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  • More Media Disintermediation?

    Posted by David Foster on December 19th, 2007 (All posts by )

    Last month, Marc Andreessen suggested that the Hollywood writers’ strike…and the response of the studios to that strike…will accelerate a structural shift in the industry–specifically, a move toward a Silicon-Valley-like model in which the creators of the product–the talent–have strong ownership interests in the companies. (Link via Newmark’s Door.)

    A couple of days ago, the Los Angeles Times ran this headline:

    Striking writers in talks to launch Web start-ups

    Dozens are turning to venture capitalists, seeking to bypass Hollywood and reach viewers directly online

    From the article:

    Dozens of striking film and TV writers are negotiating with venture capitalists to set up companies that would bypass the Hollywood studio system and reach consumers with video entertainment on the Web.

    At least seven groups, composed of members of the striking Writers Guild of America, are planning to form Internet-based businesses that, if successful, could create an alternative economic model to the one at the heart of the walkout, now in its seventh week.

    and

    Some of the writers who are drafting business plans said that if the strike had lasted only a week, they would have just gone back to work. But now they’ve had time to plot strategy — and to realize that a prolonged strike with reruns and reality shows filling the airwaves might allow them to grab a wandering audience.

    “The companies are pushing us into the embrace of people that are going to cut them out of the loop,” marveled one show runner who is tracking the start-up trend but not participating.

    “We are one Connecticut hedge-fund checkbook, one Silicon Valley server farm and two creators away from having channels on YouTube, where the studios don’t own anything.”

    (Link via The Big Picture, where there is an extensive discussion.)

    As several people observe in comments at the above site, there are lots of individuals who don’t have any interest in watching video on computers…also, there are lots of individuals who won’t put up with download delays, even with a convenient appliance allowing the videos to be watched on a standard TV. But there clearly does exist an audience subset that is interested in watching downloaded videos, and it seems likely that this subset is large enough to make some of the ventures economically viable. And as the ventures succeed, they will be in a position to obtain distribution, on favorable terms, from cable TV providers, thus reaching the non-early-adopter market segment.

    Christensen & Raynor, in their book The Innovator’s Solution (my review here), point out that disruptive technologies usually attack from below; ie, they are first manifested in a form which does not appear to be as high-quality as the incumbent technology. Transistor radios, for example, initially had sound-reproduction qualities which were inferior to vacuum-tube sets: Sony sold them to teenagers for whom portability outweighed sound quality. Steel mini-mills initially produced steel which could only be used for products such as rebar, leaving the market for high-quality sheet steel to the giant integrated mills. But over time, the transistor circuits and the mini-mill steel quality both improved, almost completely destroying the incumbent technology in the case of the transistor and taking a big bite out of it in the case of the mini-mills.

    The current situation in media seems to offer a pretty good parallel to these cases.

     

    2 Responses to “More Media Disintermediation?”

    1. John Jay Says:

      “As several people observe in comments at the above site, there are lots of individuals who don’t have any interest in watching video on computers…also, there are lots of individuals who won’t put up with download delays, even with a convenient appliance allowing the videos to be watched on a standard TV.”

      A big block of the former are getting older and less relevant as entertainment consumers.

      The latter are going to drive Cisco’s stock price back to where it was during the tech bubble.

    2. Shannon Love Says:

      Like major media, movie studios exist only because the pre-internet era required a massive physical infrastructure to mass distribute information. The internet has pretty much ended the need for such infrastructure and for the organizations that evolved to create and manage it. Just as anyone can no do news gathering and publish to a wide audience, soon just about anyone will be able to create movies and other visual media and transmit it to a large audience for next to nothing.

      I would note that the most profitable movie in history (percentage wise) was “The Blair Witch Project” shot by college students with cheap digital cameras. We’ll see more of that.