We knew it was only a matter of time before the Hollywood Studios hegemony would give way to the new media titans, but I think few saw that the path of their demise would come from the successor to
Pong.
At the E3 Media & Business Summit in Los Angeles, Sony and Microsoft each announced strategies to expand motion picture distribution directly to the consumer using their videogame stations. In the case of Microsoft, the Xbox 360 will stream Netflix’ on demand movies and television shows directly from the console. Xbox owners will be required to have a Netflix account beginning at $9.90 per month and subscribe to Microsoft’s owners "gold" membership, at $50 annually.
Sony, which has maintained a Hollywood studio strategy since it acquired Columbia Pictures in 1989, has entered the market with a non-subscription model. Rental content will range from $2.99 to $5.99 while purchased content will cost $9.99 to $14.99. In addition, Sony’s films and televisions can be transferred to a PSP (PlayStation Portable), allowing the PlayStation to compete with Apple’s iPhone and iPod touch.
Apple’s iTunes store and line up of video and audio players make it another viable Hollywood contender. Netflix, Nintendo, and Amazon remain potential rivals to Sony, Apple, and Microsoft. In each case, these companies maximize strategies emphasizing reintermediation – creating necessary interaction between the company and the consumer.
Hollywood has been losing market share and relevance in this battle because it has no relationship with its consumers. Fox has developed a strong editorial brand under Rupert Murdoch’s ownership, but the brand bears no relationship to its movie studios. Warner Bros., Paramount, and Universal all suffer from the same lack of brand or distribution relationship. Disney remains the exception. The tiniest of the old Hollywood Studios, Disney has struggled, but returned time and again to its focused, family entertainment shepparded by Mickey Mouse and Company. Warner Bros. never understood the importance of Bugs Bunny. The franchises of Harry Potter, Batman, and Superman will continue to drive ticket sales, but they don’t define the company or tell the audience anything about a Warner Bros. film.
Since focusing on content is a difficult strategy for developing a brand, the core relationship between Hollywood and the consumer will be the distribution strategy. Netflix use of social networking builds a strong audience base, and to the extent that consumers can rely on the recommendations, it will have an important place in the living room. The arrangement with Microsoft nicely benefits both companies, increasing Netflix reach and allowing Microsoft up from the kid’s basement or out of the office and into the living room as well.
Apple’s strategy begins with children when they are in school, introducing them to their proprietary brand of computers. It has added a brilliantly integrated technology platform and proprietary content store. Together, these steps represent the most effectively integrated approach to reintermediation, contrasting its business plan with the commodity-based PC computer manufacturers.
The new Hollywood will be reluctant to become studios, but as the need for high quality and expensive content continues, they will have the funds available to assure that expensive content and tent pole entertainment brands are developed. They may have learned from Sony that companies should not embrace Hollywood, but they will also have learned from Sony that Hollywood is essential to their strategy.
The curtain on the latest saga is about to rise. Who knew what Pong would bring?
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A few years ago I taught about copyright at my son's elementary school class. After having all the students draw a picture or write a poem for one minute, the cards were sent around the room and other students were encouraged to "add" to the cards. While most had fun marking up their classmates cards, some were visibly upset that their work had been changed without permission. These children instantly understood the purpose of copyright.
The purpose of copyright is to encourage and support authors and artists -- providing them the economic return to make a livelihood. Academics like Professor Lessig (and myself) have the luxury to have university patrons to pay our salaries and allow us the ability to write without compensation. Most musicians, poets, playwrights, authors, painters, and filmmakers have no such support.
Without copyright we would return to an era of professional works funded only by patrons. How much more power would the media giants have under such a regime than they have now?
iTunes is the beneficiary of the litigation against Napster and Grokster. Legitimate business models will transform the business strategy but only if we continue to hold true to our constitutional tradition of promoting our artists and authors.
Needless to say, I could go on regarding this subject at greater length, which I have done in my legal writing, but the heart of my disagreement with Professor Lessig is not the need for a robust fair use or the importance of participatory copyright, but his instance that the law must demand all authors and artists submit their works to his sense of their property rights regime.
I allow unlimited copying of my academic work and substantial copying of my commercial books. But I should not demand all other authors do the same. I now how difficult it is for an independent filmmaker to raise the funds to make a movie; how arduous a task to find distribution; and how long the road to financial response. Let these people give away their works if they so choose, but do not suggest they have no rights to their labor.
The only thing worse than copyright -- is the unimaginative world we'd have without it.