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Tuesday, May 16, 2006

Fortune mag on `The Future of Hollywood'

Marc Gunther of Fortune writes about some of the technological waves washing up on Hollywood's shore, and how they might reshape things over the long-term.

It's a good piece, although I wonder if Gunther underestimates the established media companies' abilities to learn from changing audience tastes and viewing habits. (The main focus of the piece is on Fox and News Corp., which of course recently purchased MySpace.) Gunther writes:

    The Hollywood studios have had an uneasy relationship with technology... They hated television. They went to court to try to outlaw the VCR. These days, they have to contend with digital piracy, Internet distribution, and TiVo boxes. They are keeping a wary eye on the user-generated content on YouTube and the dazzling new video game players from Microsoft and Sony.

    "I don't think it's an overstatement to say that it's been the most revolutionary period in the history of mass media," says Peter Chernin, the chairman and CEO of Fox, W.F.'s studio, as well as second-in-command to Rupert Murdoch at parent company News Corp.

    Chernin gets no argument when he says there's a revolution going on - the debate is about what it means for Hollywood's future. Many people believe that digital technologies threaten the established order in much the same ways that digital music has rocked the foundations of the music industry and Internet news, blogs, and classifieds have taken readers and advertisers away from newspapers.

Some of the article's data points and observations:

  • Distribution is becoming cheap and ubiquitous. That's good news for anyone making media.
  • Movie rental revenue is dropping, but some of that revenue for the studios is being replaced by DVD sales.
  • More than 30 million high-def TV sets have already been sold in the U.S.
  • Sales of TV shows on DVD were $4 billion in 2005 (a business that many media companies doubted, since the shows had previously been available for free)
  • Fox sells its one-minute "mobisodes" of "24" (short episodes designed for viewing on cell phones) to cellular carriers for three times what they cost to produce.
  • Smaller projects have big potential. `Sideways' cost $16 million to make. "Eventually," Gunther writes, "the film brought in $70 million at the domestic box office, $40 million overseas, and $75 million from DVD sales. It was sold to HBO and cable's Independent Film Channel, and it will earn revenues for years."
  • Wired editor Chris Anderson anticipates a world of "microhits and ministars" -- media products with small audiences that, if made cheaply enough, can find an audience and do well.
  • But studios will always be tempted to swing for the fences, with big-budget blockbusters.

(Thanks to Srini Vasan of Animatix Studios for the link.)


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