The Future of Film Distribution and Exhibition

(This is a redraft of an essay I wrote back in July 2008.  It rambles towards the end but some of the analogies might be useful)  

In thinking about cinema exhibition a while back, I found a useful analogy with the music industry.  Here is an industry which was changed by advents in technology and is continuing to change to this day.  Historically film has developed later than music, purely because of the more complex marriage of sound and picture, as opposed to pure sound. 

Around 20 years ago, the advent of digital technology started to have an impact in the music industry.  First, as is often the case, it was picked up in production terms.  Previously, the recording and production of records or cds was in the hands of big businesses.  Then with the development of computers, synthesisers and samplers, production became accessible to anyone with some spare cash and a bit of computer know-how.  And what happened?  Broadly speaking, music diversified.  No longer was popular music and the charts the dominant force that it was.  New and different genres of electronic music were spawned, and continue to develop every year, with the birth of drum and bass a few years ago, and now the development of dubstep.  Charts underwent a massive decline and hundreds of new genres developed and diversified as the means of production became accessible to everyone.

Although the major labels still continued to dominate the industry, more and more people became interested in other forms of music and other smaller labels.

Developments in production then led to developments in distribution.  No longer was music only available in the big chain high-street stores.  Hundreds of smaller record shops and online shops sprang up offering often very specific, narrow ranges of music, and overall the choice for the consumer multiplied hugely.

In terms of the film industry, digital technology had led advances in the production of film, resulting in the great digital revolution and such pioneers as Dogme 95, which eschewed traditional production methods of the majors, but was still able to compete in the film exhibition marketplace.  It seemed at the time, that the development of production was similarly diversifying and broadening the range of films that could be made, increasing the choice and range of films available to the consumer, and that the dominance of Hollywood was going to be undermined.   Undoubtedly, the range of films has increased, and the rise of small DVD labels (equivalent to the independent record shops) has resulted.  However, one major factor would slow the comparable change, and that was that whilst someone could create in their bedroom a record that would stand up alongside something produced in expensive studios, big-budget films would always stand apart from smaller-budget films, not necessarily in terms of critical quality, but in terms of production values and technical (cgi and the like) values.  But across the world, big-budgets were not uncommon, and it can be argued that the playing field has levelled considerably over the last 20 years.

There are undoubtedly a number of DVD labels that are doing similar things to record labels, there are differences between the two industries that are important.  Firstly the scale.  Every year there is a vast number more records released than films, mainly due to factors of production costs.  The result of this is that there is far greater choice, innovation and ultimately quality in the music industry.  One need only compare the aggregate scores in Metacritic.com for films and music to see the vast gulf.  This difference means it is much harder to sustain any kind of niche film business than it is a niche music business. 

Secondly, marketing.  Marketing, advertising and the star system are always going to be a deciding factor in the consumption of films and music.  Interestingly, one can see a connection between the widening of film consumption and the ever greater reliance of stars in the financing of movies.  Stars, and the marketing and advertising of them are always going to be a massive force in the music and film industries.

So, whilst perhaps the distribution of DVDs has developed in comparison to the independent record labels, the reach of digital technology in the music industry has reached beyond production and distribution.  Whilst, for a time, it seemed that digital advancements would create a more level playing field in terms of distribution and choice, we are now starting to see a decline in the number of independent record shops and an overall decline in the music industry as a whole.  The reason?  Digital downloads. 

Whilst there are many arguments as to who the download culture hurts more, the majors or the smaller independents, undoubtedly it is affecting them all.  And when digital technology develops to the same extent for films, it will undoubtedly come to affect not only the major Hollywood distributors, but the smaller distributors as well. The value of music in terms of a packaged product has decreased hugely, and in the next decade, when films will be even more easily downloaded and copied, the value of film as a packaged product will follow suit.

What has happened now with the Internet and digital age, is a radical re-evaluation in the value of cultural production.  Now, the value of a band lies not in it’s ability to shift CDs from the shelf of a shop to the general public, but in their fanbase, their following who are willing to pay money for CDs and merchandise and get the band into other revenue streams from tv and magazines and most importantly, their ability to sell tickets for live gigs.   What is important now in financial terms is the development of a band as a brand.  And yes, this marketing term does reflect the continued importance of marketing and advertising in today’s commercial climate.  Nowadays it is common for new bands to give away their music via MySpace and the like in order to develop their fanbase, whilst at the top end, established bands like Radiohead and Prince are giving away their music for free via websites or newspaper giveaways.  Although the value of the ‘gimmick’ as it stands is not to be underestimated in terms of exposure, they are doing this because of the belief that they will make more money through ancillary revenues of tv etc. and sell a great deal more tickets to live gigs than they would through selling CDs in the shops.

So how does this relate to the future of film and film exhibition?  Firstly, in terms of distribution, the value of a DVD release will decline.  When you can download the film for free (or for a small fee direct from the producer) why buy an expensive DVD copy?  More importantly, film exhibition becomes increasingly important for the value of the product, both as the shop window for DVD sales as is currently happening more often, but also for the experience that it offers.

It is my belief that with the developments of digital technology the film market will follow that of the music market in due course.  This means a devaluing of the actual product and a rise in the ancillary values or exploitation of the product.  One of the biggest distributors of music now is Apple and iTunes.  Why?  Because the positioning of iTunes as the media player and download centre of choice means that Apple will sell more Mac, iPods and iPhones.  Selling music only seems to have value now in relation to other financial gains and smaller music download sites are going to struggle because they cannot compete with Apple’s small or non-existent profit margins.  Music downloads have become a brand or marketing tool.

Will there be a similar model followed in film?  It seems unlikely that a DVD player manufacturer would harness film downloads in such a way and the relative differences in the scale and value of films and music seem to rule this out.  It also seems unlikely that the major multiplexes will fail to continue to fill the weekends with its core teenage audiences for the latest blockbuster.  However, the one thing that does seem certain for distributors and exhibitors is the value of the brand be it that of a director, movement or season, and in particular, the exhibition experience.  And in the film world, this value is of use to the rights owner, or the distributor.

It is hardly a secret though – witness the successes of the revamped Curzon Soho, the full houses at the Rex for obscure films screening way beyond their release dates, and also, significantly, the moves of the majors towards the ‘cinema de lux’.  Live music is not dead.  It is becoming more important than ever, if the venue can develop a strong enough brand and large enough b(r)ands.  Cinema neither is dead.  In the next decade it’s value to distributors and rights owners will become crucial.  But the way forward for the independents lies beyond the traditional cinema model.  The inflated ticket prices of the West End in order to maintain the rents, will not hold.  The audiences are there, as seen in the comment regarding the Other Cinema.  But running a cinema is an expensive business, and new business models need to be adapted if a cinema is to survive.  And, with shortening windows of play and diminishing terms for distributors, it is essential that the high quality cinema experience is maintained for the value to be extracted.

This is why I believe that the way forward for the independent or non-Hollywood distributors and exhibitors is integration, not only so that there is only 1 share of the diminishing profit, rather than 2, but so that the exploitation of each film can be maximised with regards raising the profile of the film and extracting the financial value of the exhibition of the film, at a time when the face product value of the film is falling.  Whether or not the value of cinema exhibition will rise or fall is open to question.  Certainly Radiohead have no problem in selling out with tickets costing over 5 times the price of a CD, and The Electric Cinema continues to thrive with £12 ticket prices, but the value here is the allround cinema experience, the seats, the surroundings, the comfort, and the extras. 

Further note to changing trends – an example of an explosion of diversity led by small independents is the alcopop market which exploded out with dozens and dozens of different small brands.  15 or so years later, the alcopop market is totally dominated by the big brands Smirnoff and Bacardi, with WKD being an exception (although probably owned by a big brand). 

In relation to film?  Perhaps that the major cinemas will at some point come to re-dominate the exhibition market, although probably through mass marketing to the widest market groups – generally teenagers etc. leaving the independents to satisfy demand in the more culturally-led, discerning, more mature audiences.  Analogous perhaps to the wine market – dominated by the big brands certainly, but because of associations of wine and the general wine drinking audience, the independents (both in production and distribution) still thrive.