In a world where content is king, surely the film business is in good health? Although production budgets and global box office are on the rise, we’ve seen recent high-profile friction in the market when the Cannes Film Festival publicly blocked Netflix from entering any of its movies in the prestigious Palme d’Or, signalling the defence and protection of a tale as old as time: the film distribution model. As the industry shifts, creating a new distribution model, how will it re-invent itself amid this disruption?
OTT and power of consolidation
The box office is only at a record high due to an increase in ticket prices, large screen formats and organic growth in territories such as China that will unquestionably slow down, placing a ticking time bomb on the industry as we know it. The emergence of OTT (over the top) platforms, a way of distributing content to the consumer over the internet via streaming, such as Netflix, Amazon and Hulu are beginning to disrupt a market that hasn’t really changed in the last 40 years. Unsurprisingly, the combination of these factors is driving industry consolidation. We expect to see the number of major film studios reduce from six to only three, dramatically shifting the landscape. Ambitious acquisition moves from cable providers (Comcast NBCU, AT&T Time Warner), consolidation from existing players (Fox/Disney and potentially CBS/Viacom) as well as new entrants in to the market such as Netflix, Amazon, Apple and Facebook are all ones to watch.
Closing windows - the distribution window and curse of disassociation
Up until now, the industry operated off a rigid windowed release system. Typically, movies will release in cinema first with an exclusive three-month window before launching through home entertainment (DVD/Blu-ray/EST, VOD, PPV), pay television (SVOD) and then network television (AVOD). These windows are being challenged by the likes of Netflix and even Sky which is disruptively launching content day and date across cinemas and the Sky Movies network.
The film industry must proceed with caution having seen the music industry overhauled by similar disruptions. Considerations must be both platform-led (the value of data driven recommendation) and consumer-led. We live in a world where for the most part, content owners and distribution outlets are disassociated (i.e. Disney owns the content, but Odeon shows it). This means that content owners are also disassociated from data and owning the full conversion funnel, ultimately crippling the studio industry when it comes up against disruptors who own every step.
The opportunity for content owners like Warner Brothers to put its own content in front of a more targeted audience and complete the conversion chain is far too good a prospect ultimately leading to the windows collapsing.
Opening new doors – opportunities for marketers
If the commercial film model is changing, the way we market film brands will need to follow suit. Entertainment marketing needs to reflect the changes we are seeing in the wider world as the model is still very traditional. In a world where we can be far more targeted, it’s a shame that we still see large scale TV campaigns designed to hit 100% of the market when only 20% are regular cinema goers. As the market moves towards a data-driven model, there will be a huge opportunity to deliver better efficiencies, drive more sales and brands will also see an opportunity to associate with the entertainment industry in a more meaningful way.
The power of data will be critical in re-marketing to the same audiences, but hopefully not at the detriment of creative instinct. As every marketer knows, observing consumer behaviour changes is vital. We know that linear TV, appointment to view and restricted time windows do not represent a commercial model with longevity. Our most powerful commodity is time, so anything that drives time efficiency will create more value and this in turn reduces cost for the consumer.
The future of distribution therefore will be about owning platforms that can bundle owned content and critically owning and keep the data that allows you to better target and segment your audience.
Change is good
This is arguably the biggest change to a single sector and requires innovation, leadership, personnel, the right infrastructure and an appetite for change. The question is whether a change as substantial as this can happen before the disruptors pivot and find new ways to commercialise old models. It can only be a matter of time before Amazon acquires a cinema chain as a showcase and warehouse product.
Disney’s model is not around profiting from the cinema business. It is about using content as an advert for ancillary revenue streams such as consumer products (selling toys), theme parks (selling experiences) and media networks. This sheds light on their recent acquisition (subject to approval) of Fox and its assets such as Sky, Star India and Hulu, which could be combined to compete with Netflix, potentially even adding in sports (via SKY/ESPN). The addition of sports brands could break down the walls of global sports rights.
Disruption and change should be welcomed with open arms. If the music industry taught us anything, it is that we should change before the choice is taken out of our hands. Sometimes this eagerness for change is mistaken for disillusionment or discontent with the industry today. I am a believer, a student and a passionate ambassador of the cinema business, so I believe in its future. However, it’s a future that looks very different to the present day.
This is an edited version of an article that first appeared in The Drum Network Entertainment special
Adam Rubins, CEO, Way to Blue