If anyone needed any further proof that the interweb tubes were acting as a disruptor to the media and entertainment industry, this story from Wired has to be a wake up call.
It’s been interesting watching the trends when it comes to the effect the internet has been having on the media and entertainment industry. You’d have thought they’d have picked up on this a bit quicker…since the trends have been pretty clear for at least ten years (see below), and the trends have started in the US–home of the world’s largest entertainment industry (“Hollywood“).
It all started with music
First hint at the huge disruptive impact of the internet came waaay back in 1999 when Napster was released to the world by Shawn Fanning. Sure there were other music sharing apps out there, but Napster went viral, and soon enough dominated the field. The music industry’s reaction? At first indifference, then they swung wildly to the other end of the spectrum: inappropriate overreaction and panic. Instead of embracing the new technology, the music industry (read the RIAA) decided to attempt to fight it. Didn’t anyone over in the RIAA realize that trying to oppose advances in technology is akin to trying to dig a hole in the water in the middle of the ocean? Sure you may win a couple of fights…but you’ll never put the genie back into the bottle. But hey, if you are scared sleepless by something in the US, what do you do? Launch a lawsuit, of course. The RIAA did win the battle with Napster, but it inevitably lost the war.
And things progress…
Then in November of 2003, along comes The Pirate Bay. Building on Bram Cohen’s bit torrent technology, The Pirate Bay became one of the internet’s most popular sites for discovering torrents (although the site, itself, didn’t host any content, it provided an invaluable “tracking” service to discover torrents. Again, the entertainment industry’s reaction: sue. And so they did. Of course, the flippant attitude (and quite appropriate “pirate” responses–which, by the way, were hilarious) of the site’s operators only goaded the suits to pursue their lawsuits…and eventually The Pirate Bay was also deluged with a blizzard of lawsuits and legal costs (though it should be noted that the site does continue to this day). Did the industry learn anything? Evidently not. Or maybe they did?
Finally understanding that the internet/web might pose an opportunity rather than one big threat, NBC, Fox, and ABC teamed up to create Hulu–a website which features their content and delivers it, streaming, via the web. Of course, the old titans of the broadcast industry still had some old fashioned notions which illustrated that the old guard was still out of touch with how things work with the internet/web (and still had a view of the internet as a threat rather than an opportunity), but hey, you can only hope the old dog learns a few new tricks, I suppose. Nevertheless, Hulu has proven to be largely successful…and hopefully will lead the old guard into the new age of video content.
Of course, it’s not just the broadcast media that’s been affected. Everything in the entertainment industry has been affected–including the movie studios. Nothing illustrates this better than Netflix, and the disruption it has caused the traditional distribution mechanisms of the movie studios. Here, too, the industry has been slow to respond…first insisting that new movies would be released on DVD/BluRay after a delay so that their traditional distribution systems (read: movie theaters) could make money/profit off of the new releases. What the studios will eventually realize is that the market would like immediate releases of movies on the internet/web. And that the potential for immediate profits is huge: imagine a movie being released worldwide–and getting gross receipts for the entire world, at one time (instead of the piecemeal release studios do today on a country/geographic basis). Instead of waiting a month (or two) to get worldwide receipts, studios could potentially pay off their investment in days. In addition, word of mouth these days spreads within hours–not in weeks. If they have a dog on their hands, the best chance to make money is by making the movie available immediately everywhere…before word of mouth closes off some markets (yes, that’s a bit Machiavellian…but it’s true nonetheless). Economics will force the studios to adopt this new way of doing business–and those companies which embrace it first, will reap huge rewards…
Im using “learned” loosely here–mainly because I’m convinced the media and entertainment industry still doesn’t, by and large, “get it”. The bottom line is this: expect instant distribution of media. Monetize that distribution by reducing costs (afterall the cost to distribute a movie via the web is significantly less than the cost of distributing via theaters…reduce the cost of a movie, say, to $5/viewing would immediately boost sales while at the same time increasing revenue due to an expanded market base…and the commoditization effect is inevitable anyways…for proof of that, just look at the iTunes store).
So, adapt or die. It’s something that we’re all extremely familiar with in the tech industry (and a basic precept of evolutionary theory). But, unfortunately, it seems as if it’s still largely not understood in the media and entertainment industry (to be fair, they’re not alone–same thing is evident in the news/newspaper industry, and to a lesser extent the publishing industry–which is being dragged kicking and screaming by the likes of Amazon and now Apple). Within five years, I suspect, the landscape will be significantly different. If you’re a movie theater owner, by the way, you better find some differentiators that’s compelling enough for people to fork over 3x the amount they’ll be charged to view the content online in order to survive. I’m fairly pessimistic that the theater owners can adjust that quickly (or have the capitalization to effect the changes they’ll need).
So kick, back, have some popcorn, hook up your lappy to your TV (eventually that cable will disappear and you’ll just be able to stream it–yes the technology exists today, but it’s always too geeky for widespread adoption…it should literally be a couple of button presses/clicks), and enjoy your favorite entertainment. Produced by the former broadcast networks (which will increasingly, I believe, resemble movie studios as producers of content rather than the delivery mechanism)…