Dr. Joseph Schumpeter, the insightful mid 20th Century Harvard Economics and Political Science Professor, will never be the subject of a Hollywood-style biopic. But his ideas on innovation and the rise and fall of industries form the basis for the script the media business finds itself following today.
Put plainly, Schumpeter's imperative is: the new strikes at the heart of the old. And this is exactly what is happening to our industry as we write. Watching the Academy Awards this Sunday, we will be looking at this annual spectacle mindful of Schumpeter's principle and focusing on the bigger-than-life struggle that the media industry faces to maintain its competitive position beyond the glamour of the Red Carpet and the almost predictable excitement played out inside the Kodak Theater.
We all know that entrepreneurs build, develop and grow industries with new inventions and innovations. These create new products, new means of production, and new business structures. But there is, according to Schumpeter, a critical twist to the process: at some point innovation leads to "creative destruction." The original companies, products and innovations deteriorate and new ones are created once again, often out of the ashes of the old. Schumpeter declared this cycle not only inevitable, but necessary for the healthy growth and regeneration of economies.
The historically high cost of creating content and building distribution systems erected solid barriers to competition. These barriers gave entertainment companies the luxury of control over the supply of valuable goods and products to consumers, and over the availability of advertising inventory for companies wishing to promote their products.
But inventions and innovations like microprocessors, mass storage, networking, and media software catapulting into our world have put today's modern entertainment companies dead in the sights of Schumpeter's "creative destruction." The old mechanisms of control are fast becoming obsolete. Today, virtually anyone is capable of creating, producing, or distributing entertainment content. The entertainment industry is easy prey to new and disruptive technologies and ideas, making these times both daunting and exciting.
There is more than enough evidence that many of the models that have sustained the business for decades are on the verge of collapsing: declining DVD revenues; the scarcity of pay-television dollars; a proliferation of ad-skipping DVRS combined with an over abundance of TV and Web advertising inventory supply; the collapse of local TV station economics; and, 14 billion streams of Internet video during the month of December in the US alone.
While streaming TV shows on the likes of Hulu and YouTube and allowing electronic downloads of theatrical films appear to be reasonable responses to the challenges the media giants are facing, they are simply not radical enough to spark the regeneration that ultimately is necessary to create a highly successful business in this fast-moving media environment.
Soon it will not be enough to create content that can merely be viewed on multiple platforms and devices. Additionally, new forms of content need to be created which behave more like "open-source" software, which is not only used, but can be improved upon by its interaction with consumers and innovators, who may be one and the same. A different kind of creative product must be designed that has a DNA which favors mutation in the face of innovation.
By radically reconceptualizing the form and function of creative products beyond the historical anchors of moving pictures and television, unique new partnerships between content creators and entrepreneurs can be unleashed. Throwing off the shackles of the old and relying on the transformative power of creativity, these partnerships will bring new kinds of entertainment, new content-based services, and, most importantly, new business models to our industry.
Schumpeter's dictum challenges all of us in the entertainment business to define a future which is as innovative as the past, especially when new companies and industries are writing our script. As we have already seen from the new power players arraying against the traditional incumbents, companies that are more focused, better able to differentiate, and willing and able to partner are the ones most capable of delivering sought after new products, services, and business models. "The viewer" has morphed into "the user," and companies need to recognize and utilize this transformation.
To most people sitting inside the Academy Awards auditorium, this might sound like a horror movie. However, recognizing and hastening Schumpeter's "reality show" would likely provide a happy ending, and give our industry a real cause for celebration.
Reporters working as stringers with cameras and sound would create a story. The reporter would push (electronically) the news stories to the "back end" of a "New Broadcast Server". Editors would make editorial decisions about the content, and make it either part of a "news broadcast", or post it as a news "piece of interest story" on a News Interest "Blog" to see what type of play it gets.
The "News Broadcasts" could be viable community interest broadcasts to take space on "Public Access Channels" on Cable Providers, like those that were available in the 1970s.
The production values of any beginning enterprise should not be expected to be of the highest quality, but rather the effort will spur the nest generation of effort that can build on what came before, and reach for a higher level of production.
But people will always want a story to be told to them, no matter how skilled they become at "mash ups" or being "interactive" with "content."
Cable Television has also been an incredible enabler for access to content that historically had been distributed to the public through a myriad of means and changing the constrictions of time based viewing.
Internet Multiplayer Imagination Centric Gaming has provided the first steps in understanding the ability of multi user input into the creation of output that has not been predetermined, or whose plot and outcome are based on the input of those who partake of the game.
But if you look at the current distribution model for content, entertainment, and gaming it tends to use a Hub and Spoke methodology for distribution. Basically a controlling server feeds the application to a “local” server that then feeds the content to the “box” at the user site. There tends to be solely an “upstream” and “downstream” hierarchical relationship in the delivery of the current model.
The next generation of media will need to mesh it’s information, and be more of a “self learning” model. Consumer “broadcast” devices will need to have the capabilities to receive and record, as well as have “Thin Client” capabilities to allow the end user to create , edit, and interact. (Assuming all broadcast media will be based on an IP based delivery model in the next few years.)
of production and distribution made a possibility by tech
advance, while indeed benefiting a more truly independent
access to mass audiences than ever seen,
also will ensure the survival of Hollywood.
But in the end, as another poster has noted, few outside sources
can consistently rival Hollywood's production values, despite
technology, for the simple reason that these cost real money.
And then too, there is a hard to quantify component
in the mix that we know as the movie 'stars'.
The virtual worlds unfolding now will suit them well,
since at bottom they are and always have been 'virtual'
and floating both in and above the movies themselves.
They are still and I think will remain, a kind of tabloid royalty
for a huge number of people. Since so much ancillary product
will continue to depend on stars, and since no star can exist outside
of a 'Hollywood', the town will always have some
amount of financial backing to muddle through the times.
But you're right that there will be some big changes.
Just as the arrival of television and the dismantling of
the Studio System resulted in a staggering drop in
the number of films produced per year as compared to
the pre-TV era, we will probably see Hollywood's already
paltry output reduced significantly further, and its content
even further homogenized
It will become its own zombie Norma Desmond in a way.
Looking at the so called "models" more deeply, the old industry's were built on analogue technology that relies on Newtonian laws of physics; the new technology which relies on Quantum physics and the difference is dimensional. In the Newtonian universe, conservation and scarcity is operative; in the Quantum universe, energy is ubiquitous and the context is that of abundance. Interestingly, the further we develop our world based on the new physics, we are able to do more and more with less and less. What we've seen in the last decade or so is capitalists exploiting (which is okay, that's what we do) old industrial structures -development and replication- with new technology tools and mindset-morphing and cloning, since the old institutions can't regenerate themselves on that scale they've been sucked dry. The problem now is not to get crushed by the old structures as they implode under their own weight and to get over our attachment to them and stop propping them up.
In a very real way, our physics defines our world view. This is nothing less than an identity change for our entire society and it is daunting. The more nimble we are, the less damage we sustain by flying debris.
Entertainment provides a threat-free arena for small talk and makes an intolerable economic climate bearable.
"There is no accounting for taste" the old adage tells us. So long as the entertainment media aims only to entertain and not to develop taste, it will periodically run out of steam, by running out of novelty. That needs to be discovered, however, by each new generation. I have no pity for those who struggle so hard to sell us whatever we willingly buy.
Quality is important to the viewer. There are some successful cheap films like the Blair Witch Project, but these are rare and few. Hollywood's production values are unrivaled, which is why many foreigners come to L.A. begging for a piece of the action. South Korea, for example, tried to emulate Hollywood with D-Wars. After spending $100+ million on production and marketing, this Korean film wasn't able to recoup its costs because of its mediocre story and special effects. While Hollywood has had its share of box office bombs, to suggest that it'll be surpassed in the near future is rather doubtful.
Worth adding, Schumpeter was right in believing that capitalism would not survive -- at least not with the Barons like Morgan who are still on Wall Street. Much to his credit, Schumpeter did believe that socialism could work. On the same track, he thought that the intellectual would lead the attack on capitalism -- perhaps (I am just guessing) the saltwater economists** would be in the vanguard! :)
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** http://en.wikipedia.org/wiki/Saltwater_school_(economics)