December, 2007 | The present and future of post production business and technology

Is a return to the “Studio System” on the horizon?

If there’s one thing that’s very clear over the last decade, is that the tools of production have become cheaper. But so far only the tools of production – cameras, edit gear, accessories, color timing suites, et al – but for craft skills there seems to be the same dichotomy of old: work for next to nothing in “Indie” production, or hang out for one of the few really well paying (Guild) jobs in the traditional production system.

Neither option is particularly suited to emerging “new TV” or “new media” production.

There is justification for extremely high salaries in broadcast: a popular show makes good money for a network and if paying the stars of, say friends $1 million an episode (as they did in the final year) means they get another year of high-value advertising slots to sell, makes sense. But $6 million an episode (plus the actual production cost for equipment, sets, studio and crew) is not going to fly for “niche” programming, in a 10,000 channel world. Frankly, as actors they were competent enough, but it wasn’t the talent that made the show in the first place. Writing, talent, the way the ensemble works, direction et al all had a lot to do with the success of that show.

At the other end of the equation you have shows like Goodnight Burbank where some of the people make some money off the advertising revenue blip.tv secures for the show. There has got to be a middle ground, where profits can be made by the producer and everyone involved gets a decent living. I’m wondering if a return to the studio system of early Hollywood isn’t on the cards?

In that system, actors, directors, cameramen et al were employees of the studio on fixed salaries. Generous salaries for the day, for sure, particularly for the most bankable, but salaries none-the-less. No $20m payments for “stars” that don’t actually contribute to the profitability of the movie. They may make it easier to market, but the studios today do not get payback or value from the huge sums paid to “stars”. The downside of that system is that the studios (vertically integrated businesses including the cinemas in those days) made outrageous profits off the backs of their employees, leading to United Artists and talent as independent contractor.

It seems to me that there is going to be some sort of structure – cooperative, studio, whatever – that allows a minimum of a decent middle class income for everyone involved, but retains control of the show through the newly democratized distribution system. It would have to have far more transparency in accounting than is common in the current system, so that profits are shared *fairly* with those who are responsible for creating the value.

Yeh, utopian, and probably unrealistic, but I can visualize a system where creative talent gets to do what they love (perform, edit, direct, shoot etc) and get a decent income, in the face of ever more fragmented viewing habits. A hit show today wouldn’t have even been in the top ten 20 years ago and yet, shows are still made and people in the industry still seem to live from their work – those who get to work that is. The systems and methods that worked for 3 channels may not be as suitable for a 500 channel or 10,000 channel world.

What do you think?

When you lose your monopoly, business has to change

Seth Godin has written a reprise of an old article of his called Monopolies, seven years later, which I heartily recommend.

The recording industry once had an important role that justified its monopoly, as did Broadcast Television stations and other limited outlet industries. But inevitably the monopoly is broken – by legal fiat in some cases, but by technology in a whole lot more cases.

It’s hard for a monopolist to give up the position because monopolies are very, very profitable. Sad to think that a company that was once raking in multiple millions of dollars every year, for many years, suddenly has to compete on the quality of their offering in a completely changed market where they are no longer a monopoly. This is why the music industry (concert tickets, merchandise etc) is doing very well while the recorded disc business is slowly fading away.

Some of the time monopolists don’t realize what business it is that they are in. Railroad companies apparently thought they were in the railroad business, rather than the transport business, so when their long-haul monopoly was threatened by trucking, they didn’t respond fast enough, and faded in importance to society. Record companies think they’re in the disc business, when they’re really in a promotional business. That’s probably the only role left.

Other times, industries lose relevance because technologies bypass them. This is the position that broadcasters and cable channels are facing right now: they had an effective monopoly (mandated by the government in the case of broadcasters) because they had access to limited resources – broadcast licenses and access to cable distribution. However when we don’t need those limited resources to get entertainment “out there” to the viewer, what role is left? Finance company? There’s lots of competition there.

And finally, industries lose out when they focus on the wrong customer. Broadcasters and cable programmers have the wrong focus. They believe that their customer is the advertiser, and they are correct in an advertising supported entertainment model. However, the producer’s customer is the viewer and is often in conflict with the broadcaster’s customer.

Losing a monopoly is inevitable. You can avoid fading into irrelevance by focusing on the core value of your business to the customers and to keep focused on the customer’s needs. Unfortunately, the more broadcasters do that, the faster they’ll fade from relevance because they are unnecessary in an unmediated marketplace.