“I’m a guy who doesn’t see anything good having come from the Internet. Period.”
– Michael Lynton, CEO Sony Pictures Entertainment
Over the weekend, I caught up on the news and came across this quote from the CEO of Sony Pictures. It reminded me of an old quote from a Hollywood leader in a bygone era:
“Who the hell wants to hear actors talk?”
- Harry Warner, President of Warner Brothers (1927)
After getting over my initial disbelief and amusement, I came to realize that it’s tempting to be pessimistic about this new medium. Media’s early forays onto the Internet showed great promise on the dream of delivering content to consumers anytime and anywhere. To date, however, we’ve only delivered on part of the promise. We’ve built the technologies for distributing media over the Internet, but the industry has only begun to solve the business model side of how we productively monetize this distribution.
As a result, Sony and others find themselves navigating through a formidable set of challenges:
- The Internet has enabled widespread piracy
- The economics of video on demand haven’t emerged (yet) as a viable replacement for the industry’s DVD business
- The music industry’s business model has been disrupted by the “unbundling” of songs (good for users, challenging for the industry)
- Segments of the younger generation are watching less and less TV, and spending more and more time online and playing video games.
Like every other distribution platform before it (radio, TV, VHS, e-commerce), online media distribution is being adopted by users much faster than by content owners and advertisers, thereby leading to a short-term net destruction in value.
So, if you’re a studio executive, how do you begin to navigate these turbulent waters? One thing is for sure — ignoring the sea change going on around us is not an option. Cowering in fear at the thought of translating “analog dollars into digital dimes” will have only one effect — converting these dimes into pennies. Rather, we believe content owners ought to adopt the burning platform paradigm. Recognize that content distribution will be heavily disrupted anyway, and that the worst strategy is to move too slowly. Instead, experiment like your business is at stake:
- Understand the need to re-think and evolve Hollywood’s traditional licensing windows (ad-supported versus purchase or rental)
- Understand the user experience that end consumers desire (HD versus SD, streaming versus download, PC viewing versus devices)
- Evaluate the real trade-offs that DRM introduces
- Understand WHY people are free-riding content today, since these same people also spend more money than the average Internet users on non-digital platforms (more on this later).
Technological disruption can be brutal and uncomfortable for a CEO in the media industry navigating turbulent waters. However, nothing good can emerge from a focus on short-term pain rather than long-term gain. The key is to focus on what’s important to the end consumer, and what this consumer would be willing to pay for what’s important to them.
Consumers are changing. Let’s change with them, and identify business models that embrace this change.
None of us want to end up with a quote like this to our name:
“While theoretically and technically television may be feasible, commercially and financially I consider it to be an impossibility…a development of which we need waste little time dreaming.”
- Lee DeForest, a pioneer in the development of radio (1926)