“Well written and an interesting perspective.” Clan Rossi --- “Your article is too good about Japanese business pushing nuclear power.” Consulting Group --- “Thank you for the article. It was quite useful for me to wrap up things quickly and effectively.” Taylor Johnson, Credit Union Lobby Management --- “Great information! I love your blog! You always post interesting things!” Jonathan N.

Friday, April 22, 2011

Computer Technology Revolutionizing Industries – Part II: Movie Theaters, On Demand, and DVDs

The effects of computer technology on the sales of movies and on film-making itself were notable as the second decade of the twenty-first century was getting underway. Stopping inside a Blockbuster store to rent a DVD, which itself was short-lived in the process of technological development, was going by the wayside; even buying a DVD at a Borders or Barnes & Noble was fading. As dramatic as these changes seem, the impact on film-making and, moreover, in what a film is hinted at even greater transformation.

In early 2011, Borders closed 200 stores in the United States. Although e-books sold by Amazon.com were giving Borders a run for its money, the chain was also being pummelled by the increasing file-sharing of music and movies as well as DVD rentals by mail and online movie-streaming sold by Netflix, which was rushing to ride the wave from DVD to on-line streaming.

In April 2011, Netflix posted an 86% jump in quarterly profits as its online movie streaming service clicked with consumers. According to The Wall Street Journal, “In the letter to shareholders, signed by Netflix Chief Executive Reed Hastings and Chief Financial Officer David Wells, … the two executives said in the letter that its DVD offerings will be a ‘fading differentiator’ for the service, which last year began letting people subscribe to a streaming only service for $7.99. Already the company has begun to discourage people from choosing rental plans that offer consumers the option of also renting DVDs. In its letter to shareholders, the company said the sign-up page on its website for non-members is now ‘all about streaming’.” The executives wanted to see the postal costs associated with the company’s DVD rental service drop with the decreasing volume as customers switch over to online streaming to make room for the rising costs of licensing content. In other words, the company was riding the technological wave from DVDs to online viewing, leaving brick-and-mortar based DVD companies such as Borders in the dirt.
                                                     (The Wall Street Journal)

The eclipse of DVD sales by on-line streaming effected not only companies like Borders and Blockbuster that had remained primarily Brick-and-mortar enterprises; the change was also putting more pressure on studios to get their films On Demand sooner—at the notable and rather vocal expense of movie theaters.

According to The Wall Street Journal, technology was putting pressure on the old “windowing” system, which “staggers a movie’s release through avenues like theaters, DVD and television, to maximize the profitability of each.” Theaters were concerned about DirecTV’s plan to add movies sixty days after they hit theaters to premium video on demand—cutting the time in half. The studios pointed out that most films earned the bulk of their profits within the first few weeks of release. Filmmakers, including James Cameron of “Titanic” and “Avatar,” wrote that theaters are “the optimum, and most profitable, exhibition area” of the art form.

To be sure, films such as “Titanic” and “Avatar” are particularly striking on the big screen. By the time “Titanic” got to TBS on television, the relatively tiny screen was encumbered by the network’s programming graphics even during the film. Imagine, if you will, a cartoon figure dancing around the bottom left of the screen while “TBS” is shown on the bottom right as the hero and heroine “fly” at the front of the ship in a beautiful sunset.  The “windowing” process can be viewed as a trajectory of increasing decadence as well as inferiority in terms of picture.

However, even with the decadence of commercial television cannibalizing even its own programing, the size of the screen makes less difference for some films than others. Furthermore, to claim that earlier availability on television (or computer) reduces the incentive to see a film in a theater is to manipulate customers rather than trust in us to choose the means of delivery. Todd Phillips, director of “Hangover,” argued that the new science would dissuade would-be movie goers from going to the theaters because the sense of urgency would be removed.  If that sense is constructed rather than real, DirecTV may have been doing the customers a favor.

Were directors such as James Cameron truly concerned to protect the optimality of their art form, the fact that films do not benefit equally from being on a big screen relative to a television wide-screen would suggest that customers could benefit from a system in which films are ranked in terms of the importance of the big screen. Directors could issue a recommended score, say from 1 to 10, and film critics could proffer their own recommendations.  This would systematize the tendency of critics to urge “see it at home” versus “go to the theater.” Of course, in viewing previews advertised on a computer or on television, consumers make their own decisions, rather than feeling an artificial urgency that is in the interest of the theater owners.

As salient as computer technology is to changing how (and where) movies are being watched, the impact of such technology on filmmaking itself and how films may be viewed in the future is perhaps even more dramatic. Cameron’s “Avatar,” for example, involved new digital motion-detection technology in 3-D. More significant still would be a merger of virtual reality and movies (perhaps via video game technology), such that one day a viewer may be in a scene rather than looking in on a narrow range of one on a rectangular screen. Such a development would probably reverse the tendency of scenes to get shorter and shorter (in line with decreasing attention-spans?) because the viewer would be more invested in a given scene.  “Shots” would not make sense; rather, the question for the director would be whether to control the viewer’s vantage point, and if so, how often to change it in a given scene. Furthermore, an editor would have to make the scene changes such that the viewer would not disoriented—“jumping” from one “world” suddenly into another.

Of course, movie theaters would not exist were virtual reality the predominant means, unless the traditional showing would also be sought, and even then, the economics might not support the brick and mortar venues.  In fact, if Cameron and the theater owners were correct, the theaters might not survive DirecTV and the internet.

Like the brick-and-mortar bookstore and library, the movie theater might not be as permanent as their history in the twentieth century might suggest. Indeed, what we take for a book and a movie may be on the brink of fundamental change not only in delivery, but also in terms of content. In both cases, novices with a passion are able to try their hand (or camera) and gain some market share from the “professionals.” Even the latter are being forced to adapt or become antiquated.  As the second decade proceeds, these industries are on the cusp of changes perhaps on the order of those that occurred in lighting and transportation from the 1850s to the advent of commercial air travel. It is difficult to compare the two periods in terms of their respective transformations because the industries differ and the same people were not alive for both. Even so, I suspect that the hope and optimism that came with electricity and the automobile are in the air concerning what is possible as computer technology continues to develop and be applied.
Click to add a comment or question on the film industry and computer technology.
Michelle Kung and Ethan Smith, “Filmmakers Pan DirecTV Plan,” The Wall Street Journal, April 21, 2011, B2.

Nick Wingfield, “Netflix Faces Rising Costs,” The Wall Street Journal, April 26, 2011.