In my first post on The Internet Economy I noted how we are witnessing the Industrial Revolution of our era. At few points in the history of man can one point to a single invention which has had such a profound effect on the economy, and society as a whole. The result is that technology has become a greater part of our lives. We are constantly connected via smartphones, conducting commerce online and even our consumption of things like entertainment increasingly comes from online entrepreneurs and creators. The internet has created a paradigm shift in economic, social and political power.
Considering both pros and cons, I want to know how this technology will specifically affect us as a future society born out of the “internet economy.” Using hard science and empirical analysis versus assumptions, I will take a look at key areas to address what I believe will be plausible outcomes in the near and even distant future.
The result of my research will become a non-fiction work in progress:
THE FUTURE OF SERIES.
THE FUTURE OF ENTERTAINMENT
About a week ago, George Lucas and Steven Spielberg gave a controversial prediction to a USC Film School panel. They stated that they believe the future of film and entertainment will be a form of internet television, or video on demand (VOD). And despite the fears of exhibitors, data has already begun to prove them right.
Theatrical release titles are down 60%. Movie ticket prices are up significantly, and this past month, Regal Cinemas says another 4% increase is on the horizon. Moviegoers however continue to crowd theaters despite a lower selection and expensive tickets. And that is because studios have restricted their release slate to familiar titles theater goers will spend money on.
With the cost of a movie ticket so high, most Americans are not willing to take a chance on a title they don’t know, or with stars that do not ring a bell. A friend of mine recently said “you used to be able to take a girl to dinner and a movie — now its one or the other.”
Studios know this is the case, and they want you to choose the movie. So they rely heavily on the ‘tent pole strategy,’ whereby they hope a major summer event film, or blockbuster release, will uphold them financially for the year. Then they can offset the cost of smaller budget, riskier projects with their earnings. But with smaller films attracting less and less of an audience, and with films like Iron Man doing so well, studios are expanding the tent pole strategy. And the result has been record profits for them.
However, Spielberg and Lucas argue that this is only an interim strategy. As people become sick of pre-sold franchises, they will seek out alternative options instead — like Netflix, Independent Content via Internet TV or Video on Demand options. As studios put all their eggs in one carton, it will only take one flop to break all the eggs. Lucas said this is very likely to occur, and it could spell financial doom for those involved.
Another angle to look at is that originality and creativity is loosing out under this tent pole strategy. Fewer and fewer spec scripts are being bought, and even less are being produced. And while there’s no shortage of beautiful films out there, super hero films and sequels are the vast majority of heavily marketed, wide released projects. Hollywood acknowledges this, but they have to be somewhat conservative financially in this economic climate and thus turn away a lot of potentially wonderful projects.
VOD release of these potentially wonderful projects offer a great financial alternative to expensive blockbuster films. Less popular titles in particular could do very well in a VOD environment. Studios can restrict blockbusters to theatrical releases, and reserve smaller titles for a VOD release slate. And unlike the old crappy straight to DVD options, these films can still be good selections. This is likely the result, argue the two film icons — an expensive, event style Broadway release, where a film like Iron Man will cost $150 and stay in theaters for a year — and maybe an indie film or mid-budget action flick will go to VOD for a subscription fee or individually less than the price of a movie ticket today.
So VOD can solve the creativity issue by acting as an off-Broadway alternative. People are more willing to take a chance on something less known if it costs less money. That mid-budget action film sounds more appealing to a movie-goer when its a Saturday night and you’re short on cash but still want to see something new. The one-size fits all ticket plan has absolutely slaughtered original ideas and films because its hard to justify $12-$14 base price tickets for a period piece or non-super hero action film. By testing these films in a cheaper, VOD environment, you have a greater chance people will see the film. The budget will also reflect this reality. And much like Off-Broadway, if they are successful, they could see a theatrical release based on demand.
Disney among others already plan to release select titles on VOD while the title is still in theaters to gauge consumer interest in this idea. Eventually, I believe this will become the norm. It is inevitable based on the cost structure of the business. Independent creators of content have shown they can effectively compete with audiences attention for much less than a $100 million dollar picture. Many even wind up striking movie deals of their own based off of their success. While they may never compete with Iron Man, they do compete with other smaller titles and options. So while exhibitors fear this move to VOD, it makes sense for studios to gamble with the idea of cheaper selections and VOD options to compete along those lines as well.
Ultimately though, I believe the studio system will implode in the interim as Lucas and Spielberg predicted. While I don’t see them imploding financially, I do see them fundamentally altering their way of doing business around the implosion of the old structure. In fact, prior to the filmmakers panel discussion, I noted just that in my earlier post on the internet economy.
Because of this new economy, content creators won’t even need the same structure as we move more heavily in the direction of a VOD future. While studios financing arrangements and distribution deals will remain attractive for the foreseeable future, this will not remain the case. Distribution deals make sense with regard to wide theatrical releases and subsequent windows of distribution, but what happens when we are watching movies almost exclusively from our in-home devices? OR what happens when we discover virtual reality, and have an augmented, truly 3-Dimensional, rather 4-Dimensional movie-going experience?
The players will have to change, if not change themselves. Studios will be reserved to the financing process and handling of larger, more exclusive releases. The majority of the future of entertainment will be personal, intimate consumption with some blockbuster exceptions. Netflix has already shown it can both produce and distribute its own content, free from the traditional semi-vertically integrated business structure of old. More and more independent production companies will be able to handle the entire process themselves without studio input (apart from financing and marketing if they so choose). The internet will largely rule out the middle man from the selection of what films do and do not get made. What gets made will be determined from a different set of rules and consumer behavior — one that rests almost entirely online.
Independent producers of content will share/distribute via the VOD platform. And it will be just as profitable, if not more as the content will be able to reach a wider audience. Content saturation won’t be an issue because it will still be geared towards a specific demographic, reaching highly specific, algorithmic results. And as technology like virtual reality and even avatars become a possibility, our movie going experience will again evolve to even greater heights and creative possibilities.
In the interim, exhibitors will likely fight this inevitable change, as they have with Disney’s experiment. This will continue to happen just as the agrarian farmers fought industrialization. Their livelihood depends on the current structure. But the current structure has seen its run in its current format. In the near future many will still resort to seeing event-type movies like Iron Man 3 in theaters. But those who want more options for less will seek out a separate price category VOD option. And when virtual reality hits, theaters may become totally obsolete, provided they don’t find a way to offer an immersive experience collectively like sharing theater space.
I believe the future of entertainment will be wonderful. It will again restore power to creatives, writers whose ideas would often not stand a chance in the current conservative economic climate of the industry. And I believe most in Hollywood would very much like to see that happen provided they can still profit from it; which they will. So right now, more studios and exhibitors can acknowledge this coming trend, or fight this. I suspect most will try and test it. And if they start to accept it as a strong possibility like Disney and others seem to, they may stand a chance at survival as we move more towards VOD and eventually immersive, virtual movie-experiences. Otherwise, if they don’t, the internet economy will likely move on with out them.
— Next ‘Future Of’ Post — The Future Of: Medicine (A future trip to the doctor)