September 5, 2017

A Conversation with Kanopy Founder and CEO Olivia Humphrey

Olivia Humphrey.'

Since its launch in Australia in 2008 as a DVD distributor in the academic market, then as a streaming platform two years later, Kanopy has rapidly secured preeminence in the VOD world. Having gained an early foothold in New Zealand, Hong Kong and Singapore, Kanopy set its sights on the US and the UK. The company soon moved its main offices to San Francisco, and just shy of a decade after its birth, Kanopy now streams 26,000 titles to over 3,000 university campuses around the world. And this year, Kanopy staked out another territory: public libraries. Having lured the Los Angeles and New York systems into the fold, over a hundred other cities in the US and Australia have followed suit.

Kanopy is the brainchild of native Australian Olivia Humphrey, who parlayed her psychology degree, 12 years in media rights management and a lifelong passion for independent film into a VOD juggernaut. We spoke with Humphrey in Los Angeles, soon after the LA Public Library system made Kanopy available to millions of card-carrying members, about the educational distribution market, then and now; Kanopy's patron-driven, usage-based model; and how the revenue streams work for content owners.

This interview has been edited for length and clarity.

When you founded Kanopy in 2008 in Australia, what did you see as the strengths of the educational distribution field and where did you see the deficiencies?

The gap that I felt was higher education students were watching more film than any other resource outside of the academic world, but on campus it was all books and journals. There was this big disconnect and that didn't make any sense, when we all know how well students respond to film.

So I set out to fill that gap, initially distributing DVDs and using that intel and the profits from the DVD distribution business to libraries to build the streaming solution in 2010. And it got to a point where the Australian libraries were spending more on Kanopy than on books, and that's when we knew we'd really made it in that particular market.

And then you seemingly conquered that market in Australia. Did you extend to New Zealand and other English-speaking countries as well?

We did. We were servicing the US, New Zealand and the UK, and Hong Kong and Singapore actually. We saw the US business growing; in fact, we had more customers in the US than Australia when we decided to move here.

And once you moved to the United States, what were the challenges in penetrating a much bigger market? What were your strategies in establishing a beachhead here?

The biggest challenge was re-educating the market that had been growing, and managing the ROIs [returns on investments] to librarians, who were understanding their ROIs based on three metrics: volume, price and time. "How many videos can I buy this week? How long can I get the rights, ideally in perpetuity, etc.? And how cheap can I get it?"

We were coming to market with a completely different metric, and we were saying, "The one return-on-investment metric that should be most important is usage--i.e. How many times are these films getting watched?" And this is when things changed in the US because ultimately, up until we arrived, the films weren't getting watched. Libraries were buying big collections of films and they were all sitting there unused. 

That didn't feel like a sustainable model to me, and it was also not a sustainable model to the content owners. And so bringing a model like Kanopy, whereby the libraries don't pay anything unless the films are watched and the content owners don't get anything unless the films are watched—that was the turning point here.

This big bulk model is still around, but the patron-driven model is far more popular. And the other thing that has become very different is the focus on getting the films actually used, and with that we've had to get far more sophisticated. In the past it was desktop viewing, quite funky platforms; now Kanopy is on Roku, and it's an app. And we know what places our students expect us to be. Our users expect us to be just like any other platform that they're watching.

In presenting that model in terms of usage, is it incumbent upon the libraries to generate usage, or how did you affect that to make that algorithm work?

We take that responsibility seriously ourselves, so the librarians obviously catalog the films and they do a limited amount of awareness; they have thousands of different resources that they're promoting to their students for us. From the very outset we had an understanding that we didn't have a model unless the films were watched. We had to learn to get very, very good to attract students to the platform and get them coming back and staying and making sure it was a rewarding experience for them. So that's one thing that's been in our DNA from the outset.

In approaching colleges and universities, I assume that libraries are the point of entry for all the departments and departmental libraries.

We're considered a library resource, so they're our paying customers. So, for example, at USC, USC library is our beta customer. Once a library has signed on, it doesn't matter if you're a professor, a student, which department you're from—everybody has access to Kanopy, so suddenly everybody is our audience.

We work with the major library, which is responsible for all of the libraries, so it's one point of entry. And that budget services the entire institution of USC, for example.

One of the problems for us was the students would get hooked on Kanopy and then they would graduate and they would lose their library membership and they would write to us and say, How can I get Kanopy? And up until this year, we basically said, You can't—until we launched into public libraries, and that was our natural progression. So now we can say, You have your USC membership and now you can also, once graduated, access Kanopy using your LA Public Library membership as well. So we can continue that life cycle, which is really important to us.

And you're also working with content providers. Talk about that relationship versus your relationship with libraries at universities.

One of the most important parts of our model is insuring that the content owners are at the heart of it and they are being looked after because the rest will follow effectively. With our content deals, there are two important aspects to it. The first is, We are true partners. It's 50-50 without any deductions. And so our content owners receive 50 percent of every sale we make.

The other aspect is transparency because, particularly in this world that we're in, trust and transparency are almost as important to all of our filmmakers or distributors as the revenue. And so we have a platform whereby they can log in any time and see live statistics. They can see every second view, they can see what devices where, when and how, with a sales tracker. So when we send out quarterly royalty reports, they know how much they've made.

How do the revenue streams work?

For us we have two models. One's for education and one's for public libraries. I'll start with public libraries. It’s very simple: it's a pay-per-view. So every time a public library member presses "Play" on a Kanopy video, the library gets charged and the content owner gets 50 percent of whatever we charge. Of course, as we're growing bigger and bigger, those royalties from public libraries are getting bigger and bigger.

The educational market is different. The educational market is called a patron-driven model. Four plays on any video triggers a one-year license for that institution. It's the way libraries buy books and journals; it's patron-driven. You need a certain number of plays to send their license and a one-year license is $150, of which the content owner gets half.

So this is why it's a sustainable model. If we trigger film X at Harvard, year one, it's invariably going to trigger year two, year three, year four, with eight years of streaming. So that one film in that one institution gives them sustainable revenue, and because of this model the life cycle of the film increases.

How do you work with independent filmmakers?

We work with aggregators and distributors as well as independent filmmakers. It's obviously advantageous to us to have distributors or aggregators if they have a very curatorial approach to building their collection. So if a particular New York distributor comes to us and says, We've got these new films and we can trust them, then we can then absorb those films into Kanopy, knowing that the quality control has already been assessed. That's the most expensive part of our acquisition process: managing the quality control. Is this a film that's a good fit for Kanopy or not?

When it comes to independent filmmakers who don't have the educational public library rights so they're not with an intermediary, that's a huge part of our business and we work with a lot of independent filmmakers—but only if we know the film is going to blossom into a bestseller on Kanopy, or a highly viewed film.

Do you work with professors?

We have a service called Search and Find, and this is available to professors. It generally runs through their library where they may say, "I've got these ten films that I would like to set as mandatory viewing for my course this year. These are on Kanopy; can you get these other two films?" It's a free service we offer and our acquisitions team—we've got someone dedicated to this—will go off and try and get those rights. We have around a 40 percent success rate, but it's a really cool part of our curation because we're often being introduced to films we have never heard of and probably never would hear of, which makes the collections richer, and these films are then available in a wider way.

But the way we approach the curation is that students go to university not just to study the one course they're enrolled in. It's a time of opening up their world. It's a time for challenging their assumptions, a huge time for challenging their identity. So on our educational platform, on our home page, you will always see a big focus on identity. Our best-selling documentaries are around race, women's studies, LGBTQ, immigration stories—particularly in the US.

And this is a huge part of our business. It is a little unusual how we curate our collection. What works for Kanopy and the films that are our bestsellers may be different for other platforms or other channels. It's really a big focus for us.

I assume that you and your team travel extensively to festivals and markets to really get a sense of what's out there.

We often go to festivals and we're meeting with our aggregators at these festivals and we've done a few deals directly there. But I think having our users and tracking their usage and seeing what their interested in; having our Search and Find service to fill the gaps; and having a very talented licensing team: Those are three aspects of the core way we deal with our collection.

And in terms of finding what's out there in this industry, just being in the industry and being passionate about film is probably enough to make a difference. We do go to most of the major markets, but we really value those aggregator content distributor partnerships where they go to all of these markets and we can trust that they're buying film that works for us. We do definitely value those relationships.

So with public libraries, you have LA, San Francisco and New York--

San Francisco's coming soon. We're in 186 cities in the US and half of Australia. I'm very excited about these markets. One of the things we're finding in LA is we're actually driving new memberships now for the LA Public Library systems that we're in, which is really exciting for us because we definitely value the public library institution.

It's a really interesting market; it's free for our users, yet the content owners and content creators are getting paid on a pay-per-view model. And also it's just such a fascinating film collection and being able to make these available to the general public in a way that is not cost-prohibitive is pretty exciting.

One of the things that's interesting for me about libraries as we learn more and more about them is the role they play in the local community. For example in Brooklyn, they have a shelf there that is all Brooklyn filmmakers. All films about Brooklyn, and there are a lot!

My Brooklyn, Kelly Anderson's film, is now skewing as one of the top documentary films on Kanopy over the last three days. I think that in this massive global marketplace with platforms looking more and more global, the way that we can localize the platforms by city, or even by region, is something that we're really investing into exploring further.

In looking over a five-to-ten year horizon, where do you see Kanopy fitting in? What would you like to accomplish in that time frame?

Well, I would like Kanopy in all homes! (laughs) I'd also like to see a—I wouldn't say a renaissance; that's probably the wrong word— but I do feel that as an independent film lover, and being in the industry, I find it hard to find the films I want to watch. I feel we're solving the problem and at the same time playing a small but important role in revitalizing and contributing economically.

And a lot of our films have very important messages, so getting this wider and wider reach so these messages are shared and challenged is a really interesting side of our business. On the revenue front, as we get bigger and bigger, our revenues are getting more and more interesting. There are films that other platforms may not be interested in taking, but can be blockbusters on Kanopy, so I feel that's the path we're hitting.

Looking at the SVOD market, which can be argued is your competition, has it been somewhat easier to define your niche against those of Netflix, Amazon, Hulu, FilmStruck and MUBI?

We're competing for a lot of attention in our universe and so being able to attract users to Kanopy—and you know what you're getting when you get there—and being able to press Play very quickly after arriving on our platform is one of our key metrics that we analyze.

How that compares in the broader spectrum, I see a lot of the films on other platforms, and the bestselling films are different from what would be a bestselling film on Kanopy. We have a very clear idea of who our audience is and who we want it to be, and we're heading in a very clear direction.

You carry the Criterion Collection, as does FilmStruck, but you have a different way of showcasing the titles. You have a different audience than FilmStruck and a different means of reaching them.

And one of the things Criterion, I think, loves about Kanopy is we are introducing the Criterion brand very early on in the life cycle of their future fans. That is a really important thing for the Criterion Collection brand, which is so iconic but obviously a lot of our students haven't heard of it—not just in film schools, but beyond it.

At Kanopy we're very focused on what we consider thoughtful entertainment, and that doesn't necessarily rule out any audiences; it's just that you know when you're coming to Kanopy, we actually want to make you think. We want it to be time well spent, when you finish a film and you think that was really worthwhile.

What are the challenges you're facing now and what challenges do you anticipate in the future?

The challenges now are probably related to more fun challenges to have, which is all the challenges of scaling up and growing as a team. I do see one of the interesting areas is the rights, What are our rights? And are we TVOD? I think that's an interesting conversation; in public libraries, it seems to me, we are. Where does that position ourselves against other platforms?

As we get bigger and bigger, our competitiveness in acquiring content is far more interesting, and so the sorts of films we're getting are looking really, really interesting. I feel like this is a very good thing for independent films. I think our platform is a very good thing, I think it's solving some problems and I think it's opening up opportunities.

And if we can continue growing and bringing eyeballs to these films, not only are we keeping the audience wide instead of—I worry sometimes the audiences for independent film are getting narrower and narrower—but we're also bringing revenue back. So I think that's probably the future.

Given that this is a usage model, what is a typical window per title? If the usage is high, do you keep the film on until the usage tapers off?

We actually never remove films, particularly ones that are performing off the platform. We may remove some films if we consider that they're just not performing at all and cluttering the Discovery. That's very rare. Normally we keep a film on for as long as we have the rights.

In terms of windowing, it depends on the content owners. In our mind we've done day-and-dates, which particularly for documentary can be really, really effective. We have films that are on other platforms besides Kanopy; it does us a great service because I think we're all helping each other. The more awareness a film has, the better for the film, the better for the audience, the more places you can get it.

Arguably, it comes down to the platform itself. It's up to us to be able to give reasons for users to come to us. We like to have a film available as soon as we can to leverage us over the noise in the marketplace, but it doesn't really matter too much.

We do have one gift, which is our audience shares the platform with each other. And that is something that we don't take for granted; it makes our job a lot easier having our audience be our ambassadors and effectively our sales force. We also have our filmmakers too who are ambassadors because they're marketing their own films; they're winning and we're winning.

Tom White is editor of Documentary magazine.

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