Industry analyst Michael Gubbins explores the reasons why some are still reluctant to fully embrace digital opportunities.
For all the evident caveats, 2011 ended with an air of cautious optimism in many parts of the film industry. The sky hadn’t fallen in. Cinema had continued to prove itself as the entertainment of choice for recessionary times, and a wealth of new technologies were offering fresh ways to connect with and consume movies.
From the success of The King’s Speech at the beginning of the year through a strong summer box office to an end-of-year flurry of VOD deals from the studios, there were tangible reasons for cheer. Some even talked about reaching a ‘tipping point’, where the promise of digital would at least begin to replace the loss of DVD sales and television money. So who is still afraid of the digital revolution?
Certainly some of the cynics and digital radicals have been proved wrong in the argument that film was about to fall off some digital cliff as a new Internet generation consigned the old top-down business to the dustbin of history. There has unquestionably been a decline in revenues from DVD and television, but not at the speed some had predicted. And, in the grand scheme of things, film has not followed the disastrous trajectory of the music industry. It was becoming a common smart-alecky line to suggest that the industry had learned nothing from music, but that simply is not the case. There has, at the very least, been an understanding that doggedly protecting the old models is not a realistic policy, but there’s a necessity for legitimate alternatives to run alongside tough policies on copyright theft. Nonetheless, there are good reasons to be sceptical about the tempting symmetry of the tipping point hypothesis. It suggests that, for all the hype, there is a clear road map and a clear direction to be followed.
We can all find influential people who will insist that nothing fundamental has changed in the business and that we’ve seen it all before in the evolution of film. There is of course an important truth in the assertion. It is not necessarily the case that new media has changed the taste of audiences—at least not yet. There was a time when it was a common argument that video games and YouTube were reprogramming our brains, removing the patience for long-form content. The success of great television dramas—such as The Wire, Mad Men and The Killing—stretched over many hours gives the lie to that idea, and YouTube itself has increasingly offered full-length film. Accepting that new interactive, transmedia art forms may emerge from the still nascent potential of the Internet does not necessitate the rejection of traditional linear forms; the idea that new forms push out the old, or are even the next stage of the evolution of those forms, is in many ways irrelevant. The question now is whether the demand for all forms of audio-visual content can be aggregated to create a coherent industry.
A large number of factors may have an impact on that business. Some of them are technical, such as the expansion of fast broadband infrastructures around the world or the penetration of Internet-enabled television. Some are legal, including action on piracy and territorial rights. Others are political and cultural, and there will be pressure on the current means of public support for film, particularly if economies continue to struggle. In Europe, there may well be a growing cultural debate to mirror the one about economic and fiscal union.
But the reason why considerable change is inevitable—and why there is no room for complacency—comes down to demand. ‘On demand’ has become a catch-all term for a very wide range of places where content can be accessed beyond the limitations of physical shops or television schedules. In reality, we are trying to find a means to contain demand, to create a profitable place where the anytime, anywhere, any place culture can be met halfway.
That is a major challenge, as other industries have discovered. It is not a simple question of numbers. Newspapers and magazines, for example, generally have many more readers than when they relied on physical production and distribution of paper, but this demand is too fragmented to translate into increased profits. The cliché that social networks have replaced newspapers is not really true, as they are often the means of disseminating existing content without any profit being derived by the producer. The clash between Internet-powered demand and traditional industrial structures is inevitable and the need to restructure to meet that demand equally so; the ability to succeed in this changed world depends on where one sits in the value chain. The studio giants have some power to influence demand, if not to entirely control it. They can exploit economies of scale, they can have a big say in which on-demand platforms succeed and they can take the usual big business steps of acquisition, centralisation and rationalisation. That is already happening: the development of D-cinema over the last couple of years has shown how much the global multinationals of Hollywood can exert their influence. At the other end of the scale, there are plenty of examples of innovative and entrepreneurial projects testing the boundaries of digital change, from crowd-funding to viral marketing.
The real struggle is, to borrow a phrase from politics, with the ‘squeezed middle’
It is from the traditional mid-range of films, in terms of budgets and distribution, that much of what is cherished as great cinema has come. It is the image most people conjure up when thinking about the independent sector, and most of that sector has been cutting budgets and exploiting lower-cost digital production, distribution and marketing techniques. It is that resilience, however, that demonstrates the point. Logic suggests that the way for this area to grow is to find new audiences and increase access. That may happen for some in merger and acquisition. While the ambitions for a new Polygram have receded, as the Icon sale demonstrated, mergers and acquisitions may create a degree of scale in the indie sector.
The truth, however, is that the real opportunity is in connecting with the huge untapped demand that the traditional physical business could not meet. In theory, there should be huge potential in removing the restrictions of windows and territorial boundaries. There is also promise of a dramatic increase in cinema screens if restrictions are lifted on the quality of projection equipment (the so-called DCI standard). The problem is that these restrictions are the foundations of the scarcity economic model on which film has been based. And right now there is an understandable desire to squeeze everything possible out of the declining old model. In 2012, however, we should be reminded that there will be no tipping point between incompatible models.
