Diary Of A Hollywood Refugee

Monday, April 04, 2005

Hollywood in the Digital Era

While I worked in Tinseltown, the issue of going digital, was a hot and scary topic.

With music industry sales slumping, the only explanation given was "internet downloading and piracy". Sadly, this kind of myopic thinking would prevail and it's echos would resonate with Hollywood film makers, and the money men at the studios.

So Hollywood fought the digital evolution trying desperately to keep it at bay until they could find a way to "control or mitigate" the losses they feared "going digital" would bring. But, they would soon learn what the Borg already knew: "resistance is futile"

2005 has already proven to be tipping point in the evolution of film making. Digital releases scheduled include Madagascar, Phantom of the Opera,
Star Wars 3, and in 2004, Shrek 2 and Collatoral.

Digital film making is hundreds of times LESS expensive than shooting with film. Film needs to be processed before it can be viewed, and the average print cost runs about $1500. Film being run through projectors get damaged quickly and new prints are required often. The average cost to produce and market a film is around $90 million, and few ever recoup that investment let alone make profit.

In the battle between bottom line and artistic elan, digital film making is a great compromise, and one that benefits artistic elan as much as bottom line!

We have entered an era in which EVERYTHING is going digital, and mobile, virtual, and personal. And in the process, the digital evolution is changing the nature of authority.

Access to information has always been the root of power. But in todays world, the digital evolution is removing traditional barriers that prevented the masses from accessing knowledge reserved for those in "power".

The Digital Era is changing business models, just ask Hollywood! That's what the Hollywood Elite fear most, a change in a business model that threatens their control and by fiat their power base. Lets examine this in greater detail.

Traditionally, Televison generates income by earning advertising dollars based on the number of viewers it delivers at a certain time, of a certain age. With VCR, PVR, and Tivo, viewers now fast forward or skip ads altogether. We now have INDIVIDUAL power to watch what we want, when we want, how we want, on whatever hard device we want. So now the question becomes, "how do media companies generate profits?"

While digitial cinema will become mainstream in the next two years, the risk of piracy will increase, since a digital copy is always perfect. Right now the film industry loses over $4 billion yearly through illegal copying. The fear that the film industry will suffer losses as great as the music industry is all to real. Hollywood will have to find innovative ways to mitigate those losses, but following the music industry's lead of suing those that download isnt the way to endear yourselves to the very people who you want purchasing your product.

How about creating a new business model using the technology we now have, that will generate multiple sources of revenue while mitigating losses and production expenses?

Lets start by reducing the over the top salaries we pay actors! With digital film making, the production costs are greatly lowered, and no longer justify paying actors $25 million a film, once deemed neccesary in order for studios to recoup their investment, because it was believed that mega stars would attract film audiences, thereby mitigating the risk of a flop. This is no longer true; so with digital film making reducing production costs, the return on investment is lowered, the risk is considerably reduced and higher salaries are no longer needed!

Traditional business models have always operated vertically. In the digital era, its all about horizonal connections! Where complexity used to reign, simplicity is now the order of the day. Where compromise was common place, consumers will now want it all: affordability, reliability, security, simplicity, manageability, adapability, innovation, and connection.

We shop online, chat on line, watch movies on line, listen to music online, we even have sex on line,and we have already begun to move towards casting election ballots digitally. Welcome to the 21st Century!

Carly Fiorina, former CEO of HP, asks a rather profound question and one well worth considering: What does it do to our concept of community if the places where people traditionally come together - films, music, malls, grocery stores, - can best be experienced individually?



Post a Comment

<< Home