Hollywood has a thorn in its side and it’s only getting deeper. The Internet is fundamentally changing the film industry as we know it. People are watching movies and TV shows for free online; the Internet is eating into TV watching more and more each year; Web series’ are in increasing demand and challenging traditional television networks; and what’s more, regular folks are creating their own web videos and broadcasting themselves on sites like YouTube.
Surprisingly, despite these seemingly threatening factors, movie sales are currently at an all-time high, reaching $28.1 billion in 2008 - an increase of 5.2 percent over 2007. But over-crowded movie theatres aren’t necessarily why the big bucks keep flushing in. In fact, domestic admissions have significantly dropped in recent years. (Perhaps the exorbitant rise in movie ticket prices has had some effect.) But can a system in which consumers are expected to pay more for things that the Internet offers at such a nominal fee be expected to last forever? The industries are at war and here are some of Hollywood’s biggest threats.
Threat 1: Internet Piracy
The film industry has a challenge on its hands. Internet piracy is prevalent and responsible for $18.2 billion in losses[PDF]. Hollywood’s copyright holders continue to fight for more arduous copyright laws and have had some success. The U.S. Supreme Court ruled in June of 2007 that software companies could be held liable for copyright infringement when individuals use their technology to download songs and movies illegally. The UK film and television industry has also called on the government to introduce “speed humps” that slow down or restrict the broadband access of people who illegally share copyrighted material. But efforts to control piracy have certainly not been completely effective and pirated films keep becoming available much earlier. The Motion Picture Association of America has succeeded in closing down a large number of movie file-sharing sites, but people figure out how to change their security settings so they can share files anonymously.
The battle between the film industry and piracy has been ongoing but perhaps fighting it isn’t the only alternative. Since the Internet offers movies well before their release date, big studios could offer screener-like copies to the file-sharing community. In doing this, people could blog about the film before it goes into distribution and raise hype. Another idea would be to have a legitimate site in which the movies could be watched for free, in good quality, but that would also have a paid version where upon signing up the user gets extra perks like special features, HD downloads and cinema deals. The site’s revenue would come from ads and considering the amount of traffic the site would get, it could be worth some of the initial monetary losses to have one of the most visited sites on the net. Hollywood would likely benefit in the long run by making the Internet a part of the legitimate distribution and revenue chain. These are of course risks, and big ones at that, that the industry may not be ready to take just yet.
Threat #2: Webbing Television
Joss Whedon (Buffy the Vampire Slayer, Angel and Firefly creator) was on to something with Dr Horrible’s Sing Along Blog. The show was conceived and created during the WGA writers’ strike as a way of “bypassing the system” and creating something inexpensive and professional that would be produced exclusively for Internet distribution. Funding the project himself for just over $200,000 Whedon got How I Met Your Mother’s Neil Patrick Harris on board, as Dr. Horrible- an aspiring, super-villain with a Ph. D in horribleness.
Aired for free on the Dr. Horrible official website, the episodes were then made available via iTunes where the series hit #1 on iTunes’ video chart, with 2.2 million downloads a week. A DVD with extra features was then released exclusively at Amazon.com. The DVD became the #2 bestseller in the Movies & TV category. All proceeds from iTunes and DVD sales went towards paying the cast and crew. Dr Horrible’s Sing Along Blog was named 15th in Time Magazine’s Top 50 Inventions of 2008.
The success of Dr. Horrible demonstrates that tremendous possibilities exist without studio and network interferences. Granted, the fact that Whedon and Harris were already established names in the industry certainly helped build the project’s reputation. But say that other A-list equivalents begin to follow suit, choosing to bypass the studios. Programmes and films can easily be distributed on the Internet and circumvent the old model which controls when and where content is seen. Again, the threat may seem far- but in a time so welcoming to entrepreneurial ventures, it could force some important industry changes in the near future.
Threat 3: Social Networking Sites
Using networking outlets such as Twitter, Digg and Facebook are effective ways to spread a message quick and that can be a pleasing plus or dreadful downer to ticket sales. Sure, word of mouth can make or break a movie, but with users’ contact lists going well into the hundreds to thousands, spreading a pan review could potentially crush a film, especially in its first weekend box office stats. People may be more inclined to trust their friends as to their likes or dislikes.
Though these networking tools may have a larger influence on small, independent films for now, even with big blockbuster films like G.I. Joe, when you consider the potential weight of Digg posts like “Will G.I. Joe be the worst movie of the year” or “G.I. Joe Looking Like Bomb of Epic Proportions” which are coming from sources such as NY Magazine and being read by millions a day, there are some important considerations that have to be made. People don’t want to be sold merely on ads and commercials, they want to discuss, blog, and formulate their own opinions based on many sources. Just like Microsoft CRM software helps companies manage tasks and data, developing solid online communities could help improve the industry’s reputation overall.
Whereas going to movies used to be a primary source of entertainment, the Internet now offers a wealth of other experiences which are a force to be reckoned with. 3D movies may be Hollywood’s saving grace, but it will be interesting to see whether the Internet will eventually revolutionize the film industry or if the war will continue as a fight to the death.
Awesome article! It’s a must!
Threat 1 is bullshit. The only way they could LOSE 18.2 billion dollars would be if movies were somehow stolen. Piracy is not theft. Piracy simply makes a copy. It also isnt a very big threat, because studies show people who pirate movies and songs are not actually likely to pay for them.
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There is no way to calculate the loss of revenue due to piracy without being able to prove who would actually pay for the materials if piracy wasn’t an option. As Greg said, lots of studies and polls have been conducted to figure out how many people would pay for the products to begin with, and the numbers are very low. To blow up a fiscal number based on free downloads is a lie, because their product was worth 0 dollars to most of the people who pirated it.