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Tuesday, 24 April 2012 10:49

Digital disruption hits the flicks

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Australian film makers could benefit from the digital distribution disruption which has now reached the movie world. Just as books and music have undergone distribution revolutions, the film industry is now, courtesy of increasingly ubiquitous and faster broadband communications networks, enduring a major shift which is impacting content creation, distribution and the ability to protect intellectual property.

According to Professor Stuart Cunningham, director of the ARC Centre of Excellence for Creative Industries and Innovation the range of choice for consumers will, as a result, become much broader. 'Over time I hope there would be greater opportunities for Australian product to be available in the home at the flick of a button.

'But the dollars have still got to stack up,' he warned.  Professor Cunningham is the co-author, along with Professor Dina Iordanova of the University of St Andrews, of a new book called Digital Disruption: Cinema Moves Online which explores how Hollywood titans such as Warner Brothers, 20th Century Fox, Disney and Paramount are now pitted against online distributors such as Apple i-Tunes, Amazon, Netflix and YouTube.

Part of the challenge for the established film companies according to Professor Cunningham is that Hollywood has failed to so far to successfully decouple film production and distribution. Meanwhile the new online distribution environment is giving 'rise to new content that never had a change under the old oligopoly,' he said.

While Hollywood is still struggling to transform itself for the new environment, it does not seem likely to repeat the mistakes made in the past by booksellers and music companies he said. 'The big players have learned the lessons of the wars Sony waged against Napster and teenagers in their bedrooms singing karaoke.

'You don't really win those sorts of wars, and you don't stop piracy,' said Professor Cunningham.

Instead new models were emerging where movie content producers shared in some of the revenue streams accruing through advertising on online sites, and in return allowed copyright material to remain on sites such as YouTube. This allowed wider distribution of content, revenues to be shared between rights holders and distribution companies, and at the same time avoided costly litigation.


Meanwhile some studios and entrenched players are attempting to build their own online distribution empires; witness Hulu. Available almost exclusively in the US at present, Hulu was set up in 2007 and is owned jointly by NBC Universal, News Corporation, The Walt Disney Company, Providence Equity Partners and the Hulu team.

Providing an online distribution platform Hulu is both free and legal, and offers access to a wide range of content supported by advertising. While popular with consumers it's not yet delivering the big bucks for the studios.

As Professor Cunningham points out. 'It's quite successful in the US, but it's not making money for them. It's a case of analogue dollars and digital cents.'

Meanwhile the big studios' traditional revenue streams are under assault. 'Cinema admissions in North America have declined from 5.2 billion to 3.9 billion annually in the last ten years and DVD sales are also in steep decline,' according to Professor Cunningham.

In Australia, according to Screen Australia, the proportion of people attending the cinema at least once a year was 72 per cent in 2004. By 2010 that had fallen to 69 per cent. The frequency of attendance also fell - down to 7.3 per visits per year compared to 7.8 in 2004.

The winners from this digital dislocation are likely to be the smaller content creators, who will be able to use cheaper digital production technologies and online distribution channels to reach much broader audiences than was previously possible. As a result Hollywood was experiencing a 'period of doughnutting' according to Professor Cunningham - where the big studios were forced to push the budgets and the size of projects to create analogue blockbusters which could spin off sequels and vast marketing empires.


Meanwhile a hollow was emerging (the centre of Professor Cunningham's doughnut) which was providing a home for very small budget films using cheap digital technology to film and produce new content; social networks to virally market the productions; and online distribution platforms to reach viewers.

'Hollywood will depend more and more on the blockbuster,' he warned. It's a risky proposition as ever bigger budgets means flops can have an even more devastating impact. Just last week Rich Ross stood aside from his position as chairman of Walt Disney Studios reportedly over the John Carter debacle which lost the company over $US200 million after it flopped at the box office.

Ultimately Professor Cunningham said; 'The shape of cinema worldwide will become much more diverse.'

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