×

Problems Abound in the Media Biz, but Here’s Why There’s Hope

Challenges abound in the future of the media business. But then again, so do the opportunities

The next 10 years should be the greatest time in the history of the entertainment business.

The global middle class is growing astronomically fast. It may not be growing in the U.S., but it is growing in the rest of the world: Research shows that when people leave poverty and have discretionary income, they spend on entertainment. In addition, the broadband Internet is growing just as fast as the new middle-class population, reaching 3 billion users in the next five years.

But the problem is that the revenues of media and entertainment firms are barely growing above the rate of inflation. Production and marketing costs are climbing. There are signposts of trouble ahead; if we’re smart, we won’t put our heads in the sand.

Look at what happened at the box office this summer. For the first time, total revenues were no greater than total budgets for movies costing more than $75 million. It’s not a good situation.

In the world of television, you have all sorts of disruptive technologies brought to you by Barry Diller (Aereo) and Charlie Ergen (the Hopper) meant to mess with your businesses.

Analyst Craig Moffett, who has been the greatest champion on the cable and satellite TV businesses, finally admitted cord cutting isn’t an urban myth anymore. Primetime TV ratings have fallen 50% since 2002.

In home entertainment, the revenue generated from streaming is never going to equal the amount of money studios receive from selling DVDs at Walmart.

The common wisdom about the videogame sector is that it has avoided the problems of other entertainment businesses. But sales for all major platforms are falling. You might say they’re all just going to mobile gaming, but Zynga is not a great business either.

The music industry is a total disaster. Streaming has never replaced what the CD did, and newspaper ad revenues have fallen off a cliff. In the month of January, there were 465 million IP addresses accessing pirated material.

All in all, the return on assets of media and entertainment companies is falling way below the rest of the economy. But all these signposts of disruption can also be read as signposts of opportunity.

Note all of the studios that are financing content: YouTube, Netflix, Hulu, Microsoft and Amazon. These platforms are allowing new forms of content to be sold.

There’s also all new sorts of funding. Consider what Warner Bros. is doing partnering with Kickstarter on the “Veronica Mars” movie. There’s also filmmakers accessing money from China and other new regions.

Then there are entirely new computing platforms to consider, like the new virtual-reality headset Oculus Rift that was developed through a Kickstarter campaign. And think of what 3D printing could bring; imagine Warner Bros. allowing a download of the new Batman figure in time for the Superman/Batman movie in 2015.

There’s also all of these new distribution platforms coming forth, including those from Intel, Walmart, Target, Flixter and Redbox that are exploring the notion of over-the-top Internet protocol-based distribution in various ways. They may not be brick-and-mortar, but these places will be the new storefronts of tomorrow.

If content is distributed everywhere on an international basis to a market that could grow to 5 billion consumers, getting just 4% of that market is off-the-charts money.

It could be that current production and distribution systems simply are not capturing the possibilities of this new world. What we need to create is an economy where technology is at the service of creativity, content and context.

Jonathan Taplin is director of the Annenberg Innovation Lab at the USC Annenberg School for Communication and Journalism, where he leads the Edison Project for research and executive education dedicated to forming a new media and entertainment ecosystem. This column was adapted from his Sept. 29 speech at the Hollywood IT Society Marketing and Analytics Summit.

More Biz

  • Frontrunners Emerge As BBC's Tony Hall

    Frontrunners Emerge as BBC Boss Tony Hall Set to Leave Broadcasting Behind

    As the U.K. industry reacts to news of Tony Hall’s intention to depart the BBC this July, top-level executives including Charlotte Moore and Tim Davie as well as external contenders such as Channel 4’s Alex Mahon are beginning to emerge. Variety understands that Lord Hall, who has headed the BBC for seven years as director [...]

  • Recording Academy President/CEO Deborah Dugan participates

    Executive Assistant Preparing Lawsuit Against Ousted Grammy Chief

    In the latest twist in the increasingly bitter exit of Deborah Dugan from the Recording Academy after just five months, the ousted president/CEO is about to face a lawsuit from her former assistant, Claudine Little, who has retained former Harvey Weinstein/ Charlie Walk attorney Patty Glaser to represent her, two sources tell Variety. The news was [...]

  • Two Rivers Media Buys Out Parent

    Two Rivers Media Buys Out Parent Kew Media Group's Stake In Business

    Two Rivers Media has bought out parent group Kew Media Group’s minority stake in the business. Formed by former STV Productions head Alan Clements in January 2019, the production outfit behind Channel 5’s recent “Susan Hill’s Ghost Story” launched with the backing of Kew, Noble Grossart Investments and Channel 4’s Indie Growth Fund. Noble Grossart [...]

  • Grammy Awards 60th Annual Grammy Awards,

    Recording Academy Paid Millions Annually to Outside Law Firms

    Among the concerns listed in a memo sent to the Recording Academy’s head of HR by president/CEO Deborah Dugan before she was placed on administrative leave Thursday was an item about the organization’s “exorbitant and unnecessary” legal fees to outside law firms, according to sources familiar with the document. According to the most recent 990 [...]

  • Chuck D of Public EnemyGods of

    Public Enemy’s Chuck D Slams Grammys Over Deborah Dugan Ouster

    Chuck D, frontman of Public Enemy — who are receiving the Lifetime Achievement Awards at the Grammys next week — posted a long statement on Instagram criticizing the Recording Academy over its sudden ousting of new president/CEO Deborah Dugan yesterday. Dugan, who had been in the job only five months, was placed on administrative leave after [...]

  • Any Given Wednesday With Bill Simmons

    Spotify in Talks to Acquire Bill Simmons' The Ringer: Report

    Spotify is in early talks to acquire The Ringer, the digital content and podcast network launched by ESPN alum Bill Simmons in 2016, according to a report in the Wall Street Journal. A representative for Spotify declined to comment on the report. Reps for Ringer did not immediately respond to a request for comment. Spotify’s [...]

  • Deborah Dugan arrives for the 20th

    Deborah Dugan's Recording Academy Ouster Follows Multiple Tussles With Board

    “Change is afoot,” Deborah Dugan said more than once during interviews with Variety in the weeks before her shocking removal from her post as president/CEO of the Recording Academy after just five months on the job. During those conversations, Dugan spoke of changes she planned to make in the Academy’s staffing organization, its Board of [...]

More From Our Brands

Access exclusive content