Home Opinions Why the Hollywood business model will inevitably begin to blend

Why the Hollywood business model will inevitably begin to blend

Asaf Ashkenazi, Chief Operating Officer, Verimatrix
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Back in the 1980s and 1990s, the general public was enamoured with the fast-growing availability of VHS tapes. Little could we have guessed what a few decades would bring. The Internet changed everything in content delivery.

Back then, during the era of rolled-up jeans and parachute pants, millions of kids would flock to the video rental area of their supermarket while parents did the usual shopping. And inevitably, at the end of the parents’ trip through the aisles, they would all find themselves at the rental counter debating what movies they were willing to stand in line to rent and pay for (oh, and don’t forget the experience of finding out what those dreaded late fees would be from the last time).

And we all thought that experience was “convenient.” Afterall, we were killing two birds with one stone by getting it done at the grocery store. Then, Blockbuster came along and grew to a staggering 9,000 stores worldwide, employing more than 80,000 employees by 2004.

With VHS tapes at nearly anyone’s fingertips, who would have ever thought that movie theatres would grow exponentially during the same period and it would be the VHS tape that would experience huge mutual success before its mighty fall to better technologies. That slow yet growing shift in flexibility and business models was inevitable due to the tech involved.

Today, the worldwide Covid-19 pandemic has served as a huge instigator to a change in the business model that would have inevitably gone through a big transformation anyhow – just not at the warp speed we’ve experienced due to the complete temporary closure of movie theatres. There is little doubt that the revolutionary moves we’ve seen studios take by distributing major films directly to consumer homes will shift demands and desires of the average viewer, resulting in a mix of how they prefer to pay for and consume their entertainment – and where, or on what device, simultaneously with their friends or family, or on their own with the kids watching something else down the hall.

There will likely always be movie theatres, but since they are a physical building with fixed screens and formats, they don’t offer the flexibility and convenience that all the other delivery options offer today. Theatres are about an experience. Most other avenues are about a service designed for convenient consumption that allows you to have a different type of experience at home or elsewhere.

The big change that’s arrived is the flexibility and choice offered to viewers. More and more content will be available both at theatres and via streaming services. And just as VHS and DVD didn’t ultimately kill theatres’ business, streaming services won’t either. They’ll naturally co-exist in harmony. It’s all based on demand – and with studios already giving us a taste of the direct-to-home model with top films, it’s difficult to completely yank it from the millions of viewers who not only tried it out, but paid $20 or more to do so. The latest example is Apple TV+ and their purchase of Greyhound, the Tom Hanks film they are debuting.

There are many other examples where past and present blend and co-exist, but preferences and demand changed. Social media and video conferencing will never replace the desire to meet friends and family in person. Virtual reality will not replace tourism. E-sports won’t eliminate physical sport. Telemedicine is quickly gaining ground, but people still seek out a meaningful relationship at the doctor’s office. Door Dash made it big, but good old-fashioned pizza delivery isn’t going anywhere. You can rent a scooter downtown at a moment’s notice, but you can still go to the store and buy your own. All of these industries are co-existing.

Once controlling 25% of the $16 billion home video industry in 1996, Blockbuster now has only one U.S. franchised store remaining – in Bend, Oregon. That’s not going to happen to movie theatres. But it’s forcing the inevitable blending of business models that we can’t precisely put our fingers on yet, although it’s certainly on its way. During the pandemic, studios brought the genie out of the bottle  via their decision to use direct-to-home release. There may come a day where home releases are like social security benefits – no studio would dare omit or reduce them.

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