The Most Important Trend for Entertainment 2010

At this time of year, it's interesting and fun to think about where our industry is headed.  More specifically, what are the important trends in entertainment?  Which changes are most likely to impact those of us who don't work at NBC Universal?

We can talk about the various developments and what they might mean for the various sectors, but I think this coming year there is one single development that will be a game changer in almost every area of the business.  It is the convergence of the Internet with the home theater. 

Internet content has been moving closer to the living room for several years.  One major hurdle in that process has been the lack of enough bandwidth and speed to deliver large format HD content on a real time basis.  The combination of effective compression and faster networks has pretty much solved that problem.

Also, a truly effective and dominant solution for getting the digital content on to the TV screen had not yet emerged.  The TV manufacturers have taken matters into their own hands by integrating Internet inputs into the hardware architecture, and establishing alliances with content providers.  Problem solved.

So, for 2010 we will see the emergence of huge, sharp TV screens equipped with hardware and software that provides seamless access to everything on and off the 'Net.  We will be able to get endless amounts of full-sized HD content with surround sound at the push of a button.  Vevo, Netflix, Hulu and dozens of lesser known companies are poised to fill this newly minted content pipeline. 

And all of those TV sets boast at least a 120 Hz refresh rate, so they are 3D ready.  (In-Three and Reliance, Katzenberg, Cameron, and dozens of others are poised to feed dimensional content to consumers, both in theaters and at home.)

What's the business impact of this new technical capability?  It's quickly eliminating the DVD business.  It will be the final and fatal blow to the CD business.  It is putting pressure on theater owners to develop and deliver a superior experience.  It is already eliminating the "windows" strategy in the film distribution business.  It will give small film makers the ability to find their own audience (just like iTunes allowed independent music artists to find an audience).  It will create upheaval in the broadcast and cable businesses, forcing these companies to find better business models and deliver better programming. 

Virtually everything about our business will change when this final link is placed in the chain.  It is something that cannot be ignored; it must be embraced.  There is tremendous opportunity afoot for those who are poised to take advantage, and tremendous struggles for those who delay or resist.  My friends, the cheese is about to move in a big way.  If you have any doubt about whether I'm right, come to CES in Las Vegas next month and tell me what you see. 

The new horizon is now going to be solving the marketing problem.  It's hard enough to figure out what to watch with a couple hundred available channels.  How about when that number is infinity?  How do you decide what to watch when your choices are endless?  Whoever solves that problem stands to make a lot of money.  (Personally, I'm betting on Google.  They are really good at solving that type of problem.)

As always, I welcome your thoughts.

The DVD Is Not Dead...Yet

An article in yesterday's NY Times does an excellent job of covering the point I was making last week. That is, the entire DVD business has a limited lifetime and Sony's Blu-Ray victory is somewhat hollow. The disc business is not a long-term business and it is already showing signs of fading.

The article discusses what the various studios are doing in an attempt to bolster the DVD and Blu-Ray business and keep it from going the way of the CD. They are trying everything from better packaging to actually providing a downloadable file on an accompanying disc so consumers can put the content right on their computers, iPods and wireless devices.

However, that last strategy relies on the fact that loading from a disc is still a lot faster than loading from the Internet. At least one executive claims that this advantage will remain for the foreseeable future. If that's true, then how come everyone is already foreseeing the day when all content will be piped directly to the consumer with no need for a disc or packaging or a brick-and-mortar retailer. Maybe no one can pinpoint the day that the speed and capacity of most consumers' Internet access will cause that technology shift to occur, but everyone can foresee the occurrence. And I maintain it is sooner rather than later.

I think we again are seeing entertainment companies struggling against inevitable technology shifts rather than embracing them and developing new and better business models. These guys have to give Who Moved My Cheese? another read. Change is inevitable and needs to be not only accepted, but pursued. Smart business people get out in front and give consumers what they want before they start switching to other vendors. The problem with the major entertainment companies is that they are still used to controlling the business and dictating to consumers. They need to get smart and embrace the commercial democracy that is created by technological revolutions.

And Blu-Ray sales will certainly pick up. As prices come down on 1080p displays and Blu-Ray players, consumers will seek and enjoy the higher quality. But that doesn't buy that much more time. Eventually, superior HD content will also be delivered over the pipeline. It is right around the corner -- maybe it's a 3 year corner, maybe a 5 year corner or maybe even a 10 year corner, but it's coming. Let's not put so much effort into denying consumers what they really want by delaying technological shifts as long as possible. Let's get out in front of consumers and figure out how to make more money by using technology to provide more quality and convenience at a price that consumers are willing to pay.

Update: Here is an article from Macworld, published last night, that makes the point even more directly, and backs it up with some emerging research.