Digital Business Models Disrupting Traditional Entertainment Segment

There may be a new Hollywood ending — at least for the business side of entertainment.

Netflix, Amazon Prime, Hulu and others are driving more consumers to get their entertainment at home, when they want, without the need to travel to a theater, pay for parking and popcorn, and have no pause button when the giant soda they bought forces a trip to the bathroom in the middle of a good scene.

The entertainment and technology news posits that Netflix and its fellow services have completely disrupted the business model long used for movies and television. The low monthly fees, ubiquitous access to thousands of titles, and the ability to watch those titles anywhere, on any device, and at any time, are a significant change from the movie theater experience.

Movie studios have been slow to respond to the threat that streaming has provided. Ticket sales are flat, DVD sales are plummeting, and the movie studios are facing a new threat in content development – the same streaming services that are stealing eyeballs.

For business reasons — lower marketing costs, pre-built audiences — many movies are part of big franchises that have long-established brands. After opening weekend, a good number fade quickly at the box office.

The business model is changing for mid-budget and indie films, which find it harder to get picked up or financed, relegated to art houses and smaller deals on niche cable channels and, if lucky, one of the big pay networks like HBO or Showtime.

Is the era of movie-going coming to an end? And will digital streaming kill the movie stars?

The streaming services are putting hundreds of millions of dollars into producing new content, from sitcoms and dramas to documentaries to full-length features.

Netflix and other streaming services have changed the way people watch movies.

Consider, for example, that Netflix-created films have been nominated for 15 Oscars, 128 Emmys, and four Grammys. Netflix has won two Academy Awards and the 2018 feature Mudbound earned major nominations for best adapted screenplay and best supporting actress (Mary J. Blige).

The studios have been slow to see the changes and capitalize on new opportunities. Sony, for example, had a chance to buy most of the Marvel comic characters for $25 million in the 1990s. They declined. Today, the billions that Marvel has made its new parent company, Disney, make the purchase price of $4 billion a steal.

What’s next for the studios? Consolidation is one path; see Disney’s planned acquisition of Fox. The other is a proliferation of streaming services. Disney has one. CBS did not put the Star Trek: Discovery television series on its network, but rather its CBS All Access service.

Another change is the aforementioned shift in business strategy from stars to brands. We no longer go to see the Tom Cruise movie or the Michelle Pfeiffer movie. We go to see the latest Marvel, Star Trek, Star Wars, or Fast and Furious screener.

The same digital disruption that changed the way we buy and listen to music is taking over the visual media. Will movie theaters remain a viable option? Stay tuned for the sequel.

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