October 18, 2005

Niche, niche, niche, niche, niche, niche, niche.

I feel like I write this column every six months or so, but it keeps becoming more and more relevant. We are in the midst of one of the most significant cultural shifts… I would say since the mass production of televisions. Cable was another major shift, but in many ways, I consider this shift to be the culmination of smaller ones, like cable, video and the internet.

Whenever a story like the video iPod comes up it is amusing, though disappointing, to see that old media and even much of new media continues to see the story as a stand alone event. But the issue of, say, Disney giving Desperate Housewives to be sold for $1.99 an episode for iPod viewing is nothing more than a distraction. The industry indulges the idea because they want to believe that they, too, can get $2 for a freely distributed TV program just a few days after it airs. And while there will be a few brave souls who will pay the money out of curiosity, there is no future in this model. But there is a future in the concept.

As we steam further into this millennium, those of us in the advantaged culture have more options Those in the disadvantaged culture do, too… they are just a step or three behind. Just going back 10 years, choices were significantly fewer... almost beyond belief.

The difference between the DVD culture and the VHS culture is not just purchase vs rental, but also the easy use of DVDs. There was never a NetFlix for video because videos break too easily and cost more to ship due to bulk. The next generation of DVD will be burned for you at the retailer while you wait.

In addition to Blockbuster & NetFlix, a world of DVD retailers insure that pretty much anything that has ever been put on a DVD is available to you… if you are ambitious enough ...from anywhere in the world.

Meanwhile, on cable and satellite, there are more channels than ever, as the major pay cable companies have multiplexed into four or five or six services. We have Tivo and a growing distribution of DVRs to make time shifting easier. And television networks have figured out how to show their popular series for which there is really not enough space on traditional networks and local stations over and over on various owned cable networks.

Want to watch The West Wing? Watch it on NBC, watch reruns on Bravo, rent or buy it on DVD, and soon, download it to watch on your TV - not on a 2.5-inch screen - anytime you want.

The future is already here. And while everyone is distracted by what gadgets to obsess on - or, in the movie game, on the lie of the big screen TV - long range strategies are bouncing around like ping pong balls in a Bingo machine.

We have endless media options now. This was not true a decade ago. And if the next wave of thinking continues to be about how to endlessly expand revenue sources, there will be a meltdown in the media business. Overall dollars spent on filmed entertainment may expand, but the revenue for each new film or TV series will inevitably start falling off.

There may be incremental increases in how much people spend on entertainment, but for every dollar spent on a new way of getting entertained, there is a ninety-five cents not being spent elsewhere. Our obsessive, self-absorbed show biz world sees everything based on where we are used to seeing dollars spent. But with massive conglomerates owning most of the studios already, the many ways of squeezing green from a product is part of the future.

And it is not an issue of the "quality" that critics and reporters love to throw around. What people like is not about what the chattering class thinks is quality. Nor is it an endless parade of mediocre crap that can be shoved down the world's throat.

It is an issue of choice. Endless choice. And with real choice, which has always been beyond comprehension for the world, choices will be made.

And the industry needs to make choices too. The more the industry embraces the future, the less control they have of the future. Choice may expand the marketplace, but it will invariably contract other parts of the marketplace. The next generation, looking at the very real current technology, is digital ownership or access. That is what is significant about the Video iPod, not whether Bob Iger can pick up another $250,000 in revenues for Desperate Housewives.

For the film business, the $100 million opening weekend may soon become the $150 million multimedia opening weekend. But the problem is when the product at issue is not the most successful product of the moment. Sure, a lot of people would have paid to watch Revenge of The Sith on their TVs at home on opening weekend, many of whom didn't go to a theater. But after making that choice, what will they stop consuming? And will anyone pay for opening weekend of Stealth at home?

There is a great business in delivering niche programming to niche markets. Theatrical distribution is a niche part of the film business… has been since the 60s. The power of the ancillary markets have changed, but ticket sales have been dominated by a very small percentage of Americans (frequent moviegoers) for a very long time.

Most of the movie business is a niche business. Very few films are four-quadrant (hitting all demographic groups) films. And thank God for that. But a not so funny thing happened on the way to spending all that DVD money. Studios started spending what used to be the kind of money you would only spend on three or four-quadrant movies on one-quadrant movies.

And that is where we find the industry stumbling around today.

If you insist on figuring out "what went wrong" at the box office this year, the finger could well be pointed at this issue of niche vs. wide markets. There are movies that have been badly hurt by focusing too widely, others that haven't been able to make up their mind about what they are, and others that are stuck between multiple niches. But one thing is clear. The most successful films didn't suffer any identity crisis at all.

More on that tomorrow.

E-ME.