End of the world as Hollywood knows it
To: Charlize Theron, Hugh Jackman, Seth Rogen, Tina Fey, Steven Spielberg, Michael Mann, every actor, actress, screenwriter, costumer, best boy, cameraman, set designer, makeup artist, and agent--plus anyone else who makes their living in the film industry.
From: Greg Sandoval, CNET media reporter and film fan.
Re: Your livelihood
Cut your spending. Save your money. Many of the revenue streams that have gushed into your industry for decades, some for nearly a century, are about to dry up. This will likely mean a period of belt tightening like you've never seen before.
The end is coming for DVDs, traditional movie rentals, and yes, much of your cable money will likely disappear.
The news isn't entirely bad; you still have iTunes and Netflix--places where people spend money to buy or rent movies. You still have Hulu, Crackle.com, and YouTube, which are generating ad revenue by streaming full-length films and TV shows online. But the reality is that the amount of money that these legal operations generate is far less than the returns your industry is used to making. Unless some dramatic technological breakthrough occurs that can defeat file sharing, then you are staring at checkmate. Your business is headed for the same meat grinder that has chewed up the recorded music sector and print publishing. What will come out the other side is still uncertain but will likely be much smaller.
I'm sure many of you will write this off as the apocalyptic rantings of Silicon Valley propeller heads. But I urge you to pay attention to recent events.
Over the past five days I've been in Los Angeles talking to entertainment attorneys, studio executives, and some of the tech vendors who do business with the studios. 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. The past weekend, at a conference on the USC campus, Disney CEO Bob Iger said the "business model that formed the motion picture business...is changing profoundly before our eyes."
Iger warned that studios must make profound changes, "or you will no longer have a business."
Earlier this month, Francis Ford Coppola, the director of "The Godfather" said at the Beirut Film Festival that "the cinema as we know it is falling apart." He also predicted several of the studios would go out of business.
Of course, not all of your industry's problems were caused by the Web. Hollywood has paid creators handsomely over the years and costs have skyrocketed. Then there's the problem with Blu-ray. Iger noted that consumers aren't upgrading their DVD collections with Blu-ray discs to the degree that the industry had hoped.
But if you're really inclined to wag a finger, there is nothing disrupting your business more than the Internet. The MPAA has worked hard to force file-sharing sites out of business or push them to the Web's fringes. At first, the studios tried to kill file sharing with lawsuits. Then they hired security firms, such as MediaDefender and MediaSentry, which promised to discourage file sharers by blocking or slowing the sharing process. None of that worked.
Maybe that's one reason the MPAA overhauled its "antipiracy" operations three weeks ago. CNET reported on Friday that the studios' trade group decided to change the name of the "antipiracy" unit to "content protection" and fired three leaders, including the MPAA's general counsel.
And now, snatching a pirated film or TV show doesn't require knowledge of torrents. There are scores of sites that stream movies and TV shows over the Web and a viewer doesn't have to actually download the movie to their hard drive. I spoke to someone at the studios last week who said these sites are tougher to fight because they can crop up anywhere and many are based overseas. Often, said the source, "We don't know where they are."
What is happening is that the consumption of unauthorized content appears to be moving out of dorm rooms and into the living rooms of average Americans. Here is what you're up against:
A 28-year-old woman I'll call Alexandra (she asked for anonymity) grew up in Missouri, graduated from college, attends church every Sunday, and told me that she watches episodes of the hit cable show "Mad Men" at least twice a week at Surfthechannel.com, a site that hosts links to many unauthorized clips. She gleefully said that visitors can find almost any TV show they want and not pay a dime.
Alexandra said a friend told her about Surfthechannel.com a year or two ago and she watches shows there because she doesn't want to pay for a cable subscription, or a TV and because it's so easy.
She explained that she is not a bad person and that "everybody is doing this." She says one of her professors told her "he and his wife sit at home on the weekends and enjoyed movies they downloaded (illegally) off the Web."
I ask her if she has tried Hulu, the popular video site created by News Corp. and NBC Universal. The site offers a few feature films and lots of TV shows free to viewers and pays for them by serving ads. She said she had visited Hulu but added that "there's more of the stuff I want at Surfthechannel.com."
Alexandra's statements about Hulu come at a time when the site's backers are mulling whether to build a pay wall around some of its content. Alexandra and people like her aren't even accepting Hollywood's offer of free content because unauthorized sites offer better selection.
What do you think will happen if Hulu begins charging?
Don't get me wrong. I understand that the returns at Hulu are probably much smaller than what the studios are accustomed to getting. There's also the problem of growing dissatisfaction among the cable operators. How long will they continue to pay big bucks if more of their customers dump their subscriptions in favor of sites such as Hulu? Leaving a business that generated billions for one that makes far less would be hard for anyone.
But the possibility that studio chiefs must consider is what if the money offered by iTunes, Hulu, and Netflix is all that a digitally ravaged media world offers.
Eric Garland, CEO of Big Champagne, a company that tracks file-sharing usage and sells the data to the studios and major record labels said: "Hulu may be doing immediate harm to elements of your business, but waiting right behind Hulu in the shadows, are things that do so much more harm."
Greg Sandoval covers media and digital entertainment for CNET News. He is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at http://twitter.com/sandoCNET. 
Blacksmiths know all about it.
The motorcar put most of them out of business.
The fact is, the Web is the future.
Blacksmiths- mass production, stamping plants, casting, etc.
Buggy whips, horse shoer's - motorcars
It's time the movie studios understood that they can no longer make insane amounts of money. I am very happy to be a witness to this change.
It's not just SurftheChannel out there. There are dozens of places where you can watch( sometimes legally) all your favorite shows: OVGuide(ovguide.com), TV-Links.eu(tv-links.eu), SideReel(sidereel.com), Missedashow(missedashow.net), TvShack(tvshack.net), FlickPeek(flickpeek.com), Free-project-tv(free-tv-video-online.info), Watch-Movies... and many more.
Of course, what is needed is some balance between the greed of the studios/actors/creators and the pockets of the consumers. When we'll reach a compromise, all will be good again.
The bottom line is that change is afoot. Some is being brought about by piracy. But, even without that, there will be significant change in the TV/movie industry. And those who fight that change, who chose to not prepare for it, or who deny its reality, are doomed to fail. --mark d.
Illegal copies are not a new thing, they have been around for years, I'm sure not long after the birth of Hollywood someone worked out how to pirate film reels and show them in bootleg cinemas.
The main thing that is changing for all media (Music, Book and film) is that the profit margins are coming down to everyone else's level. A DVD cost what 50c to make? A DVD in a shop cost what 20 times that cost. A T-shirt cost maybe $1-$2 to make (in a sweat-shop) and you can get them from 5-10 times the price. Now if the media industry just comes in line with other physical retail products their profits could be slashed in half.
The other threat is themselves. Have you ever got a free DVD with a newspaper, magazine or the like? Can you find ultra cheap DVD's that cost $2-$5 (even if the movies are rubbish)? Well the more cheap alternative (including free(ish) films on cable/satellite TV) there are to full price media the harder it's going to be to sell high price media.
And that's without taking into account that a whole bunch of really good content is just about to go copyright free...
People become pirates *because* what the media-owners offer *doesn't* make sense. Until it does, the media-owners will suffer for it.
which is what they are afraid of loosing.... no more private jets...
Change or be left out... and looks like this change is for the better.....
People (us lazy americans in particular) are drawn to convenience.
Even if it's technically illegal. It doesn't FEEL illegal, because when people stream an episode from their favorite TV show from several seasons ago, they're paying exactly what they would've payed if they had been watching it when it first came out: zero dollars and zero cents.
Many people don't realize that ads are the only way a show can stay alive.
PS: The day that Hulu (God-forbid) chooses to start charging for its services, it will lose over half of its web traffic. That is NOT the path it should take. If it really needs to make some extra money, most of us would tolerate slightly longer ads, if it helped the site out...but beyond that, it would lose what makes it such a great site at the moment: convenience and freeness.
None leads to extinction. A little may mean smaller budets and a different way of going about the movie business, but it's survival.
What is happening this time is that smaller scale but often more personally engaging cinematic forms are emerging. YouTube is an example of amateur film making and at a more creative and professional end short film festivals are thriving around the world. The shorter form of the medium allows smaller teams and small budgets which enables creative new and young talents to be seen where the old Hollywood style film making was closed except to a few powerful people. The short form covers amateur, semi-professional and professional film makers in a creative engagement with the audience that does not have the huge profits of years past but has other rewards for creators and audience alike.
Sure the old money empires are dying, but the new world is more creative and interesting. There are transition pains but there are more winners than losers in the process.
Than let them go elsewhere. I bet we would lose some big names like Tom Cruise who are used to making $15 million a film. Everybody, raise your hand if you'd be willing to do that same job for $2 million per film instead. I bet in the millions who would raise their hands, there are a ton who are better actors with plenty of charisma and athleticism to match. Maybe this will get the entertainment industry to realize that, among other things, it does not have to rely on the types who demand more pay to act like a doctor for one episode than most real doctors make in a year.
That being said, I agree with the original poster about the REAL thieves. By thief, I mean someone who flat out pirates content, not those who have cut their cable subscriptions and use Hulu and Netflix instead, nor even the person who "pirates" because the Blu-ray they purchased is so locked down that they have to rely on someone else to format shift for them. If it is a victory for those types of "thiefs" that will cost Hollywood, then good.
Now, if only we can convince advertisers that they will be next to go.
Even if you think the blockbuster movies are anything but utter rubbish, they'll (soon enough) be able to make that utter rubbish for cheap. A lot of the remaining costs are the actors, but does that make sense - given the "acting" in blockbusers? Lets face it, outside the deranged, Hollywood universe, does it make sense to spend millions on a Keanu Reeves-"quality" actor?
Who knows: perhaps when actors are being paid more realistically, they'll realize "hey, I'm not special: maybe I should shut up about these 'important' issues."
Seriously? Every single film CGI? No actors or sets or traditional cameras, lighting rigs, stunts, props, makeup etc etc? I really don't know how you came to that conclusion but you are way off the mark. Even not considering the technology aspect, which kills your argument right off the bat, what about the directors who will want real people in real settings doing real things in their films?
Sorry dude, it just ain't gonna happen
With the "success" of Independence Day, the big studios showed a willingness to abandon art for a buck. Live actors aren't going away, they'll just become the thing of the "fringe" . . . you know, independent filmmakers and viewers (I say fringe jokingly since I sort of include myself in those that appreciate these things).
The studio's business model doesn't support anything low-key . . . which is fine, it'll be easier to determine good movies at a glance . . . and not waste your time with crap :)
hmmm what about dumping the theaters and purely focusing on the home market and selling subscription to the latest movies. I am sure you can find actors that will work for 100k vs 1 million. If every studio is experiencing this problem the actors will have no choice but to work for less. The cost of making movies is a lot less then it used to. A good example is the movie open waters. Movie industry says effects are expensive to get produced. Find ways to make it cheaper, use open source as a tool, use the internet to find people who can remotely work on the project that work for much less.
I could go on and think of more ideas, but the bottom line is the movie industry needs to stop crying, and start competing and try new strategies that are radically different then what they are used to. Legal retaliation only works when you are dealing with a few people/companies. You cannot fight the world legally.
I like your idea that the movie studios have areas where they can compete with the Internet. 3D films are fun and different and the big screen is and always has been a better visual experience than the TV and certainly the PC. Why not try to do more with that?
One of the things that Big Champagne CEO Eric Garland told me during the interview for this story is why don't the studios try to sell him the DVD of the movie he just saw when he leaves a theater? As for your cost-cutting ideas, one has to anticipate these and more like them are coming.
"Find ways to make it cheaper, use open source as a tool, use the internet to find people who can remotely work on the project that work for much less."
I had wondered about that for a while myself.
While $3,500 for a Maya license, for example, is pretty steep, it is negligible when you think about the cost of the employee using that license. (Salary, health coverage, payroll taxes, etc.) As far as remote work, that does not make the employee cheaper, but when considering the size of the assets (8k environment maps and textures, million polygon models, uncompressed footage into which something is being composited, etc.), I'd image the transfer back and forth of that alone would bring someone telecommuting on even a 20/5 to a screeching halt, and remote desktop cannot facilitate the necessary interactive feedback. Asset management and transferring among different nodes in the pipeline is a big challenge even on fast local networks. Besides, if you look at the credits of any big effects show, you will see that many segments are outsourced to smaller (probably cheaper) effects houses.
As for software turns here is a good reason Hollywood will not go open source on software: they want a known entity accountable for its performance. While a package like Blender is very capable, what are effects houses going to do if there are bugs that need to be taken care in a short amount of time so they can meet a deadline, or features they need to make their pipeline more efficient, etc.
For open source, the developers are going to be scattered about, guiding the development of the software based on their wants, and it is not like they have anything to lose if you decide not to use their product again. Even if those wants include use in top notch effects houses, those developers still likely have day jobs they can't cannibalize. It is not like even the person at the top of the pecking order can say to his volunteer team, "I need this done by this date." and have any reasonable assurances that it will get done.
While I agree that belt tightening can be done in effects production, I don't imagine free software is the place to start finding ways to make it cheaper. As far as the freelancing aspect, I don't know what kind of salaries members of the effects team get, but from what I understand, they are well inline with the effort they put in and the expertise they bring to the table. (Unlike many of the actors.) For the John Knolls and Stan Winstons (sorely missed), I don't think your going to outsource them, nor do I imagine their salaries are a big factor in the costs of visual effects production. (Again, unlike the actors' factor in the total production cost.) I would agree with you that efficiency and more clever use of and better technology would help in the cost department.
As far as movies go, I agree that actors are ridiculously overpaid. That will have to end. When it comes to DVD sales, the Netflix model will almost certainly dominate this market soon enough. I don't think they'll be able to salvage this one. Selling DVD's at the exit from the theater may increase DVD sales, but people will go there, buy the DVD, and then show it to their friends, thereby dropping sales when the friends don't go to the theater (I can almost guarantee that would happen).
If the studios want to make an increased profit, they're going to have to mimic and improve upon the Netflix idea. Perhaps they could offer subscriptions to their movies, such that movies from a given studio become available for download or stream after a fixed period, or perhaps even a bundle of DVD's arrives monthly/quarterly/at some rate with all the movies released during that time period. And again, they need to cut actors' salaries. That's step 1.
As for TV, I won't be too hurt if 99% of the content on TV dies in the wake of web media. That said, it seems to me that they need to follow South Park's initiative and allow people to watch ALL of their episodes at ANY time with NO hassles. This will draw people away from less reputable sites with drastic variations in quality. Why would you go to a poor-quality bootleg site when you can get a fine product with a few advertisements for the same cost (free)? If they want to sell DVD's of their show, then they just need to come up with some actually-cool special features that appear exclusively on the DVD. People will be able to find them elsewhere on the internet, sure, but it won't be as easy to do if the bootleg sites shut down when they're not nearly so necessary (I use the term "necessary" rather loosely since bootleg sites equate to stealing, which is never necessary).
I think the prevailing sentiment, though, is evolve or die. Neither business people nor art people were ever any good at evolving when it came to technology, though, so there may be a lot of dying going around before this is through.
When I found out my Toshiba 42" LCD HDTV had a VGA port, I went to Staples and bought a VGA extender cable ($11) and then went to Radio Shack and bought a PC audio jack (1/4 each end - $4).
I hooked up an old e-Machine with WiFi to the TV. Using a free piece of software called Zinc, I now have an organized collection of web sites that I can view content from for free! Also, went to BestBuy and a got a MagicJack for $40 ($20 of the $40 pays for the first year of service). So now my phone service is $1.97 a month. Hello Mr. Cable Sloth? Please drop my cable service and phone service. I'll keep the internet service. Yearly savings? $1200.
Technology is the big equalizer. The suits with their old revenue models that don't accept and embrace the changes new tech brings, will eventually become irrelevant and unemployed.
MGZC Media
http://mgzcom.info
They don't "raise the volume" of their commercials, they just set it near the top of the "dynamic range" of the performance being shown. As a result the late, great, Billy Mays's screams, as he tries to sell me some piece of junk, end up as loud as the helicopter crash that just occurred on "24".
No thank you. I'm in the process of dumping Comcast for a combination of shows/movies downloaded from iTunes and other places. I'm tired of having to dive for the mute button.
Studies and Hulu have conspired to prevent devices like xBox 360, PS3 and Wii, two of which have browsers, from being able to show most full length episodic or movie sites like Hulu -- which is why I went with a Mac Mini over a PS3. But now even TV manufacturers are incorporating web browsers into their equipment! It's a losing battle, and after offering it for free for years now, how will people react if the networks start putting in charges to access these sites?
I know how I will react. I'll look elsewhere.
As for blu-ray, I think people are sick of re-buying the same movies every time technology changes. After blu-ray, the industry will invent some other latest, greatest whiz bang technology and expect another round of sales. People are sick of that and if they can get movies for free that they already own, why not?
It seems the entire entertainment industry needs to rethink their business model. The revolution has already begun, and the entertainment industry in general needs to adapt to this new economy and sensibility. People are sick of paying for half the junk they produce, only to find it's really bad. People are sick of commercials, so they go the gray or black market route and stream and file share. The free ride for Hollywood is over, as it is for the big TV networks. They are going to have to get used to making do with only 1 new Mercedes a year, and they may have to sell one of their 14 houses... It still make me sick to my stomach how some of these folks live when I see every day, people living in boxes who don't even have an old radio to listen to. Wise up Hollywood, the cash cow has been shuffled off to the meat packing plant.
I am not saying it's legal to file share. But I do see why people do it, and from what I see, the entertainment industry has created the situation of their own downfall. IF movie tickets weren't so overpriced, IF TV shows didn't have as many commercials, IF DVDs were crippled with obnoxious DRM, IF content could reasonably be downloaded off the web legally, and IF the studio executives developed a brain cell or two, maybe they might see a reduction in illegal file sharing and streaming. In short, the entertainment industry has no one to blame but themselves.
Seriously...you get it.
Seriously, actors need to start making less money. There is no way they deserve millions for their work. CEOs of the big companies make less! Directors and producers need to make less money too. Bottom line: movie industry will adjust, don't worry. Not the first, not the last...
New content comes from tradition media - TV shows, movies, DVD's. People are not going to watch old content on those sites.
What is worse is the homegrown content. How many times can people watch a kid light a firecracker between his butt crack?
Also, why are people running out to buy 50"+ HDTVs? They must want to watch true high definition content on these TVs. Once the consumer knows the difference between the picture quality, then they will not be satisifed to spend $2,000+ on an HDTV, and then watch a low resolution stream over the internet.
DVD sales are gone though. Blue Ray/HD-DVD came too soon after a successful format (DVD), and people became understandably leary about upgrading to a new format. And did the studios expect peole who just bought The Godfather six months earlier on DVD to rush out and buy the Blue Ray? Insanity. Plus, how often do you really watch the same movie over and over again? I've got no more than five movies I watch often enough to warrant owning the DVD's for, yet I've got a ton of DVD's sitting on my shelf taking up space.
The studios need to let things like the Real Networks box hit the market, and allow people to download and store their DVD collection onto hard drives easily and legally. And they need to do this quickly and without a format war with one or more centralized locations to purchase movies from different studios. If they don't become proactive in this regard, they'll continue to see revenue disappear.
Are these adult DVDs?
Seriously though, it's the adult films that's driving the DVD and Blueray sales.
The things you say are spot-on.
There's one of the problems. People are limiting legal and paid access to their content. Hulu is nice enough but it doesn't have what I'm wanting to watch when I want to watch it so I don't use it. Now I"m sure Hulu would love to offer those shows so the problem is elsewhere.
The world is much bigger than the US, and this could be an opportunity for American content creators to reach that international audience without all the filters (resulting in more money for them) but they chose to limit things instead, yet another nail in the coffin.
Movie piracy all began 10 years ago with Xing software dvd player. This app leaked the encryption key that allows a Norwegian hacker to create deCSS - a tool which allows you to rip dvd.
While the music industry were suing Napster for mp3 music sharing, divx was created for video compression - the movie industry had no idea it is their mp3 nightmare.
Only in recent years, broadband speed reached a level capable of streaming and downloading quality video - this makes movie piracy possible.
As the speed of internet gets faster it becomes even easier to download movies, back then no one will be crazy enough to download full-length movies on dial-up connection - it's easier to rent a DVD. Now, you can download a movie in half an hour for free, would you still rent or buy DVD?
- by abcd9009 October 20, 2009 8:28 AM PDT
- In my opinion, the reason why we have piracy or copyright infringement is all because of Hollywood & Cable execs. They are too greedy and don't want to accept and adapt to the change.
- Like this Reply to this comment
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Showing 1 of 3 pages (95 Comments)I blame Hollywood execs because they are very picky at who they want to give license to for their content. As stated in this article "...She said she had visited Hulu but added that "there's more of the stuff I want at Surfthechannel.com..." It all comes down to content availability. Now if the execs want to, they can provide Hulu with all the content available and not limit it to only say a fraction of what they have available.
I blame the Cable execs because unlike yesterday, today people don't want to get a package. Why isn't there a choice to select individual channels? If I only want to get HBO, why should I also subscribe to basic cable (just an example). Or if I only want Sports, why do I need to upgrade to higher premium package? I can guarantee no one can ever say they subscribed to all channels because they wanted everything. The Cable Industry's justification is packages cost less. I agree with them on that. It's the same as buying at Costco in bulk will be cheaper than buying at your local grocery chain. However, what if I don't want to buy in bulk... shouldn't I be given that choice. What if I am willing to pay more for selective channels? Just like how they have PPV where you pay for individual content that you want to watch, why can't they have a similar concept like Pay per Channel? Granted it will end up more than buying a package if you end up buying all the channels individually which would come in a package, but odds are people who only opt for the ones they really want.
Secondly, the Cable industry has to evolve into the Internet age. Take some tips from Google. Yes, I said Google. Google generated most of it's revenue from context based search ads. The way Cable companies can do that is through Internet TV. With Internet TV, the ads can be catered based on your individual behavior. For example, if I am single, what's the point in showing me ads for Baby diaper when I will never buy a diaper. Ads should be based on the viewer and the content you are viewing.
Right now we are there about 40%. At least we are only limited to local ads. If I am in SF I am glad I don't see any ads for products sold only in NY. This can be improved by, not only limiting the ads for products sold in SF but also based on my personal interest.
On computers, this is done through cookies. With digital cable, your DVR or TiVo can act as your cookie in terms of television content.
To take it a step further, most (if not all) cable providers also provide internet. By providing Internet TV, they can provide Ads on your TV based on your internet behavior on your computer since everything will be IP based and going through one ISP (your cable provider). For example, if I am looking for a new car - say I am searching for a Pruis... I can see ads on TV for new deals on hybrid cars in my area instead of showing deals on F-150 or SUVs which I don't even care about.
Again, learning lessons from Google, the best way to do this is... giving away the Cable box along with some content for FREE. People love it when it's FREE.
Just like how Google gives all it's products for free and makes money based on the data it collects to calculate your behavior and then provides ads relevant to your behavior.
The reason why Ad revenue is growing astronomically in online market as compared to cable is because online it's content based Ads as compared to cable where you see the same ad on every channel regardless of the show you are viewing - most of them irrelevant to the viewer who's watching.
In the end all I can say is... "something is better than nothing". It's better to license your content at Hulu or YouTube or any site legally and share ad revenue (even though they can be significantly lower than what they are used to) rather than keep the content locked and let the piracy win the race where anything and everything is available and end up with NADA.
And for the cable industry, learn something from Google. You have to give something in order to get something. Just one question... what are you giving away?
The movie & cable industry just need to think outside the box and not be afraid of the technology. They should embrace technology. And by embracing I don't just mean by creating a facebook or twitter account and hoping people will buy their content just because they have a million friends on Facebook.