Scarcity Is A Shitty Business Model

The Gotham Gal has been under the weather this weekend. Last night we made soup for dinner and decided to sit on the couch and watch a movie and go to bed early. After dinner, we fired up Boxee and checked out Netflix. Nothing good there. Then we fired up the Mac Mini and checked out Amazon Instant Video. Nothing good there. Then we went to the Cable Set Top Box and checked out movies on demand. Nothing good there. Frustrated and unwilling and uninterested in heading to a "foreign rogue site" to pirate something good, we watched a TV show and went to bed.

Making movies is expensive and risky. I totally get that the studios need to make a lot of money on those movies to make their business model work.

But denying customers the films they want, on the devices they want to watch them, when they want to watch them is not a great business model. It leads to piracy, as we have discussed here many times, but more importantly it also leads to the loss of a transaction to a competing form of entertainment.

We would have paid good money to watch Sherlock Holmes or Tinker Tailor Soldier Spy. But it simply was not an option. So we went with a TV show that was free and then went to bed.

I am sure there was a time when scarcity was a good business model for the film industry. And I am sure that many of the leaders of the film industry came of age during that time. I understand their muscle memory in terms of the scarcity business model. But restricting access to content is a bad business model in the age of a global network that costs practically nothing to distribute on.

I've argued this point many times with film executives. They insist that they need their windows. They argue they need to manage access to their films to extract every last dollar from the market. That just doesn't make sense to me. If they went direct to their customers, offered their films at a reasonable price (say $5/view net to them), and if they made their films available day one everywhere in the world, I can't see how they wouldn't make more money.

I understand that many participants in the broader film ecosystem might do worse under this model. And I understand that moving to such a model will cause great disruption and pain to the broader film industry. But the studios themselves are likely to do better in a direct distribution model where they reach a broader market at lower effective prices to the end customer. This is what happens in digital distribution. Prices come down, markets expand, customers see lower prices and broader availability. Producers do better. Everyone else does worse.

But for some reason the fim industry doesn't want to move to the new model. They want to stick with scarcity. So they lost a transaction last night. And they lose transactions every night, to piracy, to competing forms of entertainment, and possibly to apathy brought about by frustration. Such a shame.

#Film#Web/Tech

Comments (Archived):

  1. Jan Schultink

    “Willing to pay good money”As you said, I think viewers are willing to pay lot for good/recent entertainment on a weekend evening. Maybe a super premium pricing option might get the studios over the hill?I can understand that this type of content does not fit in the $7/month flat fee of let’s say Netflix.

    1. fredwilson

      we would have happily paid the $30 it would have cost us to both go to a movie in a theater last night

      1. Jan Schultink

        Exactly. But with that, the studios are not being nice to their century-old friends: the movie theaters… Channel conflict.

        1. fredwilson

          that was what i was alluding to in my second to last paragraph

          1. Jan Schultink

            What about “iTunes match for film” :-)You buy a real bricks & mortar movie ticket and have the option to watch the movie at home (0 marginal cost)

          2. iPosit

            I like that idea.

          3. awaldstein

            The theaters make their money on popcorn and coke, not on the tickets. That’s why 3D works because the extra dollars support both studio and theatre.If you don’t go to the theatre, the distribution system chokes. That may be the end game but it’s too easy to simply think that the studios can just move the revenues and the problem is solved. 

          4. Jan Schultink

            @awaldstein:disqus OK. If they not make margin on the movies, that means that the studios charge the theaters a lot for their content?

      2. ShanaC

        You don’t think that is a bit obscene in terms of pricing?  That’s one expensive date night (compared to say pigging out on ice cream).

  2. Wanderinglex

    On an unrelated note, you should watch the new British TV series “Sherlock” (if you haven’t already) – it’s simply brilliant.

    1. fredwilson

      thanks for the suggestion. i wonder if i can get that legally here in the US

      1. Wanderinglex

        Sadly, not in digital format. The first season is available on DVD, and you can probably watch the final episode of the second season today on BBC One online…It would be really nice if they put the episodes on sale as soon as they aired, direct to consumer, in digital format on their site – it can’t be that hard to do, right?

      2. e.p.c.

        You can get the first season [of Sherlock] via iTunes: http://itunes.apple.com/us/…Second season just started airing.  The BBC hasn’t quite figured out how to simulcast shows in the US on BBC America unless they achieve the level of fame like Dr. Who, then suddenly they’re capable of showing in the US on the same night.Theoretically if one has a VPN with a UK end point it should be possible to download the BBC iPlayer and play a show from the BBC site.  In theory if one does this it is possible to watch a show the same evening it’s been broadcast in the UK.  I found the quality of the video to be just a couple hairs off from HD, in theory of course.

        1. fredwilson

          i will download on itunes and watch. thanks!!!

          1. fredwilson

            ooh, even better. thanks!!!

    2. ShanaC

      I still need to watch Downton Abbey

  3. iPosit

    Great blog, Fred.I wish I could reply / comment from my email client where I read this post. Using my Disqus login.

  4. iPosit

    Had to visit site, then post comment & login to my Disqus account.

    1. fredwilson

      yeah, disqus is acting funky this morning

  5. noam makavy

    I think part of the problem is that funders of the movie industry are surprisingly risk-averse. Zero day global VOD may also turn into an instant failure. All these tiered distribution deals that the big studios make before the movies are released come with a lot of guaranteed revenues.”They argue they need to manage access to their films to extract every last dollar from the market” – they are actually telling you that their career might be over if they have a huge flop.EDIT: Case in point – look at “The Devil Inside” which is currently the top grossing movie at the box office according to Rotten Tomatoes ($33.7m). It had 6% positive reviews from critiques and 25% of movie watchers liked it. Do you think that movie would have done as well with a global 0-day VOD distribution?

    1. ShanaC

      could you do the same with VOD and guaranteed revenue in contracts?

    2. fredwilson

      they could sell views of the movie before it even premiers

      1. noam makavy

        Why would you buy views before the premier? You either need to get a discount or exclusivity in return. That’s what is happening today and the source of a lot of consumer frustration.

        1. fredwilson

          discount. that’s what kickstarter is taking advantage of

          1. FAKE GRIMLOCK

            KICKSTARTER COULD DO MORE.

          2. fredwilson

            yes, they can and they will. but they do have their hands full right now.

          3. FAKE GRIMLOCK

            WHY HANDS FULL?WHEN GRIMLOCK HAVE TO DUCT TAPE FEATURES TO OWN KICKSTARTER PROJECT, THERE LOTS OF MISSED OPPORTUNITIES.NOT HARD ONES FOR BUILD.TEAM NOT AWESOME ENOUGH?

          4. noam makavy

            I’m Netflix.I pre-purchased views at a discount, essentially buying the risk from the studio.But I don’t like risk, and now I have these discounted views I must unload.Now I’m messing with my customers trying to get them to watch a movie they may not want to watch. Back to square one.

    3. tyronerubin

      yip its in the horror genre. Supported by horror fans who watch and support all films in this genre. So yes it would have done well no matter what, its a new horror. People who want to watch it in the cinema, which is still a lovely option can, and people who want to chill in bed and watch it can. Everybody wins.

    4. awaldstein

      I agree with everything you say except the part that funders in the movie industry are risk averse. There is probably not a more risky investment than funding a movie. That risk being so high is what has driven the model for scarcity and control.

      1. LE

        “that funders in the movie industry are risk averse”Which is interesting. Because the reason that they are risk averse is that it’s hard for them to predict creatively what will be a hit or bust with the public. So inherent in their thinking is an insecurity which drives their reluctance to change a system that works.  Which is the same reason the movies they fund tend to follow the same themes that are proven (and even then success is not assured).(I’m not a big watcher of SNL but if you look at the skits the majority are always variations of skits that they have been doing since the first show in ’75.)

        1. awaldstein

          True…Maybe I’ve been too narrow in my definition of the cinema channel.Do the same rules apply to Battery Park Cinema and Sunshine, with one showing Hugu 3D and the other Pariah?I need to slice up my thinking around the channels. 

  6. William Mougayar

    That distribution network is a total mess and a choke point. What happened to movies and programs on demand totally on digital with the user controlling everything. Why can’t we surf that content the same way we surf the internet? It’s ridiculous.

  7. awaldstein

    I want what I want when I want it as well. And as a serious movie geek, I would pay a premium. And, as you, am not a believer in scarcity as a model.This discussion with the studio though defies logic and will do so for awhile. While overly optimistic about disruption, I’m not on this one.Hollywood and the studio system was built by the distribution system to provide content to itself. Its start was at the theatre as an event-based brand and model.These emotional ties are still strong. For launches to happen online to homes, the ecosytem will not change, it will crumble. And even if this were possible here in the US with ever larger percentages of revenue coming world wide, that is not possible there. Yet.China is building multiplex after multiplex, many in 3D so the terrestrial footprint is growing actually. I want this as well. But after spending a little time in the industry, this is just beyond my imagination to see where to start. One takeaway for this community to think about is that this is not just a distribution problem, it is a marketing one. The movie business is big bang with a very long tail hanging off of it. To drive events that can bring in $30+M in a weekend, social tools and ways to market to a million living rooms needs to happen as well.

    1. fredwilson

      big bang with long tail – great description

    2. leeward

      Of course it is a marketing problem. It was only ever a marketing issue. If consumer Choice is kept front and center higher profits will be found. I think you are right on about the history of the industry but we didn’t imagine overpasses for a long time either.I’ll add this:  this entire discussion is somewhat predicated on the cost of digital data connectivity and that the cable-cellphone market is successfully imposing scarcity as a long term business plan. The talk of the distribution cost being nil is not really accurate if you think like a marketer.That affects all participants. 

      1. awaldstein

        Great comment.I’m certain change will happen but the solution will have to include not exclude the cinemas. The footprint is getting larger and of better quality by the minute internationally.The marketing/branding issue is fascinating. Time-shifted catalogue stuff is solved, It’s the event nature of the movies, the size of the initial spreading big bang that stretches the tail. But I agree. Change can happen but the idea of event connected to the terrestrial footprint needs to be part of it.

        1. Steffan Antonas

          While the “what about the cinemas” argument is valid, it’s interesting to consider how a popular direct distribution model might benefit (and potentially give rise to) smaller, entrepreneurial film groups and networks. There seems to be a lot of opportunity in the middle for budding film makers and firms to start viable businesses and projects that wouldn’t otherwise be possible under our current model. Consider the Paranormal Activity movie series as an example – the first movie cost around 50K to make and was done with a small crew. I think you’d see a lot more of those types of lean projects make a lot of money, without ever having to deal with the overhead and risk that traditional channels pose. Maybe the big boys in film and the cinemas chose not to participate at first, but you’d see a lot more activity in the middle for sure – and the movie industry, for consumers at least, would be a much more vibrant ecosystem.

          1. awaldstein

            Hi SteffanThis is an unusual stance for me. I’m always the disruptive activist but my exposure to the Hollywood model is holding me back here.You are right though about innovation and digital distribution. It’s happening already to some degree and a good thing. I’m a supporter.I just wonder where the numbers break out and I don’t have visibility to them as I’m not a film maker. My sense is that if you raise the ante to let’s say $1-3 or 4M to make the movie and then lay that model back on top of digital distribution it is still difficult. Hopefully someone who has a closer contact will chime in.

    3. SubstrateUndertow

      I just wonder what portion of that big-bang revenue come from younger people whom I would imagine are more motivated to get out and socialize by making the scene at a real theatre than staying home and watching on TV?

      1. awaldstein

        Don’t know.To Fred’s whole point, I go to the theatre a lot because I’m a geek and want to see the film when its new. In most instances, yes I would see it at home.

  8. giffc

    I imagine you saw Tim o Reilly’s post on white house response to sopa/pipa where he questions the underlying assumptions around economic impact, but check it out if not: https://plus.google.com/u/0…The whole sopa thing reminds me of the software patent debate. It is a legislative protection that would do more harm than good, but there is an army of money/lobbying and misguided good-intentions that obfuscates everything.

    1. fredwilson

      yup. i reblogged the money quote from tim herehttp://fredwilson.vc/post/1…

  9. jonathan hegranes

    My friends and I were recently discussing how great scarcity can be for a business model, not to mention the additional marketing and buzz that scarcity creates (eg lines in front of Apple stores for the latest iXYZ or this ridiculous man bag my friend would love to get his hands on)… Interesting to think about the industry implications, particularly when other options – piracy, apathy, etc – are available. Scarcity works when you control supply, and hence can optimize pricing and inventory, but otherwise – as is the case with entertainment, profits are not maximized, while customer satisfaction and loyalty are minimized.

    1. fredwilson

      i think scarcity works in physical goods but not digital goods

  10. ShanaC

    A) Feel Better Gotham Gal (weirdly enough, I was talking about her last night)B) Part of me wants to laugh at this(in a sad, heaving, what’s wrong with us sort of way).  It is basic economics that there will be tradeoffs when there are acceptable substitutes.  The web makes for LOTS of acceptable substitutes for renting or watching a movie (especially going to the theater, prices are out of control).  So the content industry just priced itself out of the market.  That’s just idiotic.  Bring down prices, release more content, and you’ll make money as content grows into a volume business.I just don’t get who isn’t telling the movie business this…

  11. jason wright

    Scarcity is a shitty business model – a sweeping statement.De Beers may take a different view. It’s been making good money off creating an artificial scarcity of diamonds for some time. So it really depends on the nature of the product.

    1. fredwilson

      i should have said scarcity is a shitty business model for non-physical goods

      1. jason wright

        With non-physical ‘goods’ scarcity is still an interesting proposition. Take Facebook and compare it to Path. “I have 500 Facebook *friends*” – sure you do. For your scenario it’s about access generally, and yet choking access to some degree can be beneficial to the user experience in other circumstances – quantity verses quality. Some people need saving from themselves, but who is to decide that? The ‘free’ market…”of course”, but every time?

      2. Olivier Issaly

        But scarcity is a dominant business model in the gaming industry with virtual goods. Any online game is a closed platform where you create and sell scarcity. This is not the only monetization mechanism (also collection, etc.) but one of the most effective.Will you write the same post in 10 years when people will complain they can’t move their virtual goods from one game to another ? 🙂

        1. Ryan Tanaka

          Good point, although I would argue that what you’re talking about is somewhat different because the players have a say in how much these “virtual currencies” are worth.  The limitations that the game companies impose on their systems are based on the demands of their users, within enclosed systems that they have complete control over.The way that the industry is doing it right now is that they’re basically trying to make themselves artificially more “valuable” through scarcity in an open system (i.e. the real world).  Back when that’s all we had, this model may have worked or even made sense to a certain degree, since they had a near monopoly on the public’s distribution channels.  Now that’s no longer the case, people will move onto other things just because we can.They need to learn to adapt, or it’s going to be over for a lot of them.

        2. fredwilson

          they do via gray markets already

        3. SubstrateUndertow

          So you are saying that scarcity works in fantasyland !:-o)

      3. paramendra

        I would go further…… Scarcity is a shitty business model for mindfood that can flow over the Internet. 

    2. SubstrateUndertow

      Is scarcity ever a good model for the consumer ?The network economy is amplifying the power of consumers to collaboratively enforce there interests.The train is leaving the station.Old school scarcity merchants need to start hustling up that new business model before they get run over by history.The movie industry may be doing right by their shareholders in the short run but they really need to accelerate their transition plans.The crowd is getting restless and apparently Fred is too.

  12. Michael Elling

    As a wireless analyst I used to say the most expensive minute was the minute left unsold.  The same goes for viewership of movies or live events, etc…  Yours is just another example of poor capacity utilization; albeit on the demand (Fred’s Saturday Night Capacity), not supply, side.  The problem with monopolies/oligopolies is that they focus on average, not marginal cost, pricing and consumption.  When they start thinking at the margin they will see a world of infinite demand unbound by the narrow confines of historical distribution models.  That’s why wireless revenue exploded from 1996 to 2000, even as pricing came down 90%.

    1. fredwilson

      yes, you said it way better than i did michael!

    2. george

      I disagree here (though I respect the rationale), it’s not a marginal vs. average cost issue; it’s about control! The studios and cable operators fear new forms of technology delivery because its disrupts their ability to control both the production and the distribution side of the business model equation. Youtube has jumped in to produce content and Apple’s iTunes delivery system threatens their traditional sales channels.I’m ready to have movies delivered my way not the studio/cable operator way but that won’t change until someone figures out a way to leapfrog over the traditional touch point with consumers.

      1. Michael Elling

        George,Actually you are agreeing with me. New technology is applied to the marginal (typically high volume) user. Shift the discussion from video to broadband data. The current wireless carrier data pricing vs consumption model is not sustainable.MichaelMichael

        1. george

          Maybe we are looking at this differently or maybe not. To expand, studios and cable operators behave like a monopoly (or oligopoly), which implies you do not have a perfectly competitive supply curve – thats how I’m referencing control. 

  13. PKafka

    I’m all for watching movies in earlier windows, too: I’d happily pay a premium instead of waiting many months – or more – to see films I’m interested in (movie nights out v. rare for us and will be for next few years). But: Pretty decent odds that the free TV show you watched last night instead was made by one of the big studios, which means that they got paid for their product (ads + licensing fees), using their existing windowing system. 

    1. aweissman

      Yes Peter but the economics of the business have changed – the marginal cost of distribution is basically zero.  At the same time the supply of “content” is massive.  I think what Fred is saying is that therefore there should be new models to take into account these new economics. 

      1. PKafka

        But Fred didn’t want to watch “content” – he wanted to watch a specific couple of movies. I’m sure studios would argue that one of the reasons he wanted to watch them was *because* they are in theaters, which play a big role in promoting them. But the windows are certainly going to change over time, and the Big Media guys certainly get that. Some of them are even making very (tentative) experiments.What will be interesting as (some) people move to “day and date” digital distribution (a la Louis CK) is how you promote that stuff/let people discover it, because there *is* a massive supply of content. That’s one of the reasons the Netflix move into original content creation will be important to watch — they’re going to try to promote shows without the benefit of most traditional marketing campaigns, but their ROI also won’t be tied to short-term windows.

        1. aweissman

          Fair enough, but I think the economics still matter.  This is not to say theaters dont.  It is to say that digital distribution changes the fundamental economics of industries, particularly this one (it also increases the potential market size massively).  Pirates are semi-rational actors – they know this, and thus they offer a shitty product but on a digital on demand basis.One way to compete with that is to rethink the concept of scarcity and also question the assumption that maximizing revenues from each specific release is a good long term business strategy.  it probably is not, but expanding one’s market probably is.

          1. awaldstein

            Not sure I understand the logic.Digital distribution is already here although less than 10 years old. Right now it is simply timed…to the cinemas for the big bang release then time-shifted in the catalogues for device viewing.How would the market get bigger?  Bigger on release but not on the tail as it already is there.

          2. Rurik Bradbury

            But most pirated content is not a shitty product: it’s an exact replica (in 720p or 1080p) of the for-sale product, assuming the product has reached its DVD/BD window.For in-theater content, you have classic channel conflict: why should movie theaters show your films when you are selling the same content direct, cutting them out.

    2. William Mougayar

      What do you think of DRM. With or without? 

    3. andreaitis

      I completely agree, and always thought it would be a good business model for Hulu.  People watch last week’s episode of Glee or The Office, and I bet many would then pay to watch the upcoming episode early.  Emotional impulse buying right when you’re in the mood. 

      1. ShanaC

        Maybe. It also would make tv more cuthroat. At least now you can delay the end of crappy.

      2. Luke Chamberlin

        They already do via Hulu Plus for some shows.

    4. fredwilson

      TV shows aren’t windowed. they are available once they run via on demand or itunes. it is a better situation than films

      1. PKafka

        Yup, much better. I think the studios/networks would still consider them windowed, because they make different amounts of money, at different times, via the different distribution methods. But from consumers’ perspective it doesn’t really matter — as you’re willing to pay something (cable fee, Netflix sub, iTunes, etc) you can get almost everything, legally, soon after it first airs.

        1. fredwilson

          “you can get almost everything, legally, soon after it first airs”that is what i’m suggesting the fim industry should do

      2. Luke Chamberlin

        It depends. HBO shows are usually windowed until after the season ends. I’m still waiting to be able to pay to watch Curb Your Enthusiasm season 8. My friends talk about episodes they torrented. I get punished for being honest. Dumb system.

  14. Tristan Louis

    Fred,Here is, in details, what that scarcity looks like on the screen:http://www.tnl.net/blog/201…The most surprising thing to me is that we appear to be rolling BACK from where we were last year so box office hits in 2011 are, as a percentage, less available than the equivalent movies were in 2010.

    1. ShanaC

      Approved

  15. narikannan

    Nice article and great advice! In fact, Shrek DVD is a great example of how studios can make more money by lowering prices and increasing availability. DVDS were $40 to $50 before Shrek (the first one) and for the first time they released Shrek at around $20 and had record sales!http://www.nytimes.com/2001

  16. jason wright

    One experiment could be to simultaneously release ALL (perhaps not “ALL” – some) new films to theaters at $X and over the web at $X x 3. You pays your money you takes your choice.

    1. William Mougayar

      Wait a minute. You’re on to something there. Only thing is I would make it the SAME price, to level the playing field…so the experiment is fair. And since not all homes have the fast pipes required to download movies, offer it to those households that have high-speed.Could that be the end of movie theaters then?  

      1. jason wright

        I am trying to give Fred and his Gal what they want on a Saturday night and everyone else a fair choice too. Not everyone’s a social engineer ;-)1:1 pricing would kill theaters. I’m against that because if there’s something that really does need protecting in this digital paradigm it’s one or two authentic mass shared human experiences. That’s reverse social engineering for an age of digital dogma.

        1. William Mougayar

          Do movie theaters need re-engineering? Why do they keep ripping us off on the popcorn and pop?- posted via http://engag.io

          1. jason wright

            So it’s you! The popcorn muncher on row P spoiling my mass shared human experience.Got something for you. A fleeting reference to SOPA and Canada;http://thisweekinstartups.c…At 58:25 for four minutes or so. Get ready for the invasion.

          2. William Mougayar

            LOL. Yeah, that was me with the popcorn.SOPA or no SOPA will have an impact on Canada. There’s very little that the US and Canada don’t impact each other about. – posted via http://engag.io

          3. awaldstein

            That is how they make money William.Same as with sports events except that theaters don’t own the content, teams do.

          4. William Mougayar

            I realize that. Was playing with that model. Something has to shake.- posted via http://engag.io

    2. fredwilson

      i would love that model. you pay more to watch in the comfort of your own home

      1. jason wright

        It would be interesting to see the film industry perhaps jointly finance the production of a ‘blockbuster’ film and then try this form of parallel distribution as an experiment. They could easily tweak it by varying the theater price in different regions to account for population and theater densities, and relative regional affluence. They may even be able to define regional web and price point access to further refine the experiment.

      2. Patrick Campi

        It happens occasionally on Vudu. My go to choice for streaming current released films. I have watched films that were just released in IFC theatre from my couch. Cost was same as going to theater. It only happens once in a while though. 

    3. gordonmattey

      Universal (owned by Comcast) tried to release Tower Heist on VOD three weeks after theatrical release, for $60!The theatre chains threatened to not distribute the movie, which was enough for Universal to change it’s plans.http://latimesblogs.latimes

      1. William Mougayar

        They are gridlocked with each other and preventing each other from progressing.- posted via http://engag.io

    4. paramendra

      Bad idea. It should be $10 in the theater, and $5 or less on your laptop. On day one. 

      1. jason wright

        Then theater is killed stone dead.

  17. Rohan

    Ah. I’m going to resist ranting and say..Sherlock Holmes II – Kickass movie! 

    1. andyidsinga

      yes it was – I thoroughly enjoyed it – looking forward to a whole series of them 🙂

      1. Rohan

        I guess there will only be 1 more! 🙂 But hey.. that’s one more to enjoy!

    2. leigh

      Sherlock BBC series — best Sherlock ever.  

      1. Rohan

        Aha. Haven’t seen that. Should see! 🙂

  18. Bala

    This is even worse in places like Iceland, not only is the content itself scarce there are gate keepers for each region. It is such an absurd business model, you have to pay rent to every gate keeper to watch something. I could not agree with your argument, it should be obvious that people want to consume this content in the device of choice hence the flooding of piracy websites why not embrace this and legalize this? and seek fair rent for it as well. I don’t buy the story that you will derive every dollar in the “window” because of the infinite choices that exist today you just loose out on getting to the top of my choice by limited distribution model. I don’t think Movie producers and executives understand the transformation that is happening in the market place. If they keep limiting the option guess what I am going to just not even bother looking for what movies are available. They are loosing a huge revenue stream.

    1. fredwilson

      yes. that’s why i mentioned global distribution a few times in the post

  19. Elie Seidman

    Completely agreed on being able to watch wherever/whenever though I had not heard the argument that it’s because of a scarcity stratgegy. My better half just went into her 3rd trimester so while we love movies, getting out to the theatre is not nearly as convenient anymore. If we could have watched Tintin last night, we would have gladly paid 20 dollars to do so (via iTunes or direct from their website). What I think is often lost in the free vs paid debates on the web is that for many people – people who can afford the 20 dollars and dont want to steal – the debate is not free vs paid, it’s free/stolen vs available. But I’m not remotely convinced that the makers of content don’t understand this. Over the past two years I’ve spent a lot of time around smart and talented producers of TV shows. They are not luddites and not dumb. The tech industry thought leaders tend to paint them as these unknowing simpletons who “just don’t get it”. A recent Steve Blank post called them “Studios are run by financial managers who lack the skills to exploit disruptive innovation”. Studios includes the people who make Disney and Pixar movies and HBO shows. These are very smart people. These simplistic assessments are wrong and insulting (and often motivated by a strong self-interest). The challenge that most of them face is a complicated distribution channel. If you’re a maker of TV shows, you can’t just do what you want – you have to first get the cable affiliates (who are the bulk of your revenue) to agree. If you’re a maker of movies, I’m guessing you want to be very careful about not upsetting your movie theatre distribution partners lest they not distribute your next movie. And since distribution is a form of marketing (push marketing), if you upset the movie theatres, you’ve actually reduced your marketing budget for your next movie. When you evaluate it in this light, it’s less simple what to do. Brad Gurley has a great post that should be required reading for anyone wanting to criticize the movie/TV people. http://abovethecrowd.com/20…

    1. jason wright

      I disagree.

      1. Elie Seidman

        looks like Disqus posted my comment three times. ugh. 

        1. fredwilson

          i deleted the third one. will leave the first two up because there is reply activity

      2. ShanaC

        Why?

        1. jason wright

          …because higher up I agree with him. Makes me look like a flaky baffoon. That’s a good thing. I was just taking the opportunity that flaky Disqus offered me to say that everything is opinion, and that sometimes it’s OK to be seen to change our minds or contradict ourselves publicly, that to acknowledge a ‘rethink’ without loss of credibility is good and aids the process of learning, and sharing ideas freely and fluidly. ‘Fixed’  is not progress – I’m sure you agree(?).I guess I’m saying that one should never be afraid to be wrong,…and publicly wrong. Have a hypothesis, or a thesis, and test it out. Entrepreneurialism is sometimes seen as being all about ‘brash’ and ‘bold’ et.c., but it’s also about being humble.

    2. fredwilson

      congrats on your expanding family!

      1. Elie Seidman

        Thanks! ☺ it’s our first child – we’re super excited.

    3. ShanaC

      Mazel Tov on your first!

  20. Elie Seidman

    Completely agreed on being able to watch wherever/whenever though I had not heard the argument that it’s because of a scarcity stratgegy. My better half just went into her 3rd trimester so while we love movies, getting out to the theatre is not nearly as convenient anymore. If we could have watched Tintin last night, we would have gladly paid 20 dollars to do so (via iTunes or direct from their website). What I think is often lost in the free vs paid debates on the web is that for many people – people who can afford the 20 dollars and dont want to steal – the debate is not free vs paid, it’s free/stolen vs available. But I’m not remotely convinced that the makers of content don’t understand this. Over the past two years I’ve spent a lot of time around smart and talented producers of TV shows. They are not luddites and not dumb. The tech industry thought leaders tend to paint them as these unknowing simpletons who “just don’t get it”. A recent Steve Blank post called them “Studios are run by financial managers who lack the skills to exploit disruptive innovation”. Studios includes the people who make Disney and Pixar movies and HBO shows. These are very smart people. These simplistic assessments are wrong and insulting (and often motivated by a strong self-interest). The challenge that most of them face is a complicated distribution channel. If you’re a maker of TV shows, you can’t just do what you want – you have to first get the cable affiliates (who are the bulk of your revenue) to agree. If you’re a maker of movies, I’m guessing you want to be very careful about not upsetting your movie theatre distribution partners lest they not distribute your next movie. And since distribution is a form of marketing (push marketing), if you upset the movie theatres, you’ve actually reduced your marketing budget for your next movie. When you evaluate it in this light, it’s less simple what to do. Brad Gurley has a great post that should be required reading for anyone wanting to criticize the movie/TV people. http://abovethecrowd.com/20…

    1. jason wright

      I agree.

    2. fredwilson

      i don’t want to criticize them. i want to challenge them to try some new things

    3. William Mougayar

      That was a good analysis by Bill Gurley. It does show that the industry is quite messy, with lots of bickering, turf protection, back channel deals, etc…

    4. kidmercury

      i’m not sure it’s just free/stolen vs available — price is also a factor. people expect a lower price for digital. the higher the price goes, the greater the incentive to violate the will of the merchant and get the product for free. 

      1. Elie Seidman

        I agree. Though I think perceptions on price for online media are changing rapidly. Five years ago most/all online content was free. Today, forced monetization is nearly always the norm for premium content. Either you pay for it or you have to watch ads. As the norm changes, the consumer psychology around what they expect it to cost will change.

        1. fredwilson

          content creators have to make money. i’m all for them having a viable business model. in fact much of what we have invested in lately is around that theme.

          1. Elie Seidman

            Yes, people do pay for good content and are going to increasingly pay for more of the content they consume.

          2. SubstrateUndertow

            Yes and part of what makes content GOOD is convenience !

          3. laurie kalmanson

            i would gladly pay for good stuff, at my convenience

      2. Morgan Warstler

        I have yet to see the studios offer digital content transparently to end users:Cost to Retailer — DVD manufacturing costs + streaming charges.The next step is then letting user participate in reduced marketing costs vis a vi Social Living / Groupon (get 4 of your friends to buy it is free).

    5. tyronerubin

      @nycstartupfiend:disqus all the best wishes to you and your better half.so happy to hear you would pay $20 for tintin at home. Saw it in the cinema in 3D last night and am a Spielberg sucker, watched War Horse today. He absolutely understands whats going on. I agree that a lot of these Pixar, HBO people know whats up.I have always heard rumors of streaming new films in homes for pricey amounts.Please keep us posted on any news you have as I am convinced that in order for HBO and Pixar to make the content they do, they have to totally get what the audience wants.And they must all know that we want to choose wether to see TinTin at home in 3D, or  2D streaming 1080p. Or download at 1080p although I always worry about bandwidth as Africa, where I live, just does not have enough. The entire continent that is.If bandwidth is not a problem and new films can be streamed in High Res and you and Fred are willing to pay, then so many more people will be and thats great news.Thanks for challenging things Fred. We all supported what Louis C.K. did. Making his amazing comedy show available to everyone in the world at the same time for $5.

    6. FAKE GRIMLOCK

      ME, GRIMLOCK, READ LINK WHEN IT ORIGINAL COME OUT. IT BASED ON FACTS AND LOGIC, SO NO ONE LIKE IT.FUTURE WHERE STUDIOS MAKE MILLIONS INSTEAD OF BILLIONS INEVITABLE.DELAY IT LONG AS POSSIBLE NOT DUMB MOVE.

      1. gordonmattey

        Exactly..Just read the last ten years of news from the music industry and you can see the future of movies for those who are of the old value system..

    7. LE

      “But I’m not remotely convinced that the makers of content don’t understand this. “”These simplistic assessments are wrong and insulting (and often motivated by a strong self-interest”I agree with you on this 100%. The people in any part of the entertainment industry, at least creatively, can’t rest on their laurels at all. Just like in tech, they have to paranoid. There is no cash cow where they can sit back and be complacent. They are sharp operators and they are influenced by money.   They need the constant reinforcement of success. They don’t get credit for failure either (like in the tech world). Failure can sink them and make them untouchable.  “I’m guessing you want to be very careful about not upsetting your movie theatre distribution partners lest they not distribute your next movie”Not only that but the entire shine of the business uses the cornerstone of theater release to make what they are doing big and important. Just like the Superbowl is important in promoting Football or the World Series is important in promoting baseball. Take away the physical location of that game, no big stadium and fans and it’s not the same event, is it? Theaters can’t survive as a business entity without some critical mass of films to show and an advantage. You can’t take something like that and say “oh I would still go to a theater or parents would still take their kids”. At a certain point, by taking away some of the visits and appeal (exclusive venue) the whole thing can easily collapse. I can easily see the fear. Not only that but the deals they have with the theaters and that entire system is a significant barrier to entry for new operators.  So why would distributors want to remove that barrier? That’s the reality.  Try to produce a film and get it into 3500 theaters. Can’t be done without the middlemen. Critical mass is important. Look what is happening with tradeshows. Look what happened with Comdex. That used to be a huge deal. All the sudden, poof.  CES is going to go the same route. (There was recent news regarding this but I can’t find the link.)

    8. andyidsinga

      Great comment Elie – I also really like Bill Gurley’s post – very good read.Your comment & Bill’s post have been making me wonder when tech companies will start creating studios that create great content. (it seems to me this is starting ..but I don’t have links etc) youtube is certainly becoming a place where low budget productions are being distributed (and making $).

      1. Burger

        Netflix is already making their own content

        1. andyidsinga

          I thought that I had heard that 🙂 that’s very cool. I love netflix.

    9. Troy

      This is probably the most accurate assessment that I’ve seen around these discussions. I was recently in Germany and would have paid $100 to watch the Eagles play Monday night football, but my only option was to watch it through a pirated site. The NBA just released an app that allows you to watch games in real time for $30 for the entire season, so we’re beginning to see some content owners come around. Major studios will be the last to the party. They’re publicly traded companies that can’t afford to take big risks, specifically around movies that are in demand. Universal attempted to try the model that Fred suggested with Tower Heist and the theaters not only threatened to pull it, but also future movies from Universal. I look forward to the time where we can watch first run movies and premium content whenever and wherever we want.

      1. Antone Johnson

        That sounds like an empty threat. Are exhibitors really willing to put their money where their mouth is?  Refusing to show obscure arthouse titles from Fox Searchlight is one thing, but when Universal releases the next huge summer action blockbuster featuring an A-list star whose name alone guarantees packing ’em in, I’d love to see who has the cojones to say no to all that revenue just to make a statement.  (Typical game theory scenario:  Maybe all theater chains stand to gain if they form a united front, but in reality, if chain A doesn’t pick up the next “Twilight,” Chain B will.)

    10. CJ

      Theaters have to distribute the next movie, it’s how THEY make money.  If they have no product, they have no customers to buy concessions.  While it’s nice to think that AMC would tell Dreamworks to ‘stick’ their next blockbuster, they won’t because they’ll lose more money than making that particular point is worth.  Especially when you consider that they are just one of many distributors and not even the most convenient or profitable to the studios anymore, they are just the method with the least amount of friction.  Currently.But when the studios realize that they can sell new movies via Ondemand or Netflix or their own service at $X and keep more of that money, the theaters will be the link with the most friction and that’ll end badly for them.  It’s only a matter of time and the theaters know it.  They’ll never try such a power play, it’s got too much risk and very little reward for them.

  21. K.C. McLeod

    Hi Fred and the very participatory AVC community,First time commenter here: I’ve read your thoughts on the film industry before, and it seems there are two issues here: 1) the want for first-rate, high quality films on-demand and 2) increased access to mainstream, wide-release films.  While the second issue might require the financial meltdown of the studios (which may not be as far as we think), my venture Vyer Films is working right now on the first issue.There is a huge gulf between the amount of excellent films that are produced around the world and the ones that actually make it to U.S. audiences; traditional distributors are often not willing to plunk down the advertising dollars to attract an audience.  Luring audiences to theaters for smaller titles really is an unsustainable model.  Vyer Films is a pay-to-stream service that curates the best films, as selected by top critics and film writers, never distributed in the U.S., bringing them to audiences looking for something new, smart, and unlike anything showing at the local multiplex.  It doesn’t require being in the know of what’s good, or having to solicit your friends’ opinion (like your Movie Recommendations thread from a little while ago), we’re just working on making discerning viewers happy by bringing them films they may have otherwise never known about, let alone seen.Next time you’re feeling under the weather and looking for something good to see, I think it might be of extreme interest to you: http://www.vyerfilms.com-K.C.

    1. fredwilson

      i just went to your website. i think i had a problem trying to create a userid and password. but in any case, it looks like you feature one film at a time. is that right?

      1. K.C. McLeod

        Yikes.  Your registration came through just fine on our end; you should have received an email with a default password.  As always, we recommend checking your spam folder.We premiere one new film every other week, but retain films for a year.  Having launched in October, our slate is 8 films right now.

        1. fredwilson

          i would change that flow. let me create userid and password myself and not wait for email that will likely be munched by spam filters. that is best practices this day and age.

          1. K.C. McLeod

            Thanks for the suggestion.  Will implement.

          2. fredwilson

            i got ini’m not ready to watch a film right now so i just saved my login info to come back lateri think you are on to something but the user experience isn’t greati can’t give you feedback now because i’m rushed for time. but happy to at a later date.

  22. Chris Ellis

    There was a great line from Steve Jobs’ biography where he said to the Murdochs re Fox News, paraphrasing:”Left wing versus right wing is an old axis, the new axis is Constructive versus Destructive.”Jobs thought you’re either building the new world or tearing it down.This Wikipedia article sums up the effects of a post scarcity model nicely:http://en.wikipedia.org/wik…”Some things will remain rare even in a post-scarcity society. There is a practical limit to the number of people who can live in any specific, ‘in-demand’ locale.”So a just like money didn’t replace bartering and the telephone didn’t replace face to face conversation, an abundance mentality won’t replace scarcity it will just become the new building block.

    1. fredwilson

      great comment. i do think you can be constructionist and deconstructionist at the same time. steve jobs was

      1. Chris Ellis

        Thanks for the great forum. And Jobs wasn’t afraid to deconstruct even his own products if he thought the time was right. Look at the Mac Pro and how it is being cannibalized by the iPad and smaller laptops.

        1. sujal

          Apple execs actually take that lesson to heart. I sat in a meeting with one of their top execs (at my old gig) where he lit into us when someone said one of our worries was that a mobile app might cannibalize our mobile web site. He made precisely this point – if you can cannibalize your own product, that means someone else can too, so you might as well do it if it’s a better experience for the end user. Plus, you can probably make more money. That’s been Apple’s guiding principle in the second Jobs era, according to him.That was the thing from that meeting that stuck with me. Not enough companies are that brave.Sujal

          1. Chris Ellis

            Thanks for the insight Sujal. Courage is lacking, especially here in the UK. But safety lies on the other side of danger, it’s just not that easy for us to see it.

      2. panterosa,

        You can be both constructionist and deconstructionist at once. Indian deity Shiva, a favorite of mine, has for some a three pronged role – creator/protector/destroyer – which some interpret as transformer.I am happiest with scissors in my hands, editing, making a silk purse from a sow’s ear, and I think of Shiva when I am doing that.My feeling is that you are challenging the content industry to do the same in this post. 

    2. FAKE GRIMLOCK

      ONLY POLITICS THAT MATTER IS BUILD VS DESTROY, EMPOWER VS CONTROL, LIFT ALL VS LIFT SELF.

      1. Chris Ellis

        Quite! And when you ‘lift all’ you make yourself stronger.

    3. SubstrateUndertow

      Energy  supply and population doubling time is the fly in that pipe-dream!

      1. Chris Ellis

        You see a devastating future ahead. And it’s not hard to see why. I think our species is facing its biggest challenge yet and it certainly isn’t a forgone conclusion that we will survive it. Rather than a pipe dream I see a challenge.To your point on population:The more people there are the more brain power there will be to solve our problems. To leverage that brain power we need unfettered, fast connectivity. We also need people with soft skills who can help create new relationships and inspire people in to action; checkout http://tummelvision.tvTo your point on energy:This is outside of my domain so I don’t know much on this one. Though this is on my reading list: http://en.wikipedia.org/wik… interesting theory but I often think we overestimate how much control we have in the face of a rather fierce reality.

        1. Atilla Hun

          Energy, food, housing, transportation are industrial not digital/semiconductor/software things. Their information content is small in relation to physical/material/labor components. A billion smart people cannot change the laws of thermodynamics – even if they are ALL lawyers!Scale will drive the 21st century as billions of people with rising expectations around the world want the same access to energy, food, transportation, and housing as Americans have today.But, demographic trends are in our children and grandchildren’s favor. Birth rates are crashing everywhere and the most of the world population is young today. In 2050 they will be 60 and a large human die off will begin if trends hold. And as long as we keep educating women those trends will hold – smart women means less offspring as they want to have their own lives, jobs, and freedom for being locked up by men.

          1. ShanaC

            But Mr. Hun, from the time you took over China, we’ve gotten so much better at maximizing energy, food too!

  23. tyronerubin

    Hollywood is very close to charging premium for this service @fredwilson:disqus It will happen, especially with tech people like Cuban and his production company.Cinemas are there for a group experience. And can continue to exist.The model you suggest is spot on.Hugo has not come here and hearing only positive things about I would have love to have experienced it at the same time with the rest of the world but here in South Africa we are getting it late.New models will be implemented in time, its the nature of technology, and hopefully a VOD model that allows us all to be happy, will prevail.It looks like music is possible paving that way.

  24. tyronerubin

    and so would millions of other people.

  25. panterosa,

    Thanks for hammering down on this pain point Fred. It so needs to be fixed.Last night, daughter Rosina (itching for me to give her a disqus profile to comment here) and I were in SAME position >>everything we wanted to watch would have to be pirated. I love going to the theater as well, but there wasn’t anything we wanted to see playing locally. She convinced me to do an apple rental of something second choice.We will have same problem tonight. What to watch. There is so much good stuff which I can’t get instantly and that really blows.

    1. ShanaC

      I also find the choices arbitrary. You can’t stream old Disney movies on netflix. They were made in the 90s. There is probably more money to be made by allowing busy parents to introduce these films on their schedule than worry about people breaking rights

  26. Chris Ellis

    Apologies for the double post everyone, Disqus and/or Chrome being buggy

    1. fredwilson

      i’m having issues with disqus too chris

      1. obscurelyfamous

        Are you getting double posts too?

        1. fredwilson

          i was. not anymore. it was flaky sunday morning east coast time.

          1. obscurelyfamous

            A few people have been, from what I’ve seen. We’re looking into this but haven’t found the culprit yet.

          2. FAKE GRIMLOCK

            ME, GRIMLOCK, NOW SEEING ONLY POSTS FROM FRED, REPLIES TO FRED, IN DISQUS DASHBOARD.IT FUNNY, BUT ME PRETTY SURE ME LOGGED IN AS ME, SO IT BUG.IT OKAY IF YOU WAIT TO FIX UNTIL ME DONE CHECKING IF FRED LEAVE CREDIT CARD NUMBER IN ANY OF REPLIES.

          3. Carl J. Mistlebauer

            You are not on disqus, you are looking in the mirror!

          4. FAKE GRIMLOCK

            IT FIXED NOW. TOO BAD. IT FUN TO PEEK INTO EVERYTHING FRED DO.ME NEVER KNEW HIM SUCH BIG FAN PRECIOUS MOMENTS STATUES.

          5. Carl J. Mistlebauer

            Lets start a campaign: SEND FRED WILSON PRECIOUS MOMENTS STATUES!I really would have thought that he leaned more to the Willow Tree Statues (http://willowtree.info/)See, you never really know a person! 🙂

  27. Eric

    I fear this is the exact reason so many of my favorite TV shows go dark. The execs are trying to force us to watch content where we don’t watch content anymore and the ratings numbers look horrible because a good portion of the audience is lead to piracy. It’s maddening how these distribution deals are playing out

  28. Ryan Drew

    I feel as though direct and immediate distribution is a matter of when, not if. I wonder what will be the trigger to make it happen: – productions studios losing money and finally caving to direct distribution  – theatre owners losing money and pressuring studios to create a way to receive revenue from direct, in home distribution (either viewers having to select a local theatre playing the movie to receive a % of the cost, or enticements to join a ‘theatre club’, so theatre x gets a % of any movies you download for in home viewing, viewers get membership perks for joining theatre club ‘x’) – establishment of new production studios, built on new business models (direct distribution only, creation of new models for financing/payment, where actors/employees aren’t paid a fixed fee up front, but earn a % of the direct revenue, or a Kickstarter model where viewers pay up front and get access to the actors/studio/information while the movie is made, and movie access once released).

  29. andyswan

    Sounds like someone needs a sit-down with pappy:  http://money.cnn.com/2011/0…I know you’re referring more to digital than physical goods….but I think there CAN be value in scarcity in the digital world as well— IF it is based on the feature of exclusivity.  TheLadders comes to mind.Your examples don’t do that….their main feature is frustration, so we agree.  Summary:Physical goods and digital goods CAN benefit from scarcity if it is done in the right way for the right kind of product and it adds value via exclusivity.Physical and digital goods CAN piss off customers through artificial, illogical scarcity that frustrates and adds no value to the product itself.

    1. ShanaC

      Do digital content goods perform well that way. Job listings aren’t nearly as analogous to movies. Different quality aspects

  30. Steffan Antonas

    I’ve gone through this exact same scenario with my wife a hundred times. So frustrating. If there was a site/service called “Still In Theaters” that allowed me to watch movies that were just released (even if they charged $14.99 per view the way that hotels do), I’d have spent hundreds already. It’s worth it. Most of the time we’d prefer to see new releases in our living room anyway, just for the convenience factor – especially in the winter. Comfy couch, 50 inch screen, home made snacks and a fridge full of beer. We’d spend almost twice that going to the AMC around the corner if you factor in the trip, the tickets and the snacks. The only reason we go to the theater anymore is because of scarcity, and that’s becoming less of an argument daily with boxee, the apple tv and even having an iPad or a Kindle Fire you can curl up with in bed – we watch a ton of content like that. If I were a movie exec, I’d be doing everything I could to innovate around box-office timing and direct distribution models. Pre-screening, directors cuts, movie night packages on opening night that include interviews with the director and actors (instead of movie previews you get in the theater) etc. Bring it on.

    1. pointsnfigures

      Although I will make an argument that seeing film on a big screen is a much different experience than seeing it on a small screen, even a 50″.  Plus, the sound in the theatre is generally a lot better than you would get at home.

      1. Steffan Antonas

        This is true, especially in the case of 3D, IMAX etc. But then again, I’m not saying I’d ever stop going to the theater. I’m just saying I’d generally pay more per movie experience and buy more movie experiences in general if they were available to me on demand and the timing was right (during a premier etc). That’s what matters.

        1. pointsnfigures

          I don’t disagree with you on that.  My family has the same problem as Fred’s.  I feel like I am listening to Bruce Springsteen’s song about a million channels and nothing on.  They are trying to control their chain of distribution because it’s a lot easier to make money on that than it is a new way.  The movie business is not unlike the banking business.NY Banks control distribution via Federal regulation.  Dodd-Frank was SOPA for finance.  Both are horrible bills designed to kill off competition.

    2. Dave

      So, the primary reason that works in hotels and not in homes is that you’re generally going to be solo in a hotel but with friends/family/children at home.$15 in a hotel for someone to not leave the hotel and find a theater in a place they may not know their way around, no big deal.$15 at home for you to have 3 people show up and watch the movie with you?  Yeah, not going to happen, at all.    Even $60 would probably be too cheap for the theaters to consider that you’d have just you and your wife and two kids (average family, lets say) to watch the Tintin movie, as they’re still losing out on concessions.  I think $15 is a little naive, if not obvious that yes the consumer would like to get a 2:1 deal on a movie ticket and maybe better than that if they have kids.  You’d spend a lot less actual money, and everyone on the content side loses out here.  Would a $60 movie on the weekend when you’re too lazy to get to the theater really turn into a viable impulse buy?

      1. Steffan Antonas

        I’m not trying to make a statement about what the price of a film should be and I’m not saying a price like $15 would be a boon for Cinemas. Clearly, regularly releasing films to the entire world on demand on opening nights for the price of a few tickets would hurt brick and mortar theaters and other players in the film industry as the industry exists right now. That said, it’s likely that film makers (studios) are likely to do better in a direct distribution model where they reach a broader market at lower effective prices to the end customer…and I’m saying there’s clear demand for such a model. Would the cinemas welcome this? of course not. But does that matter to consumers? of course not.

        1. Dave

          I’m not sure I agree with there being a clear demand for this model from anyone honestly. It’s a very small slice of impatience that’s too busy to get to a theater but then won’t dare to watch a movie either on demand or rental or whatever unless the movie is also in theaters right now.   I can’t believe many of these people exist. 

  31. Carl J. Mistlebauer

    In the world of supply and demand, scarcity maybe a “shitty” business model but its a wonderful way to get rich.  The whole world of venture capital is based upon the scarcity model, which makes me laugh when a venture capitalist exclaims that “scarcity” is a “shitty business model!”  Lets see, two weeks after the holidays and you find yourself with nothing to do on a Saturday night.  So, that leads to a rant about “on demand” and “choices” when the real issue might actually be that you could have had access to everything and you still would have been dissatisfied.I know from years of selling t shirts and dealing with the constant demand for more choices and options, that you do reach a point where too many choices and options ends up with the consumer not being able to make a choice.  Everyone believes that more sku’s leads to more sales, but the reality is there is something called the law of diminishing returns.Next time you find yourself and Gotham Gal alone on a Saturday night, play a board game!  That’s actually quite popular nowadays.  Its cheap, its social, and its entertaining.Not all solutions to the problems of the world reside in innovation and change.

    1. ShanaC

      Are there ways to handle too much choice?Its interesting to me, I feel overwhelmed in stores when I shop(I admit to panicking more than once in Macy’s) and feeling way more comfortable in the world of online shopping because I can filter.Netflix is onto something with their recommendation engine, but I don’t think it is enough to solve the issue of too much choice.

      1. gleslie

        I think of Trader Joe’s as an example of a business capitalizing on the too much choice problem. Pasta sauce was the example I remember reading about where seeing 27 different flavors in the aisle wasn’t appreciated by the customer as the producer might have imagined. There are certain products where the incremental value delivered to the consumer by additional choices does have diminishing returns. This does not really apply with media because Fred and Gotham Gal know that a specific superior product exists and they know that they want that product. Where as the pasta sauce shopper doesn’t walk into Trader Joe’s hoping that garden vegetable with extra garlic is available only to be disappointed when they have to choose between garden vegetable or extra garlic.

        1. Otto

          “Too much choice” is only a problem for people who prefer that some things be simple. It’s a preference. In other words, simplicity is a choice. Trader Joe’s serves people who have made that choice for their food and it’s good that food shoppers have that choice. But the same person who chooses a simple grocery store might also prefer a ton of entertainment choices and own 50 pairs of shoes. It’s relative.Personal example, I love craft beer. Here in Oregon there are many choices. But that is part of the fun for me. I listen to my local beer nerd tell me about them, show me new stuff, and then I make a decision. I always try something different and I go “around the world” with my beer choices. I like the adventure of choice.

      2. jason wright

        Albert Einstein had a view on this, and linked it to time, perhaps not surprisingly for this was Albert E. When he went shopping for clothes and found a suitable shirt, or jacket, or pants he’d buy in bulk…AND in the same color. Every day he’d put on a clean shirt and jacket and pants, always look the same, but never look crumpled, and was never ‘ripe’. Why? He  didn’t want to waste his time choosing. In this narrow regard he wanted to eliminate choice. He saw it as having a negative impact on other more valuable areas of his life. 

        1. FAKE GRIMLOCK

          CUT AWAY CHOICES THAT NOT MATTER TO MAKE BETTER ONES THAT DO.

          1. Ryan Tanaka

            People like variety, but they do not want to be overwhelmed by huge piles of crap.  It was the critic’s job to help people parse through stuff, but like the media, there’s lots of cases where a lot of them just end up becoming mouthpieces for whomever was paying them.The best of the artists and business people, I would say, are the ones who know how to handle and incorporate criticism and feedback into their works.  But when you have a feedback loop where people are only saying positive things to each other, it eventually becomes unsustainable.Criticism and reviews (serious ones) was a lost art for a while, but maybe it’ll make a comeback in the near future.  (If so, I might actually be able to use my degree for something!)

        2. ShanaC

          I actually sometimes do this with my basics.  Because I agree with him in that sense.

      3. LE

        “Are there ways to handle too much choice?”Organization helps. Netflix does this by their suggestion engine or their “Top 10 for …” and various genre queues. 

    2. fredwilson

      how is venture capital based on scarcity?

      1. andrewwatson

        I was wondering about that… is that supposed to mean that there’s a scarcity of investment opportunities or a scarcity of investment dollars? neither of those has been true for a while now…

        1. fredwilson

          it sure feels like a world awash in money and new startups these days. i’m see a ton of both all around me.

          1. Carl J. Mistlebauer

            Are all the potential start ups getting funded?  Is all the cash being spread around, or is that where the “frothy valuations” issue comes from?Its kind of like Code Academy, if everyone learns to code then the “premium” price paid for coders disappears.Coders become the “hamburger flippers” of the 21st century.

          2. fredwilson

            not all the startups are getting funded. the market is still working to a degree. but way more startups are getting funded than at any time (including the bubble years of 99/00) in my career

          3. Carl J. Mistlebauer

            Good! In 2008 I sent a letter to Mitch McConnell and told him that instead of TARP and the Stimulus why not just give $150,000 to every American that has a start up, that has an idea, or that is willing to start a business….I came up with another idea just the other day, with my visit to the college bookstore and thinking about Shapeways; I just wish I could see the BIG picture rather than always looking to exploit niches….

    3. tyronerubin

      I am no VC @tao69:disqus and in every respect agree with @fredwilson:disqus post.Its about a broader theme. One the music industry is dealing with.Most people with good enough bandwidth, that bandwidth connected to a viewing screen, no matter what financial status, want to enjoy great content. That content for many people, including myself, sometimes needs to be something fresh, new and entertaining. Like the new Sherlock Holmes which is put together by talent in the form of Guy Ritchie and the impeccable Robert John Downey, Jr. Or Tinker, Tailer, Soldier, Spy which I hear is an intelectual caper.I am 100% for Fred’s point of making new content available to all people, around the world on any device. I assure you we will all be laughing in the not too distant future. When we think we had to wait at home to watch amazing content while it was playing at a cinema down the road. This will seem totally laughable.Please note I do love the cinema experience. So why no have both. Let me answer. No reason at all it will happen.  

      1. Carl J. Mistlebauer

        Tyrone,Here is where I get confused, on one hand you talk about access and then on the other you talk about “great content.” Of course then everyone seems to use the same two movies for their example, thus I cannot help but wonder if the issue is not one of access (quantity) but rather one of quality.It seems to me that everyone is dismayed that they cannot view these two movies when they want and how they want. So, what happens when everyone who wants to see these two movies have seen them? In a world of 7 billion people with access to content 365 24 hour days a year?Well, you get exactly what television is today; or what music is today. While the advent of cable has increased the quantity of our choices I doubt anyone would argue that it has improved the quality of our choices.

        1. Otto

          “I doubt anyone would argue that it has improved the quality of our choices.”Some say the same thing about the Internet. Quality is subjective.

          1. Carl J. Mistlebauer

            Yes, and sometimes we confuse the availability, or quantity, with the real problem, quality.Sometimes more is less…..

        2. Erik Urtz

          This is really a money issue. The current studio / theater system concentrates money at the top. Any disruption of that model risks spreading the cash out and in turn limiting those ‘quality’ features you guys are looking for.

    4. LE

      “that you do reach a point where too many choices and options ends up with the consumer not being able to make a choice”I’ve found that as well when dealing with people. “Next time you find yourself and Gotham Gal alone on a Saturday night, play a board game! “I’d rather call my aunt or clean up the garage than play a board game.

      1. Carl J. Mistlebauer

        Then LE, you live a life of abundance and you have a multitude of options available to consumer any free time you find yourself facing!  🙂

      2. ShanaC

        You need to play more board games then.Seriously, one of the best times I had was going to the brooklyn brewery with settlers of catan.  Alcohol plus board games makes for interesting times.I also know of at least one guy who likes to take girls on chess dates….

    5. Otto

      More choice is not a problem.

  32. bjorg

    I’d love to be able to watch movies at home that are currently playing in the cinema.  We have a 2 year old and organizing a babysitter to watch him for 3 hours is not cheap either.That said, I cannot condone piracy.  If something is not available legally, then don’t get it! Period.  There’s no excuse for poor behavior.  Have we become so entitled that if something is not available legally, we think we have the right to make it ours illegally?  I hope not…

    1. gordonmattey

      Download it, then send a check to the movie theatre company.

      1. tyronerubin

        haha

  33. Steffan Antonas

    I’ve gone through this exact same scenario with my wife a hundred times. So frustrating. If there was a site/service called “Still In Theaters” that allowed me to watch movies that were just released (even if they charged $14.99 per view the way that hotels do), I’d have spent hundreds already. It’s worth it. Most of the time we’d prefer to see new releases in our living room anyway, just for the convenience factor – especially in the winter. Comfy couch, 50 inch screen, home made snacks and a fridge full of beer. We’d spend almost twice that going to the AMC around the corner if you factor in the trip, the tickets and the snacks. The only reason we go to the theater anymore is because of scarcity, and that’s becoming less of an argument daily with boxee, the apple tv and even having an iPad or a Kindle Fire you can curl up with in bed – we watch a ton of content like that. If I were a movie exec, I’d be doing everything I could to innovate around box-office timing and direct distribution models. Pre-screening, directors cuts, movie night packages on opening night that include interviews with the director and actors (instead of movie previews you get in the theater) etc. Bring it on.

    1. Patrick Campi

      Steffan, I’m just checking in here but check out Vudu. It offers the most recent available movies at three different levels of streaming and three different price points. AND they occasionally have movies that are currently in theaters and better yet some times pre released. And it’s all pay as you go. It’s my go to first option on those nights.

      1. fredwilson

        Vudu is great. i was trying to get it set up on boxee last night when my wife ran out of patience with me

        1. Patrick Campi

          Hey Fred, You will find that Vudu (I’m not an investor) is trying to address most of the arguments on this post. When you factor all of the expenses of an evening at the movies here in NYC – cost of sitter (for us), taxi’s to and from, cost of actual film, etc. the option of paying premium streaming pricing to enjoy from home is very welcome when it happens. 

          1. fredwilson

            yup. vudu seems like the best option. it’s not broadly available on devices like netflix is. i am going to get it set up on boxee today. that would have been the solution last night had the gotham gal had more patience.

          2. kenberger

            Vudu on boxee is fantastic. Vudu does and will suffer from the issues that any gatekeeper of media does (re content selection), but it today delivers 1080p + amazing surround sound audio. Add these cool small 5.1 speakers I got for just $400 and have your mind blown: http://cnet.co/zAcD1U

      2. Steffan Antonas

        Thanks, Patrick. I’ll check Vudu out.

  34. pointsnfigures

    Without running the numbers it is hard to agree with you, or the movie people.  It seems to come down to the argument over who will extract the most producer/consumer surplus.  They are using third degree price discrimination, even four degrees in many cases.  There are movies that are made and go directly to all access, however the quality of those movies are usually pretty poor, so they aren’t good examples.  I am excited to see the new George Lucas movie, Red Tails.  What would the profitability of that movie look like if they simply released it wide open on every platform versus trying to control the rollout of it through distribution?  A very interesting question.

    1. fredwilson

      hard to run the numbers unless the movie industry tries some experiments

      1. tyronerubin

        I am certain it will. It might be an indi film first though.Cant see The Avengers or Dark Knight Rises being available on VOD at the same time as release this year.Has to start with a smaller film, like in the case of an indi Louis C.K. type production.The point I would love to drive home is that even if The Avengers or Dark Knight Rises were released on VOD and Cinema at the same time.I am the fan boy going to the cinema. Then doing the VOD straight after. It will not effect the cinema numbers on those massive films in the slightest. How can anyone conceivably think that all of a sudden a fan boy like myself who watched the first two Nolan directed batman films in the cinema, with that experience etched in my brain, is now going to all of a sudden forgo that because its available on VOD. It will only enhance the film and the revenue. In your case if you honestly feel like watching it at home and that makes you happy then it will happen. And sometimes I am sure you will go to the cinema, or not. It doesn’t matter. The film is the film is the film. No matter where the %$# it is screened. Thats why so many film makers have such massive blu ray collections. To study and enjoy high quality versions of films.I dream of the day where this will not be a big deal. We can all watch anything we want wherever we want. Imax, 2D Cinema, 3D cinema, 2D home, 3D home, iPad, mobile in the home on a camping trip. It will def happen, no reason for it not to happen.The audience and customers and consumers always win. And if thats what people want, thats what people will get.

      2. Carl J. Mistlebauer

        Experiments are expensive and the movie industry has its investors and they expect a return on their investment.  Especially since funding is by movie, a one time value, not much of a reoccurring income stream.

    2. Erik Urtz

      The entertainment industry is in the business of making a product and selling it to its customers over and over again. From book to movie to video game, to vod, dvd, bluray, tv, netflix, toys, the list goes on. As much as fans want the content right now film executives fear selling their product just once. I’m not sure that going direct to customers will actually make them more money – but it will certainly make dramatic changes to the current landscape. The shift is inevitable though. 

  35. kidmercury

    sounds like what you’re waiting for is the emergence of the new value network that disrupts the movie industry. the old studios are never going to get it, nor should they — they have their own customers and value network to serve. the new value network will come in due time. in fact, i’d argue it’s already here: most kook films go straight to web, even before DVD. many are also financed by product placement, advertisements, and kickstarter type stuff. that value network has kooks as their foothold and will swim upstream in the years to come. thank god for the kooks! 

    1. leigh

      “thank god for the kooks!”  :):):):)

  36. chrisdorr

    Great analysis of the fear that drives the movie industry.  It would rather hold onto any model that it has grown accustomed to, then venture into a more fruitful future. Its history is loaded with such examples. They hate that consumers have much more power today.  It literally has driven them so crazy that they can not think straight. For most high level movie executives, the words “Internet” and “piracy” might as well be the same word–they cannot separate them in their minds.

    1. fredwilson

      i loved your kickstarter post on the tribeca film festival blog chris. i would have left a comment but it would have simply said “great post”

      1. chrisdorr

        Thanks Fred–I love the discussion you have unleashed with this post–the film world needs more provocative debate like this.

  37. jmcaddell

    It seems to me the content industry is caught in the Innovator’s Dilemma.

  38. gregorylent

    living in china, dvd store on every corner, unavailable otherwise ….and you know what? most of them are NOT worth even the buck or so that they cost. five minutes, toss it …so, availability, yes …. AND qualityotherwise, it’s disposable, and deserves to be treated as such.

  39. Dave W Baldwin

    @awaldstein:disqus is right regarding the tail related to movie inventory.Flipping to the other side of the spectrum comes to this.  Most readers probably wish they could pull up Sherlock II at their convenience.  Let’s say you did.  Problem is, let’s say on a 3 day weekend, you could gobble up everything in the theaters…. what would you do then?We need to put the pieces together, from bandwidth to its distribution to pioneering in content (we can sit and bitch about Hollywood, or do something better) and all the adjoining models that come into play.The bigger danger to the current industry being fried in this post is the bracket size they’ve already lost, who are not tuning in.  And that bracket isn’t waiting for the next hit show as defined per outdated model.

    1. FAKE GRIMLOCK

      ADD DISQUS TO MOVIE, SPEND REST OF DAY DISCUSS IT.MONETIZE THAT.

      1. andyidsinga

        funny – I was working on a little project – brainstorming really – around “video apps” and integrating social features. Anyhow, I was imagining how much noise we could add to a to a program. Imagine watching lord of the rings ..and snarkey little disqus “pop up balloons” hovering right over the content. That would be A*W*E*S*O*M*E.

        1. FAKE GRIMLOCK

          THERE WAYS TO MAKE AWESOME.HAVE DISCUSSED WITH DISQUS.

  40. kidmercury

    i thought a value network exercise would be useful to conduct and share here. my quick take:old value network:+ movie theaters with push distribution model+ talent unions (i.e. screenwriters, directors, actors, key grips….the whole thing is unionized and drives costs to preposterous levels)+ MPAA+ pay per rental, pay to buy, merchandise, product placement, games, books new value network:+ publish direct to web, + non-union talent+ product placement, merchandise, games, ads, premium experience (i.e. kickstarter stuff)i’d argue that as the new value network grows, it will come with a new type of movie theater.i also think the profit center is shifting from media sales to the sales of other stuff. accordingly, i think films will increasingly be a cost-center in someone else’s business. what amazon is doing via its prime membership (which gets you a bunch of free digital content from amazon) and what lockerz is doing are some examples, in my opinion. #fs

    1. Dave W Baldwin

      Totally agree.  The independents already support each other via associations.  Need to strengthen the associations accelerating quality and growth of those films/shows via Amazon and so on.

  41. falicon

    But did they really lose the transaction or simply delay it? If you never watch the movies you mention that is one thing…but if you watch them later then they didn’t really lose that transaction.Frustrating as it is, scarcity often helps to build demand…and demand results in transactions (eventually).

    1. fredwilson

      there’s always another movie to see. hard to say but the best way to do business is in the heat of the moment.

    2. awaldstein

      Bingo!We are talking not about creating a bigger market as the market for time-lapsed catalogue based viewing is already here.We are arguing whether there is a model for premier multichannel, big bang release.Movie marketing is remarkable. They create a creeping scarcity, theater by theater. Limited then slow grow releases keeping just behind word of mouth demand. From a handful of theaters in NY and LA, London and Paris, then creeping globally. For every location it is an event. 

  42. kenberger

    2 other major areas that drive me nuts:1. Music. The labels *still* insist that a record is released when the timing is right for *them*– despite the band and the fans wanting the product consumed asap.2. Mobile phone OS updates. Android Ice Cream Sandwich is available now. It’s beautiful. When will it come to your just-released expensive phone? You’re completely beholden to the carrier (sometimes the manufacturer), who routinely hold innovation back because it’s not in their financial interest to accelerate offerings too quickly.#1 drives some to piracy. #2 drives some to installing Cyanogenmod and other hacked versions. Both hopefully have an influential role in enticing change with the powers that be.

    1. fredwilson

      that’s why i am on the nexus line of android phones. these devices seem to always get the latest versions of the OS

      1. kenberger

        Sure, but that’s a thin argument/strategy. If I’m stuck with just 1 option per year or so, than I’m no better off (in this aspect) than I was with Apple phones. I left iPhone and embraced Android in huge part to be able to indulge in a multitude of ongoing options from multiple innovators, not just the OS custodian’s flagship.

        1. fredwilson

          agreed!!!!!

          1. kenberger

            The Big Point to be made here is that with all 3 areas (video, music, phones), the companies operate like fiefdoms. They are not in existence for the greater good of their world or nation, they believe their survival model depends on holding on to their feudal manor as long as possible, using the tools they’ve long embraced. And I totally understand that behavior.

      2. kenberger

        oh, and hang on a second: you’re not even always golden with that strategy. The year-old Nexus S that I have, just this week finally got the ICS push. Some people still don’t have it. That waiting game is mind-numbingly frustrating.

    2. jason wright

      So is it better to buy a handset not tethered to a network contract, initially somewhat more expensive but with the bonus of OS updates?I’d read that most Android phones are ‘locked’ to that version of the installed OS with no possibility of updates. That, if true, seems like a terrible proposition.

      1. kenberger

        That premise is false.

  43. Ryan Tanaka

    Same with music — in imitation of the industry, I see a lot of aspiring musicians do bizarre things like printing limited edition copies of only 100 records for those who’re “cool” enough to be part of the club.  “Artificial scarcity”, as it’s called — some have internalized this method as part of their overall strategy.There’s something very ungenerous and exclusive about this type of marketing though, so maybe part of your objections might be a moral one as well.  As Burtrand Russell once said — the pleasures that are acquired from those practices come primarily from the feeling that someone else doesn’t have what you have, as opposed to having something in itself.  In the long run, though, these feelings don’t last for obvious reasons.I think that describes a lot of what the industry has become in recent years.

    1. Sprugman

      Or maybe they’re rewarding their extra good fans with special content.

      1. Ryan Tanaka

        Only if they want it, though — don’t get your cart before the horse, is all.You can make things artificially scarce, but you can’t artificially create demand.  No duh, right?  But that’s what a lot of people basically seem to be doing…it’s a source of pretension that doesn’t serve the medium well.

        1. Ryan Tanaka

          Lets say a 100 people out there are willing to pay for an album — normally you’d make a 100 copies to meet that demand.  But a “limited edition” marketing strategy might print only 25, then raise the price in order to recoup its lower selling numbers.  Even when successful, this artificially raises the prices of goods without improving its quality.  At the same time, the company loses an opportunity to interact with its customers and spread its brand name. In fact, from the people I’ve spoken to about the industry, a lot of the resentment comes from them engaging in these types of practices.So what are the benefits behind doing things in this way?  I’d really like to know.

  44. andrewwatson

    The entire process for making movies has been completely turned upside down 25 times in the past 100 years.  Black and white to color, film sizes, offline editing, CGI, digital effects, 3D rendering etc… not to mention the infrastructure for production has evolved from shipping rolls of film, cutting it with razor blades to satellite uplinks for realtime transfers to ISDN to high speed fiber connections between cities.Meanwhile the primary viewing method remains largely unchanged: you go sit in a room with a few hundred noisy strangers and watch the movie and 20 minutes of advertising at a time of the theatre owner’s choosing…There’s a reason the buggy whip factories are all closed.

    1. awaldstein

      Well said but it’s not that  black and white IMO.The reason buggy whip factories were closed is that we didn’t need buggies.Just because we have digital distribution doesn’t mean we don’t love the event itself as a way to collectively experience a story.Does that mean that date night at the movies is some piece of vestigial human behavior that is just hanging around?I’m with you. I have the biggest flat screen I can buy, high-speed connection and I’m a movie fanatic who gets pissed off when I have to order a DVD. But I don’t think simplifying this problem is the way to solve it.

      1. Patrick Campi

        The theaters still get filled to capacity for the new big films. They have legs for two or three weeks and they’re gone. People are filling up the seats and selling out etc. but there is a massive audience who can’t get into those seats at the times available – the theaters now try to book the time slots to get the most showings they can in one night. Addressing the giant potential audience that – wants but can’t- properly should be the key.

        1. awaldstein

          It’s been 6 years since I’ve been connected to the movie biz so I may be talking out of school and things have changed.Don’t get me wrong…I want this! I don’t have a visceral gut feeling that you are not correct though. That there is a massive audience willing to pay  premiere pricing for blockbuster on release and not wait till they are in time-lapsed catalogues. If you are right that the audience is larger, then it will happen. This is just an economic discussion.

      2. Aaron Klein

        Totally agree. If that were true, takeout would have defeated going to dinner years ago.We humans like variety. The studios are effectively shunning their takeout customers out of an insane fear the restaurant will then be empty.

        1. awaldstein

           ‘The studios are effectively shunning their takeout customers out of an insane fear the restaurant will then be empty.’Perfect.

        2. LE

          I don’t think the analogy is valid. For one thing there is proof of the validity of take out being a viable extra source of revenue already and even then the scale is much smaller.Second whoever did the first takeout did it with little risk. They could easily stop offering takeout if it hurt the dining room business. Same with anyone doing it today.Third, in restaurants there is a shortage of space and tables as well as wait staff. Assuming the kitchen can make the food it is a tremendous addition to profitability of a restaurant. And the entire process is controlled by an entrepreneur who makes the decision with regard to this restaurant or chain of restaurants. It’s not an industry wide issue with entrenched players (although that’s not what you are saying here).

          1. Aaron Klein

            1. Are you saying you don’t think people would buy movies to watch them at home? If so, we firmly disagree.2. Same low risk applies here. Nothing is stopping studios from killing the windowing approach except fear and an innate desire to control everything.3. There is a shortage of people willing to go to the theater to watch movies. The market expands dramatically if you open up your product to people at home.4. There is no reason individual studios can’t test this approach. In fact, when this happens, that’s how it will happen – one studio will be the tipping point and the rest will follow.Paramount should have tried it with Mission Impossible 3. I’d still have taken my team and a group of friends to go see it in theaters, AND it would have been our choice of movie the other night when our kids were in bed.Great products will find a willing market, period.

          2. LE

            1. – No I’m not saying that at all. 3. – I agree. I hate to go to the theater. Practically never do. 4. – I agree. It can be tested. And yes the proof of it working for someone else will be the proof that is needed. Problem is it will piss off the legacy interests. And nobody wants to draw first blood.There needs to be a certain amount of people sitting in theaters in order for a theater to make sense to operate. And they are fearful of getting below a certain capacity in the theaters by cannibalizing people that would normally find it acceptable to sit in the theater. Not people like myself. They would get more money out of me because by the time the movie gets to DVD or is available online I’ve forgotten about it and actually more importantly I’m not in the firing line of the media hype. So it doesn’t seem as important to watch.

          3. Aaron Klein

            Completely agree on your last point. So many movies I want to see, so little time, and I lose interest by the time the window gets to me.

      3. FAKE GRIMLOCK

        START STARBUCKS FOR MOVIES. RENT ROOM FOR 12 FRIENDS TO WATCH WHATEVER MOVIE WANT WHILE EAT GREAT FOOD.LOTS OF SMALL ROOMS MAKE IT VIABLE BUSINESS.KEEP PART PEOPLE WANT, THROW AWAY SCARCITY MODEL.

        1. gordonmattey

          This kind of started happening 4 years ago in South Korea, people watching TV on their laptops in coffee shopshttp://en.trend.az/news/soc…

        2. Christopher Herbert

          would you replace $7.00 buttery popcorn?

          1. FAKE GRIMLOCK

            YES.WITH $7.00 AWESOME FOOD WORTH $7.00.

          2. ShanaC

            Organic popcorn with flavored butter 🙂

        3. LE

          A great idea. Combine superboxes with the movie experience. Or a private box where you and a wife or date (depending on whether it’s Friday or Saturday night) could be alone with food and a movie.I’ve heard from food service people that they call some people “the dining dead”. Couples that go out to dinner and never say a word. This would be a big draw for them. Without private boxes, and with live entertainment, this used to be call a “supper club”. (I’m sure you remember the scene in Goodfelllas).http://en.wikipedia.org/wik…This is a classic 2-1/2 minute single camera steady cam scene from Goodfellas:http://www.youtube.com/watc

      4. LE

        “Does that mean that date night at the movies is some piece of vestigial human behavior that is just hanging around?”Disruption in this area could cause more unwanted pregnancies. Something to think about.

      5. ShanaC

        No, you just get different dates on date night 🙂

  45. Doug Gibbs

    If you are asking why, the answer is human psychology. The executives you are talking to are not entrepreneurs. As a VC, you talk to people trying to disrupt and change the world all the time. A movie studio executive today is the third or forth generation removed from the studio founder. They don’t want disruptions. The business is hard enough without trying to build a new distribution model. Yet, with each new model and technological innovation, they actually make more money. The theater ownership breakup, TV, video, DVD, Blue Ray and the internet will not kill their industry. When they figure it out, they make a pile of cash. Any paying way to get more people to see a movie is good for them.The real why is why the whole industry has a sue and legislate reaction. That makes no sense. One company needs to go first, make it big, and the herd will follow. Jason Calcanis suggested  Netflix produce independent films, or pay to have Sundance films the week of the festival. It would cost less to experiment with than some of their other screw ups.

    1. Dave W Baldwin

      The last paragraph goes with the disruptions HBO, USA, Fox and so on did via Sopranoes, Monk, 24 and more.  It could be done.

  46. Dev Jones

    Fred, if you really believe in this, form an investment consortium and buy a movie studio.  Create an internet distribution company independent of the studio and release a blockbuster over this service for $15 per view.  Use the success from this case study to get other studios to release with your distribution company.  Studios won’t release over the internet, not because they hate the internet, but because they think they’ll lose money.  If you can take the risk to prove the model, they’ll switch immediately.If this works, the returns will outperform any other company in your portfolio.  If you started now, you could release your first movie in less than 2 years.You work with entrepreneurs everyday who take big bets.  You seem to believe strongly in this idea so do it.

    1. fredwilson

      buy a movie studio or build a new one?

      1. marybaum

        I was thinking build a new one, but if there’s one that’s struggling, that might be easier to buy. As with everything, it depends on the numbers – and you probably have better access than we.

        1. Patrick Campi

          Every time a film gets made it’s a one-off startup. Idea gets backed by $$ It gets distributed to market and it sinks or swims. The due diligence will try to figure out the possibilities but the “distribution” is the key. The movie house chains hold big power. The Louis CK model will happen more and more and you will then see the old ways falling in the wake of the new. It’s happening now. 

          1. ErikSchwartz

            The Louis CK model leverages the brand he built through traditional channels.

          2. Patrick Campi

            Yes,of course. and those traditional channels are going thru change. People are grabbing new content in different ways. A You Tube video can make grandpa an internationally known presence. Real quality content now has many more paths.

          3. LE

            Yeah for some reason people fail to realize that details count in terms of why something works or doesn’t work. If I remember correctly you have sailed multiple times across the Atlantic solo? So while it’s clearly possible to do it’s also simply not achievable by the vast majority of people.

        2. LE

          “but if there’s one that’s struggling, that might be easier to buy”So what are you buying then? Physical facilities, equipment and existing contracts and contacts? But you also are getting a bunch of people that have not succeeded at making it work. You’d have to weed them out.

      2. Guest

        Buy an existing one.  You don’t know how to make movies and that shouldn’t be your focus.  The point of buying an existing one is to have control over how it’s distributed.

      3. FAKE GRIMLOCK

        TECHSTARS FOR MOVIES.GATHER CLASS OF MOST PROMISING DIRECTORS, ACTORS, WRITERS.3 MONTHS TO BUILD VIABLE SHORT VIDEO.PUT SHORTS ON KICKSTARTER. RAISE FUNDS FOR FULL MOVIE.RELEASE CREATIVE COMMONS WHEN FUNDED.

        1. LE

          “GATHER CLASS”Another gatekeeper.

          1. FAKE GRIMLOCK

            TEMPORARY MEASURE UNTIL ECOSYSTEM MATURE.SAME AS TECHSTARS, Y COMBINATOR.

        2. ErikSchwartz

          Consumers like stars in their movies.At the moment stars get paid 8 figures. You need to convince them to work for a percentage.

          1. gordonmattey

            Bigger stars already do both, up-front and % of revenue so this could be a lot closer than we think.

          2. FAKE GRIMLOCK

            MAKE MOVIE LIKE STARTUP.ALL FOUNDERS HAVE %.

          3. ErikSchwartz

            I understand the theory. Getting it done in practice is the hard part.

          4. FAKE GRIMLOCK

            GET IT DONE IN PRACTICE IS HARD PART ABOUT EVERYTHING.

          5. FAKE GRIMLOCK

            ME, GRIMLOCK, CORRECT YOU.CONSUMERS LIKE GREAT MOVIES.STAR JUST PRIMITIVE METRIC FOR WHETHER MOVIE GREAT.FIX THAT PART, NOT NEED STARS.

          6. ErikSchwartz

            I think you underestimate the cult of celebrity in a large swath of our culture.

          7. awaldstein

            Yes…but in an era of exacerbated attention deficit the power of brand as a filter is immense.And stars at whatever level to whatever audience are filters for attention. True in movies. True on this blog. True in every layer of life. 

          8. FAKE GRIMLOCK

            @awaldstein:disqus THAT WHY ME, GRIMLOCK, PUT IN SENTENCE ABOUT “FIX THAT PART”.IT ONE OF GRIMLOCK RULES OF STARTUPS. LOOK FOR DUCT TAPE. BUILD PRODUCT THERE.STARS AS DISCOVERY = DUCT TAPE.

          9. LE

            “CONSUMERS LIKE GREAT MOVIES.””FIX THAT PART, NOT NEED STARS.”Don’t know about that. I kinda like that guy Michael Douglas and some of the stuff he’s done.  As a brand yourself I’m surprised you would say that actually.

          10. FAKE GRIMLOCK

            ME UNDERSTAND POWER OF STAR.ALSO UNDERSTAND STAR USUALLY HAVE LITTLE CONTROL OVER WHETHER MOVIE GOOD OR CRAP.CONSUMER HAVE NO WAY TELL IF GOOD OR CRAP, SO GO WITH STAR. RESULT IS CRAP MOVIE WITH STAR STILL MAKE MONEY.INTERNET CHANGE THIS. LOTS OF CRAP MOVIES WITH STARS BOMB IN PAST FEW YEARS, MOVIES WITH NO STARS MAKE BIG MONEY.NEED ACCELERATE.

          11. jason wright

            The Ashton Kutcher web startup model applied to films?

          12. ErikSchwartz

            You only know who Ashton Kutcher is because Fox and Viacom spent a ton of money making sure you know who he is.

          13. jason wright

            Ashton K – the web startup model I’m pointing at here is the celebrity model. Kutcher is investing for a %, an equity percentage based on his ability to attract an audience to the website. 

        3. William Mougayar

          THAT EXIST ALREADY (PARTIALLY). My 25-yr old nephew won Best Short Film (he’s the director) in a competition where the movie was written, filmed and edited in 48hrs. His movie is now selected to be screened for Cannes this year. http://www.imdb.com/title/t… The part that’s missing is allowing him to show it online. He can’t release anything online until it goes to Cannes, except for a 20 sec trailer. But I know, regardless,- he will be a big director one day. 

          1. FAKE GRIMLOCK

            DISRUPT DISTRIBUTION MOST IMPORTANT PART.CROWDFUND, RELEASE CREATIVE COMMONS. THAT WHAT DESTROY OLD ROTTED SYSTEM, MAKE WAY FOR NEW.

          2. William Mougayar

            True. The Internet is a great savior for a better distribution system. It’s working very well for breaking news and real-time events where Twitter beats any other pre-existing system, including Television. – posted via http://engag.io

      4. gordonmattey

        A studio rolls up financing and marketing, and does the distribution deals.On the internet, distribution = hosting.Thank you Youtube.The challenge with any media or service delivered on the internet is demand, not supply.  So there’s marketing.Building an audience is hard.  You can’t spend enough on advertising to drive demand for every movie you produce.Tools and investment/patronage vehicles that enable talent to build a viable long term career in creating film and video is where it’s at.That’s why kickstarter is such a big part of this movement.Kickstarter is the new studio.

        1. ShanaC

          It is also marketing costs. Just because your thing exists on the internet doesn’t mean people will find it

          1. William Mougayar

            There’s something else missing. A YouTube for movies/shows that are released on the Internet only. So you go there to see what’s available. Sort of an iTunes a la Wikipedia openness. 

      5. leigh

        blow up the movie studios – fund creators

        1. William Mougayar

          Exactly. Studios are outsourced. They move down in the new value chain. Fund a director without the traditional distribution/industry strings attached and they will do their magic and release on the Internet only. 

    2. LE

      “form an investment consortium and buy a movie studio”The world is littered with business people who thought they could make a go of it in the movie business. This is a business where knowledge and experience means something. A newcomer has no pattern matching. (Added: Mark Cuban being one exception.)Same thing happens with many people who think they can go into the restaurant business because they eat at restaurants. (That of course is much easier and some have had success.)

      1. DevX

        I think Fred should have no hand whatsoever in the creative process of making the movie.  The decision to buy a studio should be solely for control over distribution.

  47. tyronerubin

    @fredwilson:disqus also try out http://mubi.com/ sometimes.Very intelligent film lovers there. Streaming content and great discussions. Its def a film lovers site.

    1. Patrick Campi

      Yes, international, cinofile streaming!!

      1. tyronerubin

        @PatrickCampi:disqus what a wonderful amount on amazing discussion and film knowledge being brought through mubi.

        1. Patrick Campi

          I think Mubi is going to be huge platform on the international film scene. There are only a few great foreign “film” houses here in NYC but there is a giant engine of product being made all over the world. 

  48. Mark_hachman

    You don’t have a device that has Vudu? I would have thought Boxer would. A little pricy, but otherwise just like the local video store

    1. fredwilson

      i have a boxee box with vudu on it at my officei’m getting a second one for my home todayi do have a mac mini with boxee on it at homebut vudu is no longer available on boxee for mac.

      1. Patrick Campi

        We get Vudu through our LG blue ray player – of which I can’t remember the last time we put an actual disc in it.

  49. Michael Flood

    Think of the poor babysitters!  When my wife and I want to go out to see a movie, we need a babysitter for our 2 children.  This means the movie generally costs ~$14 for the tickets, ~$10 for drink/snack, ~20 for the babysitter.  So that is ~$45 for the night out.  Could be more if we grab dinner or coffee, etc.  Direct to the home would be great, but not for the theater or the babysitter. 😉

    1. Aaron Klein

      There will always be a market for giving parents a break from their kids. Trust me.

    2. LE

      Agree an entire ecosystem. Think of the restaurants in the shopping center where a theater is located. Also many theaters are attached to malls. 

  50. Irving Fain

    Music has a similar issue in many respects. There is something special and unique about going out to the movies or going to a show that can’t be replicated in your home or on your computer. That said, sometimes people still want the content, but don’t want that full experience. It seems that the studios, labels, etc. are afraid that by simply providing one without the other (i.e. no windowing in movies & easier access to music re: labels) you obliterate people’s desire for the “full” experience. I don’t believe that’s true and in fact, I’d argue that by building loyalty and engagement with your product, you’re more likely to grow your share of the consumer’s wallet in the long run.

  51. Masonsexton

    A good friend of mine has started his own movie production company and has told me that both movie studios and movie theaters alike are scared to death of losing their distribution model. In an age where almost anyone can become a content creator, the real leverage in their model comes from controlling distribution. To me this is close to the same issue the newspapers dealt with in the late 90’s. The genie is out of the bottle. The movie studies can either change with the times or they can play catchup over the next 10 years.

    1. FAKE GRIMLOCK

      DR. HORRIBLE IS FUTURE OF VIDEO.JUST NEED MORE JOSS WHEDONS WILLING TO MAKE HAPPEN.

  52. Jake McGraw

    Here is how I consume top quality, original programming without cable:Pre-purchase entire season on iTunes, download HD ver next day:Mad Men, Breaking Bad, The Walking DeadDownload HD ver illegally two hours after broadcast:True Blood, Boardwalk Empire, Game of ThronesAMC, because they see the value in simultaneous online release, gets around $120 from me, which I imagine is much greater than a typical cable subscriber.HBO, despite having incredible content, gets nothing. I would be willing to pay twice the amount per season for a series like Game of Thrones.I don’t subscribe to cable because the vast majority of programming is inexcusable shit. The cost has nothing to do with it, I just can’t abide hours and hours of reality television, obnoxious commercials and the piece of crap cable box.

    1. Christopher Herbert

      The problem is that HBO makes something like $5-10 a month from their 28 million subscribers, while AMC is probably more like 50 cents/month.  If HBO went straight to the consumer, a lot more people would cancel HBO and just start buying piecemeal.  Trading pennies for dollars.  AMC has everything to gain.  This whole system is going to crumble, eventually, because things fall apart.  I believe it will start very slowly and gradually and then all of a sudden the bottom will drop out.

  53. palbi

    IFC would be an interesting example.Most of the movies currently in theatre are also available on Time Warner for around $6.99 each. I don’t know if there are public data available but it wouldn’t seem digital distribution of their contents has had a negative impact on their tickets’ sale at their physical location.

  54. Jonathan Fields

    I wonder if what’s really happening here is the same game of chicken we see happening in book publishing. For a few generations, a small number of companies who fund and release the content have relied on an extensive network of distributors and resellers to extract and return cash. They don’t consider the ultimate viewer/reader the customer, in their minds the distributor/reseller is.The studios and publishers see the handwriting on the wall, but every time they hint at doing something that’d go direct to the real ultimate consumer, their current perceived customer–distributors and resellers–freak out and say they’ll stop selling their stuff. So, it ends in one big, fat stalemate. Nobody wants to balk, because both sides know the change that’s necessary will mean a huge amount of creative destruction and, very likely short-term financial hit, while they built the machinery necessary to make up the loss of an immediate hard-stop in the current mode of distribution.Meanwhile, the direct-to-consumer market keeps chipping away and increasing the realization that change is inevitable and it’s going to hurt, at least for a short while, and very likely eliminate a huge number of people in the middle. At some point, the pain of not changing will become greater than perceived pain of change, and the studios/publishers will say screw it and make an aggressive move to go direct and serve the people they need to be serving to stay alive. And, in the end, they’ll be a lot better off because of it. But, nobody wants to endure the disruption until they have to.In publishing, at least you have massive disruptors like amazon forcing the issue and individual content creators have the ability to increasingly peel away and do it all themselves. It’s a bigger gambit when it comes to movies, but that gap will close.

    1. FAKE GRIMLOCK

      NEED TECHSTARS MODEL FOR MOVIES.THEN NOT NEED WAIT.

  55. Chipotle

    Netflix is dipping their toe into the water with Lillyhammer, Arrested Development, and House of Cards but as enlightened as Reed Hastings might be they’re still acting as a gatekeeper.  Here’s hoping the Louis CK model inspires more content creators to go direct to the consumers.  Anybody have a creative use case for empty movie theaters?  

    1. Rurik Bradbury

      Empty movie theaters can play movies based on realtime polling of people around them. Needs a demand aggregation platform and a smartphone app (“Uber for movie screens”!)  Can do revenue management by floating prices based on demand: “Want to see Casablanca tonight at 8pm for $3? Click to book now”

      1. Chipotle

        Yep, throw in a restaurant discount and you have yourself a date night (a couple of hours without kids).

      2. jason wright

        You could do that through home viewing too. In fact your model would work best for home viewing. Imagine that a movie *could* be available to the many to watch but alas only social engineers could afford to pay the fixed $30 charge. So through the platform and app a price elasticity of demand algorithm can set the price in real time based on the accumulated expressions of interest in watching film X on evening Y at Z time.

  56. aminTorres

    Fred, this goes hand by hand with what I want to do with Spread.The reason why people go around and steal photos is because the photo giants have made it impossible to licence images. They want a different price, higher the larger… and the more cash depending on when, where and how an image get’s used instead of making them easier available to everyone and easy to pay for.On top of it all, no-one can keep up with agreements expirations which leads to more fees and more maintenance work for publishers.Imagine if you had a system were people can buy/sell quality images?All blogs and news organizations can benefit from it instead of stealing each-other’s contentand as a result, sending their lawyers at each-other. These, rights management and affordability/accessibility are two of the main problems we want to solve. It sucks that regular citizens running their opinion blogs can’t afford to buy and image from the AP for instance. And, if they do, it comes will all these impossible to understand strings attached.  Along with Michael’s words, the most expensive image is the one left unsold sitting on a server.All of the above makes it impossible for regular people to take part on the buying process.On the flip side, the same is just as bad or worse for aspiring journalists who unless they are part of a “special club” their images/work don’t even ever get looked at.

  57. linhares

    You’re right.  They could probably make much more money by dealing directly with customers and deleting all middleman.Yet Lawyers and lobbyists benefit enormously from the status quo.  They are parasites between content creators and consumers.  They don’t care if they kill the host.  If the industry were to deal directly with customers, à la Steve Jobs, these types would be gone.

  58. J Nicholas Gross

    I guess I question whether it is truly “scarcity” since the consumption option you want right now is simply deferred, and is not strictly unavailable.  The movie studios have obviously done a lot of marketing research and from years in the business understand the mentality of the folks they are selling to. They know that you didn’t get what you wanted last night, but that won’t stop you from consuming that same item at a later date.  Their inventory doesn’t behave like other items – so they have optimized their own monetization model. It may not be convenient for the consumer who wants to see every title in every distribution channel from day 1, but that’s a different question.

    1. fredwilson

      maybe we will watch it in the future. maybe we won’t. the best time to do a deal is when both parties want to.

      1. Christopher Herbert

        Yes, but you can’t do a deal when the parties are so far apart.  They get $12 per person in movie tickets, plus 80% margin on $7.00 popcorns and $5 sodas.  Plus 20 minutes of commercials and previews.You’re willing to pay $4.99 or maybe even $14.99, but that ain’t enough.

    2. LE

      “consumption option you want right now is simply deferred”Good point.  Same thing with the tech and other industries charging more for early adopters. I was willing to pay a premium to get the first iphone on day 1 (not my typical behavior but I was leaving for a trip and wanted to take it on the trip). Others weren’t. Apple was able to maximize revenue. Auto dealers do that as well. When a new model comes out it is scarce either by manufacturing delay or by choice. If the dealer only has 3 vehicles on the lot you’re going to pay more. 

  59. Guest

    There is some discussion here a few layers deep in the thread, but the MOST critical part of this value network is the financing and funding of movies.This is where it all starts.  Everything downstream from production exists to protect the up-front investment.Publishers [Studios, Broadcasters, Networks] currently constrain the whole media value system by absorbing the financial risk of investment in media supply, controlling media demand by ensuring distribution scarcity [controlled by them and possibly by regulation]. In return they take a lions share of the value, financial and otherwise. This strategy works.However, when there is no distribution scarcity and an abundance of media supply, i.e., on the Internet, the model is blown. The current value system can no longer efficiently [and effectively] allocate financial resources to invest in the right Talent to ensure a blockbuster. In fact, the blockbuster can no longer be realised using todays methods.Any change to the existing model means shifting who participates in the risk of funding media, without guaranteed returns. Looking across the rest of the value system, there are candidates who can take this of investing in supply; the Viewers, the Marketers and the Producers.A. Viewer Funding. One or more Viewers fund the production of for-profit and non-profit media. The Viewers take the risk (crowd-funding), and could have an option and desire to participate in the return. However, funding with an expectation of a return is treated as a security, limiting the options for how this model works due to regulation.  Although the Startup Exemption framework being included in some new laws will change this.B. Marketer Funding. One or more Marketers take the risk and fund the production of media (This was how soaps were originally created). The current ROI revenue model for video entertainment, in-stream advertising, is driven by marketer money and this model flips the investment to the beginning of the production process. By committing marketing money up front, and by participating early in the process, marketers have an opportunity to be significantly more involved and relevant to the experience and therefore more than just an interruption to the experience. This however should not mean branded programming and heavy product placement. This is an opportunity to innovate how marketing experiences are created for video.C. Producer Funded. One or more Producers take the risk and self-fund production. This gives Producers complete control but the only people that can do this are the ones that have funds at their disposal; These are a) Producers with existing revenues to reinvest (high up in current Publisher funded hierarchy like George Lucas) b) Producers with VC backing who are trying to establish a pedigree in the market (these came and went a few years ago), and c) Producers of user generated content, mostly a labour of love from people with financial and/or time freedom. However, producer funded systems are not financially or creatively scalable as they are inherently limited by reinvestment of revenues. A series of failures, and a Producer could fall just like the Studios today.So, which will it be? or will a combination of two or all three of the models above?

    1. fredwilson

      i agree. the funding model needs to change along with the distribution model. our investment in kickstarter is somewhat predicated on that. i’m not suggesting that kickstarter is the solution. but it is part of the solution.

    2. leigh

      yes yes and yes.  for a project i’m working on i had someone map this out for me – in Canada it gets even more complicated bc a lot of funding for content creators (60%) comes from the Government too.  

  60. gordonmattey

    There is some discussion here a few layers deep in the thread, but the MOST critical part of this value network is the financing and funding of movies.This is where it all starts.  Everything downstream from production exists to protect the up-front investment.Publishers [Studios, Broadcasters, Networks] currently constrain the whole media value system by absorbing the financial risk of investment in media supply, controlling media demand by ensuring distribution scarcity [controlled by them and possibly by regulation]. In return they take a lions share of the value, financial and otherwise. This strategy works.However, when there is no distribution scarcity and an abundance of media supply, i.e., on the Internet, the model is blown. The current value system can no longer efficiently [and effectively] allocate financial resources to invest in the right Talent to ensure a blockbuster. In fact, the blockbuster can no longer be realised using todays methods.Any change to the existing model means shifting who participates in the risk of funding media, without guaranteed returns. Looking across the rest of the value system, there are candidates who can take this of investing in supply; the Viewers, the Marketers and the Producers.A. Viewer Funding. One or more Viewers fund the production of for-profit and non-profit media. The Viewers take the risk (crowd-funding), and could have an option and desire to participate in the return. However, funding with an expectation of a return is treated as a security, limiting the options for how this model works due to regulation.  Although the Startup Exemption framework being included in some new laws will change this.B. Marketer Funding. One or more Marketers take the risk and fund the production of media (This was how soaps were originally created). The current ROI revenue model for video entertainment, in-stream advertising, is driven by marketer money and this model flips the investment to the beginning of the production process. By committing marketing money up front, and by participating early in the process, marketers have an opportunity to be significantly more involved and relevant to the experience and therefore more than just an interruption to the experience. This however should not mean branded programming and heavy product placement. This is an opportunity to innovate how marketing experiences are created for video.C. Producer Funded. One or more Producers take the risk and self-fund production. This gives Producers complete control but the only people that can do this are the ones that have funds at their disposal; These are a) Producers with existing revenues to reinvest (high up in current Publisher funded hierarchy like George Lucas) b) Producers with VC backing who are trying to establish a pedigree in the market (these came and went a few years ago), and c) Producers of user generated content, mostly a labour of love from people with financial and/or time freedom. However, producer funded systems are not financially or creatively scalable as they are inherently limited by reinvestment of revenues. A series of failures, and a Producer could fall just like the Studios today.So, which will it be? or will a combination of two or all three of the models above?

  61. Sohrob Tahmasebi

    If Apple can succeed in convincing the production studios to make all of their content available just like the music studios have, then that can establish a successful model to emulate. They’ll need to do so in order for their rumored Apple HDTV project to become a true success.

    1. William Mougayar

      I agree. It’s coming. See my separate comment on that.

  62. Andreas Duess

    Every single production house that we work with is currently exploring new distribution models. They might not do this in public, because they don’t want to be seen to be biting the hand that feeds, but they are all experimenting with live streams, content delivery via app or subscription, etc, etc.As others have said, they are not dumb people.

    1. fredwilson

      not dumb at all. some of the most talented and driven people i’ve ever met.

  63. Yjpalmer

    Like most “old school” business, these guys have baggage that was once required for their businesses to succeed (i.e. distribution via theaters, unionized production crews, etc.). All of these interests likely put extreme pressure for them to avoid deviation from their current business model. Only a very gutsy company or a new entrant could break this model.

  64. ErikSchwartz

    I’m not sure the business model is scarcity. By staggering windows the effective shelf life of attention is extended. The scarce resource is viewers time. If the marketing push for a film last 2 weeks across all channels and you have no time to see the movie in the two week time frame you might never see it. But if you miss the theatrical release, you will catch it on PPV, if you miss it on PPV you might catch it on DVD, if you miss it on DVD you might catch it on HBO, if you miss it on HBO you might catch it on free TV. Each of these releases comes with a marketing push (mostly paid for by the channel partner). Each marketing push is another chance to grab your attention.Your attention is what is scarce.

    1. Johnson

      Erik nailed it. Also, the industry probably didn’t lose any money by you not being able to watch a movie; they simply time-shifted you watching tinker/tailor to a later point. To recoup hundreds of millions, they need to build enough mindshare and buzz to get everyone to see it. Thus they want a constrained initial release (theaters) to ensure people are funneled predictably through their ecosystem.That said, if there can be a trade in return — e.g larger reachable audience, more ARPU, etc. — then they might make the switch. Of course it will still take another decade because of the wide network of suppliers/channels that benefit from today’s model.

      1. Canucker

        The problem with this argument is that there is a lot of product loss at each step. When a movie is launched, it’s at maximal hype value and maximal cost (theatre tix). There is considerable burnout when a movie flops or is deemed limited. Sure, most make their way to DVD but that’s the long tail. If movie companies realized there is a significant audience that is not able/willing to go to a movie house, but would pay a similar price to see it *at the same time* as a new release, they might pick up more dollars overall. The demographics for watching movies are complex and there is money left on the table.As usual, though, it will likely be some independent group that breaks through. The big production houses are unable to pull themselves away from the fascinating blue light. Zzzzt.

    2. awaldstein

      I’m going to quote you on this Eric.Attention scarcity is a huge challeng for businesses in general not just the movies.

    3. another cultural landslide

      Yup – attention is the true 21st century currency.If somebody could only convince the studios & record companies of this, I’d be really happy.

    4. Will DeWind

      The business model shouldn’t be scarcity but that’s exactly what it’s become in a counter-productive attempt to maintain value in a market that is completely saturated.  It’s not unlike the hoarding of diamonds by De Beers.  What you said, I think, essentially agrees with Fred’s post: the more distribution channels content is offered through the higher chance people have of seeing it.I think you also highlight something else important: marketing is even more important than it used to be now that distribution is cheap.  But that doesn’t mean controlled release windows are the only way to market a piece of media.  Quite the opposite.

      1. ErikSchwartz

        The key is the staggering of distribution, that’s what increases shelf life.You need to get 3rd party marketing dollar spend after the initial window closes. The only way to do that is to offer exclusive time windows.  

        1. Will DeWind

          There are a large number of people who, due to the extremely low cost of distribution, have entered the market over the last 10-15 years.  This poses a huge amount of competition for traditional media.  I think the demand is generally for entertainment, not a specific title, and so constraining the supply of a specific title is not really going to grow demand, it’s just going to shift the demand towards more readily available media.  The demand is there, if it’s not filled by big content it’s going to continue being filled by social media and pirates.

          1. ErikSchwartz

            No. The key is not distribution anymore . The key is getting anyone to care or notice, especially when if you cannot throw a brand name actor in the mix as a hook.———————————————————–Sent from my phone. All disclaimers apply.

          2. COMRADITY

            Yes Erik. Didn’t Netflix founder offer a million dollars for a system to match movie titles to subscriber? This was many years ago when the Netflix catalog was a fraction of its current size. Wonder what the ratio of unfulfilled browsers to movie selectors is on Netflix.If I remember correctly there were many startup’s in the “TV guide” software category in the nineties, but nothing really emerged as the winner.Separately, is anyone else annoyed by this little AdChoices thing floating on their screen?

          3. Wm Morris

            That’s exactly right. There’s a plenitude of good enough. And with windowing, there’s a strong chance of downstream consumers forgetting about a particular title. 

          4. Kris Haamer

            Isn’t each window with a new 3rd party marketing push supposed to exactly counter the forgetful nature of the audience?

          5. ErikSchwartz

            There were hundreds of movies available that Fred would have loved. None of them had the brand awareness to get him to click.———————————————————–Sent from my phone. All disclaimers apply.

          6. ShanaC

            But there were also 100s of reasons why he wasn’t aware anyway, even with a marketing campaign.

        2. Anonymous

          This is what’s missing in the music industry at this point. A record comes out, then it disappears just as fast. There’s no way to have multiple windows anymore. At best you get a Grammy nod and can talk about the record again, but that’s only a tiny, tiny percentage of albums released. Hollywood has seen this happen, and thanks to the larger file sizes of videos, they’ve had a little bit longer to prepare to make changes to avoid the same problem. That said, the world is changing rapidly, and with that: public opinion and habits.For example: “…we fired up Boxee and checked out Netflix. Nothing good there. Then we fired up the Mac Mini and checked out Amazon Instant Video. Nothing good there. Then we went to the Cable Set Top Box and checked out movies on demand. Nothing good there. “Fred had every opportunity to watch tens of thousands of films on services he’s already paying for (Netflix, Cable, etc.), but he’s too picky to land on one, so he goes to the internet to write an article about how the business model is broken. Fred, the only thing a bit out of wack is your viewing habits. You don’t need access to a movie that’s in the theater. Just because you could have everything in the entire world on demand, perhaps it’s not a realistic long term plan for the industry that creates the things you want to see. Again: look at the music industry. It’s toast.

    5. JLM

      Well played.The issue is the availability of the film and its pricing based upon the time since release and the venue in which it is viewed.  The Shiny Penny marketing challenge.Movie theaters cost a lot of money and they get the first run release of the film because they have huge traditional distribution channels which they have funded by providing not just a viewing experience but also popcorn and refreshments.In most instances, the distributors themselves have to bid for the movies.The movie theaters have bricks and sticks to pay for.As time passes, the methodology of distribution becomes more convenient and less pricey until it is literally available in your own home and “on demand”.It will all become perfectly flat as soon as you can digitally reproduce the movie popcorn smell.

      1. ShanaC

        If there were better ways to control that flatness when it comes to attention, would we get rid of the time span of releasing from type a to type b?

    6. William Mougayar

      Do you think that traditional marketing spend needs to stay the same when you can use the Internet/Twitter for instant marketing at lower dollars.

      1. ErikSchwartz

        You do what you know works.The twitter campaign will work much better if you’ve spent $50M in traditional channels.

        1. William Mougayar

          But we’re testing the assumption here that an online-only distribution/marketing could become viable on its own one day, not? – posted via http://engag.io

    7. AndyBeard

      Tweet = “I’m currently watching Sherlock Holmes – great movie – come join me”I am not sure the model would work immediately with film, it should be rolled out with shows that have a relatively short shelf life where the studios totally fail currently.e.g.Britain’s Got Talent (and other international versions)X-FactorThese are shows where there is already mass distribution & commentary on social networks during the initial airing, and the pirates have videos up on YouTube within 5 mins of each performance finishing

      1. ErikSchwartz

        Tweeting about Sherlock Holmes (a movie with a marketing budget in the tens of millions that has a great brand and is a sequel) is not telling, .Would the tweet “I’m currently watching After Fall-Winter – great movie – come join me” do much.

        1. Alan Wolk

          100% depends on who that tweet is coming from Erik. If it’s someone whose friends also enjoy indie films and regard Michael Bay as a scourge on humanity, then it would probably do a lot.And as for Fred – recommendation engines like Jinni – where you input what you are looking for (e.g. romantic comedies set in London) and it shows you what’s currently available – can solve the problem of what is and isn’t on his radar. Kind of how when you go to see Blockbuster A and it’s sold out and you decide to go see Indie Flick B because you’re already at the movie theater and the write-up on the movie poster looks interesting even though you’ve never heard of it before.

      2. William Mougayar

        Isn’t that what GetGlue does? – posted via http://engag.io

    8. Peter Kaufman

      Erik is only partially right. While, it is the consumer’s attention that’s scarce, there are two more significant obstacles to simultaneously “streeting” movies across all distribution windows.1. Movie theaters are a limited, high value distribution channel. There are only so many movie theaters and so many seats in those theaters. Only a small fraction of the movies produced each year get a theatrical release in the US. Foreign distributors look at a US theatrical release as a quality marker (this, despite the fact that international revenues generally account for 70% of a film’s budget). So a domestic theatrical in it of itself drives the value of foreign distribution rights up. This kicker in international revenues could not exist in its present form under a simultaneous street paradigm.2. Allocation of marketing dollars. Movies and virtually every other product with novel elements has a distribution cycle, with demand for a well regarded/well marketed product highest at or near inception (e.g., the latest incarnation of any Apple product or StarWars sequel). The costs to strike prints of the film – which are coming down as more theaters use digital projectors – and advertising (also called “P&A”) on a typical domestic release of a 1,000 screens or more are substantial. Studios/producers require millions in marketing dollars, sometimes in excess of the cost to make the movie, to theatrically release a movie in the United States. The goal is to fill each and every seat of every screen in which the movie is shown to justify these marketing expenses (which if successful, drive up the value of international revenues as noted above). That would not be possible if consumers had other, possibly more convenient choices that might dilute audience share at movie theaters. Although each exploitation window requires additional marketing spend, a successful US theatrical release can have a halo effect on subsequent windows (e.g., Titanic, the Twilight movies).3. History of Industry Resistance to New Technologies. Lastly, the industry has always been hostile to new technologies. Silent movies was adverse to talkies which was against television which bristled to home video and so on to the present day. The advent of on demand viewing of movies in theatrical release is already part of an evolving theatrical release window. The industry needs time to adapt its model to the new demands of its audience but change is inevitable even if it won’t come fast enough for the Fred Wilsons of the world.

    9. Mark Essel

      Theatrical release coupled with a direct download from producer could open up an additional window. Not sure of the $ but it could (and should) vary with the quality of the production.

    10. chernevik

      Aren’t they also generating a social motivation to demand?  “Sherlock Holmes” and “Tinker Tailor” are the movies people are talking and asking about now, so there’s a community component to seeing them.  People satisfying that community component at home for $5 for a few people won’t pay $9 / head at the cinema.  So if they make it available at home, they eat into that component of their revenues.

      1. ErikSchwartz

        I think it’s interesting looking at the movies Fred was interested in.Sherlock Holmes is a sequel in a movie series that probably has $100M in world wide marketing spend. Tinker Tailor has nowhere near the marketing budget of Holmes, but is a movie based on a classic best selling book.The movies with his attention (and social buzz) are the ones where the investment has been made through traditional channels to build the brand.

        1. fredwilson

          i’m not that interested in those two films to be honest. i just wanted to reference two in theater films we haven’t seen. i’d much rather see an indie film every day of the week.

          1. William Mougayar

            Indie films could stand to benefit the most if they were allowed into the homes, legally and easily, as soon as they are released. That success can then bootstrap their entry into the big theaters. – posted via http://engag.io

          2. Donna Brewington White

            Have you tried Fandor.com ? I met the COO in the AVC comments.

    11. Brian Hayashi @connectme

      Bingo, Erik. Once upon a time it only took a handful of impressions to lead to a movie viewing. With the glut of available entertainment options, the number of impressions it takes to get someone to pull the trigger has gone up, even if the product is free. Each participant in each distribution window produces their own house ads to promote their own product, adding an amazing number of incremental impressions which are almost never included in calculating marketing costs, leading to more conversions in subsequent distribution windows. The sum total of the distribution windows leads to the studio making a hurdle rate  analysis to determine if the movie is a potential hit or a non-starter. If your career depends on the financial success of your next movie, you’re going to be more invested in a system that gives you multiple chances to win, as opposed to a system that gives you exactly one chance to hit the jackpot. And, as the number of entertainment options goes up, the chances of hitting that one-in-a-hundred jackpot has changed to one-in-a-million.  Unlike most VCs, Ari Emanuel of CAA has mentioned that he believes in models where the value goes up as more people get involved. I think it goes further than that. As we move from primitive social media models that rely on one-way cascades of shared information to more collaborative models with more complex interactions between parties (think transmedia), I believe that the number of distribution windows will only increase. But going back to Fred’s original point — until someone pulls a Groupon and writes a huge check to the producer, essentially guaranteeing that their costs will be recouped, I don’t see the system changing.  

  65. Brandon Mendelson

    “If they went direct to their customers, offered their films at a reasonable price (say $5/view net to them), and if they made their films available day one everywhere in the world, I can’t see how they wouldn’t make more money.”Because we’re assuming there will be an audience. One large enough to make the money back that was spent on making and marketing the film.This may be true for a film like Batman, but can you really assume this to be true for others?

  66. Carl Rahn Griffith

    Lesson in point – everyone (well, the ‘experts’) thought Monty Python was mad when they allowed all of their episodes to be ‘unofficially’ available via YouTube – they said it was commercial madness because it would impact the sales of their DVDs, etc.What happened? Well, on the contrary – DVD sales rocketed.Giving the people what they want, when they want it – only served to actually accelerate sales of the premium product.Hope GG gets well soon!

  67. Bad Uncle Leo

    +1 for this blog entry, and here’s my experience:A couple of days ago I saw ‘Vanishing Point’ on IFC. Of *course* it was the cut up US version.Within 2 minutes and from my iPad, I had the Wikipedia entry open, that mentioned that there was a UK Director’s cut and that both cuts were on the US DVD.1 minute later I *found* that cut on ROGUE_SITE, but decided to be nice and beg off.2 minutes after that, I found the DVD on Amazon for US$4. So. That, along with Zardoz, Bullitt, and Logan’s Run.. in a week I’ll have movie night(s) for the cost of a couple theater tickets. I’m (more adult these days) and patient. Most of my age group doesn’t have to be though.On the much younger side, the next night I spent *4 hours* — yes, double the time I spent on that 1 movie — playing an Indy Jones character with my nephew, courtesy of a used game acquired at GameStop. This kid, left to his own devices will play for HOURS and never watch even normal TV. And I can’t get canned John Williams game OST out of my head (from Lego Star Wars, Indy Jones, etc). Games acquired used for… what? US$12 or so?The point is this: The Hollywood model is already gone. They compete against their own (better) past in the used market and have commodified themselves to a fixed cost. And parents like it better that way. That the old stuff is consistently better than the ‘new’ (remade on the cheap, formulaic, predictable) is just icing on the cake.So while they can’t move off scarcity, most of their customers, myself included, have already moved on. And while they fuss/lobby/waste money with SOPA/PIPA/OPEN, they’re missing the point: They’ve lost touch with their customers.

    1. Dave

      Considering the last Harry Potter movie made over a billion dollars, I don’t think there are any facts or figures that will back up your personal anecdote of the death of the entertainment industries.  If everyone only bought used movies and old crap from amazon or ebay, the originals would never get made in the first place. If everyone only bought used video games for $12, then companies would no longer make them in the first place, as selling them for $60 seems to be what they’d much rather prefer to do and are making a lot of money on it.  $12 is profitable for gamestop, as they buy it for $5.   There are small amounts of non-customers or former customers that are doing things differently, but the industries as a whole are not only healthy but robust in their current model.    You’re lucky that there are plenty of consumers that are fine with things as-is, because they subsidize your cheap entertainment by going there first.  

  68. render

    Im not sure you are right.  Clearly when you say “the broader film industry”, you are referring to the theaters.  Thats a little bit of a copout, as if to say “they will all go out of business”, which they will, doesnt matter.  Without coming out and saying it.Remember that the film industry is completely vertical.  The own and control their means of distribution in the physical world.  What would likely happen if the industry allowed DRM free streaming and download, is that someone would post the file free on a well known google-able server the minute it was released and potentially millions of dollars would be lost instantly.Now, how many people would do that if the movie was 5 bucks direct download from universal?  I dont know, I wouldnt I like to pay for the things that I want.  It will be very hard to stop this from happening and that free link and thousands others like it will be on the web permanently with hardly a hope of any takedown since they bought the content originally.Its easy for technologists to sit back and say oh just do it already hollywood, but it is in fact OUR fault that there is no decent technology to protect the industry’s interests, so they have to just say screw it and open themselves up to infinite piracy.I doubt it will ever happen that they allow downloads on the day of.  Unless you think the studios want to see every movie theater in this country turned into a Sunday flea market.

  69. LE

    Entertainment wise, Andrew Mason of Groupon is on 60 Minutes tonight. There’s a small preview on http://www.60minutes.comIf you miss the show you can watch anytime online as well as old shows.(Thank drug company pfizer and the health care system for the sponsorship.)

  70. Guest

    Argh. Damned doubled posts.

    1. fredwilson

      it sounds like you understand the film industry pretty well. it’s disheartening to hear that things aren’t likely to change

  71. Bt Johnson

    I agree. Try Vudu. Pretty much has every rentable movie out there.I completely disagree with this post. I think the movie industry is doing a much better job than music in digital distribution. Every movie that is available on blu ray is available digitally within a week either through fios, the cable copany, or streaming (vudu, bestbuy’s streaming service, iTunes).I am sorry not everything works on boxee. Maybe you should diversify the hardware you use to watch movies.Studios practiced price discrimination based on time. If you really really want to see a movie, you will go to the theaters. If you really want to see the movie, you will buy/rent the blu ray. If you casually want to see the movie, you will watch it for free

    1. fredwilson

      did you read my post? i tried cable, i tried amazon. this is not about boxee at all.

      1. Bt Johnson

        You could not find anything to watch across all of VOD, Netflix, and amazon?Last night I watched the “life aquatic” on vudu in full 1080p. The movie is not even out on blu ray.Netflix has all of Mad Men, Breaking Bad, and even great foreign shows like the Take.We all have problems finding something to watch with our spouse (there every weekend), but to say you could not find anything to watch defies reason.I cSompletely disagree with this post. I think the movie industry is doing a much better job than music in digital distribution. Every movie that is available on blu ray is available digitally within a week either through fios, the cable copany, or streaming (vudu, bestbuy’s streaming service, iTunes).I am sorry not everything works on boxee. Maybe you should diversify the hardware you use to watch movies.Studios practiced price discrimination based on time. If you really really want to see a movie, you will go to the theaters. If you really want to see the movie, you will buy/rent the blu ray. If you casually want to see the movie, you will watch it for free

        1. Bt Johnson

          I think my disqus frustration is bleeding through my response.I see the glass as half full. Between fios, vudu, iTunes, and Netflix, I can pretty much watch anything that is not still in theaters (I.e. is on DVD). That is a pretty awesome catalog of choices to choose from.I think the studios get digital distribution and the amount of platforms to get DVD content is plentiful.The studios will never release big budget box office movies on demand. It makes no economic sense. Sales would need to quadruple just to break even.I love technology, but I think folks forget the importance of channel marketing and business. Channel marketing may be worth an MBA Monday post.

        2. fredwilson

          yup. i’m not lying. i could not find anything to watch on netflix, amazon, or VOD

  72. another cultural landslide

    Wow – something I can comment on where I can actually have something to contribute to this community. ;)I have worked within both the distribution & production sides of the film business; and their belief in the model of artificial scarcity is nothing short of an Orthodox religion, based solely upon “this is how we’ve always done things.” The fact of the matter: this is not how the studios have always done things. They choose to ignore their own history (which for them is easy, since many within the industry have no sense of history beyond Star Wars in 1977 – which is in fact considered to be Ancient History) while chasing after the latest fad or fashion, in attempt to keep ahead of their audience – rather than lead the audience, as many of their predecessors did.Over the last 25 years, the film business has increasingly become a creation-driven business where creators are no longer in any kind of decision-making role; these roles have been relegated to people who really don’t understand the creative process, who then hire people to tell them what they want to hear, rather than rather than try to understand what will work and innovate accordingly. And since the people below them fear for their jobs, they will never tell them anything that could possibly cost them their jobs. Such as changing how “they’ve always done things.” The current crop of studio heads have no desire to understand the creative process. To them, all the film business is supposed to be about is “going big.” This, of course, is completely ridiculous – again, they have not looked back upon their own companies’ history of having many different levels of filmmaking developed under the same roof, played out through many different platforms, with varying levels of “shelf-life”, to many varied segments – instead of only a mass audience. This narrowing of what can be considered “product” – not film –  reveals the greatest problem facing the film business today: it is stuck within a traditional model that it has no ability to escape from, caught up in a symbiotic death spiral with the large traditional exhibition chains… an industry that will definitely disappear within our lifetimes. When any idea pops up about of doing simultaneous release via pay-per-view/streaming and exhibition, the exhibitors go into near-heart failure & threaten studios with a total shutdown on their product. (It doesn’t help that studios don’t know how to price that “new” type of product, either.)This is why “windows” ain’t goin’ away any time soon.And why studios hate any new technology-based models they can’t completely control. And why “piracy” is going to continue as the red-herring of choice.And why film-gross numbers are pumped all over their other media properties as some sort of gauge of quality.All while hiding the fact that real movie attendance – butts in seats – is at a historic-all-time low.Desperation is an ugly thing.

    1. leigh

      Great comment and totally agree :)Interesting that many of the Cable Co’s are moving to a content everywhere strategy and this system is actually a barrier to them.  We are already starting to see new models emerge (kickstarter, direct to Web and many transmedia/cross platform plays). Content creators I know are so way ahead and the traditional production companies who are simply put dinosaurs.   We are going to see (at least here in Canada) more co-productions with Cable/Satellite Media companies and/or advertisers directly and/or direct to Web if they can afford it to build audience disinterrmediating the traditional production machine.  Desperation is gonna get worse before it gets changed…….

  73. Harry DeMott

    They lost a transaction, but that loss of transaction keeps people plugged into cable tv subscriptions – which make Hollywood more $ that theatrical release – so while this is inconvenient for you – on the whole it is completely convenient for the studio system. If every piece of “good” content were available on every device for a nominal fee – there would be far less packaging of less good content for cable subscriptions. what you propose is a big win for consumers – but a huge immediate loss for studios – until they rebase their business model. Imagine owning TWX or VIA stock the day they made these announcements! Ruh-Roh Shaggy!

    1. Skayl

      why would anyone own twx or via?

  74. render

    Also, I think people making this argument (its a common retread) need to come up with some actual numbers instead of throwing out statements like the more freely available it is (including youtube and pirate sites), that that will increase sales.I think you can assume that there is a curve that would look like the more in demand the content is (the more people are hyped to get it), there will be a rise in piracy which will probably take about half the profit out of the total revenue stream over the life of the product.So if a studio needs to make 300 million on a blockbuster, charging for content (not butts in seats) reduces sales by a third to half, also subtract the price reduction required to sell it on the net probably about 5-10 bucks less than a DVD sale.  I think you get somewhere around 100 million if your lucky.The Louis CK experiment was encouraging but in reality he was marketing to a very niche audience (his).  So overall demand was very low, but he did very well, because he was selling to his “fans”.  Thats a very different thing from selling a movie direct online.  Hollywood has no “fans”.  Even most movie stars have no “fans”, in the sense that even though I like Charlize Theron, I would not directly pay her 5 dollars for her performance and feel good about it.  With Louis CK I very much did feel good about it.So I dont know if the radiohead and louis CK things translate.  But if netflix and all these stale content video sites dont get better content they too will go the way of the mom and pop video store with a ton of outdated loser movies that noone really wants to watch. (Arent they there already?)

  75. Bt Johnson

    Speaking of businesses that need to be fixed, can Dusqus get their act together on the ipad.It is pretty disgraceful that a tech company cannot get their products to work on one of the most popular platforms for browsing the web (iOS). Please disregard the garbage I cannot delete after this line. Oh, and I hope your wife is feeling better.Begin garbage message I cannot delete: Try Vudu. Pretty much has every rentable movie out there.I cSompletely disagree with this post. I think the movie industry is doing a much better job than music in digital distribution. Every movie that is available on blu ray is available digitally within a week either through fios, the cable copany, or streaming (vudu, bestbuy’s streaming service, iTunes).I am sorry not everything works on boxee. Maybe you should diversify the hardware you use to watch movies.Studios practiced price discrimination based on time. If you really really want to see a movie, you will go to the theaters. If you really want to see the movie, you will buy/rent the blu ray. If you casually want to see the movie, you will watch it for free

    1. obscurelyfamous

      Weird, what’s not working on the iPad? I’m posting via iPad right now.

  76. CJ

    Scarcity is a shitty business model when your product isn’t as scarce as you think it is because you no longer control its distribution.  That’s the elephant in the room that old media is refusing to acknowledge.  When you can’t control the distribution of your product, you can’t control its scarcity, when your product is more plentiful than your business model allows, you go out of business.  It’s really that simple and no amount of lobbying, lawyering or cursing will fix it.  It comes down to atoms and bits, if you don’t know which one you’re selling, chances are you won’t be selling either for much longer.

  77. gubatron

    in today’s world who has time for their stupid windows. You want to watch a show when you have the time, in the case of comcast, which you are paying for, you go to their Xfinity site to watch say “The Office” season 8, you can only start watching from episode 6, wtf?You go to netflix, they have season 7… FML.You’re paying $100 a month on the most expensive cable plan and you can’t watch your favorite show legally because these exec “morans” are still thinking of time windows and geographic limits… what do you do?Scarcity is only an illusion big media execs want to believe, your backward business models are your biggest enemy, not piracy. Scarcity creates piracy.

  78. Laker11

    the studios have no interest in a direct distribution model because such a model would move control of the economics downstream to talented movie directors ….if you want a decent movie on a regular basis you need to look into sundance, etc – in which case you often need to buy the dvds outright on amazon —going to netflix or cable tv for a decent movie is looking for a memorable dining experience at the shopping mall…..criterion is a good site for finding some quality indie films – I just found the Colors trilogy on bluray – expensive but worth the price

  79. Dazzie Duke

    The chief danger in life is that you may take too many precautions. So live a little. If you stand in one spot you will not go anywhere.

  80. Andrew Meyer

    Pirate sites have the same annoying windows. For instance, in the first couple weeks of theater release you can only download what is called a “cam rip” which is a pirated version of the film captured by a digital video camera in a theater. After waiting a couple weeks or months you can usually download a “DVD rip”  of the film. Bonus tip: You can usually get DVD rips of Oscar season films before they are released in theaters since they mail DVDs to Academy voters. 

  81. ayo

    Not only do they end up leaving money on the table in their drive “to extract every last dollar from the market” , but they also have been shown several potential distribution models, that are monetizing at the rate of billions per annum (Itunes/Netflix/Vudu/Amazon) even with significant content straitjackets, yet the studios refuse to apply one.Imagine a video platform with premium content immediately available on release. It would put netflix out of business (not that this is what I’m rooting for). Instead, in trying to starve netflix, they seem to be simultaneously ensuring that no one serves users. Completely upside down.

  82. jason wright

    Perhaps the idea that we can expect to have what we want when we want it just because we have money to spend is the underlying problem here – “Money…Can’t Buy Me Love”, The Beatles.

  83. James

    I can’t say if this is totally accurate, but I believe that the value of a movie over it’s lifetime is determined by its opening week ticket sales. As the film makes its way down the classic distribution timeline the price a network will pay for the rights of that film is determined by opening week. That being said if the film opened up to the world at the same moment and 100m people watched the film (through facebook for example) for $5 then that would be an amazing opening night that is more along the lines of the revenue brought in when a video game is launched. Maybe the price you pay is determined by the size and quality of the screen, mobile $0.99, home TV $4.99, theater $14.99.It seems as if the follow-on content could be a powerful revenue generator as well, make the films the opening 2 hours of an online game where all of the people rush to after the film and where they can buy virtual goods, etc. Think if they did this for LOTR or The Matrix or The Dark Knight?If they opened to everyone on earth at the same moment through their own distribution network and had follow on games and other content in that network then the opening week sales of that brand (for lack of a better term) could be over $1b. Do that 10 times per year and you have the largest entertainment studio on earth. 

    1. fredwilson

      i like the video game analogy. the video game industry does not window its content as far as i know

  84. Terry J Leach

    Does any entertainment entity take advantage of every digital distribution channel and marginal costs?

    1. fredwilson

      increasingly the music business does

  85. Paul Jones

    There are a few big issues with worldwide day and date releases.  First off, the marketing expense.  The amount of money that it would take to create worldwide awareness of a movie to maximize sales across all available formats would not be cost effective.  Windows allow for word of mouth to help drive sales in the later windows.  For example, if I loved a movie that I saw in the theater but the rest of my family had not seen it, they might purchase it on demand even if the movie was not of the genre they normally would have considered on my recommendation.  That wouldn’t happen with worldwide day/date release.  In terms of extracting value, a very significant portion of people that watch a movie on demand, purchase it on DVD, or watch it on television have seen the movie previously.  They purchased a ticket to see it in theater and then bought the DVD so they could watch it over and over again.  That person may have bought the DVD day 1 if it was available resulting in one less theater goer and a smaller pie. I recognize that there are strong arguments against these points, however, I don’t think there is a single great example of a successful worldwide day and date release of a movie across all windows even though it has been tried before by companies such as Magnolia.  This isn’t to say that it won’t happen, but I think the shift will be gradual toward this and I think successfully pricing the product across the different windows is a very challenging and important element that will influence its success/failure.  

    1. fredwilson

      according to Rob Weisenthal (a top exec at Sony North America), it is because the theater owners are fighting day and date. https://twitter.com/#!/wies

  86. russfordyce

    Film is a good example. The real issue is with supporting a legacy and now old fashioned distribution model, theaters, movie purchase and then movie rentals via stores and cable cos. Distribution of everything is the constant change, not the content of our purchases. We don’t really buy new categories of things, we just buy and experience them in new ways.Comcast and others seem to play both sides of this coin to their advantage. Work to slow the change in the evolution of distribution while buying more of the thing ultimately being consumed.

  87. Nathan Hangen

    I can’t tell you how many times I’ve done the same thing. I’m married with 3 kids, and it’s a rare occasion when we have a babysitter, so I often don’t see movies until they hit blockbuster, and even then, blockbuster never has the good ones in stock, so I wait, and wait, and then forget.It’s hard to stay excited about a movie a year after it’s been released. That said, much of what I think will be good has been a letdown, with Margin Call being the sole exception.

    1. LE

      This article about prima from 2010 says it all:http://online.wsj.com/artic…”While this is a niche market, there is a chance for significant upside,” says Adam Fogelson, chairman of Universal Pictures, which holds a minority stake in Prima. “And precisely because it is a niche market, that upside should come without harming any of our existing partners or revenue streams.”

  88. johnbattelle

    Exactly what we go through in our house. The fact this issue hasn’t been addressed by our industry (Internet) is testament to how intractable old school business models can be. 

    1. Carl J. Mistlebauer

      I think it would be enlightening if you explained the difference between “old school” business models and I guess “new school” business models?

      1. johnbattelle

        Scarcity was baked into the ecosystem before effortless digital distribution became possible, as it is now. Piracy is a ruse to protect the old biz model of scarcity.

        1. Carl J. Mistlebauer

          Actually, scarcity is one of the fundamental principles of capitalism; something is worth more the less of it there is. Thus the “ecosystem” you refer to is capitalism.I totally agree that we are facing an epic battle between “old” business models and “new” business models; or as I like to put it, industrial capitalism vs post industrial capitalism.But remember, scarcity of coders is what makes good coders expensive; if Code Academy turns everyone into coders then there is no premium to be paid for coding skills.Have you ever wondered what the tech world would look like if companies like Twitter or Facebook actually charged the user for their services? That’s industrial capitalism. While the new model is provide a free service and then charge advertisers for access to this captured audience.Its traction vs sales.

          1. jason wright

            Scarcity is one side of the equation. Demand is the other. The first is defined by the second. If there is zero demand then one of something is a surfeit.Fred demands, but on this occasion because his money can’t get him what he wants when he wants it he defines it as a scarcity. It’s all relative.I look at what’s on at the local movie theater and I see a surfeit of product, but a scarcity of *quality*.

          2. Carl J. Mistlebauer

            I think that its time for Fred to venture “downstream” and fund his own content company.If you can’t get what you want and you believe it is the future, then build it yourself.

          3. jason wright

            Fredflix, or Flixstarter. A platform for independent film makers and producers and investors.

  89. render

    Heres how they do it.Web only releases, delayed release to theater (patent pending)

  90. Guest

    Except you’re not “happy” to pay for a newer movie.  You could have rented a movie from iTunes or Vudu for $3.99, or had you planned ahead, gotten a physical DVD from Red Box or through the mail with Netflix.  But what you wanted was something from your existing subscriptions to Netflix, Amazon, etc.   Well, hey, that’s life.  There is no way the newer movies are going to be available on services like Netflix Instant unless the monthly charge goes WAY up.  I’d say at least $20/month, a price it seems that Netflix doesn’t think it will get from their customers or an agreement with the studios.  As to movies in the theater right now, I am fine with that window.  That is how to really watch a movie, in the dark, on a big screen with no distractions from home.  I would hate for that window to close.

    1. fredwilson

      i’d pay $30 to watch opening weekend on my couch. this has nothing to do with price. it’s all about the lack of availability

  91. goldwerger

    I have Netlix, Hulu Plus, Vudu (Walmart), CinemaNow (BestBuy), Apple TV, and Fios Cable. And now, I stream directly from my computer to my TV any web content. I’ve been amassing content sources because this problem of fragmentation has been driving me mad.I agree that it can lead to piracy, but I believe mostly it leads to just lost transactions. When I can’t find something I want in more than 2 places, I just give up.Where the studios (both film and TV) get it wrong is this, in my opinion – they believe that if the content they produce is in high demand, it doesn’t matter where they will choose to make it available, the consumers will go there to consume it.While certainly this is true in some extreme cases, this is a legacy of the cinema and 3-network days, where there was literally one channel of distribution, and demand was “pull”.These days, with an increasing array of consumer choice, even the best shows and movies need to “push”. And while some demand will find its way to an exclusive channel, most consumers will have too much choice to bother with the pain.The studios though have not lost their power. They just fail to see that they can get the same “pull” also from distributors. If they just made their content available for distribution by anyone at a given price structure that was clear and simple, everyone would carry it. What a colossal missed business opportunity.

    1. fredwilson

      i need to replicate your setup!

      1. goldwerger

        #1 ingredient – a very (very) long white HDMI cable…:)

  92. JLM

    It is inevitable that any product — particularly a relatively expensive product — which has an element of real estate (movie theater, stadium, classrooms) and several levels of distribution between the producer of the content and the consumer of the content is inevitably going to be impacted and disrupted by the Internet.First, the literal costs of physical real estate are going to disappear; and, then the multiple levels of distribution will be compressed into nothingness.Eventually the producer is going to roll over in bed and embrace the consumer and the money is going to change hands between them and them alone.I am a guy who has been to Final Fours, Super Bowls, CWS and every kind of sports game imaginable.  Now, I only go to the UT v OU game in Dallas almost more out of habit than anything else.Why?  Because the viewing experience is better, the cost is lower and the time commitment is less.The Longhorn Network is an example of this comprehension and the desire of content creators to get a bigger slice of the pie.Now, the only cost is time.  You want to see a good old John Lecarre film?  Tinker, Tailor — you just have to wait.It is only a matter of time before the ultimate consumer says — I do not want the cost of the traditional movie theater real estate, I want the Internet real estate version.

  93. JLM

    Tempted to agree with you but the most significant addition to custom homes in the last 25 years is home movie theaters and complete home automation with bleeding edge Internet access.

    1. fredwilson

      i’ve got a home theater quality setup in my family room (big screen, HD, surround sound). the coolest thing is when watching football games you get the crowd noise from behind the couch.

  94. adamludwin

    You can’t fix distribution unless you understand that the underlying problem is actually the content itself.  Most movies are bad.  And the studios simply don’t know in advance which movies will be blockbusters and which will be duds. Unfortunately for them, bad movies cost the same to produce and market as good ones.  This means studios will try to recoup costs primarily on opening weekend by combining a huge marketing spend with distribution to as many theaters as possible (the leading factor in opening weekend revenue is the number of screens it opens on).  When a blockbuster hits it accrues huge profits under this model and makes up for the others.If studios knew in advance that they could produce good films consistently, they would be more willing to change the distribution model.  I think this is the underlying problem that, if solved, would create the most value.  Ryan Kavanaugh’s Relativity Media has gotten closer to this than anyone in history.  Here’s a must-read if you want to learn more about how he’s doing it (http://www.vanityfair.com/h…. Pixar’s hit machine could have led to innovation around distribution if they hadn’t been bought by Disney.TV is a different animal.  It isn’t a one-shot game.  That is, in part, why TV content has been quicker to adapt to online distribution.

    1. fredwilson

      i saw your post adam and commented on it. i love turning a blog comment into a post!

      1. adamludwin

        your posts have a thought-provoking way of leading to that 😉

  95. Youssef Rahoui

    Same behavior in the old medias business (magazine, news, etc). They don’t want change not only because they benefit from the status quo ; they don’t want change because they are afraid of it, because they know that they don’t master the rules of the new game, because they can’t fully embrace it (culture, talent, etc.) and, would they embrace change, they know that they would probably lose to tech giants or to smart startups.

  96. Tracey Jackson

    I think you are overlooking one real point here, for the most part Hollywood is turning out crappy movies that outside of teenage boys few adults are longing to see. At the end of the year near Oscar time they buy a few decent pics for distribution from the Brits so they don’t like total talentless dopes and those usually walk away with many Oscars.Studios have totally taken the middle level out of entertainment, and they are not about to make the big tent poles readily available to boomers home on the sofa. If they cared about that demo they would be turning out more movies like The Descendants and fewer tedious sequels. Grown ups would rather stay home and watch Dexter or Downtown Abbey and studios know it.I think it will be a long time before they come close to making their product easy for the home viewer. 

    1. Tom Labus

      Well said.I always retreat back to books after trying 200 channels of worthless gibberish.In the 30’s, novelists, at least for awhile, gave hollywood a whack for a pay check.  I don’t know if Scott Fitzgerald would be trekking out there today.

    2. fredwilson

      well then there’s a big opportunity to make quality content and make it available everywhere day one

  97. Missing the point

    You’re neglecting the people who make the content – the content creators may not intend for their creation to be viewed or heard a certain way because the audience would have a lower quality experience. What director wants their audience to watch all the hard work and effort they put in to their project on a mobile phone screen? It’s called integrity.

    1. fredwilson

      then they should paint paintings.

    2. Kris Haamer

      There’s room for different sizes of screens and audio equipment. People are consuming more content in a variety of ways, including phones. I don’t think it’s whether you watch it in the cinema or on the phone but whether you watch it at all.

  98. Dustin Chang

    Scarcity is only a side effect.  The real issue lies in the dynamics of Hollywood.  Rights of the popular contents are

  99. matthughes

    When I think of scarcity I think of 3rd world economies…It’s the domain of people trying to exert control and limit choice. 

  100. DogmaStudios

    Great Article.  It seems that many of the entertainment content companies (music) are be bludgeoned by “tradition”.  You glossed over the largest voice against this change.  The parasitic industries that have been built on this model – trailers and marketing, PR, music and composition, post production, distribution, and of course (the big one), the theaters.This is ripe for disruption, but I don’t see a Min. Viable Movie providing enough info to ascertain a product fit.  Although if you look at the comedian that sold his show via digital instead of running on HBO maybe it is time.SSS

  101. wildlyinaccurate

    I think what you (and many others who share your opinion) are forgetting is that the film industry has never delivered a product directly to consumers. Sure, the studios will make a load of money by selling their products directly to consumers on the web, but where does that leave the cinemas?

    1. jason wright

      They need to reinvent themselves.I wonder what the average % of unfilled seats is annually across all theaters?

    2. fredwilson

      where the record stores went

  102. Hugh Guiney

    Agree with this 100% and as a filmmaker I intend to release all of my films in the modern, consumer-friendly fashion you describe. The time is ripe for independent producers/distributors—costs cheap enough, culture of micropayments/supporting indies has become mainstream thanks to Appl etc.—to fill the void left by Hollywood, which I don’t anticipate being around much longer, unless they all-of-a-sudden one day decide to adapt to the new content landscape.

    1. fredwilson

      yessss!

  103. William Mougayar

    I said it before. Wait for the real Apple TV to disrupt this awfully complicated value chain. That should be a thin TV with huge built-in storage to store your movies/shows, ultra high-speed intake, home wi-fi replication, control via iPhones/iPads, etc. And maybe a digital-only content producing company by its sides, a sort of YouTube for broadcast.That’s what I would do if I was Apple. It’s coming.

  104. Dustin

    Scarcity is only a side effect.  The real issue lies in the dynamics of Hollywood.  Rights of the popular contents are often owned by distributors, instead of content creators.  Given the role of distributors, it’s easy to understand their hostility toward online distribution, which may render parts of their organization obsolete.  Ones that controls the money today.The unfortunate reality is that content promotions are usually done by Hollywood distributors.  So as long as online distributors wants to leverage the popularity of existing contents, they will have to pay a lofty licensing fee.  Enough to cover marketing cost and failed investments.  Unless online distributors have the ability to invest and promote their own content, this tug of war of control is unlikely to end

  105. Douglas Crets

    In China, they distribute to online the same day they open in theatres, so that they avoid piracy. Don’t see why they can’t do that here. 

    1. laurie kalmanson

      really smart

    2. fredwilson

      great example. thanks for sharing it

    3. Kris Haamer

      Why/how does same day online distribution reduce piracy? Do you know what are the online payment systems like (a lot of friction in usability or great UI?). And what are the prices like?

      1. Douglas Crets

        The impetus for OFFLINE piracy in China was that people were trying to see films distributed first in the United States as soon as they could, because they were delayed coming to China. 

  106. JackGateswood

    The fact that a consumer wants a good or service does not determine whether the change should come about. If that was the determining fact we could get a new Ferrari for $25k or VC’s would give out loan interest loans rather than the current model. Come up with a model that works & they may come around.BTW, the comments have been a jumbled mess towards the middle to bottom and unreadable on this blog & others for a while. Dump it.

    1. fredwilson

      dump what? the blog?

  107. Dazzie Duke

    Some of the more popular movies have been made with minimal amounts of money.

    1. jason wright

      Name a couple and expand on “more popular”, and define “minimal”…please.

  108. Alan Warms

    Fred – hate to shill products in comments, but you could have at least saved significant time by checking out http://www.yidio.com (I am on BOD and investor) – they could have given you easy info on all those sources in one search and given you your choice of sources.

    1. fredwilson

      only if i have all the sources

      1. Alan Warms

        if you don’t have them you’re one click away from signing up through their system

  109. John Revay

    Zediva seemed like a novel attempt to distribute content before it got shut down

  110. Matthew Birch

    Did you bang her?

    1. fredwilson

      you are a sick fuck

  111. falameufilho

    I like how Disney like to threaten their customers on the ads for classic DVDs – “BUY NOW BEFORE IT GOES BACK TO THE VAULT!” They actually used to have an animation of the DVD being locked inside a closing Fort Knox style vault door. It’s despicable.However, the model works like a charm for the Girl Scouts, doesn’t it? You can’t get Thin Mints or Samoas on the supermarket. You can’t get it all year. They have a great product (delicious cookies) which you can get only one way, for a limited time. So artificial scarcity still has its uses. Hard to know when it’s a valid approach though…

    1. laurie kalmanson

      they *do* put stuff in the vaultwhen my daughter was in the princess stage (mercifully brief but hellish) she wanted what she wanted, regardless of whether it was in the vault or notthe discs avail on ebay were pretty good; only one randomly flipped to other languages

  112. Ubi

    In Malaysia, satellite TV provider Astro has a tied up with the local film industry where there is a dedicated channel showing new releases after a 2-3 weeks release in cinemas.Scarcity promotes piracy especially in under-developed countries. I find that is caters to a lot of people in the country which are mostly made up of a huge middle class group. It help lessens (not eliminates) piracy and at the same time make a big impact on the local film industry

  113. laurie kalmanson

    the fans who want the content the most — the ones willing to pay — are the ones who will be first to find the pirate sites if the paid sites are not availablei came late to the downton abbey party. when i got there, series 1 was already avail on netflix streaming, and i watched every episode. it was also avail on itunes.right now, series 2 is being doled out in the us 1 week at a time, even though it’s already aired in the uk.and since (1) i don’t have cable to see the weekly release and (2) i don’t want to wait,  i found the pirate sites.the scarcity business model is broken: in the new world, by definition, the fans who want the content the most are those who (1) will pay and (2) don’t want to waitrevenue streams in the new world should be:1. stream early for paid fans, and have indepth exclusive extra content2. stream late for mass viewing that is ad supported

  114. TVisio

    There is no scarcity of big screen movie theaters where everyone can access first run hot releases. It is obvious why the movie industry refuses to make first runs available for ez download. They make a guaranteed upfront profit from movie theater distribution deals. They are not interested in pandering to couch potatoes who opt out of attending a theater, choose free entertainment and then whine that they should have been given the first run flick on their TVs. The irony is that Hollywood pretends to be the 99% while in fact it adheres to big bank free market capitalism which has rendered it the envy of the world.

  115. Thiru Arunachalam

    The lack of marginal thinking manifests itself in another form : The horrendous UI for VOD assets. Many times, I find the VOD library having a better selection than Netflix. But consumer has no way of “Discovering” that a piece of content has become available on VOD. My satellite provider actually buys air time and advertises about a single piece of content when it becomes available. (Presumably the most profitable piece of content). But this is not sustainable. They cannot afford to advertise every time a good movie becomes available on VOD. There should be a better UI and  second screen solutions that should become available. VOD should be better merchandized. They should think “take rate” much like the digital medium thinks of Click through and Views etc. This will make them better compete with Netflix and bring in a lot more incremental revenue with the existing subscriber base. We at @peeltv:twitter (not to be seen as plug) have been trying to bring clarity to this world of fragmentation. And in that process, I have spoken to several of the executives. Its my belief that they actually understand the issues. Its just that, sometimes, change is better embraced when its forced upon you. 

  116. Nitin Goyal

    There are a couple of things your post makes me think aloud (I am not in any way related to movie business):1. The conflict people have is more choice is available than they can handle.  Barring a one off scenario in which you did not get what you want, I think most of us have a library of un-watched films – even the Netflix offline orders used to go back un-watched most of the time.  There is too much choice and backlog.  The only thing that scores is the impulse buy – the flavor of the day like Sherlock Holmes, Tinker Tailor….2. Regarding pricing, the movie industry does not follow the demand and supply model as we should expect from our Economics 101 class.  The audience dwindles in the second or third week onward but there is no reduction in ticket price – this is against the laws of Economics where in a falling demand should lead to a price adjustment to get maximum revenue.  They use price as the sole signalling mechanism – so to come to your point making movies available at US$5/view may be correct from an economics/revenue perspective, it will signal that the movies are not worth much – price is a big signal in this trade is what I feel.

  117. alphaG77

    This has probably been mentioned already but I guess the reason the studios cling to windows of release also has something to do with not pissing off or causing a greater rift than they have already with theater chains. These guys have already been squeezed to the margin and like airlines seem to go bankrupt at least once a decade. Perhaps studios believe that the windowed release supports a level of demand for access through the theater dist. channel, but that logic seems erroneous – it’s unlikely that you (Fred and Fam.) would have decided out of frustration to go hit the theater to see Tinker/Tailor….you wanted to stay home.

  118. Guest

    What’s interesting is that the movie theater experience seems to get worse and worse, while the home theater experience gets better and better. At some point, that creates a material disconnect for the consumer, such that the theater experience either has to get a lot better, or that window has to collapse.Also, I think the studios ARE preparing for the day when you will walk out of Avatar 2 at the movie theater, and buy the DVD (or a digital equivalent) on the spot, but the truth is that there is no forcing function to make that change happen now. In other words, there are no real breakout success examples that have bucked the model, and made major coin (or more coin) by doing the simultaneous release or window-free approach. Until that happens, the only impetus for studios is that it costs less to market globally across all channels in one orchestrated spend than to spend over and over across different windows.The one outlier of note, however, was when I flew to London this past week, and Virgin Atlantic had a chunk of films playing that are still in theaters (e.g., Tinker, Tailor) in their excellent entertainment system. 

  119. hypermark

    What’s interesting is that the movie theater experience seems to get worse and worse, while the home theater experience gets better and better. At some point, that creates a material disconnect for the consumer, such that the theater experience either has to get a lot better, or that window has to collapse.Also, I think the studios ARE preparing for the day when you will walk out of Avatar 2 at the movie theater, and buy the DVD (or a digital equivalent) on the spot, but the truth is that there is no forcing function to make that change happen now. In other words, there are no real breakout success examples that have bucked the model, and made major coin (or more coin) by doing the simultaneous release or window-free approach. Until that happens, the only impetus for studios is that it costs less to market globally across all channels in one orchestrated spend than to spend over and over across different windows.The one outlier of note, however, was when I flew to London this past week, and Virgin Atlantic had a chunk of films playing that are still in theaters (e.g., Tinker, Tailor, Soldier, Spy) in their excellent entertainment system. 

  120. James Ferguson @kWIQly

    Great way of looking at the issue. So let’s turn it on its’ head !For many industries the competition is not a competitor but apathy or a market with high entry barriers ( ref http://www.claytonchristens… ) and  a wish to watch movies instead  amounts to the same thing.So if you are selling paint for home renovation, one market that is ripe for disruption is the apathy market. Maybe one could offer deferred apathy – “buy our paint today, send us a photo of your painting and we will send you a Groupon Pizza and Movie Voucher” and an “I am feeling righteous – ‘ cos I painted the fence” badge.So Fred – maybe the film industry, instead of selling product could be inverted as a sales incentive. A) we would all get more done. B) Movies and movie stars would be seen as the content commodity they really are, rather than as a scarce resource. – I also wonder what @msuster would think of this ?

  121. Vijay

    One of those days where by a series of events, i am bumping onto a vein here.First it was about Amanda Hocking, the young author who never found a publisher bold enough for 17 of her novels, go the amazon self-publishing route and make more, and better margins : http://www.guardian.co.uk/b…Then it has been a good friend and independent movie producer Sudhish Kamath (@sudhishkamath) talking about the nightmare of movie producing, even more so if you are a independent film producer and how the system has become tainted, even the film festivals which were to bring rare gems out of the long tail. http://www.longlivecinema.c…Then i read your post, and realize that there is a pattern emerging here.Vijay

  122. SAP Users Lists

    Its all about making, creating and innovating the business partners to indulge at regular basis.

  123. Arnon de Mello

    I totally, totally agree. We use Apple TV. They only come out with 3 new movies every Tuesday. I wish we had more options to chose from. Boxee is still not an option in Brazil. Netflix just launched their services in Brazil, but the selection is still very limited. 

  124. Soysuyo

    A shame you are incapable of articulating a point without using vulgar toilet level language. It merely enhances your sense of illiteracy and ignorance.

    1. fredwilson

      Are you offended by the word shitty?Or are you offended by the truth?

  125. Ciaran

    “I understand that many participants in the broader film ecosystem might do worse under this model. And I understand that moving to such a model will cause great disruption and pain to the broader film industry. But the studios themselves are likely to do better in a direct distribution model where they reach a broader market at lower effective prices to the end customer. This is what happens in digital distribution. Prices come down, markets expand, customers see lower prices and broader availability. Producers do better. Everyone else does worse. “And all of this creates jobs how exactly? http://www.avc.com/a_vc/201…I’m not saying I disagree with you that movie companies need to find new ways of distributing their content, but the (seeming) apparent lack of concern, of any type, that many might lose an income so that an increasingly entitled population can get their content fix exactly when they want it, isn’t something I can get behind.

    1. fredwilson

      You might want to read this post about jobs and content and copyrighthttp://www.cato-at-liberty….

      1. Ciaran

        I’m not saying I believe the stats (or that I agree with SOPA – a great piece in Stanford Law Review convinced me of its stupidity), but nor do I believe that the web is a massive job creator. Nick Carr’s book The Big Switch has a lot on why it isn’t. I sometimes worry that those who are fully involved in the tech world can’t see that it can have unfortunate repercussions on other parts of society. Driving down costs for consumers isn’t a positive in and of itself.

        1. Ryan Tanaka

          oops double post

          1. Ciaran

            It probably is a political one, but I’d argue so are most things, when you really get down to it.” Proponents of “progress” tend to argue for market changes because in theory, it leads to a higher standard of living because of cheaper products and increased distribution. Although that has lead to other problems like over-consumption and environmental hazards, in an overall sense this has turned out to be true. This pattern is going to play out again and I doubt anyone is going to be able to stop it in the long run, even with measures like SOPA. “I think that the major problem is that many people aren’t sure that’s the case anymore. Anyway, just to repeat, this doesn’t mean that I’m in favour of SOPA, more that I worry that a lot of this progress is only really progressive if you’re young and work in Silicon Valley (or own shares in something based there)

          2. Ryan Tanaka

            Yes — there will be winners and losers in this change, and what we’re seeing is a battle being played out on who gets to govern public policy in the digital age.  Standards of living will no doubt continue to rise, but it’s an issue of control in a lot of ways.  I think that it’s pretty clear now that the technologists are going to win in the long run, though, as it always has been the case historically.Anyway, if you’re interested in the political aspects of this, I’d highly recommend the book.  It talks about forging an alliance between “radical centrists” in the political sector and the “technological elite”, which they were successful in doing somewhat since Schmidt is on their board now.  The point being that there are a few people in politics who actually know what’s going on in technology and that there are opportunities for Silicon Valley to participate in the process if they so wish.  A lot of my research now is about how we might be able to give entrepreneurialism a more holistic platform to stand on, which includes both political and cultural arm.The book is over 10 years old now, but here’s a long boring video about what happened a decade later: http://www.youtube.com/watc…

          3. Ciaran

            Consider the book added to my Kindle list (an irony that doesn’t escape me, considering Amazon’s recent, rather cheap shots IMO, at high-street retailers and their attitude to taxation.” Standards of living will no doubt continue to rise”We’re getting well off of the track in terms of relating to AVC now, but one of the biggest fears I have is that I don’t think millions of people share your views (many of them in Ireland, where I currently live), and the results of that are unlikely to be pretty.

          4. Ryan Tanaka

            I’ve given a lot of thought to this since I’ve always been somewhat caught in between the two sides of the issue, but since we’re working in a global market now I tend to side with the tech sector in terms of what we should be doing.  But I do agree with you that within these discussions there’s often a picture painted that things will be rosy for everyone, but this will not be the case — it will be messy, as it always has been.There’s a few goofy things like the “genetic divide” in the book (this was written back when genetic modification was a hot-button issue) but the people at the New America Foundation seem to know and be honest about the fact that these changes are going to create divisions among the citizenry.  What makes it significant is that these are ideas that high-profile people in politics are discussing and debating about — fortunately they seem to take the point of view that this is not a good thing, and that public policies ought to reflect the ideals of an equal society that our country was founded upon.  They’re not as stupid as you might think; they’re just limited by political realities that they often have no control over.I thought the entrepreneurial community might like the book because it was written specifically with a “visionary” purpose, so it’s a very exciting read, in my opinion.  It also highlights some of the concerns that the political community has on its own plate, so if anyone here is interested in getting into the politics of things it could maybe help them make more nuanced arguments in relation to their issues and interests.  They are extremely smart people for the most part, but I do think the tech sector in general tends to underestimate the power that culture can have on their long-term interests, which is something I’d like to see changed.

        2. Ryan Tanaka

          I see your point of view, though its a political one. I would recommend everyone here to read “The Radical Center: The Future of American Politics” because it talks in depth about issues of changing job markets in the upcoming digital age. (Probably one of the more enlightened bunch of the political sector.) Eric Schmidt is on the board of the New America Foundation that supported its publication, so there’s some clout behind it.There’s no doubt that technology destroys old jobs and concentrates power to those who control the means of production. The tech sector is in a very good position to capitalize on this shift, so it’s in their own interest to see that these changes happen as quickly as possible. There are plenty of historical examples of where members of obsoletized skills resist — to the very end — changes enacted by technology, even in cases where they were promised higher wages after being trained in the new skill set. There’s always a period of “creative destruction” before things start to settle within the new paradigm, and the unfortunate fact is that some will always get left behind.Proponents of “progress” tend to argue for market changes because in theory, it leads to a higher standard of living due to cheaper products and increased distribution. Although that has lead to other problems like over-consumption and environmental hazards, in an overall sense this has turned out to be true. This pattern is going to play out again and I doubt anyone is going to be able to stop it in the long run, even with measures like SOPA.As far as I can tell, education is the only answer to this problem — the only way to keep everyone on the same boat is to train them to be adaptable to the changes that are about to happen in the future.

  126. Blaise

    Maybe they’d be more willing to give up old models if you weren’t encouraging them by paying for Amazon Instant, Netflix AND cable if they aren’t showing any programming you even want to see.

    1. fredwilson

      I was hoping that paying instead of pirating would be constructive

      1. Blaise

        I’m not advocating pirating, just that if what you want is not there the way you want it, unplug. If you’re feeding money into a system that you don’t agree with, it isn’t the system that needs to change, its you.

  127. Rufus Dogg

    Huh. I remember the days when Christmas shows like Rudolf the Red Nosed Reindeer, Frosty, The Grinch and A Charlie Brown Christmas were on TV at ONLY a specific night in December. Everyone cleared their calendar, sat in front of the TV and made it an event. Now, all these shows are on 24/7/365 on the Internet, run 5 million times a week on cable and nobody cares. “I’ll catch it later” and they usually do.56 channels and nothing on.Your opening paragraph actually makes a case FOR scarcity. There is SO MUCH content that none of it looks appetizing any more, like an all-you-can-eat buffet in Vegas open 24/7/365 for 7.99. There is no anticipation, no sense of community that an event creates, no anything that gets the juices flowing, the heart racing and the mind thinking. I remember seeing the Death Star blow up in a movie theatre and to this day, it still overwhelms me. I doubt very much anyone under 40 has had that same sensory experience.Even if you were to watch Tinker Tailor Soldier Spy, I’d lay odds that you would have been checking Twitter, your email, etc within 20 minutes of the start. “What else is out there..” I watched the Golden Globes last night… the television was not enough stimulation; I had to also tweet..The problem isn’t one of access or scarcity. The problem is there is TOO MUCH access. Any time, any where, any place. We have programmed our audience to always expect the “New and Improved” model instead of building value for the experience of enjoying what is available now.

  128. Rufus Dogg

    Huh. I remember the days when Christmas shows like Rudolf the Red Nosed Reindeer, Frosty, The Grinch and A Charlie Brown Christmas were on TV at ONLY a specific night in December. Everyone cleared their calendar, sat in front of the TV and made it an event. Now, all these shows are on 24/7/365 on the Internet, run 5 million times a week on cable and nobody cares. “I’ll catch it later” and they usually do.56 channels and nothing on.Your opening paragraph actually makes a case FOR scarcity. There is SO MUCH content that none of it looks appetizing any more, like an all-you-can-eat buffet in Vegas open 24/7/365 for 7.99. There is no anticipation, no sense of community that an event creates, no anything that gets the juices flowing, the heart racing and the mind thinking. I remember seeing the Death Star blow up in a movie theatre and to this day, it still overwhelms me. I doubt very much anyone under 40 has had that same sensory experience.Even if you were to watch Tinker Tailor Soldier Spy, I’d lay odds that you would have been checking Twitter, your email, etc within 20 minutes of the start. “What else is out there..” I watched the Golden Globes last night… the television was not enough stimulation; I had to also tweet..The problem isn’t one of access or scarcity. The problem is there is TOO MUCH access. Any time, any where, any place. We have programmed our audience to always expect the “New and Improved” model instead of building value for the experience of enjoying what is available now.

  129. Rufus Dogg

    Huh. I remember the days when Christmas shows like Rudolf the Red Nosed Reindeer, Frosty, The Grinch and A Charlie Brown Christmas were on TV at ONLY a specific night in December. Everyone cleared their calendar, sat in front of the TV and made it an event. Now, all these shows are on 24/7/365 on the Internet, run 5 million times a week on cable and nobody cares. “I’ll catch it later” and they usually do.56 channels and nothing on.Your opening paragraph actually makes a case FOR scarcity. There is SO MUCH content that none of it looks appetizing any more, like an all-you-can-eat buffet in Vegas open 24/7/365 for 7.99. There is no anticipation, no sense of community that an event creates, no anything that gets the juices flowing, the heart racing and the mind thinking. I remember seeing the Death Star blow up in a movie theatre and to this day, it still overwhelms me. I doubt very much anyone under 40 has had that same sensory experience.Even if you were to watch Tinker Tailor Soldier Spy, I’d lay odds that you would have been checking Twitter, your email, etc within 20 minutes of the start. “What else is out there..” I watched the Golden Globes last night… the television was not enough stimulation; I had to also tweet..The problem isn’t one of access or scarcity. The problem is there is TOO MUCH access. Any time, any where, any place. We have programmed our audience to always expect the “New and Improved” model instead of building value for the experience of enjoying what is available now.

  130. Rufus Dogg

    Huh. I remember the days when Christmas shows like Rudolf the Red Nosed Reindeer, Frosty, The Grinch and A Charlie Brown Christmas were on TV at ONLY a specific night in December. Everyone cleared their calendar, sat in front of the TV and made it an event. Now, all these shows are on 24/7/365 on the Internet, run 5 million times a week on cable and nobody cares. “I’ll catch it later” and they usually do.56 channels and nothing on.Your opening paragraph actually makes a case FOR scarcity. There is SO MUCH content that none of it looks appetizing any more, like an all-you-can-eat buffet in Vegas open 24/7/365 for 7.99. There is no anticipation, no sense of community that an event creates, no anything that gets the juices flowing, the heart racing and the mind thinking. I remember seeing the Death Star blow up in a movie theatre and to this day, it still overwhelms me. I doubt very much anyone under 40 has had that same sensory experience.Even if you were to watch Tinker Tailor Soldier Spy, I’d lay odds that you would have been checking Twitter, your email, etc within 20 minutes of the start. “What else is out there..” I watched the Golden Globes last night… the television was not enough stimulation; I had to also tweet..The problem isn’t one of access or scarcity. The problem is there is TOO MUCH access. Any time, any where, any place. We have programmed our audience to always expect the “New and Improved” model instead of building value for the experience of enjoying what is available now.

  131. Garrett Smith

    Scarcity is a shitty business model? Tell that to oil companies 🙂

  132. Polly Jenkins

    The beginning sounded like what I did last night.

  133. Brandon Marker

    I agree on many levels and will relate it to videogames to provide some sort of substantive evidence. Video games are released all at once (digital copies do come later–but the game is readily available at any store from day one).I remember when midnight releases would sell-out ALL THE TIME. Then kids were waiting for 3-7 days to get it somewhere. This all went away when the industry decided that the hype machine is all they needed to make the release socially and financially huge. Plenty of games everywhere with us sweating the release 3 months before a new one because new content and descriptions are being released daily. Genius.

  134. Wesley Verhoeve

    I am so on board with this sentiment Fred.If you take away the window of exclusivity, movie theaters will be exposed for what they have become: a mostly mediocre entertainment experience. The window of exclusivity = the emperor’s clothes. Without it theaters would have a much harder time pulling the crowds necessary to maintain their levels of income. Most mainstream theaters no longer provide a superior experience to watching a movie in your home on a big flat screen. Aside from semi-relevant technology like 3D, the only thing that really keeps them in business is exclusivity. Sure, people also go to a theater to be part of a group experience, and because some movies look much better on a really big screen, but in the big picture (get it? 😉 ) it’s mostly because of an antiquated set of rules and not because theaters provide an undeniably awesome service we cannot wait to consume. That’s when you know you’re in trouble.As a business and technology geek  I experience lost transactions, even when they save me money,  as ugly and inelegant happenstances caused by the failure to provide a quality experience around content that I am eager to pay for. When we fail as companies to provide these quality experiences we turn fans into reluctant pirates, and we lose their support. I hope that the ever-louder voice of the consumer can push us along to accept that we now live in a single market world when it comes to digital entertainment. It’s pretty great actually, and we should take advantage of it rather than fight it.

  135. Rufus Dogg

    Huh. I remember the days when Christmas shows like Rudolf the Red Nosed Reindeer, Frosty, The Grinch and A Charlie Brown Christmas were on TV at ONLY a specific night in December. Everyone cleared their calendar, sat in front of the TV and made it an event. Now, all these shows are on 24/7/365 on the Internet, run 5 million times a week on cable and nobody cares. “I’ll catch it later” and they usually do.56 channels and nothing on.Your opening paragraph actually makes a case FOR scarcity. There is SO MUCH content that none of it looks appetizing any more, like an all-you-can-eat buffet in Vegas open 24/7/365 for 7.99. There is no anticipation, no sense of community that an event creates, no anything that gets the juices flowing, the heart racing and the mind thinking. I remember seeing the Death Star blow up in a movie theatre and to this day, it still overwhelms me. I doubt very much anyone under 40 has had that same sensory experience.Even if you were to watch Tinker Tailor Soldier Spy, I’d lay odds that you would have been checking Twitter, your email, etc within 20 minutes of the start. “What else is out there..” I watched the Golden Globes last night… the television was not enough stimulation; I had to also tweet..The problem isn’t one of access or scarcity. The problem is there is TOO MUCH access. Any time, any where, any place. We have programmed our audience to always expect the “New and Improved” model instead of building value for the experience of enjoying what is available now.

    1. laurie kalmanson

      too much crap, not enough good stuffi’d pay for the good stuff and i’d pay more to get it any time, any place

  136. Matthew Russo

    Hulu gets it. That’s why they’re spending $500 million on original programming this year and delivering it direct to their customers.

  137. stegel

    I think the problem is a lot of movies don’t merit the cost and experience of seeing them on the big screen. Seeing MI4 or Transformers in 3D with THX surround and what not is an amazing experience, that cannot *cheaply* be experienced in the home. Seeing a sappy love story or cartoon doesn’t necessarily warrant the experience and cost of the theater.

  138. Marc Delurgio

    I totally agree with the post, but I must say that I perpetuate the entrenched business model – every time I see an “available same day as theaters” promo on Comcast VoD, I assume that the movie sucks and they are scraping for revenue.  When better/mainstream content goes direct to consumer it will lose this stigma.

  139. Bill

    Any time an industry undergoes a Titanic shift in thebusiness model, people will fight to keep the status quo.

  140. Business Model

    Isn’t it time for Hollywood to innovate thebusiness model instead of fight it?

  141. Kris Haamer

    There’s an interesting paper from France telecom that argues the higher the production cost, the higher the audience interest, so movies are not high fixed cost but variable cost: http://www.gensollen.net/sc…

  142. Kris Haamer

    But why would I watch a movie again. It’s not short and sweet like music? Or perhaps there’s some data to show that people do watch movies multiple times I haven’t seen?

  143. Peter G

    At Distrify.com we agree completely with this. All films should be available on whatever platform the audience wants. Slicing up windows and territories worked for the film industry in an era when communication was slow, attention spans were longer, and reach of advertising and publicity was limited to local areas. Now, any promotion for a film is going to bleed over into other territories and windows and consumers already expect to be able to watch any new film anywhere in the world thanks to the internet (and you can!). If my friend in New York sees a new film at the cinema and tells me to watch it, I need to be able to watch it now, not when the film comes to my small-town multiplex, or is available on NetFlix. By then I’ll have forgotten about it. We believe the business model should be about discovery (the moment you learn about a new film is the moment you’re most likely to decide to purchase it). Effective exploitation of discovery depends on immediate availability and possibilities to choose a viewing method. We recently helped Gary Hustwit release his new documentary Urbanized worldwide, while it was still in cinemas. People all over the world are happy to pay a premium ($7) for a digital rental, and it’s not eating into cinema tickets, and probably doing the opposite. The simple fact that the film is available and discoverable is enhancing sales all round…Surely if the studios are going to blanket-bomb the media with ads and PR they should want to make the most money out of it and let people choose between going to the cinema, buying a DVD or renting or buying online from the moment they discover it.

  144. ramaaysola

    Maybe these studio guys think they are selling rare bordeaux wine where scarcity sort-of works… but they do not have as compelling a product.

  145. Durden964

    If this were true why aren’t indie filmmakers making money from netflex exclusives?

  146. tyronerubin

    @ccrystle:disqus it has to happen. Some film has to break the camels back. It might not be specifically a Studio film, but could definitely be an Oscar worthy film. The window from cinema to online does seem like it is narrowing. 

  147. Anne Libby

    I love what Edward Burns (of *Brothers McMullen* fame) is doing — and what he has to say about disruption in the film business resonates with a lot of today’s discussion.http://www.thedailybeast.co

  148. William Mougayar

    Exactly. Release only online. Movie theatres 6 months later. Reverse the rules.

  149. Luke Chamberlin

    except that Academy Award rules specifically state that a film must be released theatrically to be eligible for an Oscar http://www.oscars.org/award

  150. tyronerubin

    @twitter-41899343:disqus oscar’s not be all and end all. Adds revenue for a couple films. Its a great acknowledgement. But I dont think the model of VOD will revolve around wether the film is going to be Oscar worthy.

  151. William Mougayar

    Start a new type of Awards for film that are NOT released theatrically…

  152. LE

    “oscar’s not be all and end all”Tremendous smoke blown up the ass of all in that industry. Totally ticket getting punched. Extremely important to people in that business. They don’t want that to go away anymore than I want my college to no longer be highly regarded.

  153. Luke Chamberlin

    You specifically said “Oscar worthy” so that’s why I brought it up.

  154. tyronerubin

    I’m a film lover that absolutely loves the Oscars.The Oscars wont be the single determining factor wether shorten the delay from theatrical release to VOD.We all know the importance of Oscars and what they are but they will never be the central point of discussions in regard to our discussion of the window from theatrical to the web. Its so much bigger than the Oscars. Thats a fact. 

  155. Luke Chamberlin

    Sure there are ways around it but definitely reinforces the old distribution model.It was only a couple of years ago that they amended the rules to allow “digital” films to be eligible. The rules specifically stated “35mm film projection” before that.

  156. fredwilson

    yes, he is certainly trying new things. i wish more of the industry was doing that