The Digital Media Manifesto

 

Source

Ernst F. Schroeder

Title

Use case no. 08: Movies

No.

030829schroeder02r01

 

1. Introduction

 This contribution uses the methodology proposed in 030701chariglione01 for the specific use case “Motion Pictures”. Revision 01 includes cntributions by Jordan Greenhall.

 2. Description of the traditional case

 2.1 Functions of traditional "Movies"

Movies are a case of communication with one-to-many directional characteristic. The communication channel uses signals visible and audible by the end user and film stock as carrier.

At least three different types of communication are supported:

·              Entertainment

This seems to be the main task, from the humble beginnings up to today’s multi million $ blockbuster movies.

·              Information distribution

In the days before TV, newsreels, the audiovisual presentation of news from all over the world, have been an integral part of all cinema presentations. Nearly vanished today.

·              Advertisements

Less important part, but local advertisements can be one of the main income sources for movie theatres. Also intensely used to announce the next movies coming up. In some countries one of the last refuges for tobacco advertisements. 

2.2 Traditional value chain players

·              Movie theatres:

They provide the basic infrastructure for display of moving pictures and sound. Anything from open air and some equipment on a truck to well designed multiplex houses with air condition, comfortable chairs, high-quality projection and sound systems.

Catering (drinks, ice-cream, pop corn) is a major part of the business.

·              Funding:
The methods of funding movie production (including e.g. pre-sale of exclusive territory distribution rights and syndication) and the various parties that fill this role are probably the most critical element of the value chain these days. Given the risks of failure, availability of funds is the big limiting factor in this business.

·              Content producers/creators/owners:

The high cost of movie production and the large number of specialized people and services needed has led to a concentration of creative businesses in a few centers like Hollywood and Bombay.

·              Post-production / Film processing / copying

Traditional technology needs specialized chemical processing in the creation phase as well as for large-scale distribution. Color correction is done in semi-automated processes.

·              Handling and distribution:

Handling and distribution of film reels over a larger area and in time for a concerted start is a major task, a service provided by specialized organizations. A relatively small number of distributors control the vast amount of high-value content and, as a consequence, can command retail (theaters) to show their movies.

·              Advertisers:

They provide material to distributors or directly to theatres.

·              End users:

They consume "Movies" mainly for entertainment, with a broad range of needs and expectations.

·              Equipment manufacturers

They are divided into manufacturers of professional equipment (cameras, studio devices) and manufacturers of consumer, i.e. theatre devices (film projectors and sound enforcement devices).

·              2nd and 3rd tier marketing

After exploitation in cinemas, most successful movies are further exploited in TV programs and by putting them on VHS or DVD for selling or rental services.

·              Authorities

Rating and censorship can be imposed by public/national authorities or on a voluntary basis

2.3 Technologies used in the traditional use case

Movies use a combination of opto-mechanical and chemical technologies to capture, edit, distribute and present visible content. In the course of roughly 100 years a larger number of incremental technology improvements and a few disruptive changes have been made.

Display technology is very simple in principle and mainly consists of a light source and some mechanical projection device. Standard film projectors are simple, rugged and relatively cheap.

Various different versions of picture size and orientation on standard 35 mm or double-wide 70 mm film stock have been proposed and used, but only few of them are typically in use today.

A major breakthrough has been the introduction of color, which created a whole new range of businesses and services.

In the beginning there has not been any sound with the pictures, except for the live piano player. Then sound has been added, on discs or on the film itself. Intelligent methods for noise reduction made way for 2-channel sound and even surround sound. Digital technologies already entered the movie world for storing sound on film or, again, on discs.

2.4 Legislative framework of the traditional use case

2.5 Business model of the traditional use case

Movies are produced in a highly specialized environment encompassing diverse businesses and specialists. Each movie is a major financial undertaking in the million $ range and upward.

Processing, copying and distribution are also characterized by a number of specialized businesses.

Presentation is done in film theatres that range from small ventures to large multiplex cinemas. Here the end user’s money changes hands at the box office and fuels the whole chain. Catering is a further and important source of income for movie theatres.

After exploitation in cinemas, most movies are further exploited in TV programs and by putting them on VHS or DVD for selling or rental services.

Special merchandizing can also be a source of revenues in case a movie is marketed and embedded in a “story”.

3. Description of the digital use case

 If you ever had the chance to watch a movie in a “digital theatre”, you will never want to see anything else. But, when there’s a good story, then after a few minutes you will be taken away and no longer notice the many imperfections of traditional movie technology, your brain is more than willing to perfectly correct them.

 3.1 Functions of the digital use case

Basically no change from the traditional case. Physical distribution will be replaced by digital distribution over network or satellite links.

 3.2 Value chain players

Not many changes from the traditional case, except:
Chemical processing is of course vanishing and shipment and handling is simplified due to less bulky material.
A digital media distribution regime through a common-carrier pipe could conceivably radicalize the entire balance of power between some of the business players and effectively remove (physical) "distributors" from the value chain.
 

3.3 Technologies used in the digital use case

3.4 Cost/benefits for value chain players

Value chain players

Cost

Benefits

Movie theatres

need new equipment, especially new & yet expensive projectors

digital technologies enable automated control, especially for multiplex cinemas, leading to cost reduction;

chance to find new revenues by presenting high-value HD content and other type of group video experience.

Funding

 

chance to reduce total production and distribution cost, opens possibilities to more easily provide funds for specialized content.

Content producers / creators / owners

initially increased production cost

Much easier data manipulation, access, storage,

 

Post-production / Film processing / copying

Existing equipment will become obsolete,

new equipment is needed

No chemical processes any more, easier handling, access, storage

Handling and distribution

New equipment

Much easier to handle,
physical distribution and sneaker nets will disappear

Advertisers

initially increased production cost

much easier interworking with distributors and theatres, better flexibility and highly reduced reaction time.

End users

 

Higher visual quality,

potential  for even higher sound quality

2nd and 3rd tier marketing

 

Easier interworking.

DVDs are easier to produce than VHS.

equipment manufacturers

cost for new developments

new markets

Authorities

 

 

3.5 Legislative framework of the digital use case

Currently no significant changes are under way.

3.6 Business model of the digital use case

Assuming that DM finally makes production, post-production, and distribution of content cheaper, these effects would tend to lead to a change in the economics and marketability of content.  This could change the character of how content is funded and who produces it. Because DM enables "on demand" distribution of content, the ability of the market to react flexibly to content popularity will be increased. This, combined with the ability to send content out in very specific fashion (e.g. demographically targeted), can again increase the variety of content created and the economics thereof.

There are models to take the financial burden for new projection equipment away from cinemas. Especially the advertising business seems to see the most benefits from going digital and is therefore willing to finance new theatrical equipment.

3.7 Difficulties of current deployments

Two different developments can be seen:

First, the adoption of digital technology within the movie production chain is gaining momentum. Where benefits are clear, digital processes are used.

Secondly, the adoption of digital technologies in the final link to the customer is slow.

4. Hurdles

We have a transitional problem with an existing service. The following can be considered as hurdles of primary importance:

·              Lack of profitable business models for movie theatres. Large initial investments for new equipment have to be made, but they will not automatically lead to increased revenues.
Some new developments are starting to change this:
- Cinema advertising is starting to embrace “digital” and partly or fully subsidizing the necessary equipment,
- theatres are starting to see new uses for their venues once the digital equipment is installed.

·              Lack of perceived service improvement for the end user:

The perceived quality in a digital cinema is drastically better, but visual quality is not automatically the prominent criterion for typical end users: The whole “cinema experience” does not so much depend on visual quality.

·              Pirate copying has been a problem ever since, and the increased danger leads to some reluctance to fully embrace digital technology.
To copy an analog movie you had to handle bulky reels and needed access to chemical processing and special know-how. This simply prevented large-scale pirating in the first place. Then consumer-type and semi-professional analog and digital technology (from outside the cinema world) provided tools like video cameras, VCRs and PCs that made copying much easier. The resulting quality is low, but it is really a most interesting phenomenon that people are more than willing to watch the 6th copy of a VHS tape just to save a few bucks.
With digital distribution, storage and projection, pirate copying is potentially much easier and leakage in that chain could be a major disaster. Strong and proprietary encryption can prevent it, but that may not be enough. The same projectionist that - in analog days - let you walk away with the reels for a few hours will probably arrange a special after hours session for you and your digital camcorder. Special open or hidden (watermarked) signals in the projected pictures can at least help to trace such sources of pirate copies.
Interesting to note that the movie industry itself promotes pirating by handing out (even before official release) digital copies on DVD to journalists and reviewers. No wonder that some pirates are faster than the official release.

5. Relations with other use cases

·              Terrestrial broadcasting

6. References

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