Rearview mirror business plans

So much going on in the media world that seems to be based on a combination of feelings that innovation is bad and that people are in the delivery business and not the content-creation business.

First up there is, of course, Hollywood.

If you remember back to the Christmas of 1989 you’ll remember a seismic shift that occurred in the world of home video. While VHS had dominated the video market after triumphing over Betamax and being adopted by Blockbuster (just starting its expansion plans in earnest), most all consumer activity had consisted of rentals since to buy a movie cost about $99, at least in the first year or so of its release. So you would rent a movie dozens of times if you wanted to keep watching it.

But in 1989 Warner Bros. led the sell-through market by releasing Tim Burton’s Batman on VHS for just $20 or so, the first blockbuster to get such a release strategy, a move that essentially kicked off the home video library behavior among consumers. The elimination of that window combined with an attractive price-point, in other words, created demand to own and not just rent.

But now studios want to go back to that window (Los Angeles Times, 10/23), making movies unavailable to rent at first. They’re seeing too much drop in sales as consumers pull back their spending and too much growth in low-cost rental options like Netflix and Redbox. Those options have grown at the expense of not only sales figures but also higher-cost options like Blockbuster, which has to maintain those high prices because they have more overhead.

While that’s happening there’s increasing chatter (New York Times, 10/25) around what used to be the third rail of home video, digital distribution. The subject is touchy because it cuts out the retail partners that contributed to the success of the DVD format. But that doesn’t change the fact that digital is where the growth potential is at. But Hollywood’s hesitancy to adjust is exemplified by the outcry that’s resulted from Paramount’s decision to speed up (Variety, 10/26) the home video release of G.I. Joe: Rise of Cobra and the genuflecting the studio had to do to assure theater owners this wasn’t the new norm but an exception to the rule.

While all this is going on, reports are circulating that Hulu will begin charging for “some” content (Mediaweek, 10/23) in 2010. That led to this absolutely ridiculous statement from columnist Diane Mermigas, who I actually enjoy reading, about the streaming site:

“Hulu’s online video platform may be a success with the masses, but it will have to begin charging for at least some of its content if it doesn’t want to destroy the $185 billion television ecosystem it draws from.”

Mermigas’ comment is indicative of the problematic thinking that’s going on at studios, TV networks and newspapers, which are reeling from a report that their cumulative circulation continues to drop like a rock.

Specifically, the problem is that Hulu doesn’t need the broadcast television infrastructure to survive. It depends on the creation of high-quality content. It doesn’t actually matter to Hulu if “30 Rock” airs on NBC, ABC or anywhere else. It doesn’t matter if it airs at 8PM, 3AM or any other time of day. It just needs “30 Rock” to be created.

Likewise, Netflix doesn’t need Universal or Paramount to make the movie. It just needs the movie to get made. And the audience *really* doesn’t care who the studio making a movie is, what network a show actually airs on – TiVo is channel agnostic, as is Hulu.

Problems *always* emerge when content companies become invested in the distribution format. That’s what we’re seeing with movies, TV and newspapers/magazines right now. Studios have no vested interest in movie theaters (something corrected with the Paramount Decrees) but they are the ones distributing DVDs. So they want to see that format survive and are willing to start the process of turning up the heat on theater owners to further their own self-interest. Similarly, TV networks are beholden right now to the physical television set instead of seeing themselves as creators who can put their content anywhere and everywhere for distribution. And newspapers are so set on the survival of ink-on-paper they can’t rightly judge any plans that don’t involve that as the cornerstone.

An industry has never survived by hunkering down and going into survival mode, and that’s exactly where all three of these industries are. They survive by innovating and meeting customer needs, wants and desires in smart ways. I’m not advocating giving away the farm here. But retreating to or clinging desperately to the business plans of the past is never a recipe for future success.

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