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Everyone in This Industry Wants Change — Until It Happens

Crushing change didn’t save the music industry — at least film folks are handling it slightly better

Innovation creates change. This is a ridiculously obvious statement, but many people often disregard the connection. Everyone is quick to trumpet their support for innovation, but when it results in actual changes and the need to adjust, they act like the sky is falling.

new mediaNowhere is this any truer than in the entertainment business. Everyone in our business wants to be perceived as the newest, coolest and most creative. But when the industry experiences anything that’s actually new, everyone goes back to their offices and quietly frets about how they will ever keep up.

The people who are making money want everything to stay the same so the dollars continue to flow. And even the people who aren’t making money hope the rules don’t change while they are still trying to master the game.

No one wakes up hoping that the world has turned upside down while they were sleeping.

But things do change, whether we like it or not. And these days, things change much faster than ever before. Innovation is constantly driving new technology, which is driving hundreds of new ideas that are transforming our culture on an almost constant basis. Our only decision is how we respond.

When the pace of change began to accelerate in the music business several years ago, the level of resistance was astounding. The major companies’ business models were based on making a certain amount of revenue, and it was supposed to increase every year. When those revenue numbers started heading the other direction, there was a strong desire to “fix” the “problem” and get things back to “normal.” Lawsuits were filed by the thousands and battle lines were drawn.

Apparently, the plan was to crush the changes and anyone who embraced them.

Did this strategy save the music business? I don’t think so. In fact, it probably had little or no effect. The changes continued to come, revenues continued to slide and eventually the music industry started to adjust rather than resist.

Similar changes are now beginning to impact the film industry. I think the film folks are handling things slightly better, having learned some lessons from their music brethren, but there is still a strong underlying current of fear. Not many people are excited by the possibilities – probably because the details are still very murky. It is difficult – if not impossible – to know what the film business will look like in five years.  And not many people are interested in placing big bets on a future they can’t envision.

But in truth, we know more about the future of our industry than we realize. We know that revenues might go down, but profit margins are likely to rise. It’s simply easier and less expensive to create and deliver content in a digital world. In my experience, rising profit margins are probably the best indicator of a healthy business. It is much easier to expand volume than to fix a business model that loses money.

We also know that consumers continue to enjoy good stories told with great imagery and brilliant sound. There is a certain magic when you are sitting in a darkened auditorium with hundreds of other people, everyone ready and waiting to be amazed. Millions of people gladly pay for this experience every day and they will continue to do so.  

And next year (or in two or three years – it doesn’t really matter), when everyone is carrying around their own version of an iPad or other personal media device, they will be looking to justify and enjoy their purchase with great audio-visual content – perhaps more intimate stories that lend themselves to the smaller format, but real and original entertainment nonetheless. And those consumers will be happy to pay for that experience, as well. We may not know how much they’ll be willing to pay, but it will certainly be enough to generate a healthy gross profit margin.

The bottom line – we need to stop comparing today’s circumstances to how things used to be. Instead, let’s look ahead and see the opportunities as they are emerging. That attitude could perhaps be our most important innovation, and we need to embrace it and be ready for the changes it will bring.

Roger Goff is an entertainment attorney in Los Angeles.  He makes deals and gives strategic advice in the areas of film, music and entertainment technology.  You can read more from Roger at The Business of Entertainment.