Business Transformation Through

 Information Technology

The Entertainment Industry in the 21^st Century

by

Viji  Rajasundram

23 October 1995

Introduction

The 21^st Century will bring with it several challenges, as well as opportunities in terms of dealing with rapid technology developments. One industry which is being deluged by this avalanche of technological innovations is entertainment.  From opportunities such as High Definition Television and Interactive Television to challenges from new technologies such as the Internet and the like. All competing for the same attention of consumers looking for new ways of spending their leisure. While it was clear what the definition of entertainment was 10 years ago, changes in consumer behavior tends to indicate a shift away from traditional sources of one-way entertainment to more ‘involved’ forms, where the consumer expects a tailor-made package that they are able to design themselves.

The industry has to reevaluate its position and think about its directions. In order for the ‘big players’ to maintain their dominance, they would have to seriously consider the implications of the changes taking place in the current market and plan their own future - or risk someone else planning it for them.

The Present

The industry consists of a handful of movie studios, such as Columbia Pictures, MGM, Disney and Twentieth-Century Fox (at least one problem this company will face in the 21^st century is clear), several Television networks such as TNT, CBS, Turner Broadcasting, FOX, Star etc., and their respective distribution networks in the form of television stations and movie theaters.

Currently, these media giants are toying with ideas of satisfying the entertainment needs of every consumer by offering a multitude of channels and the possibility of adapting the entertainment to each individuals own liking (to an extent). Interactive TV, brings with it the possibility for these companies to deliver to the consumer what they want from a suite of material that is available. To allow the consumers to interact with the program instead of just watching it. Interactive TV also allows for the consumer to download the entertainment they want to see - to decide when they want to see the movie, instead of waiting for HBO to decide when they will show it.  With narrow-casting or video on demand through satellite downloads, the industry seeks to give each customer their choice of programming. Any movie, anytime.

And with the ability to deliver close to 500 channels to each household - companies like Viacom, Tele-Communications Inc. and Bell Atlantic believed that the “television set would extend its domain from the center of the entertainment universe to the worlds of commerce and business”^[1]. And this would surely satisfy the needs of even the most discerning of consumers.

But therein  lies the problem. What is enough ? Is this what the consumer wants ? Or is this what the entertainment industry thinks they want ? With such formidable offerings, can they foresee anyone or anything usurping their dominance ? Does the consumer perceive only movies as entertainment and the Discovery Channel as education - or are they looking for more. And is someone else able to meet those needs better.

Is there anyone else out there ? (or Threats to the industry)

Already, the threats are beginning to loom. One such upstart which seems to be shaking up the industry, is DreamWorks Inc., which is a combination of a software company and a movie studio. And with Bill Gates buying up the rights to old photographs - would he be going into old movies next ?  AT&T’s plan to link the Internet through their satellite - so that it would be able to transmit the “equivalent of the Encyclopedia Britannica every 16     seconds”^[2] would mean that the possibility of transmitting  whole movies in a reasonable amount of time is becoming a reality. In early October, Phillips  Electronics N.V. announced that it would be introducing a system into Britain which would allow consumers to watch movies downloaded from the Internet on their regular TV sets. The system which would link the TV to the Internet directly via the phone line would have a joystick and an on-screen  keypad^[3].

The Internet

With the explosion on the Internet, there now appears to be a real threat. With many leisure hours of millions^[4] of people being spent in front of a computer instead of the TV, the entertainment industry would do well to seriously look at the Internet as direct competition.  Could what happened to the companies that made buggy whips happen to these media giants ?

Some of these companies have already begun to cruise the Net. With several companies having web sites (Disney, Sony, CNN, Turner, CBS, as well as regional television stations). Recently, NBC announced new software that would allow the transmission of short news clips with audio, in real-time, over the Internet - expanding the reach of its on-line news delivery which was available via leased lines^[5]. 

It therefore can be assumed that the industry is well aware of the threat and is considering counter measures. The threat that sooner or later, the entertainment center of the average home would not be the Cable TV or the stereo, but the Multimedia Computer (MC) that would provide all of this and more. The Internet would be able to provide all the ‘interactivity’ that one could wish for as well as the depth and breadth of information and entertainment that a myriad of sources could offer - not just from the 30 or 40 Movie & Television companies, but from hundreds and thousands of information providers eager to gain the attention of these consumers.  Now the industry faces competition from anyone with a couple of thousand dollars to set up a web site. ( And they thought the ‘Brothers Mulligan’ was a surprise. )

Managerial Implications

And with all this going on around them, the company would have to continuously monitor themselves and be ready to respond in a timely manner. They have to consider their own structure and mechanisms with which they address change. Not only do they have to deal with the changing market place, they have to be ready to deal with internal evolution which must come about to meet the external evolution. Being prepared for this change would allow them to be prepared to meet their ever changing competitors and customers.

Next, the industry has to look at exactly who the competition is. They are no longer just the companies with millions of dollars to create spectaculars like “Gone with the Wind”, but the little kid next-door with an inspired idea for an exciting game such as “Interactive Space Invaders” or the like. And the consumers would not be flocking to the arcades to play this, but sit fixated to their MCs.

But are these kids the only competitors ? Not by a long shot. The Internet, by making it so easy  to reach these consumers, has made it extremely attractive for small operations in remote third world countries to compete with these industry giants. And what seems to be on an equal footing. No longer would the monopolized distribution system be a stumbling block for these companies. As long as they can get to the Internet, the world is their oyster. On the Internet, all web sites are created equal.  With entry barriers no longer high, what would become of the huge budgets expended on movies these days. Where would funding come from if all and sundry can compete and get a piece of the action ?

Besides these considerations, the industry would have to study their role in the lives of the consumer. What really are the entertainment needs of the  average person on the street ? Is the industry correct in assuming that it has predicted correctly the wants of the customer - or has it just decided what the customer wants using its own capabilities as a gauge.

Was the industry being naïve to expect that giving a consumer who already had 60 cable channels, 500 channels make him/her captivated for life ? Or is this quantity not the answer ? Why does the Internet act as such a draw ? Would it be the death knell for the television and the cinema that industry observers predict ? And if so, what shape should the industry transform itself into, in order to meet this challenge ? 

If you can’t beat them, join them  (What can be done ?)

One may consider developing programming more suitable for transmission through the web as a first step. Investment into software to allow better compression should also be considered. And this would have to be done as quickly as possible so as to build sufficient lead time in developing the expertise and skills required for these sorts of tasks. The industry should also consider mergers with software companies. Alliances which would benefit both parties. The software companies which do not have as much expertise in the entertainment industry would gain from the entertainment people, while the entertainment industry would benefit from receiving a fresh perspective of what hot and what’s not. So one extreme would be to go full bore at moving their core capabilities from delivering entertainment through their regular channels such as TV and the cinemas to adapting themselves to be able to meet consumers through other media such as the MC. Instead of developing cable set-top boxes with the ability of delivering hundreds of channels, the industry should put their efforts into aligning themselves with the already existing Information Providers and performing a value added role on the Internet.

Fighting back

But does this mean that the industry should jump on the bandwagon and just move lock, stock and barrel onto the Internet ?   It is of course the extreme. Another method would be not only to hedge their bets by getting on board the Internet, but to also aggressively seek ways and means to add the essence of the Internet, which attracts the new consumer to it, to the broadcast channels. A “Cablenet” to compete with the Internet.  Everything that is needed is already there. A cable set-top box which is for all intents and purposes a small computer. A cable which is able to carry a very much higher bandwidth signal. A monitor (TV) and a keypad (remote control). All the industry has to do is to put some muscle behind the development of these devices and they would have the makings of the Internet in every home with a cable TV. This would immediately be more attractive to the average consumer as they would not need to invest in a computer - especially when the cable company is providing all that is necessary to access the Internet right there with their package of HBO and the Disney Channel.

Now instead of the entertainment industry playing an away game, they would be on home ground. As long as they could make available all the functionality of the Internet ( with the number of people with cable TV, this would not be a problem - as they among themselves would constitute a large enough market to attract the Information Providers. As cable is also more secure than the regular phone lines and has better throughput, commercial customers would also be drawn by the promise of reaching these ‘premium’ consumers. And with their home ground advantage, the Cablenet providers would than evolve to be solutions integrators of a sort. Not only would they be distributing their products, they would also be the channels for a host of other services through their network. Services, that before this was only catered for through on-line networks etc.

At this point, the entertainment industry would need to reevaluate itself. They are not only in the traditional entertainment industry, but also in the relationship management business - managing the relationships between themselves and the other Information Providers who may wish to trade through Cablenet. The opportunities to profit from such a system are vast and only limited by those who define those limits. There would be some companies which may feel that they are not the solutions integrator, but merely the component specialist, providing a specific product to be distributed through any means. And there would be others that would see their roles changing and take on this task of managing others. It would be difficult to fathom that the former would last very long - while the latter evolves with the changing times.

Taking a walk on the wild side (The future)

Taking this a step further, movies of the future may not be as they are now. By using the marketing principals of differentiating one’s product to attain competitive advantage, the industry could itself push forward TV technology and create Holographic TV. This would set them apart from the MC ( at least for a short time ) and put them in the outer-limits of  the Capability-Relationship Matrix[6]  i.e. making it a core strategic importance and being best in class in relative competence in that field. And after that … maybe the Virtual World TV, where the customer is an actor. As long as man dreams, technology will keep racing to meet those dreams and make them a reality.

The trick here, is of course to be able to see it coming and ensure that the company is prepared with a plan to meet that challenge and a plan to manage that change in the demands of the industry. Watching the customers - all the customers. Watching the competition - all the competition.

Conclusion

The entertainment industry is at a point of redefinition. Redefinition of itself, its customers and its competition. A corporation within this industry must have the ability to work in multiple markets , focus on core competencies - be they current or evolving,  and organize work in an efficient manner to deliver these core competencies to their audience - be they current or evolving,  at the cheapest and most reliable and timely manner.

These challenges that these corporations are facing now are by no means restricted to them alone. But trying to keep ahead of the pack, and dreaming up new ideas to stay on the ‘outer-limits’ has always been difficult.  History has shown that many other  industries have faced such challenges. Some succumbed - like the tin mining industries in Malaysia with the advent of aluminum cans, while others seem to thrive on change - like the Korean Chaebols which are in a constant state of evolution. Those who succeeded have one thing in common - they were able to deal with change - be it technology or otherwise.

This change management should therefore be considered as an integral part of any strategy adopted by the companies in the entertainment industry. While the challenge of the next 10 years may be the management of  technology and their new relationships with competitors and alliances alike - but on an on-going basis, it is their mastery of change management that will see them through to the end of time.  As long as a company is dynamic, and is expecting itself to be in a constant state of flux i.e. by readily adapting itself to the needs of its customers and watching its back as to what the competition is up to[7],  it would be well placed in ensuring its survival in the 21^st century - no matter what technology is introduced.