Hollywood: Money, Innovation, Guesswork

Two articles are getting my long-term pattern recognition centers bubbling today. I don’t have anything definitive… yet… but I wanted to share some of my quick notes on them with you, loyal readers*, since I think somewhere between their two poles lies the Big Picture.

First up is a July 1st New York Times magazine piece by Planet Money’s Adam Davidson that looks at how the entertainment industry actually makes money. Davidson is a business reporter, so there is little in the way of sentiment here. If you read between the lines you get the message: they don’t really and Hollywood is a bad bet. That’s a gross oversimplification, but I sense it in the tone. If you look at the movie biz from a math standpoint it really is quite stupid.

Thank the maker we know better than to look at most human endeavors with a cost/benefit analysis alone right? Uh oh.

Not that Davidson is totally bearish on Hollywood:

Hollywood is, somewhat surprisingly, a remarkably stable industry. Over the past 80 years or so, its basic model – in which financiers in New York lend money to creative people in Los Angeles – has been largely unaltered. Partly as a result, today’s biggest studios – Columbia, Disney, Paramount, Warner Brothers, Universal, 20th Century Fox – have been on top since at least the 1950s. This stability is initially puzzling because movie studios don’t have many assets. Worse, every one of their projects is a short-term collaboration between a bunch of independent agents.

A modern studio’s main asset, however, is its ability to put together these disparate elements. They know how to get Tom Cruise to do a film, how to get it into theaters around the country and whom to call to set up a junket in Doha. They also know the industry’s language of power, with its ever-changing rules about which stars, restaurants and scripts are cool and which are not. It’s the stuff of easy parody, but it’s worth billions.

There is something underneath all this about the bloat in the current system and that might be answerable by a post I picked up on thanks to Techdirt’s Mike Masnick about how Hollywood really doesn’t get Silicon Valley. Said post is by Tyler Crowley (@steepdecline) and gives a great metaphor about the way the world-views of tech and the music industry differ.

For tech folks, from the 35,000′ view, there are islands of opportunity.  There’s Apple Island, Facebook Island, Microsoft Island, among many others and yes there’s Music Biz Island.  Now, we as tech folks have many friends who have sailed to Apple Island and we know that it’s $99/year to doc your boat and if you build anything Apple Island will tax you at 30%.  Many of our friends are partying their asses off on Apple Island while making millions (and in some recent cases billions) and that sure sounds like a nice place to build a business.

Music Biz Island, on the other hand, starts shooting at you the second you come close to their shore.

It’s time for the entertainment industry to start looking for opportunities in this post-apocalyptic archipelago, instead of trying to defend their shrinking turf.

Adapt or die.

* I mean YOU Lucas, Jon, and Lisa. Amongst others.