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Big, complex, old systems and companies are typically expensive to operate, full of quirks, and really, really hard to change. Here’s a little thought experiment that gets at what we mean…
Let’s go to IBM and tell them we have an idea for a business, with the following specifications:
- Must support 350 million user accounts.
- Requires 100 Terabytes of data storage – all needs to be on-line, no archiving.
- Supports at least 100,000 database transactions a second.
- Needs to work internationally, supporting multiple languages.
- Must include a web interface, an iPhone application, a Blackberry interface, and a full administrative console application.
- Must include API’s to allow other systems to use the user authentication platform as a form of Single Sign On.
Something so outlandish would surely take them a long time to wrap their heads around. After all, these are smart folks, with an established methodology and way of doing things. The functional specifications alone could take years, followed by more years to build the thing, and then, perhaps, another couple of years to test it and work the kinks out.
Now imagine you’re Facebook. You start from scratch and in nearly no time at all you’re not only up and running, you’re en route to the stratosphere. This is called “Greenfield” development in the IT world, a kind of idealized state where you have nothing old and lumpy to deal with or slow you down. You start fresh and new and achieve the improbable.
Which makes us wonder about the future of movie studios.
Most studios today are cogs in, well, big complex old companies, where quarterly reporting and shareholder value fears make risk-taking and game-changing moves nearly impossible to negotiate. What if we scrapped all that? And then we scrapped the incredibly complex finance and participation models that have evolved over decades of deal making. Oh, and the symbiotic relationship between distribution and exhibition that has long kept tight reigns on experimentation with different release windows, including day-and-date distribution in multiple mediums. Scrap that.
In other words, what would a Greenfield studio look like? We suspect it could look a lot more like Facebook than Sony.
Consider something like Ten Pages, where writers post the first 10 pages or more of their book and readers who like them can become shareholders. If a book sells a certain number of shares, it goes into production, with the author getting 10% of the money raised and the rest going to publishing and promotion. Following publication, authors earn royalties of 10%, publishers earn 30% and shareholders as a group earn 10% for up to four years, divided according to the number of shares they bought (and, yes, their names also appear in the credits).
Cantor Futures Exchange, a subsidiary of Cantor Fitzgerald and owners of HSX.com, expects to open an online futures market this month that will allow studios, institutions and moviegoers to place bets on the box-office revenue of Hollywood’s biggest releases. MediaPredict users play a similar prediction game but in a virtual market with virtual, rather than real, dollars. The hope is that the wisdom of the crowds will provide a better barometer of potential success than a development persons gut instinct—a plausible bet in the very least, considering similar prediction markets have had an amazing track record for forecasting election results, economic indicators, sales levels and more.
HarperCollins is trying another crowdsourcing variation with its Authonomy website. There are no investors here, but site visitors review and rank sample work from unpublished authors. The site keeps track of the number of recommendations a book receives and ranks writers accordingly, with works from top performers routed to an editorial board to consider for further development. Readers are also ranked, based on how good they’ve been at spotting books that make it to the top of Authonomy’s charts.
Could we see adoption of platforms like IndieGoGo and Prosper.com as an increasingly important direct-to-the-people models for financing and promoting films?
And what about Eventful, credited with driving the successful release strategy of Paramount’s Paranormal Activity? Random blip, or a new direct distribution and affiliate model developed where slates of films are developed that appeal directly to an audience?
On the distribution front, is it possible that some combination of xBox, Playstation, Wii and/or Netflix and similar direct-to-home offerings could actually become financially significant outlets, spurred by changes in social networking? Industry pundits are quick to dismiss this possibility, but then again, most of them also said the iPOD, iPHONE, and now the iPAD would never gain enough traction. They also said that about televisions, VCR’s, DVD and DVR’s. We note with some amusement that Netflix reports more people streaming videos than renting DVDs and Amazon reports higher sales of many titles in the Kindle edition vs. the paper edition. Digital distribution is happening, regardless of the likes or wants of big, old media conglomerates.
The barriers to entry for moguldom are dissolving. Digital democracy is demystifying media making and distribution. One thing is certain, new models for creating, aggregating, and distributing content will emerge and fortune, we sincerely believe, will continue to favor the bold—and those who don’t have a vested interested in the status quo.
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