March 3, 2004

Yes, I am still just barely here.

By the end of the day, there is a good chance that Return of The King will have its first defeat of the week… but not the movie… The Eisner.

Word is, from a few papers, that the Disney board is considering moving forward in splitting the chairman and chief exec jobs, a move that has been considered something that should have happened years ago by most people. Will it change the fate of the company, outside of the very specific issue of leadership? Not very quickly. But this whole fight is mostly about image and very little about reality. Stanley Gold finally came out and said that he and Roy Disney would be around until Eisner was gone from his job. There was no conditional verbal outclause for, say, a major positive growth spurt by the company under Eisner. I’ve written it before and I’m writing it again… this crusade against Eisner is more personal than business… and while it is his prerogative to feel whatever way he likes and to express it out loud, Mr. Disney is misleading people about that reality.

Nobody seems to want to grapple these days with real solutions to real problems. Instead we just get the parade of things that people hate, with that hatred at the main argument for taking action. Michael Eisner is a popular target. But where is the argument about what comes next that is so much better than Eisner’s leadership? Disney is hardly alone in this regard. It often seems that the Democratic Party plans on running a Presidential campaign that is about rage against George W. Bush more so than on the ideas of the party to change the future of this country. The foundation of the battle against the screener ban was a belief that film piracy was not a big enough threat to reshuffle the marketing deck for awards season… at least for major studios and studio-owned dependants.

My spidey sense about what kind of threat a digital universe will be to the film industry has gone a little bit wilder in recent days after I finally got educated about the iPod thanks to a friend of mine. I am, generally, a semi-early adapter. I generally jump on new technology early enough to find myself buying gray market hardware, which means that the U.S. market hasn’t really matured by the time I get in. CDs, the web, Tivo, the Blackberry and now, the iPod. I was just reading yesterday how unhappy some marketers were that the new mini-iPod had a $250 price point and not one close to $100, since that price is assumed to be the breakthrough amount that will bring every teenager with a double-digit allowance into the digital music game.

I had an interesting conversation with a journalistic colleague who likes technology. But his sense of how complicated the process of downloading movies from the web is and his lack of perspective on how much easier it becomes every week made it easy to understand why he could believe that studios had no reason to worry about piracy, back in the bad old screener war days.

The film industry cannot fight piracy. It has to fight the battle of expectations and value. The film business has faced the threat of new technology over and over and over again and come out a winner. But this threat is different. The effort cannot just be an avoidance of the history of the music business. But the lesson of what happened to the music business must be included in the analysis.

My comparative studio of choice would the computer business. Just 20 years ago, we were thrilled by the versatility of the 512k floppy disk. Nowadays, you’d be hard pressed to find a new computer to buy without literally 80,000 times that space on its built in hard drive… for a lot less money than those old computers cost. But somewhere in between the small floppy and the 125mg necklace, most of us get settled in with a series of software applications that we still are using, half a dozen computers (or more) since the good old days. Word processing, accounting, e-mail, web access & browser, maybe publishing tools, some games and a handful of other applications. So why do we find ourselves needing an increase in processing speed every couple of years to keep using the same old programs? Part of it is because the programs are getting better. And part of it, it seems to me, is that the industry has a vested interest in continuing to sell both hardware and software.

In the film business, as in the computer business, there has been a big change in the game. What used to be the fixed commodity, the hardware – the theatrical release – has become the variable and what was the variable commodity, the software – home entertainment and the other ancillaries – has become fixed.

But the digitized universe is the coming Microsoft, ready to shift the power once again from what is now the variable commodity back to the current fixed commodity. It’s not that piracy is going to kill the DVD business. It won’t. And the effect on a healthy theatrical exhibition game will be minimal. But digitization will likely bite deeply – 40% to 60% - into home entertainment fairly soon after we hit the point of easy entry.

Unlike the computer world, the film world has the advantage of being integrated. Each studio controls both the “hardware” and the “software.” Without real collusion, the computer world has found a balance and advances on one side supports growth in the other.

The film industry faces a different challenge of balance. Not only does the industry need to maintain the income levels produced by the DVD revolution, but it need to do everything it can to keep as high a percentage of that DVD revenue from disappearing. My first suggestion is that a concerted effort be made to revive the second run theatrical release, offering an economically viable alternative to DVD that also maintains the habit of theatrical moviegoing and - while cheaper - cannot be repeated with the flip of a switch.

Which brings us back to the iPod. You have to look past piracy and to the functionality of digitization. With a 40g iPOd, most people can have their entire music collections on one drive, the size of a pack of cigarettes, and have the highest quality music available in almost any forum they choose. That same 40g will only hold about a dozen movies. But the $500 price tag will get lower and the size of the memory will get bigger.

People do not want to pirate, in my opinion. But they want convenience, price and they are willing to share with friends and family – traditionally considered “fair use” – after they have bought something.

If a movie becomes available on DVD, I might buy or rent it here, my sisters in Santa Monica, Chicago and Washington might rent or buy it in their towns, and my mother might rent/buy it in Boca. But if I get it on DVD here, even paying retail (yick!), and I put it on my “MoviePod,” what is my sense of morality going to be regarding sending the file off to my family?

Imagine a NetFlix that really is a net of flix… $2 a film for download. There will be a time, not too far into the future, at which this might well be a workable deal for the film industry. Better $2 than nothing.

Imagine being able to walk around with your 200 favorite movies that you can watch at home, at a friend’s house, on a plane, in the car, at starbucks… wherever. Imagine getting the entire month of HBO sent to your Tivo at the 1st of each month and deciding what you are going to watch when. Imagine getting the entire NBC schedule without advertising for only $10 a month.

It’s all coming.

Of course, the business of commoditizing the industry, which is likely to happen, can wait a while. Plans should be made, but they aren’t right around the corner. But it will take a whole to get revenues from second run theatrical going. Better start soon. Just look at Lost In Translation, which played effectively in theatrical even as the DVD was in stores. Given a choice, many people chose to go to the movies. That experience is the only thing that is not replaceable by technology.

Ah, the humanity.

READER OF THE DAY: A batch of letters about The Passion of The Christ will go up on MCN sometime today.

ANTI-EM writes: ‘Again, I don't know why I'm bothering, but my Oscar recap goes a little something like this...

Very pleased about the well-deserved "LOTR: ROTK" sweep. It was cool to see the whole cast onstage at one point, but as Jon Stewart so hilariously put it on "The Daily Show", "Viggo Mortensen was noticeably absent, since he was attending the Armand Assante Clinic for Smoldering Intensity" (dammit that guy's funny!).

And I was also happy to see Miss "You cain't get a man with a gun!" get the Best Supporting Actress award (squinty face and all).

Kind of a bummer that neither Tim Robbins, nor Sean Penn said anything even remotely political or controversial.

What the hell?!

Billy Crystal has his moments, but overall wasn't that funny. I think Robin Williams, or even Jack Black & Will Ferrell would be better hosts (loved their song!).

Charlize, Scarlett, Naomi & CZJ all looked gorgeous & glamorous. Someone should've reminded Diane Keaton that her "Annie Hall" look just isn't workin' for her anymore, and I thought Marcia Gay Harden looked like she came straight from shooting the next "Star Trek" film.

As for Mr. Gibson's massive profits from "The Passion"... I think he should donate them to the Catholic Church to help bail them out of their little sex abuse scandal. That's what Jesus would want him to do!

And I swear I saw Taiwan Steve on last night's "American Idol Untalented" show... Oh, wait... that was William Hung! All I know is that if he does get a recording contract, his first album's gotta be titled "Well Hung"!

SHE BANGS!”

E ME: Does she really?