SDI Blog from 2000 to 2019

There are only so many hours in the day. Take a look – if it’s not etched already in your film business memory – at the graph of cinema admissions in the UK following the launch of television. TV's arrival, peaking in the 50s, did not herald an end to people engaging with mass-market moving image – but it dramatically changed the platform and format for where they did that.

This impact of TV on cinema, which cut admissions by some 3000% from the peak in 1946 to the very bottom in 1984, left much of the industry terrified of new distribution technology, leaving them erring on the side of caution henceforth. Indeed the first video-on-demand system running over a phone line was Zenith’s PhoneVision and was unveiled back in 1951. It aimed to offer Hollywood films direct to people's homes for a $1 a time, but in a pattern that many start-ups today could sympathise with, it never got the studio support it needed. It's understandable the majors were scared: thousands of cinemas had closed and laid empty or were turned into bingo halls and night clubs. Perhaps hundreds of thousands of people lost their jobs. But the appetite for great films didn't decline, it just moved to a different space. 

The graph is significant as it not only shows how dramatic an impact such a new ‘empowering technology’ can have on a business model, but also how slow adaptation allowed for the recovery of some lost ground. With the TV-saturated market of the 1980s and the threat of multi-channel TV and cable, cinemas began to split their screens into smaller spaces so they could show a wider range of films. It was a step backwards for the architecture but a jump forward for audiences and producers. The rise of the multiplex in the 1990s, a further unfortunate footnote in the history of architecture, helped to drive a resurgence in film-going that has not abated since, with admissions rising more than three-fold since the mid-80s and continuing to grow through recent recessions. In these adaptations, the cinemas had found that they could keep their base costs of running a building and box office roughly the same while offering more films to attract wider audiences. In other words, cinemas (eventually) evolved, much to the benefit of producers and filmgoers – and the cinemas' survival.

Just as cinema admissions collapsed as people moved from viewing in large groups to viewing at home, the last two decades have seen a similar shift in viewing from the living room to the bedroom and personal spaces. Where less than 20 years ago, the average British TV viewer had access to four channels and one TV, and other than the few houses with a games system or BSkyB dish, VHS rental and retail was the only way to exercise control over living room entertainment. (It's worth remembering how home video was a technology famously resisted by the film industry and compared in its danger to the Boston strangler by MPAA's Jack Valenti, yet went on to make more money for film studios than cinemas, while making new, unexpected profits from back catalogues.)

"Home video as dangerous as the Boston strangler"

Since the arrival of the VCR in the 1980s, we still engage with video constantly, but in ways that have as much in common with early TV as cinema-going has with theatre. People binge on short films and clips; they surf the web, tweet and message friends while watching; they remix and annotate and meme-make; they pile a stack of TV episodes into a 7-hour epic and watch in one go without leaving their beds. The public has been empowered, for the decade or so that most regions have had broadband, to chose how they wish to consume moving image, leaving distributors, producers and broadcasters playing catchup, and running scared.

But the changes in viewing habits are only one of a large number of significant shifts that a producer faces, all of which illustrate how, in spite of a more powerful, open and far-reaching global distribution infrastructure than ever, the last two decades' disruption has led to a greater competition for people's attention than at any time since the launch of TV. For instance, there's: 

• No limits to platform size. Closed, pre-longtail distribution markets – limited by the size of the Virgin Megastore, cinema chain or TV schedule – offered security for those putting together a business plan to raise finance for a film. If there’s room on the shelf for just five foreign-language comedies in a typical Blockbuster, and your film is likely to be one of them because of a letter of guarantee from a distributor, then it's much easier to make business forecasts (and a return). When you're potentially competing against all the film output of the world it’s a significantly more uncertain situation.
• Much more professional content. The ever plummeting cost of 35mm-quality digital media and powerful desktop editing systems has seen the quantity of professional-level films increase exponentially - with 12,000 submission to Sundance for 2013 and an estimate by B-Side of 50,000 films produced each year. In Nigeria, low-cost production has reshaped the nature of film consumption: a film might cost $16,000-$23,000 to make, and shift up to 150,000 units on its first day of DVD/VHS sales, with some 2,000 films produced a year made available to the country's expatriate population the world-over. Add to this, the film and TV archives coming online, from every Doctor Who episode or David Attenborough documentary, to rare art-house films, Pathé newsreels, millions of hours of archive footage, and films that have never had international releases – not to mention thousands of hours of cinema-quality US TV imports for ‘series stacking’.
• The explosion of user-generated content. Over four billion videos a day are watched on YouTube alone – the majority of which is user-generated or user-remixed content. There is not much publicly available research for the breakdown in online video, but Screen Digest forecast in 2010 55% of video watched online would be non-professional. 26% of 16- to 24-year-olds in the UK claim to have made and uploaded a film to a website. As people's skills and access to equipment continues to improve, the dividing line between ‘professional’ and ‘user-generated’ keeps getting smaller, while in areas such as advertising, the line is already blurring.
• Many more channels. From the four channels of the mid-90s, half of UK households now have multi-channel free-view – the other half have multi-channel satellite or cable. Most channels also have a +1 catch-up service, and a VoD platform available through web, YouView, cable or satellite box. Of course on one level, this means more there are more places looking for content to acquire or produce, but it also means less money available for acquisitions and production other than big ‘blockbuster’ programmes, and a corresponding fall in advertising income for broadcasters as audiences get fragmented. A DVD subscription service such as LoveFilm also undermines traditional revenues in another way. Where once a distributor would sell a rental copy of a video for £80 or more to each shop, these services tend to operate with flat-rate, perpetual buyouts: £150 per feature is not uncommon. In other words, the buyout provides much less income for the producer than rental.

As if this wasn't enough, there also are two significant competing entertainment activities that are continuing to grow:

• The Internet replacing TV. In the most recent OFCOM study, for the first time, 12- to 15-year-olds were found to be spending as much time surfing the Internet as watching TV. The 16+ hours per week young people spend watching local and national TV is being replaced with surfing on US-owned, regulated and controlled websites. While some of this online activity will be spent watching video, the vast majority is spent on social networking sites and gaming.
• The ever-continuing rise of gaming. By the time they are 18, the average American teen will have spent 10,000 hours playing video games - almost as much time as they've spent at school. 39% of UK Internet users play games online - spending more time doing that than downloading music or films, or watching TV-on-demand.

So looking back to the impact of the adoption of TV on cinema, it's hard not to see the combined impact of video games, social media, smart phones, multi-channel TV, series stacking, catch-up TV, much increased production and far wider distribution as anything other than devastating to the traditional film model.

Piracy isn't the priority

And while many in the film industry consider piracy to be the greatest threat in the current environment, I would argue that it is this massively-increased competition for people's attention through legitimate and – in the case of gaming and social networking – highly addictive alternatives, that is creating greater disruption and challenges. Without better research on what the impact of such ‘attention scarcity’ is having on feature film consumption, it's impossible to say for sure if the losses are larger than piracy – but intuitively, the sheer scale would suggest they probably are. It also seems that discussion about how to deal with this market shift has been lost in the ongoing debate about how to deal with P2P piracy.

I stress this not to belittle the impact of unlicensed file-sharing, or to downplay the urgency of encouraging people to pay the creators of the films and music that they consume and enjoy, but because the debate needs to shift dramatically and quickly. For even if piracy could be suddenly stopped in its entirety, film business models still would be facing this rise in competition from alternative content, platforms and formats, conceivably as significant as the impact of TV in the 1950s and 60s. For developed western media markets, at least, we’re at ‘peak eyeballs’, with a saturated capacity for attention meeting an exponentially increasing supply of moving image.

Surviving 'peak eyeballs'

This is why – like the cinemas in the 1980s who eventually adapted their spaces to make it cheaper to offer a wider range of films – the films that survive and thrive in this environment will be those that best adapt to the new shapes of media consumption. Already some have made the intuitive move in this ‘peak eyeball’ world towards short-form and episodic films, for it’s far easier to engage with someone 10 minutes at a time than at feature length. But beyond this, survival requires both an understanding of the new environment, awareness of the tools available, and the strategies that have been successful in this space for different kinds of films – alongside a willingness to adopt a strategy and take risks in applying it during a period where the rules are still being written, and constantly rewritten with each new ground-shifting success. This doesn't mean that traditional aspects of multi-party financing, sales deals and the festival/market calendar will soon cease – but instead means the relationship with these traditional guardians of film funding and distribution will be different. 

The path is unfamiliar and full of new challenges, but not all bleak, for this technology is also giving tools to find, engage and talk with audiences the world over in a way filmmakers and artists have never had before, with many emerging financing and sales models leaving producers with more control over their rights and content. Independent filmmaking has always been brutally tough for all but the wealthiest producers, and some shifts – from crowdfunding to self-distribution – certainly make things easier. And remarkably, in spite of all this, somehow, films don’t seem to have got worse - indeed some suggest we are living in a golden age of film as well as television. For as more people make films, with lower barriers to higher production standards, and with fewer distribution bottlenecks preventing us from seeing them, the range and quality we, as film lovers, can access should only increase.