Posted 2 December, 2007 in FilmUSA
From the Huffington Post
November 20, 2007
By Kevin Morris
The most frightening thing facing Hollywood today is not the WGA strike.
The most frightening thing facing Hollywood today is a highly untrained work
force.
Unless and until Hollywood workers at all levels are prepared for the
digital transformation of entertainment, we will suffer missed
opportunities, inefficiencies, diminished revenues, obsolete employment
categories and, ultimately, thousands of lost jobs.
We all feel the thumping footsteps of the digital revolution each day. You
can’t avoid it once you accept it.
* Music. This is the horror story, the nightmare. Global music sales
have by some reports dropped by 49% since 1997. The music business as we
knew it has evaporated. Sales of CDs in the U.S. have slipped from $13.2
billion in 2000 to $9.2 billion in 2006 (that’s down 30%). As of June 2007,
overall CD sales have plummeted 16% for the year so far–and that’s after
seven years of near-constant erosion.
* Movies. Whether you think the motion picture business has thrived or
survived for the past 10 years, it is axiomatic that the DVD is to thank for
any success. It has been a profit center for every movie company, providing
predictable strong margins in a notoriously unpredictable world. Now we know
that technology will eventually make the DVD obsolete. While it may take a
while for streaming and download-to- own markets to become efficient,
consumers will be able to get any movie any time on any device — there will
be no need to buy or rent a DVD any more. While the media companies will
figure out ways to monetize downloads, the profit margins just are not the
same as with the DVD.
* Television. Our One Screen (TV) World is becoming a Three Screen
(TV, Internet, and Mobile) World. The $65-$70 billion per year US TV Ad
market is under attack from digital advertising migrating to the internet
and mobile. Studies show that people are spending 25% of their time on the
internet and yet only 9% of the ad-spend has moved to broadband. And mobile
has not really started penetrating the ad market yet. You don’t need to be a
futurist or have a crystal ball to predict where the dollars are heading.
This obviously creates enormous pressure on traditional television
platforms, both broadcast and cable. As in music, no one really seems to
know what to do.
To make matters worse, there is an elephant in the room: Google. It has
already figured out digital distribution in a more economic and pervasive
way than any traditional media company (so has Apple, by the way). Via
YouTube and its other divisions, it is developing and refining ways to make
money on entertainment and Wall Street, at least, buys what they are doing.
Google is currently valued at over $200 billion dollars — compare that to
the Walt Disney Company at $65 billion. Now Google is working out the last
piece of the entertainment puzzle: content. Once it does, it could be game
over.
The “Case Study” of the Advertising Business
I recently attended the Google Zeitgeist Conference and while I was there
took in a panel discussion which centered on a presentation by Robert
Greenberg, founder and president of the advertising agency RGA. Bob’s
presentation was entitled “Talent Crisis” and in it he explained that while
digital advertising is growing in every possible way, the ad industry’s
ability to employ skilled workers to handle the tasks involved in creating
digital campaigns is reaching crisis proportions. To meet the booming
demand, a functioning agency needs internet designers, technologists, data
analysts and mobile specialists of all kinds to staff the work. But there
simply are not enough of these folks to go around in today’s marketplace.
Compounding the problem, the schools are apparently still training students
to enter a traditional ad world — one in which an elite group of executives
and companies make commercials for the traditional outbound, interruptive
mass media campaigns. People responsible for hiring will privately tell you
– and this is not limited to advertising — that once an executive is set
in his ways in the traditional world, he or she isn’t of any use at all to
the digital side.
The Training Crisis
In truth, our own version of the talent crisis in the advertising business
is the thing we have to worry about the most. My assessment of the
entertainment business is this: The heart of Hollywood is not ready for the
digital transformation which is shaking the ground under our feet. As
remarkable as this may seem given what has happened in the music business
and the explosion of Google and YouTube and itunes, it is true. This is a
giant disconnect. It is a grand self-deception.
The companies which make up Hollywood — the studios, the networks, the
production companies, the talent agencies, the management companies, the law
firms, the finance groups, the marketing firms, the PR firms, the facilities
providers — are all well aware of the digital transformation and most are
trying to do something to address the situation. The problem is that there
is a tremendous lack of meaningful action in the heart of these companies.
Each company, by and large, has a “Digital Group” or “Digital Division” or,
in some cases a few “Digital Guys.” These groups are usually made up of
people not from the center of the business. Their training and background is
different than Hollywood executives and, to be blunt, they are powerless
within the arrangement structure of our studios, networks and talent
agencies. The core people in our business — the people who facilitate the
development of material into motion pictures and films, the people who cast
the actors and hire the directors and set the budgets — are not paying
attention in the right way to the changes that will soon recalibrate
everything we do. The heart of Hollywood is not paying attention to this
thing and it will soon reach a crisis.
It is true that people who make content have for a very long time believed
that others will find a way to distribute their material so long as it is
“quality.” I’ve been told many times: “there will always be a market for
good stories.” The Business has been able to absorb every type of emerging
technology, more or less, since the studios came into prominence in the
early part of the last century. After denying television for many years, the
Business absorbed it and the movies survived. When video came along,
executives ignored it until it could not be ignored anymore and the Business
absorbed it. Some believe that Hollywood will always be able to deal with
new technologies in the same fashion and the “stuff” that is going on now
will fall into the same pattern.
But this strikes me as worrisome historical arrogance which threatens the
very existence of Hollywood. If you have ever hit “send” you ought to be
able to realize that we can no longer make these assumptions — especially
at the leadership level of these companies. In the film and television and
allied businesses, we will wake up one day soon and find ourselves untrained
for the very jobs we do right now. We are not that different from the
advertising or music businesses and we need to not kid ourselves that we
are. The ability to create, market and distribute entertainment through
various digital media will be what our jobs require. Right now, most of us
are not able to do that. If you doubt that this spells trouble, go look for
a record company executive. If you can find one, I bet you they will confirm
this fear.
What to do
Here’s where to begin: We all have to be digital.
Hollywood companies need to embark immediately on a re-training effort. The
executives who occupy the core of Hollywood need to be instructed on the
primacy of digital issues. They need to learn the platforms; they need to
learn the capability of the emerging technologies to transform their
product. Again, this does not mean that companies need to start or bolster
their “digital groups.” That is not the point. The point is that the main
people — starting at the top — need to understand that a sophisticated
understanding of the changes being brought about by technology are
fundamental to their jobs going forward. There can no longer be a
distinction within companies of employees who work in the “digital group.”
Everyone needs to be digital. At our law firm, we are requiring that
everyone views digital as a part of their practice, not as some sidebar or
developing trend. There is no “new technology” or “new media” departments or
practice areas into which things must be directed. Digital is ubiquitous and
everyone has to incorporate it into their life and practice and learning.
Each company in Hollywood needs to do the same thing in its own way. If we
don’t there is sure to be a labor crisis which makes the current one look
quaint.
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