Hollywood is worried, although they have not yet had a full-blown panic attack. Their bedrock market - the one they have always taken for granted - is eroding beneath their feet. Generation X, is growing up and their tastes have changed. The once captive audience that grew up on the "Star Wars" movies that their parents took them to is finding that their own children are not nearly as impressed as the Gen-X parents once were with special effects.
But that is not the only place we are seeing changes.
Video games are capturing a bigger piece of the pie.
"If I had some time in the afternoon, and it was a choice between watching a movie or playing a game, I'd rather play a game," said Marlon Castro, 35, of Foster City.
Already, the gate is down not only at theaters, but also at Blockbuster Video - once the powerhouse of video has taken yet another hit as reported on PBS, Marketplace. The reports says,
Blockbuster is expected to report a third quarter loss today. Efforts to adjust its brick-and-mortar business model to compete with on-line DVD distribution don't appear to be working. Jeff Tyler reports
In short, the market in going through a shakeout - one which Laura and I have watched closely.
It is no secret that I take much of what Clayton Christensen says, to heart. Christensen is a professor at the Harvard Business School. His specialty is the evolution of technology.
I have a few observations of my own which square with Christensen's observations.
New technologies are often force-fit to solve existing problems - and that makes sense. We have today's problems that need to be solved. Disruptive technologies are those that unseat the market leader, the dominant player, the king of the hill. In film, Polaroid, the instant picture people, did not survive. Wedded to emulsion technology, Polaroid did not take the grasp the realities of the emerging videotape market. Polaroid plunged millions into its Polavision. The product is now a curio.
What seems to be the case is that new technology creates new markets and disrupts old channels of distribution. Revenue and distribution models change - as do tastes and forms and even cost structures. Can emulsion film compete with digital? The business model Polaroid had was to provide cameras at cost and sell the film to make the revenue. The digital camera turned that model on its head.
Both radio and television evolved over time into what they are today, but first they experimented with older forms - such as vaudeville - before settling into their current content.
2006
The silent revolution hasn't been so silent - computer generated graphics, but the interesting thing is that film makers are not the only ones who have benefited. To be sure, the barriers to entry for a film company are substantial - high-cost equipment, pricey actors, and technical issues having to do with real-world filming.
More and more, blue screens and animation have crept into the movie process. And the directors are fascinated with their toys. As an aficionado, I enjoy listening to the director's commentary - sometimes good, sometimes really bad - and the interesting thing I am hearing is how they used some special effects gimmick to accomplish something. It wasn't a commentary about the story; the commentary was about how they managed to make some effect happen. I suppose there is nothing wrong with that, but it does suggest that the movie making mind-set is currently driven by technology.
And yet, the "Revenge of the Sith" has not ignited the popular culture the way very first "Star Wars" movie did. Re-releasing the original one, with current special effects technology inserted into it, had little tangible impact.
The trend has been for films to be turned into video games, yet there is a countertrend where video games, such as "Tomb Raider," are turned into movies.
Content
I suppose this all reminds me of the first Apple computers - when people collected fonts, just like some people collect baseball trading cards. Memos appeared with a variety of font. (Guilty, your Honor). But soon people got back to the content and were not quite as mesmerized at the fonts as they once had been.
The basic difference between video game and movies is the level of involvement in the outcome.
This is the dark horse, yet always the front runner. Technologies come and go - but involving the reader-viewer in the story and giving the person a say in the outcome, is a powerful thing which sall too often gets forgotten.
This is where interactive will change the landscape and the time is much closer than people think.
]]>The gating step is how much data can be delivered how fast over what system to the destination.
I look back ten years ago and Netscape was the rage. My customers changed markedly from 1990 to 1996. In 1990, they were mostly software oriented people who could pop the top of a computer and fix stuff as fast as Gyro Gearloose, could.
Ten years before that, most computers with any power were the size of a refrigerator and word processing was something that required a special set of hardware - and Wang was its name. Color laser printers, digital cameras, flat panel monitors, search engines, web cafes - the concepts ranged from Buck Rogers to the incomprehensible.
The other day a news reporter told how some students were tapping out text messages on their cellular phone - while in their pockets, no less - and sending schoolmates answers to questions during a test. This has led to some schools to contemplate a policy of banning all cellular communication - especially, phones.
The generation that has taken the place of Gen-X, young boys with money (allowances) for whom movies are targeted, have stopped going to films. Passive watching of programming is hardly in peril, but the trend is unmistakable and spiraling.
Interactivity in games might be a large market, but it is hardly the largest. The revenue models are still taking shape, but what is clear is the firms that find ways to interact electronically will have a competitive edge over those that are still door-to-door - in the way of the Fuller Brush Company.
Something I have noticed is the "standard" looking web site and design. Like a newspaper, having a standard format is not altogether bad. There is the content, and the ads, and the various sections, and even when we're in another town, we know how to look through the paper.
Today, this is where Web 2.0 seems to be. Borrowing largely from the Sears catalog and the Yellow Pages model, web pages present products on the "TV screen" or give information on how to locate the establishment. Frequently asked questions are addressed, but the infrequently asked ones take some time - and sometimes a competitor or alternative solution is found before the question gets answered.
Take an example of what might be in store. Suppose I would like to own a sports car such as a Ferrari.
Nice brochures and pictures, but let's say they really wanted to get my attention. What about sitting inside - somewhat virtually - and taking a spin? Does any dealership take its customers out for a 185 mile per hour ride? Not likely you'll be allowed to sit inside one of the ones in the showroom (they're locked) let along roar down the open road.
And if Ferrari decides they don't have the budget, maybe Corvette does.
Interactivity that is thrilling is not limited just to games.
]]>Dumbest thing said on the stage:
Bary Diller dismissed the idea that citizens with blogs and video editing software were major threats to the entertainment industry. "There is not that much talent in the world," Diller said. "There are very few people in very few closets in very few rooms that are really talented and can't get out."
When you think about it, that really is pretty dumb. This idea that the entertainment industry is actually open and accessible to new talent is a popular myth perpetuated by many who "make it" in Hollywood. But these "winners" fail to acknowledge that many talents languish their entire careers in the "paying their dues" struggle to make ends meet ... and so many more simply never even try.
This blindness to the realities of creative talent in and out of the entertainment industrial complex is not new, especially when it comes to the internet. Mr. Diller's attitude towards creatives is the very same attitude that helped to kill the broadband entertainment boom in the late '90s: the idea that talent is cheap and that it's the industry that actually creates entertainment content -- presumably using Excel spreadsheets and lunches at Nozawa. Companies like pop.com and DEN blasted through tens of millions of dollars, spending nearly all of it on management and not on writers and artists and directors and producers and actors, and ended up closing their doors with precious little to show for it. In fact, Pop.com never even got started. As Red Herring noted (.pdf), these "experts" didn't know what they were doing. And after these spectacular train wrecks and the dot bomb, the smaller players simply didn't have a chance.
But now it's six years later, and the net has changed, with faster, cheaper and better tools to create and distribute new media. And yet it seems that it's not only Mr. Diller's board members who agree with him:
Of course Diller is right about this. The ability to create doesn't mean that everyone has the talent to create something outstanding. Which explains why the vast majority of private websites have a readership that's generally composed of the friends and family of the creator. And there's nothing wrong with this either. We're not all Picassos, nor should we expect to be.
This is a fair point. Much of the net explosion is driven by individual expression for expression's sake, never mind the ballyhoos.
But the real question is not what motivates most personal bloggers to blog, but what blocks motivated creators from creating. In other words, the real groundswell today is in the avenues of distribution, marketing and promotion that are emerging outside of the mega-corporate entertainment complex -- avenues that not only can draw audiences away from the mainstream offerings, but can actually create and cultivate new markets for these new entertainment forms. The barriers to entry are so much lower than they were even 10 years ago, there are a lot more people with fires in their bellies who will be able to get past their "one of these days" speeches in the coffee shop and actually create and distribute things -- product -- that people want to experience.
We saw this when transistor radios exploded on the marketplace, giving Japanese companies in-roads into American markets. And we see it today with podcasting and video shorts and digital movies. The new media paradigm is disrupting the closed, top-down nature of the old media marketplace. Already large numbers of people are seeking out alternatives for news and narrative. And we're only what, 5 years into blogs? 10-15 years of popular use of the internet? 2-3 years of significant broadband penetration? Pre-wimax and internet 2? We're just getting started.
Then again, maybe it's not such a surprise to hear Mr. Diller's perspective in the context of the Web 2.0 conference. After all, when you have admission going at $2,800 and sponsorship from a veritable Who's Who of internet industry corporations, maybe the appeal of "web 2.0" is not its disruption of existing hierarchies but rather the profit-promising idea that there's a "new release" of the internet that everyone needs to buy into (again).
How successful they can be at branding the internet today as a version release, I don't know. The phrase "web 2.0" has caught on, but it's hardly descriptive of what's happening. What these large corporations need is a certain degree of predictability in the marketplace, and the ever-evolving new media marketplace is just a little too fast and wild and uncooperative to make a "web 2.0" prospectus a very safe investment.
At least that's how it seems to me now. It might all change tomorrow.
]]>The cost to rebuild the city is estimated at $200 billion. My own estimate the actual cost will be several times greater. Why? Because the $200 billion will only return the city to a shadow of what it was.
New Orleans was one of America's most unique places, and it is that very uniqueness that is now under threat - but I will blog about that a bit later.
One of the first questions a business person asks is about profit. If your business is not making money, the IRS will call it a hobby - not-for-profit organizations not withstanding.
The interest rate is complex, but the rate is tied to profit.
There is a term, return on investment, which many of us have heard and which can be done on a massive scale - including for cities such as New Orleans - but they can also be done on the city and dwelling you live in. For example, there is some likelihood our home could be hit by a fire, or flood, or be burgled - so many of us take out homeowners or renters insurance. We might get money, but if some precious heirloom is lost, the "replacement," or the impossibility of it, goes beyond money. But we all know this and I make the point only to suggest that this kind of thinking is not alien to most people.
If a city such as New Orleans will be hit every hundred years by a hurricane carrying at least the power of Katrina, we know that every hundred years, or so, Americans will be revisiting the problem, and if not New Orleans, then in some other town or city. I was truly moved when I viewed Fatal Flood shown on "American Experience" series. The copyright says 2001, but it is a chilling parallel to what happens in the Delta. This was 1927 and led to a mass exodus of people, many of them black, to Chicago and elsewhere.
Destroy a city or region with flood waters and the displaced people move and send a ripple through the nation. Having a dust bowl that destroys once-fertile lands, and another migration begins.
I am amazed to hear there are voices that say let New Orleans die. Others predict a new New Orleans, New Orleans 2.0, I guess. Their vision is a shadow of the old one - part of the Disneyfication of America. I devote another blog to this, but the character of the city was due in large part to its ethnic composition and to shift that balance will mean the end of New Orleans, even if its successor is built on the same spot and bears the same name.
The fact remains that when a massive of people are displaced, they will seek shelter, jobs, and lives somewhere and all of American society will be affected.
I would say more, but will close on the example of the city of St. Louis. The Army Corp of Engineers predicted a hundred year flood of the Mississippi River that would effect St. Louis and they build a levy to withstand it. In recent years that levy was put to the test and had the river risen just one more foot, St. Louis would have been hit. Some called the original project a wasteful boondoggle, but when waters came to within a foot of the levy top, people wondered if it had been built high enough. St. Louis survives.
We can't protect all places against all things, but at the same time playing Russian roulette with cities and a shell game of shifting populations is not the only alternative.
Now is the time to invest in our cities and ourselves and though the people may seem far away, in our nation every more interconnected through the internet and other modern means, we come to know - they're just our neighbors and what happens to them happens to all of us.
We saw the banner after 9/11 "We're all New Yorkers, now." We need another banner and it should read, "We're all New Orleanians, now."
]]>There will be an endless number of post-mortems concerning the tragedies that befell the residents of New Orleans last week. More important are the actions, if any, which may result from them. In this regard, can lessons learned in the private sector be brought to bear in minimizing the suffering and damage from inevitable future calamities?
Professor Heskett invited responses and I answered, in part:
...there is a deeper lesson and that is one of investment to prevent disasters in the first place. A large firm is well aware of the human capital and material assets within the perimeters of its fences. It does not take long for the finance committee to run a return-on-investment analysis of operating safely or know that safeguards are part of the cost of doing business, and that industry has a moral responsibility to those who work on-site. There was a saying at [DuPont]: "You are safer inside the plant gates than outside."
Someone forgot to do the return-on-investment, and we as a nation will now pay a pretty price, not only monetarily but also emotionally. This has driven home an important lesson that as a people I pray we don't soon forget.
Thus the basic question: given the likelihood, have we truly weighed the cost of being ill-prepared?
Slightly edited by the publisher, my reply was ePrinted in Harvard Business School's Working Knowledge. I highly recommend "Working Knowledge" as an excellent source of views by business people reflecting many diverse opinions.
I attach the full version of my reply below.
Business tends to maximize its available resources on a minimum set of objects. Government distributes its limited resources over a broad range of objectives.
Prior to HBS, I spent several years in manufacturing at one of the world's largest chemical firms*, and disaster drills and disaster preparedness was part of our responsibility. I chaired the site's Disaster Control Committee, so I empathize with how industry can take a proactive stand. As on-site managers, our main concern was to contain a disaster and prevent the loss of life. This meant localizing damage: shutting down processes, securing tanks that might rupture, moving people to safety if there was a threat of toxic release or accidental detonation, and sending crews in to neutralize potential hazards.
In case of disaster, as Area First Aid Warden, my immediate responsibility was to get a head count and render what aid I could until help arrived. Always, help was on the way. Every equation had that in it. Yet, I still get a queasy feeling, remembering in memory the great steam whistle's mournful dirge tolling out the disaster call.
These drills were on a plant of 500 workers who could call in assistance from the local community. What if it is 500,000 people and is just one city in a large region that is also hit? What happens when the call for help goes unanswered? What if no one comes to do a head count, and there is no Area First Aid Warden to find out if you are alive or dead or MIA?
The tragedy of New Orleans is that no one came. Industry protects its assets and knows where its people are: That's part of staff management, disaster or not. But if someone is unemployed, old, sick, or otherwise disenfranchised, who comes to get them? Do they have visibility? Who has written the evacuation plan to help those most in need? Who can enforce it? Who will enforce a city-wide disaster drill every six months? On site we marched the workers out the front gate, hopefully to safety. How can a city of a half million free citizens be made to do that? And are the city limits the realistic perimeter?
But there is a deeper lesson and that is one of investment to prevent disasters in the first place. A large firm is well aware of the human capital and material assets within the perimeters of its fences. It does not take long for the finance committee to run a return-on-investment analysis of operating safely or know that safeguards are part of the cost of doing business, and that industry has a moral responsibility to those who work on-site. There was a saying at the chemical firm: "You are safer inside the plant gates than outside."
The lesson of the New Orleans disaster is that some people fell off the radar because they weren't part of "the plan."
Someone forgot to do the return-on-investment, and we as a nation will now pay a pretty price, not only monetarily but also emotionally. This has driven home an important lesson that as a people I pray we don't soon forget.
Katherine Lawrence (HBS MBA '76)
COO
Ping Vision
I wrote thus on September 7, 2005. What I did not wish to say so early and while the responders were still the throes of events, is that something truly becomes a "disaster" when people are unable to deal with events.
Surely man is puny in the face of a category four hurricane, but a line is crossed when a system breaks down.
A minimalist strategy, by definition, spends the minimum amount. Surely we cannot defend completely against absolutely anything, anywhere. On the other hand, a disaster of large proportion hits an entire nation, not just a region and as a nation what we might wish to do is to look closer at how many we could have saved and what the cost would have been?
We are paying the price now, even if New Orleans is never rebuilt. The question I feel freer to ask now - was the savings in not being prepared worth it?
I doubt it.
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* I did not mention DuPont by name in the "Working Knowledge" article, but DuPont is probably the safest industrial place to work in the world. I plan a future blog on this topic.
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