The Final Act To Film Distribution

– This article, written in late 1999 for ‘Written By,’ the trade magazine of the Writers Guild of America (the WGA), has held up well and my predictions about the future of film distribution were not wide of the mark:

No invention of the past 50 years has been the inspiration for more overblown hyperbole than the Internet. Not since the atomic bomb have media types spewed and foamed, searching for new, more expansive adjectives to describe a man-made device. Internet prophets claim “the Internet changes everything” as if the business and social rules that preceded it were just so much old crap, like ledger books and desk calendars.

Certainly, the Internet changes a lot of things. Ask a young stock broker whose Daddy could kick back and add up fat commissions at the end of the day if the Internet is a hyperbole or a brand new business device that can rearrange relationships like a cheerleader on prom night. Is such a relationship rewrite going to happen to film distribution?

In short, yes, it is. It is happening right now. In one way or the other, the Internet will emerge as a significant force in film distribution in the very near future. For good or ill, the trickle of movies migrating to the net today will become a mighty flood of digitized films in the future. This rewrite will have lots of new characters, plot twists, and an ending for the screenwriter that has yet to be worked out.

Consider that for most of this century, the film distribution drama was a one-act play. Before the fifties, if you wanted to see a movie, you had to get up, put on your shoes, and go to the theater for the experience. No trip to the theater, no movie. You had to see it when it was playing, and you could only see what the theaters would show.

Television introduced a second act for films. There was a scene change, from public theater to private home. Suddenly, there were three whole channels to chose from, and a whole new character; the made-for-TV movie. The plot thickened with cable television. More characters, more players, more rights to exploit, and more revenue streams for studios to pursue.

The VCR (and now the DVD player) has been the plot point at the end of the second act for film distribution, giving people control, for the first time, over when they saw the movie of their choice. Since the late eighties, home video has steadily expanded film revenues for studios, and choices (and the privacy to make choices) for consumers. Home-based media has pushed movies further into our lives than ever before.

But where does the film distribution drama go from here? What is the third act? How could this story possibly end? A new writer has come on board to script the drama. Meet TCP/IP.

TCP/IP is the Lingua Franca of the Internet. It is an acronym that describes a family of common protocols that allow computers to talk to each other. Invented in the 1970s, it suddenly allowed geeks and eggheads the world over to exchange scribbles. Now, it is embedded into every computer and piece of software worth having.

But when is a computer a computer? When it can speak TCP/IP. TCP/IP allows the Internet to seep into any device that speaks it. It is currently being loaded into all manner of consumer devices including cell phones, palm pilots, household appliances, and cars. This is where you get all the speculation about being able to talk to your house, your coffee pot, your VCR or whatever, from your office. TCP/IP makes it happen. Where TCP/IP goes, so goes the Internet, and if movies are on the Internet, then they are everywhere you turn.

And that is the outline for the third act of film distribution.  The Internet will complete the process of bringing movies into our lives. It will push movies into every nook, cranny, and orifice without one. Wherever a screen can be fit, there a movie will be. The net will present, and possibly overwhelm, the consumer with unprecedented movie choices, as it has with newspapers and magazines. The movie moguls of old would have had a hard time imagining such an ending to the drama they began.  The future of film distribution is any movie ever made, anytime, anywhere, and right now. How’s that for an ending, Louie B. Mayer!!

This final act is still in the barest outline stage, however. Sure, you can find movies on the net, but the only studio features to be found are pirated. The vast majority of features online are films that could not get traditional distribution anywhere else. Download times for folks with conventional Internet service provider accounts such as AOL are prohibitively long for a file the size of a feature film. (A feature movie at film resolution is 1.7 terabytes) For most, the idea of watching a movie hunched over  their computer is unappealing anyway.

But the Internet to come is not really like the one of beep beep beep, hiss hiss hiss, You’ve Got Mail that most people know. That is the Internet of the desktop modem. The next evolution in the Internet is called broadband.

“Broadband is about greater bandwidth,” says Robb Ottenhoff, the chief technology officer at Internet business incubator Bold New World. “It is the difference between a garden hose and a fire hose.” The hose analogy gets used a lot when discussing broadband. To get a big, fat pipe, he explains, you have to go beyond the desktop modem that simply calls up other computers with your conventional phone line. Those lines only have so much capacity to move information. A cable modem, however, comes and goes over your television coaxial cable. The cable television rush created thousands of miles of fiber optic lines that ring the country, and the owners of those lines are now rushing headlong into the broadband Internet business. MediaOne, for instance, provides broadband access in a wide service area, including Los Angeles.

A cable modem isn’t the only way to get broadband. There is a whole host of potential ways to bring broadband to your location. Special phone lines called DSLs (Digital Subscriber Lines) can bring broad bandwidth to the user through a phone line and even leave space for a conventional phone call. Others are in the offing.

“But the real deal would be to get a hose that would be as big as a sewer pipe you can stand up in,” says Ottenhoff.  Breakthroughs in compression technology are making the files sizes smaller, and the bandwidth of the current lines grows accordingly.

The problem with broadband as a deliverer of the final act of film distribution is that it isn’t everywhere, and it isn’t cheap. Already, billions have been spent by the phone and cable companies upgrading their lines, and those costs are built into the access charges. Providers must also upgrade their servers that push out the programming. Those servers have to be set up in a nationwide series of relay stations, much like broadcast television stations.

As the costs mount, broadband providers have turned to the federal government to allow them a monopoly use of broadband lines. This has set off a nasty debate in Washington about the nature of the Internet, who owns it, and if it is to be regulated in the public interest. Broadband providers claim they cannot bring access to the country, and all its benefits, unless they have the ability to profit exclusively from it. Smaller providers who wish to trailer their services on the new high speed lines say monopoly control would destroy the freewheeling spirit of the Internet, and stifle content. They are calling for ‘Open Access’ to the broadband lines, and are organized to duke it out before the bar with the big boys.  This means many of the critical decisions about what is on this new medium, and who gets it at what price, will not be made by consumers or producers, but by the FCC.

In the meantime, while the majors ponder how to maximize the new distribution possibilities without losing control of the product entirely, hundreds of web-based companies have already jumped into the ring. Two firms, Atom Films (www.atomfilms.com) and Sightsound.com, have brought former Universal chieftain Frank Biondi onto their board of directors.

“We want to be the premiere distributor of short form entertainment,” says Matt Hulett, marketing director for Seattle-based Atom Films. “Attention spans are short and people are just looking for quick bits of entertainment.” Given the limitations of computer modems and the sub-VHS quality of most streaming videos off the web, Atom’s focus on short form entertainment is perfect for the technology that is already out there. On the Atom Films site, one can find a variety of traditional live action shorts from around the world, the kind every film school grad has made. Also, there are several quickie animated films. Most are simple, irreverent, and satirical; the sort that ‘South Park’ fans would enjoy.

Atom’s evolving business plan offers an early glimpse into the Internet distributors of the future. “We have three basic ways we make money,” explains Hulett. Like a TV station, Atom sells ad space on the site. Animated banner ads appear on nearly every page. Atom will also make custom VHS or DVD compilations of films posted to its site, following a customization trend set by music distributors on the net.

Most interesting, however, is Atom’s practice of what Hulett calls “off-line sales”. Atom Films, an Internet company that posts its acquisitions on the Internet first, also sells the rights to its library of films to other traditional distributors, like airlines and television stations.

Why is this noteworthy? Because it presents the Internet as a first position venue for films. Atom is not only building a brand, it is placing the Internet ahead of traditional distribution in the chain. In a world of digitized movies, this is a potentially business altering new development.

And Atom is not alone in pushing along this trend. For feature films, the company to watch thus far is Sightsound.com. Sightsound claims to have patented the business model of selling digitized movies and music over the Internet. If a movie is transferred over the Internet from one computer to another, via digital download, Sightsound claims to have a stake. This patent claim has not explicitly been tested in court, but the company has taken an early lead in selling features over the web. In April of this year, indie notable PI (screenplay by Sean Gullette) was the first film to be sold via digital download off the Sightsound.com site. Domestic theatrical distributor Artisan Entertainment took a stake in the company as well.

The next milestone Sightsound.com will set is to co-produce the first film specifically produced for initial distribution over the Internet. In partnership with Metafilmics, the production entity behind the 1998 hit WHAT DREAMS MAY COME (screenplay by Ron Bass), Sightsound.com will post THE QUANTUM PROJECT on its site in mid-2000. The $3 million film will work its way through the other distribution outlets afterwards, upsetting the apple cart of traditional distribution that begins in the theaters.

As of this writing, there have been no distribution deals between a major studio and an Internet distributor, nor have guild signatory studios begun uploading their films to their own sites. Studios sites have thus far been marketing tools for traditional distribution. There is speculation that this kind of deal or availability will occur soon. When it does, will guild writers see a piece of the new pie?

“Our expectation is that they (the studios) should be paying,” says Grace Reiner, the director of contract administration for the WGA. If the Internet opens new revenue streams, writers ought to get a piece of it.

The WGA’s position is that the Internet is simply a new form of television, which is covered under the Minimum Basic Agreement between the Guild and the studios. Writers, the agreement states, are due 2% of the license fee for basic cable. Streaming video over the Internet, Reiner says, is just like basic cable, where the viewer pays an access fee and gets unlimited viewing. Downloading is basically the same as buying a cassette tape for replay. “We cover any product that is reused on any TV, or, as the contract reads, any ‘home type’ TV.”

Any loophole was meant to be closed when the guild negotiated the MBA in 1995, just before the explosive proliferation of web browsers and websites. Article 64 was inserted into the agreement which covers ‘interactive reuse of guild material.’ If the Internet distribution of movies is interactive, it is covered. If it is not interactive, then it is basically TV, which is also covered. The WGA is prepared to battle to any claim that the Internet offers a way to deny writers a share of the spoils. “We will fight them if we have to,” Reiner says.

The guild has also made the first forays into getting companies who produce for the Internet to become signatory. Budgets have thus far been small for these start ups, and the newcomers have balked at the idea of paying residuals. But, Reiner says, when the stakes are high enough, and the webs need writing talent, they will relent, and the WGA will represent its members in the new arena.

To industry old-timers, none of this will sound new. All of the issues, points, and debates concerning films on the net have occurred before in the distribution saga. Low quality of the new medium? Consider the first tiny black and white television broadcasts. A pitched battle over division of revenues generated by a new medium? The fight over television residuals was so fierce it ended in Congressional testimony by SAG president Ronald Reagan. Public versus private regulation of the new medium? The FCC has been roasting that chestnut for decades. Television lifted movies from a chemical medium to an analog medium, and the Internet takes them the rest of the way from analog to digital. The implications of this shift are currently being played out in courtrooms, boardrooms, and living rooms around the country, and around the world.

Even the idea of any movie any time is not new. Video-On-Demand has been the siren song heard by several companies who have experimented with the service for at least a decade. It never really caught on because it was just so much easier and cheaper to rent a movie at the video store than to futz around with some server somewhere, trying to get the movie you want to show up on your screen. The Internet offers the chance to make the promise of total availability of movies a reality.

Stuart Volkow, a web entrepreneur and instructor at UCLA, offers a timeline. “By the end of the year 2000, about 10 million people will have a broadband connection and will be able to realistically download movies. But, of those, only 10% or so will have the gear they need to watch a movie at DVD quality. So, it will be easier for most people to just go to the Blockbuster.  Then, in two or three years, there will be some kind of intermediate version of the net widely available, that lets more people get movies (from the Internet) straight to the TV. In 10 years or so, it will be a really different story. The whole thing will go up on satellites that can download information at incredibly rapid speeds.”

In other words, the Internet as we know it will fade out, and what will be left are movies, the one and true King of All Media, swirling in the air around us, waiting to light anywhere we rest our eyes.