Because many parts of the entertainment industry share the same travails and futures, it is worth keeping up with the goings on and the opinions of leaders in the film industry. Music and movie share painful transitions to digital from physical and are equally perplexed with how to deal with piracy. And because two trade groups lobbying the government are more powerful than one trade group, the movie industry's long-term strategy will have an impact on that of the music business.
At a symposium at the University of Southern California over the weekend, Disney CEO Bob Iger outlined the trends of the changing film industry. Consumers' movie libraries are waning, he said, and other forms of entertainment abound. High-definition DVD sales are not compensating for falling sales of standard DVDs (Just as digital sales do not match the losses in CD revenues). The industry is going through a permanent change "in profound ways," Iger said. "That means you're going to have to change your business in profound ways, or you will no longer have a business."
Iger's stab at profound change started with an overhaul of Disney's studio. From BusinessWeek.com:
It produces fewer films, is looking to keep costs down, and has focused of brand name producers who cut through the clutter of other filmmakers and might even bring gamers like his sons to the movie theaters. Since taking over as CEO four years back, Iger bought Pixar, has a deal pending to buy Marvel, and has struck a deal to help finance films made by superstar director Steven Spielberg's newly reconstituted DreamWorks studio.
In other words, Iger is putting a lot of eggs in fewer baskets. And safer baskets. Disney is going after brand names to create blockbuster titles. While there is no such thing as a sure thing, Spielberg and Marvel franchises come pretty close. Expect more emphasis on branded entertainment, advised the LA Times earlier this month after Disney fired its studio chief and Universal Pictures dismissed two chairmen. The future holds more sequels, movies based on toys and television shows, fewer adult dramas and less reliance on A-list actors. (Sounds a bit like today's music new release schedule.) "You're not going to get away with the old business model," an entertainment industry analyst told the Times. "They still haven't found a new business model to replace the old one."
CNET's Greg Sandoval had this to say in Tuesday in a post about the film industry:
I've been covering the sector three years now and I've never seen people in the film industry so dejected. DVD sales are falling, the number of upcoming film releases is expected to drop. Some big shots have even acknowledged the bleak situation in public.
While Sandoval's article urged movie studio to "cut your spending" and "save your money," this issue isn't about marketing budgets and executive salaries. It's about the shape of the industry. Movie studios don't necessarily need to shrink themselves in anticipation of lower future revenues. As has been the case with music companies, movie studios will need to restructure for a new marketplace. That may mean shrinking the beast, so to speak, in order to navigate tumultuous times.
Restructuring and spending less doesn't mean merely lower budgets for making and marketing movies. Hollywood is a winner-takes-all game with huge payoffs for the winners, and movies' costs do not rise and fall with the public's willingness to buy movie tickets and DVDs. But it will mean doing what Iger mentioned, producing fewer films. And it will mean overhauling the companies, maybe cutting some divisions, almost certainly shifting resources and definitely reimagining the form and function of a 21st century movie studio.
Same goes for music companies. And they are doing all of the above. Even though some companies may not share the same vision at the Department of Justice, they are all rethinking the form and function of the 21st century music company.
On to the topic of digital piracy. At the USC symposium, William Morris Endeaver's Ari Emanuel called for the U.S. to adopt into a law "three strikes" anti-piracy legislation similar to that passed by France. This came just days after news broke that the Motion Picture Association of America fired three members of its anti-piracy unit. Wrote CNET's Sandoval:
"The shifts come as the sharing of movie files continues to creep toward mainstream adoption. In the past, digital copies of movies were too big to transmit easily on the Internet, but file-sharing technologies are improving, and sending large movie files is becoming easier.
Hollywood fears that the pirating of movies will become as common as the illicit sharing of music files. Studio insiders say they know that the answer isn't lawsuits but the hope is that Comcast, AT&T, Time Warner, and other bandwidth providers will help them thwart file sharing at the network level. So far, though, the music and film industries have failed to get the major ISPs very involved."