These are some of the things you really need to know about entertainment today.
As in the Billy Wilder film, Sunset Boulevard, let’s start at the end: The legacy studio system is in steep decline, theater admissions are dropping by 8% annually, home viewing is the new view of choice, digitally-based opportunities are on a tremendous upswing, Internet distribution platforms are dominated by big players, smaller systems are literally available to anyone, and the entertainment industry of 2017 is awash in new opportunities and new business models.
The media & entertainment industry, as a whole, is complex. But the parts are simple. While the audience thinks of entertainment as “content,” the cash flow in entertainment (i.e., the “business” part of show business) is defined and controlled by distribution. The paths to success for both content creators and distributors haven’t changed much in a hundred years. Make something highly entertaining, get it in front of an audience, reap the rewards.
What are the key takeaways for entertainment companies?
- Few industries have changed more convulsively in the last few decades than the world of entertainment.
- Everything is digital.
- Marketing and viral word of mouth are the keys to an audience.
- In 2017, the chasm between audiences and film critics has disappeared. If the critics don’t like it, audiences won’t either, and they just won’t go.
- Movie theaters are increasingly less relevant as large, affordable home-viewing screens fill the market.
- Viewing options and new entertainment networks are proliferating, along with acronyms like PPV, VOD, AVOD, SVOD and (gasp) P-VOD (see below).
- Theater admissions are steadily falling (down 8% Y-O-Y as of Summer 2017).
- Profits are down (other than at Disney) and some movie studios (Paramount and Sony, 2016) are losing hundreds of millions a year.
- Movie studios and TV networks have allied and diversified. It’s hard to find a studio today that isn’t co-owned by a TV network or a cable provider (Fox TV/21st Century Fox, Time-Warner Cable/Warner Bros., Viacom/Paramount, NBC TV-Comcast/Universal, ABC TV/Disney).
- For many of these companies, cable TV revenues are now the main lifeline. But cable-cutting has accelerated as Internet platforms (Netflix, Amazon, Vudu, Hulu, Youtube TV) move aggressively into content creation.
- Today, Netflix may be the most successful studio on the block, and it doesn’t own a studio.
- Morgan Stanley says that legacy studio “desperation” is reaching new highs, with the likely rollout of P-VOD (“Premium VOD” rented for home viewing at $35-50 day-and-date with theater release) being the next palliative.
- The P-VOD audience isn’t a new market. Research suggests that the prospective users of P-VOD are the same people who would have gone to see the film in theaters. Internet technology buoys studios but sinks theater owners.
- Over time (“time” being 1975 to now), studios have changed hugely from being progenitors of original ideas into serving the public a steady diet of “tentpole pictures” differentiated mostly by a “2,” “3,” or even a “4” or “5” in the title.
- In 2017, consumer choice is the new currency, accepted as legal tender in niche markets all around the world. Digital is the technological solution. The Internet is the platform.
- Entertainment is no longer a marketplace, but an industry offering thousands upon thousands of marketplaces.
- There are over 20 online distribution platforms that indie film/TV makers can readily access apart from the big boys like Amazon, Netflix, Vudu, Hulu and such. Their business models differ widely, but many of them operate on a revenue share, and most of them, of course, are relatively micro distributors. But, in a long-tail world, does that matter?
Consider this: If the budget for a film or TV pilot is relatively small, it doesn’t take much of an audience to put the project into profit and then you not only made some money, but you have a great sales tool to move to the next, better-funded step. Frankly, some YouTube videos — without any marketing whatsoever — can get 50,000 viral hits day one.
Stay tuned. I’ll be sharing more insights into the new media & entertainment landscape in upcoming posts.