Tuesday, May 20, 2008

Hollywood's Doomed Obsession With Reselling Video Online

Over the past 20 years, a Hollywood film has become the starting point for ongoing revenue streams for some lucky ones.

Those lucky movies that have gone on to become enormous ongoing money earners through television, dvd, merchandise, videogames and theme parks, have essentially driven up the price of producing the initial film that kicks the whole thing off. When a major motion picture is greenlit, the intention is to one day have the title throwing off money from it's theme park ride. If that is the intention, it is very hard to tell everyone in the film that they should be paid based on the probability that it will not make it to that status. The filmed entertainment business is based on producing ten films and having the 1 or 2 home runs pay for the bombs.

So what does this have to do with the internet ?

After a film is made and marketed for the theatrical release, the studio then has to spend the next ten years trying to make the money back that they invested. Sure the theatrical, dvd and television releases are sexy. But then it is about licensing the characters to McDonalds and cereal companies to claw back some more money. So along comes the internet and someone has said, "Hey, this is just another distribution point for our filmed entertainment!" Yes it is, but not it isn’t.

I think it is definitely a way for them to make money out of their stories and characters. But not by reselling the actual video. The same way the studios need to build a theme park ride for a theme park, they need to create a web product for the web.

The web is an interactive medium. That means there are things you can do on the web such as interact with the content and with other people. So, it puzzles me that studios believe that by taking something that has been made specifically for non-interactive mediums such as the theatre and television will be a big success on an interactive platform.

In the early days of the internet, e-retailing was all the rage. The thinking was, build a website, go to sleep and wake up with a million orders in your inbox. The amount of times I have heard from well funded companies that all they have to do is capture 1/50th of 1% of the market to make millions astounded me. I really believe that the studios are thinking the same thing. “There are millions of people out there in the cyberworld, so lets just keep licensing the content and watch the money roll in.”

My contention is that the studios and license holders need to think about creating web versions of their stories for the web and to quit trying to re-distribute content that was made for non-interactive mediums.

After being very aggressive in the amount of shows it distributed online last year NBC netted only $15m. As Jeff Zucker said, “"We don't want to replace the dollars we were making in the analog world with pennies on the digital side".

So, yes, to get lucrative revenue on the internet, you have to be really smart about what you do and where you invest. Just because it is so easy to put up a website and that there are no printing costs like there are for movies, does not make it any easier. The audience is still super savvy and will only spend time on things they want to do.

At the moment, there is an obsession with reselling video on the internet. There are very few successful adaptations of filmed entertainment in the online world. When Hollywood starts creating web versions of their licenses look for new revenue streams and models - until then, look for pennies from reselling video. Actually, if you see a company focused on it, sell their stock. It wont cover the cost of the catering for that film.

Here are two articles from Peter Chernin and Michael Eisner calling for the same thing:

News Corp: Media Need New Business Models

Michael Eisner Sees Web's Future in Storytelling


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