on the consumer

They failed 15 years ago

I remember it well, the first "burned CD" a friend brought me back in 1999 (or maybe it was 2000). It contained 3 crappily encoded episodes of Serial Experiments Lain (the anime series), a series that was at that time impossible to get a hold of because no Western release existed yet. I was astounded that a small fan community could bring something to the West way quicker than the big players could, and I was pretty sure that soon the big companies would come up with a way to counter this emerging trend.

I was wrong. While alarm bells should've been ringing for the movie industry, it was baffling to see they did absolutely nothing - except underestimate the potential of the web - for years to come. Sure, back then the encoding quality sucked and trying to download 100MB was a daunting endeavor, but with the ever-rising exponential growth of bandwidth it was clear and plain that it was only a matter of time before we could be watching series and movies over the web. In 1999 or 2000, the movie industry should've released its first online movie platform, but they failed to do that.

Taking one step back from the movie industry, let's take a minute to look at a player that did manage to succeed and build itself a market on the web. Amazon.com was founded in 1995, well aware of the potential of the internet and e-commerce. Now it's the biggest online retailer and a household name. Even my parents know what amazon.com is, though they have never ordered something online. Many people believe amazon.com to be a true success story but it's a bit more complicated than that. For 6 long years, amazon.com didn't make a single penny. They were not profitable, yet they kept believing that e-commerce was the way forward. The rest is history. Mind that this all happened as part of the literary industry - amazon.com used to be a simple book store - not exactly the most booming entertainment sector.

The important lesson in the amazon.com story is that in order to be ready for the consumer, it's essential to anticipate. This may lose you some money at first, but when the time is right you hold all the advantage over your competitors. More than that, Amazon's continuous presence actually helped to build the market.

The result of this first failure

The film industry failed to see this opportunity, with rather disastrous results. They simply stood by while an ever growing number of consumers was getting used to unprecedented amounts of choice, instant gratification and watching films in the comfort of one's own room. And instead of taking notice, recognizing these things as consumer wishes and needs, all they could do was take some cases to court and whine about lost income.

The internet was breeding the "right here, right now" generation (which is not just limited to film, mind), but the industry did not react and simply hoped to hang on to their old economic model.

They failed 5 years ago

So when the industry finally began to act, realizing that the web was here to stay, it was already too late. Many of the early attempts to break into e-commerce only indicated that they still did not understand what exactly they were dealing with.

Many of those early attempts tried to copy the amazon.com model. What they did not see was that Amazon was able to sell its "buy from your chair" service as a complimentary bonus. In 1995, people were still impressed when they ordered something online and received it in their mailbox a couple of days later. Though Amazon competed on pricing too (especially in the early years e-commerce was dealing with a serious trust problem), they also had an extra service to sell. The film industry was dealing with a different group of consumers when they were finally ready to "go online", one that had already gotten used to getting the films from their lazy chairs. From the get go, it was a lost cause trying to sell them their films at the same (or slightly reduced) price that regular stores did, especially when the consumer didn't have anything physical to hold on to after the purchase. The benefit was just too small compared to the consumer's situation at that time.

Another thing they didn't realize was that to be successful in the websphere you need perseverance and money. Amazon had perseverance, similarly a company like Apple had the money to back up their initiative (iTunes), even when it wasn't very profitable. Somehow the film industry never really believed in their platforms and dropped them when they didn't return the expected profit. A shallow and short-term vision.

The result of this second failure

Basically the film industry let everything slide once more, to the point where downloading films became accepted amongst an insanely large group of consumers. Even non-tech people got to downloading what they wanted to see rather than going out to buy it in stores.

What's worse though is that after 15 years of internet revolution the film industry still lacks any form of global release platform. It's still clinging to regional releases, shabby release windows favoring movie theaters and region-locked hardware. In these 15 years it did little to listen to the needs of the consumer, rather it favored its old economic model and kept forcing it on people.

Other industries, like the music industry, have adapted to the situation. Sure it wasn't easy and yeah, they did put up a fight, but these days you see a big shift in how they approach their money-making business. Music itself has become the advertisement, and if people want to pay for it, that's great. But their money also comes from elsewhere. The music industry didn't die, it reinvented itself in order to maximize their profits in this new world.

But what changed the most in these 15 years is the perception of film amongst consumers. "Film" used to be an event, something special you witnessed in a theater. Or, if you were not as interested, something you waited for until some local tv station picked it up three years later for its TV premiere. VHS sales were mostly for fans, not so much the common man. Film nowadays is a product for quick consumption. Watching a film is worth very little in the eye of the consumer, as film is everywhere and can be consumed easily for little money. The image of "film" dropped considerably over these past 15 years. A sad reality for some, but a reality nonetheless and something that cold, hard economics should learn to deal with.

They are still failing now

Even today, the film industry does not understand the internet and its effect on people. You don't even have to look far, just take a look at the Twitch homepage for example. Surely you've noticed this, whenever a genre film (or series) is close to release, banners start appearing everywhere around the web. Internet marketing for movies has become more and more aggressive over the past months and years. A couple of weeks ago you couldn't get on Twitch without being reminded that there was this new, cool series called American Horror Story that you simply needed to see.

What the industry fails to see is that the web is an international affair, and not only Americans are visiting Twitch. I won't publish the exact statistics, but a considerable part of our readers consist of people not living in America. When Twitch advertises a release, you're also advertising directly to these people without actually giving them the release. You're holding up a carrot to the consumers, but you won't let them eat. Maybe not for another three months, maybe never. When the first episode of AHS aired, positive reactions began to surface. People were wild to see this thing, but the only way to do so for people not living in America was through unofficial channels. For a consumer group that's used to getting what they want even when it is not offered through legal means, how do you think this will turn out? Do you really believe people will wait until someone (hopefully) will pick up AHS and release it locally?

Back to the original argument: vote with your money

Like I said in the beginning, I do support Todd's argument that we should actively support the stuff we love. What is lacking in his argument is that in order to decide whether we love something or not, we should be able to evaluate it first. That's where platforms like Netflix come in. They offer us a way to consume film at low cost, allowing us to filter the good from the bad and allowing us to actually cast a vote with our money.

As a film fan I watch a lot of crap. Sometimes because nothing better is at hand, sometimes because crap can magically turn out to be good and sometimes because many others like crap and I'm curious enough to find out what all the hype is about. What I call crap has little to do with production costs and effort people put in to make the actual film, it simply refers to my appreciation of the result. People don't pay for entertainment because someone put a lot of effort into making it, they pay for entertainment because the result entertains them. That's simple consumer economics.

Many of the films I watch are crap and the only way to see them is to pay (quite a lot) of money for them. When I pay up I'm voting with my money, but when it turns out a film sucks there's really no way to recall my vote. If for example my morbid interest had gotten the best of me I might've seen The Smurfs in theaters and payed 9EUR for watching it (or maybe even 11+ EUR, can't even remember if it was a 3D release or not). In the end I feel they should've paid the audience for the atrocious nonsense they tried to serve us. But my money would've been gone and my so called vote would've been counted.

I support the stuff I love, but find myself incredibly handicapped in the ways of finding out what to vote for. Right now this should be priority one for the movie industry to fix, because if you look at other aspects of the entertainment industry it turns out people are still willing to pay for the things they like, they just don't want to pay for the crap they don't like.

How they should do this is beyond me. I'm not an economist and I don't feel enough familiarity with all the details of the industry to lay out a plan that works. What I do know is that in order to sell, your first priority should be to make sure you get your goods to the consumer. If you can't offer (or, more in line with current needs - if you can't offer it in time) the goods to the people interested in buying, you're going to lose out. A global release platform should be an essential part in dealing with this priority. Who should own this and how it should be managed exactly is probably the biggest uncertainty, but as we see all other industries moving to web platforms, it's really important to finally get this off the ground.

But as long as the industry keeps supporting itself - if you preach the laws of cold hard economics, how do you explain the life support for the movie theater business? - not much is going to change. There is a whole generation of people out there who are used to getting stuff from their chair, when they want it, and in the future, where they want it - hello cloud computing. This is a mental change that transcends the movie industry and trying to fight it is naive and futile. So please, wake up, open yourself to the needs of your consumers and reinvent yourself so you can keep making money while we can keep enjoying films.