Monday, January 23, 2012

Kill Hollywood? Here's a better approach

Last week, partially in reaction to the SOPA/PIPA debacle, Paul Graham of Y Combinator issued a "Request for Startups" under the title "Kill Hollywood". Graham argued that the fact that entertainment companies are relying on legislation rather than competition and innovation is a sign that they can be displaced. Graham's right about the industry's ham-handed reliance on legislation, but segments of the entertainment industry have gone through extinction-level crises many times in the past. Here are a few examples:

  • The music industry was threatened by radio starting in the 1920s, but radio stations eventually chose to play recorded music because it was cheaper than producing original shows. Radio became the primary mechanism for promoting records for decades, until MTV.
  • An entire generation of movie distributors and studios, most of which were affiliated with Edison's patent pool, went out of business in the first two decades of the 20th Century. Companies such as Essanay, Kalem, Selig Polyscope, Mutual and Biograph disappeared and were replaced with the progenitors of the movie studios we know today.
  • In the 1950s, movie studios were forced to divest themselves of ownership of theaters in the U.S., but independent theaters quickly picked up the slack.
  • Television also threatened the movie industry in the 1950s, but the major studios started producing television shows and licensed their movies to television stations and networks.
  • Some movie studios went bankrupt or experienced painful reorganizations in the 1960s and 1970s, thanks to massive cost overruns on unpopular films. The industry was saved by the "independent movement", which was where many of today's most successful directors began their careers.
  • File sharing and digital distribution has led to consolidation of the biggest record companies. For example, who would have believed that RCA Victor and Columbia, once the world's two largest record companies and fierce competitors, would eventually both come to be owned by Sony?
It's really hard to "kill Hollywood", even when Hollywood seemed to be dead set on killing itself. Industries die when they become obsolete or are replaced by something better. Movie theater attendance is declining, as are DVD sales, but the movie business itself isn't obsolete. The record industry has been struggling, but it's still surviving. The commercial television networks' audiences are declining, but cable networks have been growing for years.

What's needed is a two-part approach:
  1. First, take on the entertainment companies head-to-head with lobbying. As distasteful as lobbying is to most technology companies, they can't let their opponents have the battlefield to themselves. A strong, coordinated approach to lobbying would counter the efforts of the entertainment companies, which are certainly vulnerable, especially in the "Red States".
  2. Second, invest in technologies and content that appeal to consumers during their leisure time. Don't worry about what the effect will be on entertainment companies; if consumers like it and are willing to pay for it, that's all that matters.

Enhanced by Zemanta
Post a Comment