of views or event attendance, length of views, and drop-off rates, in comparison with information on key demographics. Purchases and product shipments are also used and reported in a number of contexts to understand how valuable a media property is, or at least the value of its merchandising rights. And, even with the changing nature of what can be measured and how data can be collected, these metrics will remain easier to translate into easily “crunchable” numbers than indirect sources.

The two “indirect” sources of economic value listed above are so called because, although some of their dimensions can be measured and even quantified, they focus not on existing sources of value but on nurturing and creating new audiences and markets. They are also rarer than direct sources of value, as they emerge from activities engaged in by a subset of the direct-value audience. Direct sources of value are tied to individual enjoyment and the act of consumption—whether in the form of viewing or a purchase. Indirect sources are more about how the individual uses the pleasure they derive from those measurable activities within their social networks and the broader community of fans. In terms of economic value, the payoff of indirect sources of value is in the recruitment of new fans who will contribute to the two direct sources.

“Endorsing” is an umbrella term for public displays of affinity among friends or strangers. This includes a broad range of behaviors, from wearing a Boston Red Sox T-shirt to telling your co-workers you love SyFy’s news app, from visiting The Wizarding World of Harry Potter theme park to donning an elaborate Klingon costume to attend Comic-Con, from waiting in a bookstore until midnight to buy a new Twilight book to hanging an anime calendar in your office cubicle. The uniting factor among all of these different scenarios is the expression, to other people, of an affinity for something.

“Sharing and recommending” go one step further. Rather than just demonstrating an affinity for something, this category focuses on when fans actively sell media properties to their social networks. This can range from recommending that great new book Spreadable Media to your Twitter followers to organizing a Super Bowl party in your living room, from organizing a Doctor Who convention to posting an enthusiastic review of the new Kanye West album on your Facebook page.

These types of expression, while more difficult to quantify and sometimes to measure, are immensely valuable because of the social elements that help to both retain and recruit audiences. It is also an instance when interests among fans, creators, and producers are aligned. For fans, expanding the community and forming or strengthening social relationships through the media property provides an extra incentive to participate further and to contribute both direct and indirect sources of value. For creators and producers, this type of behavior increases the audience, enhancing both the short- and long-term value, and thus the sustainability, of their projects.

The bottom line then, is that the relationship between strength and numbers can vary. A media property could draw strength from a small number of fans who are heavily engaged in creating value of all kinds or from a larger number of less engaged viewers. For most media properties, however, the balance will likely shift over time, from one end of the spectrum to the other, and back again.

Next, we will look at how relativity, repetition, and the progression of behaviors over time play into the economic value of fan behavior.

The Importance of Time

Every media property vies for the attention, loyalty, endorsement, and money of a pool of fans. While direct and indirect sources of value focus on behaviors that add economic value, they do not address another crucial element: time. Too often, we see a statistic such as the number of Facebook fans or Twitter followers of a media property and an assertion that this number represents value. However, these data do not indicate what those fans do once they’ve friended or followed in order to participate in, promote, or support the media property. They also do not take into account how these numbers change over time—a gradual ramping up of participating fans, friends, or followers is probably a better argument for future value than a sudden surge of individuals who never engage with the property again.

There are three ways in which time affects the intensity and scope of fan activity:

1. Relativity: the amount of time spent with a media property compared to others
2. Repetition: how frequently fans interact with or around a media property
3. Progression: changes in how fans interact with or around a media property over time

Relativity is important in assessing how important a particular property or brand is compared to the total pool of things that are ultimately competing for a finite amount of time and money. There are three ways to look at relativity. The first is to look at the activities that the fan community engages in with the property itself—the proportion of time spent watching and listening to that spent sharing, for example. The second is to look at how fans engage with the property relative to similar properties. The third is to look at the time fans spend with a property as a percentage of their total media consumption and fannish activity.

Repetition is simply how frequently fans supply direct or indirect value. It is crucial in understanding relativity because, for many media properties, the frequency of an activity helps to establish its share of fans’ attention and ultimately the property’s sustainability. Expectations and benchmarks for repetition of course vary and would be very different for a theatrical movie release than for a television show or sports team.

Progression, or behavioral shifts, the third time-related factor in this model, is measured through the observation of fan behavior over time, rather than in a single, discrete snapshot. Understanding trends in behavior is helpful both in understanding shifts in a fan community for a single property and in establishing benchmarks.

Now that the elements of the model are defined, let’s look at the final step—how to put it all together.

Applications

There is no one-size-fits-all for putting this model into practice—how to use it will depend heavily on the size and nature of the media property and whether it is ad or subscription supported.

One of the biggest misconceptions about the value of a fan community is that it has to be large and locked into particular consumption behaviors to be meaningful. Over the past 30 years, it has become increasingly clear that amassing eyeballs and finding advertisers is not the only way to sustain a media property. With the rise of cable networks in the 1980s, we discovered that a subscription model could support television programming. With the decline of record companies, the rise of online sharing of music, and the explosion of places to discover and share online, it became clear that some artists could thrive without a recording contract and that the music itself could become a loss leader which paves the way for real profit through live events and merchandise sales.

The flipside of this is that, without mass-market-size audiences, the property needs a dedicated core of fans who will contribute enough economic value to achieve sustainability through primary sources and who will recruit more people like them to help grow the market or at least compensate for attrition.

How this model is applied would depend on the resources and information available to the creators, producers, advertisers, or fans. For instance, while it might make a lot of sense for a sports team or television show to gather and analyze a lot of data on a regular basis, it may not make sense for an independent band or a small community theater.

The most basic analysis of a fan community’s economic value would involve establishing some key parameters before collecting any data:

1. Choosing a meaningful level for assessing value: In some cases, estimating a lifetime value per fan might make more sense than valuing the community as a whole, or vice versa. Evaluating relevant comparisons—establishing how to benchmark one property’s fans against another’s—also is very important in making a meaningful assessment.
2. Deciding on the most meaningful behaviors to include: Some activities may generate more value than others, depending on the media property in question. Any analysis should include at least one of each of the four types listed earlier. Endorsing and recommending are long-term drivers of economic value, but fans also generate economic value through direct sources which sustain the media property itself in the shorter term.
3. Identifying a time frame to study: Looking at activity over a period of more than a year is probably ideal to identify any cyclical factors behind fan activity, as well as trends or patterns around major changes (e.g., a winning streak, celebrity guests, new releases, sharing news with fans via a social network site).

Fans have always gone beyond the consumption behaviors that advertisers and producers have used as the predicator of the ultimate value of the audience. However, by broadening the framework and digging deeper into how people actually show their affinity for a media property and what drives them to do so, we can gain a more thorough understanding of which communities are fast and fleeting and which are here to stay.