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November 8, 2005New platforms do not guarantee new money.
Read it, absorb it, believe it.
This does not mean that they can't mean more money. But expansions of the market are few and far between and when one happens, as we just recently experienced, it confuses the hell out of everyone.
The DVD expansion was based on one simple leap. The cost of renting - an expansion that had matured by the time the DVD arrived in earnest in the late 90s - and the cost of buying became close enough to allow sell-thru to become a dominant business. And in doing that, the number of units that could be sold at retail increased massively.
The quality of DVDs helped a lot. But really, it was as simple as, "If I rent it twice, I might as well buy it… and if I rent it once and return it two days late, I might as well buy it."
I don't have the exact figures, but if a rental returned $1 to a studio, a sell-thru returned more than 10 times that. Boom!
I cannot say that the same expansion would have happened if videocassettes were similarly priced. But we never found out because the system the studios set up with Blockbuster and Hollywood video destroyed most sell-thru by flooding the rental market with copies and then allowing the retailer/renter to sell them weeks later for incredibly deep discounts, often for under $5.
But my point is, while a DVD is more convenient and generally of better quality than videocassettes, the principle is the same. Rent it or buy it, take it home, put it in a machine and watch it on your TV.
The increase in quality and the ease of delivery that allowed, for example, NetFlix to go into business, created incremental growth. But the massive financial increase was a price point issue that made a bigger expenditure to own seem like a bargain compared to renting.
The next step in delivery has no such mechanism available. The strategy that is being kicked around argues that people will buy endlessly and obsessively and/or that people will pay a steep additional price for increased convenience.
And some people will. But again, that increase is an incremental one, not an industry shifting one.
The huge mistake being made is that all this energy is being expended on figuring out how to sell people who are already sold the same thing they have already bought in a new and exciting way. There is, by any logic, no major growth possible in that market.
What is possible is incremental growth that will make up for incremental annual losses in other areas as technology shifts. But the theatrical marketplace is only down a normal amount this year. I can't seem to say this enough times for people to get it. No one in their right mind thinks that The Passion of The Christ can be duplicated as a regular piece of business. If you remove that film from the equation, the business for the entire year to date compared to last year - the highest grossing year ever - is $232 or 3%. That is a normal year-to-year drop that is likely to become smaller when Potter/Narnia/Kong are through sucking up dollars.
Theatrical is healthy. And the decreases are, as they have been for more than a decade, directly correlated to the shortened Home Entertainment window. Because of that short window, there are two phenomena working against theatrical. First, studios have become increasingly first weekend oriented, which has led to flat rate exhibition deals that have led to a deep disinterest in long theatrical runs by mainstream exhibitors. Second, there is a bit of "wait for the DVDism," which is powered by the perception that the Home Entertainment is getting shorter and shorter. It doesn't matter if the reality is that most films are still at four months and longer. When one or two studio films a month go to Home Entertainment in under 3 months, the perception that everything is heading that way is established… and destructive.
But that was true before DVD. As I have often written, it started back in 1989 when Batman was the first smash hit to go to a window of less than six months from theatrical release.
Not to be a real prick about it, but the industry is now filled with people who think like George Bush, who says, "Don't worry about the deficits" because after Reagan rang up record deficits, the internet boom drove the market so insanely high that the debt was paid off. But the internet boom was a once-in-a-century kind of event.
Delivery systems are changing and quality and ease are improving. But we old folks (over 30) really misunderstand the biggest market of movie spenders, teens. Going to the movie is not competing with videogames, for instance, because videogames are in the home and going to the movies are going out. Homework is competing with videogames. And in the long run, cable/satellite is competing with video games and DVD rentals and sales.
Teenagers will buy videogames ($50 price point) and DVDs ($20 price point) until the cows come home… or until they run out of their parent's cash. Videogames put, for the most part, the video arcade business out of business. The only kids who went to arcades were the ones who couldn't afford to buy the expensive games for their homes, so the arcades became dangerous and trouble was normal.
But five years into DVD sell-thru and 20 years into video rental, we have not seen this occur in theatrical film exhibition. Why? I would argue two reasons. 1. Playing a video game to "the end" - essentially a mastery of the game or solving all the built in problems - would be much more expensive a quarter, half-dollar or dollar at a time rather than simply buying a game for $50 and playing it endlessly. And 2. The experience of playing a video game is not communal, so the home experience, now that the computing speed of home machines has progressed as it has, is as good if not better than in an arcade in every way.
But kids are still buying and renting movies, playing video games, AND going to the movies as often as they can.
The barriers to going to the movies are very, very different to over 30s than for teenagers. But that is not a new phenomenon either. When you have the conversation with anyone who wants to tell you that going to the movies isn't as fun anymore, you are almost surely talking to someone over 30… an age at which going to the movies starts to decrease exponentially.
Studio execs and journalists make the horrible mistake of basing their perceptions on their own experiences and the experiences of their friends. But we have all aged out, no matter how much we love movies. And we are also part of the very small group that can afford the allegedly ubiquitous $10,000 home entertainment systems that are so much like going to the movies.
Most importantly to the overall equation, we are a group that deals with the valuation of being the first to see something differently than teenagers do.
Think about it. Every year, studios screen movies every day from early November to late February for free for guild and Academy members. Free! And with zero price resistance, on good screens with quality sound, among well-mannered audiences, people with a vested interest in seeing the best films of the year have a hard time getting to all the movies. So studios send out screeners as well. And you know what? Most of them never get looked at either!
The biggest challenge of the award season for most movies is simply getting seen. And that is without anything other than interest keeping the 10,000 to 15,000 people who have access to see the films.
A very smart person said something to me this week that set my head spinning. They said that people are so busy multi-tasking that going to the movies where they couldn't multi-task as relentlessly was a reason not to go to movies.
I would argue that it is the opposite.
And before you start disagreeing, disallow yourself the use of the phrase, "I don't feel that way, but they do."
Do you find yourself getting aroused by the notion of being plugged in and multi-tasking 24 hours a day, seven days a week? If you do, you are a rare person. All this technology is a part of our lives, in theory, to make our lives easier and more efficient. But everyone I know, of every age, likes to get off the merry-go-round sometimes. Yes, pretty much every teenaged boy would rather be blowing stuff up than doing homework or taking out the garbage or playing Scrabble with mom. But these boys get immersed in the story of a movie they are enjoying the same way they get into a videogame. The issue of attention span becomes an issue again the minute they leave the movie theater. But that's another column.
If you think the Video iPod (already known simply as "The New iPod" in Apple stores) is a much longer-term technology than The Photo iPod (less than a year) than you are reading too many Disney press releases. The 500 gig iPod… now that is going to be something that will last for a while. When you can carry around 25 movies that you can see on that little screen or plug into a TV to see full DVD quality films, then you will be satiated by that portable toy for a long while.
But still the question… is this any different than The Walkman? An entire generation of parents fought to get kids to take off those goddamned headsets and to participate with the family before the first iPod arrived.
Don't get me wrong. I believe in new platforms. And I believe that servicing the majority of people in this world who do not go to the movies or spend more than $30 a month on filmed entertainment beyond their cable/satellite bill more effectively will create some growth in income streams for the movie business.
But the old age thinking in this moment is not about keeping new technology from happening, but rather chasing new technology recklessly because even though "we adults" don't understand it, "the kids want it."
Kids want a lot of things, but this industry can't afford to chase fads, lest it become a fad.
I would like to have TVs of varying sizes and designs in every room of my home that could either all play the same thing or be controlled separately, so I can watch a football game, for instance, and not be interrupted when wanting to make a sandwich or to go change clothes or sit in the dining room or whatever. That would be very cool.
But equally, if not more important, would be being able to turn the TV off.
Podcasts are great. But how many can you listen to in a week?
With my iPod and the pressing urge to get satellite radio, will I ever engage the randomness of broadcast radio again?
If I am working, like now, and the TV is on, am I really hearing anything that is playing? I have watched the special "Butch Mystique" three times now and while I recognize the people being interviewed, I still feel like I've heard nothing but fragments. I did get that David Letterman has the hots for Jennifer Aniston. And Osama bin Laden has poopie pants and Cartman engaged in some old school Bugs Bunny antics (I stopped working to watch part of that South Park episode) and I've only gotten 20 e-mails since starting this column at midnight. Do you know who The Hollywood Reporters' "Next Generation" Class of 2005 is? I saw the list. It bored me. Back to work.
I bet everyone reading this column feels like the tools they use to make life easier have started controlling their lives at some point.
You clicked on this column on purpose (or someone sent it to you). No wonder newspapers are dying. Forget about quality… they are, by nature, a passive choice of media. You get more than you read when you buy them and you select from mostly unknown quantities as you go through the paper. But you make so many active choices every day, who has time left for those grand old passive choices… except when you are in the bathroom?
Even JetBlue is a classic example of being serviced into losing something… in that case, reading while flying. You never knew how interesting The Iron Chef was until you got a boring passage in your book and looked at that damned TV!
And there is nothing inherently wrong with watching The Iron Chef. Not my point. My point it, we already have many, many more options in many, many more ways than ever before. The field for change is not the same as it was even a decade ago.
Even going to the movies is different than it was a decade ago, as stadium theaters with bigger screens, better sound and fewer seats are now the norm as big movies are accommodated not with "the one giant theater" in the multiplex but by more screens in the theater so that every one who wants to buy inventory (seats) can buy it when they want.
If the film business expands the ways of delivering entertainment, more people will have the experience. There is no question. But unlike the ad-based television world, gathering the maximum number of eyeballs is not the goal in the film business. It is maximizing revenues. If studios could double theatrical ticket prices and sell 30% fewer tickets, they would do it in a second. And then, after enjoying that 40% increase in revenues and start trying to figure out how to mine that 30% they lost. And then, how to expand even further. It's not real complex.
The notion of smashing all records with one massive all-delivery system weekend makes execs drool. But this is not a one night stand business.
And I am still looking for a single example of an entertainment industry that was able to raise the price point based not on a significant improvement in technology, but rather on convenience.
People draw about 175 hours of entertainment from their cable or satellite systems each month. It generally costs less than 50 cents an hour.
$5 for a 2 hour movie is 5 times that price.
How many more times than that will they pay based on convenience?
What is the industry really offering with new delivery systems? Who are these new delivery services going to serve? And while delivering via a system whose price point is already established as so low, is opening weekend fever enough to get people to pay enough multiples over what they already pay to make it viable?
In a world of softening DVD sales, studios do need to tighten their belts. But that is a whole lot better than hanging themselves by those same belts instead in an act of sexual asphyxia.
