Hollywood’s collapse is, as of the summer of 2006, not imminent but it is facing certain economic challenges. A bit like Detroit, it has left innovation to the Europeans and Asians and opted to concentrate on the star-and-dollar-guzzling V12 land yacht movie. Imports are not the biggest problem facing Hollywood, rather it’s an issue totally out of its control – the rise of online shopping. On the face of it, it shouldn’t impact directly but unfortunately many multiplexes share the mall anchor role with department stores. Since in American life cinema and shopping is a favorable combination, it looks very much as though one will drag down the other. And of course online shopping consolidates the home as the principal leisure venue. Sooner rather than later a major retailer will announce it will be online only. No one should be surprised by that – look at the success of LL Bean before the Internet. A major newspaper, too, will be online only by subscription, no newsprint or distribution costs. Economics and environmentalism make this a no-brainer. Why shouldn’t the New York Times, say, drop New York and become a 24/7 global news brand with customizable local listings and advertising. When syndication is considered we’re almost there anyway. Sports franchises routinely drop cities and though they may not have the prestige of the New York Times (although its reputation is even more battered than that of Hollywood) they can certainly match its visibility.

The film industry will have to start conducting itself in a way that reflects creativity and independence rather than act like a massed school of whales committed to floundering on a deserted beach. Although there is much talk about giving consumers what they want, focus groups stifle creativity. The iPod is a great success because it surprised its audience- militant consumer activists and focus groups did not demand a hard drive successor to the CD walkman. Great products create their own market- they shift consumer tastes, they do not follow them. It’s often the case that the public has to have what becomes the norm imposed on its consciousness. Airbags are a good, if unlikely, example. Most automobiles are equipped with so many they could do double duty as a rubber dinghy. But that is not the public’s doing- car safety was such a low priority with consumers that in many territories governments even had to mandate the wearing of seat belts. Whereas drivers and passengers now demand very high standards of safety barely a generation ago many of them had few qualms about going through the windscreen. (And doubtless a generation from now we will be talking in similar terms about fuel economy.) The movies are about creativity, unexpected entertainment, captivating brilliance and surprise.That’s what audiences pay for. The industry must be less intimidated and bamboozled by the bloated legions of the technorati and the early adopters – if all these people have as much savoir as they think why don’t they ever realize all these endless gadgets and trends are bound for the garbage heap? For every technical expert and visionary you can safely count hundreds of followers with too many credit cards and too little sense. Hollywood should be about creativity and risk, not about conferring, not about test screening. It could be said there is lack of ability in the business side to recognize and nurture creative talent. If this continues Hollywood will be to filmmaking what Dell is to technological innovation, in other words not a lot. Hollywood must be a pioneer in the move to online business models. The solutions are open to debate and interpretation but here are a few suggestions:

• To start with, that classic cost cutter – cut out the middle man. The studios must completely abandon cinema distribution and all other retail outlets. Film festivals, established city favorites and new virtual thematic festivals, will become the defacto launch pad for most event and prestige movies. For audiences wishing to continue the cinema-going habit then those previously endangered species, the neighborhood and art house cinemas, will trump the multiplexes as the only economically feasible venue. IMAX will also feature were suitable. Similarly the studios should abandon television as a secondary distribution channel. Network TV has gone from a desirable, even prestigious, operation to a cesspit of reality drivel. The networks will become even more arid-  TV programming will be for the poorest and least sophisticated viewers. Upscale audiences will seek, find and pay for entertainment elsewhere. The TV set will become an object of absolute consumer-controlled convenience not a device at the mercy of TV Guide.

• The studios must launch a competitor to Amazon, a co-operative online DVD store – direct sell and rental – which allows access and membership status to all independent filmmakers. Just as small companies rent office and call center support, the smaller filmmakers pay their own overheads and handling costs. This online store will offer them global DVD distribution. This is an indispensable part of the strategy, it allows filmmakers to get full retail price rather than wholesale. Online commerce and DVD rental is everywhere – it can’t be that hard! Oh, and the selling price of these disks won’t be $29.98, no matter what Steven Soderbergh thinks. Although the industry may feel reluctant about such a model, it will not be long before direct online retailing is the unchallenged norm that will threaten even the might of Wal-Mart. Faced with mounting consumer interest in environmentalism why shouldn’t Heinz or Kellogg or Dove abandon stores and use the retail margin to go heavily or exclusively organic at an affordable price and then distribute directly to the customer rather than through markets? Postal services could easily deliver from a multi-company regional distribution center. Soon retailing will be only for perishables, your ketchup, cereal and soap will be delivered together to your door with your movies.

• Global DVD release means blanket availability. There was always a whiff of imperialsim about the old Hollywood release schedule of focusing on the US primarily and acknowledging the film audience colonies months later. The DVD-only option simplifies film distribution instantly. The legal complexities of buying and selling for individual territories and markets will disappear. Huge savings will be made on the money wasted in prints and marketing etc. Actors and television audiences are bored with the monotonous little sojourn where the Hollywood star flies in stays on message and flies out again. It’s drab, it’s dull and for the actors it seems particularly dispiriting and counterproductive, especially if they are juggling the production of one movie with the promotion of the last. Why aren’t the studios using the net directly? Online webcasts and podcasts with fans may not suit everyone but they are a lot less hassle than those magazine covers. Who cares if the studio is seen to control the star’s publicity? We all know those ‘revelations’ and ‘sensational’ interviews in Vanity Fair are stage managed. Worse still, the studios are actually subsidizing Vanity Fair by allowing it to tempt advertisers whilst promoting stars in a preposterously overhyped manner that leads the studios to pay salaries to said stars that reflects column inches generated by the studios rather than box office gross. The publicity machine has always been an indispensable part of the package. The audience knows it. A webcast doesn’t have to be live free for all, TV interviews certainly aren’t. Some stars will want questions filtered in advance. Others like, say, Susan Sarandon will relish the opportunity to say what would be censored on the networks and she will get an audience that wants to hear what she’s got to say. All the studios should use their websites for complete movie promotion, individual sites for particular movies only takes eyeballs away from the studio core. Moreover as traditional media loses its grip, the studios and the stars are going to find the tabloid mentality becomes the norm in the fight for survival, more stars wiil yearn for the warm embrace of the studios, and the studios will have to be more proactive in protecting their investments.

• Online distribution is not going to happen on a huge scale. Why the studios are opting to go down this dead end is bewildering. The consumer is not spending thousands of dollars on HD home theater systems to cluster around a computer monitor watching compressed lo-resolution and standard definition images. It might work in Seoul because the Korean residential template is a high density tower block with an individual communications room. It could work in Manhattan and possibly parts of Chicago and San Francisco but for the American metropolitan market the Internet infrastructure will be unsuitable for the HD files the customer will demand. There is also the looming issue of Telco charges which will become inevitable if the telephone networks are clogged with large film files. And for the uninitiated, broadband routers crash and fail, time outs are not unknown and writing large film files to disk is not exactly quick. Also, and it’s fundamental, most people want the physical disk complete with cover art, although I will concede that they could be dispatched to downloaders by mail. There’s too much hype on this one- many of the denizens of Web 2.0 are shamelessly chasing a higher share (sale) price the way the Weinstein chased Oscars. Groundhog Day, coming soon to a portfolio near you.

• Alternatively the studios should consider resurrecting prestige television, a by subscription global satellite channel, a genuine home box office. Imagine the entire vault of Hollywood at the viewer’s instant disposal!• Sony moved from electronics to content. Let the studios do the same in reverse. Like my online store proposal, the studios form an independent electronics co-op which creates its own format (Sony will have a tantrum). Release movies only on this proprietary format. License the format to the electronic companies to make the players, a secondary revenue stream. If the hardware companies don’t co-operate, then the consumer has no movies no play. Consumer stops buying equipment. The electronics companies suffer. The studios create and control a Digital Rights Management system that meets their needs and the expectations of the consumer. Of course it will cost, but so did Alexander and The Kingdom of Heaven and The Stepford Wives and Poseidon…. The fact that there is a new DVD format battle reflects an uncharacteristic lack of self-importance in the Hollywood executive ranks. The studios should have been vocal to the point that Toshiba and Sony’s respective shareholders understood immediately there could only be one HD format. Admittedly Sony’s studio involvement complicates matters. But then Sony could save the studios any investment and trump Toshiba by spinning-off Blu-Ray as an inter-studio owned cooperative, one way of avoiding a Betamax sequel…• Studio websites should have users with profiles that can be alerted to staggered releases and screenings – if Hollywood wants to stay with current exhibition model – or, for example, the studio library online to assess demand for the back catalog. Most people loathe market research, and it’s an expensive waste of money, but when asked who their favorite stars are and in what movies, film-goers can rarely contain themselves. The information the audience wants to give the studios is enormous. An untapped luxury just waiting to be data-mined.

And since we have sports bars why not have cinema cafes- with large screens, coffeehouses and cafes could host screenings of shorts from directors the studios have signed or screen the interviews that go with launches combined with a well made coming attractions slot. And possibly even preview screening of small movies to consumers who have registered with websites or provide a comprehensive distribution channel for movies that would have trouble filling auditoria.

• Over a decade ago the buzzword ad nauseum was interactivity. In the movie auditorium it never had a future. We pay $10 knowing in advance that Harrison Ford will save the world and we don’t want our expectations thwarted by some idiot two rows behind. In the home, though, the interactive DVD could be used creatively by filmmakers, if they so wish. That’s not to say we need remake of The French Lieutenant’s Woman with multiple endings but I think it would allow greater opportunity for difficult and experimental fiction/screenplays or the classic detective/courtroom drama presented in a longer, more intricate manner to connect with the audience and allow viewers to choose and allocate roles and/or degree of difficulty within families or groups of friends. There is an opportunity here for the studios to take on the video game industry in a more tempting way by offer the audience the chance interact creatively without the consumer having to invest in other platforms.

• As HD cinematography and the DVD revolution lead to plummeting production and distribution costs, there is going to be a power shift to writers, novelists and copyright holders, although not all will exert it. Unless a film’s financing is dependent on the casting of a particular actor, all stars are totally dispensable. HD and DVD distribution is going to make what Mel Gibson did even cheaper with greater rewards. Television will also suffer- to avoid all the restrictions, timidity and creative interference, pilot episodes will debut on the web. Here they will attract the most sophisticated audiences, the business model will change dramatically. What we now call episodic television will become straight-to-DVD box sets. Viewers have already shown considerable enthusiasm for buying TV shows they could easily have recorded, the model of the future spares the consumer the TV subscription fee. By the same logic if, as I have suggested, the New York Times became a non-geographic specific online operation it could rival the international TV news by providing webcasts. Why not? Foreign bureaux have local translators, local drivers, local fixers, it wouldn’t be a particularly demanding leap to add local videographers.

• Address the economics of film-making immediately- if the studios were to demand between $1M and $20M on eBay for casting someone in a role they would very probably find enough people crediting their Paypal accounts to get a movie completed. It might not be legal in the US but think about it… If all the above seems a preposterous overreaction then Hollywood has to consider the urgent issues facing the West in general. We are approaching a moment when the economic order of the past century will rupture. Western governments have cynically allowed housing booms- runaway inflation by any other name- and lax credit policies to continue unchecked as a substitute for genuine economic growth at a time of manufacturing collapse. This has led to the western economies being saddled with woefully inflexible wage patterns just at the moment the emergence of India and China demands that the West be more flexible than ever. The overdue adjustment of these economic imbalances will have a monumental impact on what disposable income American and European households have for the movies. Millions of Western households have confused their ability to amass huge mortgages and miscellaneous debts with prosperity. Globalization will soon affect the white middle class white collar employee- especially in the media- as it has miners and factory workers, and all those outsourced situations, already. Most of us don’t know that China was the world’s largest economy for 18 of the past 20 centuries. What we consider the norm is actually an aberration. Compound this with the vulnerability of the dollar (which does benefit the Studios’ foreign earnings) just as all those baby-boomers start retiring and we have a future that is going to challenge Hollywood rather brutally. The industry must get ahead of the curve or it will have to endure a very unflattering close-up in ultimate movie disaster.

Finally, the mainstream press have spent much of the past year gloating over Hollywood’s failures. And while Hollywood has done a bad job it doesn’t come close to matching the appalling failure of the printed media in the run to the Iraq war, for example. And of course, editors, the next time you run an article condemning sequels and remakes and a general lack of originality kindly consider those relentless power lists and theme issues you so regularly use to fill your pages. Everyone is sick of them. People in glass houses…. Moreover millions of people will still want to see movies this year and next year but many, many people have no intention of ever buying a newspaper or a magazine again.

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