As with any new business venture, I’ve been spending a lot of time speaking with people, espousing my views of what’s going on in the entertainment industry.  Frequently, the conversation (naturally or otherwise) finds itself at “What Is The Future of Entertainment?” a topic of obviously great concern to the vast majority of those I interact with.  More and more during these conversations, I find myself defaulting to a certain set of comments and thoughts.  Initially, I’d decided to write this essay for my own edification – an opportunity to refine and clarify my views and talking points.  The more I got into it though, the more I realized it needed to be opened to the wider world for discussion.  One opinion is interesting, but ultimately the discussion is what’s going to decide and define the next era of entertainment.

Before I jump into it I’d like to clarify two points: First, to make it easier on myself and those reading this blog, I’ve broken it up into three sections: Background, Future, and Conclusions.

Second, my arguments mainly revolve around entertainment as defined by mass media that include moving images.  I’m not an expert in text-based media or how blogs are affecting the newspaper industry, and I’ll kindly defer on commenting to those who are.  My expertise is in the intersection of moving pictures and technology.

With that in mind, let’s get to it.

Background

For the past 100 years, the business models of entertainment and mass media have functioned under very specific rules of scarcity:

Film (pre 1980s) - If you wanted to see a movie, you went to a special venue, at a special time, and paid to see the movie.  If you wanted to see it again, you repeated the process from step one. Once it left theaters, you waited for someone to show it again and started the process over.

Film (1980s on) – If you wanted to see a movie, you went to a special venue, at a special time, and paid to see the movie.  Once it left theaters you waited a specified period of time, and then paid a special place a certain amount of money for a physical object which presented the opportunity to watch the movie again at home so long as you paid for the proper equipment.  If you waited a little longer, you could pay a specific company for the opportunity to see it on television if you were on the right channel at the right time.

Television – If you wanted to see the program, you made sure that you were in front of the television and tuned to a certain channel at a certain time to see the program.  If you wanted to see it again, you waited until the channel showed it again.  Later, you could also pay a special place a certain amount of money for the physical object that allowed you to watch the series again at home so long as you paid for the special equipment.

While these are perhaps very simplified versions of the various content business models, the overall commonality in each is that they’re all based on scarcity of product; either physical product scarcity or timed scarcity.  You have to follow certain rules to experience the content in question and deal with a very few companies who have established themselves as gatekeepers.  Thus the scarcity is established within the market with very few alternatives.

There’s an additional related element to the scarcity argument that must be discussed as well, and that’s the control of the distribution pipelines. It used to be that if you wanted to reach millions with a moving picture project, you had two choices: you could play in television’s sandbox, or you could play in film’s sandbox.  Either of these scenarios required you to play within the system because you were otherwise unable to access the distribution pipelines.  Basically, if you wanted to have your project on TV or in a movie theater, you went to the people who controlled the airwaves and theaters.  There was no real alternative for video content on that scale of either audience or distribution.

So there was a lock on the experience (both into and out of the system) and the scarcity of product (either the experience itself or the physical product) was what enabled a premium to be charged. It’s not a bad business model, but there’s one major problem: it no longer reflects the current market conditions because the scarcity upon which these businesses are based no longer exists.

The present situation is that there are more efficient distribution mechanisms available, which provide content to the customer in a way which many customers find to be preferable either due to convenience or cost.  Internet distribution – and I don’t distinguish between legal and illegal for reasons I’ll get into below – is allowing content distribution to proliferate at a pace unprecedented in history.  While the world-shaping effects of widespread connectivity can be discussed at great length (the sociological, economic, and political effects of connectivity are another topic for another blog post) let’s focus on how this artificial scarcity has affected the above business models:

Film (theatrical) – It is both easy and cheap/free to stream or download films that are currently in theaters.  Many films are leaking before they hit theaters due to the ease of uploading, and the switch to digital intermediates within the post-production marketplace.  As more films are shot digitally, and fully digital masters become more common, this will only increase.

Film (home video) – It is both easy and cheap/free to download films whose quality is identical to the physical disc versions sold at retail.  Both SD and HD versions are easily found and copy protection technologies have thus far proven ineffective in stemming copying of said films.

Television (Live) – Hardware has allowed consumers to skip commercials and virtually all consumers who use DVR technology prefer the experience to normal television containing commercial breaks.  This has lead to a crisis of confidence amongst advertisers, and lower advertising rates.  Also worth noting is that the ease of finding television online has led to a noticeable and calculable drop in live viewership of television.

Television (DVD) – It is both easy and cheap to find television series online to either stream or download.  Whole seasons are generally available with ease, and legitimate streaming services can only offer 1/5 to 1/6 the amount of advertising per program.

Where does this leave the major studios, networks, and content creation companies?  The simple answer is “not in a particularly good place.” Their distribution model is no longer the largest or most effective, their scarcity model is no longer viable, and their revenue streams are shrinking or disappearing outright.  The good news is that they have brand equity, but even that equity comes with the downside of zero brand loyalty. Creatives have fans, studios have logo recognition.  Maybe it’s just me, but I’ve never gone to see a movie because it was from Warner Brothers or Paramount, and I’ve never watched a TV show simply because it aired on NBC and not ABC.

The counterpoint is that while these pipelines are no longer as exclusionary as they used to be, that’s not the end of the distribution argument, because distribution still requires content, and content – at least as we understand current “mainstream” models of content - still requires funding.  So there’s still a checkmark in the win column for the traditional entertainment companies in this regard, as they’re the entities currently spending a lot of money on mass entertainment. No one else is financing content like media companies, and no one else in the world has the expertise to do so either.  It’s sort of an irrelevant point unless you can make money on the release, but it is something worth highlighting as a point in their favor.

For now.

Getting From The Present To The Future

The argument is often made that the internet is putting thousands of people out of work and killing off professional content.  This may or may not be true, however it’s irrelevant for the following reason: disruptive technologies always put people out of work…temporarily.  The automobile put thousands of coachbuilders and workers out of business as well.  The smart ones adapted their businesses or skillsets, the others went away.  It would be lunacy to suggest that the coachbuilders have put “guardrails” on the march of progress (though they definitely tried) and we would have been much worse off if that had been the case.  Mark my words that if we shortsightedly protect a business model which does not reflect current market conditions and the further progression of modern technology we’ll be far worse off in the long run.

Now this is not a judgment on piracy or downloading, and I’ll refrain from opining on said practices.  The existence of worldwide piracy is, however, a reality and must be taken into consideration. If you’re selling propriety shiny discs, or timed scarcity, then understand that there is a competitor in the marketplace which offers the exact same experience for less, legal or not, and is unhindered by things like “manufacturing costs” or “shipping details.”

With that said, I’ll move on to what I do think the answers are, for better or for worse.

With scarcity gone, there must be something worth paying for, otherwise there’s quite literally no business model at all for large-scale content creation. Unlike others, I don’t think that “convergence” is the future.  I don’t see television, movies, and online content merging into one indistinguishable entity. In fact, I think the best scenario for content involves doing the exact opposite and emphasizing each medium’s respective differences.

Every medium has its own distinct pros and cons, and since scarcity is no longer a viable option, the unique experience imparted by every medium must now be its selling point. Let’s examine how that affects the business models we discussed earlier.

Film is an easy first example, because there is quite literally no adequate emulation of the theatrical experience.  Seeing a big movie like Star Trek or a small indie-flick like Brick at home – regardless of the expense of your entertainment system – is no comparison to seeing it on a huge screen in a full theater.  This goes double for a comedy or event film: there’s something about the shared experience within a crowd of hundreds that’s impossible to emulate in any other environment.  The human element – cell phones aside - adds to the theatrical experience; and the theatrical experience has to be seen as duplicable.

3D is another very convincing experience argument, however it needs to progress beyond gimmicky tricks and into a serious filmmaker’s technique. Right now, 3D is a $4 add-on for a movie someone already intended to see.  Elevate it alongside the other skills in a director’s repertoire, and it becomes the reason people attend certain films in a theater.  With wide-scale 3D television adoption at least a decade off, this can be a real differentiation factor to seeing a film at home. James Cameron’s AVATAR is the nearest release to present a strong argument that 3D is the only “real” way to experience this film, but it must be followed by others. Give the audience a reason to differentiate between theatrical and home experiences.

Television is a much trickier proposition for two reasons: First, the argument of “live VS DVR” is generally already settled amongst those who own DVR devices.  Second, the experience of watching a television show (pirated or legally) on your laptop is nearly identical to watching it live or DVRed on television.  Some would argue the experience is actually better in a pirated scenario, and as more and more devices have the ability to display downloaded content onto televisions, it becomes harder and harder to defend the economic viability of current “live broadcast” models.

Outside of sporting events, most shows are identical when viewed a day, a month, or a year later.  The idea of evergreen content is what launched the syndication model: if a show is fun to watch now, it’ll be fun to watch later. The irony is that in the effort to produce shows that can live on forever in syndication, the idea of creating that unique experience was gradually diluted out of the entire process.  Only now are we realizing the effects of this decision, and it’s manifesting in no reason at all to watch a program “live broadcast” versus later.

The only shows adapting to this environment are viewer-participatory reality shows.  These shows have created an environment in which the only way to participate in the voting (i.e. the season’s dramatic arc) is to view and vote within a certain period of airing.  Yes, the show can always be watched later, and the drama and rooting for your favorite people will still exist – but to truly have the “whole experience” including voting, you only have a short window.  This can work when the show is built on viewer participation, but is of no use in scripted programming as we see it today, where the audience is generally just along for the ride. Thus, the overly broad question of “how do we save television” shifts to the more specific “what unique experience can we impart on our audience that they cannot have in any other scenario?”

This brings us to my favorite bit, and the part I think will have the biggest impact over the next decade: online content. Online and traditional content have begun to blur a bit when both are being consumed online. The lines between what constitutes television and what constitutes online content are continuing to get ever closer. This is very dangerous to the long-term health of online content. I’ve often said that the job of a creator is not just to make good content, but to make good content specific to a certain media. Each medium has unique advantages and disadvantages, and the creator must craft an experience that accentuates the advantages and mitigates the disadvantages of the medium in which it lives.

The most important question for the future of all online content is this: “What are those unique elements which allow content created primarily for online consumption to stand apart from its more ‘traditional’ or ‘mainstream’ rivals?”  Film can tell an epic story over a period of 1.5-3 hours on a scale that’s unmatched in other media.  Television can tell a story over a period of dozens or hundreds of hours with an intricacy and character development that’s as of yet untouched in other media. What is the “online experience” that makes telling a story in this medium so different the experience in any other?

For online content to further expand, we must experiment to find and exploit those unique elements that enable the experience itself to stand as the draw. So long as we’re content to mimic other media, it will never grow into a viable “mainstream” entertainment medium.  If all you’re doing is creating “TV-lite” or “Film-lite” in an attempt to mimic the experience, then there are already better competitors out there - they’re called “Film” and “TV,” and most people are already familiar.

There are advantages built into the way we interact with social and online media that can allow for a freedom of storytelling across a much wider spectrum than anything else out there. There are advantages that stem from intimacy, user expectation, depth of experience, and portability. There is a scale and a bidirectional freedom which stems from the online shift to “conversation” versus “broadcast” that’s just starting to really take hold in the content iself. We’re barely scratching the surface of what’s possible and the best news is that new tools are being built every day that can allow for different storytelling techniques, and if the tools aren’t already out there you can build them yourself.

There are great shows out there now, but too many are being created as if they were a smaller and more inexpensive version of a television show.  Online content can be so much more. Our jobs over the next few years will be to experiment within this medium and find those elements that enable a truly unique audience experience that stands apart from any and all other entertainment media.  Only then can we begin to explore what “online content” means within the larger entertainment spectrum.

Conclusions

1.     Film isn’t going away.  It’ll change a bit, and the home video market will go through some rough times, but the theatrical experience is too unique to disappear.  I don’t believe we’re at the end of the era of the blockbuster film, I think that this can be a real boon for both the smaller and larger films.

2.     Television is going to go through some real rough times over the next 5 years.  Prepare for a lot more reality television (cheap to make, user participatory and thus timely) and other non-scripted content.  Television Ad rates will continue to drop, and license fees will too, thus further cutting the budgets for content.  There isn’t going to be another LOST for a very long time.  In the first draft of this essay, I included the line “Maybe ever.” but I hope I’m very wrong there.

3.     I don’t know whether the idea of a view online will come to be seen as equal from a monetary standard to a view on TV – at least concerning professionally produced content – but I sincerely hope it does.  I don’t see any logical or economic reason why it won’t, but then again logic rarely has any place in arguments about art and commerce.

4.     The larger media companies will remain, however they’ll never have the same power over the marketplace they once had.  Since their competitive advantage is no longer distribution but financing and development, new competitors will come to market with Hollywood talent and outside money looking to exploit that more open distribution model.  When scarcity is at play, it keeps competitors away.  When “experience” is the driving audience draw, you get a lot more people banging on that door.  Look to see more midlevel studios popping up over the next few years.

5.     The new gatekeepers won’t be WB, NBC, or Fox, they’ll be Verizon, AT&T, and Time Warner Cable.  As more and more is shifted to those pipelines (VOIP, VOD, TV, Internet, Fiber/Cable, etc.) they’re now the most valuable real estate in the world.  Remember, NBC, ABC, etc were able to take advantage of the airwave scarcity to become huge media companies.  That scarcity now applies to online access.  The last thing those cable and fiber companies want to become is a basic utility, so they’re doing everything in their power to change the way they interact with (read: charge) the customer.  Witness TWC’s attempts at consumption-based billing (no more “unlimited access,” you pay as you go) and the “tiered” access proposals which prompted the battle over net neutrality.  They’ll fight tooth and nail against any challengers because as long as they control the route to the end consumer, they’re the most powerful companies in media.

Unless…

6.     I’ve got a really dark-horse theory which ends with “Google provides free, basic, nationwide wireless internet access” which revolves around their dark fiber buying spree, testing of city-wide wireless, and creating an open-source mobile platform.  My theory is that they’re looking to cut the legs out underneath the mobile service providers by attacking their handset and data markets with VOIP over city-wide wi-fi, but a side effect of this is that it also ruins the Cable and Fiber “scarcity” business model and puts them into the “experience” marketplace.  I.E. “Google is free, but with us you get 50-100x the speed and a better experience.” This would be very interesting if it did happen, and falls right in the Google disruption wheelhouse.

7.     Online content is still 12-18 months away from a “mainstream hit.”  Right now there’s too much “filming radio” and not enough “making unique content” in online content.  This can’t and won’t happen overnight, it requires a lot of experimentation within the medium.  Mark my words: it will happen though.  We’re coming closer, and each new project is about 5% better in the “unique experience” field, but there’s still a ways to go.  Being cheap to produce is not a reason for a consumer to watch.  Being an experience that they simply cannot have in any other media is.

8.     The application marketplace and online content space is going to intersect in a big way.  This falls under the “end user expectation” and “new storytelling tools” categories, but the simplest explanation is that the expectation for online content is “free,” and the expectation for the application marketplace is “paid.”  People will pay for good applications (the same way they’ll pay for movies) so long as the experience is worth it.  How “applications” differ from “content” is about to be seen over the next few years.

The takeaway from all of this can be summed up thusly: content is changing in a big way.  Big changes to established industries are both painful to the aforementioned established companies, and an opportunity to the more nimble.  Business models will change drastically over the next few years to compensate and remain relevant, but when everyone is comfortable there’s no room or interest in changes.

Right now, entertainment is in a low-to-mid-level state of chaos. There’s little confidence in the status-quo, and unlike past decades no one seems to know what the future will bring.  This means that those who are willing to experiment will have first opportunity to rewrite the rules.  Those who are content to live with the status quo will be replaced.  This is equally true across the entire scale of entertainment, from large to small.  We’re well placed in a disrupted field, and that presents unprecedented opportunities.

So what is the future of entertainment?  It’s up to us to decide.  All of us.  Because we now have a seat at the table.  Fortune (in all forms) favors the bold.

So grab a seat and speak up.