The Digital Revolution Will Be Televised...for $24.95

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I'm Matt Holzman with The Business Brief, a guide to what's happening in and around the business.

Yahoo has launched a nice new ad campaign with messages of digital empowerment like "now the Internet has a personality – yours." But one of their slogans has got to be causing Hollywood severe angina.

"There's a new master of the digital universe – you" – well, that sounds like a flat-out threat to the movie studios and TV networks as they struggle to survive in the new digital world. Because "you" are spending your free time with YouTube and Facebook and video games instead of watching their movies and television. And when "you" are watching TV, you're doing it on DVR's and skipping the commercials. And when "you" are watching movies, you're watching pirated copies.

For network TV, the result has been shrinking audiences and reduced ad revenues. For the movie studios, it's flat DVD sales and topsy-turvy box office. Sure-fire movie formulas often fall flat on their face the days and the biggest stars often fail to bring vast numbers of people into the theaters like they used to. Even the healing power of 3-D has been called into question – Disney's $200 million A Christmas Carol didn't sing at the box office last weekend.

The fact is that the digital future is here and it's been here for a couple of years. But the studios and the networks have had to work through denial, anger, bargaining and depression to get to a place of even partial acceptance. Well, at least they're doing a better job than the music labels, who were so afraid of piracy that they embraced digital distribution a day late…and about $40 billion short.

So using the demise of the labels as a cautionary example and a shaky bottom line as a kick in the pants, a normally cautious industry has finally crept out of its comfort zone in the hopes that it will have some kind of future.

And I'm not talking about half-measures – like letting Netflix stream some movies or creating Hulu which allows you to watch some TV programs on-line.

I'm talking about Hollywood's much ballyhooed new digital initiatives – the Digital Entertainment Content Ecosystem, Disney's key-chest and Time/Warner's TV anywhere. In the near future, these specific programs might be replaced by something more sexy, but they do show that there has been a paradigm shift in thinking.

And the new thinking goes like this: instead of charging you for a movie, then for a DVD, then pay per view, etc., you would pay once and watch it where and whenever you want. Or maybe you'll have access to a library, kind of like Netflix without the DVD's. The new paradigm eliminates the motivation for piracy, it makes marketing and distributing stuff cheaper, it hopefully makes getting the stuff easier – think of iTunes – and hopefully will end up with more customers. The only real down side is for the movie theaters, which might get cut out of the pie.

The common wisdom used to be that a fully realized digital entertainment future would arrive when there was a single set-top box that would send entertainment all around your home and maybe even your mobile devices. But it wasn't technology that kept that from happening, it was the willingness of the studios to give up all those opportunities to suck cash out of your wallet. But now, like an alcoholic who has hit his bottom, they have to change or die.

The last stumbling block before the revolution can be complete is the question of who will have the relationship with you, the consumer. To make this thing really work, there needs to be one bill – again, think of iTunes and all the different stuff you can get there. But of whoever sends out the bill has the relationship…and the chance to market to you.

All I can say is they better figure out who will have the relationship with customers and quick, or they will end up like the record labels – with no customers at all.

I'd love to know what you think. You can comment on today's thoughts or subscribe to the podcast at For KCRW, I'm Matt Holzman.



Matt Holzman