Hollywood Studios Slash Wholesale Prices on DVDs.

Update: Shoppers, just in time for Christmas, big big savings on DVDs are coming your way. You can thank RedBox for commoditizing the movie business. In case you live under a rock, RedBox is a company that has about 22,000 red box movie dispensers all over America in supermarkets, retail stores, pharmacies, etc., where you can rent a movie for $1.

So, why does this translate into big savings on DVDs? Well, the studios are desperate to make up for this shortfall in the sales of DVDs so they are cutting whole-sale prices. That includes Blu-ray discs and players. Wal-Mart and Target are offering Blu-ray DVDs for as low as $8.99 and Blu-ray players as low as $79.99.

Gone are the huge profits of years past, and the revenue streams Hollywood has traditionally experienced, as the DVD sales continue to decline by double digits annually, flat box office returns for the last decade, and an international market that's drying up. In addition, steep competition continues to grow with 500 cable channels, countless videogames, free online video content galore. And then there is the exploding array of options to deliver movie content and the inevitable marriage of your TV to your computer screen/Internet, if not already hitched. Yes, it's clear that Hollywood isn't the only kid on the block anymore.

Disney CEO Bob Iger said, this past weekend, at a conference on the USC campus: "[The] business model that formed the motion picture business...is changing profoundly before our eyes."

In other words, if Hollywood doesn't find a new business model that reflects the current push toward digital distribution technologies available today, as well as keeping an eye to what's right around the corner, and embrace, rather than try to displace the generation of consumers who are used to getting their content for free, Hollywood may become a squally hood.

Mark Gill, Founder and CEO, The Film Department, an independent film financing company, and formerly president of Miramax LA, which has recently gone from 500 workers down to 20, says independent film studios have been hit hard and by the end of next year, the number of movies released in theaters will be cut in half.

In addition, Hollywood will have to cut overhead costs, marketing costs, picture production costs, and the biggest one of all, talent costs.

"Meaning, if you're a big movie star, if you're a top filmmaker, you used to get a big, nice back-end of the movie -- you got part of the profits. By in large, the studios are cutting back on all of that. They're saying, 'you share in the risks with us; you don't get first-dollar gross, you don't get a share of the profits right away; you have to wait till we break even with all our expenses; and then, if the movie is still successful you can share in the profits." -- Patrick Goldstein, columnist and blogger for the "Los Angeles Times"

The quality of studio movies will surely suffer, as the emphasis will shift away from creative content to marketing because marketers, who know more about creating brands that can live across multiple platforms, than what goes into making a good movie will increasingly take over the movie studios.

However, chasing the almighty dollar, by focusing on marketing rather than producing a good movie will backfire on them, as the Internet enables all of us to tap into trusted communities who are more than willing to share what they think is good and not so good. In addition, there is more, and a greater diversity of content being produced than ever before. This wealth of creative talent is able to both produce and distribute content without going through a centralized system, therefore, not bound restrictive marketing forces and to traditional marketing campaigns that try to sell consumers on what is good.

"Not every idea has to start at the widest reach platform. It used to be that when writers would develop an idea, the initial target was TV or film. What’s starting to evolve is that writers are approaching smaller platforms where there is not as much available audience - like publishing or digital - but where they’re allowed to express their creation in a more undiluted manner…one that reaches the market quicker where they can show what they want to do, and then try to leverage some degree of early traction and success in smaller platforms to bring to larger platforms like TV or film."

Hollywood used to be driven by technological change whether it was the invention of sound, color, television, or even new audio formats. But then things changed... around the time of home video, that Hollywood started to lose their mojo. They tried to maintain and protect old business models that were starting to deteriorate, and they chose to take a heavy-handed approach, imposing their ideas of what's "good" - more like what would make them the most money - on the consumer, and started making movies that were marketable vs movies that were enjoyable or good. The exponential growth in technology that has occurred and will continue is forcing Hollywood to adjust or go bust.

Links:

Hollywood's Sales Floor How independent film is faring in a tough economy. The annual American Film Market is the less glamorous side of the movie industry.

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