Scarcity, Disruptive Technologies, and the Future of Media
Over at the Artful Writer blog, Craig Mazin has spotted an insightful analysis of the future of the entertainment business written by former UTA agent and media strategist Barrett Garese.
In “Scarcity, Experience, And A New Seat At An Old Table,” after noting that technology has knocked the props out from under the traditional business models of film and television based on distribution, Garese examines how these businesses can move into the future. He first notes:
The argument is often made that the internet is putting thousands of people out of work and killing off professional content. This may or may not be true, however it’s irrelevant for the following reason: disruptive technologies always put people out of work…temporarily. The automobile put thousands of coachbuilders and workers out of business as well. The smart ones adapted their businesses or skillsets, the others went away. . . . Mark my words that if we shortsightedly protect a business model which does not reflect current market conditions and the further progression of modern technology we’ll be far worse off in the long run.
Garese sees television faring much worse than film in the near future (“Prepare for a lot more reality television . . . and other non-scripted content. Television Ad rates will continue to drop, and license fees will too, thus further cutting the budgets for content”) and believes original online content is at least 18 months away from a mainstream hit. The larger media companies will remain, he opines, but will never regain the power over the marketplace they once had. He concludes:
Right now, entertainment is in a low-to-mid-level state of chaos. There’s little confidence in the status-quo, and unlike past decades no one seems to know what the future will bring. This means that those who are willing to experiment will have first opportunity to rewrite the rules. Those who are content to live with the status quo will be replaced. This is equally true across the entire scale of entertainment, from large to small. We’re well placed in a disrupted field, and that presents unprecedented opportunities.
The article is a major wake-up call for those who believe that the top priority right now is simply more aggressive negotiation under contracts based on the old business models.
A quibble with this:
Pirates ONLY have to worry about manufacturing costs and shipping details. They’re unhindered by CONTENT CREATION COST.
That’s true if you’re thinking of piracy as the guys on the street corner selling DVD-Rs. When you consider piracy from the angle of nonphysical piracy (i.e. information being transmitted and spread in a far more efficient manner than any physical product could ever dream of) then shipping and manufacturing of discs doesn’t ever enter into the conversation.
But I would venture to guess that 90% (if not higher) of modern piracy is of the non-physical variety.
It’s worth pointing out too, that the above quoted statement was meant to cover downloading and streaming (both legal streaming, and illegal streaming) as well, which both have an immense effect on the economics of physical home video sales.
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Mod. Comment: Our thanks for posting your informative article.
Non-physical distribution still has costs associated with “manufacturing” and “shipping.” There’s a cost to creating a digital stream from the pirate to the consumer (server hardware and net access bandwidth), so even though the cost per copy is very small compared to a copy on physical media, it’s not zero.
Cost of content acquisition is probably non-zero as well: someone gets paid to steal it.
But none of the pirate’s revenue stream goes to content creators, and that’s the crux of the problem. If content creators don’t get sufficiently compensated, they won’t create any more content, and the pirates won’t have anything more to steal.
The meta-shift is not in platforms but in the audience getting out of their seats and trying to become the players. Reality shows are about the fantasy that you are as interesting and compelling as any TV star, and ratings seem to bolster that idea. Youtube is about the same thing – me. Twitter is a digital “follow me”. Facebook is about me.
New scripted programs will not satisfy this craving regardless of the platform they use. Subtract the ego audience, subtract the gamers – and spread the rest of the audience over all the cable channels and networks, and you cannot sustain production that costs millions per episode.
I agree. Twitter and Facebook and just the cell phone exchange of pix and vids is the advent of the ‘micro series’. The kids that absorb themselves in the celebration of their circle of friends are participating in the atomization of entertainment. It’s the niche so small, that no one else even knows it’s a niche.
They know all the characters by name and though the plot is numbingly tedious to others, it is more interesting than regular programming because they know the cast so intimately.
Narcissus would be mesmerized. “Come Nar, step away from the pond.” “Are you kidding. You won’t believe what’s on!”
How do you get THOSE kids back to ’story’, even a 23 minute one, is a huge problem. And the boat has probably sailed on them. The question though, I guess, is how many do they represent? I think it’s probably a relatively slim percent, but it is the future?
It’s the future, but it is also the past.
When it comes to entertainment, we have always been a culture that has moved between being our own producers and merely consumers. Every technological and cultural advance that seems to break down the barriers between the performer and the audience ultimately helps create a new group of performers, but, most importantly for this discussion a new class of consumers.
Think of the millions of kids who picked up guitars after Elvis or the Beatles. Almost all of them gave up, but the ones that didn’t are still creating music we listen to (and will pay for.)
If you are of a certain age, do you remember “happenings?” If you don’t, or won’t, they were participatory events at which the crowd was the entertainment for itself. For a while, about six months in 1966, they were novel, at least until the drugs wore off. But they underscored a lesson for us that the new generation is learning again from Twitter and Facebook and YouTube:
ALL of us are boring MOST of the time, and MOST of us are boring ALL of the time.
The cycle will move on. Will we return to familiar forms in familiar business models? No, no more than TV will return to the Golden Age of live comedy. But we will move on to a time and place where people will pay, if even only with their time and attention (which can be monetized) to watch professionally created and conducted material.
It is probably going to upset Mike, but this will probably not all happen within 25 miles of Los Angeles. That’s because it doesn’t HAVE to, and in fact, the concentration there of people who have lashed themselves to old business models pretty well ensures that the next great step forward for professional entertainment will come from someplace else; Portland, or Mumbai, or even the backwater of Nashville (you wouldn’t believe the inventive visual stuff being done here).
This is the kind of thing that makes a mockery of demands for a share of “distributor’s gross.” Where there is no distributor’s gross, there is nothing to share.
It is the kind of thing that made a mockery of David Joliffe’s cleverness in the 2005 Commercials negotiation where he insisted that SAG compensation for new media use be based on a formula premised on a specific business model, which never worked, and no one tried.
There’s no question that the technology is disruptive, and that people get displaced when that happens. The idea is to figure out that it makes no sense to cling to the sinking Titanic just because it used to be a good idea of a way to get from Point A to Point B.
There will always be a need for professional talent. Where there’s a need, there’s a way to get compensated. It may not be the fastest or the best way to get rich, but there are good livings to be made, if we are smart enough to figure out how.
The r has been saying for months that we need to be progressive and proactive. Trying to find a way to make money from New Media using the 30+ year-old residuals model is a disaster waiting to happen – as if God were to put a fun house mirror in a monkey cage.
We need totally new way to get our share of new media.
I think one of the most significant insights in the article — and the one that says the most about what might or might not work with SAG-AFTRA negotiations — is the observation that original online programs that are simply “film lite” or “TV lite” are unlikely to have enough economic heft to represent a significant source of revenue or profit in their own right. Thus, trying to force-fit the traditional film or television production models on online content is probably not a good use of our time.
Garese challenges all of us in the industry to think about what can make the online experience unique and valuable in and of itself — rather than just another way of delivering the same stuff that exists on TV or at the local Blockbuster. From our own selfish standpoint, we need to figure out how union performers fit within the new paradigms that will be created.
If there’s a lament for the vaunted “middle class actor,” it’s that there is a lot less work now, and the trends are not looking very promising. Instead of MF fighting to bump top-of-show rates by 25%, for example, it would make more sense to find a way to allow those top-of-show performers to work more often at the current rates. That would make a huge difference. It would also have made a huge difference if SAG (working with AFTRA) had used its time leading up to the 2008 negotiations to find a way to improve DVD residuals. That alone would help a large segment of “middle class” people. It’s now becoming too late as the DVD market tanks.
AFTRA should have been collecting information about New Media deals since mid-2008, and SAG is now eligible to do the same thing. For those screaming about getting ready for the next round of negotiations, I would ask: Who is looking at the New Media deal information and figuring out what it means? And since the DGA and its outside advisors are largely responsible for the current New Media “template,” what kind of outreach is occurring to those folks? Is there any “there” there?
VG
voiceguy,
you’re a smart fellow.
and perhaps the MF proposal to bump up top of show is unworkable.
but exactly how should we,
(SAG – AFTRA , and all political ideologies contained therein),
“find a way to allow those top-of-show performers to work more often at the current rates”?
it’s not up to us.
if the networks decide to move away from scripted toward more reality,
or to put Leno on for 5 nights of primetime, that’s what they’re gonna do.
they may finally figure out, after some years perhaps,
that dumbing down their programing and saving money upfront
may actually cost them tons of ad $$$ in the long run.
but what do we do?
BRAVO has a deal with those “Real Housewives” women that they work for FREE …
AND … then BRAVO is entitled to 10% of any other work those women score as
a result of the exposure they receive on that stellar piece of programing.
how do we compete with that?
we can’t.
all we can do is try and ensure that when we do work,
it’s for decent pay with benefits.
respectfully, there is no way to “allow those TOS performers to work more”.
not much we can do.
hopefully, when the viewing audience stays away in droves from the drek
that’s on TV, perhaps the networks will again invest in scripted.
or maybe this is the end of network TV as we know it
and it will henceforth be comprised of reality and infotainment.
i don’t know.
harry –
I hear what you’re saying.
What concerns me however, is that in an era where scripted TV programming is perceived as already too expensive, and the buyers of such programming are either hammering license fees or seeking cheaper replacements (or both), the last thing we need to be doing is finding ways to make production of such programs even more expensive. Doing so is likely to accelerate the trend away from scripted programming, and cause actors’ financial plight to become worse.
It’s like the fallacy of trying to solve the problem of affordable housing by requiring the developer of luxury beachfront condominiums to set aside a handful of the units for “low to moderate income” occupants. All this does is create a windfall for a few secretaries, but there is absolutely no measurable spillover benefit to the vast number of other people who can’t afford to live in the area.
It’s also worth noting that raising contractual rates does not automatically mean more aggregate income for actors. It depends completely on the effect of those rates on the actual amount of paying work that takes place. The same phenomenon has been demonstrated repeatedly with tax rates and government revenues. Government that are strapped for cash often raise tax rates or impose new taxes in order to make up the shortfall, only to discover that overall revenues actually drop. At the same time, there have been repeated examples where dropping tax rates has led to increased total tax revenues.
The point I was trying to make in my earlier comment is that it is foolish for SAG to assume that it can automatically improve aggregate member income by demanding significantly higher minimum rates in the TV-Theatrical contract. The economics are almost certainly more complex, and the higher rates might just as readily lead to lower overall member income because the rates cause producers to move their money elsewhere.
Thus, I remain of the view that what SAG should be worrying about is not automatically “how can we force contractual rates ever higher?” but rather “how can we help bring about conditions where the rates we already have are used more often?” I don’t know where such thinking might necessarily lead (union painters discovered, for example, that their work skyrocketed when they decided to drop overtime for painting on weekends), but it’s thinking that should be taking place.
VG
I remember in the W & W’s this last time around, AMJ was urging everyone to ask for the moon. She was starting the bidding at 10K an episode. I said, don’t you think we should try for something more reasonable and use it as leverage for something more gettable? I was told not to worry my little head and that the Neg. Comm. would do the real thinking. Then she went back to asking how much we needed in order to make a living.
I told her $40K an episode. It was the height of absurdity.
Now, by trying to make a 25% raise in MRM seem like our due, she hopes that anything less than that will be perceived as a failure of the upcoming Neg. Comm.
“They didn’t strike to get you the Moon! They’re traitors!”
It’s coming.
harry98: “it’s not up to us.”
But it COULD be up to actors, writers, directors and the rest of the content creators to find ways to shape their own future.
The point of the article is that the studios and networks are not necessarily going to be in charge of production in the future.
When getting a program out to the television audience meant getting it transmitted over the air by one or more broadcast stations (up to and including a whole network of stations), the station owners (including networks) had control over what programs got on the air, and even which ones got made.
Now getting a program out to the “television” audience doesn’t require access to any broadcast stations, because you can put it onto a Web server and make it available to every Internet user in the world.
And if you don’t have a Web server capable of delivering video to a large number of viewers, you can take advantage of other people who do — Apple’s iTunes, for example, which will even take care of billing consumers for accessing your video content.
So the remaining challenges are creating compelling content — good writing, good acting, good production values — and creating demand on the part of paying customers.
The article also points out that the nature of the online environment means that the compelling content can and probably will be different in significant ways from the fixed form of traditional “television,” where every viewer sees the same story told the same way as every other viewer. Instead, content creators will learn ways to give each viewer ways to become a “user” who interacts with the content to experience it in a way that’s unique (or close to unique) to him or her.
The ultimate way to stick it to the AMPTP is to make them essentially irrelevant by finding ways to go around them. (Of course, in the longer run, those entrepreneurs and companies that figure out the new media may end up turning into media megacorporations that control production and distribution in that environment just as the AMPTP did in “traditional” media. In fact, it may already have happened: corporations like Google, Apple, Microsoft, Verizon, AT&T, etc., may already be in position to take those leading roles in the online world.)
“The ultimate way to stick it to the AMPTP is to make them essentially irrelevant by finding ways to go around them.”
It is a lesson that has been repeatedly taught to the RIAA, and they still haven’t learned. The ways around the AMPTP are already there.