The New Hollywood

The world economy is a mess. Things are in flux. These are scary times. But part of that comes with change.

If you think things are scary now, imagine how people felt when World War I or World War II started. Both of those wars led to massive alterations in the world as we knew it up till then. WWI ended the age of the aristocracy. Dukes, earls, czars, even kings fell by the wayside and their fortunes and lives were ruined. WWII shifted world power structures, ending the European dominance over the developing world. Colonies were abandoned and left to find their independence. The US became a superpower after living in the shadow of Europe for so long.

But this site isn’t dedicated to geopolitics. It’s dedicated to the Big H. And that’s the subject of today’s discussion. The end of Hollywood as we know it. It’s already begun.

Entertainment is about to undergo a radical shift from old media to new media. And the rules of the game will be changed forever.

In the early days of Hollywood they had the studio system. If you worked there, you were beholden to whoever held your contract. They’d give you work, but you had to do what they said. They would hand you a project and you were forced to do it. Or you might lose your deal and you’d be lucky if anyone would hire you. The creative person in the old system may have worked more, but they had less freedom. Working for the old system was kind of like being a citizen of a Communist dictatorship. The studios controlled the press and the behavior of their stars as much as they could. They had a tight control over everything.

But that system couldn’t last. The costs of running a studio like a company town were too exorbitant. The public was also getting tired of the artifice of back lots and stages. They wanted more realism. So, with the price of land being so high, the studios sold off a lot of their lot space and compressed their operations. Actors and writers were let go of their contracts and were free to work wherever they could find it. That’s the system we have now. But even though artists are more free, there is still the game to be contended with. There is still a kind of invisible hand over it all that sometimes feels like Big Brother is watching. You dare not offend the powers that be.

In my last piece I talked about how diversification of TV content has led to a zillion channels. But the business model of advertising paying for shows is hitting some roadblocks. That’s affecting the bottom line. TV viewership, especially on the networks, is down. It’s caused a tightening of belts everywhere.

Internet usage is way up. More kids are going online than watching TV. You can download entertainment online. If you missed a show, it’s probably on the Net. Download it and watch it at your leisure for free. Movies are being pirated before they’re released in the theaters. The studios are fighting the pirates, just as the music companies fought the file sharers. But file sharing has only increased. Like Prohibition, laws banning things do not stop people from wanting them. Where there’s a demand, there’s a provider.

The studios fought the VCR in the early 80s. When VCRs first came out, you couldn’t buy a movie. You could only rent them. And they sued people for taping shows off the air. Look how well that worked out.

The studios eventually got smart and decided to go with the flow. And they made untold billions in revenue from the home video market.

Eventually they’ll figure out how to co-opt file sharing and downloads. They’re already trying different business models. When they’ve solved the puzzle of how to make money off it, they will reap more billions.

The DVD will go the way of the tape as everyone stores their films digitally as a file. The cost of storage is getting absurdly cheap and the devices themselves are getting more powerful all the time. You can buy a terabyte drive at some places for $100. And the hard drive is also becoming obsolete as we shift to “solid state” memory cards. Memory chips that can store vast amounts of information on things like the memory sticks you may use with your computer. These are approaching the terabyte range. And they’re extremely cheap. In no time we’ll be dealing with picobyte storage, which is a thousand terabytes. A terabyte is a thousand gigabytes. You get the picture. It’s plenty.

You can now load shows, movies, and large amounts of music on iPods. In fact, many cellphones can do that now. But it gets better.

The technologies coming out in the very near future will merge your computer, cell phone, and television all into a tiny device no bigger than a pen. They already have prototypes of this technology in labs. And don’t worry about the size of the video screen. They’ll have tiny projectors that can do HD quality on any blank surface. Your computer of the future may resemble this prototype: a projected laser keyboard (already on sale) with a projected “screen” on which you can watch movies, shows or play games.

You’ve already seen commercials for the iPhone or those BlackBerries with similar features. They are just the beginning of a trend.

They now have “e-paper” which is paper thin monitors that can be rolled up. E-paper is cheap to manufacture and will replace signs, billboards, newspapers and most other printed matter. You can read a book, a comic, or a newspaper, and change the page or even enlarge the view. Sony already has flexible, paper-thin color monitors. Supermarket price signs will be animated e-paper. Their message will be updated from the central office. Signs at bus stops or in stores will react to you as you pass them by, flashing ads tailored to your buying habits.

The cost of printing has held a lot of authors back from self-publishing. But it will cost you nothing to be published in the future. Just as it costs nothing to publish your work online now. A comics creator can get their books out on downloadable e-comics and charge whatever they want for them. A book author will no longer have to go through publishing houses to get distribution. New markets will be created online to allow people to get their work out. It’s already happening.

As for Hollywood, their lock on distribution is being eroded by the Internet. Right now they’re still an exclusive club, so they can afford to be snobs. If they don’t want to let you in for some reason, they can keep you on the other side of the red velvet rope. But those days are coming to an end, because competition is coming from foreign markets and soon from other markets in the U.S.

New markets mean new attitudes. The culture in L.A. and N.Y is not the culture of the South or the heartland. And you’ll see entertainment coming from there, too.

The state of California is no longer a good place to do business. The politicians have made such a mess of things: the taxes, labor laws, cost of living have driven many to flee the state. The expense of shooting in California has also gotten out of hand. Productions are running away to other locales. New studios are being built in other states willing to offer better tax breaks. The monopoly that Hollywood once had on entertainment in the US is fading fast. It will accelerate as new companies will find ways into these emerging digital markets.

You see, you don’t need a studio to make movies anymore. Video cameras are getting cheaper and higher resolution all the time. Home studio editing software, as well as special effects software can turn any competent geek into a film whiz.

Right now, fans are making nicely produced episodes of their favorite TV shows for an online viewership. The production quality is about as good as a professional studio would make, even if the acting or writing often falls short. A good example is the excellent ‘Star Trek: Phase II’ series which often has original cast members acting in episodes (and original show writers doing the scripts). There are many movies like this being made on the Internet from filmmakers all over the world. It’s only a matter of time before some of these efforts become big money makers. And then you’ll see even further erosion of Hollywood’s power.

The unions, the agencies, the studios themselves, will probably be around for many years. Some will find a way to capitalize on new markets and thrive. But the power structure of the past will not survive the way it has. And that means more opportunities for people with a competitive vision.

For one thing, the way money flows from the consumer is going to change. Advertising will still be a revenue generator. And they probably still charge money to see a movie or listen to a song. But more and more we’re beginning to see the “open source” approach where products are disseminated for free and people are encouraged to pay what they want. In several recent cases, like the release of Radiohead’s In Rainbows album, it earned the band many millions of dollars by making their music available for “free” online.