As the writers strike grinds on and TV continues to shut down, I can't help but wonder if the studios, which are so wealthy and enormous, don't realize how vulnerable they actually are. Sure, they're worried about changes in distribution models, the digital future, piracy, and so forth. But they're still making so much money.
I have long thought that the studios are foolish to treat consumers as little gnats that should be grateful for all the pap they they sell them. The studios are coming from a place that is large and all-powerful. But what if their customers slowly, quietly, in little increments here and there, stopped watching TV and buying DVDs in favor of other sources of entertainment and delight? Why are DVD sales going down? Games, FaceBook, Flixter, Quarterlife, My Damn Channel, JibJab, FunnyorDie...the list goes on. The TV networks and studios should be very worried about people abandoning live television and purchased DVDs in favor of Netflix, downloads, internet viewing, saved TiVo shows, cable OnDemand...the list goes on. (Ironically, the movies are less likely to suffer--although the marketing challenge of cutting through the noise is an issue.)
Netscape founder (and Loudcloud billionaire) Marc Andreessen posits that the WGA strike is the ideal setting for an end-run around the antiquated studio distribution system. Here are a few choice pieces of his argument (the entire story is posted on the jump):
In Silicon Valley, creation, marketing, and distribution of a compelling new product is not very expensive. And with the Internet, marketing and distribution costs drop nearly to zero. Most successful Internet companies, large and small, use free viral marketing techniques and never run ads. And the whole concept of distribution costs goes away when everything is digital -- the next set of bits costs nothing to manufacture.
Therefore, there are no bottlenecks. Many companies, large and small, can afford to be in business -- can afford to develop new products and bring them to market, market them and distribute them. And nobody can really block you.
In Silicon Valley, the creators of the product -- the talent -- are owners: owners of their product, and owners of their company. In fact, the entities that finance the companies -- venture capitalists, private equity funds, the public stock market -- want the creators to be owners: in a world where there can be many companies, the best creative talent will be drawn to the situations in which they will be owners, and will be compensated as owners.
Because of that, in technology, creators get paid like owners.
Therefore, there are no unions. There is no reason for the creators to unionize -- they would be negotiating with themselves. The concept of residuals does not exist -- they'd be paying themselves. And alignment of interests between creators and financiers is near-perfect.
I believe the entertainment industry is in the early stages of being rebuilt in the image of Silicon Valley.
What would a new entertainment media company, producing original content, look like in the age of the Internet?
Starting from the end of the process: you know distribution is now nearly free. Put it up on the Internet and let people stream or download it.
Marketing is also free, due to virality. Let people email your content to their friends; let people embed your content in their blogs and on their social networking pages; let your content be searchable via Google; let your content be easily surfaced using social crawlers like Digg. All free.
Production is very cheap. Handheld high-definition video cameras cost nearly nothing. You can do almost every aspect of production and post-production on any Mac. Hell, you can even score an entire movie for free -- there are hundreds of thousands of bands on the Internet who would love to have their music embedded in a new entertainment property as promotion for the bands' concerts and merchandise.
The creators of the content are the owners of the company. The writers, actors, directors -- they are the owners. They have a direct, equity-based economic stake in the company's success. They get paid like owners, and they act like owners.
Financing is straightforward: venture capital, just like a high-tech startup. We live in a world in which financing a high-quality startup is simply not difficult -- not for a high-quality technology startup, and increasingly not for a high-quality media startup. Modern financiers love being co-owners of a new company with the talent that will make the company successful -- and that's how it will happen here.
This is not a difficult thing to envision. And in fact, it's already happening. Will Ferrell's Funny Or Die, in which I am a minority investor, is one early existence proof of this model. And there are a ton of other such new companies either already underway, or currently being incubated, or currently being negotiated.
And in fact, there are a lot of historical precedents even in the media industry for the model of talent as owners, going all the way back to the original United Artists in 1919. Some of those precedents worked great -- George Lucas, for example. Some flamed out. Of course, they were all up against the bottlenecks.
But here we are, living in a world in which the bottlenecks have suddenly become irrelevant.
I don't think there's any question that this is the logical model to pursue in the age of the Internet -- the age of free distribution and marketing.
And here are some ideas on Screenwriters DIY:
Written by Wagner James Au
Posted Thursday, November 15, 2007 at 12:00 AM PT
Screenwriters, DIY!
In the mid 90s, during a strike against The San Francisco Examiner, a bunch of staff writers and editors abandoned the newspaper to start up their own “web magazine.” Though it seemed like a weird idea at the time, the web mag eventually became Salon.com, now a site with more readers than most newspapers — including The Examiner itself.
As the WGA strike moves into its second week, it’s hard not to see a similar opportunity: What’s to stop WGA writers (especially those associated with well-known TV shows and movies) from doing a similar thing with YouTube? Create new, low-budget shorts à la Lonely Girl, then leverage them as spinoffs for new TV series/movies when the strike ends? Or perhaps even better, come up with a Net-driven revenue model and leave the dinosaur conglomerates of Hollywood behind?
Marc Andreessen and other Internet mavens have recently made that case, but I was curious to know what working screenwriters thought of the idea. So I put the question to my friend Howard A. Rodman, who’s in a unique position to answer: As a writer, he’s worked for filmmakers as varied as Steven Soderbergh, Errol Morris, and Tom Cruise; he’s the writer of the upcoming Savage Grace with Julianne Moore; and, most pertinently, is a board member with the WGA. What did he think of the “Go Internet” scenario? His characteristically urbane answer came with a clarion call:
“[O]ur Lonely Girl, our Dziga Vertov, our salon des refusees, has yet to emerge,” he acknowledged via email. “Give it time. More conjecturally, the Googles of this world, the Mark Cubans of this world, the Jeff Skolls of this world, might see an opportunity to work with world-class writers, without having to take 30 percent off the top as the studios’ distribution fee.”
“Increasingly,” he continued, “as the studios want you to come to them with a script, with stars, with attachments, with financing, the question becomes, what’s the value added? That question will be asked, more and more frequently, and more and more loudly. Big Media’s refusal to bargain and end this strike only assures that this question will continue to be asked — until some brave and imaginative soul answers it. Loudly.”
His advice to daring writers and Internet financiers who would rise to the challenge? “DIY!” he wrote. He pointed to a witty pro-WGA YouTube video that turns the corporate owners’ words against them. “Take a look at this: created with no more resources than you or I already have on our desktops.” (For myself, I’d point to someone like Buffy the Vampire Slayer actress Felicia Day, who did that very thing months before the strike, creating a series that’s so popular online, the show’s fans willingly finance it with donations.)
For more resources, Howard pointed to Variety’s compilation of screenwriter blogs, and another at Huffington Post, where Howard is a contributor. For that matter, read more from Howard in a group interview I’m currently hosting on The Well, the legendary online community now owned (to tie this post up nicely) by Salon.com.
In 2001, Wagner James Au optioned his sci-fi action screenplay Future Tense to Canal Plus, a deal which pretty much summarizes the entirety of his screenwriting career. More recently, he’s GigaOM’s games editor and writes about Second Life for his blog New World Notes.
This a strange and significant story. It was inevitable that a studio would sever its pay-TV ties and start its own movie channel with a deep library and downloads, but I didn't think it would happen this soon and in this way. It's the wave of the future, and will accelerate the pace of change. So far the studios have been talking behind closed doors about how to take charge of their own delivery windows free from the impediments of their Pay-TV deals with HBO, Starz and Showtime. But not one had been willing to walk away from millions of dollars. 
