This year the movie industry made $30 billion (1/3 in the U.S.) from box-office revenue. But the total movie industry revenue was $87 billion. Where did the other $57 billion come from? From sources that the studios at one time claimed would put them out of business: Pay-per view TV, cable and satellite channels, video rentals, DVD sales, online subscriptions and digital downloads.
The music and movie business has been consistently wrong in its claims that new platforms and channels would be the end of its businesses. In each case, the new technology produced a new market far larger than the impact it had on the existing market.
- 1920’s – the record business complained about radio. The argument was because radio is free, you can’t compete with free. No one was ever going to buy music again.
- 1940’s – movie studios had to divest their distribution channel – they owned over 50% of the movie theaters in the U.S. “It’s all over,” complained the studios. In fact, the number of screens went from 17,000 in 1948 to 38,000 today.
- 1950’s – broadcast television was free; the threat was cable television. Studios argued that their free TV content couldn’t compete with paid.
- 1970’s – Video Cassette Recorders (VCR’s) were going to be the end of the movie business. The movie businesses and its lobbying arm MPAA fought it with “end of the world” hyperbole. The reality? After the VCR was introduced, studio revenues took off like a rocket. With a new channel of distribution, home movie rentals surpassed movie theater tickets.
- 1998 – the MPAA got congress to pass the Digital Millennium Copyright Act (DMCA), making it illegal for you to make a digital copy of a DVD that you actually purchased.
- 2000 – Digital Video Recorders (DVR) like TiVo allowing consumer to skip commercials was going to be the end of the TV business. DVR’s reignite interest in TV.
- 2006 – broadcasters sued Cablevision (and lost) to prevent the launch of a cloud-based DVR to its customers.
- Today it’s the Internet that’s going to put the studios out of business. Sound familiar?
Why was the movie industry consistently wrong? And why do they continue to fight new technology?
I think being in technology, we take innovation-as-a-good-thing for granted. Everyone else in other slower moving industries probably see their business models as granting privilege and right established so long ago, that no one really cares where they come from or how they came to be–and especially whether the world, economy, and landscape is as it was back then.
Or maybe they do, and the MPAA and RIAA willfully ignore how new technologies have helped them make money in the past. You’d think that with the pace of new platforms to be able to make them money on, they’re remember that and find ways to capitalize on it.
But I remember Dalton Calwell puts it: “I don’t envy being [in their position because] they’re dealing with economic realities, and there aren’t a lot of options.”
I suspect this is partially because they don’t innovate on their own, and are usually blindsided by what comes out of Silicon Valley. Movie and Music industries really need to learn how to innovate on their own so they don’t get blindsided so often, time after time. And it may be that they need to become technology companies, according to the Marc Andressen’s insight that Software is Eating the World.
Ironically, the six major movie studios have a great technology lab in Silicon Valley with projects in streaming rights, Video On Demand, Ultraviolet, etc. But lacking the support from the studio CEOs or boards, the lab languishes in the backwaters of the studios’ strategy.
That’s really a pity.