Evolving Content, Evolving Distribution Systems

Anybody not living in a deep burrow knows that animation ain't the same animal it was fifty years ago. Or twenty years ago. Or even five years ago. Theatrical hand-drawn animation has (with a few exceptions) vanished. And hand-drawn t.v. animation, although still robust, isn't made with paper anymore. Storyboards are now digitial, along with most everything else. Show me a work space without a computer under the desk and a Cintiq on top of it and I'll show you a crack in the space-time continuum.

But it isn't just animation studios that are changing. It's the whole damn pipeline that delivers whole damn entertainment packages ...

There is little doubt that [Disney's entertainment] segment will do well over the next two years if box office expectations are anything to go by. The company had six movies out in 2013 and is expected to launch twelve in 2014 and nine in 2015. More importantly, slate quality is very strong in 2014 and even stronger in 2015 when such heavies as the Avengers, the Pirates and Star Wars will be hitting the big screen.

The longer-term outlook is less promising. Credit Suisse featured an article in the Financialist publication of October 28, 2013 which said that:

"The movie business has a serious problem. Even though 2013's U.S. box office revenues are on par so far with 2012 - about $8.66 billion so far this year compared to about $8.65 billion at this time last year - the long-term outlook is gloomy. Whether it's video-over-the-Internet that's headed for the television or simply the world available on a tablet, the decades-old tradition of "going to the movies" is under fire from all fronts. And it's showing: Movie theatre attendance peaked at 1.6 billion in 2002 and only reached 1.36 billion last year, according to the Motion Picture Association of America. So what's Hollywood going to do? Can it script itself a happy ending? Truth be told, it's even worse than that. The hero of the last installment of this story - DVDs - is now a victim. People are also buying fewer physical copies of movies these days, putting additional pressure on studio earnings. An industry organization called the Digital Entertainment Group went so far as to stop keeping track of DVD sales as a discrete category in 2010, when they fell to $14 billion from a high of $20.2 billion in 2006. Even when lumped together with Blu-Ray, it's still getting uglier by the year. Sales of the two combined dropped to about $8.5 billion in 2012, 5.4 percent lower than in 2011."

Like a great many industries, the movie business is undergoing fundamental technological changes and these will not be limited to the U.S. alone. Undoubtedly, Disney is aware of this but there is nothing they can do to stem this particular tide over the longer-term. ...

On the brighter side, revenues from internet streaming are up, even as DVD sales decline:

Online purchases of movies rose 47% to $1.12B in 2013 in the U.S., according to Digital Entertainment Group. The striking growth rate has calmed fears that consumers would opt to wait for rental windows to open up before buying movies.

Streaming subscription rentals rose 32% to $3.16B during the period.

Kiosk DVD sales slipped 1%, but the aging business still commanded $1.9B in sales. Brick-and-mortar rentals were off 14.3% to $1.042B.

If there was a surprise, it might be the relatively slow pace of VOD movie sales, up only 4.8% to $2.11B. ...

The point to be made here? The business of entertainment is changing in major ways, and if our fine conglomerates aren't nimble, the undertow of technology will swallow them up and spit them out. Disney, News Corp., Time-Warner, Viacom and the others will have to adapt to changing realities, or they won't be around in anything like the forms we know and love them today.