Wherever you look, yesterday’s media giants are teetering.
Newspaper sales are tanking across the board. Music sales are hitting ever-lower depths. Now, with the rise of online services such as Hulu, NetFlix, LoveFilm and others, it seems that the home video market is next to collapse.
Since 2004, sales of DVDs and VHS cassettes in the USA has dropped by 29%. Why? Well, there’s no doubt that illegal downloading plays a factor. But I’m betting that a bigger reason is that consumers aren’t upgrading their media. When DVD came out as a replacement to video tapes, many of us re-purchased our favorite films in the new format. However, how many of us are upgrading our DVDs to Blu-Ray? How many of us even possess a Blu-Ray player?
The Rise Of Quality Online Content
But the biggest reason that revenues for films are on a downward slope is the meteoric rise of online services such as Hulu, which streams films and TV shows on demand, LoveFilm, which allows you to choose which films you’d like to rent and sends them to you via post, and NetFlix, which does a bit of both. Even Apple’s iTunes, the single biggest distributor of digital music content, allows you to buy or rent films with just a click of your mouse.
The general consumer trend of moving to renting rather than buying has the motion picture industry quaking. Apart from the mega-blockbuster films – Avatar, Titanic, Lord Of The Rings and so on – most films rely on disc and merchandise sales to push them into the black. If we’re all renting films more than buying them, then the movie business has a problem.
The more cynical among us – myself included – would say that we’re buying less films because there are less really awesomely amazing films worth buying nowadays. The creatives in Hollywood have long gone and the bean-counters have moved in. The accountants running Hollywood today want (understandably) as large a return as possible on their investment. This usually means populist, ‘chewing-gum’ films that are all car-chases, explosions and special-effects, rather than something that focuses on narrative, direction, cinematography, and so on. You know: the stuff that we call ‘film-making.’
Studios Are Finally Redefining Who Their Customers Actually Are
Regardless of the cause, the symptoms are obvious: just as with the publishing, newspapers and music industries before it, the movie industry is ripe for a massive disruptive technology change because the industry itself is broken.
Of course, the studios aren’t going to go down without a fight. They’re getting together with themselves and with technology companies to work out how to offer digital film distribution while still making some revenue. Sony, for example, is toying with the idea of streaming movies to its PlayStation 3 games console. Warner Brothers recently announced their intention of streaming movies to a person’s Facebook account. Paramount Pictures, in perhaps the biggest “if you can’t beat them, join them” commercial gamble of them all, is partnering with the Bit Torrent peer-to-peer filesharing network to release their film “The Tunnel” on DVD and Bit Torrent at the same time.
Why was Hollywood the last mass media channel to fall? Mainly due to bandwidth. Downloading a movie from most residential broadband internet connections used to hours – if not days – compared with a few minutes for music or books. As home internet speeds have increased, so as the problem of illegal film downloads.
The problem with Hollywood – like book and music publishers before them – is that they are a B2B (business-to-business) industry. Film studios don’t make films for you or me, they make them for cinema chains, for the large retailers, and for the rental companies. If the movie-makers start distributing their wares digitally, they’re distributing them directly. They need to be customer-facing, and that’s not something that they know much about.
The Disruption Of The Mainstream Media Commercial Model
Just as with publishers, newspapers and music, film studios need to change dramatically in order to survive the new climate. Take advertising as an example. Today, Hollywood studios advertise films in exactly the same way that they did 50 years ago. They spend billions blasting the world and his wife with news about an upcoming film, when only a small percentage may ever be interested in it. Every dollar spent trying to get a septuagenarian grandmother to see the latest zombie-killing gorefest is a dollar down the drain.
Then there’s the subject of branding. Today, no-one goes to see a film because it was made by Paramount, or Fox, or Warner Brothers. Most film studios are not brands (Pixar and Disney being exceptions). However, actors are brands, as are some directors, and even some films themselves – “Iron Man”, “Harry Potter”, or “Lord Of The Rings.” for example. Why not market these brands to the audience who love them, and are prepared to pay to see them?
Tomorrow’s movie studio will have to be a leaner, more engaged, more customer-centric entity in the way that today’s music and publishers are trying to be.