We’ve written about Sony multiple times over the years, rarely in a good light. A parody Twitter account of the company’s CEO, Kazuo Hirai, often makes for entertaining reading. The company can’t seem to catch a break. Its latest financial results, released today, warned of a $2.2bn loss for the financial year, the sixth loss in seven years. For the first time since 1958, the company will not pay a dividend. Much of the blame fell to the ailing smartphone division, which generates a fifth of the company’s revenue, but other businesses hurt the conglom too. The company loses $80 on every TV sold; rumours abound they will sell the Spider-Man franchise back to Marvel for a quick payday; the one bright light, Playstation, which took the company into the black in Q2, is beginning to seem risky, as customers look beyond single-use devices like games consoles, a trend we spotted back in January last year. (Earlier this week, Microsoft continued to hint that it might spin off the Xbox business). Sony recently spun off its TV division into a subsidiary and sold its PC business. These actions in turn were supposed to bear fruit, but clearly haven’t.
Much of the difficulty Sony faces was elaborated on in detail in a brilliant profile of then-CEO Sir Howard Stringer for The New Yorker, back in 2006. Little has changed since then. In today’s FT, the newspaper outlines the longevity of Sony’s heartache.
June 1999 Nobuyuki Idei becomes chief executive. Four years later he presides over the infamous Sony “Shokku”, or shock, in which the group surprised investors with a profits warning.
June 2005 British-born Howard Stringer becomes chief executive, the first foreigner to lead Sony with a mandate to restore profitability and turn the core electronics business round.
September 2005 Sir Howard’s first major restructuring initiative outlines a plan to cut staff numbers by 10,000, or 7 per cent, and reduce costs by Y200bn. It will also close 11 manufacturing plants, streamline its number of products and generate capital from asset sales. “We must be like the Russians defending Moscow against Napoleon, ready to scorch the earth to stay ahead of the invaders. We must be Sony United and fight like the Sony warriors we are,” he says.
December 2008 A second wave of restructuring begins with plans to cut 16,000 full-time and part-time jobs in its electronics businesses around the world.
2011 Sony downgrades its net income forecasts four times.
March 2012 The group highlights its digital imaging, game and mobile units as the three core pillars of its electronics business.
April 2012 Kazuo ‘Kaz’ Hirai takes over as chief executive. Sir Howard says he will be a “tough-mind[ed]” leader. The first restructuring under Mr Hirai is outlined under the banner of “Sony will change”. Sony will shed 10,000 jobs, or about 6 per cent of its global headcount, over the next three years.
March 2013 The group reports its first full-year net income in five years.
October 2013 Sony warns on profits.
January 2014 Moody’s cuts Sony rating to junk.
February 2014 Plans to spin out the television business and sell the Vaio PC business are announced.
May 2014 Sony warns on profits for the third time in six months.
July 2014 The group surprises the market by swinging into profit for the second quarter.
September 2014 Sony warns that its expected annual net loss will be nearly five times as big as initially predicted at Y230bn.
A recent McKinsey report declared that, for businesses, “The age of experimentation with digital is over“. That may be for most B2B and B2C private sector companies, but not for the luxury goods industry. Bemoaning the woeful development and investment in strategic initiatives for luxury brands online is something this blog has done once or twice before. There are understandable reasons why the industry has been reticent to commit to online retail, based on customer insight (the assumption that HNWIs don’t like to shop for something without being able to see and touch it for themselves) and conflicting priorities (physical store expansion into China and more experiential events has been the name of the game in recent years). But with a China slowdown mooted, particularly in the area of luxury gifting, and no real concrete research to show that HNWIs aren’t just as digitally savvy as their less liquid counterparts, there becomes less and less justification for what are, across the industry, woeful examples of digital strategy and innovation.
It can’t be easy for profitable businesses like LVMH, with an eye on quarterly earnings, to make drastic investments in the online space. Luxury’s brand equity often comes from provenance and tradition; a company’s roots are in its founding stores, the connotations of Milan, Florence, Paris, etc. They also worry about their neighbours; a flash-sale site or, worse, one full of counterfeit knock-offs, is always just a click away. From a logistical point of view, there is also the issue of back-end infrastructure to contend with. For several years, PPR (now Kering) ran much of its e-commerce business through Yoox, as we’ve talked about before. It would be wrong to single out those in luxury. L2 Thinktank recently tweeted with much excitement about Bacardi’s “cocktail discovery site” that worked seamlessly across web, mobile and tablet. Well, forgive us if we don’t leap for joy in an ecstasy of delirium, but this is 2014, that should be the minimum deliverable. Still, luxury is a sector in blatant need of redirection.
Burberry is lauded by many as an outlier in this world of luxury goods, a company that has truly embraced digital. For all the talk of such innovation though, the website itself is utterly dominated by a rote e-commerce site, as are its social networks such as Google+. It is the physical stores where technological innovation has been injected. And this is supposedly the company pushing the rest of its peers forward. It comes as little surprise then that eConsultancy published a superb piece at the end of April excoriating the sector, leaving no brand unscathed. Headlines included, “painfully slow load times“, “awful UX” and “not making much effort“. But the worst and most perplexing atrocity had to be the above screengrab on the purposeful hiding away of an e-commerce platform, one that was presumably quite expensive to source and implement in the first place. We can’t overestimate the necessity of having a clear user journey through to purchase, just as it would be difficult to overestimate the amount of luxury good companies that are guilty of this sin for which Dolce & Gabbana have been singled out for here.
On this note, Gucci’s recently relaunched mobile site – replacing among other things a tablet site that had been left to wither since 2010 – was welcome news to us, as it seemed to be also (logically) to those wishing to actually part with their money on Gucci wares. L2 in May reported the news, saying that the new site now accounts for 27% of all traffic, a 150% YoY increase. Sounds good, except that means traffic through the mobile site in 2013 was a miniscule 0.18%, right? Terrible.
There are signs of hope. Gucci’s move to invest in a new mobile site, though monumentally belated, is a welcome one. As more brands cotton on to the importance of online, the Financial Times recently reported on the moves many are making to secure ‘.luxury’ suffixes, in the wake of IPv6, if only to avoid the complications of cybersquatting. And Michael Kors, which seems only to be going from strength to strength every quarter, has praised its own social media presence for “driving international sales”. We’ve almost entirely focused on fashion brands here, but other companies within the luxury sector are getting the message loud and clear. Take the auction house Christie’s, a legacy company if ever there was one, having been founded in 1766. Not only have they dedicated time and energy to investing in major online auctions, they have also recently created a new sector vertical of ‘luxury’ within the house itself. New thinking might well take new talent, it will also take C-suite buy-in, as well an acceptance that digital commerce is an integral part of business now, no matter how exclusive your product is.
Having studied policy and regulation at university, Zeitgeist is often compelled to look at many issues facing companies today through a regulatory lens. But even the most dispassionate fan of rules and laws would have to concede that as digital innovation disrupts multiple sectors around the world, the way these new innovations and businesses are governed is an important consideration. In this piece we’ll be looking at regulatory concerns for disruptors like Uber and Netflix, as well as how regulation effects legacy companies like Microsoft and Comcast. As with many of our articles on this blog, we’ll be taking a particular look at the TMT sector. (Bitcoin will have to wait for another article).
Regulators often find themselves caught between a rock and a hard place. Should the emphasis be placed ex-ante, to ensure compliance, or ex-post to apply punitive measures and fix problems once they have become apparent? The former seems wise as it sets initial goals for companies. But it also risks opening loopholes, as well as being overly prescriptive and thus failing to adapt. It can also lead to the development of overly-familiar relations between regulator and industry, leading to what is known as ‘capture’. Currently, the US favours an ex-ante approach, but as Edward Luce detailed recently in the Financial Times, this has led to a “creeping impulse to micro-regulate“. The FDA’s recent announcement that they would regulate e-cigarettes, despite no proof it encourages the take-up of smoking tobacco, is such an example. Ex-post – regulating after an event – seems just as bad, mostly because the damage has already been done at that point. While it means that all problems addressed are real-world and practical, they can also be applied with too much emphasis. Above all, regulation ultimately risks stifling innovation; Edison moved to the West coast because he was fed up of the stringent regulations in the East. A recent lead article in The Economist asserted that, far from too little regulation, the global recession was caused by too much state involvement in the wrong places. Too little oversight though, and companies can be allowed to run wild.
Earlier this month, The New York Times featured an op-ed on regulating the online world. It is written by New York State attorney general Eric Schneiderman. As might be expected, he quickly attacks online start-ups saying it is “amazing” that they think just because their business is online, that “somehow makes them immune from regulation”. This is all well and good, but it masks the fact that clear regulations have not been established. Schneiderman is right to point out that just because a business now has an app instead of a high street store doesn’t mean its responsibilities to the law have changed. It is an apt analogy. But in practice the story is different. As with most innovations, from film to Napster and Airbnb, regulators must constantly be playing catch-up. The complaints of new businesses are not that they should be subject to regulation, rather that those rules are onerous or outdated, applying to a different time. The sharing economy works because it has found cheaper, more efficient ways of offering services that hitherto were more restricted; regulations need to be appropriately dispensed. Sadly, many cities in the US have simply blocked allowing such services to operate. Uber – a car pickup service – is probably not wholly repulsed by the thought of regulation, but they are resistant to rules put in place by entrenched interests and unions. Airbnb might violate the letter of the law, but not the spirit surely. People have always let out their living space to others. The only thing that has changed is scale. Why does scale suddenly make something legally problematic? Schneiderman points out that some lettings are so large, with multiple rooms let at once, that they are essentially hotels. True enough, perhaps, but Zeitgeist has certainly never come across such a property, and they are certainly small in number, and no more represent Airbnb’s ethos than any hotel violating its own (regulated) terms. A recent article in The Economist argued for “adaptation, not prohibition“. Schneiderman’s sentiment is that these start-ups need to work more closely and proactively with regulators, but this fails to recognise that regulators need to also fundamentally change their approach.
Regulation in China has been a hot topic for a while now. This is principally because the region has a low tolerance of free speech. But it extends to cultural concerns as well; the Google Play store, Twitter, and most of Hollywood’s annual product do not make it onto Chinese shores (legally, anyway). What this creates is a secondary tier of companies who take Western business models and run with it. That’s why there are multiple Chinese Android app stores, why Sina Weibo is a fantastically successful service, and why many poor remakes of US films flood the Chinese market. It has been pleasing then to see two recent developments in the way China regulates the TMT sector that should be good news for consumers and Western companies. Today saw the announcement that Microsoft’s Xbox One is to be sold in China. It will be the first foreign games console to go on sale in the country, lifting a fourteen year ban. This would open up the company to the half billion active gamers in China. Additionally, as Michael Pachter, analyst at Wedbush Securities pointed out,
“The middle class in China is pretty large, and positioning the box as an over-the-top TV receiver gives it a lot of appeal to wealthier Chinese.”
Earlier this week, Warner Bros was the latest film studio to partner with Chinese site Tencent. The film 300: Rise of an Empire, is available to rent through the site, while it is still in cinemas in territories like the US. The points of the deal were very interesting. Zeitgeist has for a number of years now advocated an increased flexibility to film platform release windows. Such a rigid structure as the industry has in the US is not as apparent in China. This could help alleviate piracy in the country and separately could pave the way for a relaxing of the quota of US films that are let into the Chinese market every year. Hopefully this will be a precursor to more such moves in Western markets. As someone commented on the news when it was published on the Financial Times website,
“Maybe they can do the same in the rest of the world as well?
Or I could wait 2 months for something to come out on Bluray in the UK compared to the US. Or just pirate it when the US version is available since they won’t let me buy it in my country, but will let other people buy it in other countries.”
While China is taking steps forward, the US seems to be faltering in its regulatory approach. We mentioned the impending restrictions on e-cigarettes earlier, and let’s not even go into then-mayor Michael Bloomberg’s crusade against sugar. We’ve written about net neutrality before. The issue has been of interest to Zeitgeist since university days. It was thrust into the spotlight this year when a US court ruled that the FCC had “overstepped its authority” after a legal challenge from Verizon. Last week, new rules were proposed that will undermine the original purpose of the policy of treating all traffic the same, allowing ISPs to charge companies like Netflix more in order to reach consumer with greater quantity or quality, but only on “commercially reasonable” terms. These terms have yet to be defined. These moves touch on a related matter that has also been greeted with consternation by those who favour fairness. This is Comcast‘s proposed merger with Time Warner Cable. Netflix recently publicly came out against the move. It is easy to see why. As The Economist recently elaborated, such a deal would limit competition and reduce any incentive to innovate. It is also one more example of the assumption companies have that their problems can be solved with size. Comcast have admitted they will raise prices for the end user, while as much as conceding there will no be no discernible benefit to them. One might argue there is little more for such companies to do, but average internet speeds in Tokyo and Singapore are ten times as fast on average as in the US. Even the Financial Times, which can often be counted on to be a bastion of support for capitalists, compared Comcast to the Railway Barons of the past.
The sharing economy is creating difficulty for many sectors, and regulatory agencies have not escaped this. Such forces have been to slow to adapt to fundamental changes in the TMT sector, particularly in print, music and film industries. There certainly seems to be a tendency for over-regulation today, particularly in the US. Returning to an article we mentioned at the beginning of our piece, Edward Luce laments that America “no longer feels unusually free”. Perhaps this is part of a cyclical trend. Like the causes of the recession, perhaps the problem is a stifling caused by over-regulation in the wrong places, coupled with a lack of innovation in areas where sensible rules that do not cater to the established are in dire need. It is good to see rules and regulations around consoles and release windows are being relaxed in China, but the furore around regulating the sharing economy needs a similar dose of innovative thinking.
UPDATE (17/9/14): We’ve included some nice examples in this post of innovative thinking paired with light touch regulation going on in China’s entertainment sector. Sadly the pendulum swings both ways; though shows like BBC’s ‘Sherlock’ were made available with authorised translations mere hours after their original broadcast in Blighty, the state is cracking down hard in other ways. The Economist reports that last week, China’s TV regulator said that, from April, any foreign series or film would need approval before being shown online. It is looking for “health, well-made works” that “showcase good values”. This sounds like a vague excuse to arbitrarily censor content it doesn’t like. Explicitly, banned subject matter includes, according to The Economist, “superstition, espionage and—bizarrely—time travel”.
It would be impossible to capture the disruptive influence the latest digital technologies are currently having on the world in a single blog post. But what Zeitgeist has collated here are some thoughts and happenings showing the different ways technology is changing our lives – from the way we do business to the way we interact with others.
Last night saw a highly enjoyable occurrence. No, not the Academy Awards in general, which as ever moved at a glacial pace as it ticked off a list of predicted favourites. Rather, it was a specific moment in the ceremony itself, when host Ellen DeGeneres took a (seemingly) impromptu picture of herself with a cornucopia of stars, tweeting it instantly. The host declared she wanted the picture (above) to be the most retweeted post ever. The previous holder was none other than the President of the United States, Barack Obama, whose re-election message saw over 500k retweets. It took Zeitgeist but a few minutes to realise that Ellen’s post would skyrocket past this. Right now it has been retweeted 2.7m times. Corporate tactic on the part of Samsung though it may have been, Zeitgeist felt himself feeling much closer to the action – being able to see on his phone a photo the host had taken moments ago several thousand miles away – and the incident helped inject a brief air of spontaneity into the show’s proceedings. Super fun, and easy to get definitive results in this case on how many people were really engaging with the content. But can we quantify how much Samsung and Twitter really benefited from the move, beyond fuzzy marketing metrics? Talking heads on CNBC saw room for improvement (see below).
The big news of late in tech circles of course has been Facebook’s $19bn acquisition of messaging application Whatsapp. Many, many lines of editorial have been spilled on this deal already. In the mainstream media, many commentators have found the price of the deal staggering. So it’s worth reading more considered views such as Benedict Evans’, whose post on the deal Zeitgeist highly encourages you to read. Despite the seemingly large amount of money the company has been acquired for – especially considering Facebook’s purchase of Instagram for a ‘mere’ $1bn – Evans sagely points out that per user the deal is about the same as Google made in its valuation when it purchased YouTube. So perhaps not that crazy after all. The other key point that Evans makes is on Facebook’s dedicated pursuit to be the ‘next’ Facebook, or conversely to stop anyone else from becoming the next Facebook. With a meteoric rise in members (see image below, as it outstrips growth by both Facebook and Twitter), Whatsapp was certainly looking a little threatening.
The worry for investors is how Facebook will monetise this platform, when the founders have professed an aversion to advertising. Is merely ensuring that Facebook is the ‘next’ Facebook a good enough reason for such acquisitions? Barriers to entry and sustainable advantages will be few and far between going down this route. The Financial Times, in its analysis of the acquisition, points out that innovation is quickly nipping at the heels of Whatsapp. CalPal, for example, is one example of a mobile application that lets users message each other from within an app. In the markets, there has been a relatively sanguine response to the purchase, but only because of broader trends. As the FT points out,
“External forces have also helped to push the headline prices of deals such as WhatsApp into the stratosphere. A global excess of cheap money, along with a scarcity of alternatives for growth-hungry investors, has boosted the stock prices of companies such as Facebook and Google.”
One of the most visibly exciting developments in technology in recent years is the explosion of the wearable tech sector. But it is Google’s flagship product, Glass, that has met with much ire and distress. An excellent piece of analysis appearing in MIT Technology Review last month hit the nail on the head when it identified why Glass was having trouble winning people over. The article rightly identifies the significant shift in external appearance inherent in making the switch from a device that needs to be taken out of a pocket as makes it clear when it is being interacted with (you need to cover half your face with the product to talk to someone, for example). The article also details the savvy approach Google have taken to the distribution of their product. It’s always sensible to try and mobilise the part of your base likely to be evangelists anyway, so as to build advance buzz before a full-blown release. But to get them to pay for the privilege, as Google are doing with their excitable fans, dubbed Explorers, is a stroke of genius for them. However, the key issue, and what the article states is an “insurmountable problem”, is that “Google’s challenge in making the device a successful consumer product will be convincing the people around you to ignore it”. It is this fundamental aspect of social interaction that is worrying many, and now Google is worried too. As detailed in the FT, the company has acknowledged that the product can look “pretty weird”. Recognising it has a “long journey” to mainstream adoption, it published a list of Dos and Don’ts. Highlights include,
“Ask for permission. Standing alone in the corner of a room staring at people while recording them through Glass is not going to win you any friends… If you find yourself staring off into the prism for long periods of time you’re probably looking pretty weird to the people around you.”
It indicates that Google may have a significant ‘Glasshole‘ problem it needs to attend to. The case may be overstated though. One of the problems may just be that potential customers have yet to see any practical uses for it. This is beginning to change. Last week, Virgin Atlantic announced a six-week trial of both Glass and Sony smartwatches. The idea will be for check-in attendants to use the devices to scan limousine number plates so that passengers can be greeted by name and be instantly updated on their flight status.
In the arts, digital technology has inspired much innovative work, as well as helped broaden its audience. David Hockney, one of England’s greatest living artists, recently exhibited a series of works produced entirely on his iPad at London’s Royal Academy of Arts. He is far from alone. Last week’s anniversary issue of The New Yorker featured work from Jorge Colombo on its front cover, again produced entirely on an iPad. Such digital innovation allows for increased productivity as well as new aesthetics. When done well, art can also involve the viewer, encouraging interaction. Digital technology helps with this too. Earlier in the year The New York Times covered how the New York City Ballet redesigned part of their floor in a new scheme to attract new visitors to the ballet. The result, roughly life-size pictures of dancers arranged on the floor, has seen great success, and an explosion of content on social media platforms like Instagram, where users have taken to posing on the floor as if interacting with the images (see above). It’s a simple tactic that now reaches a far greater audience thanks to new digital technologies.
A recently published book, ‘Now I know who my comrades are: Voices from the Internet Undergound’, by Emily Parker, seeks to demonstrate the ways in which digital technology has made helped to coalesce and support important activism in regions such as China and Latin America. But, as The Economist points out in its review, the disappointing situation in Egypt puts pay to some of the author’s claims; there are limits to how productive and transformative technology can be. In business, these hurdles are plain to see. A poll taken by McKinsey published last month shows that “45% of companies admit they have limited to no understanding on how their customers interact with them digitally“. This is staggering. For all executives’ talk of the power of Big Data, such technology is useless without the proper structures in place to successfully analyse it. We also perhaps need to think more about repercussions of increased technological advances and how they influence our social interactions. In the recently opened film Her (starring Joaquin Phoenix, pictured below), set in the very near future, a new operating system is so pervasive and seamless that it leads to fraught, thought-provoking questions on the nature and productivity of relationships. When does conversation – and more – with a simulacrum detract from interactions with the physical world? These considerations may seem lofty, but as we illustrated earlier, the germination of such thoughts are being echoed in discussions over Google Glass.
So technology in 2014 heralds some promise for the future. Wearable tech as a trend is merely the initial stage of a journey where our interaction with computing systems becomes seamless. It is on this journey though that we need to make sure that businesses are making the most of every opportunity to streamline costs and enhance customer service, and that individual early adopters do not leave the rest of us behind to deal with a bewildering and alarming new way of living. One of our favourite quotations, from the author William Gibson, is apt to end on: “The future’s already here, it’s just not very evenly distributed“.
Interesting video from the FT on Moncler, above. London’s more tony neighbourhoods of Chelsea and Belgravia have seen an explosion of thick down jackets over the past three years, mostly colourful, all with the same logo on them. They are worn as much by macho Eurotrash as Yummy Mummies. The brand is seemingly reaching a tipping point, where exclusivity leads to a bling reputation, where mass acceptance is quickly followed by mass exodus. La Martina has done a good job of steering clear of such waters, as we reported on in a state of retail article. While Moncler considers its IPO and a strategy for selling hot coats in Hawaii, North Face takes a completely different tack, embracing its mass appeal while still communicating an aspirational feel by showcasing the demanding professionals who use their apparel. Canada Goose, another recent entrant into the winter sportswear / city chic market, has also seemed to have had a burst of popularity recently. Zeitgeist saw no fewer than a dozen such coats around Soho and Chelsea this past weekend. An interview with the CEO of the company earlier this year described the strategy thus: “By focusing on the made-in-Canada, used-in-Canada story behind the coats, people would clamour for them.”
It will be interesting to see what happens to Canada Goose as it develops; whether it will try to emulate the more ritzy path of Moncler or the performance-related one of North Face. Zeitgeist doesn’t see many people in Europe on the ski slopes wearing Moncler, and doesn’t see many players on the polo field wearing La Martina (unless they are a sponsor). North Face, on the other hand, seems to have a deeply-seated place among hikers and skiiers, particularly in North America. Time – and a sound strategy – will tell whether Moncler retains its exclusive airs.
Damien Hirst divides the art world. No one thinks him a good artist, of course. But there are those who despise him for his commercialism, and those who recognise the ingenuity of the man and his innate sense of self-promotion and salesmanship. The apotheosis of this was undoubtedly Beautiful Inside My Head Forever, the infamous Sotheby’s auction held on the eve of the global recession. The diamond skull that was the centrepiece of the auction was described as a “vulgar publicity stunt” by The Economist. In the auction’s aftermath, the market for his works “bottomed out”; sales performed poorly versus the contemporary art market as a whole (see chart below). Despite such schadenfreunde, it was satisfying to read a positive review for the artist’s new retrospective, “Relics”, which opened last month in Doha. The exhibition is part of a major push by Qatar to make itself culturally relevant abroad. Indeed, the physical context in which the pieces are set do apparently allow the viewer to judge them anew, without all the tabloid baggage the artist’s works usually bring with them. But concessions have had to be made too:
“In a country where Muslim clerics hold sway, the titles of these works, many of which feature the word “God”, have not been translated into Arabic. Mr Hirst sees the sense in this, admitting that he wants his art to be “provocative in the right way”. Nudes are also virtually banned from public view.”
In an increasingly homogenised culture – by which we simply mean one where content from one nation is easily accessible and ultimately transferable to another – what does being “provocative in the right way” mean?
In New York, such questions were similarly asked in recent months, in particular at the city’s two opera houses. One, the New York City Opera, recently filed for bankruptcy. The house has long been suffering from financial difficulties, and despite a last-minute Kickstarter campaign that raised $300,000+ in a short space of time, the curtain will fall on this institution. Its strategy seemed sound – to not be, rather than to beat, the competition, in this case the Metropolitan Opera. In pursuing this end, they often used American singers and often produced avant-garde works, the most recent and famous of which was undoubtedly Anna Nicole, about a Playboy model who captured the hearts of America’s flyover states before meeting her tragic end. Such courage should be commended, and in a just world, rewarded, but sadly it was not to be. Indeed, the City Opera lost its biggest donor entirely because of this production.
The other of New York’s opera houses, The Metropolitan Opera, a stalwart of tradition, is battling with political ramifications that are happening thousands of miles away. In June this year, in another blow to any sense of fledgling democracy in Russia, President Putin signed into law an act that restricted discussion or promotion of homosexual acts, labelling such things “propaganda”. The New York Times cites one Anton Krasovsky, “a television anchor who was immediately fired from his job at the government-controlled KontrTV network in January after he announced during a live broadcast that he is gay, saying he was fed up with lying about his life and offended by the legislation”. Such news quickly became internationally relevant when mixed messages came from the Kremlin as to whether openly gay athletes would be welcomed at the Sochi Olympic Games next year. Boycotts are being considered. Just as there are openly gay people in sports, so in the arts. The controversy settled on the Metropolitan Opera as it prepared to launch its new season with Tchaikovsky’s Eugene Onegin. The new law, the almost universally acknowledged fact that the composer was homosexual, as well as the presence of talent (soprano Anna Netrebko and conductor Valery Gergiev) that were known Putin sympathisers, served to create a perfect storm. It was not long before opera fans were pleading with the Met to dedicate its opening night performance in support of homosexuals. Gergiev, an indisputably great conductor, as well as being a “close Putin ally”, according to the Financial Times, has long been dogged by rumours of political favours from the President, and protesters are becoming increasingly vocal. His claim on his Facebook page that the law targeted pedophiles, not homosexuals, pleased few. The stubbornness was mirrored by the Met. Writing an article for Bloomberg, Peter Gelb, General Manager of the Met, attempted to clarify why the house wouldn’t “bow to protest”. Gelb conceded he personally deplored the new law, as much as he deplored the 76 countries that go even further than Russia currently by completely outlawing homosexuality. He went on,
“But as an arts institution, the Met is not the appropriate vehicle for waging nightly battles against the social injustices of the world.”
Clearly, Gelb is declaring that such a mention before the performance would not have been – to return to Hirst’s words – “provocative in the right way”. But just as we have called it a perfect storm of political and cultural affiliations, was this not also the perfect opportunity for such a tremendously important institution to take a stand for those people who do not have such a prominent pulpit? Gelb asserts that the house has never dedicated a single performance to a political or social cause. Progressive thinking and innovation rarely develops from such thinking. Moreover, the Met has stood up for the rights of the marginalised in the past when it refused to play in front of black/white segregated audiences. So a precedent exists, which arguably is not being lived up to.
It would be naive to avoid acknowledging the pitfalls in the knee-jerk use of the arts to constantly promote change and stand against discrimination. In some cases, such calls to action can fall on deaf ears, or worse, provoke outrage that costs the institution and earns it an unfortunate reputation. Such damage to a reputation can be financially devastating (the New York City Opera is to an extent an example of this), which apart from anything else rules out any future opportunities to make such important statements. These organisations are, whether for profit or no, ultimately businesses that cannot afford to support every cause, no matter how relevant. Arts organisations have the rare distinction of often being at the intersection of culture, politics and money (which can often make for a murky combination). Perhaps what is needed is an entirely new fundraising model. Monied interests will usually be conservative in their tastes (why would someone want to change the status quo that allowed them to get where they are?). Increased use of crowdfunding, such as the City Opera briefly used with Kickstarter, will surely play a far greater role in the years to come. Such efforts could go some way to negating the worry of avoiding a few vested interests. What an organisation should or should not publicly speak out on must always rest with the individual situation, as well as how any statement is phrased, which does not necessarily need to condemn a party. As Andrew Rudin, the composer who started the petition to ask the Met to make a statement, implored, “I’m not asking them to be against anybody. I’m asking them to be for somebody”.
Are incumbent companies starting to see the light when it comes to embracing digital? Evidence is slowly starting to point in that direction.
Artists are known for embracing change and innovation, but the art market itself has been slow to adapt to changing consumer behaviour. Now mega e-tailer Amazon is selling art on its site, and venerable auction house Christie’s is pushing headlong into online-only sales, as Mashable recently reported. And while fashion designers know how to use digital to push the envelope, the fashion industry as a business has been notorious for their skittishness at investing in efficient, immersive digital experiences for their customers, so worried are they about detracting from the brand. So it was reassuring to see during Paris Fashion Week recently that French marque Chloé had gotten the message. As Zeitgeist’s dear friend and fashion aficionado Rachel Arthur details on her blog, the brand launched a dedicated microsite for their runway show. Brands like Burberry and Louis Vuitton have been doing this for at least three years, so in of itself it’s nothing new. What made the experience different were two things. Firstly, the site created a journey that started before the show, and continued after it, rather than merely offering a stream of live video and little else. More importantly, it tried to make the experience one that reflected the influence of those watching. As Rachel points out,
“As the event unfolded, so too did different albums under a moodboard header, including one for the collection looks, one for accessories, another for the guests, and one from backstage. Users could click on individual images and share them via Twitter, Facebook, Pinterest or Weibo, or heart them to add them to their own personal moodboard page.
‘[We] are excited to see how you direct your own Chloé show,’ read the invite.”
The recognition of platforms like Weibo should be seen as another coup for Chloé. Too often, companies send out communications to global audiences with perfunctory links to Facebook and Twitter. Not only is there no call to action for these links (why is it that the user should go there?), but there is no recognition that one of the world’s most populous and prosperous markets are more into their Renren and Weibo.
Elsewhere, despite what seems like some niggling problems, Zeitgeist was excited and intrigued to read about Disney‘s latest foray into embracing how consumers use digital devices, this time creating a second-screen experience in movie theaters. Second Screen Live, as Disney have branded it, doesn’t immediately sound particularly logical, as GigaOm point out,
“Of all the places I’d thought would be forbidden to the second screen experience, movie theaters were near the top of my list. After all, you’re paying a premium ticket price for the opportunity to sit in a dark theater and immerse yourself in a narrative — second screen devices operate in direct opposition to that.”
And yet the Little Mermaid experience that the writer goes on to describe cannot be faulted for its attempt at innovation, at reaching beyond current thinking (not to mention revenue streams), in order to forge a new relationship between the viewer and the product. Kudos.
Lastly, Zeitgeist wanted to mention the US television network Fox as a classic example of a company that has slowly come to realise the power of working with digital, rather than against it. In years passed, companies like Fox were indisputably heavily involved in digital, but only from a punitive standpoint. Fox and others were ruthless in their distribution of takedown notices to sites hosting content they deemed to infringe on their product. Fan sites that exploded in support and admiration for shows like The X-Files were summarily threatened with legal action and closed. There was little thought given to the positive sentiment sites were creating around the product, and little thought given to the destruction of brand equity that such takedown notices brought about. Not to mention the dessication of communities that had come together from different parts of the world, their single shared attribute being that they were evangelists of what you were selling. Clips of shows, such as The Simpsons, appearing on YouTube would be treated with similar disdain. So it shows how far we’ve come in a few years that this morning when Zeitgeist went onto YouTube he was greeted on the homepage with a sponsored link from Fox pointing him to the opening scenes of the latest Simpsons episode, before it aired. Definitely a move in the right direction.
This post serves as a companion piece and extended update to our previous article on rethinking film industry strategy, which can be found here.
“For me, the business of tentpoles is about generating franchises. The more tentpoles that are being made, the more risky the first installment of a potential franchise is going to be. That’s why I think everybody needs to be asking hard questions about what is a real tentpole and what is a faux tentpole.”
- Jean-Luc De Fanti, managing partner at Hemisphere Media Capital
Since our last post a few weeks ago on the need to rethink film industry strategy, when Steven Spielberg publicly predicted an “implosion” in the industry, the subject remains in the zeitgeist. As we referenced in our last post, Mr. Spielberg has some familiarity with the industry’s modus operandi, having created the blockbuster phenomenon way back in the 70s with Jaws. Like a mutant in a film of that genre though, the nature of blockbusters has changed since then. Jaws, were it made today, would look very different (i.e. terrible). Despite Mr. Spielberg’s warnings, studios presumably took some comfort in an animated sequel – Despicable Me 2 – becoming, in the words of NBCUniversal chief Steve Burke, “the single most profitable film in the 100 year history of Universal Studios”, more than E.T., Jurassic Park, etc. Not only did it paint a picture of an industry continuing to grow (though presumably the figure did not take inflation into consideration), it must have also quietened any further calls for originality, safe in the knowledge that it was a pretty lowbrow sequel that had triumphed.
The caveat is a large one though, that any proponents of summer blockbusters need to pay close attention to. Despicable Me 2 has made £437 million so far, with a production budget of just £50 million. While on the surface then Despicable Me 2 seems to prove how successful and profitable summer movies can be, it actually provides a lesson in what commercial success can look like with a small-budgeted film. Instead, the rule of thumb during the summer is more likely to involve investing some $200m+ in a film that fails spectacularly – think The Lone Ranger. Though this Disney production is the most visible disappointment of the season, it is by no means alone. The New York Times count “six big-budget duds since May 1“. It is interesting to note that Now You See Me, “the kind of midrange film that studios have largely abandoned as they focus more on pictures that play globally — has taken in $200.4 million worldwide and is still playing”, after costing $75m to make.
Those responsible try to spread the blame. Johnny Depp and producer Jerry Bruckheimer absolved themselves of wrongdoing for their involvement in The Lone Ranger by blaming the critics. Said Depp, “They had expectations that it must be a blockbuster. I didn’t have any expectations of that”. Yet it is easy to see how one might assume the film – created at such expense, with ripe intellectual property to be exploited, with talent involved in the phenomenally successful Pirates of the Caribbean franchise – had all the appropriate ingredients to make it a blockbuster. Studios meanwhile harp on about Twitter, which lets people instantly share their thoughts on a film and is now considered a worrisome bellwether for box office potential. But this is a reaction to poor filmmaking, not a reason why a bad film exists in the first place. They also cite a tight calendar. As The New York Times elaborates, “One or more cinematic behemoths — those loaded with similar-looking computer-generated effects, films that cost $130 million to $225 million to make — have arrived almost weekly since May, fragmenting and fatiguing the audience”. Again, this is no one’s fault but that of the industry. The idea of launching films in a specific time window, when consumers now enjoy time-shifting and device-shifting with their content, is antiquated. It is just as irrelevant in winter, when back-to-back “prestige” films clutter cinemas, desperate for Oscar attention. It is overwhelming for audiences, reduces choice, and in the case of the winter season implies that the voting member of the Academy have no long-term memory.
The summer product is so derivative that evidently audiences are pushing back, showing indifference to the “clones” that feature so prominently at Comic-Con. Films are either direct sequels / reimaginings, or strongly resemble other recent projects. Again, The New York Times has an excellent article on this, elaborating,
“Studios showcased another Amazing Spider-Man, another Cloudy With a Chance of Meatballs, another Avengers, another Thor and another Captain America… In addition to Godzilla, remakes teased here in recent days included RoboCop… and Riddick,… Even many of the original movies introduced at Comic-Con this year had a been-there-done-that feeling to them, notably Legendary’s sword-and-sorcery picture Seventh Son, which co-stars Jeff Bridges, Julianne Moore and Ben Barnes. In thundering snippets of footage shown on Saturday, the movie at times resembled Clash of the Titans, Snow White and the Huntsman and The Chronicles of Narnia: Prince Caspian.”
Cheering news for Sony came last week when it announced a $35m profit in the last quarter, but turbulence lay beyond that. In our last post, we mentioned the imbroglio that Sony found itself in as investor Daniel Loeb – whose hedge fund owns roughly 7% of Sony – continued to urge Sony to spin off its entertainment assets. Last week, he wrote a third letter to Sony – the most aggressive yet, with the Financial Times calling it “blistering” – comparing the film division’s two recent duds After Earth and White House Down to Ishtar and Waterworld (two of the floppiest flops to ever flop). He wrote that the CEO, Kazuo Hirai was sitting by complacently while the film division remained “poorly managed, with a famously bloated corporate structure, generous perk packages, high salaries for underperforming executives and marketing budgets that do not seem to be in line with any sense of return on capital invested”. It was with some interest then that, this past Friday, Zeitgeist saw that none other than George Clooney had stepped into the fray, calling Loeb an “activist” who “knows nothing about our business”. He lambasted the hedge fund industry in general, saying “if you look at those guys, there is no conscience at work”.
Clooney added that the “climate of fear” Loeb was creating would lead to even more risk-averse productions. It is creative, rather than financial risk, that Hollywood is sorely in need of. Art doesn’t engage audiences when it is timid and derivative. It inspires people when it is innovative, daring and different. Usually such creative thoughts do not spring forth from the mind of a hedge fund manager. Such new thinking – involving a review of a market research firms say is suffering from “overcrowding” – will require a significant course correction, one that is not going to come anytime soon. The summer slate for 2015 currently includes a Terminator sequel, an Avengers sequel, a Smurfs sequel, Independence Day 2 and Pirates of the Caribbean 5.