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Will Technology Advances Limit Entertainment Choices?
Hollywood has recently been telling America about the financial
trouble the movie industry is facing. In response, Americans
have asked Hollywood to start producing movies that are good
enough to watch and worth the ten dollars theaters charge! Over
the past four years ticket sales for new movies have steadily
decreased. Why is this happening? Are movie theaters going away?
Will movie studios go out of business and further limit consumer
choice? This article will attempt to answer these questions by
examining the challenges and opportunities faced by both the
entertainment industry and consumers.
Why are ticket sales declining?
Home theater systems
Besides the limited quality of movies being produced, many
Americans have set up "home theater" systems in their homes. The
decrease in prices of big screen TVs and theater quality
surround sound systems has produced a generation of movie
viewers who have the resources to create a theater environment
in their own homes. When you add the convenience of not having
to tolerate someone else's crying child and being able to pause
the movie when you need to get a snack or drink there's really
no question why movie theater attendance is down.
DVD pricing and release windows
For years, the movie business has operated on a series of
complex release
windows:
First, movies play in theaters, then, six months later, the
video window opens, followed by the opening of the pay TV and
then free television window. (Slate, Downloading for Dollars)
Since the price point for a DVD is lower than taking a family of
four to the theater, many consumers simply wait for the movie to
be released on DVD. DVD players have decreased in price so much
they're almost ubiquitous in American households and are a
crucial part of any home theater system.
Hollywood is being pressured financially at the theaters by
these situations. A good opening weekend is a huge part of the
viability of a film. Studios spend an average of $30 million per film
promoting the theatrical release. The question many industry
analysts are asking is why the studios don't shift the release
windows, or eliminate them all together.
Simultaneous Releases?
Some of Hollywood's biggest players are testing this theory
right now, sort of. The film Bubble, directed by Steven
Soderbergh and backed financially by tech entrepreneur and
Dallas Mavericks owner Mark Cuban is the first of six films
planned to test Hollywood's window system. Released January
27th, Bubble could be seen in theaters or pay-per-view on
cable and from satellite
providers through HDNet television. Four days later,
Bubble was released on DVD with additional content
available on the DVD version.
Bubble is a tightly controlled experiment. The film
itself is short (72 minutes), starred only amateur actors and
was mostly panned by critics. Theatrical
distribution was limited to Landmark Theaters which Cuban owns
and a few independents...other theaters boycotted it.
Pay-per-view was also distributed through a Cuban owned venture
HDNet which has distribution through many major cable companies
and satellite providers DISH Network
and DirecTV.
A few days after the film's release, Soderbergh and Cuban declared victory in their experiment. While theater
earnings were only $70,644 on 32 screens, DVD sales quadrupled
expectations. A profit sharing model gave 1% of DVD sales to
theaters that showed Bubble. The film itself cost about
$1.7 million to make and had profit projections after only a
week of release.
Are movie theaters going away?
Why do Hollywood profits matter to American consumers?
If you like economics, the declining movie ticket sales
conundrum may be of interest to you. Most Americans however
don't really care. Hollywood presents an image of big budgets,
expensive cars, mansions and movie star lifestyles while most of
America is buried under credit card debt and struggling to put
gas in their Hondas or pay their heating bills. But, Hollywood
profits should matter, because if a film, TV program, or
documentary doesn't have a large audience, it gets cancelled and
nobody gets to see it.
In America, we love our entertainment. Despite the quality of a
program, television shows that don't have big enough audiences
for network TV inevitably get cancelled. In my mind, Arrested
Development is one of the funniest programs out there
right now. It has had critical success and a core of viewers,
but it won't be coming back next season. Fox will burn the
remaining episodes in poor and sometimes random time slots. Even
long running, "successful" programs like The West Wing
and Star Trek: Enterprise ultimately get the axe. If
Hollywood resorted to different distribution and income models,
they could still make a profit and American consumers could
still get the programming we crave.
Will consumers pay for TV programming?
Hollywood has made an assumption that consumers won't pay for
programming and have to rely on advertisers for revenue. But,
over 70% of Americans already subscribe to cable or satellite TV
to get clear programming. The question isn't whether Americans
are willing to pay, it is how much will they pay.
Andy Bowers from
Slate offers this theory -
The West Wing has about 8 million viewers per week. It costs
about $6 million per episode. In other words, if every person
who now watches the show paid $1 a week, TWW would more than pay
for itself.
Obviously not all 8 million viewers could or would pay for the
show. But let's say a quarter of them would. That's 2 million
people paying $3 per episode (or maybe $4, throwing in a buck
for Steve Jobs and the cable companies). The episodes could be
viewed on a PPV channel, downloaded to a DVR, or slurped onto
video iPods.
Now, imagine if all TV programming could be distributed in this
fashion! Programs like Arrested Development wouldn't have
to rely on a top 20 ranking to stay on the air. Programming
would become a function of consumer demand...American TV
watchers would actually have more choice!
Will advances in technology decrease consumer choice?
Technology creates choice
Technology is the enabler in this scenario. If there were no
device for us to record or playback programs, we would still be
at the mercy of TV broadcasters for our entertainment. The Digital TV migration of 2009 will make it possible
for every household to enable some sort of pay-per-view option,
even if they don't subscribe to cable or satellite TV. Mobile
viewing choices will also be increasing with products like
Apple's video iPod and DISH Network's PocketDI
SH.
So how do technology advances effect movies?
I was noticing the other day after a Shaggy Dog
commercial that most new movies that are advertised heavily are
re-makes, sequels or spin-offs of comic books, video games or TV
shows. Think about the movies released lately - Starsky &
Hutch, The Dukes of Hazzard, King Kong and
Star Wars: Episode III. I thought it was because
Hollywood had finally run out of new ideas, but Edward Jay Epstein
explains they do it on purpose!
Simultaneous release on multiple platforms will reduce the $30
million advertising cost studios use to blitz consumers into
going out to a new movie on opening weekend. In turn, Hollywood
will be able to afford to "green light" more movies that can
still turn a profit even with smaller audiences. If theaters are
given a share of DVD sales, the burden of possibly having less
movie goers in their seats is alleviated.
Bubble is only the first of six films to be released
simultaneously by Soderbergh and Cuban. Soderbergh made a prescient
statement in a recent interview, "Name any big-title movie
that's come out in the last four years. It has been available in
all formats on the day of release. It's called piracy." Indeed,
controlling piracy is a huge motivation
behind the industry wide move to digitize TV. Movie piracy can
take several forms including filming the movie in the theater with a high quality camcorder, or
copying the master disc from a post-production facility.
Conclusions
Bubble was just a test. I think the next few films to be
released by Soderbergh and Cuban will feature A-list actors and
really send a message to Hollywood they must change their
business model, or they could be out of business.
Technology is a great enabler of change and consumer choice. For
Hollywood studios it is the ultimate profit maker and vehicle
for "just in time"
product delivery. Simultaneous delivery of new movies
through various outlets like theaters, DVDs and cable and
satellite TV pay-per-view allows more choice for consumers and
more choice for Hollywood to produce innovative, high quality
films. These advantages will also trickle down to TV programming
as well.
Hollywood can lead the way in driving digital video content for
TV and movies while remaining in control if they will embrace
technological advances instead of fighting them. The music
industry has already shown suing 12 year olds for downloading
pirated songs is no solution for anybody.
About the author:
Max Stein, Salt Lake City, UT, USA Max Stein is a freelance
writer who writes about a variety of contemporary topics.
maxstein_9@hotmail.com. For more articles about digital
satellite visit the I-Dish Network
blog.
Max Stein
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