Cliffhanger

Hollywood is trying to solve the problem of the attack of the killer turkeys. For some reason, a lot of movies are simply bombing. The Australian suggests that film companies now have to rely on merchandising and brand tie-ins to replace plummeting DVD revenues:

Like zombies who keep getting up, the turkeys of 2009 just won't stop coming: Land of the Lost, Gamer, Surrogates, Funny People, Love Happens, The Taking of Pelham 123... This week, Walt Disney and Universal Pictures announced changes in their executive line-ups ... Many believe such a shake-up is long overdue in an age in which merchandising and brand tie-ins must replace cash from lost Wall Street loans and DVD revenues.

At current costs of production, the film industry will be forced to produce fewer movies, creating even greater risks for the studios. Putting their eggs in fewer baskets will make them more vulnerable than ever. Some industry executives are now talking about cutting the going rates of pay. The Financial Times writes:

At Universal, Ron Meyer, the chairman who decided to dismiss Mr Linde and Mr Shmuger, has vowed to make cost control a priority when commissioning films. “We have overspent and underperformed,” he says of the films released this year. “We have to change with the times and look at the economics of today’s movie business.”

In an industry rife with bloated salaries, talent pay is the most obvious area to cut. Some stars receive astronomical fees for their work and the “20 and 20” pay day – referring to a $20m upfront payment plus 20 per cent of the film’s gross before the studio earns a penny – is not uncommon.

Universal’s new management team refuses to be drawn on star salaries, with Donna Langley, the new co-chairman, insisting there are other areas to consider, such as the rising cost of energy and materials.

Adding to the drama is the possibility that what is killing the movies may be a version of whatever is killing the newspapers; that whatever is stalking Disney is stalking the New York Times. Price Waterhouse Coopers recently published a study called the "Global Entertainment & Media Outlook 2009-2013". It's message is simple. The entertainment industry is in the middle of the digital revolution and the audience wants to be in control.

The accelerated migration to digital technologies has reinforced and proliferated new consumption habits and “digital behaviours” as consumers seek more control over where, when and how they consume content while, more than ever, watching the pennies and seeking the best value from the choices they make. The advances in digital are enabling this with ease. ...

Consumers are taking control in various ways. They are adopting “time-shifting”, using digital video recorders and video-on-demand to free them up from the TV schedule enabling them to watch what they want when they want. Increased broadband penetration is enabling them to get what they want from wherever they want while improvements in technology allow better downloading and streaming. Growth in mobile access is allowing consumers to access the Internet from any location and giving rise to the popularity of high-end devices such as smartphones, iPods, and the Kindle that combine mobility and access. The advances in digital music are also allowing consumers to purchase songs individually through digital channels (unavailable in physical format) and generating growth in sideloading, which allows consumers to buy music less expensively online, then transferring that music to mobile devices.

Tapping into the massive collective buying-power of online communities is an increasingly central focus of consumer marketing campaigns globally. However, companies are still struggling to adapt their current business models to ensure that they are monetizing their digital content and capturing the revenues.

We know that news flagships are rapidly going under. Can giant "blockbuster" films aimed at markets of millions survive in this environment? The Financial Times notes that finding a market with far fewer resources may be the key to future success. "After a summer bursting with expensive box office flops, a film made for a paltry $15,000 and starring an unknown cast is shaping up to become one of the year’s surprise successes. Paranormal Activity, a horror film in the mould of the Blair Witch Project, has been selling out midnight screenings in a handful of US cities and looks set to become a bona fide hit when it is released across the US by Paramount this month." This cheap production contrasted sharply with the standard products whose production costs continued to increase.

The average cost of producing and marketing a studio movie has risen more than 6 per cent since 2007, according to The Motion Picture Association of America, while in the past 12 months profitable revenue streams, such as DVD sales, have sharply declined.

While it would be simplistic to conclude that Hollywood really is facing the same kind of business-model destroying forces that have savaged the MSM, the new digital age -- plus the recession -- probably means that business as usual for the entertainment industry is over. Something has to change and everyone is waiting to see how things adapt. But perhaps the carnage isn't over. My guess is that the killer will hit the universities next. The current woes of higher education have been ascribed to declines in endowment and a much more competitive market for intellectual capital. People just aren't willing to pay huge amounts of money for a credential that doesn't give them real marketable skills any more.

Those are serious factors, but there's a bigger threat. The process of knowledge exchange and mentoring is rapidly going online, not only through posted documents but over collaborative platforms. People are learning skills for which no degree granting course exists and without going to universities. I've seen projects formed, software built, meetings held and mentoring proceed apace without the participants ever meeting each other once in person. Sooner or later this process will reach a critical mass and begin to rival the formal schooling system, at least in certain spheres. How much longer before students begin wondering whether the Ivy League model will be ripped apart by the digital revolution?

The glue that holds a society together has always been the power of its myth, which hitherto has been the province of the cultural elite. This has been widely recognized through history. Mohammed is said to have believed that four things support the world: "the learning of the wise, the justice of the great, the prayers of the good, and the valor of the brave." An even older source -- Homer -- described the ramparts of the Grecian universe in much the same terms in his allegorical description of the Shield of Achilles: layers of war and peace, work and festival and only lastly, the Great Stream of Ocean.

The digital age, as exemplified by the Internet, is wreaking havoc upon the pillars of Western society -- the memes of the MSM, the shows of entertainment, and the wisdom of the academy, to use Mohammed's metaphor -- are all being shaken.  The earthquake is potentially so far-reaching in effect that today's political crisis probably can't be understood without it, because the more general question isn't how Hollywood, the MSM and the great universities will survive the digital age: it is what meaning elites will have in an online universe. How will it end? Who knows. The final reel hasn't been shot yet.

Below, the ultimate Killer Turkey.


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