Why the Movie Industry Can't Innovate and the Result is SOPA
The movie industry has been consistently wrong in its claims that new platforms and channels would be the end of its business. Now it can't innovate, leading to SOPA.
This year the movie industry made $30 billion (1/3 in the U.S.) from box-office revenue.
But the total movie industry revenue was $87 billion. Where did the other $57 billion come from?
From sources that the studios at one time claimed would put them out of business: Pay-per-view TV, cable and satellite channels, video rentals, DVD sales, online subscriptions, and digital downloads.
The Movie Industry and Technology Progress
The music and movie business has been consistently wrong in its claims that new platforms and channels would be the end of its businesses. In each case, the new technology produced a new market far larger than the impact it had on the existing market.
- 1920s: The record business complained about radio. The argument was because radio is free, you can’t compete with free. No one was ever going to buy music again.
- 1940s: Movie studios had to divest their distribution channel – they owned over 50 percent of the movie theaters in the U.S. “It’s all over,” complained the studios. In fact, the number of screens went from 17,000 in 1948 to 38,000 today.
- 1950s: Broadcast television was free; the threat was cable television. Studios argued that their free TV content couldn’t compete with paid.
- 1970s: Video Cassette Recorders were going to be the end of the movie business. The movie businesses and its lobbying arm MPAA fought it with “end of the world” hyperbole. The reality? After the VCR was introduced, studio revenues took off like a rocket. With a new channel of distribution, home movie rentals surpassed movie theater tickets.
- 1998: the MPAA got congress to pass the Digital Millennium Copyright Act, making it illegal for you to make a digital copy of a DVD that you actually purchased.
- 2000: Digital Video Recorders such as TiVo begin allowing consumer to skip commercials was going to be the end of the TV business. DVRs reignite interest in TV.
- 2006: Broadcasters sued Cablevision (and lost) to prevent the launch of a cloud-based DVR to its customers.
- Today it’s the Internet that’s going to put the studios out of business. Sound familiar?
The movie industry was born with a single technical standard—35mm film, and for decades had a single way to distribute its content—movie theaters (which until 1948 the studios owned.) It was 75 years until studios had to deal with technology changing their platform and distribution channel. And when it happened (cable, VCR’s, DVD’s, DVR’s, the Internet,) it was a relentless onslaught. The studios responded by trying to shut down the new technology and/or distribution channels through legislation and the courts.
Regulation/Legislation
But why does the movie business think their solution is in Washington and legislation? History and success.
In the 1920s, individual states were beginning to censor movies and the federal government was threatening to do so as well. The studios set up their own self censorship and rating system keeping most sex and politics off the screen for 40 years. Never again wanting to be at the losing side of a political battle they created the movie industry’s lobbying arm, MPAA.
By the 1960s, the MPPA achieved regulatory capture (where an industry co-opts the very people who are regulating it,) when they hired Jack Valenti, who ran the studios’ lobbying efforts for the next 38-years. Ironically, it was Valenti’s skill in hobbling competitive innovation that negated any need for studios to develop agility, vision and technology leadership.
Management of Innovation
The introduction of new technology is always disruptive to existing markets, particularly to content/copyright owners whose sell through well-established distribution channels. The incumbents tend to have short-sighted goals and often fail to recognize that more money can be made on new platforms and new distribution channels.
