How Will the Recession Impact Hollywood?

The LA Times has a great piece exploring the ways that an economic downturn will affect television and movies. Essentially, consumers seem to be shifting consumption online (where they often find the same content for free, on sites like Hulu and YouTube, that they'd have to pay for via cable or Netflix). For media companies, profits are much smaller (at least today) from those online delivery methods. That means that media companies are earning digital dimes instead of analog dollars (as many folks, including NBC's Jeff Zucker, have put it.)

From Dawn Chmielewski's piece:

The endless stream of free content, through legitimate services as well as pirate sites, appears to be shifting viewing habits more quickly than industry executives had anticipated -- or intended. That creates a dilemma for media companies because the Internet generates substantially lower revenue than established business models -- 30-second TV commercials and home video sales -- which have long supported the costly economics of TV shows and movies. That's not Hollywood's only problem.

When Midori Connolly's family business in San Diego, which supplies audiovisual equipment for conferences, began to feel the economic slowdown this summer, she and her husband trimmed expenses.

The monthly subscription to DVDs-via-mail service Netflix was the first to go. Now they rent movies for $1 a day from a kiosk at the supermarket. Next they saved the $10 to download George Strait's new "Troubadour" album on iTunes. Instead, they bought two tracks for 99 cents each. And they didn't rush out to spend $17 for the DVD of "Sex and the City." They checked out a free copy from the library.

"We started finding alternatives that we didn't have to spend money on," said the 31-year-old mother of two. "I don't feel that we've lost any quality."

Talking Hollywood History with Filmmaker Cass Warner Sperling

At the Paley Center for Media in Beverly Hills earlier this week, I had a chance to sit down with author and filmmaker Cass Warner Sperling.

Her documentary The Brothers Warner premiered on PBS last month as part of the "American Masters" series. Two questions I wanted to ask: how did she get the film onto PBS, and what are her other distribution plans?

But we also talked about Cass' famous ancestors. Her grandfather Harry was one of the four original Warner brothers who founded the great studio. Since my new book deals with the way the Warner brothers helped usher in the sound era (they were also early proponents of Technicolor), I wanted to talk about some of that history. Cass tries to set me straight about whether her grandfather ever really said, "Who the hell wants to hear actors talk?"



The audio is also here in MP3 form.

There's some video from her film here (in non-embeddable form).

Podcast: 'What Innovators Can Learn from Hollywood'

I gave a talk last month in Providence, Rhode Island for a gathering of technologists and CIOs from colleges and universities, the title of which was "What Innovators Can Learn from Hollywood." The podcast is here, though it seems they've snipped out all of the movie clips -- all of which are covered by the Fair Use doctrine. Ah well. The talk also has a lot of photographs, too, which you'll have to imagine.

Here's the description:

Technology innovators sometimes expect that users will embrace new ideas and new tools with open arms. In reality, most innovations are met with hostility and indifference, and it can take a lengthy campaign to persuade organizations to change the way they work. In an illustrated spin through Hollywood history, journalist and author Scott Kirsner will demonstrate how innovators like Pixar, George Lucas, and Bing Crosby (yes, "Mr. White Christmas") have changed the movie industry while facing enormous resistance. He'll also describe the three kinds of people that exist in every organization and some of the key reasons people tend to rebel (or go into a shell) when confronted with a new piece of technology.

What's the Economic Value of User-Gen Content?

The investment firm Bear Stearns issued a report last month looking at the economic potential of user-generated content (including things like video and blogs) -- and the impact that UGC content could have on established media companies as it competes with their big-budget movies and TV shows for viewers' time.

From the report:

We see the emergence of UGC as an alternative and viable form of entertainment. If we are correct, this may augur, over time, for a significant increase in the supply of content available to consumers. Given constraints on leisure time and disposable income, both of which are finite, we think UGC will compete over the long run with content produced by the incumbent Hollywood studios and independent producers (although UGC is unlikely to be a perfect substitute given lower production values).

The authors of the report see more potential in ad-supported content models than paid downloads:

...[M]any users prefer free online video with no advertisements, [but] contrary to popular perception, consumers are not completely adverse to short pre-roll ads. Among all respondents and M18-34, 48% and 67%, respectively, prefer a free, ad-supported service with ten- to 15-second commercials. À la carte fees, such as paying $1.99 per video or a $14.99 monthly subscription fee, do not appear compelling to users with only 7%-9% of respondents indicating a preference for these types of offerings.

Drilling deeper into user attitudes toward video ads, our research finds that over one-third of respondents have no major complaints about pre-roll ads. Only 10% of respondents stated that a ten- to 15-second commercial was too long to watch before the video. Our survey finds that online video providers can monetize and improve consumer attitudes toward advertisements by focusing on targeted, relevant ads, reducing frequency (i.e., a user seeing the same ad too many times), and creating less-intrusive ads.

The authors see more opportunity in what I think of as "content curation and navigation" than in simply creating content. Content curation involves creating a thoughtful, targeted collection of content for the audience; navigation is helping users get to the content they want, either through search, subscription feeds, or personalized recommendations. From the report:

...[I]n an era of theoretically infinite video choice, the greatest value can be created not by producing content but by solving the “paradox of choice” and connecting users’ individual interests with the vast supply of content. The need for this type of aggregation/navigation is highlighted by findings from our online video survey — e.g., among users not fully satisfied with online video, one-quarter of the target demo (M18-34) cited difficulty in finding what they want to watch.

(The "paradox of choice" refers to the phenomenon that as the amount of content grows, it can become more difficult and time-consuming to find what you want to watch.)

In their wrap-up, they sound a wake-up call to established media companies:

Net-net, our work finds that technology changes pose a threat to the incumbent entertainment companies. To be clear, we are not calling for the demise of traditional media any time soon. However, we can certainly envision these changes leading to slowing growth and the rise of a new class of media companies just as the text-based Web spawned powerful new competitors such as Yahoo! and Google. As broadband Internet continues to evolve, it seems fairly probable that other, as-yet-to-be-determined companies will emerge from out of nowhere to play a role, as YouTube
did.

To me, this report reads like a memo to media executives that should've been titled, "Buy Internet Start-Ups Before They Get Too Expensive." The next couple years are going to be a race between traditional media companies (Time Warner, Viacom, NBC Universal) and Internet companies (Google, mostly) to buy companies they see as the next MySpace or the next YouTube. Of course, lots of money will be misspent in that race...

Hollywood and Silicon Valley: Where is the love?

Having coffee earlier this week with the founders of Caachi, a nascent marketplace for independent film, we got to talking about some of the differences between Silicon Valley and Hollywood.

The two industries have one important thing in common…

Silicon Valley is a magnet for people from all over the planet who want to help develop new technologies. Hollywood is a magnet for people from all over the planet who want to make important (or at least, successful) movies. In both places, you have people doing what they love, and getting paid for it.

Often, they’re paid obscene sums of money: Johnny Depp and Tom Cruise have both earned more than $30 million in a single year, and the Forbes billionaire list is studded with geeks like Bill Gates, Larry Ellison, and Google co-founders Sergey Brin and Larry Page.

I think the main difference is one of priorities.

In Silicon Valley, tech trumps everything else. What a new technology can do is far more important than any content it carries, any businesses it threatens, any behaviors it changes. The technology, as long as it works reasonably well, should be allowed to do its job unhindered. There’s no nostalgia in Silicon Valley; life here is a headlong rush toward the new-and-improved future.

In Hollywood, storytelling trumps everything else. A great tale, well-told and well-played by the screenwriter, actors, and director, is the ultimate objective. How the story reaches the audience is immaterial, whether it’s carried in canisters to a theater’s projection booth, or beamed by cell towers to a wireless handset. Hollywood is pervaded by nostalgia: premieres still take place at Grauman’s Chinese Theatre, which opened in 1927, and many directors (including Steven Spielberg) say they still shoot on film, rather than with digital cameras, because that’s the tool their predecessors used to tell stories.

Having different priorities doesn’t necessarily create conflicts; Hollywood and the Valley work together well when they acknowledge each other’s strengths, and let the entertainment companies tell stories and the tech companies write code. What creates conflicts is when one group disses the contributions of the other...when Silicon Valley types say, “Oh, we’ll just go out and license some content,” or when Hollywood types say, “That’s not important – it’s just technology.”

When there’s an appreciation of the value of technology combined with storytelling, you get real breakthroughs like The Great Train Robbery (the first movie to tell a story), The Jazz Singer (the first feature film with a synchronized soundtrack), Gone With the Wind (the first movie in Technicolor to win Best Picture), or Star Wars (the first use of motion-controlled cameras to shoot miniatures), which marks the 30th anniversary of its 1977 release today.

And it’s a pretty diificult-to-dispute fact that if it weren’t for a fresh technological revolution every decade or two – from sound in the 1920s to home video in the 1970s to the Internet today – Hollywood wouldn’t have endured and grown as a business.

Your thoughts?