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When. Cinema. Works.
“[T]he big screen. That is its natural habitat—the only place, you might say, where its proud and leonine presence has any meaning. Anything more cramped is a cage, as Jon Stewart showed during this year’s Oscar ceremony. At one point, we found him gazing at his iPhone. “I’m watching ‘Lawrence of Arabia.’ It’s just awesome,” he said, adding, “To really appreciate it, you have to see it in the wide screen.” And he turned the phone on its side. Deserts of vast eternity, reduced to three inches by two.”
- Anthony Lane, The New Yorker
Film can sometimes be a mercurial medium. Especially nowadays. It encompasses multiple genres, and, like food, is meant for different occasions, for different needs. Of course, sometimes we go to bad restaurants, or order in, and the experience is terrible. Uber-flop John Carter cost Disney a cool $200m, and wasted many a precious dollar and hour for those that went to see it (admittedly few). But sometimes it’s like a great burger and fries – Die Hard springs to mind – and sometimes it’s a sumptuous 6-course meal cooked by a Michelin-starrred chef – Lawrence of Arabia, or All the King’s Men. Film can stimulate us, it can teach us, and it can be a breezy bit of consumption to pass the time, like a coffee at Starbucks. Moreover, as with food, it can be consumed in different places and circumstances. There are times when the right way to watch a certain film is on your iPad in a cramped airline seat. Pure escapism. But cinema has a crucial place too.
It was interesting today, when Zeitgeist went to see a movie, that it was preceded by an announcement showing an empty cinema, covered in cobwebs and dust, bemoaning the death of the medium at the hands of pirates. Its aim was to take the audience on a guilt trip: ‘Why are you illegally downloading films?’ ‘Why aren’t you coming to see more films at the cinema?’ it pleaded. There are a couple of things strategically wrong with this approach. Firstly, what is the principle problem here? Alright, people are not going to the cinema as often as we would like. Zeitgeist remembers in a brief stint working for Fox several years ago that people went to the cinema 1.8 times a year in the UK. The Economist reports that the share of Americans who attend cinema at least once a month has declined from 30% in 2000 to 10% in 2011. The assumption is that people are instead pirating films at home, thereby depriving studios of money (ignoring research that suggests those that pirate are often avid cinema-goers, and optimistically equating every film downloaded to ticket revenue lost). Well, one quick way to address this is to make films legally available – at a sizeable premium – on multiple platforms day and date. We’ve argued this before, and entertainment trade Variety has used our argument for a lead editorial. It should be recognised, that, although the most prominent face of the film industry, cinema is not what makes the studio money; for years the bulk of profits have been made in home entertainment consumption. Furthermore, there are two fallacies here. One is that cinemas make most of their profit from the snacks people buy at the cinema, not the films themselves. If you want to increase margins, there should be a much more prominent focus on food options, and that means offering a wider, more tempting range of food to be eaten, which is then promoted more effectively. The way such snacks are currently promoted – “Let’s all go the lobby” – has not altered for a half century. Lastly and most egregiously, the communication is completely misdirected, talking to the very audience who is already doing what the ad asks them to do. The ad is shown nowhere but the cinema, therefore only people who go to the cinema will be subject to this guilt trip. To avoid feeling guilty, one can avoid the ad by avoiding the cinema. The logic is completely twisted. Negative communications have been shown to be much less effective in influencing behaviour than positive affirmation. So let’s think about a way to promote cinema that goes beyond a highlight reel of what movies are on in a particular season. More robust revenue streams will have to be found soon. Less people are turning out to the cinema, and in foreign markets, which are doing relatively well, a far smaller chunk of box-office receipts go to the studios.
What also played during the reel before the film started was a short film by Disney Animation that has been nominated for an Academy Award, called Paperman (see trailer above). Zeitgeist had watched the short some days ago on his iPhone after coming across it on Twitter, and enjoyed it thoroughly. It was exciting and convenient to be able to consume something so quickly after hearing about it. Moreover, it was instantly shareable with the 400-odd people who follow our tweets when we retweeted the link. Seeing it in the cinema today though really reinforced the power of the big screen; the detail you couldn’t see on the iPhone, the great sound, and the shared laughter and enjoyment from those around you. “Grandeur is a far from simple blessing”, writes Anthony Lane in the same article quoted at the beginning of this post, in The New Yorker back in 2008. The pleasure of watching something in the cinema is ultimately an irrational benefit, which can be hard to quantify, but even harder to ignore.
Netflix: House of Cards and Castles in the Air
“If you have built castles in the air, your work need not be lost; that is where they should be. Now put foundations under them.”
- Henry David Thoreau
Though the brouhaha over the series House of Cards has been building steadily since its announcement almost two years ago, through rumours of budget battles between director and studio, it was upon the release of the series this week that the media meta-echo chamber really went into overdrive. The first season, with a budget far north of $100m, debuted to ebullient praise from critics. But what does it signify for the trail-blazing company’s future?
Aside from the mostly positive reviews, the series piqued the media industry’s interest for other reasons too. It is the first to be created and screened exclusively by Netflix, a company previously known for striking deals with studios to distribute and stream their content. Not satisfied solely with such (sometimes pricey) deals, the company also saw an opportunity for greater brand visibility and a separate revenue stream – assuming it eventually licenses the show regular TV networks – in fully-fledged independent production. What is also interesting is that the entire first season was made available for instant viewing, all 12 hours. By doing this the company recognised and capitalised on a trend that has been accelerating for almost a decade; people like to watch multiple episodes at once. This has never not been the case, but the weekly episodic installments of shows on network television have allowed the audience little say in the matter, and thus no room for such a habit to develop. This changed dramatically with the arrival of the DVD, specifically with affordable boxsets, as those that had missed the zeitgeists of West Wing, The Sopranos and 24 were able to quickly catch up with their obsessed brethren. Critics have often noted how the viewing of multiple episodes at once – which is how such reviews are often conducted as they usually receive a disc with several shows to consider – particularly for shows like Lost, improves the structure and narrative flow. With the arrival of boxsets, such opportunities were available to all. Indeed, marketers leveraged this enthusiasm for consecutive viewing, creating events around it. Netflix saw this with absolute clarity and allowed viewers to watch as much or little as they desired. Many, it seemed, chose to devour the whole first season in one weekend, which entertainment trade Variety covered with humourous repercussions to the viewer’s psyche, across now fewer than six stages of grief. Zeitgeist has written before about the increasing popularity of streaming, and the complementary preference that audiences have for the type of films (action, romcom, broad comedy) they like to watch when choosing such a distribution method. It is interesting to consider then just how much the viewing experience differs between a 12-hour marathon over two days, and a one-hour slice over a period of three months. As the article in Variety half-jokingly posits, “Is tantric TV viewing a thing? If it’s not, should it be?”.
Of course, Netflix aren’t alone in seeing an opportunity to delve into developing complementary products and assets. Microsoft are using the functionality of Kinect to pair with their own content development, letting children “join in” with Sesame Street, for example, and are in the process of setting up a dedicated studio for production, in Los Angeles. Amazon, which owns the streaming service LoveFilm, is also getting into the game, recently setting up Amazon Studios for original content production. At the end of last year, The Hollywood Reporter announced Amazon would be greenlighting twenty pilots, all of which were “either submitted through the studio’s website or optioned for development”. YouTube recently launched twenty professional channels on its UK website, Hulu is following suit… It really is quite startling to see such fundamental disruption and turmoil in environments where incumbent stalwarts (such as 20th Century Fox in film and Walmart in retail,) have long been accustomed to calling the shots. Could the model become completely inverted, such that the Fox network and HBO become the “dumb pipes” of the TV world, showcasing the best in internet-produced television? Maybe so, and this is not necessarily a bad thing. The Economist this week argue that one of the most important factors in Liberty Global’s recent purchase of Virgin Media was the avoidance of paying corporate tax for “years” to come. If content is still king though, a problem remains for those incumbents. The New Yorker astutely points out,
“An Internet firm like Netflix producing first-rate content takes us across a psychological line. If Netflix succeeds as a producer, other companies will follow and start taking market share… When that happens, the baton passes, and empire falls—and we will see the first fundamental change in the home-entertainment paradigm in decades.”
Netflix must tread carefully. Crucially, what seems like competitive differentiation and all-quadrant coverage now can quickly shift. Amazon’s ventures into content production will be backed up with a sizeable and perpetual stream of revenue that it derives from its e-commerce platform, which isn’t going away anytime soon. The BBC are publicly welcoming new entrants, and is devising its own tactics, such as making episodes available on iPlayer before they screen, if at all, on television. Interesting but hardly earth-shattering, and likely to make little difference to viewer preference. Netflix will have to do better than that if it wants long-term dominance of this market. It will have to be increasingly careful with its partners, too. Recent, though long-running, rumblings of discord with partners like Time Warner Cable, though seemingly innocuous, tend to be indicative of a larger battle ensuing between corporate titans. Moreover, though the act of providing a deluge of content seems new and sexy now, what about when everyone starts doing it? Chief content officer for Netflix Ted Sarantos told The Economist last week, “Right now our major differentiation is that consumers can watch what they want, when they want it, but that will be the norm with television over time. We’re getting a head start”. Fine, but about when that is the norm, what is the strategy for differentiation then? Netflix have made some lofty, daring, innovative moves here, exploiting consumer trends and noticing a gap in the competitive environment. But they will need firm foundations to support this move into an adjacent business area, of which they know relatively little, in the years to come. As President Bartlet of West Wing was often heard to say, “What’s next?”.
Beyond the Linear – New ways of entertaining
The days of P.T. Barnum and the sense of spectacle an audience received from seeing a live performance have long passed; codified, commodotised, sanitised and made instantly available. Or have they? The way we entertain ourselves nowadays has changed greatly, and keeps changing. But are our tastes evolving or revolving? Is there hope for such seeming anachronisms as the TV, the live performance and even the book?
Two years ago, Zeitgeist wrote a brief article on the nature of contemporary consumption of media. It began with the headline that 8-18 year olds in the US spend a quarter of their media time with multiple devices. Furthermore, almost a quarter of that age group use one other device most of the time while watching television. In 2013, this preference for multiple stimuli has only accelerated. 80% of UK smartphone owners (making up over half the phone-owning population) use their phones while watching the TV. Similar figures were reported in the US, and similar figures were also reported for tablet owners. Such figures give marketers pause for thought as they begin to approach these complementary devices as ways to extend their brand from the television onto the second screen. JWT Intelligence has a great report on this.
However, it is easy to overstate the arrival of shiny, new devices, and the apparent death of television. The blame for this misconception lies partly with the media itself; journalism is less engaging when it merely reports on the maintenance of the status quo (i.e. ‘people are still watching TV’). Far more interesting to hear about what new objects are showing a bit of ankle at CES, and that us mere mortals might one day dare to dream of owning ourselves, at which point all other material objects become unnecessary. All the more so when the journalistic integrity is compromised by corporate meddling, as was the case with CNET’s reporting this year. It was refreshing then to read TechCrunch’s recent article with the headline, ‘TV still King in Media Consumption’. The article, quoting a recent report by Nielsen, was particularly interesting in noting the prevalence of TV when it referenced that almost half the homes with TVs in the US owned four or more sets. Startling. More startling, the average household spends six days a month watching television, far ahead of other media consumption (using the Internet on a computer, at a little over 28 hours a month, came a distant second). The FT writes,
Over the past decade, despite the proliferation of video content on the web, TV consumption in the UK has remained steady with the average person watching about four hours a day. Almost 80 per cent of this viewing is on the top five channels, virtually unchanged from 10 years ago.
Creative destruction is something Zeitgeist takes an active interest in and has written about several times before on this blog. It takes hold in some industries (and households in this case) more quickly than in others. The same Nielsen study found that over 55% of US homes still had working VCRs. Moreover, despite much editorial to the contrary over recent years, the PC has not yet been wiped out by creative destruction and remains a staple for several reasons in both Western and emerging economies. According to Deloitte’s recent publication, “Technology, Media and Telecoms Predictions 2013″, although the attraction of tablets – and now ‘phablets’ – mean powerful computing and a cheaper cost, allowing the potential for leapfrogging of PCs in emerging markets, qualitative research shows a small but significant demand remains for PC ownership. Moreover, many businesses in the West, currently struggling with the implications of BYO devices, are not about to jettison the PC either. Switching costs, Zeitgeist suspects, are at play here, as with those stubborn VCR owners. Click here for more of our thoughts on switching costs.
VCR owners though will one day cease to be in the majority. New avenues of distribution and consumption are opening up, though not as quickly as first thought in some cases, particularly in that of live, streaming TV, which has faced many regulatory hurdles. Variety elaborates, “Loudly trumpeted efforts have fallen short, victims of poor design decisions, overpriced services and/or confusion about the target audience”. Yet alternatives are there. One of the more interesting streaming TV options in the US currently is that of Dyle, with 90 stations in 35 markets. It is run by a partnership that includes Fox, NBC, Hearst Television and others. The really interesting thing about the service is that it neutralises the problem many smartphone users will have of returning data caps by streaming off a separate network spectrum, which doesn’t impact on data allowances. Nice thinking.
Is the increasing popularity of streaming, and the content viewers prefer to watch over such a channel, already beginning to effect the types of films being produced?
Though new technology has not created new tastes in content or viewing habits, it has undeniably acted as a catalyst to desires already present. Zeitgeist remembers hearing a LoveFilm representative speak last year at AdTech in London about the increasing share streaming films took in the marketplace. Nothing too extraordinary in that statement, especially from a purveyor of streaming content. The rub came when he went on to elaborate that people tend to stream films when they are in the mood for instant gratification, in the form usually of an action film or romantic comedy. The increasing popularity of streaming, and therefore the increasing popularity of these particular genres, means the way the medium is distributed may very likely have a very significant influence on the type of content in the future that is commissioned. It was no surprise then to see, on a recent cinema trip, trailers for three films that neatly fit into that category for instant gratification (see above). Zeitgeist wrote at length on the need for film studios to address arbitrary platform release windows at the end of last year. Our article was mentioned in the lead editorial of entertainment trade paper Variety. Part of our argument is beginning to be addressed already. The FT recently published news that studios had managed to stem the six year decline in home viewing figures for films last year. The article elaborates that this is in part due to the strength of digital downloads, with films sometimes being available for digital distribution before they were available on DVD. Taken 2, a superb candidate for streaming given the previous statement by LoveFilm, was released Christmas Day in the US on digital platforms, “weeks before its release on DVD”. Such thinking goes hand-in-hand with the new UltraViolet format, to which several studios are subscribing. This allows those purchasing a movie on DVD – such as the recent Dark Knight Rises – to watch it with ease on multiple platforms. Mashable carried an article last week stating that several electronics firms have now also signed up to the UltraViolet partnership. Consumers will receive ten free movies when they sign up to the service, as incentive.
The example of Netflix is an interesting one in trying to understand the balance between consumers’ desire for multiple media and instantly-accessible content, and content owners desires to drive maximum revenue from their product. The company has been making a bigger push into providing TV shows of late, and is being rewarded for it, particularly with regard to older shows. A cultural trend many a pundit has put their finger on since the credit crunch began to bite back in 2008, nostalgia has manifested itself in consumers’ desire for old shows, including Midsomer Murders and Rising Damp, reports the FT. This long tail effect is turning a tidy profit for Netflix, as well as the original broadcaster, ITV. As a complement to this, the company is also fostering new partnerships, first with Disney in December, giving it “exclusive rights from 2016 to movies from Disney, Walt Disney Animation Studios, Pixar Animation Studios, Marvel Studios, and Disneynature”. Then, at the beginning of this year, it inked a deal with Warner Brothers, to show new and old TV shows from the studio. It should be noted however, as with all these new deals and technological developments and marches into previously uncharted territory, regulatory wranglings have ensued, in this case with sister company Time Warner Cable. The problem in this situation is not perhaps so much that Netflix is trying hard to push its availability into lateral markets, but that it is not trying hard enough to create a cohesive platform that is available across all complementary platforms and devices. One thing which Netflix will want desperately to escape being accused of – and it has done so with much success thus far – is being a niche provider of content. Sadly, the days of the point-and-shoot camera, the dedicated games console, etc., are numbered, according to a recent report by Accenture.
It is evidently with such a strategic outlook in mind that Disney have recently announced their Infinity gaming platform. Variety describes it as an “online treasure chest”, featuring a plethora of Disney characters from over the years that can be interacted with over multiple platforms, whether on mobile or on videogame consoles. Importantly, the concept is designed to be an iterative, one that will grow and add characters over time, presumably as new IP is created. It certainly pays heed to the second screen phenomenon by recognising the need for multiple device access. It also plays off the trend started by the game ‘Skylanders’, which involves both physical toys and digital interaction. The same principle will apply with new toys developed for Infinity, which can then be used to create unique stories and drive narratives. The idea of having disparate characters from different Disney franchises is potentially a frightening one for those in charge of the individual brand essences of said titles, but the potential for success can be found by looking no further than the Toy Story films, which feature an assortment of different genre toys that mix well in situ.
We’ve discussed the changing models of consumption for most of the article, but it is worth noting briefly how our cultural tastes are also changing, brought on by technology (again), but also globalisation. Pundits are often quick to point out nowadays that there is a substantial demand for the live experience. Yet if we look at music, one of the most profound things to experience live, recent figures showed attendance to concerts had dipped. At the end of last year, in an insightful roundtable, The New York Times interviewed several talking heads, asking them to round up their thoughts on 2012 in the music industry. One of the more interesting points repeatedly made was that of the abundant opportunity that the Internet now provides for musical talent. Moreover, the Internet at large has become just as viable – if not a more viable – starting place for an emerging artist than signing with a record label:
“Now this year something’s been proven: Pop performers can become truly famous by building their careers themselves online, maybe more efficiently and faster than a major company can help them to do.
… you look at the first-week sales numbers of someone like Kendrick Lamar, who had an independent album that was digital only and is now on [the major-label] Interscope, but basically has no major radio hits, even if he is well-liked by mainstream hip-hop. He comes out and sells about 240,000 in his first week. A couple weeks later Rihanna comes out — not her first album and at the height of her pop fame — and sells a few thousand less than Kendrick did.”
The other trend, globalisation, has meant that voices increasingly other than those that are Western, are more easily heard. The irrepressible Psy had the honour of being the performer in the first YouTube video to cross one billion views. Conversely, in his home country of South Korea, ‘Gangnam Style’ has accrued a pitiful “$50,000 from CD sales and $61,000 from 3.6m downloads”. The point remains, however, that the fallacy of the West as the cradle of pop culture is being exposed. Christopher Caldwell illustrates this masterfully, writing for the FT in December.
Zeitgeist has written before about the upheaval new trends and preferences for media consumption – impacted significantly by the arrival of the Internet – have wrought on financial growth in the media and entertainment sector. Digital, in the form of Napster and its myrmidons in particular, has a lot to answer for. There was some relief then that at the beginning of the year when UK digital sales topped GBP1 billion for the first time (though still failing to off-set the physical media decline). Moreover, Boston Consulting Group predicted last month – in an excellent report entitled Changing Engines in Midflight: The 2012 TMT Value Creators Report – that by 2015 the digital services ecosystem will reach $1 trillion by 2015 (see above).
It is interesting to see where the ownership of content starts and ends across layers, and how content owners are trying to monetise these platforms and grab as much market share as possible from their competitors. Amazon recently began offering digital downloads of any CD you have purchased from them since 1998. It would be a great surprise to see if they do the same for books anytime soon. Fortunately, reading still constitutes an avenue of entertainment, for those of all ages. A recent piece by The New York Times reported that digital reading was on the rise for children. The article notes the numbers give some room for discrepancy, but states “about one-fourth of the boys who had read an e-book said they were reading more books for fun”, which is a desperately important emotional connection to maintain. While e-reading is a commendable past-time, is there any merit in pushing further, and advocating for interacting with a medium that does not involve a digital display? Such a turn of events, perhaps aided by the trend for nostalgia mentioned earlier, is presenting itself in the luxury hotel market, with physical libraries returning to shelves. It has been termed ‘rematerialism’.
So what does this all mean for consumer entertainment? There are evidently lots of new technologies being released, from smart TVs to new gaming devices, that will attempt to capture eyeballs. These devices, far from having to think of their natural competitors, still have the common television – and, as we have seen, even VCRs – to compete with and overthrow first. TV commands such a huge slice of viewing time, but it is under threat from distracted viewers who are now very comfortable – and more importantly socially accepting – of using a tablet, laptop or phone during a show. There are also regulatory implications t consider, which will most likely be shaped, ex-post, along the way. Taking consumers on a journey across multiple platforms and media in a seamless way will be key. Disney’s Infinity platform, when it is released, will hopefully serve as an excellent example to others of how to combine physical and digital entertainment.
On movie release windows – I love the sound of breaking glass
It’s fair to say that in the past ten years, the pace of technology has evolved at an ever-increasing rate. The way in which devices have changed, and with it our use of them, was humourously summed up in the above cartoon from The New Yorker. Digital trends have affected the way we communicate, the way we consume media, and indeed the way we consume goods and services, i.e. shop.
So it is a little surprising to many – your humble correspondent included – that we still have to put up with a film being released in one country one day, and in another months later. That we still have to wait a certain number of months for a film to amble its way from the cinema screens to our home, whether on Blu-ray / DVD or on VOD. It’s interesting to note that vertical integration isn’t a key issue; Disney recently launched the second subscription video on demand (SVOD) service in Europe, with a library of constantly refreshed titles that can be viewed on platforms ranging from TVs to Xbox to iPads. Indeed, Disney’s CEO Bob Iger announced way back in 2005 in an interview with The Wall Street Journal that he foresaw a day of collapsed release windows, when a film came out the same day at the cinema as it was available to watch in the home:
We’d be better off as a company and an industry if we compressed that window. We could spend less money pushing the box office and get to the next window sooner where a movie has more perceived value to the consumer because it’s more fresh.
So there is money to be saved in such an exercise. Yet seven years later, such a situation is still mostly a fantasy for major films. Studios have undoubtedly dipped their toe in the water, and some moderate success has been seen on the indie scene, specifically with recent films like Margin Call, Melancholia and Arbitrage. The former film was released simultaneously in the cinema and on VOD (seemingly only in the US, however), eventually recording strong results, months after its initial release at Sundance Film Festival. Again, what is the justification for such a change in platform release timings? Not meeting consumer desires and addressing piracy, but simple cost savings. Variety reports:
“We’re a star-driven culture, and on a crowded (VOD) menu, what are you going to be drawn to?” posits WME Global head Graham Taylor, who adds that with marketing budgets skyrocketing, the ability to use a single campaign across closely spaced bows on multiple platforms is an important cost savings.
The whole situation is quite frustrating for any fan of film or television. It is a frustration shared by Frederic Filloux, co-author of the excellent blog Monday Note, which Zeitgeist strongly recommends to anyone with an interest in insightful thoughts and reasoning on media industry goings-on.
Their most recent post also happened to detail the author’s frustrations with such seemingly arbitrary release windows. One of the most pertinent charts displays the achingly slow rate of change in platform release changes, that is so at odds with the pace of change in other media (above). The content of the post has rational recommendations, which at first glance seem eminently appropriate and overdue for implementation. Some of the recommendations though fail to account for the fact that the film industry and its machinations are often governed by winds of irrationality.
To summarise, Filloux recommends a global day-and date, shorter, more flexible window of time between cinema and home release. There are a number of obstacles to these ideas though. Firstly, exhibitors must be placated. They hold such a sway over studios that they cannot easily be ignored. Bob Iger, in the interview mentioned earlier, mentions exhibitors as being a key obstacle. Think about it, why on earth would a cinema want their film to be available in the comfort of their audience’s home any sooner than it already is? It wants to enforce scarcity, so that when the film’s marketing machine is at its height, the cinema is the only place you can see it. As already mentioned, indie films have had some success with multi-platform releases, but even these have met with consternation from exhibitors, as a recent example in Canada shows. The consternation becomes outright war for larger films. Zetigeist reported when, in 2010, many exhibitors refused to show Tim Burton’s Alice in Wonderland when the studio, Disney, flirted with releasing the film to home release less than four months after its theatrical debut. After much back and forth, exhibitors eventually relented, and the film went on to gross over a billion dollars at the global box office. Exhibitors are not going to be convinced about flat release windows anytime soon. They are perhaps the largest roadblock to such a move, and the largest point of advocating a return to vertical integration of production, distribution and exhibition that was the case until the Paramount Decree in 1948.
Studios can only flatter exhibitors for so long
Moreover, while the argument about having flexible, shifting window releases depending upon a film’s success is logical, it does not acknowledge the existence of sleeper hits, films which do not open to huge returns but gradually accrue it over months of release (as illustrated by Margin Call, mentioned earlier). It would also be hard to define when a movie “succeeds” or “bombs”. You could use box office as a figure, but would this be without context, as a ratio of the film’s budget, or against its current peers? Using box office fails to take awards – principally Oscar – coverage into consideration, which invariably adds its own box office bump to a movie when it is nominated or wins.
The recommendation for simultaneous worldwide release is also a valid point. Zeitgeist has written before on the ridiculous prices pirated films go for in markets that have no access to the official product. To their credit, studios are moving further toward a “day and date” system. However, doing so exclusively would be dangerous. Releasing some films market by market allows the studio to gauge audience reaction, and if necessary tinker with the marketing or the film itself. Staggering release dates is also necessary for cultural events, such as the World Cup, which may be more relevant to some countries than others.
It is the last point made in the article, that of making TV shows “universally available from the day when they are aired on TV” that Zeitgeist could not agree more with. Apart from audience frustration – and recent technological development such as DVR show how the opportunity can shape viewer habits – such a move would also surely divert people from resorting to illegal downloading.
To conclude, while there are caveats and significant roadbumps to be addressed, and some progress has been made over the years, the film industry has a long way to go in a short time if it wants to catch up with consumer habits. Flat release windows should be an inevitability, and a priority. Moreover, they should not be seen purely as cost-saving measure, but as an important way of keeping an increasingly technologically and globally savvy customer base happy.
Game Change – How TV stole Film’s Spotlight
In a belated – and very un-zeitgeisty – move, Zeitgeist only got around to seeing HBO’s Game Change this past weekend. The film, which first aired in the US in March, is based on the book by Mark Halperin and John Heilemann. While the film has attracted its fair share of controversy, it has been deemed “very accurate” by those on the campaign trail at the time. Zeitgeist thoroughly enjoyed it; HBO had done it again.
HBO have had a remarkable run of success, producing some of the most daring, innovative and enjoyable TV shows of the past 20 years, from Curb Your Enthusiasm and Dexter to Sex and the City, The Sopranos and Boardwalk Empire. HBO has created a brand halo effect for television, a medium once dismissed by serious actors and directors whose natural home was in movies. Now those professionals, such as Dustin Hoffman, flock to television. Speaking recently with the FT, he commented,
‘The big studios were making films that are only being done outside the studio system today. It used to be you would never do TV.’ That stigma has gone, he says; these days the only creative risks being taken are in low-budget independent films and on well-financed pay TV networks… ‘HBO leave you alone and there’s no censorship. You do the work you want to do.’
The real game change then is in the drift in creativity from the big screen to the small. The world of film is increasingly deemed to be suffering, bombarded as we have been for several years now with iteration after iteration of superhero from DC and Marvel. To rub salt into the wound, The Avengers yesterday passed the $1bn box office threshold after just 19 days, joining Avatar in its speed at reaching said gross. Last month’s Vanity Fair editorial elaborated on the malaise that is slowly descending on film. Graydon Carter notes,
Television offers a range and scope, and a degree of creativity and daring, that the bottom-line, global-audience-obsessed, brand-driven movie industry just can’t compete with… the superiority of television goes beyond drama. Comedy on TV is undergoing a renaissance, far outpacing the bromances that the film business falls back on so much.
Within this shift in TV’s prominence, a microcosm of change is also taking place. Ten or fifteen years ago, all the best US programming was being produced by the major networks – NBC, CBS, Fox, ABC – and garnering many a golden statuette at award ceremonies, with cable left to function as auxillary provider of repeats of said programming. This situation has now changed, as cable networks like HBO, FX, Showtime and AMC debut their own quality shows. The New York Times reported on this ‘cable envy’, and how the majors are trying to fight back. It seems a seachange has occurred as the glut of ‘reality’ shows has made way for higher quality programming.
Of course, the other massive shift occurring in the TV landscape at the moment is the way in which we consume television. This has to influence both the quantity and type of media that we consume. Social TV and the ‘second screen’ trend are making the TV-watching experience even more engaging. VentureBeat feature a great infographic of how said landscape has changed.
Hollywood and China
We have reported before on the quota China imposes on Hollywood films coming into the country.
Zeitgeist remembers being in a meeting while doing at stint at 20th Century Fox back in 2004, when presentations were optimistically suffixed with the potential for China to drop said limit. It was always an inevitability, and when last month DreamWorks Animation announced a pact with Shanghai Media Group and China Media Capital, it was clear something bigger was on the cards. This has been the case for a while though, as US production companies have sought to get into China’s goodbooks with relevant films (witness Kung Fu Panda and the most recent iteration of The Mummy franchise).
Good news finally came to studio heads and cinema exhibitors. While the quota hasn’t been dropped, it has been dramatically extended to allow another 14 films into the market each year (from the current 20). This can only be good news for Hollywood, coming at a time when DVD and Blu-Ray revenue is slowing; Bloomberg recently reported that more films will be streamed than watched on disc this year. In China, however, views are mixed. Variety summarises,
“Theater owners are very upbeat, filmmakers are split — will this mean unnecessary competition, or a boost to moviegoing habits? — and Hong Kong industryites are watching things closely.”
The country already means big business for Hollywood, with the piece of rubbish that was Transformers 3taking in $170mn, and Avatar making $210mn. Year on year, the number of screens in the country increased 33%. 803 cinemas opened in the past 12 months there. So the supply-demand ratio is currently extremely favourable (with Hong Kong hopefully not being a harbinger). One would have to be very naiive however not to consider the political landscape of China, which is inscrutable to say the least. Whether dealing with the electoral process in Hong Kong, or the media landscape – from TV to social media – it can be difficult to know where you sit at any time. Variety again,
“Filmmakers face… rigid – and opaque – standards of control and censorship [in China]… [I]f a filmmaker doesn’t meet those sometimes abstruse rules, it won’t be admitted.”
What the Chinese government will have some difficulty in regulating though is the black market, which should hopefully see film piracy diminish as a source of revenue. With an assumed lowering of cost per purchase of pirated film, it should mean even more Chinese get to see Hollywood product (though admittedly without compensating the studios for it, at least initially).
As well as receiving net net more money from China from its films, the deal made also allows Hollywood to receive 25% of the Chinese box office back on imported films, previously at 13%. What should be a lucrative influx of revenue for the film studios comes at a welcome time. Not only is the business shifting from discs to digital delivery – which currently is proving harder to monetise – it is also under increasing pressure to collapse its sacred windows – the time period between when a film is released in cinema, DVD, POV, TV, etc. A few weeks ago, Netflix, an increasingly powerful player in the mix as it broadens its availability to the UK, and becomes a content creator, called the windows structure “pretty archaic”.
While releasing films on multiple platforms simulataneously might produce a spike in opening weekend returns, it comes at the cost of angering a lot of cinema owners, who would not take kindly to the idea of their film being available to watch at home at the same time they are trying to charge you £12 to watch it in a big dark room with a bunch of strangers. Zeitgeist’s radical solution is to allow the windows to collapse, and then for the government to allow the film studios to vertically integrate with the exhibitors again, like in the old days. But that’s another article…
What Creative Destruction means for Kodak, China and Romney
Some things are built to last. Some businesses are made this way. They are in the end ultimately just as susceptible to market forces as their counterparts. Originally a Marxist idea, creative destruction has found its way into popular economics. Former Fed chairman Alan Greenspan mentions the phrase often in his autobiography. Zeitgeist has previously mentioned the late, great economist Schumpeter, too. His notion of ‘disequilibrium’ was that within the market, though you may have a great product or solution, there are external forces that can render said product or solution redundant. These innovations often come in leaps of ingenuity that might initially seem to be extraneous to the current product or solution’s market. Finally though, the new innovation ends up eradicating any synonymous inefficiencies. Think first about Henry Ford’s famous quotation,
“If I had asked people what they wanted, they would have said faster horses.”
Along with the insight that customer research is not always the best way to go – Apple’s avoidance of it is a case in point – what this quotation also illustrates is our tendency toward myopia when it comes to seeing strategic competition from a seemingly unrelated field. Harvard Business Review have an excellent paper on strategy that covers this. It is unlikely that anyone thought the motorcar would replace horses, or that it would even be popular. This eradication of the other, more inefficient product or solution is a great example of creative destruction. Apple’s iTunes and it’s myrmidons, and the damage it has inflicted on CD sales, is another example.
Speaking of cars, attention on the auto industry was front and centre during half-time of the recent Superbowl in the US. The automaker Chrysler, which produced a similarly provocative commercial that aired during last year’s Superbowl, has caused much chatter over television, radio, print and social media. It’s an affecting advert, not least because it is built on a fallacy. Though Zeitgeist believes that bailing out the auto industry was the right thing to do, this commercial, and politicians of different stripes (including Newt Gingrich and Obama), have all been harping on about the manufacturing renaissance coming to the US: America Redux. The simple, horrible truth is that while manufacturing as an industry has room to grow it will not return to what it was.
Moreover, those jobs that will be required demand increasingly skilled, technical labourers, i.e. college-educated. There will be a great many people who are now out of work in the US who will be unlikely to find work again due to a lack of required skills. This is not President Obama’s fault, just as it is not Bush Jr. or Daddy Bush’s fault. Though some would point the finger at policies endorsing outsourcing, this would be incorrect. Insourcing is an increasing phenomenon as wages improve in regions like China. It is the way of things, as a recent editorial explains in the FT explains,
Mr Obama [has] bought into the fallacy… that manufactures are declining in the US, but his work suffers from conceptual flaws. Take just one problem: services splinter off from manufacturing even as vertical integration yields to specialisation. Over time, manufacturing yields to services. This gigantic change that is taking place has nothing to do with outsourcing.
And speaking of China, the country sits on the brink of mass creative destruction. While money poured into the country during times of less fiscal restraint, China funneled it into myriad infrastructure and planning projects. Now the easy credit is drying up, the country is in a difficult situation, not helped by mass protests across the land as workers demand remuneration that could almost be considered wages. As with the US, there will be an inexorable shift from a manufacturing industry to a services industry. How horrific this shift will be depends upon timing, among things, as a recent article in The Economist points out,
“The long-term plan is for China to wean itself off its reliance on exports and investment projects such as roads, railways and overpriced property developments, and for domestic consumption of goods and services to play a much bigger role in fuelling growth. But this rebalancing will be a long, hard slog. Officials do not want shock therapy because it could threaten the jobs of many of the 160m migrants who come from the countryside to provide the cheap labour behind China’s exports.”
Republican Presidential candidate Mitt Romney, as is the lot of someone frequently perceived as front-runner in the candidate race, has been the focus of unrelenting criticism from his fellow party members. Some of this criticism has focussed on his time working for the private equity wing of uber-consultancy Bain & Co., specifically on how many people’s jobs the man cost during his tenure there. Though Romney claims to have created a net sum of 100,000 jobs, he has since withdrawn that rather nebulous figure as his arithmetic has been questioned. His Republican opponents, as well as grass-roots Democratic lobbying group MoveOn (below), have been airing ads featuring blue-collared workers who were let go thanks to Romney’s strategies and implementations.
Mr. Romney, though his flaws and foibles may be many – he recently praised the height of Michigan’s trees as being “just right” – is not responsible for the trend of efficiency savings in America, as the Schumpeter editorial in The Economist points out,
“[I]t was also a symptom of a wider change. It was not just people like Mr Romney who were pushing American companies to shape up. It was also the new rigours of global competition. Firms of every description sought to squeeze out inefficiencies, sell off non-core businesses and close redundant operations, all in the name of shareholder value. [I]t was the shift from manufacturing to services.”
To attack Romney for such practices is to attack the foundations of modern capitalism. Which one is most welcome to do, but presumably something that most Republicans would want to shy away from, continuing as they do to bizarrely refer to Obama as a socialist. One can’t have it both ways.
Similarly caught unawares was the film industry back in the silent era, which underestimated the massive success it would have on its hands with the arrival of sound. While excellent news for film studios, many of the talent in front and behind cameras suddenly found their way of storytelling outdated and unpopular. The Artist, which won Best Picture and Best Director awards at the Oscars at the weekend, perfectly illustrates this change. The ceremony was a grand affair as usual, hosted in the same venue as it has been for years, The Kodak Theater. Reuters recently reported that Kodak has asked to have its name removed from the building as it tries to reduce its debts.
Kodak’s recent fall into bankruptcy serves as a superb example of the forces of creative destruction. The brand is surely one of the most famous of the 20th century. The Economist called it the Google of its day, and surely there are few companies that manage to enter the public lexicon. Until the 1990s it was “regularly rated as one of the world’s most valuable brands”. The phrase “Kodak moment” has long since left the zeitgeist. The company built one of the first digital cameras ever back in 1975, the cheapest of which cost $1,000. Its share price has fallen 90% in the past year. Its competitor Fujifilm was cheaper and quicker to adapt. Creative destruction first made physical film cameras obsolete, and increasingly digital cameras as smartphones become equipped with high-definition cameras.
After trying to diversify into chemicals, George Fisher, boss of Kodak from 1993-99, “decided that its expertise lay not in chemicals but in imaging. He cranked out digital cameras and offered customers the ability to post and share pictures online.” This could have led to the creation of something akin to Facebook, but for one reason or another it did not. The Economist blames Fisher, and whatever the cause, the company has also suffered from inconsistent strategies due to a revolving door of senior management. Tony Jackson, writing in the FT, defines the creative destruction as one of “technological disruption… cheaper than the existing version and initially not as good. Faced with a cheap and dirty alternative… it goes against the grain to devote resources to it.” One of Kodak’s problems was also its passion; for physical film itself. This passion essentially made them blind to investing fully in the coming digital revolution. There was an acknowledgement that a change was coming, but it was underestimated.
Creative destruction works in terms of the stock market too, of course. What this clip, from the excellent film Margin Call, is alluding to, is that good times lead to indolence; crashes trim the fat. It is nothing new. The series is a cyclical, unending one, difficult to influence, let alone prevent. (That’s why it was so ludicrous when Gordon Brown, as short-lived UK Prime Minister, grandiloquently announced “no return to boom and bust”). Each new cycle brings new regulations, new ideologies and practices. New products, new solutions. The ways the booms and busts happen changes. The products we make and the strategies we implement change and become more and more innovative. But the cycle never ends. Enjoy the ride.
Luxury Retail Activation
A couple of superb examples of retail activation at the premium and luxury end of the spectrum. Interestingly, both are examples of companies relying heavily on associations with the past, in particular nostalgia. It’s no surprise that people want to forget their current predicaments, and presumably the upcoming Future Laboratory trends briefing – Not/stalgia – will touch on this.
Louis Vuitton is cementing its cultural ties with bygone eras and modern masterpieces. It is lending “support” – presumably financial – to the new fourth plinth installation at London’s Trafalgar Square. Variety magazine reported last week that the brand has also signed a “three year partnership with Rome’s venerable Centro Sperimentale di Cinematografia, comprised of sponsoring scholarships… tutoring and… workshops”. Zeitgeist has been to the Louis Vuitton store in Rome a couple of times over the years, and always thought it a bit small. The addition of a bookshop, let alone a cinema, to the list of requirements, was far from expected. The brand, whose heritage stretches back to 1854, has recently unveiled a new flagship store in the eternal city. According to PSFK, “The Louis Vuitton Maison Etoile Rome includes a book room dedicated to Italian cinema… It also features a 19-seat cinema, which will screen short films, documentaries and original creations.” It is a beautiful-looking store that leverages its own history by using complementary environmental, geographic and artistic devices. Zeitgeist looks forward to visiting soon.
Those readers in New York might recently have found themselves briefly feeling like they had stepped back in time 90 years or so. Boardwalk Empire is a critically acclaimed and popular television series produced by the pay-cable channel HBO, of whose merits The Economist elucidated in detail recently. The programme’s Facebook page recently reached 1 million fans. It is a story set in the era of Prohibition, a time of sharp suits, Trilby hats, suspect crates and conversely a large amount of liquor. Faced with a stagnant market for DVDs, HBO conjured a bespoke shop, exclusively to celebrate the launch of the boxed set. But just as the bootleggers of the day had to be nifty and mobile, so did the brand, setting up streetside vendors. Simple but imaginative, effective and inspired.
On demographics, devices and ‘Downton Abbey’
“Keynesian paradigm shift” was a term Zeitgeist was introduced to back in those glorious days of university. We’re often on the lookout for that next shift. 2003 was the first time when Zeitgeist began to take blogs seriously, as your average Iraqi citizen started writing journals online that gave more of an insight into the invasion than any “embedded” Fox News reporter. Incidentally, anyone looking to know more about the way news was covered by those reporters under the care of the US military at the time should check out the fascinating documentary “Control Room”.
There’s has been much discussion of more paradigm shifts over the last couple of years as PVR / DVR devices like TiVo and Sky+ have set various network TV honchos and advertising execs fretting about the lessened impact of advertising caused by delayed viewing. Advertisements on television are scheduled at a particular time to appeal to a very particular audience, and may be very ephemeral in nature (eg for an upcoming event or film). Having viewers watch the commercial at a later time might be bad, as it could be – in the advertiser’s eyes – too late. But having the viewer fast-forward through the commercial break altogether is disastrous. Simply put, companies won’t pay to have an ad on TV if no one is going to watch it. This of course is especially relevant to shows with covetable demographics, i.e. Watched by the financially comfortable, as ironically they are more likely to have purchased a device that makes those advertisements fast-forwardable.
However, recent news should cheer those whose job it is to worry about such matters. In the first place, as the world economy stutters into recovery, advertisers are funnelling money back into mainstream media, particularly television, as we reported on last October. Moreover, as Variety recently reported, the feeling of watching a show as it is broadcast “live” is a special one. This has long held true for sporting events and the Oscars, but increasingly it applies to popular sitcoms and dramas, too. Shows like ITV’s recent Downton Abbey revealed that people made a point of watching the broadcast live so that they could engage more in the online conversations that were taking place on social networks like Facebook. UK TV ratings are now at their highest since records began.
This brings up two points, one of cultural philosophy, the other of political science policy. In the mid-1930s, Walter Benjamin wrote a seminal piece of work known as “The work of art in the age of mechanical reproduction”. The crux of this paper rested on the idea that there is something infinitely intangible and special about seeing the genuine artefact; beholding the original Mona Lisa in the Denon wing of the Louvre is a more special experience than looking at it on a postcard. There is an “aura” to it. If we extrapolate this to the world of film and television, that aura is fed now by social media chatter amongst friends.
From a policy point of view, an argument that Zeitgeist has mentioned before bears noting, that of technological determinism vs social constructivism. It posits the argument over whether what a technology is intended for necessarily dictates how it is used, and influences user behaviour. With a heightened demand for the live experience, evidently this is not the case with PVRs. Recent studies show that people are fast-forwarding through commercials less and less, and, as mentioned, gravitating toward enjoying the live experience more and more. A savvy person might ask how we can mesh these two worlds together. Zeitgeist wouldn’t be surprised to see in the near future programme recommendations appearing on your PVR from friends you are connected to over social networks.
Downton Abbey is worth noting again. In the past, when we have thought of wildly successful shows and films, thoughts of the latest teen sensation might have come to mind. And while Twilight and Justin Bieber do occupy a significant part of the current Zeitgeist, shows like Downton Abbey illustrate that there is another audience – a rapidly growing one – that is only just beginning to appear on the radar of media executives. As The Economist recently pointed out, the baby boomer generation has a relatively high spending power, and buys a relatively high quantity of media like CDs. And while, according to Variety, movie studios plan to release some 27 prequels or sequels this year, there are also signs for hope too. The King’s Speech came very close to not getting made after debacles with funding, and Black Swan had a similarly bumpy road to production; Variety says it “kept losing its funding until the day before principal photography”. These were two of the greatest (and most mature) films of last year according to Zeitgeist, with the former winning both Best Picture and Best Director. Black Swan has grossed more than $100m in the US. The only other film from Fox studios to do the same was the latest Narnia incarnation, which must have cost north of $200m to make, once marketing is included. Films about royalty and ballet are ones that will appeal to the superannuated audience, and not coincidentally perhaps the ones with the highest profit margins. The much-coveted 18-49 demographic is an anachronism, let’s think bigger (and older).
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