So begins the postcrash push, when all of this investment starts to pay off. Broadband use in the United States jumped from 6 percent in June 2000 to more than 30 percent in 2003. Today, most of us have access to it at home or work. (Significantly, we signed up for it after the dot-com crash.) Now, instead of engaging in theoretical thumb-sucking about “what broadband will mean,” we’re doing something with it. And unlike the 1990s, when experiments failed because entrepreneurs misunderstood the Internet’s usefulness, or because it simply wasn’t ready, we’re working with a known quantity. It took thirty years for electricity to have a serious impact on the U.S. economy, after all, but by 1930, virtually every home had juice and it was driving refrigerators, toasters, lamps, radios, and other appliances. As Henry Blodget put it, our exuberance, irrational or otherwise, builds industries.
We have been experiencing a similar, but vastly accelerated, process, with high-speed connectivity plowing under the business landscape and remaking it in its own image. Those most adept at leveraging all of that capacity within their own markets are likely to flourish over the coming decade and beyond. The ones that don’t may go the way of all extinct life-forms. Amazon founder Jeff Bezos has likened the impact of the Internet to the Cambrian era, when single-cell life-forms gave way to multicell life. It was a time when the number of life-forms exploded; it was also the period of the greatest rate of extinction. It poses an almost Darwinian challenge.
The fluidity of information is bringing about a radically democratized business world where consumers enjoy unprecedented power. At its most basic level, companies must meet our expectations or face our anger, amplified through countless channels (from blogs, to search engines of video and text, to others yet to be developed; there is such a thing as bad PR). A single bad review can grow into a consumer revolt. And as the newspaper industry exemplifies with its recent implosion, any leap into the unknown leaves some bodies broken on the rocks below. After the introduction of electricity, the U.S. population grew by 15 percent between 1910 and 1920, but the number of personal servants fell 25 percent, replaced, in large part, by appliances. In the early part of the twentieth century there was a whole industry built around delivering ice to homes, a business that melted away with the advent of the electric refrigerator and freezer. Trucks picked up dirty diapers and dropped off clean ones until Pampers hit store shelves. When was the last time you used a typewriter—or stored information on a floppy disk?
Horror flick auteur Wes Craven, director of Scream and the Nightmare on Elm Street series and an early adopter of editing software, views this growing global linkage of computers “as the beginning of neural pathways to planet consciousness,” a “digital central nervous system.” There is, he says, “a brain forming around the skin of the planet.” And moviemaking wannabes like Buice and Crumley, with no stake in the old ways of doing business, are there to pursue the new paradigms.
[ MUSIC: THE PROVERBIAL CANARY IN THE COAL MINE ]
Naturally the winds of change swept in well before broadband hit critical mass. In the late 1990s, music pirates began to proliferate on the Web. One eighteen-year-old, who called himself “The Lair,” became a star in the underground. In many respects he was your typical T-shirt-clad teen. During the school year he attended classes. In the summer he slept until noon, grabbed a bowl of Honey Nut Cheerios and padded over to his computer, where he checked on his website to make sure it hadn’t crashed, answered email, and swapped music over the Net. Those who knew where to find his site were free to “leech” from his personal cache of tunes, hundreds of them, neatly organized by artist. If you wanted a taste of Will Smith’s rap, “Men in Black,” all you had to do was surf over to The Lair’s site, click on your mouse, and let the music pulse into your hard drive. Were you feeling nostalgic? How about a trip down “Penny Lane” with the Beatles? Cared to sample the latest Sheryl Crow or Pearl Jam? The Lair, a self-professed music junkie, had you covered. Because on his site, the hits kept on coming.
It was like the 1990s version of trading baseball cards, except for one off-key difference: it was illegal. And if you listened to the strains emitted by the Recording Industry Association of America (RIAA), which represents the interests of the major labels, The Lair and the thousands of other music pirates who called the Net home were causing the record industry “incalculable harm.” In the past, the authorities, with much fanfare, had raided warehouses stacked floor-to-ceiling with records, then later, cassettes and CDs. But like an irritating tune they couldn’t get out of their heads, the question reverberating inside the minds of industry executives was: what would they do when all the average Joe needed to warehouse millions of bootlegs was a laptop and a fast Internet connection?
Music had entered a brave new domain: the Internet, the largest and most efficient copying machine in history. It was also the world of music pirate guerrillas, geeks armed with powerful computers and high-speed Internet access who got a thrill playing cat-and-mouse with the recording industry. Since it’s hard to feel sympathy for a multibillion-dollar industry, the recording industry had (and has) trouble rallying the public around its cause. Whether offered knockoffs of Rolex watches, illegally copied videocassettes, or CD bootlegs, Americans have shown they are only too happy to shave a few bucks off the retail price, sometimes for shoddy merchandise, even if it means, technically speaking, breaking the law. As The Lair said, “My parents were kind of concerned when I told them what I’m doing is illegal, but as long as I can supply them with some songs by the Beatles and Tom Jones, it doesn’t seem to bother them.”
Claiming a 2.1-gigabyte hard drive crammed with two gigs of music files and a site that had been visited by more than one hundred thousand users, The Lair wasn’t worried about the long arm of the law. “By coming after sites like mine with court orders, RIAA is bashing a thumbtack with a sledgehammer,” he said, “but if they’re not careful, that thumbtack is going to get caught underfoot and hurt. The MP3 scene has already begun to adapt by going deeper underground, and these days, all you need to adapt is to change your IP address.” And no matter how many encryptions, watermarks, and other high-tech approaches to stamping out piracy software companies tested, nothing worked. Pirates displayed an ingenious talent in cracking whatever new techno-wrinkle was thrown at them, often within forty-eight hours.
The Lair was but a single voice in a vast cacophony. With greater access speeds and bandwidth, improved compression technology, and Napster—the first of the peer-to-peer networks—piracy grew a thousandfold when regular users (like students on college campuses on powerful university network connections) got wise to what was out there. By 2004 the hierarchical pirate culture had vanished and piracy became a mainstream pursuit, with 13 billion songs available through peer-to-peer networks, far more than the 800 million compact disks (about 10 billion songs) record companies were shipping each year. The record companies were powerless to stop it, especially as compact disk sales slumped while digital downloads grew. In other words, pirates like The Lair, who were at heart little more than overzealous consumers, had dictated how the music industry would change.
And if Buice and Crumley had their way, Hollywood, too.
[ THE VIRAL REALITY SHOW OF THE MAKING OF THEIR MOVIE ]
The pair’s strategy began taking shape when they attended South by Southwest, where they posted a daily online video diary of their experiences. The diary proved popular and helped draw an audience to their screenings. For Buice and Crumley, it also drove home the point that the battle to get their film recognized (not to mention the peripheral tales of their own interpersonal combat and financial woes) was something their peers could relate to—that the story about their story might help them get over the hump.
So they sketched out a series of ten 3- to 5-minute video podcasts they planned to post once a month, a kind of reality show about the making of their movie. One episode told how they got started. Another related their experience at Slamdance, detailing fights that broke out when an actin
g teacher and some of his students who appeared in the movie clamored for more credit. A third looked at the impact on their relationship, which teetered on the brink of disintegration. Their first podcast was a viral hit and it didn’t take long for each new installment to attract sixty-five thousand downloads via iTunes, YouTube, Google Video, and MySpace. Their audience attracted an even bigger audience. The first seven episodes were downloaded half a million times, unleashing a platoon of citizen marketers, their clips posted online, emailed to friends, or played on iPods.
The marketing was so effective that a Four Eyed Monsters screening at the Brooklyn Museum sold out: 470 tickets in five minutes. After Buice and Crumley posted their final podcast, they threw screening parties across the country, organized by volunteers. They tried out a service that let filmmakers distribute their work to art-house theaters; the more advance tickets sold, the more theaters signed on. Simultaneously, they released Four Eyed Monsters through their website, on DVD (complete with the podcasts, for around $15), or as a digital download. Eventually they earned a deal with the Independent Film Channel (IFC) to broadcast it on television and their DVD was available at Borders. Crumley viewed their strategy as a showdown between Hollywood and the New Economy: “If we are successful with releasing our film by building our own audience, getting the film directly to that audience, and using what they say about it to get to a bigger audience, that would prove that the distributors’ existence is completely unnecessary. It’s better than a couple of guys in an office making a multimillion-dollar decision based on their own personal taste.”
Buice and Crumley are early examples of the millions who have been flowing into this filtration process. It’s a process that may have some unlikely by-products of its own, possible alliances, say, between low-rent filmmakers and theater owners, who in the past have been separated by a gulf of power and influence. The rise of digital makes it easy enough to imagine a day when theater owners look to the Internet to find movies (or compilations of shorts, or animation, or any other sort of content that can be screened) to supplement the list coming out of Hollywood or the not-so-indies. Even now, they could gauge an audience’s interest in advance, based on metrics such as the number of downloads or click-throughs, and deliver specialized, microtargeted content on nights when they’re tired of projecting unpopular movies to an empty house. Remember, Buice and Crumley’s online presence translated into a packed theater, with real tickets.
There are, of course, a number of things delaying that day. It would cost about $3 billion to convert all thirty-six thousand movie screens in this country to digital, and the process has barely begun. But as Bud Mayo, president of AccessIT, a company that offers financing and expertise to theaters looking to convert to digital, explained, delaying that process leaves a lot of money on the table. “You have a $9 billion domestic box office, and that’s using 15 percent of available seats,” he says. “If you can impose digital cinema and all its benefits, and attract 5 percent more customers to fill some of those empty seats, that’s a $3 billion to $4 billion opportunity.”
Adding to the power of the digital model is the fact that the big studios themselves stand to benefit from digital conversion. The studios now spend upward of $10 million to dispatch 35-millimeter prints of a single blockbuster, at $1,500 per print, to the thousands of theaters across the country (and $5 million for a more modest release). A digital release would bring that number down to about $200 per movie, transmitted at the push of a button. Within ten years, your local cinema will probably have digital capacity (although it may retain film technology for a time, to appease the purist Hollywood directors), and this will profoundly shift the economics of the movie business. AccessIT alone plans to convert ten thousand screens by 2010, by ponying up the initial costs. (In return, film studios pay a $1,000 fee per screen the first time a film is shown, which Mayo says would generate about $15,000 a year per screen.) AccessIT then transports the film via satellite or fiber-optic cable from a central server; theater owners could add advertisements or trailers, track concessions, and even monitor lights remotely. They would have the technical capability to change their lineup on the fly, substituting 3-D rock concerts, video-game competitions, religious revivals, World Cup matches, versions of a movie dubbed in Chinese or Spanish, or indie efforts like Four Eyed Monsters.
“The studios are afraid of the loss of control that digital sets forth,” says Ira Deutchman, president and CEO of Emerging Pictures, another company that converts theaters to digital. “Once you have digital equipment, exhibitors can play whatever they want on a given day. This changes the balance of power between exhibitors and Hollywood.” Standing between the studios and the theaters, however, are the distributors, and they still wield enormous clout. “If a theater pulls a movie before the contract stipulates, it’s going to have a problem,” says David Zelon, head of production for Mandalay Filmed Entertainment. “It’s worse than getting sued: you won’t get the next big picture.”
Zelon claims Hollywood studios aren’t losing any sleep over the ascendance of digital filmmaking or its ancillary benefits to small-scale indie directors. “Every once in a while, you’ll get a My Big Fat Greek Wedding or The Blair Witch Project. But you really need a studio-marketing campaign. At the end of the day, you need stars, because the first question people ask about a film is, ‘Who’s in it?’” he says. “Without mass marketing, you won’t capture the attention of a mass audience, and the Internet is not a viable way to attract a mass audience.”
Fred Zollo, a producer of Mississippi Burning, didn’t bother to contain his contempt for moviemakers like Crumley and Buice, perhaps reflecting the views of many of the Hollywood elite. “The idea that you go out with some girl, make a movie about it, and put it on the Internet is preposterous. How can you watch a movie on a computer screen? The only use for the Internet is misinformation and pornography. It’s the Cliffs Notes of our age.” The problem with digital technology, he continued, is “it lets people make movies who have no business making movies. Now any idiot can make one. They wouldn’t know Gone with the Wind from ‘Blowin’ in the Wind.’”
Harsh words indeed. But even if Zelon and Zollo are right, that doesn’t make movies created for, marketed, and distributed over the Web negligible. After all, NBC, Fox, and a number of other entertainment companies banded together to launch Hulu.com, which offers TV shows and movies online—free. And if 85 percent of a cinema’s seats lie fallow every year, a hundred smaller movies that attracted a following would become a force, while a thousand events—from films to sports events to rock concerts—could represent a revolution. How long could theater owners turn their backs on that kind of upside? If they caved, how long could distributors afford to withhold their films, especially as more theaters joined the digital ranks? And perhaps most important, how long would studios back distributors in that battle if they could deliver their films directly to theaters in a few minutes, for a fraction of the cost?
[ LEARNING FROM NEWSPAPERS ]
In the way that consumers forced the music industry to adapt, and pushing newspapers to do likewise, Hollywood should pay attention because it could be next. In this broadband era of YouTube, iPhone, BlackBerrys, email, IM, and RSS feeds, most of us dash through life at a frantic pace. We are bombarded with text, images, ads, and digital come-ons. We don’t read news—we consume it, often by clicking headline to headline in pursuit of whatever catches our eye. Standing in line at the pharmacy, we update our blogs; we check our BlackBerrys and Treos idling at traffic lights and our voice mails on train platforms, we Google the sales manager we’re supposed to meet in fifteen minutes. What’s more likely in the coming years: suddenly we will return to a slower, simpler time, or our culture will continue this acceleration as information, the lifeblood of our work, leisure, investments, friendships, and family, cascades all around us?
Contrast this glitzy postmillennial lifestyle with the premillennial, time-consuming trek your local newspaper makes each day. It owes
its analog existence to trees that are chopped down, trucked to a mill where they are mashed into pulp, flattened into paper, and transported to printing presses. There the huge rolls of paper are sprayed with letters and numbers, photos, crossword puzzles, sudoku, and drawings, cut, stacked, bound, and stuffed into trucks. These bundles are dropped off at newsstands or distributed to people whose job entails flinging each copy, one at a time, house to house. Later you step onto your porch, pick up the paper, scan the headlines, and realize everything in it is a day late. You’ve already skimmed these articles on the Web, were fed email links on your PDA or cell phone, or accessed RSS feeds, watched them on CNN, heard them on the radio, or caught a glimpse of them on a news ticker atop a taxi cab. By the time you read the paper, the news has moved on and so have you. It’s one thing to rely on such an intricate supply chain to manufacture a Stealth bomber. It’s a complete waste of scarce and expensive materials and fuel for the dissemination of mere words and pictures on a page, and it takes far too long.
The decay of the printed word on paper is part of a predictable pattern of development. The incipient form of a new technology tends to mirror what came before, until innovation and consumer need drives it far beyond initial incremental improvements over its predecessors. The first battlefield tanks looked suspiciously like heavily armored tractors equipped with cannons; early automobiles were called “horseless carriages” for a reason; the first motorcycles were based on bicycles; the first satellite phones were as clunky as your household telephone. A decade ago, when newspapers began serving up stories over the Web, the content mirrored what was offered in the print edition. What the tank, car, and newspaper have in common is they blossomed into something far beyond their initial prototypes. In the way an engineer wouldn’t dream of starting with the raw materials for a carriage to design a rad new sports car and Hollywood might have to branch far beyond the local multiplex, newspapers will eventually cease to use paper and ink.
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