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Thursday, May 14, 2009


Movie studios can go from zero-to-hero or vice versa in any given year. Boxoffice hits drive movie attendance and revenue, so one would expect the studios to continue to focus on fantasy and character films that can be leveraged into other licensing and ancillary products/outlets which is also good news for exhibitors. However, in the digital age, more and more, it's control of distribution channels and not content that is paramount.

The large studios are housed within media/industrial conglomerates (Time Warner, Disney, GE, Sony, News Corp., Viacom) and although they are relatively modest profit contributors to the consolidated operations of these media giants there are huge barriers to industry entry, most notably, the control of a global distribution network - which is based upon a worldwide media standard - 35mm film.

For the media giants music distribution is gone. Yes, Apple will share royalties for iTune downloads but the day of the media industry's control of music is history; and easily demonstrated by a web search where thousands of songs can be downloaded via hundreds of music "file sharing" sites.

Currently, it is the publishing business that is battling for survival. Newspapers are closing, books are being digitalized, and even the AP news service is under attack as they cannot control content as they could in an analog world. Media companies, worldwide, are scrambling to find new business models to cope with the digital (content free) onslaught and find new ways to charge for content with subscription fees and ad revenues - but it's a losing battle. Could the cinema follow the same fate if it goes digital?

In the digital future what would prevent a content provider from going directly to exhibitors for distribution. There is no shortage of movie content, each year thousands of movies are produced but only a few reach the silver screen, but only because the studios control an analog based distribution network.

Digitizing the movie industry's distribution channels will change forever the business model for both the studios and exhibitors and probably not for the better in terms of revenue and profits. As the adage goes - analog dollars/digital dimes - and it couldn't be more apropos in this case.

History has shown that the digital revolution has changed many industries in many unforeseen ways - spawning new, altering some, and killing others. The changes the digital age has and will bring to the cinema industry are and will be profound and unforeseen - and that is the only certainty that can be counted on. Hollywood should think hard before completely committing to digital cinema, for as archaic as it is, film allows the studios worldwide distribution control. Yes, with film there is piracy at the periphery but not the wholesale duplication and ease of distribution that could very easily and unforeseeably occur with digitally formatted content.