Issue #38
Last Update May 19, 2005
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Finance Technology Challenges Entertainment Companies by Sten Grynir Movie, music, and television companies all are feeling the impact of technology on their revenue models. Technology has given the consumer of their products the ability to opt out of the payment structures these companies have long relied on. For music, file sharing over the internet makes it possible to obtain a song without buying the CD. For movies, the fear is that high- speed web access and DVD burners will make the same process possible. For television, hardware and software now exists that allows the view to skip commercials, threatening the revenue stream of the network or local station.
Only the TV industry is dealing creatively with these threats to its income.
While the music industry is trying frantically to stuff the Napster/CD-Writer genie back in its lamp, and the movie industry is depending on the US government to enforce control over its country-by-country rollout schedule for DVDs, television, long wedded to a model of free access for viewers in exchange for sitting through (revenue-providing) commercials, has begun the process of intelligently reevaluating how they make a living. Rather than trying to bury new technologies, TV is trying to figure out how to live with them.
This coming video season will see the advent of commercial-less shows, where advertising money is earned through product placement (visibility of products as props or mentions during the show - think Reese's Pieces in the movie E. T.) or the use of product as an integral part of the plotline. This allows the packagers of TV shows to work with its customers, the viewers, allowing the use of TIVO and other time-shifting technologies that the public has come to love, instead of treating its customers as a band of thieves unwilling to submit to high prices and high-handed control of formats, playback devices and release dates.
Perhaps TV is exhibiting flexibility now because it was smart enough to learn from its past battles against new technology; it lost the cable battle decades ago and moved on. The music business refuses to learn from experience: it fought home creation of cassettes and CDs, and is still fighting the internet. Music publishers are no longer needed to create or disseminate music; their sole legitimate function is to provide PR for artists. The sooner they realize this and redefine the business they are in and figure out how to make money at it, the better off they, the artists and the music-listening public will be.
Movie companies are in a somewhat different position. Even with digital equipment, making a movie is still a vastly more expensive proposition than cutting a record. Piracy aside, the major quarrel that movie companies have with technology is that it allows DVDs to be bought and viewed in places where the movie companies would prefer to delay release. This is another King Canute attitude. Assuming a schema can be developed that affords reasonable protection from bootleg DVDs, the movie companies should realize that, from an information standpoint, the world is now a single market, and they should develop profit strategies that take this into account.
It's strange to think that TV, which now is really an old technology (the first TV broadcasts took place in the 1930s) is breaking a path that the newer art forms should follow.
New York Stringer is published by NYStringer.com. For all communications, contact David Katz, Editor and Publisher, at david@nystringer.com
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